Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • The Price of a Re-org

    Some decisions just make me nervous. The Sixth Circuit decision in Cincom Systems, Inc. v. Novelis Corp. is one of them.

    Cincom Systems licenses software. In 1989 it licensed software to Alcan Rolled Products Division (Alcan Ohio), a wholly-owned subsidiary of Alcan, Inc. The license was for use of the software on one computer in a facility in Oswego, New York (N.B., the district court opinion used the plural “computers”). The license provided that Alcan Ohio could “not transfer its rights or obligations under this Agreement without the prior written approval of Cincom.”

    Alcan, Inc. did some internal restructuring of the company (you see where this is going). Alcan Texas was created and Alcan Ohio merged into it, with Alcan Texas surviving. The next day, Alcan Texas merged with three other Texas subsidiaries and the former rolled products division became a subsidiary of Alcan Texas, called Alcan Fabrication Corporation. The name was later changed to Alcan Aluminum Corporation, then to Novelis Corporation, the defendant. The software remained on the same computer in Oswego throughout. No one asked Cincom for assent to a change of licensee.

    Cincom sued, claiming that the computer was no longer licensed for the software and therefore the continued use of the software was a copyright infringement. The parties stipulated that, if there was a copyright infringement, damages were $459,530, the amount of Cincom’s original licensing fee.

    A 1979 patent case in the Sixth Circuit, PPG Industries, Inc. v. Guardian Industries Corp., 597 F.2d 1090 (6th Cir. 1979), held that, although state law provided for the automatic transfer and vesting of licenses in the successor corporation in a merger, an intellectual property license is presumed to be non-assignable and nontransferable in the absence of express provisions to the contrary. This is because intellectual property rights are meant to be exclusionary, so that allowing free assignability would undermine the reward for invention.

    In PPG Industries, PPG’s new licensee would have been a direct competitor. Novelis therefore argued that an internal reorganization should be treated differently, but without success:

    The fact that the license at issue in PPG ultimately found its way into the hands of a competitor does not serve to distinguish our holding from the present set of facts. While it is true that the primary reason for the federal common law rule prohibiting the transfer of a license without authorization is to prevent the license from coming into a competitor’s possession, this does not translate into a rule of “no competitor possession, no foul.” The harm is the breach of the terms of the license: the violation of the federal policy (or contract term) allowing the copyright or patent holder to control the use of his creation. The fact that Novelis is not a competitor of Cincom is therefore immaterial.

    Thus,

    when Alcan Ohio merged with Alcan Texas, the license granted by Cincom solely to Alcan Ohio transferred to the surviving corporation, now known as Novelis. Because Novelis did not abide by the express terms of Cincom’s license and gain Cincom’s prior written approval, Novelis infringed Cincom’s copyright. We therefore affirm the judgment of the district court.

    Seriously, was there really a material breach here, justifying a termination of the contract? The computer never moved, the software never moved, the only thing that changed was that the company did some internal organizational housekeeping. It doesn’t look like Cincom lost any part of its bargain – it may not have liked the bargain it struck in 1989 and was looking for a way out, but that doesn’t make every breach material.

    And the consequence was draconian. The court just seems to assume that the inevitable consequence of breach of a copyright license is copyright infringement: “If any other legal entity holds the license without Cincom’s prior approval, that entity has infringed Cincom’s copyright because a transfer has occurred.” But there’s no explanation of how the defendant actually infringed any of the exclusive rights of the copyright owner. The lower court’s entire analysis on the subject is this:

    [T]he Court finds that the series of events leading to the creation of Novelis Corporation resulted in an impermissible transfer to Novelis of the License Agreement granted to Alcan Ohio by Cincom. Thus, when Novelis used and copied the software subject to the License Agreement, which it has done since at least January 2005, it infringed upon Cincom’s copyright.

    In the life of a corporate lawyer, the re-org seems like a pretty low risk transaction, and checking assignability of a software license used in operations far down the punch list. What a lesson.

    Court of Appeals: Cincom Systems, Inc. v. Novelis Corp., No. 07-4142, 2009 WL 3048436 (6th Cir. Sept. 25, 2009).

    Decision below: Cincom Systems, Inc. v. Novelis Corp., No. 1:05-cv-00152-SJD, 2007 WL 128999 (S.D. Ohio Jan. 12, 2007)

    © 2009 Pamela Chestek

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  • Not So Fast

    A little while ago I blogged on Gerber Scientific International, Inc. v. Satisloh AG, a case that decided whether a later-filed continuation-in-part was included in the assignment of a grandparent application. The 271 Patent Blog is reporting that the issue was certified for interlocutory appeal to the Federal Circuit.

    © 2009 Pamela Chestek

  • A Registrant, Its Assigns – and Exclusive Licensee

    Section 32 of the Lanham Act, 15 U.S.C. § 1114, provides a cause of action for a “registrant” of a trademark. Section 45, 15 U.S.C. § 1127, defines a “registrant” as including “legal representatives, predecessors, successors and assigns.” So one only has a cause of action under Section 32 if one is the registrant or its legal representative, predecessor, successor or assign.

    But despite the express language, an “exclusive licensee” can also bring an action under Section 32. As explained in Experian Marketing Solutions, Inc. v. U.S. Data Corp., though, it’s really just an analysis of whether there is a de facto assignment of the mark, thus:

    To rise to the level of a property interest, the license must be truly exclusive in that the licensor retains no rights to use the mark and the licensee can exclude the licensor from use. A license may also be tantamount to an assignment where the license agreement grants exclusive use of the trademark without restrictions on the licensee’s ability to enforce it. Courts have found that a licensee has no property interest where (1) the license agreement imposes geographical limitations on the use of the trademark, (2) the licensing agreement requires the licensee to maintain the trademark’s quality and reserves the right to monitor the licensee’s product quality, (3) the rights and duties in the license agreement are inconsistent with an assignment, and (4) the license agreement states that the licensor retains ownership of the trademark.

    Which makes it a long shot for a plaintiff. In the ten cases cited in Experian Marketing, there were only three where the plaintiff was successful. One, G.H. Mumm Champagne v. E. Wine Corp., 142 F.2d 499, 502 (2d Cir. 1944), was pre-Lanham Act and wartime, involving the right of a U.S. licensee of French champagne maker Mumm to bring suit. In Ultrapure Systems, Inc. v. Ham-Let Group, 921 F. Supp. 659, 665-66 (N.D. Cal. 1995), Ultrapure Systems (standing in the shoes of ACOA) was successful on the following basis:

    Here, the contract between CGMI and ACOA contains the following provision:

    ACOA [Licensee] will have the right to register in the TERRITORY the CGMI brands in CGMI’s name but at ACOA’s expense. ACOA [Licensee] will have exclusive rights to their use in the TERRITORY for the duration of the contract.

    Thus, the contract gives exclusive use of the trademarks in the U.S. to the licensee. Further, the contract does not set forth any restrictions on the licensee’s ability to enforce the trademarks.

    In Bliss Clearing Niagara, Inc. v. Midwest Brake Bond Co., 339 F. Supp. 2d 944, 960-961 (W.D. Mich. 2004) the plaintiff also succeeded. It had an agreement with the record owner, Chicago Services, Inc. (CSI), in settlement of an earlier dispute over an asset purchase. The court decided the Settlement Agreement was a de facto assignment:

    The Settlement Agreement grants to [plaintiff] BCN/Clearing “the exclusive and perpetual right and license to utilize the Proprietary Rights … to … design, engineer, manufacture, service, maintain, repair, rebuild, retrofit, use and sell Clearing Machines and Parts throughout the world and the right to sublicense such rights,” subject to certain rights reserved by CSI. The Settlement Agreement also emphasizes that CSI retains its ownership interest in the mark: “The Verson Parties [Clearing] acknowledge that the Hitachi Parties [CSI] are and shall remain the exclusive owners of all Proprietary Rights.” Section 2.6 grants BCN/Clearing the right to grant sublicenses, but that right is subject to various restrictions. For example, a non-affiliate sublicensee may not grant sublicenses; BCN/Clearing must provide immediate notice to CSI when it enters into a sublicense; and BCN/Clearing may not grant a sublicense to a non-affiliate in the United States, England, or Japan without the prior written consent of CSI. Section 2.15 reserves to CSI “the continuing right in perpetuity to utilize the Proprietary Rights” and to license others to utilize the Proprietary Rights with regard to “HZC Machines,” but neither CSI nor its affiliates and licensees has the right to grant any licenses or sublicenses with regard to Torc-Pac clutch equipment or to manufacture Clearing Machines and Parts. BCN/Clearing is required to make royalty payments to CSI, and BCN/Clearing’s failure to make such payments constitutes an event of default, entitling CSI to terminate the license. BCN/Clearing has no further right to use the mark in the event the license is terminated. Finally, the Settlement Agreement designates CSI as the party responsible for maintaining all registrations of the trademarks and provides that BCN/Clearing “will cooperate with and assist CSI in reestablishing CSI’s ownership rights” in any trademarks for which the registrations have expired. CSI is not required to initiate any actions with regard to alleged infringement of the trademarks, but BCN/Clearing has the right to pursue any infringement actions at its own expense. In the event BCN/Clearing decides to pursue an infringement action, CSI is required to “sign all documents and provide such other assistance” as BCN/Clearing may request.

    Based upon the foregoing provisions, the Court concludes that BCN/Clearing’s interest as an exclusive licensee of the Torc-Pac mark is sufficient to confer standing on BCN/Clearing to maintain its infringement and dilution claims.

    But Experian Marketing didn’t have a prayer. It apparently didn’t provide a copy of its license and instead relied on the allegations in the complaint: “In connection with their activities, Experian Marketing, Experian Information and their affiliates have provided products and services under the trademark EXPERIAN® and other distinctive marks,” and “Experian Marketing’s affiliate owns and Experian Marketing has the right as an exclusive licensee to use and enforce the violation of the federally, [sic] registered, incontestable trademark MOSAIC®, including the right to initiate litigation against infringement . . . . Experian Marketing is a licensed user of the MOSAIC® mark in the United States.”

    This just didn’t cut it. The first statement alleged no more than various entities were using the mark. The second granted that an affiliate actually owned the mark and also didn’t allege that Experian Marketing had the right to exclude all, including the licensor. Experian Marketing didn’t have standing under § 32. No harm, no foul though, since the § 43(a) claim survived.

    Experian Marketing Solutions, Inc. v. U.S. Data Corp., No. 8:09CV24, 2009 WL 290957 (D. Neb. Sept. 9, 2009).

    © 2009 Pamela Chestek

  • What Every Transactional Counsel Should Know

    Intellectual property specialists may not be involved in the preparation of merger and acquisition documents, and a couple of recent cases show what can go wrong when the form is missing something important. In one case the patentee won, but in the other the patentee didn’t.

    In Carotek, Inc. v. Kobayashi Ventures, LLC, the missing provision was an assignment of the right to sue for past infringement. There had been a three-way transaction: on September 28, 2007 Jacklin Associates, Inc. agreed on behalf of Kobayashi Ventures, LLC to buy patents from International Paper. On October 19, 2007, International Paper sold the patents to Jacklin and on December 10, 2007 Jacklin transferred the patents to Kobayashi.

    Of course, conveyance of the patent itself doesn’t necessarily include the right to sue for past infringement, doing so only where the agreement “manifests an intent to transfer this right.” Declaratory judgment plaintiff Carotek won the battle over which state’s law controlled, which was Virginia. Virginia does not look to the “surrounding circumstances” when determining whether a patent transfer includes the right to sue for past infringement, so, since the agreement itself didn’t expressly assign it, Kobayashi’s claim of infringement only accrued as of December 10, 2007. An effort by Jacklin and Kobayashi to patch the mistake after the lawsuit was filed by “confirm[ing] and reaffirm[ing] that” the December assignment included past claims was ineffective; it was parol evidence that was inadmissible because there was no ambiguity in the original agreement.

    In Gerber Scientific International, Inc. v. Satisloh AG, the missing term was “continuation-in-part.” Inventors assigned a patent application and “all divisions, continuations, and continuations-in-part of said application, and reissues and extensions of said Letters Patent or Patents” to Pilkington Visioncare, Inc. Pilkington assigned the application to Coburn Optical Industries, a predecessor of the plaintiff. The transactional document assigned “all its right, title and interest in, to and under said Letters Patent and patent applications and the inventions covered thereby and any divisions, reissues, continuations and extensions thereof.” Note that it didn’t assign “continuations-in-part.”

    The patent-in-suit was a later-filed CIP (grandchild) of the assigned application. Shortly after the CIP was filed, the inventors executed a separate assignment transferring the CIP to Coburn. Defendants argued that the CIP was never assigned to Coburn, either by Pilkington (because of the missing term in the agreement) or by the inventors (because they had already assigned any CIPs to Pilkington, so couldn’t assign them again to Coburn).

    The court was left to decided whether the Pilkington assignment included the later CIP application. It found that the assignment was broad, transferring “all right, title and interest in” 27 patents and 13 pending patent applications, which would logically include CIPs. It was an entire business that was transferred, not just the patents themselves, evidencing an intent for a broad transfer. Pilkington had also assigned all “continuations and extensions,” which indicated an intent to include in the assignment future changes to the parent patent application. Altogether, the document showed that the parties clearly intended that the assignment include CIPs. Since Coburn’s ownership traced through Pilkington, the court didn’t need to consider the effectiveness of the inventors’ subsequent assignment to Coburn or other nunc pro tunc efforts to fix the problem.

    There was another challenge in the chain of title, more easily disposed of. At one point J.P. Morgan had taken a “Patent Collateral Assignment” of the parent patent application. The document indeed stated that “assignor hereby grants, assigns and conveys to Lender the entire, right, title and interest of Assignor in and to the Patents.” Nevertheless, the court noted that “as a general rule, ‘an assignment made as collateral security for a debt gives the assignee only a qualified interest in the assigned chose, commensurate with the debt or liabilities secured.’” Further, the bank had filed a UCC-1, used to evidence a lien on collateral for a debt, something that wouldn’t be necessary if J.P. Morgan had actually been assigned the patents. Regardless, even if J.P. Morgan had ownership of the patents at some point, the debt had long ago been satisfied and the patent ownership transferred back by the terms of the agreement. There was no documentation of the transfer-back, but none was required. The icing on the cake was J.P. Morgan’s declaration that it had no right, title or interest in the collateral any longer.

    The two missing provisions – causes of action for past infringement and CIPs – are patent-specific, so not something that a general M&A practitioner would necessarily spot. A reasonably attentive intellectual property specialist probably would have caught the problems when reviewing the documents. Use one if you got one, don’t assume the forms are right.

    Carotek, Inc. v. Kobayashi Ventures, LLC, Nos. 07 Civ 11163(NRB), 08 Civ 5706(NRB), 2009 WL 2850760 (S.D.N.Y. Aug. 31, 2009).
    Gerber Scientific Int’l, Inc. v. Satisloh AG, No. 3:07CV1382 (PCD), 2009 WL 2869705 (D. Conn. Sept. 2, 2009).

    © 2009 Pamela Chestek

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  • Why You Always Bring a Claim Under § 43(a)

    For starters, so you have standing. Particularly if your assignment record is a hot mess.

    There are two statutory bases for trademark infringement, § 32 (15 U.S.C. § 1114) for infringement of registered marks and § 43(a) (15 U.S.C. § 1125(a)), a broader provision that can also encompass trademark infringement. Section 32 provides a cause of action for the “registrant” of the trademark, but § 43(a) allows for an action by “any person who believes that he or she is likely to be damaged by such [infringing] act.” So if you’re not a registrant you can’t bring a claim under § 32, but you may be able to under § 43(a). Typically, a licensee, or an owner of an unregistered mark, will bring suit under § 43(a). But all registrants should, to add suspenders to the belted pants.

    There were three registrations asserted in Invisible Fence, Inc. v. Fido’s Fences, Inc., INVISIBLE (assignment record here), INVISIBLE FENCE (assignment record here), and INVISIBLE FENCING (assignment record here). The actual chain of title looks fine, which should be all that matters. (“The recording of a document pursuant to § 3.11 is not a determination by the Office of the validity of the document or the effect that document has on the title to an application, a patent, or a registration.” 37 CFR § 3.34). Unfortunately, the recording was so bungled that the court finally concluded that
    it is clear that Invisible Fence has “some cognizable interest” in the mark and therefore has standing to sue under 15 U.S.C. § 1125 . . . . Whether plaintiff is the current registrant of the marks, however, such that it has standing to sue under 15 U.S.C. §1114, is not clear. As documented above, there is a question as to whether Innotek, Invisible Fence or Fifth Third Bank currently is the registrant of the marks. . . . The court will reserve a ruling on whether plaintiff has standing to sue under 15 U.S.C. § 1114 upon further evidence at the bench trial of this matter.

    Part of the court’s confusion may stem from the PTO’s practice of referring in the electronic database to everyone as “assignor” or “assignee.” The recordation cover sheet doesn’t; all versions refer to “conveying party” and “receiving party.” No bank took an assignment of any of the trademarks; instead, the banks had only various forms of security interests correctly characterized on the cover sheet. So there’s no reason the court should have thought the marks had been assigned to a bank unless it was misled by the use of improper terminology by the PTO.
    But the court had little help from the data supplied on the cover sheets. Here’s a comparison of what each of the recorded documents say with what the cover sheets say. For reference, Innotek (a non-party) is the parent of plaintiff Invisible Fencing, Inc.

    Reel/Frame What the Documents Say What the Cover Sheet Says What the PTO Database Says Comment
    1937/0916 Amendment to Certificate of Incorporation, changing the name of Invisible Fence Company, Inc. (DE) to IFCO Enterprises, Inc. (DE) (dated Nov. 11, 1997) Certificate of Amendment; conveying party Invisible Fence Company, Inc. (DE) to receiving party IFCO Enterprises, Inc. (DE) Conveyance type: Certificate of Amendment So far, so good, although it would probably have been clearer to check “Change of Name” on the cover sheet rather than “Other” and adding “Certificate of Amendment”
    1958/0625 Confirmatory Assignment, assigning marks from IFCO Enterprises, Inc. (DE) to IFCO Enterprises, Inc. (PA) (dated March 27, 1999) Assignment; conveying party IFCO Enterprises, Inc. (DE) to IFCO Enterprises, Inc. (PA) Conveyance type: Assigns the Entire Interest Hmmm, looks okay – but who’s IFCO Enterprises, Inc. (PA)?
    2074/0001 1. Application to amend certificate of authority for foreign business doing business in PA to change the name of the company with authority from Invisible Fence Company, Inc. to IFCO Enterprises, Inc. (dated Nov. 18, 1997)
    2. Certificate of Dissolution of IFCO Enterprises, Inc. (DE) (dated March 27, 1999)
    3. Articles of Domestication of Foreign Corporation in PA of IFCO Enterprises, Inc. (dated March 27, 1999)    		 Change of name; conveying party Invisible Fence Company, Inc. (DE) to receiving party IFCO Enterprises, Inc. (PA) Conveyance type: Letters of Administration Ah, that’s who IFCO Enterprises, Inc. (PA) is. And not really a change of name at all.
    2383/0194 Assignment from IFCO Enterprises, Inc. (PA) to Canine Acquisition Company, Inc. (dated Jan. 24, 2001) No type of transaction given; conveying party Canine Acquisition Company, Inc. to receiving party Innotek Pet Products, Inc. Conveyance type: Assigns the Entire Interest What? Grabbed the wrong cover sheet on that one. What it does suggest, though, is that Canine “Acquisition” Co. might be some kind of transactional vehicle, and that a further transaction assigning the marks to the parent was at least contemplated. But the document itself is clear that Canine Acquisition Company, Inc. is the owner of the marks.
    2475/0651 Same document as above Corrected assignment; conveying party IFCO Enterprises, Inc. (PA) to receiving party Canine Acquisition Company, Inc. Conveyance type: Corrective Assignment to Correct the Name of the Assignor and Assignee Previously Recorded at Reel 002383 Frame 0194 Okay, it’s all fixed.
    2475/0858 Amendment to Certificate of Incorporation, changing the name of Canine Acquisition Company, Inc. to Invisible Fence, Inc. (dated Jan. 25, 2001) Change of name; conveying party Canine Acquisition Company, Inc. to receiving party Invisible Fence, Inc. Conveyance type: Change of Name Phew, this one looks alright. Looks like they decided to keep the marks in the sub instead of assigning up to the parent.
    3164/0588 Contingent Patent, Trademark and License Assignment, where Canine Acquisition Company, Inc. grants a “lien and security interest” in the trademarks to National City Bank to secure credit on its own and Innotek, Inc.’s behalf (dated Jan. 25, 2001) Security interest; conveying party Innotek, Inc. to receiving party National City Bank Conveyance type: Security Interest Whoa, that was a mistake on the cover sheet. It’s clear in the document that the conveying party is Canine Acquisition Company, Inc., not Innotek
    3396/0316 Trademark Collateral Agreement, where Invisible Fence, Inc. pledges the trademarks as collateral to Fifth Third Bank as administrative agent for creditors (dated Sep. 15, 2006) Security agreement; conveying party Invisible Fence, Inc. to receiving party Fifth Third Bank, as Administrative Agent Conveyance type: Security Agreement Looks okay.
    3397/0226 Release of Contingent Patent, Trademark and License Assignments, releasing Invisible Fence, Inc. (f/k/a Canine Acquisitions Corp.) and Innotek, Inc. (dated Sep. 15, 2006) Release of Security Interest Recorded on September 23, 2005 at Reel/Frame No. 3164/0588; conveying party National City Bank to receiving party Innotek, Inc. Conveyance type: Release of Security Interest Recorded on September 23, 2005 at Reel/Frame No. 3164/0588 The cover sheet perpetuates the error made in the original grant of the contingent assignment, which listed the wrong conveying party. Do you go with the flow and list the wrong party so the chain looks correct in the database? But the document itself is clear.
    3398/0025 Same document as above Release of Assignment; conveying party National Banking Association to receiving party Innotek, Inc. Conveyance type: Release of Assignment The same document was filed by two different attorneys. And who’s “National Banking Association”? That name isn’t one listed as a party. So this recordation has BOTH parties wrong.
    So, all in all, apparently it IS rocket science. If you look at what the documents say, it’s a clean chain of title – Invisible Fence Company, Inc. changed its name to IFCO Enterprises, Inc. (DE), which assigned the marks to IFCO Enterprises, Inc. (PA), which assigned them to Canine Acquisition Company, Inc., which changed its name to Invisible Fence, Inc., the plaintiff. The security interests were all properly done. At the moment, it looks like the marks are pledged as collateral to Fifth Third Bank, but there was no assignment of them. But the recordation of the documents is nothing but a series of mistakes and compounding errors, suggesting that Innotek, if not a bank, might own the marks, and ultimately leading the court to toss up its hands and put the whole problem off until another day. If the recordation record was cleaner, would the defendant have bothered challenging standing?
    And another reason to always file under § 43(a)? If your registration is deemed invalid for some reason.

    Invisible Fence, Inc. v. Fido’s Fences, Inc., No. 3:09-cv-25, 2009 WL 2601857 (E.D. Tenn. Aug. 20, 2009). Assignment documents available on Scribd. The filing with the court was a hot mess too: “In its memorandum, plaintiff referred to each of these documents by the reel and frame number . . . . As the exhibit was submitted in seventeen different documents, however, without any master index for the reel and frame numbers, this citation method was actually very inconvenient for the court.” Here, here.

    © 2009 Pamela Chestek

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  • “I Didn’t Mention It Was Just a License?”

    Defendant Smith used the mark “Suncrest” for his hair replacement business “Best Hair Replacement Manufacturers, Inc.” (“BHRM”). Wendy Wan owned First Fashion Hong Kong, a wholesale supplier of hair replacement products. Smith was a customer and a friend of Wan. Smith’s business was going under, so he, Wan, and a third person, Friendy, started a new business, plaintiff First Fashion USA, Inc. Wan and Friendy contributed a substantial amount of inventory and capital. Smith didn’t have any money to contribute, so he contributed the assets of his business. Smith says that he didn’t discuss the ownership of the trademark with Wan and Friendy. Smith ran the new business, which used the “Suncrest” mark extensively.

    Smith then did some unsavory things, like stealing from the business, and was eventually ousted. He then reactivated BHRM and resumed using “Suncrest.” Confusion ensued. Wan and Friendy said that the trademark was transferred to the new business; Smith says he only gave an implied license to use the trademark.

    The court disposed of the legal standard briefly: “The law presumes that when a business is conveyed, its trade name and good will are also conveyed” unless there is “express evidence to the contrary.” Wan and Friendy contributed cash but Smith didn’t, which meant his contribution was his business, including the trademark. That was Wan and Friendy’s understanding, and Smith admitted he never talked to them about retaining rights in the trademark. Smith is thus preliminarily enjoined from using SUNCREST.

    As an aside, who gives control of a business to a person who’s getting out of his own because it’s failing?

    First Fashion USA, Inc. v. Best Hair Replacement Manufacturers, Inc., No. 09-60938-CIV, 2009 WL 2252249 (S.D. Fla. July 28, 2009).

    © 2009 Pamela Chestek

  • “Lizzie Borden B&B wins trademark patent”

    Yes, that’s the unfortunate headline of the article in the The Herald News, “News of the Southcoast.” The Fall River, Massachusetts “Lizzie Borden Bed and Breakfast/Museum” sued the Salem, Massachusetts “True Story of Lizzie Borden Gift Shop and Museum” and they settled (previously blogged here and here). The Fall River business now has a federal trademark “patent,” um, registration, for promotional goods. The Salem business is now called “The 40 Whacks Museum.”
    Bonus feature, an article about an author who wrote a self-published book exonerating Lizzie, after Lizzie’s sister Emma confessed to her in a dream.

    © 2009 Pamela Chestek

  • News Flash: Patents Can Be Transferred by Operation of Law

    The patent blogs are reporting on a new decision by the Federal Circuit, affirming that transfer of ownership of a patent can occur not only by assignment and through intestacy, but also by the operation of law when a holder of a security interest exercises its right to sell the collateral. Good thing, as the court pointed out:

    The policy justifications for permitting transfers of patent ownership through operation of law without a writing also support our holding. First, if foreclosure on security interests secured by patent collateral could not transfer ownership to the secured creditor, a large number of patent titles presently subject to security interests may be invalidated. Any secured creditor who maintained an interest in patent collateral would be in danger of losing its rights in such collateral. Second, by restricting transfer of patent ownership only to assignments, the value of patents could significantly diminish because patent owners would be limited in their ability to use patents as collateral or pledged security. Lastly, it would be impractical to require secured parties to seek out written assignments following foreclosure from businesses that may have ceased to exist.

    Patent Prospector here.

    Patently-O here.
    The 271 Patent Blog here.
    Sky Technologies, LLC v. SAP AG, No. 2008-1606 (Fed. Cir. August 20, 2009).

    © 2009 Pamela Chestek

  • Three Chocolate Companies Run Three Different Ways

    If you’re interested in trademark management in large enterprises, or management of large enterprises in general, there’s an interesting decision in a multidistrict antitrust case against the chocolate candy industry. The opinion discusses whether the court has personal jurisdiction over some of the foreign family members of Cadbury, Mars and Nestlé. The case also provides great insight into how companies in the same business can be so different in their management style and structure.
    For Mars, the issue was whether Mars Canada was subject to the jurisdiction of U.S. courts. Mars Canada owns the trademarks it uses in the Canadian market.
    For Nestlé, it was whether the ultimate parent, Nestlé S.A. (of Switzerland) and Nestlé Canada were subject to U.S. jurisdiction. The Nestlé trademarks are owned by Swiss subsidiary Société des Produits Nestlé S.A. and the patents held by Swiss subsidiary Nestec, S.A., with royalties paid to the parent. Employees called regional intellectual property advisors (RIPAs) are liaisons between the IP companies and the operating companies.
    For Cadbury Schweppes (now split into Cadbury plc and Cadbury Holdings), it was whether the parent (plc) and its single subsidiary (Holdings), both British companies, were subject to U.S. jurisdiction. Unfortunately there’s no discussion of the trademark ownership, and the manufacturing isn’t entirely clear from the decision either – the decision says that in the late 1980’s Cadbury Schweppes withdrew from the U.S. market and Hershey became the U.S. trademark licensee for Cadbury-branded goods, but it’s also clear from the decision that Cadbury has its own U.S. business too.
    The opinion explains in detail how each of the parents manage their global businesses. It ranges from very little control (in the case of Mars) to a great deal of control (in the case of Cadbury). For all three companies, the court analyzed whether the foreign entity so controlled its U.S. entity that the two were alter egos. The court used the following factors to decide – note that trademarks plays a significant part:

    (1) the parent owns all or a significant majority of the subsidiary’s stock,

    (2) commonality of officers or directors exists between the two corporations,
    (3) the group possesses a unified marketing image, including common branding of products,
    (4) corporate insignias, trademarks, and logos are uniform across corporate boundaries,
    (5) group members share employees,
    (6) the parent has integrated its sales and distribution systems with those of its subsidiaries,
    (7) the corporations exchange or share managerial or supervisory personnel,
    (8) the subsidiary performs business functions that would ordinarily be handled by a parent corporation,
    (9) the parent uses the subsidiary as a marketing division or as an exclusive distributor, and
    (10) the parent exercises control or provides instruction to the subsidiary’s officers and directors.

    Evaluating all the factors, Mars Canada, Nestlé S.A., and Nestlé Canada weren’t alter egos of their U.S. entities; Cadbury plc and Cadbury Holdings were, even though Cadbury USA was not named as a party. The case is a roadmap for how to exercise adequate control over the use of marks while still maintaining the separate corporate identities of the enterprise family members.

    In re Chocolate Confectionary Antitrust Litigation, No. 1:08-MDL-1935, — F.Supp.2d —-, 2009 WL 2447992 (M.D. Pa. Aug. 11, 2009).


    © 2009 Pamela Chestek

  • Just Get Over It

    Janky v. Lake County Convention and Visitors Bureau is not a precedent-changing decision.  But you know you’re in for an entertaining read when a case starts:
    This over-litigated case, involving a song by a doo-wop group, comes to us with 18 district court orders and memorandum opinions spread over a combined 239 pages.  The district court’s 46-page docket contains a staggering 371 entries.  And the briefs of the parties on appeal are a bit unfocused to say the least.  But although it’s a tough job, someone has to do it, so with shoulder to the wheel, we forge on.

    Defendant Lake County Convention Center was commissioning a song to promote the county.  Plaintiff Janky and co-defendant Farag were both members of a doo-wop group called “Stormy Weather,” and Farag suggested that the band write a song.  Janky then wrote a song and lyrics by herself and registered the copyright in it.  Farag suggested some changes, which Janky made.  She then registered the copyright in the revised work, listing Farag as a co-author who provided additional lyrics and characterizing it as a joint work.  She also filed with the American Society of Composers, Authors and Publishers (ASCAP), saying that Farag held a 10 percent ownership share.  Farag subsequently gave the Convention Center a license to use the work, which the Convention Center did for a number of years.  In 2003, Janky filed another copyright registration to correct the previous registration, this time listing herself as the sole author.  Janky then sued the Convention Center, Farag, and others alleging copyright infringement.
    The district court held on summary judgment that Janky was the sole owner of the copyright and awarded her $100,000.  The Court of Appeals for the Seventh Circuit reversed, finding that instead it was a work of joint authorship and thus the Convention Center a licensee, not an infringer.  The lesson seems a pretty easy one – don’t file a copyright application listing someone as a joint author and later claim you didn’t intend that the work be one of joint authorship, especially in a circuit that is quick to substitute its own judgment for that of the trial court:
    More important, however, is the evidence of intent supplied by Janky herself.  We observed in Erickson that crediting another person as a co-author is strong evidence of intent to create a joint work.  In this case, we have such an acknowledgement–Janky named Farag as coauthor and deemed the song a “joint work.”  Janky’s post hoc rationalization–that she only intended to express her gratitude–is simply at odds with the significant contributions made by Farag and Janky’s identification of Farag as a co-author in the copyright registration form.  Just as litigants “cannot create sham issues of fact with affidavits that contradict their prior depositions,” Janky’s affidavit cutting the other way is entitled to little weight.  A reasonable jury could only conclude that Janky and Farag intended to create a joint work.

    So instead of summary judgment for the plaintiff, summary judgment for the defendant.  Judge Ripple, in dissent, criticized the majority for its overreach in deciding that there was both intent to create a work of joint authorship on Farag’s part and that Farag’s portion was independently copyrightable (as required under 7th Circuit precedent).
    But there’s so much more going on in this case.  The appeals court remarked numerous times on the size of the record in its case, but that’s not the half of it.  A few days before the appeals decision, a district court granted sanctions against plaintiffs’ attorneys, Gregory J. Reed and Stephanie L. Hammonds, as well as plaintiff Cheryl Janky, in a subsequent suit between the same parties.  This lower court opinion tells a story of at least three lawsuits, two federal cases and one state case, all about this situation.  It described how the $100,000 award had already been eaten up by attorneys’ fees before trial and described the multiplicity of motions filed by both sides.  It documented other cases where the same lawyers were sanctioned, and further prohibited them from filing any further complaints on behalf of Cheryl Janky.  This is a a blood feud, fed by both the lawyers and the litigants.
    Janky v. Lake County Convention & Visitors Bureau, Nos. 07-2350, 07-2762, 08-1606, — F.3d. —-, 2009 WL 2357929 (7th Cir. Aug. 3, 2009).
    Janky v Tatistatos, No. 2:07-CV-339 PPS APR, 2009 WL 2382324 (N.D. Ind. July 31, 2009).

    © 2009 Pamela Chestek

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