Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Standing No More

    Medtronic Sofamor Danek USA, Inc. v. Globus Medical, Inc. is another effort by a patent-owning enterprise to try to have its cake and eat it too. The problems start when the company that owns the patents isn’t the manufacturing arm, so the patents are licensed to a sister (child, parent, cousin, etc., etc.) company. It’s sometimes done for tax purposes. The result is that the plaintiff may not actually have standing, and there may be limitations on the damages available.

    It appears Medtronic put some effort into trying to conquer the beast with its licensing strategy. Co-plaintiff and Medtronic family member Warsaw Orthopedic, Inc. was the owner of the patents in suit. Warsaw granted patent licenses to family members Medtronic Puerto Rico Operations Co., Medtronic Sofamor Danek Deggendorf, GmbH, and Medtronic Sofamor Danek USA, Inc. The four were parties to the suit.

    Defendant Globus challenged the four companies’ standing. After describing the three categories of ownership (those that can sue in their own name alone, i.e., owners, those that can sue if the patent owner is joined, i.e., exclusive licensees, and those that can’t sue, i.e., non-exclusive licensees), the court evaluated each of the companies’ ownership interest in the patent. Warsaw was fine as the owner. The parties had also prepared for the threat to the licensees’ standing, set up by the license agreement to argue they were “co-exclusive” licensees: “Licensor grants to Licensee the Co-exclusive right to use, develop, enjoy, and enforce the Intellectual Property Rights . . . .”

    But the court wasn’t fooled; the argument was a no go. Warsaw had retained the right in the various agreements to grant other licenses. That was enough to defeat the “co-exclusive” licensees’ claim of exclusionary rights, even though in some cases Warsaw could only grant further licenses to other family members. The three Medtronic companies had no standing.

    Why does it matter if the patent owner was a party? Damages. If the licensees’ claim of exclusionary rights stuck, they would have been entitled to lost profits. Warsaw, as a non-manufacturing licensor, conceded it had no lost profits, so its damages were limited to a reasonable royalty.

    There’s also a lesson Medtronic will never forget – the court must always consider constitutional standing, whether the parties stipulate to it or not. Maybe it was a dirty play, but the parties stipulated that “Plaintiff Warsaw is the owner, by assignment, of [the patents in suit]. Plaintiffs Medtronic USA, Inc., Medtronic Puerto Rico Operations, Co., and Medtronic Deggendorf, GmbH are co-exclusive licensees of the [patents in suit] and, together with plaintiff Warsaw, share the exclusive right to bring suit for infringement of the patents.” But that isn’t good enough to divest the court of jurisdiction over the question. The plaintiffs moved to re-open the record to add evidence of Warsaw’s lost profits in light of the late-breaking theory, but Medtronic had enough clues that the defendant hadn’t waived the argument that the motion was denied.

    Medtronic Sofamor Danek USA, Inc. v. Globus Medical, Inc., Civ. No. 06-4248, 2009 WL 2138486 (E.D. Pa. July 15, 2009).

    © 2009 Pamela Chestek

  • Do Ethnic Slurs Mean a New Trial?

    The National Law Journal is reporting (free subscription required) that four organizations – the Anti-Defamation League, the Public Affairs Alliance of Iranian Americans, the Iranian Americans Jewish Federation and the Iranian American Bar Association – filed an amicus brief in the Court of Appeals for the 9th Circuit, asking the court to grant a new trial in the Bratz case. The district court had denied a new trial after dismissing a juror for stating during deliberations that Iranians were “stubborn,” “rude” and “thieves” who had “stolen others people’s ideas” (blogged here). One of the defendants, Isaac Larian, who is MGA’s chief executive, is Iranian-American.

    Docket number 09-55673 or 09-55812 (not sure which, or both); brief not yet publicly available.

    © 2009 Pamela Chestek

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  • Leibovitz Postcard Anyone?

    News stories are reporting that renowned photographer Annie Leibovitz has used – well, something – as collateral for a $24 million loan that is due in September. The New York Times reports it this way:

    On July 29, Ms. Leibovitz was sued in State Supreme Court for nonpayment by a company that had lent her $24 million, and which demanded access to her homes so it could begin the process of selling them to satisfy her debt. Ms. Leibovitz had taken out the loan last year, pledging as collateral properties in Greenwich Village and in Rhinebeck, N.Y., her negatives and the rights to her photographs.

    Morning Edition on National Public Radio only serves to confuse:

    Last year, Leibovitz went to Art Capital Group — which Salkin describes as “basically a high-end pawn shop” — for a loan. “Anybody can go to them with their artworks — their Cezannes, Picassos — and get a loan against them, up to 40 percent of the appraised value,” he says.

    The statement suggests that one is getting a loan against possession of the tangible objects, the paintings. The Art Capital Group’s web site also seems to only contemplate financing using the tangible objects, not the copyright in them. But the New York Times reference to using the “rights” as collateral suggests that Art Capital Group might have some kind of ownership interest in the copyrights themselves. Assignment, license? I can’t imagine that Art Capital Group would flub that piece of the action, although an interesting exercise to contemplate. If it has the negatives but not the copyrights, does it have an implied license to make new prints to sell? Just direct prints or other types of reproductions, like postcards?

    I imagine Ms. Leibovitz’s lawyers are having a good crack at the contract.

    © 2009 Pamela Chestek

  • Stitch in Time

    Changes of ownership of intellectual property rights are sometimes done in a series of transactions all executed at generally the same time. For example, when acquiring assets, they might first be assigned to an acquisition company, the acquisition company merged into the purchaser, the seller dissolved, and the purchasing company’s name changed to the name of the original seller. Good practice is to execute and record the documents in order.

    And sometimes there are cases that remind us to keep up the good practices. Tracfone Wireless, Inc. owned a number of trademarks and copyrights. The intellectual property assets were assigned from Tracfone Wireless, Inc. (Florida) to Tracfone Wireless, Inc. (Delaware). On the same day, Tracfone Wireless, Inc. (Florida) became Tracfone Wireless, LLC. The defendants in the suit argued that the LLC was the true owner of the assets, not the plaintiff, Tracfone Wireless, Inc. (Delaware). Tracfone parried (through a declaration from a senior vice president) that the assignment was executed before the Certificate of Conversion. The court decided:

    [T]he only evidence in the record is the declaration by Jill Garcia that clearly evinces the intention of the Florida corporation to assign its intellectual property rights to Plaintiff before it was converted to a new business entity. See Hinote v. Brigman, 33 So. 303, 305-06 (Fla.1902) (“if the party sought to be charged intended to close a contract prior to the formal signing of a written draft, or if he signified such an intention to the other party, he will be bound by the contract actually made, though the signing of the written draft be omitted. If, on the other hand, such party neither had nor signified such an intention to close the contract until it was fully expressed in a written instrument and attested by signatures, then he will not be bound until the signatures are affixed.”) (emphasis added). As there is no evidence that there was an intent for the conversion to take place prior to the time it was executed, I find that the evidence in the record indicates the assignment was consummated and therefore took effect prior to the conversion. Accordingly, Plaintiff is the owner of the trademarks and copyright at issue in this action and subject matter jurisdiction is proper.

    At least the court was not pleased with the defendant’s ploy, but unfortunately for plaintiff not displeased enough. Plaintiff had moved for sanctions:

    Plaintiff claims that Defendants’ position as to subject matter jurisdiction was frivolous and unsupported by the law. Specifically, Plaintiff represents that it explained to counsel for Defendants the circumstances surrounding the assignment of the intellectual property rights to Plaintiff and requested Defendants to withdraw their Motion. The Defendants’ position is without merit, and these circumstances present a close call as to whether imposition of sanctions would be appropriate. Defendants fail to recognize or address, either in their pleadings or at oral argument, that the crux of the question here is whether the assignment took place prior to the conversion becoming effective. The sole reliance on Fla. Stat. § 607.1114(2) is insufficient. However, because it is at least a colorable argument, I do not find it so frivolous or unsupported by law to warrant the imposition of sanctions. The Motion for Rule 11 Sanctions is accordingly denied.

    Tracfone Wireless, Inc. v. Access Telecom, Inc., No. 09-20397-CIV-Gold/McAliley, 2009 WL 2207818 (S.D. Fla. July 24, 2009).

    © 2009 Pamela Chestek

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  • Seizing Cuban Trademarks

    The IPKat reports on an effort in a Florida court to seize trademarks owned by the Cuban government in order to satisfy a judgment against it. The Miami Herald does a great job of explaining a complicated situation. I can’t improve on it, other than to provide a search query if you’re interested in seeing the marks at play. Cut and paste this query into the freeform search at the USPTO web site to see the marks:

    (“CUBANA DEL TABACO”.on. or (“CUBANA EXPORTADORA”.on. and rum.gs.) or ETECSA.on. ) and live.ld.

    The family of the late Bobby Fuller might accomplish what the U.S. government has been trying to do for years, refuse the Cuban government trademark rights in the U.S.

    © 2009 Pamela Chestek

  • MGA Now Has Moxie

    Never resisting the urge to be defiant, MGA Entertainment announced that it has a new line of dolls called “Moxie Girlz.”

    mox⋅ie /ˈmɒksi
    –noun Slang.
    1. vigor; verve; pep.
    2. courage and aggressiveness; nerve.
    3. skill; know-how.

    Provocative name for a provocative event. You be the judge whether they infringe the copyright in Bratz.

    (Moxie Girlz)

    (Bratz)

    © 2009 Pamela Chestek

  • Mongols Can Wear Their Colors

    An anonymous commenter to a previous blog post provided a link to today’s opinion finding that the government seizure of the Mongols trademark in United States v. Cavazos was not proper under the RICO statute. You may recall it was widely reported back in October, 2008 that the government had seized the registered trademark of a biker club, the Mongols, and obtained an order allowing the ATF to seize all products, including clothing, bearing the Mongols trademark. It seemed a creative ploy even at the time, and props for trying.

    Today’s decision was in a civil case brought by a member of the Mongols Motorcycle Club, who filed a motion for a preliminary injunction alleging that he cannot wear his colors because the government will seize them – indeed, the ATF has seized items bearing the trademark from those not charged in the Cavazos action. After finding the club member had standing to challenge the seizure order in the RICO case, the court went on to conclude that the trademark seizure was improper. The Mongols trademark was originally owned by an unincorporated association, Mongol Nation, and was assigned to a corporation, Mongols Nation Motorcycle Club Inc. Under California law, property acquired by an unincorporated association is property of the association, not the members individually. Since a forfeiture under RICO is in personam, not in rem, and the unincorporated association was a third party to the RICO action, it was improper for the government to have seized the trademark.

    Criminal and RICO law are not my forte. Any comments on how this opinion affects the Cavazos action greatly appreciated. I also found it interesting that it was the same judge on both cases, and would be interested to know whether that was by design or happenstance.

    Every trademark practitioner should also read the section about how the seizure of a collective mark (or rather seizure of the clothing bearing the mark) implicates the First Amendment freedom of speech and association.

    Rivera v. United States, No. 2:09-cv-2435-FMC-VBKx (C.D. Calif. Aug. 3, 2009).

    © 2009 Pamela Chestek

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  • The Elephant in the Dark

    Knight’s Armament Company and Optical Systems Technology, Inc. (OSTI) collaborated on the production of “clip-on in-line night vision devices” (CNVD), night scopes for use in low light conditions to be placed on a rifle immediately in front of the regular scope. Knight’s Armament contracted to provide the scopes, which were manufactured by OSTI. The contracts referred to the scopes by different names, including KNIGHTSCOPE, UNIVERSAL NIGHT SIGHT and the initialism for the phrase, UNS.

    There wouldn’t be a lawsuit if there hadn’t been a falling out. It started in 2003 when the parties disagreed over who owned the underlying technology and ended up in the instant lawsuit in 2007. By then, Knight’s Armament had filed trademark applications for the the marks KNIGHTSCOPE, UNIVERSAL NIGHT SIGHT, UNIVERSAL NIGHT SCOPE (not mentioned in the case) and UNS, successfully registering KNIGHTSCOPE and UNS and abandoning the application for UNIVERSAL NIGHT SIGHT. OSTI eventually tumbled to the registration of UNS and filed a petition to cancel it; it also filed its own applications for not only UNIVERSAL NIGHT SIGHT and UNS, but also for UNIVERSAL NIGHT SCOPE, MAGNUM UNIVERSAL NIGHT SIGHT and its initialism MUNS, and DUALBAND UNIVERSAL NIGHT SIGHT and its initialism DUNS. Knight’s Armament also had an attorney re-file a new application for UNIVERSAL NIGHT SIGHT.

    Knight’s Armament ultimately sued OSTI for trademark infringement, claiming that OSTI’s use of UNS, UNIVERSAL NIGHT SIGHT, MUNS, MAGNUM UNIVERSAL NIGHT SIGHT, DUNS, DUALBAND UNIVERSAL NIGHT SIGHT and UNIVERSAL NIGHT SCOPE was infringing.*

    The central issue was therefore who owned UNIVERSAL NIGHT SIGHT and UNS. The court used the Planetary Motion v. Techsplosion analysis to decide. Under Planetary Motion, the first question is whether a party can show it adopted a mark and the second is whether it demonstrated that the mark was used “in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark” under the totality of the circumstances.

    While this test may be appropriate for deciding whether a mark has been sufficiently public to have enforceable rights, I’m skeptical that this is the correct analysis for the situation where two entities claim to own the same mark. In this case, both parties used the same evidence to support their respective claims to ownership. The first use was in 2000, after Knight’s Armament and OSTI together pitched the Department of Defense Special Operations Command. OSTI subsequently wrote the spec for the night scopes using the terms “UNS” and “Universal Night Sight,” which were then used by the Special Ops Command in the Statement of Work it sent to Knight’s Armament. Knight’s Armament relied on the SOW as evidence that the Special Ops Command had adopted Knight’s Armament’s marks; the court instead found this evidence of OSTI’s ownership, since it was because of OSTI’s earlier use in the spec.

    Correctly analyzed or not, at the end of the day the court decided that UNS and UNIVERSAL NIGHT SCOPE were owned by OSTI. Therefore, any infringement claims based on Knight’s Armament’s ownership of those marks failed.

    As I see it, the elephant in the room, for UNIVERAL NIGHT SCOPE at least, is genericism. Since both parties claimed to own the phrase, neither was motivated to challenge the distinctiveness of it. Thus the court never analyzed whether that or UNS were marks at all, despite some remarkable statements in the opinion showing that both parties didn’t treat them that way.

    For example, there was evidence that Knight’s Armament would submit documents to the government using “Knightscope” and the government would return them saying “UNS” and “Universal Night Scope.” The opinion said this: “Knight speculated that [the government contact] called it the Universal Night Sight because [Knight’s Armament] was ‘calling it Knightscope and [Special Ops Command] wanted it to be something generic’”; likewise “Knight testified that [Knight’s Armament] persisted in calling the CNVD the KNIGHTSCOPE despite what he believed was the government’s attempt to affix the ‘generic’ Universal Night Sight and UNS labels.” Knight’s Armament had this in a response to a Request For Quote: “Knights Armament Company can supply the (4) Universal Night Sights with the modifications described in Section C of your request . . . .” This was on documents written by OSTI: “The Universal Night Sight (UNS) has been developed entirely by [OSTI] funds and OSTI maintains all right, title, and interest in and to the UNS. Nothing in this proposal . . . shall convey, transfer, assign any right or interest, whatsoever, in the UNS . . . “, and “[Knight’s Armament] is pleased to propose the Universal Night Sight . . . . The Universal Night Sight (Knightscope Model 007) . . . .” The court also blithely attributed statements about “Universal Night Sights” (including quotation marks) as evidence of use as a mark by OSTI.

    But Knight’s Armament’s second application successfully traversed a descriptiveness refusal by disclaiming NIGHT SIGHT and explaining the night sights aren’t “universal”:

    (click to enlarge)

    The mark was subsequently published for the Principal Register without a Section 2(f) claim, now opposed.

    Knight’s Armament Co. v. Optical Sys. Tech., Inc., NO. 6:07-cv-1323-Or1-2DAB, 2009 WL 2137163 (M.D. Fla. July 7, 2009).

    * There were also allegations of infringement by OSTI’s use of KNIGHTSCOPE, UNIVERSAL KNIGHTSCOPE and UKS, but the ownership of KNIGHTSCOPE was not disputed.

    © 2009 Pamela Chestek

  • It Wasn’t the Royal “We”

    Third Education Group, Inc. v. Phelps is a short, clean, decision on trademark ownership. Richard Phelps wanted to create a web-based journal and asked Thompson to join him in the endeavor. Phelps thought of the name “Third Education Group” and registered the trademark in his own name. The parties had a falling out and ownership of the trademark was disputed.

    Without any tedious multi-factor tests or legal standard cited, the court distilled it down quickly:

    Although it is undisputed that the name Third Education Group was Phelps’ creation, it is similarly undisputed that Phelps created this name not to be his own property but as the name of the voluntary association he entered into with Thompson. (See Docket No. 67-5. (“I think we should call ourselves ‘Third Education Group,’ or something like it….”).) And it is further undisputed that, at least prior to the registration, the mark had never been used by Phelps individually but only on behalf of TEG. (See, e.g., Emails from Phelps to Thompson, Docket No. 73-2 at 26 (“I already got us a trademark and domain.”); Docket No. 73-2 at 190 (“I got a card from the U.S. Patent Office a few weeks ago notifying us that they would post our name for a month (July) to give any other potential claimants to the name or complainants in general the opportunity to challenge our right to the name.”); Docket No. 73-2 at 219 (“I haven’t heard about our trademark.”) (emphasis added in each)). Thus, the name belonged to the association and not to Phelps personally.

    Phelps therefore didn’t own the mark, so the application wasn’t filed in the name of the owner of the mark and the registration was void. In the court’s opinion, the registration should have been made in the name of the two as joint owners. Multiple claims fall as a result.

    Here’s a practice tip: a voluntary association can register a trademark only if its existence is in a state where this type of entity has the capacity to sue and be sued. Lanham Act § 45, 15 U.S.C. § 1127 (“The term ‘juristic person’ includes a firm, corporation, union, association, or other organization capable of suing and being sued in a court of law.”) Wisconsin isn’t one:

    Prior to its incorporation, TEG existed under Wisconsin law as a voluntary association between Phelps and Thompson. A voluntary association “is a name applied to a group of individuals who have joined together for a certain object and who are called, for convenience, by a common name.” Herman v. United Auto., etc., Implement Workers, 264 Wis. 562, 567, 59 N.W.2d 475, 477 (1953). As a voluntary association, TEG lacked the capacity to sue or to be sued, Elections Bd. v. Ward, 105 Wis.2d 543, 546, 314 N.W.2d 120, 123 (1982) (citing Crawley v. American Society of Equity, 153 Wis. 13, 17, 139 N.W. 734 (1913)); but see Teubert v. Wisconsin Interscholastic Athletic Asso., 8 Wis.2d 373, 99 N.W.2d 100 (1959), and thus, contrary to the assertion of TEG, Inc./Thompson, TEG was not a juristic person, see 15 U.S.C. § 1127, capable of registering the trademark, see 15 U.S.C. § 1051. Rather, a voluntary association acts through its individual members.

    As an aside, hat’s off to the court for struggling through less than clear legal argument. You know it was tough going when the court had to figure out whether a theory of “estoppel” mean promissory estoppel or equitable estoppel.

    Third Education Group, Inc. v. Phelps, Nos. 07-C-1094, 07-C-1095, 2009 WL 2150686 (E.D. Wis. May 15, 2009).

    © 2009 Pamela Chestek

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  • Get a License

    Ryan Gile, the Las Vegas Trademark Attorney, reports on an interesting and complicated new lawsuit revolving around the ownership of the mark TROPICANA – for casinos and hotels, not orange juice.

    “The Tropicana’s famous roadside sign, a Las Vegas landmark dominating the Strip and welcoming arriving guests for a half-century.” (from the complaint).

    The complaint tells the story of the famous Tropicana hotel in Las Vegas, which opened in 1957. In 1979, Ramada became the owner of the hotel and named the operating company Hotel Ramada of Nevada, Inc. In 1989, the Ramada chain sold the stock of the Hotel Ramada of Nevada to Aztar Corporation. Part of the acquisition included the assignment of a pending trademark application for TROPICANA filed by Ramada, Inc. In 2006, Aztar Corporation’s stock was purchased by an entity now known as Tropicana Entertainment LLC, a defendant in the suit. According to the USPTO assignment database, the mark was thereafter assigned to Tropicana Entertainment LLC on September 12, 2007.

    On May 4, 2008, Tropicana Entertainment LLC (the parent of Aztar Corporation) and most of its subsidiaries filed for bankruptcy in Delaware under Chapter 11. As part of the reorganization, the lenders converted their claim in bankruptcy to equity ownership of the new entities formed to operate the Tropicana Las Vegas, the plaintiffs in the lawsuit. The trademark, though, would still be owned by Tropicana Entertainment LLC.

    Part of the original bankruptcy plan was for the Las Vegas hotel company to pay $10 million over five years to Tropicana Entertainment LLC for a license to the trademark. The former lenders objected to this provision, so, according to this motion filed in bankruptcy court, the plan was confirmed but with a reservation of the right to dispute the trademark issues until post-bankruptcy.

    Tropicana Entertainment then filed trademark applications for THE TROP LAS VEGAS EST. 1957, which could only mean the Tropicana Las Vegas. The new Las Vegas hotel owners took this as an opportunity to file a declaratory judgment action, asking the court to declare that the Las Vegas hotel be allowed to continue to use the name TROPICANA without a payment.

    What an interesting question about trademark ownership. The complaint tells a good yarn about the fame of the Tropicana Las Vegas:

    Clark County honored itself and the Tropicana by naming one of its major boulevards – Tropicana Avenue – after the storied property whose name is the subject of this lawsuit. The Tropicana name thus is not only an integral part of the hotel/casino itself and an integral part of Las Vegas history and legend, it is a name stamped indelibly on Las Vegas’ very geography.

    and its previously uncontested use of the mark:

    the Tropicana has enjoyed the use of its own name, without any demand for royalty or any attempt at interference by any of the entities that purported to register the name Tropicana as their own without any consideration to Hotel Ramada of Nevada.

    But while the Tropicana Las Vegas was the first casino to use the name, it concedes there are now other hotels that have the right to use the Tropicana mark. It therefore does not appear that there was necessarily anything untoward when a Ramada entity filed the original trademark application, when the application was then transferred to the new owner Aztar, or when Aztar assigned the registration up to its new corporate parent. Perhaps what went wrong is that it does not appear there was any formal license for the Tropicana Las Vegas to use the mark. That’s all well and good when everything stays in the family, but it’s the nature of the corporate enterprise that parts get split off voluntarily or, as in this case, involuntarily. So while the complaint spins a story of a stolen trademark, what it looks more like is a question of when and how the terms of an implied license can be changed. But there’s plenty of other fodder; the plaintiff hasn’t conceded that the original registration or any of the subsequent assignments were valid. This will be really interesting to watch.

    P.S. TROPICANA is an example of how not to use and license a trademark. While the court documents state that there are several legitimate licensees of the Tropicana mark and I could find a number of hotels using the name “Tropicana,” there is no consistency in logos or appearance whatsoever. Some appeared to be entirely unrelated, making one wonder about the exclusivity of use of the Tropicana mark by the parties. I couldn’t even tell if this was the legitimate site of the parent entity.

    © 2009 Pamela Chestek

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