The IP Finance blog has an excellent post on pitfalls in the sale of trademarks out of bankruptcy. The whole article is useful (and good advice on both sides of the Atlantic), but the most interesting part is the story of how the family of MG marks was split, so that one mark went to a different owner. The result was a validity challenge on the theory that marks were separated from the goodwill, as well as a lawsuit. All yet to be decided.
© 2009 Pamela Chestek
The concept of “intellectual property” is often used as a generic category, particularly in contracts. So what does it mean for an amusement park?
The “Hard Rock Park” was an amusement park in Myrtle Beach, South Carolina. This isn’t going where you think; it’s not about the HARD ROCK marks. The park had been designed by HRP Creative Services Co., LLC (“HRP”) and the Hard Rock marks were appropriately licensed from Hard Rock Café International. The park was a bust, though, so it closed and the operating company, HRP Myrtle, filed for bankruptcy.
HRP claimed ownership of the “Creative Content” in the park, as described in the “Creative Content Registry” (“CCR”) exhibit to the Creative Services Agreement between HRP and HRP Myrtle. The CCR listed as its creative content, in part, the “concept of park program (mix of attractions and amenities) designed to allow all demographics and ages of a family unit to enjoy attractions in the same Zone”; the “concept of landscaping to provide a significant portion of shade cover”; “theme park elements (meaning the design and layout of the Park, the mix and all other aspects of the Attractions)”; a “buffeteria-style restaurant/food facility featuring indoor and outdoor seating, a live performance stage, island theming and island/rock memorabilia”; a “British Zone area”; a “Caribbean Island themed crafts/shopping area”; a “retail gift shop themed to look like an old retrofitted military Quonset hut”; a “full service sit-down restaurant themed in a late 60’s, early 70’s antiwar, naturally ‘bitchin’ love-in decor”; and a “Heckle House,” which is an industry term for inanimate object or puppet that comically berates people in the crowd for fun entertainment purposes, in this case in the form of a “fiberglass cow that talks to the audience (via a live-voice performer off ‘stage’ on a speaker in the Cow’s mouth.”
Defendant FPI-MB Entertainment, LLC (“FPI”) bought the park out of bankruptcy. The Asset Purchase Agreement excluded the Hard Rock assets and the “HRP Creative Services Co. LLC license.” When FPI contacted HRP about the license, HRP demanded a royalty. FPI instead elected to file a motion in bankrutpcy court for an order that it owned the intellectual property in the park, which was denied without a determination of rights. FPI then undertook a rebranding, removing all the Hard Rock branding and HRP’s registered trademarks from the park and changing a number of aspects of the park to make it more family friendly, like covering a painting of a large marijuana leaf with a sunburst.
HRP filed the lawsuit on April 24, 2009. On May 14 it asked for an expedited hearing for a preliminary injunction to be held before Memorial Day, when the park was scheduled to open. The court held the hearing on May 20 and issued its memorandum on May 22.
In this case the “intellectual property” was two things: registered trademarks and trade dress. The infringement of registered marks was readily disposed of, since FPI had removed them all. This query in the freeform search at the PTO web site will show you the marks: (“hrp creative”)[ON] and (`AD > “20090424” or live[LD]).
And not so fast that there were any “trade dress” rights either. “Creative content” and “intellectual property” are not the same: “HRP asserts that it retains ownership in the Creative Content, as detailed in the CCR . . . . According to HRP, it ‘has shown validity and ownership of its intellectual property’ and the only other issue is likelihood of confusion. This conclusory argument ignores two of the three factors HRP must establish to succeed on its trade dress claim,” i.e., functionality and distinctiveness.
On distinctiveness, the court made the following observation:
Denial of a preliminary injunction was easy:
| HRP has failed to demonstrate that it will suffer harm. By contrast, FPI’s harm from a preliminary injunction would be catastrophic and probably fatal to the new park. Given the low to non-existent likelihood of public confusion, especially weighed against the indefinite layoffs of more than one thousand people in this difficult economy, the public interest heavily weights in favor of FPI. Given its vaporous to preposterous claims, HRP has not shown any serious likelihood of success on the merits. |
Visit the new Freestyle Music Park.
P.S. The entire opinion has (rightfully) a high snark quotient. One example – HRP had listed in the CCR a theme for a gift shop that included “flowered ‘Hawaiian’ wear like shirts, shorts and bandanas (ala [sic] Tommy Bahama . . . .” This drew a footnote from the court: “There are 72 trademarks in the federal trademark database containing the words ‘Tommy Bahama.’ Yet HRP–staunch defender of intellectual property that it claims to be–gives no attribution in the CCR, which HRP claims it owns.” Likewise, HRP’s reference in the CCR to a “House of Blues feel” provoked the court to comment that “Again, the federal trademark database includes 86 entries for ‘House of Blues,’ but HRP does not provide any attribution in the CCR.”
© 2009 Pamela Chestek
The Las Vegas Trademark Attorney gives us the jot and tittle of a dispute between Ozzy Osbourne and Anthony Iommi over the ownership of the BLACK SABBATH name. An interesting twist beyond the usual band name story, because Ozzy assigned the name to Iommi in 1980. What does it take to recapture ownership of a name?
© 2009 Pamela Chestek
It’s still hot and heavy in the Bratz litigation. There are these enticing entries on the district court docket:
| 05/18/2009 | 5510 | PHASE 2 DISCOVERY MATTER – ORDER NO. 34 filed by Special Master Robert C O’Brien Regarding Motion to Compel Production of Hard Drives from Computers Used by Isaac Larian after February 27, 2008 (O’Brien, Robert) (Entered: 05/18/2009) |
| 05/18/2009 | 5509 | BRIEF filed by counter claimant Mattel Inc. in Support of an Injunction Requiring MGA to Obtain Court Approval Before Filing for Bankruptcy (Naim, Cyrus) (Entered: 05/18/2009) |
MGA’s emergency ex parte motion for stay pending appeal in the district court was denied on May 21, so on May 26 MGA moved in the 9th Circuit for a stay.
The order MGA wants stayed is one that sweepingly transfers, in the court’s words, “all tangible or intangible assets, including, without limitation, all intellectual property necessary or materially useful for the design, manufacture, marketing, distribution and sale of any Bratz doll or other Bratz-branded product in the possession, custody or control (whether or not claimed to be encumbered by any security interest) of any of the MGA Defendants” and, in MGA’s words, requires “perhaps the largest toy recall in U.S. history.” Injecting personal opinion, I find MGA’s arguments that the order should be staying until after the decision on appeal are very persuasive. Appeal briefing schedule as follows:
| 05/29/2009 | DOCKETED CAUSE AND ENTERED APPEARANCES OF COUNSEL. SEND CADS: No. Setting cross-appeal briefing schedule as follows: First cross appeal brief due 10/19/2009 for Carter Bryant, Isaac Larian, MGA Entertainment (HK) Limited and MGA Entertainment, Inc. Second brief on cross appeal due 11/18/2009 for Mattel, Inc. Third brief on cross appeal due 12/18/2009 for Carter Bryant, Isaac Larian, MGA Entertainment (HK) Limited and MGA Entertainment, Inc. Optional cross appeal reply brief due 14 days from the service of third brief on cross appeal. [09-55812, 09-55673] (BG) |
District Court denial of stay here. Court of Appeals emergency motion here.
P.S. Note to MGA attorneys: It’s “brooch,” not “broach.” Really killed the analogy.
© 2009 Pamela Chestek
Here’s an interesting story on the derivation of the word “tabloid” for a newspaper. It’s a trademark registered in the United Kingdom in 1884 for compressed medicines, a portmanteau of “tablet” and “ovoid.”
The use of the mark was later expanded to tea,
first aid kits,
snake bite kits,
photographic chemicals,
and other goods. Burroughs Wellcome fought a battle with newspaper publishers over their use of the word, one we now know it ultimately lost.
© 2009 Pamela Chestek
The Exclusive Rights blog reports on a case from the Supreme Court of Indiana, where one company hired another to design and host its web site. An often-told story; the hiring company stopped paying the bills and the designing company shut down the web site, then sued on the bill. In response, the defendant counterclaimed conversion. Ownership of the web site based on work made for hire and assignment theories was readily disposed of, since the web design company was easily not an employee under CCNV and there was no signed writing for an assignment. The counterclaim thus tumbled, since the defendant didn’t actually own the web site that it claimed was converted.
The case is a recommended read for analysis of whether Article 2 of the UCC applies to software (not in this case), and particularly for the concurring opinion on what would have happened had the defendant pleaded a nonexclusive license theory rather than conversion. But it didn’t, instead the defendant “elected to pursue only a conversion theory, presumably in hopes of treble damages and attorney fees in this dispute over an amount that surely is dwarfed by the cost of this litigation.”
Conwell v. Gray Loon Outdoor Marketing Group, Inc., No. 82S04-0806-CV-00309, 2009 WL 1409477 (Ind. May 19, 2009)
© 2009 Pamela Chestek
Applera Corp. v. MP Biomedicals, LLC is an infrequent occurrence, a patent-related case in state court. In the case, the two original contracting parties entered into a royalty-bearing patent license for the PCR (polymerase chain reaction) process for amplification of DNA. The license included terms for ascertaining royalties based on whether the products would infringe a valid patent claim.
The original licensor assigned the license to plaintiff Applera, including the right to collect all royalties accruing or arising on or after the Effective Date, but it didn’t assign the underlying patents. The original licensee went through some acquisitions and a change of name to MP Biomedicals, S.A., of which the defendant, MP Biomedicals, LLC, is the grandparent. The licensee had been preparing the reports on royalties due, but the royalties never made their way into the plaintiff’s pockets, so Applera sued.
The defendant claimed that Applera didn’t have standing because it wasn’t the owner of the patents. Indeed, Federal Circuit cases are universal that a plaintiff must have some sort of interest in the patent in order to have standing to sue for infringement; a private agreement assigning the right to sue isn’t enough. But this wasn’t a patent infringement suit, it was a breach of contract case that did not necessarily depend on the resolution of patent issues – indeed, at trial there was no evidence about patent infringement entered. Rights to payment and choses in action may be assigned under California law, thus, Applera had standing to sue, California state court had jurisdiction for the breach of contract claim even though it involved patents, Applera hadn’t waived its right to invoke Swiss law for its claim for attorneys’ fees, and MP Biomedicals had to pay up.
In Applera Corp. v. MP Biomedicals, LLC, No. G038984, 2009 WL 1151861 (Cal. App., 4th Dist. April 30, 2009)
© 2009 Pamela Chestek
Sometimes the TTAB is an alternative reality. It’s happening right now as it struggles with trademark ownership disputes. In Arturo Santana Gallego v. Santana’s Grill, Inc., there was family falling out. The TTAB reached a conclusion that may be right, but in a way that is so doctrinally irrelevant that we can’t know.
The cast of characters:
Petitioner and father: Arturo Santana Gallego (Gallego)
President of respondent and son: Abelardo Santana Lee (Abelardo)
Ex-wife of son Abelardo: Claudia Vallarta (Claudia)
Son: Arturo Santana Lee (Arturo)
Third party: Arturo Castaneda (Castaneda)
In late 1987 and early 1988 petitioner Gallego re-named his two restaurants, one in San Diego and one in Yucca Valley (five hours away), “Santana’s Mexican Food.” He used a musical jingle that included the phrase “Es Muy Beuno” (“It’s Very Good”) and the phrase was incorporated into signage and menus for both restaurants.
Son Arturo worked in the San Diego restaurant for a year starting in 1986, then worked in the Yucca Valley restaurant for 1½ years. Son Abelardo started working in the San Diego restaurant in 1987. In January, 1992, Abelardo and his then-wife Claudia bought the San Diego restaurant from his dad. Abelardo and Claudia eventually formed the respondent entity, Santana’s Grill, Inc., in 1998.
In 1997 son Arturo opened a “Santana’s Mexican Grill” in El Cajon, California. His father helped him select the location and his brother and sister-in-law helped with the lease, insurance and staffing. This restaurant was similar in appearance to the Yucca Valley restaurant.
The father continued to operate the Yucca Valley restaurant until 1998 or 1999, when he sold it to employee Arturo Castaneda. At the time of the cancellation proceeding the respondent owned six restaurants, son Arturo owned two, and Castaneda owned eight. They were all using variations of the same mark.
On December 5, 2001 the respondent filed trademark applications for “restaurant services” for:
Santana’s Mexican Grill (typed word), Reg. No. 2,634,976
Santana’s Mexican Food . . . Es Muy Beuno (typed word), Reg. No. 2,631,458
Reg. No. 2,682,978Three petitions to cancel were filed on March 30 and April 5, 2004. The deposition testimony shows a fractured family, but no hint, suggestion or breath of what caused the falling out. The TTAB, in its typical way, pretended this was just two independently adopted marks and approached it as a question of priority, abandonment through naked licensing, and likelihood of confusion.
On priority, the father was the first to adopt. The son’s first use, at best, was when he bought the San Diego restaurant, so the father won on priority.
The story told in the naked licensing portion of the case was a master class in how not to manage family businesses. There were no documents submitted evidencing transfers, only testimonial evidence. The father testified that when he sold the San Diego restaurant to his son Abelardo, he had no discussions about granting exclusive use of the mark. He said he didn’t charge his two sons for a trademark license, but had an oral license with Castaneda, who pays him for it. [Ed. note: the case suggests that this might be a paid-up license that isn’t fully paid for yet.] He said he was satisfied with Abelardo’s restaurant operation and would discuss problems with Abelardo if he saw them. He said he regularly checks Castaneda’s operations.
The respondent’s witnesses testified that Abelardo and his wife weren’t licensees, but acquired the mark with the restaurant. They said the respondent is the one who licenses the mark to brother Arturo and that Arturo’s restaurants are part of the respondent’s chain.
Arturo testified that his family members helped him set up his restaurant, but just because they were family and his English wasn’t good. He said that he uses the same menu and food preparation as first set up by his father. Abelardo and Claudia would visit and offer advice, but they didn’t indicate to him that they have the right to control the restaurant or the use of the mark.
Castaneda backed up the father’s story that he had an oral license for use of the mark. He said he consults with the father when opening a new restaurant and doesn’t open any near Abelardo or Arturo. He confirmed that the father regularly visits Castaneda’s restaurants to inspect them.
The TTAB held that the name was not transferred with the sale of the restaurant to Abelardo. The TTAB reasoned if the father had, he wouldn’t have continued to use it at the Yucca Valley restaurant and subsequently license the mark to Castaneda. Since there was an oral license and Castaneda continued to make payments, the TTAB held that Castaneda’s use inured to the father’s benefit, thus the father had continuous use of the mark from 1987 to the present and there was no abandonment. Likelihood of confusion was thereafter fait accompli.
So the case was cabined into likelihood of confusion and naked licensing theories, but neither appear really true at all. It seems unlikely that any of the involved parties ever thought in terms of “licensor” and “licensee” until their lawyers had to figure out a legal theory. Rather, more likely it was a loose collection of family-owned restaurants, where they were frequently in each others’ establishments and where they didn’t care about the consumer perception that they were all related establishments, or perhaps even fostered the perception.
By ignoring the true relationship of the parties and pretending that this is simply about two marks adopted separately, we wind up with dodgy reasoning inconsistent with the rest of trademark law. It’s fantastical to consider “priority” in the first place: the father had two restaurants with the same name, sold one to his son, yet, according to the TTAB, the son suddenly has his own mark with his own first use date. Another: the TTAB reasoned that the father hadn’t transferred the mark to his son because he continued to use the restaurant name at the original restaurant after he had sold the second restaurant to his son. Why is this any more likely than a theory that the father had transferred the mark to the son and the son licensed it back to the father? Probably neither is really true – they just went about their businesses never minding, until something went wrong. We shouldn’t create a false reality that instead there was some sort of licensing arrangement going on here.
The only question should be who, as a matter of equity, should wind up with the mark after the dust settles, if anyone. There are many facts that may be relevant, but they don’t come out because they don’t fit anywhere in a priority/abandonment/likelihood of confusion analysis. Have they been facilitating the consumer perception that they are a chain? Do they put each other’s locations on their menu? Do they have the same menu? Does one opinion about how the restaurants should be run, perhaps the father’s, dominate? Perhaps the reality is more similar to the case tried, which is that they are geographically separated so there is no perception that they’re the same chain. What is each restaurant’s territory? And most of all, why are they in a dispute now?
Using a better fitting legal theory would draw out evidence that would lead to a meaningful conclusion. Perhaps it would show no single one of them owns the mark, but rather they are co-owners or concurrent users. Note that the TTAB can’t enjoin use of the mark, so marketplace “confusion” presumably continues unabated; the next stop would be district court. The district court case may address the right question, or instead the parties may accept this decision and continue their spiral into more inapt legal theories, like laches. If instead the TTAB had dealt with the ownership question in an analytically logical way, the parties might have been much closer to working their way through to a rational resolution.
Arturo Santana Gallego v. Santana’s Grill, Inc., Cancellation Nos. 92043152, 92043160, 92043175 (TTAB May 6, 2009).
© 2009 Pamela Chestek
MGA Entertainment has asked for, and was granted, an expedited hearing for a stay of the injunction pending its appeal to the Ninth Circuit. The hearing will be May 18. In expected fashion, MGA couldn’t pass up an opportunity for a smackdown in its press release:
Mattel’s iteration of the brand will necessarily bear little resemblance to MGA’s Bratz. Because the 12/3 Orders only grant Mattel “ownership” over two dimensional drawings and a single sculpt that materially varies from the Bratz products on the market today, Mattel will have to design its own Bratz dolls, and entirely new environs for those dolls to live in. Although MGA may no longer label them “Bratz,” the vast majority of the Bratz brand, as well as the packaging, fashions, face paint, and marketing campaigns still belong exclusively to MGA—as do all of the Bratz characters outside the original four.
Yet the evidence in this case, and the harsh reality of the market place, have already demonstrated that creativity and innovative thinking are not Mattel’s strong suit, as evidenced by Mattel’s repeated failures to capture any meaningful share of the “tween” market through their ill-fated “Flavas” line, among others. Mattel’s devotion to Barbie and the corporate culture that Mattel has developed to support its hegemony in the toy industry present a very real danger to Bratz as a brand and to the availability of choice to consumers.
© 2009 Pamela Chestek
Patent numbers 5,138,459, 6,094,219, 6,233,010 and 6,323,899 had three named inventors, Marc Roberts, Matthew Chikosky and Jerry Speasl. They invented the subject matter of the patents while working for Mirage Systems, Inc., then formed their own company, Personal Computer Cameras, Inc. St. Clair Intellectual Properties invested in the company, and when Personal Computer Cameras was about to go under St. Clair took an assignment of the patents. It did its due diligence before taking the patents, asking about employment agreements and shop rights, confirming the men had invented on their own time using their own resources, and ensuring that the inventors had disclosed the patents to Mirage.
St. Clair then proceeded to enforce the patents, suing Canon. Canon raised an ownership defense, claiming that there was an automatic assignment provision in the men’s employment agreement so that Mirage was the true owner of the patents. Later at trial, Canon disclosed that it was in cahoots with Mirage on the defense. Canon was sanctioned and the ownership defense dismissed.
St. Clair then sued more defendants, including Samsung, in November, 2004. Mirage also sued St. Clair and the inventors in state court over ownership of the patents. Kodak, one of the defendants in the Samsung case, bought Mirage’s rights to the patents and was substituted as plaintiff in the state court action. St. Clair then next brought the instant suit.
Kodak, Mirage and St. Clair entered into a Memorandum of Understanding which stated that St. Clair had owned the patents all along, ending the state court suit. The Samsung case settled.
The defendants in this case, not surprisingly, also raised an ownership defense, claiming that St. Clair didn’t have standing to sue at the time suit was filed. If Mirage was the owner by an automatic assignment, St. Clair didn’t own the patents at the time it brought the suit and thus didn’t have standing. The defendants argued that the MOU between Kodak, St. Clair and Mirage was a private agreement that didn’t affect the reality of ownership at the time this suit was filed.
So the court looked at the assignment language to determine whether there had been an automatic assignment. The assignment language was:
5. I will promptly disclose in confidence to MIRAGE or any persons designated by it all inventions . . . .
6. [A]ll such Inventions which MIRAGE in its sole discretion determines to be related to or useful in the business or research or development of MIRAGE, or which result from work performed by me for MIRAGE, shall be the sole and exclusive property of MIRAGE and its assigns and MIRAGE shall have the right to use and/or to apply for patents, copyrights or other statutory or common law protections for such inventions in any or all countries. I further agree to assist MIRAGE in every proper way (but at MIRAGE’S expense) to obtain, and from time to time to enforce, patents, copyrights and other statutory or common law protections therefore [sic], and in enforcing the same, as MIRAGE may desire, together with any assignments thereof to MIRAGE or to persons designated by MIRAGE.
The court held that the language “shall be the sole and exclusive property” was not language of present conveyance. Further, the two paragraphs contemplated additional steps before Mirage would own the patents, i.e., the inventor had to disclose the invention to Mirage, Mirage had to determine that it was useful or related to its business, and the employee had to assist with obtaining any assignment. Therefore the patents were not automatically assigned to Mirage, the inventors properly assigned them to St. Clair, and St. Clair had standing to bring suit.
St. Clair Intellectual Property Consultants, Inc. v. Palm, Inc., Civ. No. 0-404-JJF-LPS (D. Del. May 4, 2009)
© 2009 Pamela Chestek
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