Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Was It a License or an Assignment?

    Steve Saleen’s SMS 460

    Steve Saleen makes high performance cars. He sold Saleen, Inc. in 2003 and left the company altogether in 2007. In 2008 Steve Saleen started a new company, Steve Saleen’s SMS Supercars. Saleen, Inc’s assets, including the right to use “Saleen” for superchargers, aftermarket parts and high-performance vehicles, was sold to MJ Acquistions earlier this year and Saleen, Inc. ceased operations.

    SMS Supercars and MJ Acquisitions are both showing cars at Mustang Week in Myrtle Beach, going on now. SMS Supercars will have the SMS 460 Mustang and MJ Acquisitions d/b/a Saleen Performance Vehicles will be there with an as-yet unnamed car. As you could have predicted, on July 17, Steve Saleen reportedly sued MJ Acquisitions in Superior Court in California, claiming that, while Saleen, Inc. may have had the right to use the name, successor MJ Acquisitions does not.

    The SMS Supercars press release on the suit is quoted here. MJ Acquisitions response quoted here. For what it’s worth, the trademark assignment database shows an assignment of the registrations. Assignment with reversion?

    © 2009 Pamela Chestek

  • Senior User to One’s Self

    When a case is captioned Protech Diamond Tools, Incorporation v. Protech Diamond Tool Inc., you know that there’s a fight about who owns a mark. Protech Diamond Tool is actually the second named defendant, but you get the idea.

    There are at least three different “Protech” entities mentioned in the suit.* The first is non-party Protech Diamond, Inc., an Oregon corporation (Protech Oregon). It markets and sells professional diamond-tip cutting tools designed by defendant David Liao. After starting Protech Oregon, Liao then moved to Canada and started defendant Protech Diamond Tools, Inc. (Protech Canada).


    Protech Canada marketed its products in the United States. Liao then created another company, plaintiff Protech Diamond Tools Incorporation (Protech San Leandro), that he jointly owned with Dennies Chung – Chung was 70% owner and Liao 30% owner.

    Protech San Leadro began distributing saw blades from Protech Canada using the Protech mark. Chung then filed an application with the U.S. Patent and Trademark Office in the name of Protech San Leandro for a logo form of the mark.

    Protech San Leandro later learned that Protech Canada had unsuccessfully tried to register the Protech Diamond mark in the U.S. several years earlier, so sent Protech Canada a cease and desist letter demanding that Protech Canada not use the Protech mark in the United States. Protech Canada responded by filing a petition to cancel the Protech San Leandro registration in August, 2006. Protech San Leandro filed the instant infringement suit in August, 2008.

    The ownership issue was raised defensively on a motion for preliminary injunction. Protech San Leandro had an incontestable registration – conclusive evidence of its ownership – so to avoid an injunction Protech Canada had to argue that it was entitled to the senior user defense of Section 15 of the Lanham Act: “Except . . . to the extent, if any, to which the use of a mark registered on the principal register infringes a valid right acquired under the law of any State or Territory by use of a mark or trade name continuing from a date prior to the date of registration under this chapter of such registered mark, the right of the registrant to use such registered mark . . . shall be incontestable . . . .”

    Under the totality of the circumstances standard described in Chance v. Pac-Tel Teletrac Inc., 242 F.3d 1151 (9th Cir. 2001), the court found that Protech Canada had made a prima facie showing of first use. Thus, Protech San Leandro’s had only a possible, not strong, likelihood of success on the merits. Protech San Leandro’s claim of immediate, irreparable harm was also undercut by its two-year delay in filing suit, so the motion for preliminary injunction was denied.

    Plaintiff’s web site here.

    Defendant’s web site here.

    Protech Diamond Tools, Incorporation v. Liao, No. C 08-3684 SBA, 2009 WL 1626587 (N.D. Cal. June 8, 2009).

    * A fourth entity, “Protech Diamand USA, Inc.,” is also listed as a defendant but plays no part in this decision.

    © 2009 Pamela Chestek

  • Is a Name Necessarily a Mark?

    (Joseph Abboud, 2005)

    In 2000, Joseph Abboud sold at least the trademarks for “Joseph Abboud” to his former company, JA Apparel Corp. Others have blogged on the Second Circuit’s reversal of the district court decision that had stopped menswear designer Joseph Abboud from using his own name to promote a new line of clothing he called “Jaz.” You can get the full run down of the legal reasoning in the court of appeals opinion here.

    (“Jaz” suit)

    What I wonder is how the lawsuit could have happened in the first place. In the Purchase and Sale Agreement, Abboud assigned to JA Apparel all right, title and interest in:

    (A) The names, trademarks, trade names, service marks, logos, insignias, and designations identified on Schedule 1.1(a)(A), and all trademark registrations and applications therefor, and the goodwill related thereto (collectively the “Trademarks”), together with all causes of action (and the proceeds thereof) in favor of [Abboud and Houndstooth] heretofore accrued or hereafter accruing with respect to any of the Trademarks, and all other Intellectual Property (as hereinafter defined).
    . . . .
    (C) All rights to use and apply for the registration of new trade names, trademarks, service marks, logos, insignias and designations containing the words “Joseph Abboud,” “designed by Joseph Abboud,” “by Joseph Abboud,” “JOE” or “JA,” or anything similar thereto or derivative thereof, either alone or in conjunction with other words or symbols (collectively, the “New Trademarks”), for any and all products or services.

    Essentially, the outcome turns on the meaning of the word “names” in subparagraph (A). Note that the word is missing from subparagraph (C). Schedule 1.1(a)(A) listed only trademark registrations and applications, not common law marks. The district court ruled as a matter of law that the agreement transferred all rights to the name Joseph Abboud, even precluding Abboud from using the name under the trademark fair use doctrine. The court of appeals found instead that the contract was ambiguous, which meant that the fair use defense might apply (HT to Rebecca Tushnet for pointing out the appeals court’s unnecessarily rigorous interpretation of the fair use doctrine), and remanded to the district court.

    JA Apparel paid 65.5 million dollars for the Joseph Abboud name, however exclusive the rights will ultimately turn out to be. At the same time, Joseph Abboud also executed a Personal Services Agreement, agreeing to provide ideas to JA Apparel for five years and agreeing not to compete with it for two more years after that. In other words, the parties contemplated the possibility that Abboud would be free to compete as a designer in seven years.

    How could there have been any doubt left in the transactional documents about how Joseph Abboud would subsequently be allowed to use his name? How could it not have been addressed explicitly? I can see that perhaps the issue was a deal-breaker, and it was way too big a deal to lose, so the parties just didn’t address it. But then you also know that the point will be litigated in seven years. If delaying the inevitable was the plan, and both sides wanted hooks in the documents to hang their theories, they succeeded well. The appeals court instructed the district court to admit extrinsic evidence to interpret the contract, leaving the situation to an even more uncertain fate.

    JA Apparel Corp. v. Abboud, No. 08-3181-CV, — F.3d —-, 2009 WL 1615694 (2d Cir. June 10, 2009).

    © 2009 Pamela Chestek

  • Smart Money in Movies

    The Netflix Prize is a million dollar award for “substantially improve the accuracy of predictions about how much someone is going to love a movie based on their movie preferences.” It’s now being reported that a team has met the requirements for winning the million dollars, but for a waiting period of 30 days allowing others to match their accomplishment.

    But what kind of rights does Netflix get out of it? The rules say this:

    After qualifying for either the Grand or Progress Prize and being verified by the Contest judges, as a condition to receiving either Prize, the winning individual and/or team must grant to Netflix (including its affiliates and subsidiaries, employees, agents, and contractors), an irrevocable, royalty free, fully paid up, worldwide non-exclusive license under the Participants’ copyrights, patents or other intellectual property rights in the winning algorithm (“Winning Algorithm”) to reproduce, distribute, display, and create derivative works from the Winning Algorithm and also to make, have made, use, sell, offer for sale, and import products that would otherwise infringe the Winning Algorithm. Except as encompassed in the concept of “have made”, this license will not include the right to grant further licenses or sublicenses.

    So Netflix gets a nonexclusive license – that’s it, not even the right to sublicense. In theory, another competitor, Blockbuster, say, could license the same algorithm, matching Netflix’s ability to predict what movies a viewer would like.

    Netflix could have written rules that required assigning ownership of the invention to it but instead it took the most liberal approach possible, allowing the inventors to retain the full scope of their intellectual property rights. I think that’s a very smart move on Netflix’s part. Look at the all-star cast of the potentially winning team – it includes two people in the statistics research department at AT&T Research, two machine learning experts at Commendo research and consulting in Austria, two engineers and founders of Pragmatic Theory in Montreal, and a senior scientist at Yahoo Research in Israel, most of whom had already won lesser prizes in the contest. These are sophisticated scientists. A million dollars divided seven ways after taxes isn’t life-changing, but what they can accomplish by further exploiting the rights could be huge.

    Netflix didn’t even take (not in the rules, anyway) an exclusive field of use license. Netflix might have been able to lock up this particular functionality for itself, giving itself a differentiation point from its competitors, but it didn’t. Instead, it decided to rely only on its business acumen to retain its leadership position in order to encourage as many contributors as possible to work on the task. My guess is that will prove to be the right decision.

    And the bonus thought for the day – what kinds of agreements do these inventors have with both their employers and each other on the intellectual property rights in the invention? It gets very complicated very fast.

    HT to MR for the question.

    © 2009 Pamela Chestek

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  • Small Comfort for MGA Entertainment

    At least the insurance company is coughing up something on the advertising injury clause. Not sure how much, “terms of the settlement were filed under seal so Mattel does not obtain ‘any strategic advantage through information obtained from the settlement agreement – including, but not limited to, information regarding the funding of MGA’s defense.’”

    (the picture? My first post was on Bratz one year ago today).

    © 2009 Pamela Chestek

  • Who Owns the Chirp?

    The TTAB recently decided a case about the registrability of a “chirp” made by Motorola phones. Motorola filed an application to register “an electronic chirp consisting of a tone at 1800 Hz played at a cadence of 24 milliseconds ON, 24 ms OFF, 24 ms ON, 24 ms OFF, 48 ms ON.” Nextel Communications opposed the application. As explained by The TTABlog, the bases for the decision were issue preclusion and lack of distinctiveness.

    It’s a more interesting story about understanding the fundamental function of a trademark, versus bare application of legal doctrine. Motorola manufactured the phones for Nextel; both claim to own the chirp. Motorola’s application for the opposed mark was filed on April 8, 2003 and the application published on November 2, 2004. Nextel timely filed an extension of time to oppose on December 1, 2004, then filed its own application on February 25, 2005 for the same mark and formally opposed Motorola’s application a week later, on March 2, 2005.

    Motorola made theoretical arguments, but the TTAB wasn’t buying it. Nextel uses the chirp in its advertising; Motorola claimed this supported its secondary meaning in the chirp. While it’s possible that third-party advertising can establish secondary meaning, in this case “we find that the impression created by the advertisements is that the advertiser is attempting to associate the chirp with ‘Nextel.’ Although applicant’s cellular telephones may have been placed in the commercials, in some cases prominently, it is still the ‘Nextel’ name and contact information that was being projected repeatedly to the recipient of these advertisements.”

    (note the chirp at the end of the commercial when the Nextel name is shown).

    Nextel had also commissioned two mall intercept surveys on secondary meaning. It asked participants whether they “associate that sound with any particular product or service.” If the answer was “yes,” the respondents were asked if there was one or more than one company, and the follow up question was to name the company or companies. Motorola used the surveys as proof of secondary meaning because a majority of survey respondents indicated the chirp was a single source identifier. Motorola’s problem? Fifty-three percent of the respondents identified “Nextel” as the sole source, with only 1.5% indentifying Motorola.

    Motorola argued that the name of the company is irrelevant since the “anonymous source rule” means that a consumer need not know the identity of the manufacturer. Not entirely true, says the TTAB: “the anonymous source rule is directed to the situation where a typical buyer would not know the corporate identity of the source. . . . There is no evidence to suggest that the survey respondents were somehow incorrect, confused, or that they were mistakenly indentifying opposer as the source for applicant’s cellular telephones.” Thus, the survey doesn’t help Motorola’s claim that the chirp has acquired distinctiveness for Motorola.

    But the TTAB was able to avoid deciding directly whether Nextel owned the chirp as a mark:

    Likewise, we do not consider opposer’s argument that, “Although the Nextel Chirp has acquired distinctiveness as a mark, Motorola does not own the mark. Nextel does.” Applicant objected to this argument as comprising “an unpleaded claim” of alleged non-ownership of the mark, but argued “in the event the Board allows Opposer to proceed on this ground, it fails on the merits.” We agree with applicant that this claim was not pleaded by opposer and we will not consider it at this juncture. Moreover, even had the claim been pleaded or we deemed the pleadings amended and considered the claim tried by implied consent, we would not necessarily reach this issue. That is, because we find that applicant has not established on this record that the chirp has acquired distinctiveness for applicant’s cellular telephones, we need not determine any ownership issue.

    But expect this evidence to show up as proof of secondary meaning in the chirp for Nextel in its suspended application, now that the Motorola application is out of the way. Or does the decision that the chirp doesn’t have secondary meaning at all preclude Nextel from claiming that it does? How will this opinion come back to haunt Nextel when Motorola opposes the Nextel application?

    There’s also the business question here – what did the contract say? Based on the dueling applications, it looks like the ownership of the chirp wasn’t contemplated by the parties. What happens if Nextel successfully establishes ownership of the chirp – is Motorola precluded from putting the chirp in phones for other carriers’ phones? If the use of the chirp as a trademark wasn’t contemplated in the contract, surely there’s no clarity in the contract on what to do about the chirp if Nextel ultimately is the one that gets to claim exclusive rights to it through trademark ownership. Somehow it doesn’t look like this spat will be ending neatly or soon.

    Nextel Communications, Inc. v. Motorola, Inc., Opposition No. 91164353 (June 12, 2009).

    © 2009 Pamela Chestek

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  • Uh-oh Moment

    Terra Sul Corp. a/k/a Churrascaria Boi Na Brasa v. Boi Na Braza, Inc. is one of those “uh oh” cases. It’s a fairly routine examination of a petitioner’s first use date to determine who is senior user of the mark. The “uh oh” is a theory that the mark, when transferred from the sole proprietor to a corporate entity he formed, wasn’t properly transferred under state trademark law:

    Respondent argues that both petitioner and the prior user Churrascaria Boi Na Brasa Corporation (CBNBC) are New Jersey corporations and under “New Jersey law, any mark, registration or application for registration is assignable with the goodwill of the business in which the mark is used. The statute very clearly requires, however, that any such assignment ‘shall be by instruments in writing duly executed and shall be recorded with the Secretary of State upon payment of the recording fee payable to the Secretary of State.’” Br. p. 7.

    The New Jersey statute provides:

    Any mark and its registration or application for registration shall be assignable with the good will of the business in which the mark is used, or with that part of the good will of the business connected with the use of and symbolized by the mark. Assignment shall be by instruments in writing duly executed and shall be recorded with the Secretary of State upon the payment of the recording fee payable to the Secretary of State. An assignment of any registration under this act shall be void as against any subsequent purchaser for valuable consideration without notice, unless it is filed for recording with the Secretary of State within 20 days after the date of the assignment or prior to the subsequent purchase or transfer.

    N.J.S.A. 56:3-13.6(a).

    Petitioner argues that the statute only pertains to trademark registrations and not common law rights and points to another section of the statute which provides:

    Nothing herein shall adversely affect the rights or the enforcement of rights in marks acquired in good faith at any time at common law.

    N.J.S.A. 56:3.13.

    The TTAB wisely punted:

    It is not clear if the New Jersey statutory code requires that the transfer of common law trademark rights between two corporations related by ownership in a few family members must be in writing. The wording “any mark and its registration or application for registration” (emphasis added) combined with the wording that “any assignment of any registration under this act shall be void” suggests this section pertains specifically to registrations or applications.

    The record shows that it was the intent of Mr. Saleh, the owner and president of CBNBC and petitioner and the creator and operator of the restaurant BOI NA BRASA, to transfer the trademark rights residing in CBNBC from 1996 to 1999 to petitioner, the new corporation operating the restaurant, since 1999. We find that under the totality of the circumstances presented that petitioner acquired the trademark rights in BOI NA BRASA in 1999 and may rely on the use, beginning in 1996, of the prior holder CBNBC. However, we also find, in the alternative, that petitioner’s own use of the mark BOI NA BRASA began during the spring or at the latest June, 1999, which predates respondent’s July 1, 1999 first use date.

    The New Jersey statute is based on the Model State Trademark Bill:

    Section 7: Assignments, Changes of Name and Other Instruments

    (a) Any mark and its registration hereunder shall be assignable with the good will of the business in which the mark is used, or with that part of the good will of the business connected with the use of and symbolized by the mark. Assignment shall be by instruments in writing duly executed. . . .

    It looks like similar language is in at least 37 state trademark laws.

    It’s an “uh oh” moment because another court less knowledgeable about trademarks may not understand the full implications of holding that the assignment of common law marks has to be in writing. As noted by the TTAB, the language is not entirely clear. Those unsophisticated about trademarks often think of them narrowly, as only logos, or registered trademarks, or with some other sort of formality of recognition. They don’t realize that unregistered marks are everywhere – taking the situation in the case, how many restaurant names are unregistered marks? Watch the havoc ensue.

    Terra Sul Corp. a/k/a Churrascaria Boi Na Brasa v. Boi Na Braza, Inc., Cancellation No. 92047056 (TTAB June 12, 2009).

    © 2009 Pamela Chestek

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  • “Filed,” Not “Executed”

    It pays to read the statute sometimes. If the statute says “the applicant shall file in the Patent and Trademark Office . . . ,” having the former applicant file it isn’t going to work. The former applicant signed the document before it assigned the mark, but then filed the document after the assignment to the new owner was effective. Under the statute, though, it’s the filing that counts, not the timing of the signature.

    For the details, see the inestimable TTABlog.

    © 2009 Pamela Chestek

  • No Good News for MGA Entertainment

    The Court of Appeals for the Ninth Circuit (Kozinski, Paez and Tallman) has summarily denied MGA Entertainment’s motion for a stay pending appeal: “MGA Entertainment, Inc., MGA Entertainment HK Ltd. and Isaac Larian’s (‘MGA’s’) motion for a stay pending appeal is denied. MGA has not met the prevailing standard to show a substantial likelihood of ultimate success on the merits. See Hilton v. Braunskill, 481 U.S. 770, 776 (1987).”

    Hearing schedule? “MGA’s unopposed motion to expedite the briefing and hearing is granted. The following briefing schedule governs these cross-appeals: MGA’s principal brief is due July 10, 2009; Mattel’s principal/response brief is due August 10, 2009; MGA’s response/reply brief is due September 9, 2009; and Mattel’s optional reply brief is due within 14 days after service of the response/reply brief. The briefs and all courtesy copies must be received by the court on or before the dates that the briefs are due. These cross-appeals will be calendared before the first available panel following the completion of briefing.” So no hearing until at least late September. Meanwhile, the forking over of sensitive information commences.

    Carter Bryant v. Mattel, Inc., Docket No. 09-55812, Document 11.

    © 2009 Pamela Chestek

  • Who Was Opportunity Knocking For?

    Opportunity Knocks, Inc. d/b/a Cartoonmaps.com makes cartoon maps. Beginning in 2006, Brandon and Bridgette Maxwell paid over $35,000 for Opportunity Knocks to help them create graphical city maps for Cheyenne, Wyoming, Crested Butte, Colorado and Telluride, Colorado. Bridgette Maxwell quit her job to focus on the graphic map business. In 2008, Opportunity Knocks found that the Maxwells were distributing copies of two of the maps in violation of a Design/Printing Agreement and sued them for copyright infringement. The Maxwells counterclaimed that Bridgette Maxwell was the owner of the copyright in the maps and that Opportunity Knocks forged her signature on the Design/Printing Agreement. Bridgette Maxwell said that she was told she would own the right to the artwork and the maps. The Design/Printing Agreement said to the contrary “All material, artwork, caricatures, and design shall be the property of Opportunity Knocks, Inc. and are protected by Federal copyright protections.”

    The opinion is on a Motion to Dismiss the Maxwell counts for criminal forgery and common law unfair competition. The criminal forgery and deception count was sufficiently pleaded, but the unfair competition claim was preempted by copyright.

    What’s puzzling to me is the $35,000. The Maxwells allege that Opportunity Knocks is contacting “former customers and hold[ing] themselves out to be the original map makers of the maps for renewal purposes.” From the facts in the opinion, it sounds like the Maxwells paid $35K to develop a territory that Opportunity Knocks is now trying to claim as its own. $35,000 seems like an awful lot of money for the right to sell maps in three small towns for a couple of years at best.

    Opportunity Knocks complaint here.

    Maxwell counterclaim here.

    Opportunity Knocks, Inc. d/b/a Cartoonmaps.com v. Maxwell, Civ. No. 4:08-cv-00072-AS-APR, 2009 WL 1449019 (N.D. Ind. May 22, 2009).

    © 2009 Pamela Chestek

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