Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Removing the Veil

    We’re all familiar with the concept of “piercing the corporate veil.” As a general rule, the owner of a legal entity, like the parent of a subsidiary, or the shareholder of a company, is legally insulated from the wrongdoing of the owned company. In some cases though, where the owner and the company haven’t done a good job of observing the distinction between company and owner, an aggrieved is allowed to “pierce the corporate veil,” and the company’s liability flows up to the owner.

    But sometimes that line also gets in the way, as it did in Total Rebuild, Inc. v. PHC Fluid Power, LLC. Terry Lavergne was the sole shareholder of plaintiff Total Rebuild, Inc., a company that produces high pressure testing systems. Lavergne obtained a patent on a system he invented. His company paid the expenses of the development, paid for the costs in obtaining the patent, and received all of the profits on the invention. About three years after the patent issued, on March 26, 2015, Lavergne assigned the patent to Total Rebuild. The Assignment Agreement provided that “Assignor [Levergne] hereby sells, assigns, and transfers to Assignee [Total Rebuild] the full and exclusive worldwide right, title and interest in and to said Invention and said Patent …”

    A few months later, on June 11, 2015, Total Rebuild sued defendant PHC Fluid Power for patent infringement. PHC Fluid argued on summary judgment that Power Rebuild did not have standing for infringement occurring before the date of the assignment. You may have caught what’s missing from the assignment, which is an assignment of causes of action that arose before the assignment. “A party may sue for infringement that occurred before it acquired legal title ‘if a written assignment expressly grants the party a right to do so; that right, however, must be articulated explicitly in the assignment and will not be inferred by the court.’” The assignment didn’t explicitly state that past claims were assigned, so they weren’t. But this is where the reverse veil piercing comes to the rescue:

    if the inventor is the alter ego of a company because he has a close and intertwined relationship with the company, then the company has total ownership over the invention. LeFiell v. United States, 162 Ct. Cl. 865, 869 (1963). In those circumstances, the patent rights of the inventor belong entirely to the company, even if there has been no express assignment of rights. Id. …

    Here, taking the facts in the light most favorable to Plaintiff, Lavergne was the alter ego of Plaintiff Total Rebuild. Like Lefiell and Gerawan [Farming v. Rehrig Pacific Co., 11-CV-01273, 2017 WL 1414637, at *4 (E.D. Cal. Apr. 8, 2013), aff’d 587 F. App’x 654 (Fed. Cir. 2014)], Lavergne had such a close and intertwined relationship with Plaintiff Total Rebuild, that the company has total ownership over the ’428 patent. Indeed, Lavergne has been the sole director, sole owner, and sole shareholder of Total Rebuild for nearly twenty years. Lavergne developed the patented safety system at Plaintiffs expense and at its facilities, Plaintiff received all the profits for the ’428 Patent, and all costs and attorney’s fees to secure the patent were paid by Plaintiff. Lavergne also always believed that the ’428 patent belonged to Plaintiff even though it was issued in his name. There is therefore a genuine dispute of material fact as to whether Lavergne is the alter ego of Plaintiff, and whether Plaintiff has standing to sue for alleged infringement before Lavergne assigned the patent to Plaintiff.

    Total Rebuild, Inc. v. PHC Fluid Power, LLC, No. 15-01855-BAJ-CBW (Aug. 15, 2018).

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  • It’s About the Evidence

    Whole Foods Market filed an application to register the mark IDEAL MARKET for grocery stores, giving a first use date in 1940. Opposers Muwafak Kaki and Kaki Inc. opposed on the basis that they were joint owners of an IDEAL MARKET trademark that predated Whole Foods’ first use. Whole Foods filed a motion for summary judgment on priority.

    Whole Foods claimed it had use of the mark through various precedessors-in-interest. The store was started by Clark Chapman, who sold it to Steve LeBlang in 1989, who sold it to Wild Oats Market, Inc. in 1998. In 2007 Wild Oats merged with Whole Foods.

    That would be all well and good if it was supported by evidence. The chain of title was attested to in a declaration by Red Elk Banks, the Rocky Mountain Regional Vice President of Operations at Whole Foods Market. Banks had been employed by Whole Foods Market from 1995. His declaration was based on his own personal knowledge or based on business records made available to him during his career at Whole Foods. However,

    Mr. Banks has provided no basis for establishing that he has personal knowledge regarding the sale of the IDEAL MARKET grocery store from Mr. Chapman to Mr. LeBlang in 1989. The sale occurred six years prior to Mr. Banks’ employment with Whole Foods, and was between two parties unrelated to Whole Foods at the time.

    Although the sale of the IDEAL MARKET grocery store from Mr. LeBlang to Wild Oats occurred in 1998, at a time when Mr. Banks was employed by Whole Foods, Wild Oats and Whole Foods were separate entities until their merger in 2007, and Mr. Banks has not established the basis for his personal knowledge of the 1998 acquisition of the IDEAL MARKET grocery store by Wild Oats.

    As to his review of business records, Banks’ statements about what any documents might have said was inadmissible hearsay:

    While Fed. R. Evid. 803(6), made applicable to Board inter partes proceedings by operation of Trademark Rule 2.116(a), allows for the introduction into evidence of qualifying business records, as an exception to the hearsay rule, there is a distinction between the admissibility of business records, and witnesses testifying in their personal capacity. Testimony from such individuals based on a review of business records is inadmissible hearsay if the witness lacks personal knowledge:

    [T]he [business record hearsay exception] rule does not provide for the admission into evidence of the testimony of a person who lacks personal knowledge of the facts, who is unable to testify to the fulfillment of the conditions specified within the rule, and who is testifying only about what he has read or has been allowed to review.

    The records themselves would not have been hearsay if admitted as qualifying business records, but Whole Foods did not provide the actual documents showing the chain of title, it only had Banks’ testimony. Whole Foods therefore failed to meet its burden of showing there was no genuine dispute of material fact on ownership and summary judgment was denied.

    Kaki v. Whole Foods Market IP, L.P., Opposition No. 91224191 (TTAB Aug .22, 2018)

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  • When Is It a License?

    When reviewing a settlement agreement, I often ponder the parts where it says something like “Party B agrees not to infringe the trademark in the future.” The agreement doesn’t need it; whether you say it or not Party B isn’t allowed to break the law. I suppose adding the language gives you a breach of contract claim, but that will rarely get you any remedy that the trademark infringement wouldn’t.

    Zetor North America learned that it may have been too kind when it allowed a settlement agreement to elaborate on what kinds of uses would not be infringing. Defendant Ridgeway Enterprises thereafter tried, albeit unsuccessfully, to use the effort to claim it had a trademark license.

    Plaintiff Zetor North America is a subsidiary of Czech company Zetor Tractors a.s., which is a subsidiary of HTC Holding a.s., the owner of the ZETOR trademark for tractors.

    Defendant Ridgeway Enterprises is a non-authorized reseller of Zetor tractor parts. Its materials don’t always make very clear which parts are authentic Zetor parts and which are manufactured by others. In 2009, HTC, Zetor Tractors, Zetor NA and Ridgeway Enterprises entered into a settlement agreement over Ridgeway’s practices. In it, Ridgeway agreed that it would permanently cease and desist from the use of the ZETOR mark, except as a descriptive phrase in promotional/advertising materials to describe that a Ridgeway product is compatible with a referenced Zetor product or technology. The agreement elaborated with the following requirements:

    a. The Zetor word mark is not part of the advertised product name.
    b. The Zetor word mark is used in a descriptive phrase such as “fits,” “for use with,” “for,” or “compatible with.”
    c. The Zetor word mark appears less prominent than the product name.
    d. The product is in fact compatible with, or otherwise works with, the referenced Zetor product.
    e. The reference to Zetor does not create a sense of endorsement, sponsorship, or false association with Zetor or Zetor products or services.
    f. The use does not show Zetor or its products in a false or derogatory light.

    On the second go round, when Zetor NA sued Ridgeway in 2015, Ridgeway claimed that it had a license to use the Zetor mark so Zetor NA’s suit for trademark infringement was therefore a breach of the contract. The court disagreed, dismissing the counterclaim:

    Zetor NA argues that the settlement agreement did not create a license for Ridgeway to use the mark, as Count II of the Counterclaim alleges. Instead, the settlement agreement merely outlined for Ridgeway’s benefit an acceptable set of uses of the mark that would not violate federal or state trademark law. According to Zetor NA’s analysis, anyone could use its mark in the ways described in the settlement agreement and not run afoul of the law, since such uses would comport with the “fair use doctrine,” which the law has exempted from trademark enforcement. Zetor contends that, since the settlement agreement conferred no special rights or privileges on Ridgeway to use the mark, the agreement could not possibly have been breached, as a matter of law, by Zetor NA’s decision to sue Ridgeway for illegally using the mark.

    The Court agrees that the Ridgeway Defendants cannot make out a cognizable breach of contract action based on Zetor NA’s decision to sue for infringement in this case. Although the Ridgeway Defendants argue that their usage of the Zetor mark does, in fact, conform to the usage restrictions spelled out in the settlement agreement or otherwise qualifies as fair use, this argument is simply an affirmative defense to the claims in the Amended Complaint. The Amended Complaint itself does not allege that Defendants used the Zetor mark according to the terms of the settlement agreement. Instead, it alleges a use that was contrary to the terms of the settlement, in that it maintains: “Ridgeway’s advertising, marketing and sale of goods using the Zetor name is confusing to the consumer as to the source of the goods and the quality of the product, and dilutes and tarnishes the reputation and good will of the Zetor name.” All causes of action asserted in the Amended Complaint flow from Zetor NA’s contention that Defendants’ illegal use of the mark. Therefore, as a matter of law, Zetor NA’s decision to file this lawsuit alleging such illegal use could not possibly have breached the parties’ settlement agreement.

    In hindsight, and as a drafting lesson, the agreement could have been clearer on the purpose of section 2.2, by expressly referring to it as referential use or saying that the described uses would be non-infringing. But it worked.

    Sharp readers will have noticed a jurisdictional point, too. The trademark is owned by HTC Holding a.s. but the trademark infringement lawsuit was brought by Zecor NA only. Ridgeway finally woke up to the problem. The court was not pleased:

    Before delving more fully into the question of Zetor NA’s standing, the Court must point out the fact that it is most unfortunate that the issue was never raised in the nearly three years this lawsuit has been pending—including when the case was brought before the Eighth Circuit on interlocutory appeal. The parties have been familiar with one another since at least 2008, when Zetor Tractors’ legal counsel wrote a letter to Ridgeway, accusing the company, through its principals, of infringing Zetor’s licensed mark. The threat of litigation in 2008 culminated in a settlement agreement signed in 2009 by representatives of all three Zetor companies—HTC, Zetor Tractors, and Zetor NA—as well as Brent Rozeboom, on behalf of Ridgeway, and Brent and Glenda Rozeboom in their individual capacities.

    Up until the present, the Defendants have not suggested to the Court that Zetor NA is the wrong entity to bring this lawsuit for trademark infringement, or that another member of the Zetor family of companies should be joined as an indispensable party. The first inkling the Court was given about the possible standing problem was on June 1, 2018, through the Ridgeway Defendants’ Motion for Summary Judgment. At the time the Motion was filed, the trial of this matter was scheduled to commence less than two months later, on July 23, 2018.

    However, jurisdiction cannot be waived, so the court had to decide whether Zecor NA had standing. As to the claim for infringement of a registered trademark under § 32, the claimant must be (1) the owner of the mark, (2) the person or entity to whom the owner of the mark has completely assigned all rights to the mark, or (3) the exclusive licensee of the mark who has either been granted the explicit contractual right to enforce the mark and sue on the owner’s behalf, or else is not restricted by virtue of any term in the license from fully enforcing the mark in the owner’s place. (The court footnoted the fact that in some jurisdictions, the entity in position (3) does not have standing under § 32.) In this case, (1) and (2) were out on their face. Intermediate company Zecor Tractors was also not an exclusive licensee (read the opinion for a thorough explication), so its sublicensee, the plaintiff, could not be a sufficiently exclusive licensee to have standing either.

    The standing requirement for a claim under § 43(a) is more relaxed; in that case “‘a plaintiff must allege an injury to a commercial interest in reputation or sales.’ Lexmark Int’l. v. Static Control Components, 134 S. Ct. 1377, 1390 (2014).” However, Zetor NA couldn’t meet this lower bar either:

    As previously discussed, the Court finds that the Licensing Agreement between HTC and Zetor Tractors did not specifically grant Zetor Tractors the right to sue and enforce the mark on HTC’s behalf, and instead reserved many rights with respect to the mark to HTC for its exclusive use. Also, the Court found that the Distribution Agreement between Zetor Tractors and Zetor NA specified that Zetor NA’s non-exclusive sub-license to use the mark was even more restricted than Zetor Tractors’ license, particularly with respect to restrictions on geography, as well as other factors. In addition, the Distribution Agreement did not specifically grant Zetor NA the right to sue and enforce the mark on HTC’s behalf and reserved substantial rights to the mark for HTC’s benefit and use. Because of these findings, and because no specific evidence was presented on summary judgment as to what particular injury Zetor NA suffered as to its commercial interest or sales—as distinguished from HTC’s—the Court is reluctant to find that Zetor NA has sufficiently established standing to bring this claim on its own.

    Nevertheless, the court ordered that HTC Holding a.s. be added as a plaintiff rather than dismiss the suit.

    Zetor North America, Inc. v. Rozeboom, No. 3:15-CV-03035 (W.D. Ark. Aug. 14, 2018).

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  • Breach of a Copyright License in State Court

    It’s unusual to see what looks like a copyright case in state court, particularly one that reaches the highest court. It is Associated Management Services, Inc. v. Ruff, a license case in the Supreme Court of Montana.

    Plaintiff Associated Management Services provides payroll and business services to its parent company Associated Employer, a non-profit association of regional employers. Diane Ruff was an executive at AMS and her son, Daniel Ruff, was a Support Services Specialist for AMS. In 2006 AMS offered to develop an internet-based payroll time-tracking program for a potential customer, but the customer decided against it. Daniel proposed to his mother than AMS develop the software anyway, but she declined due to cost. Daniel then offered to develop the software at his own expense if he would own it, and his mother verbally agreed. Diane had AMS’s counsel set up Ruff Software Inc. for Daniel’s business. In advance of offering the software, called TimeTracker, to AMS’s customers, AMS and Ruff Software entered into a written license agreement where AMS would pay Ruff Software 90% of fees collected for use of the software and in exchange AMS had a perpetual, limited license to the software.

    From June 30, 2007 through December 15, 2015, AMS paid the royalties. In 2013 Diane left the company and its new executive director expressed concerns about the arrangement and tried to buy the software. This ended in Daniel leaving AMS, but they continued to use the software and pay royalties. About a year later AMS asked to buy the software again. Daniel asked for $120,000 and AMS counteroffered $60,000, saying that it was going to transition away to a newer technology needed to work with new HR software. Daniel counteroffered that AMS could either buy the software for $120,000, buy it for $60,000 a month and $3,000 a month after that until AMS developed its own software, or else pay nothing, terminate the license agreement, and Daniel would sell directly to AMS customers. AMS and Daniel couldn’t reach an agreement and Daniel left the company. AMS brought a declaratory judgment action, claiming that Daniel’s offer was an anticipatory breach of the agreement.

    So we have what looks a lot like a copyright case in state court, but is instead a breach of contract case where the contract happens to be a copyright license. It turns out, and you can read the opinion for the details, that AMS’s ongoing use of the TimeTracker software and its development of replacement software was within the scope of the license. As you might expect, AMS challenged Diane’s authority to enter into the agreement with Ruff Software, but AMS lost.

    Even the ownership claim, that the TimeTracker program was a work made for hire, didn’t turn on copyright law. Rather, Ruff’s employment contract language closedly tracked the definition of work made for hire in the Copyright Act and thus the ownership was decided as a matter of contract, with the software development easily outside the scope of Daniel’s employment. It is nevertheless a lesson on boots-and-suspenders, where reiterating a legal standard as a term of a contract gave the employer flexibility in its choice of court.

    Associated Management Services, Inc. v. Ruff, DA 17-0102 (Mont. July 24, 2018).

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  • Just “Slip It In Nebulously”

    When you see “slip it in” in an email about contract negotiations, it’s a good bet it’s not going to go well for the person trying to “slip it in.” Especially when their goal is to do it “nebulously.”

    The transaction was, to the defendant Mitel Networks, a vanilla domain name sale. However, the plaintiff’s real desire was to acquire a block of 65,536 IPv4 addresses – the domain name was just a front.

    The plaintiff Colocation America used a broker, Corey Allen Kotler, who approached Mitel Networks about purchasing the domain name “gandalf.ca.” Mitel Networks had acquired the domain name out of bankruptcy. The IP addresses were unrelated to the domain name, other than it looks like the IPv4 addresses were acquired at the same time. After Mitel Networks agreed to the domain name purchase, Kotler said in an email to Colocation, “I would write it [the purchase agreement] up for the domain and somehow slip in the IPV4.” He later said the same day

    Is there a way to slip it in nebulously? i.e. “… and should any potential intellectually [sic] properties or scenarios that may be associated at a future point in time.”

    He then amended Mitel Networks’ draft domain name purchase agreement, which in final form said:

    For good and valuable consideration, payable as more particularly described herein, Mitel hereby agrees to quit claim to INTELLECTUAL PROPERTY PURCHASER any of Mitel’s right, title and interest in and to the Domain Name <gandalf.ca> and the registration thereof, together with the goodwill of the business connected with and symbolized by such Domain Name[,] and the associated IPv4 134.22.0.0/16 and any associated trade dress, or other intellectual property intellectual property [sic] rights relating thereto, to the extent any such rights exist. The quit claim transfer and assignment shall take effect as set forth herein upon INTELLECTUAL PROPERTY PURCHASER’S making the payment as provided for herein.

    The bracketed comma is one that was in the original draft but did not survive through to the final executed copy. During negotiations Mitel Networks’ outside counsel highlighted “IPv4 134.22.0.0/16” and commented “What is this?” Kotler didn’t respond. Mitel Networks’ outside counsel asked Mitel Networks’ vice president of business strategy about it and subsequently felt comfortable having the domain name assignment agreement executed.

    After the agreement was signed, Colocation asked for the transfer of the IPv4 address block (even before the domain name). Mitel Networks’ counsel responded “there appears to be a miscommunication that needs to be worked out first” (undoubtedly with her heart in her throat). And we have a lawsuit.

    It’s a straight contract interpretation case. The suit is under Arizona law, which is very generous on its view of how to construe a contract:

    A contract should be read in light of the parties’ intentions as reflected by their language and in view of all the circumstances. Evidence of the parties’ negotiations, prior understandings, and subsequent conduct may be considered to determine the parties’ intent and to interpret the meaning of provisions in the contract.

    Important in this situation,

    Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made

    (a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party; or
    (b) that party had no reason to know of any different meaning attached by the other, and the other had reason to know the meaning attached by the first party.

    Restatement (Second) of Contracts § 201(2).

    Starting with the actual words of the agreement, the parties had two different interpretations. Mitel Networks contended that “together with the goodwill of the business connected with and symbolized by such Domain Name and the associated IPv4 134.22.0.0/16 and any associated trade dress” meant Mitel Networks was quit claiming the goodwill of the business connected with the associated IPv4 addresses and associated trade dress. Colocation contended that it meant that Mitel Networks was quit claiming the goodwill of the business plus the associated IPv4 134.22.0.0/16 addresses plus any associated trade dress.1

    The court agreed with Mitel Networks, relying on the agreement as a whole. The court recited the many places in the agreement that referred only to an assignment of a domain name – the preamble, the provisions for transfer, the warranty, and a non-disparagement provision, plus the IPv4 block was not associated with the gandalf.ca domain name.

    As to the rule of contruction on the meaning when the parties understand the agreement differently, “This case is a poster child for the rule of § 201(2) of the Restatement”:

    Mitel Networks had no reason to know that Colocation interpreted the Domain Name Assignment Agreement as an agreement to transfer IPv4 addresses. Colocation had reason to know Mitel Networks interpreted the Domain Name Assignment Agreement as an agreement to assign a domain name and not as an agreement to transfer IPv4 addresses. Although Ahdoot hired Kotler to acquire the IPv4 134.22.0.0/16 addresses, Kotler intentionally misled Mitel Networks by offering only to buy a domain name. Kotler told Ahdoot and Seligman, “I would write it up for the domain and somehow slip in the IPV4.” Kotler asked, “Is there a way to slip it in nebulously?” Then Kotler suggested slipping the IPv4 addresses in “nebulously,” using words almost identical to the language he used in his email to Whittington: “any potential intellectually [sic] properties or scenarios that may be associated at a future point in time.”

    Moreover, IPv4 addresses were never mentioned before Colocation offered and Mitel Networks accepted the offer of $10,000 for the assignment of a domain name. It would not have been reasonable for Colocation to expect Mitel Networks to add to the deal the transfer of 65,536 IPv4 addresses of value far greater than $10,000 without any additional consideration. That further proves that Colocation knew that Mitel Networks did not intend to transfer the IPv4 addresses.

    …Colocation’s objective from the outset was to acquire the IPv4 addresses. But it purported to negotiate only for a domain name without ever leveling with Mitel Networks. Colocation not only had “reason to know” Mitel Networks attached a “different meaning” to their agreement, it created and promoted that different meaning on the part of Mitel Networks. Thus, the Domain Name Assignment Agreement must be interpreted in accordance with the meaning attached by Mitel Networks, that is, as an agreement to assign a domain name and goodwill and not as an agreement to transfer IPv4 addresses.

    The court granted summary judgment in Mitel Networks’ favor.

    Colocation Am. Corp. v. Mitel Networks Corp. No. CV-17-00421-PHX-NVW (D. Ariz. June 14, 2018)

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    1. Good for the court, it did not discuss the removed comma. Don’t Rely on Commas in your drafting. The meaning was ambiguous with or without the comma and the court properly considered other aspects of the agreement besides that single phrase in reaching an understanding of its meaning. ↩
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  • It’s All About the Evidence

    One of the interesting things about TTAB proceedings is that there is no live testimony before the people who will decide the case, the judges. That’s generally a good thing; it means the proceeding is less expensive and time-consuming. Trial testimony is done like a deposition, with just the parties and a court reporter, and the transcripts are what the Board reviews. In more recent years, the Board has encouraged the use of declarations, rather than testimony, to further ease the burden of a TTAB proceeding (and I suspect their reading burden). It also means, though, that the judges sometimes get cases that have a fairly mystifying record. Because they aren’t present for testimony, the Board never has the opportunity to clear up any confusion, help ensure that the record is complete, or evaluate the witnesses’ truthfulness and demeanor.

    In Devil’s Desciples MC v. Woodard (yes, that’s how the MC, motorcycle club, spelled “disciples” in their name), the Board had this problem in a big way. The case is a dispute over ownership of the club patch. Fred Woodard filed an application for a collective membership mark to register this design:

    This was the specimen:

    The application was opposed by the motorcycle club, which claimed common law rights in this design:

    I expect everyone would agree that there is a confusion problem. I suspect everyone would also agree it’s unlikely that the similarity is a coincidence and so there must be some kind of story here. I assumed, and still believe, that it is the common situation where someone got the bright idea that they can get some kind of rights in another’s trademark by registering it first. I still think that, but the Board didn’t go that far. It couldn’t, because the parties told two irreconcilable stories, “diametrically opposed” in the Board’s view, about the mark.

    The Board quoted the testimony at length but, more briefly, the motorcycle club’s version of events is that the club was created in 1963 or so. In 1964, a deceased co-founder did an oil painting

    and the club created its patch based on the painting. The club has been using the mark continuously since then. Co-founder Johnson testified by declaration that applicant Woodard had been a member of the club from about 1974 to 1979, but was kicked out when he was imprisoned. Sixteen years later, when Woodard was out of jail, he rejoined, but was kicked out again about a year later after he tried to rob Johnson.

    Woodard agreed that he was imprisoned, but that’s about the only fact that the parties agreed on. Woodard claimed that he had been a member of the motorcycle club since 1971, had been President from 2005 to 2010, that he was considered a charter member and partriach of the club and regularly attended meetings (except when he was incarcerated), and the motorcycle club gave him the authority to award, distribute and revoke the club patch.1 In 2008, a member named Chase was kicked out but didn’t return his patch. Chase then proceeded to establish a new club, also called Devil’s Desciples Motorcycle Club, using the same patch. Woodard clamed that Johnson left the original club in 1980 to move to Alaska, severed ties, but returned to the original club in 2001. According to Woodard, Johnson then joined the new unauthorized club. Woodard then began an enforcement program against the use by the unauthorized club, which is why he filed the trademark application.

    Often when you hear two versions of a story you can guess where the truth lies. Nothing like that here.

    The motorcycle club claimed that the application was void ab initio because it wasn’t filed by the true owner of the mark. There is an important procedural point, which is that in an ownership challenge the opposer has the burden of proving that the applicant is not the owner of the mark. But the evidence was just to contradictory for the Board to be able to reach that conclusion:

    Based on the record before us, we find that Opposer has failed to meet its burden of proving by a preponderance of the record that Applicant did not own and “exercise legitimate control” over his applied-for collective membership mark as of the filing date of his application. We acknowledge that the record shows that the co-founder of Opposer’s motorcycle club personally conceived of the inspiration for the design of Applicant’s mark. However, in the face of conflicting statements made by each side regarding use and control of the mark over its members and the dueling sets of bylaws, it is difficult to assess the parties’ objective intentions or expectations. The statements made by Applicant in his testimony declaration that he, not Opposer, was authorized to control the applied-for collective membership mark, could certainly be challenged as self-serving. Opposer, however, elected not to cross-examine Applicant, making it difficult for the Board to assess the credibility of Applicant’s statements. In addition, had Opposer cross-examined Applicant and Mr. Ayre, it could have asked probing questions concerning the existence of more objective indicia of ownership such as costs incurred in printing membership patches, invoices documenting such costs, or revenue (if any) realized from the sale of patches to members. Equally problematic, there is nothing in the record to suggest that the bylaws submitted by either party are publically available, making it difficult for the Board to ascertain which party the public associates the mark with and which party exercises control of the mark. The only evidence of public efforts to police the collective membership mark consist of the cease and desist letters sent by Applicant to an unrelated third-party and Opposer’s witness Mr. Johnson in his capacity as an individual (along with another individual named Mr. Tringale whose testimony we do not have before us), evidence weighing in Applicant’s favor.

    But all was not lost; the club had shown that it was the senior user of an unregistered trademark that was confusingly similar to the applicant’s mark, so the opposition was sustained under Section 2(d) of the Lanham Act.

    The case has a good description of the law on ownership of collective marks, if you’re interested in that sort of thing. TL;DR, it’s the same as regular marks.

    Devil’s Desciples MC v. Woodard, Opp. No. 91228868 (TTAB May 15, 2018).

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    1. Fun fact. One person testified for Woodard that Devil’s Desciple is a “1%” motorcycle club, an “outlaw” club. I’m not sure who decides, but apparently you get to wear a patch for it. ↩
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  • You Will Be There – MTB-XIV

    Who could resist the lure of bowling and billiards? Surely I can’t, which is why on Tuesday, May 22, you’ll find me at the above locale, Garage Billiards, 1130 Broadway, in Seattle. After your marathon day of fifteen minute meetings and sterno-warmed chicken and penne eaten during your committee meeting, join the fabulous collection of bloggers who will be springing for the beer and some apps. But the shoe rental is on you.

    RSVP here.

    Hope to see you there!

  • Were the Patent Rights Assigned? The Federal Circuit Says No

    I asked whether a software development agreement assigned the patent rights in the software. The district court held “yes” but the Federal Circuit disagreed.

    Here again is the evidence in a letter agreement between plaintiff James (through his company GSP Solutions) and defendant J2 Cloud, known as JFAX at the time:

    This letter shall serve to confirm our Agreement on the terms by which you … will develop software solutions for the exclusive use of JFAX Communications, Inc. ….

    You agree to develop original software solutions, write original software routines, carry out testing and otherwise provide technological solutions for the JFAX system, and be responsible for the creation, execution and delivery to JFAX of a series of aspects of those solutions.…

    JFAX shall become the sole owner of all code and compiled software solutions as described in this Agreement as soon as it is developed, and GSP shall assign to JFAX all copyright interests in such code and compiled software.

    James also executed copyright assignment agreements for the software.

    The main thing to understand is that, at this procedural posture, which is a motion to dismiss for lack of standing, all inferences must be construed in the developer’s favor. The district court construed the preamble to the agreement, “for the exclusive use,” as meaning that James retained no rights, but that’s not the only possible meaning:

    The SDA [Software Development Agreement] is amenable to the construction that it does not assign, or promise to assign, patent rights that would otherwise accrue to Mr. James as an inventor.… [T]hat language is not itself a conveyance of any rights and, in any event, does not clearly go beyond GSP-developed specific software products to encompass also any underlying patentable methods embodied in the specific code. It can be read as indicating that it is only the specific code that will be for JFAX’s exclusive use.

    The section stating that JFAX “shall become the sole owner of all code” and “shall assign to JFAX all copyright interests in such code and compiled software” can be understood as referring to the actual code, not the underlying patentable methods. This interpretation is reinforced by use of the word “copyright” but not patent, and executing copyright assignments but not any patent assignments.

    There was also a “hired to invent” argument, which the Federal Circuit rejected too. James worked through a distinct legal entity. The Federal Circuit remarked that

    we have been directed to no decision applying the hired-to-invent principle where the underlying agreement for engagement of services was between two artificial legal entities and to which the inventor was not personally a party. … Regardless, the SDA does not support a hired-to-invent inference so as to deny standing here. … Based on the provisions and arguments presented to us, the SDA is readily capable of being read not to assign or to promise to assign the patent rights at issue. Because the SDA largely or even wholly defines the terms of JFAX’s alleged “hiring” of Mr. James (actually of GSP), there is at least a factual dispute about any implied assignment or promise to assign.

    James still has a long way to go. The “exclusive use” in the preamble of the letter does suggest that, even though he may be the inventor, he would not be allowed to license the rights to anyone else. So although he overcame the standing hurdle, he perhaps still suffered no harm. Interestingly, the patent in which he claims ownership, Patent No.6,208,638, is listed in Stanford Law School’s “NPE Database” as having been asserted 34 times in federal court. I’m guessing there’s money there.

    James v. J2 Cloud Servs., No. 2:16-cv-05769 (C.D. Cal. Dec. 19, 2016). Docket.
    James v. J2 Cloud Servs., No. 2017-1506 (Fed. Cir. Apr. 20, 2018).

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  • Were the Patent Rights Assigned?

    Defendant J2 Cloud Services (JFAX) hired plaintiff Greg James to write some software. Unbeknownst to James, JFAX filed a patent on the software. Many years later, James sued JFAX for correction of inventorship. JFAX argued that James didn’t have standing for correction of inventorship because he had assigned his patent rights to JFAX. The district court agreed with JFAX and dismissed the suit. James appealed.

    Here are the relevant portions of a letter agreement between James and JFAX:

    This letter shall serve to confirm our Agreement on the terms by which you … will develop software solutions for the exclusive use of JFAX Communications, Inc. ….

    You agree to develop original software solutions, write original software routines, carry out testing and otherwise provide technological solutions for the JFAX system, and be responsible for the creation, execution and delivery to JFAX of a series of aspects of those solutions.

    JFAX shall become the sole owner of all code and compiled software solutions as described in this Agreement as soon as it is developed, and GSP shall assign to JFAX all copyright interests in such code and compiled software.

    James also executed copyright assignment agreements for the software.

    Did he assign the patent rights? Add your thoughts in the comments.

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  • The Scope of the License

    The opinion is sparse on the facts and the law, so we have to do some interpretation. But it’s worth some thought about how the court construed the scope of an implied copyright license.

    Defendant Kushner wrote software for plaintiff Vickerman Co. Their relationship ended, Vickerman Co. sued Kushner (the court doesn’t say why, other than breach of contract) and Kushner counterclaimed for infringement of the copyright in his work. The court characterizes the situation as an implied copyright license. We’re not given any more details than that, other than the fact that Vickerman Co. paid Kushner. I’ll assume a more fulsome interpretation would have been that there was an implied license under the Effect Assocs. v. Cohen test, which was irrevocable because Kushner had been paid.
    ,
    On a motion for preliminary injunction the court held that Vickerman Co. had an implied license to run the software, but not to create derivative works, i.e., not to make any changes to the source code. This was outside the scope of the implied license:

    No license is implied to derivation. While writing the software, Kushner mostly kept the source code on his machines. Compl. ¶ 14. Although Vickerman Company paid Kushner to write software for its use, the Company also paid him annually for “writing, monitoring, maintaining, and troubleshooting.” Compl. ¶¶ 16, 20. If unlicensed, these updating activities would infringe the copyright in the software Kushner wrote. An implied license to prepare derivative works would thus be inconsistent with the preliminary record.

    In other words, the exercise of an exclusive right normally performed by the licensor would be unlicensed when performed by the implied licensee. I suppose that’s one way of looking at it, although I’m not sure it’s the right way. At any rate, just another reminder to get those software licenses in writing.

    Vickerman Co. v. Kushner, No. 17-cv-1771 (JNE/SER) (D. Minn. Mar. 20, 2018). Docket.

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