Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • A Less than Iron Clad Theory

    In the past few years John Welch at the TTABlog has organized a Boston road trip for the Trademark Trial and Appeal Board. They’re great events and I highly recommend that anyone nearby make it there. This past October, the TTAB held an inter partes hearing in Iron Man Magazine versus the Ironman Triathalon for collateral goods, i.e., vitamin supplements. John blogged the results of the January 12, 2009 decision here, but I have a comment on an unsuccessful argument that the applicant raised, questioning the ownership of the magazine’s mark.

    Peary and Mabel Rader were the creators and original owners of Iron Man magazine, started in 1936. The current owners are John Balik, managing partner and publisher, and his partners Michael Neveux, Irving Bier, Sydney Bier and Mario Gambetta. But the ownership wasn’t transferred directly; instead, on October 7, 1986 the Raders assigned the Iron Man magazine trademark to John Balik and his wife, not the partnership. One month before Iron Man Magazine filed its opposition, Mr. Balik and his wife executed a nunc pro tunc assignment effective December, 1986 assigning the trademark to the Iron Man Magazine partnership.

    Ironman Triathalon argued that since there was a gap of two months between the date of the first assignment, October, 1986, and the date that the nunc pro tunc assignment was effective, December, 1986, the business and trademark were separated for at least two months. Applicant’s further theory was that, since the nunc pro tunc assignment was only of the mark, but not the business, the business and mark had been separated for 20 years. All of this added up, the applicant alleged, to an assignment in gross, i.e., an assignment of a mark without the goodwill appertunant to it.

    But an assignment in gross arises when the use by the assignee is sufficiently different from that of the assignor that a consumer wouldn’t associate the two. In this case there was only ever one IRON MAN magazine, which was published continuously from its origin with the Raders to the present day. The Applicant never suggested that there was a cessation in use by the original owner and a new, substantially different use by the new owners; at most what it looks like is that the formalities of transfer were botched. The applicant’s theory was just wrong for the circumstances, or at least missing essential proof.

    The Board was saved from having to debunk the argument, since it could take the procedural route out:

    We point out that applicant never raised these issues in its answer. Although opposer clearly has the burden to prove its prior use of the unregistered trademark IRON MAN in order to succeed on its claim of likelihood of confusion, opposer has met this burden by its testimony and exhibits that the magazine IRON MAN was published by opposer prior to applicant’s claimed first use. By waiting until its brief to raise questions about opposer’s reliance on the Raders’ prior use, applicant has denied opposer the opportunity to present evidence to respond to these questions. . . . Thus, we do not consider the issue of an assignment in gross or ownership of the mark to have been tried.

    Ironman Magazine v. World Triathlon Corporation, Opp. No. 91167894 (TTAB Jan. 12, 2009) [not precedential].

    © 2009 Pamela Chestek

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  • File Your Annual Report

    IP suits occasionally get sidetracked when there are problems with the corporation’s authority to act, like here. Attacking the authority looks like a quick way out of the suit for the defendant, so worth a try.

    The Exclusive Rights blog brings us the story of a lawsuit almost foiled by the failure of a corporation to maintain its good standing. The corporation filed a copyright application while the corporation was administratively dissolved. The corporation later sued to enforce the copyright and the defendant countersued. The corporation then tried to fix its administrative problem but found itself in a Catch-22, because it could not be reinstated if a lawsuit was pending against it.

    The court finds a way through the immediate murk, although fact issues remain. Exclusive Rights post explaining how here.

    Embassy Software Corp. v. Ecopy, Inc., Civ.l No. 06-cv-00391-JL, 2009 WL 74350 (D.N.H. Jan. 13, 2009).

    © 2009 Pamela Chestek

  • Dilbert on Company Time

    Dilbert has been running a series for all of you who aspire to be you own boss but on company time, a lesson that Carter Bryant has learned. Sorry about the formatting, but click on the strip to see the full image:

    Dilbert.com

    Dilbert.com

    © 2009 Pamela Chestek

  • Only Registrants Get Statutory Damages for Counterfeiting

    The modern corporate enterprise with specialized subsidiaries may have its benefits, but it can also cause some unintended consequences on the intellectual property front. I’ve previously reported on a Mars intra-company assignment of patents that created havoc in at least two suits. Now, oil company Shell has run into a wrinkle in a routine litigation as the consequence of its trademark holding company structure.

    The suit started out as an ordinary dispute when a Puerto Rican franchisee, Los Frailes Service Station (“LFSS”), didn’t pay its bills. LFSS sold both Shell and another Shell brand of gasoline, Defenda (click on the word “Gasoline”).
    After Shell cut off delivery of gasoline, LFSS covered up the Shell marks but sold non-Shell gasoline under the Defenda mark. The Puerto Rican Shell subsidiary, Sol Puerto Rico Limited (“Sol”), sued for trademark infringement and a preliminary injunction was readily granted. Subsequently Sol moved for statutory damages, claiming that LFSS had sold counterfeit gasoline.

    While the court found that LFSS indeed sold counterfeit gas, the court explained that statutory damages are only available to the trademark registrant, its assignee, or sometimes an exclusive licensee. But Sol didn’t own the Defenda mark; it was registered in the United States to Shell Trademark Management B.V. There was a trademark license agreement between Shell Trademark Management and Sol, but it was insufficient in two ways. First, the agreement was effective more that three years after the claim against LFSS arose. Second, the agreement was for a non-exclusive license – while the agreement prohibited Shell Trademark Management from licensing to anyone else for 10 years, the grant clause was specifically of a non-exclusive license. The court also noted that under Quabaug Rubber Co. v. Fabiano Shoe Co., Inc., 567 F.2d 154, 159 (1st Cir. 1977), a license has to exclude even the trademark owner’s use for the exclusive licensee to stand in the shoes of the registrant. Here, the agreement did not expressly prohibit Shell Trademark Management from using the mark in the territory.

    Sol was therefore not entitled to statutory damages. Since ownership also affects the statutory basis for a trademark infringement claim, the court clarified that the earlier preliminary injunction was based on § 43(a) of the Lanham Act, a basis for relief also available to non-owners.

    Shell Co., Ltd. v. Los Frailes Service Station, Inc., Civ. No. 03-1623 (FAB), 2008 WL 5401588 (D.P.R. Dec. 23, 2008)

    © 2009 Pamela Chestek

  • I Own It When I See It

    How many people can own knowledge?

    Banks give merchants a line of credit for credit card transactions. The banks use independent service organizations (ISOs) to sign up merchants for the bank’s services and to provide the equipment needed to process the transactions. Merchants submit their sales to a payment processor, which transmits the information to the bank. The bank remits payment, minus commission, to the merchant. The retained commission is split between the bank, the ISO, and the payment processor.

    There’s also a market for the future credit card receivables. Companies – in this case, co-defendant Fast Capital LLC – buy the future credit card receivables at a discount from merchants in exchange for cash. The bank remits the payment to the receivables purchaser, which takes its commission and pays the merchant.

    Fast Capital contracted with plaintiff d/b/a Merchant Credit to develop leads for its services, in exchange for a portion of the commission. In the complaint, Merchant Credit claimed that Goldman Sachs controlled Fast Capital, and gave the Merchant Credit leads to Merchant Credit’s competitors, depriving Merchant Credit of the commission. The complaint alleged the expected breach of contract and tortious interference claims, as well as misappropriation of trade secret and unfair competition claims.

    Merchant Credit claimed that the leads were its property; Fast Capital claimed that they were not. The court reviewed the various provisions of the contract and decided that, interpreting the contract as a whole, the merchant leads belonged to Fast Capital.

    But Fast Capital was not off the hook so fast; one doesn’t have to own a trade secret to state a claim for misappropriation of trade secret:

    Although the holder of a trade secret may be considered as having a property right, “[t]he inherent nature of a trade secret limits the usefulness of an analogy to property in determining the elements of a trade-secret misappropriation claim.” DTM Research, L.L.C. [v. AT & T Corp., 245 F.3d 327, 331 (4th Cir.2001)]. The court in DTM Research explained:

    The conceptual difficulty arises from any assumption that knowledge can be owned as property. The “proprietary aspect” of a trade secret flows, not from the knowledge itself, but from its secrecy. It is the secret aspect of the knowledge that provides value to the person having the knowledge . . . . While the information forming the basis of a trade secret can be transferred, as with personal property, its continuing secrecy provides the value, and any general disclosure destroys the value. As a consequence, one “owns” a trade secret when one knows of it, as long as it remains a secret. Thus, one who possesses non-disclosed knowledge may demand remedies . . . against those who “misappropriate” the knowledge.

    Under these precedents, the relevant inquiry is not whether Merchant Credit “owned” the merchant information, but whether Merchant Credit knew the merchant information, the information was secret, and Merchant Credit took measures to keep the information secret throughout the parties’ dealings.

    Merchant Credit, however, had not kept the secret. The agreement stated that the leads were not “confidential information,” and that Fast Capital could assign the agreements with the merchants without Merchant Credit’s consent, exactly what it had done. Merchant Credit failed to state a claim for misappropriation of trade secret, as well as for a unfair competition on the same facts.

    Fast Capital Marketing, LLC v. Fast Capital LLC, Civ. No. H-08-2142, 2008 WL 6381308 (S.D. Tex. Dec. 24, 2008).

    © 2009 Pamela Chestek

  • Motherless IP Children

    The IPKat has a great post on acquiring trademarks that escheat to the Crown. The comments section gives some tips on how to go about it, and promises an update.

    © 2009 Pamela Chestek

  • Bratz To Remain On Sale For At Least a Year

    The fallout from the Mattel win continues – MGA filed a motion under seal for a stay pending appeal; Mattel filed a motion asking for the appointment of a receiver:

    Mattel makes this Application on the grounds that MGA has filed, both in this Court and in the Ninth Circuit, stay applications based on MGA’s claims of imminent financial insolvency, including for reasons that MGA admits are unrelated to the prospect of injunctive relief. Regardless of whether MGA’s assertions are credited, MGA’s repeated, conflicting assertions about its financial condition raise serious doubts about its ability to (a) pay the Phase 1 trial damages award and any award rendered in Phase 2 trial to Mattel and (b) maintain and preserve the Bratz intellectual property that the jury and this Court determined are Mattel’s. Furthermore, there is mounting evidence that MGA and Larian have engaged in questionable business arrangements and failed to disclose to the Court and Mattel significant financial information, including the identity of the ultimate source of the funding that MGA has been receiving since Phase 1B from a series of off-shore, non-operating entities. A receiver should be appointed, and MGA and Larian should be ordered to pay the costs and fees associated with the receiver. Alternatively, Mattel seeks leave to take expedited discovery into this subject matter.

    The Court didn’t stay for the duration of the appeal but did stay for year, and appointed a forensic auditor:

    Notwithstanding any previous Order of the Court, The December 3, 2008, Order Granting Mattel Inc.’s Motion for Permanent Injunction (docket #4439) shall remain STAYED, ineffective and non-final, until further Order of the Court. Specifically, retailers and distributors will be permitted to purchase the Spring and Fall 2009 lines of Bratz and Bratz-related products from MGA and MGA licensees, up to and including December 31, 2009.

    Motion for receiver here; Order below:

    Mattel Order Modifying Stay of Permanent Injunction

    © 2009 Pamela Chestek

  • In Service of the Government

    Wired reports about a prisoner who sued the government for copyright infringement for its sale of desk-blotter calendars he created as part of his assigned work duties while incarcerated. Suits for copyright infringement against the government are controlled by 28 U.S.C. § 1498(b):

    Hereafter, whenever the copyright in any work protected under the copyright laws of the United States shall be infringed by the United States. . . the exclusive action which may be brought for such infringement shall be an action by the copyright owner against the United States in the Court of Federal Claims . . . : Provided, however, That this subsection shall not confer a right of action on any copyright owner or any assignee of such owner with respect to any copyrighted work prepared by a person while in the employment or service of the United States where the copyrighted work was prepared as a part of the official functions of the employee, or in the preparation of which Government time, material, or facilities were used[.]

    Mr. Walton argued that employee and service are synonymous in the statute, that other cases have held that prisoners are not employees, so therefore his claim is not barred. The Court of Appeals for the Federal Circuit, affirming the Court of Claims, begged to differ:

    To the contrary, we conclude that Congress intended the two terms to have different, although related, meanings. One may have a “service” relationship with the federal government that does not constitute an “employment” relationship. Without attempting to define the precise limits of “service,” we conclude it covered Walton’s relationship with Federal Prison Industries Inc. while working for it on the federal calendar as a federal prisoner.

    Case dismissed for lack of jurisdiction. Walton v. United States.

    © 2009 Pamela Chestek

  • They’re Not Andrew Lloyd Webber’s Cats

    Although styled as a likelihood of confusion case, Kuklachev v. Gelfman International Enterprises, Inc. is really just a description of a bald-faced attempt at a trademark grab, driven by a largely untold story of a business falling out. It’s a no-brainer as a trademark ownership case; while the court dealt with a lot of theories raised by the defendant, none of them amounted to much.

    Plaintiff Yuri Kuklachev has been touring the world since the early 1970’s as the founder and lead performer of the Moscow Cats Theatre. As you probably guessed, it’s a circus-type show, housed in Moscow, that uses cats as performers.

    Kuklachev hired the defendant Gelfman International Enterprises to book, organize and advertise a U.S. tour for 2005 through 2007. The contract designated Gelfman as the “Promoter” and Kuklachev as the “Artist.” The Promoter engaged Artist to perform the “Show,” but the name “Moscow Cats Theatre” was never used in the contract. The contract provided that Kuklachev had sole and exclusive control of the Show and Gelfman had no right to engage anyone else to work in the Show. The contract acknowledged that “the services provided by Artist and his Members are special, unique, unusual, extraordinary, and posses [sic] an intellectual character that gives them their particular value.”

    Kuklachev provided all the stage equipment and props, provided the technicians, paid taxes for his performers, and provided for his own replacement in case he couldn’t perform. Gelfman made suggestions for changes the show to make it more suitable for American audiences. The promotional materials for the show and news coverage said that Kuklachev was the founder of the show and described his years of performing.

    At the end of 2006 Kuklachev returned to Russia. Gelfman claimed that Kuklachev wanted an increase in pay and Gelfman refused to pay him more; Kuklachev says that Gelfman claimed to be ill and postponed the tour.

    Gelfman then organized performances of the “Moscow Cats Theatre” without Kuklachev, using Kuklachev’s scenery, some of Kuklachev’s performers, and advertised using Kuklachev’s likeness, all without Kuklachev’s knowledge. Promotional goods with Kuklachev’s image and of Kuklachev’s show were sold at these performances. There were complaints; audience members who knew of Kuklachev had come to see him but were disappointed.

    Making the grab, Gelfman filed an application to register the trademark “Moscow Cats Theatre” in his own name a few days after Kuklachev returned to Russia. The application said that the first use in interstate commerce was in 1990, although Gelfman said during the litigation that he decided during the summer of 2005 to call the new production the “Moscow Cats Theatre.” He said had considered calling it “Broadway Cats Theatre,” but the name was too similar to the famous “Cats” musical. The specimen for the application was a poster with Kuklachev’s son Dimitri on it, with the text “World’s Only Moscow Cats Theatre”:


    Kuklachev eventually learned of the show and the trademark application, and filed an opposition to the application. Efforts to settle short of litigation were unsuccessful.

    Given this story, it’s hardly a surprise that the court found that Kuklachev owned the mark “Moscow Cats Theatre.” The court worked its way through the traditional two-part test of infringement, ownership of a mark and likelihood of confusion. On ownership, the court outlined the two tests described in Cheng v. Thea Dispecker Inc., 35 U.S.P.Q.2d (BNA) 1493 (S.D.N.Y. 1995) for performer-related marks, which ask: (1) who controls the quality of the services marketed under the mark in question; and (2) whether the mark is personal to a particular set of performers. On the facts above, the court easily found that Kuklachev was the owner of the mark under both tests.

    The court also considered the ownership for non-entertainment marks under La Societe Anonyme des Parfums v. Patou, 495 F.2d 1265 (2d Cir. 1974), a straightforward question of who was the first to adopt. Gelfman’s claim of a 1990 adoption was contradicted by his testimony that he decided in 2005 to call the show “Moscow Cats Theatre.” Kuklachev used the mark “Moscow Cat Theatre” (with a singular “Cat”) in the United States in 2000 and 2001, but the court found the lack of an “s” insignificant; it further found that the mark not abandoned during periods of non-use in the years Kuklachev wasn’t performing in the U.S.

    Tidying up, the court held, in part based on Gelfman’s adoption of the mark, that the mark had acquired distinctiveness and that there was a likelihood of confusion. Injunction issued.

    Kuklachev’s own later-filed trademark application here.

    Kuklachev v. Gelfman International Enterprises, Inc., NO. 08-CV-2214 (CPS), 2008 U.S. Dist. LEXIS 103332 (E.D.N.Y. Dec. 22, 2008).

    © 2009 Pamela Chestek

  • Mars Gets at Least One Do-Over

    The June, 2008 decision in Mars, Inc. v. Coin Acceptors, Inc., blogged here, was a tale of what happens when companies move IP assets around for tax purposes. In Coin Acceptors, Mars sued Coin Acceptors, then assigned the patents to a subsidiary, MEI, Inc. The assignment created a standing problem for Mars, which lost its damages claim post-assignment. This same assignment has now divested Mars of its patent infringement claim against two more defendants.

    Mars, Inc. sued JCM American Corp. and Japan Cash Machine Co. Ltd. on June 17, 2005. Mars said it was the owner of Patent No. 5,577,589 for a document handler, i.e., a bill acceptor in a vending machine. On December 22, 2006, Mars filed a motion to substitute MEI as the plaintiff, claiming that it had assigned the entire right, title and interest to MEI on June 9, 2006. The court found the document ambiguous, so added MEI as a plaintiff rather than substituted it. Then, in October, 2008, Mars produced the 1996 assignment discussed in the earlier June Mars, Inc. v. Coin Acceptors, Inc. Federal Circuit opinion. The Coin Acceptors court held that this 1996 assignment meant that Mars had no standing after December 31, 1996. After getting this document in discovery, the defendants filed a motion under Fed. R. Civ. P. 12(b)(1) to dismiss the suit for lack of standing.

    Even though MEI was added as a plaintiff, it was added pursuant to Fed. R. Civ. P. 25(c) and therefore only stepped into the shoes of Mars. Since Mars didn’t have standing, MEI had no shoes to step into and the case was dismissed without prejudice. The court also did not allow Mars to amend the complaint to reflect the 1996 assignment, because the amendment would not have cured the fundamental problem. Mars was also sanctioned by an award of the defendant’s attorney’s fees and costs associated with bringing the motion to dismiss and the excess discovery in pursuit of the agreement.

    Since the suit was dismissed without prejudice Mars can bring a new suit (or rather, MEI can). Maybe it’s no harm, no foul and MEI will not have lost any of its rights during the four years the dismissed suit was pending. Or maybe the whole ball of wax has been lost. In any case, a lot of money has been spent in litigation because of the 1996 assignment – how much was that tax savings?

    Mars, Inc. v. JCM American Corp., No. 05-3165 (RBK), 2008 WL 5401604 (D.N.J. Dec. 23, 2008).

    Update: Link to opinion added October 25, 2009.

    © 2009 Pamela Chestek

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