Sketchy Standing Decision

The only good thing about the latest Federal Circuit standing decision is that it's nonprecedential.  This is the sequence of events, taken from both the majority's and dissent's statement of them: 

In 2002, The Dow Chemical Company ("Dow") assigned patents to a holding company, Dow Global Technologies, Inc. ("DGTI"). The dissent described the assignment as of "essentially [Dow's] entire patent portfolio" as part of a tax strategy.  This was the grant:

2.01 Transfer of Patent Rights and Technology. Effective on the Transfer date, [Dow] hereby conveys, transfers, assigns and delivers to DGTI, and DGTI hereby accepts from [Dow] as an additional contribution to DGTI's capital, all of [Dow's] right and title to and interest in the Patent Rights, Technology and Work Processes, which rights are owned or controlled by [Dow] on the Transfer Date or thereafter.

The language defining "Patent Rights" is the crux of the problem:

1.07 “Patent Rights” means any and all patents and applications for patents of any kind, filed with and/or granted by a governmental body of the United States or any other country ... which are owned solely or controlled by [Dow] on the Transfer Date or thereafter, that [Dow] is able to assign to DGTI without the consent of or accounting to a Third Patty or Affiliated Company, without diminishing the royalties paid or payable by or otherwise materially affecting the obligations of such Third Party or Affiliated Company with respect to such Patent Rights, and without resulting in a loss of rights. The parties shall provide a schedule of Patent Rights as Schedule A to this Agreement, within ninety (90) days of the Effective Date, and shall provide subsequent supplements thereto from time to time during the Term.

The agreement also said this about the schedules to the agreement:

9.07 Schedules.  Each of the schedules referenced within this Agreement, prospectively including any updates or amendments thereto, is deemed incorporated herein by reference. While care shall be taken in the provision of the schedules, it is recognized that inadvertent errors may occur. Accordingly, inclusion of an item on one or more schedules shall not give rise to rights or an implication that DGTI has rights greater than those expressly provided for in this Agreement. Likewise, omission of an item from one or more schedules shall not give rise to an implication that DGTI has rights less than those otherwise provided for in this Agreement. Upon their mutual recognition of an error in one or more schedules, the parties will amend the erroneous item(s) on the affected schedule(s).

In 2005, Dow sued defendant Nova Chemicals Corp. for patent infringement.

Five months after discovery closed Dow first produced a Schedule A that said "this Schedule includes all Patent Rights of [Dow] ... excluding Excluded Patent Rights set forth in Schedule 'D'" and a Schedule D that indeed listed the patents-in-suit, although the patents had been added to Schedule D years after suit was filed and right before it was produced.  Dow also produced a "Quitclaim Deed," dated four days before it was produced, assigning "all of DGTI's right, title, and interest to the Patents[-in-suit], if any."

Defendant Nova pressed for further disclosure. Dow then produced a 2002 version of Exhibit D that did not list the patents-in-suit and a Schedule A dated September 15, 2005 that, unlike the broad language in the earlier-produced Schedule A, listed a number of patents by number but not the patents-in-suit. 

To recap, the definition of assigned patents had three exclusions: (1) the transfer would require "the consent of or accounting to a Third Party or Affiliated Company"; (2) the transfer would "diminish[ ] the royalties paid or payable by or otherwise materially affecting the obligations of such Third Party or Affiliated Company with respect to such Patent Rights"; or (3) the transfer would result in "a loss of rights."

Everyone agreed that the first two exclusions didn't apply, leaving the question whether transferring the patents-in-suit would have resulted in a "loss of rights." Nova argued that the language was intended only for those patents in litigation pending at the time of transfer, designed so that there would be no loss of standing in those cases. At the time the assignment was being drafted, Dow's Managing Patent Counsel sent a question by email:

"Did transfer of all patents into this new company have any provisions on how to handle pending litigations under Dow patents.... It is a question of who had standing and who is the real party in interest in these litigations." 

The response was:

"Thank you for the feedback. I've addressed this issue in the contribution agreement by excluding patents that can't be transferred to DGTI without a loss of rights (previously, it excluded patents that can't be transferred to DGTI without a loss of patent protection). As an overall safety net, there is a schedule of excluded intangible assets, just in case there may be other instances in which we determine that there would be some disadvantage in transferring the assets to DGTI."

Dow's argument was that, in addition to patents in pending litigation, the language was meant to preserve the ability to recoup lost profits in future litigation.

(I don't follow Dow's theory. Does it mean that Dow somehow was prescient in knowing that these patents would be litigated in the future and therefore didn't assign them? Or that the patents flow back and forth without any further action by Dow or DGTI as litigation comes and goes?  Was it the Schrödinger's cat of assignments, any given patent was both assigned and not assigned depending on whether it was a tax situation or a patent infringement situation?)

But the majority punted on the language. It held that, while it didn't know what the "loss of rights" language was supposed to mean, it didn't matter because Schedule A was the definitive list of what was assigned, the patents-in-suit weren't on it, ergo, they weren't assigned and Dow had standing to bring suit.

The dissent disagreed with the majority's conclusion about Schedule A's role:

Section 1.07 defines the transferred Patent Rights as "any and all patents" owned by Dow that Dow can assign without implicating one of three exceptions, none of which reference Schedule A. Nowhere in the Contribution Agreement is the transfer predicated or dependent upon whether patents are listed on Schedule A. Indeed, Section 9.07 makes clear that the contents of the schedules are not controlling. Moreover, Section 2.01 provides that Dow "hereby" transfers the patents, which strongly indicates an immediately effective transfer, while Schedule A was not even required to be completed until after the Contribution Agreement was executed. To find that no patents were transferred unless and until listed on the Schedule A ignores Section 9.07, nullifies the transfer set forth in Section 2.01, renders superfluous the detailed and specific definition of Patent Rights in Section 1.07, and rearranges the fundamental purpose of the tax and business scheme intended under the agreement as a whole. Such a reading would cause most of the Contribution Agreement to be "meaningless or illusory." The reference to Schedule A in the Contribution Agreement shows that the parties desired to make and maintain a listing of the patents that were transferred to DGTI as a matter of convenience, not as a prerequisite to a valid transfer.

The dissent also didn't buy Dow's argument that somehow these patents fit into the "loss of rights" exclusion, reciting all the extrinsic evidence (which, under Delaware law, should have been considered because the language was ambiguous) that the intention was only to exclude those patents in litigation at the time of the assignment. As well as the language of the agreement and the emails described above, the dissent also described all the ways that the company treated the patents as assigned for tax purposes.

I agree with the dissent; I don't see how you would draft an agreement intending to assign only scheduled properties but also have an extensive, but apparently non-binding, description of what should be on the list - you don't need both.  But I will be taking a closer look at the language of grant clauses and schedules in the future after having read this case.

Perhaps the whole thing was just a matter of bad timing. The district court sat on the motion on standing for nine months and heard it the day after the jury returned a verdict for Dow on the infringement trial. Maybe the majority just didn't have the stomach for a do-over with the right party-in-interest.

Dow Chem. Co. v. Nova Chems. Corp. (Canada), No. 2010–1526 (Fed. Cir. Jan. 24, 2012) (nonprecedential).


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The Yankees Still Own Their Logo

Last April there was an interesting complaint filed (blogged here) by a woman who claimed that her uncle, Kenneth Timur, now deceased, had designed the New York Yankees logo in 1936 but hadn't been compensated for it. The plaintiff's proof of authorship was the fact that her uncle, when he revised the logo in 1952, put "1P089" instead of "1908" on the top of the logo, thus:

 As you might have guessed, the complaint was kicked six ways to Sunday. First, there was no diversity jurisdiction and no federal subject matter jurisdiction because the complaint alleged infringement of a common law copyright, which is a claim under state law, not federal.

But the court, after formally dismissing the case on jurisdictional grounds, had just gotten started:

Moreover, if the Court were to have jurisdiction over this matter, it would find that Plaintiff's First Amended Complaint utterly fails to state a claim upon which relief may be granted. All of Plaintiff's non-copyright claims have been barred by the applicable statutes of limitation for over half a century. Plaintiff's argument that equitable estoppel applies to toll the statutes of limitation because the Yankees somehow concealed the Logo's provenance from the Logo's own creator is laughable.

Ouch.  But the court didn't stop there, also finding that section 301 of the Copyright Act of 1976 expressly preempts any common law copyright claim.  Next up, in 1936 there was only a common law copyright for unpublished works (published works would have fallen under the Copyright Act of 1909), but a theory that the work was unpublished was inconsistent with the statements in the complaint that the Yankees commissioned the logo, Timur transferred the logo to the Yankees, and the Yankees published the logo as part of the Yankees uniform.

The court didn't even stop there, opining on the outcome of the plaintiff's claim for infringement of a published work that wasn't made. Any infringement claim fails here too; if the work had been published under the Copyright Act of 1909, even if registered and renewed (it wasn't), the copyright would have expired in 1992.

All that in nine pages in Courier New, double-spaced (okay, a one-sentence carryover and signature on the tenth page).  About six solid bases for dismissal but hope springs eternal; the plaintiff has appealed.

Buday v. New York Yankees Partnership, No. 1:11-cv-02628-DAB (S.D.N.Y. Oct. 20, 2011).

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Defining Terms (Especially the "Agreement")

Sometimes you read a decision and don't know what the arguments really are until you read the dissent.  Abbott Point of Care, Inc. v. Epocal, Inc. is one of those cases. Out of the Federal Circuit, it's a question about whether a former employee's duty to assign inventions survived various changes in the relationship and various agreements between the inventor and his employer.

Dr. Imants Lauks, the inventor and founder of defendant Epocal, Inc., had been employed by Integrated Ionics, a predecessor to the plaintiff Abbott Point of Care, Inc.  There were ultimately three agreements in play. First, in 1984 Lauks executed an agreement that covered confidentiality, non-competition, non-solicitation, disclosure and assignment provisions. There didn't appear to be any dispute that, had Lauks invented something while this agreement was operative, Integrated Ionics would own it.

Integrated Ionics became i-STAT and in 1994 Lauks executed an employment agreement with i-STAT that covered employment duties, compensation, benefits, termination and severance payment. In 1999 Lauks resigned from i-STAT and instead entered into an eighteen-month consulting relationship that expired on March 1, 2001.  The consulting agreement defined Lauks consulting services and also said, in a section entitled "Continuation of Employee Confidentiality, Non-Solicitation and Non-Competition Covenants" that:

The existing agreement between Lauks and [i-STAT] regarding confidentiality, non-solicitation and non-competition (the 'Existing Confidentiality Agreement') shall remain in place as if Lauks remained employed by [i-STAT], except that the covenants regarding non-competition shall run 18 months after the execution of the Consulting Agreement.

Lauks filed the applications on the patents-in-suit on June 4 and 8, 2001, three months after his consulting relationship ended, and assigned the resulting patents to Epocal. Abbott acquired i-STAT and now claims that the 1984 agreement, including the assignment provision, was operative until March, 2001. It claims that Lauks conceived of the inventions before then and therefore Abbott owns the patents.

The appeals court held that the 1999 Consulting Agreement didn't continue the assignment provision of the 1984 agreement, but only the confidentiality, non-solicitation and non-competition provisions. The court considered the above language unambiguous.

The dissent saw it differently. The dissent informs us that the 1984 agreement was untitled, but that the 1992 employment agreement referred to the 1984 agreement in its entirety as "The Confidentiality and Non-Competition Agreement," and that Lauks and Epocal also referred to it (although it's not clear where) as the "certain letter agreement . . . concerning employee confidentiality and non-competition."  These instances of using a shorthand reference to the entire agreement makes it less clear what the use of the term "Existing Confidentiality Agreement" in the 1999 Consulting Agreement means - whether it was to the "confidentiality, non-solicitation and non-competition" provisions of the agreement only or the agreement as a whole.

There is more, though. The 1999 Consulting Agreement also recognized that

[t]he Consulting Agreement does not extend to work on new products, whether or not based on [i-STAT's] core technology and whether or not for point-of-care blood analysis applications.

These provisions would be inconsistent with a duty on Lauk's part to assign inventions on all his work. The dissent doesn't address this, but then it also only disagreed about granting the motion to dismiss rather than remanding for additional factfinding.

Lawyers are generally anal about defining terms, and this case demonstrates why it's good practice. Had the dissent carried the day and the contract been interpreted differently, Lauks might have lost his entire business because of ambiguity about whether he succeeded in retaining his invention for his new company.

Abbott  Point of Care, Inc. v. Epocal, Inc., No. 2011-1024 (Fed. Cir. Jan. 13, 2012).

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The Danger of Terms of Art

Sherman & Associates, Inc. v. Oxford Instruments, PLC discusses the fairly commonplace question of whether plaintiff Sherman & Associates, who was only a patent licensee, has standing to sue. The answer hinged on interpretation of the contract between it and the patent owner, ASM America, Inc. Sherman & Associates was originally the owner of the patent-in-suit, but it had transferred title to ASM several years earlier. In exchange, Sherman & Associates received a "non-assignable, nontransferable worldwide exclusive right to grant sublicenses under the Sherman Patents in fields of use other than the field of Microelectronic Applications" from ASM. The question was whether this right to sublicense also included the right to sue for infringement.

The first notable part of the case was the position of patent owner ASM - it was named by Sherman & Associates as a defendant in the Amended Complaint, with this statement: "ASM has an interest in the outcome of this litigation, and is a proper party to this action as a plaintiff, defendant, defendant patent owner, or involuntary plaintiff, whichever designation is deemed appropriate by this Court."  Sherman & Associates had named ASM in its Certificate of Interested Entities when it filed suit and two months later filed the Amended Complaint adding ASM, so there was presumably some communication about the issue.  And presumably any communication with ASM didn't turn out well because, not only did Sherman & Associates name ASM as a defendant, ASM was the one who filed the Motion to Dismiss under FRCP 12(b)(1), not the accused infringer Oxford Instruments.

But the eyebrow-raising part of the decision is the court's interpretation of this language, fairly standard in any licensing agreement:

Sherman agrees to cooperate and assist ASM in any litigation involving the Sherman Patents on reasonable terms and conditions to be agreed upon. Sherman also agrees to assist ASM in patent prosecution relating to the Sherman Patents at no cost to ASM. ASM will pay all prosecution costs and will reimburse Sherman for any out of pocket costs.

What did the court do with this?

[T]he contract says nothing about Sherman’s right to litigate. The only language in the contract about litigation anticipates that ASM will be litigating, and does not limit such litigation to the field of microelectronics. See Bunsow Decl. Ex. A ¶ 1(g) ("Sherman also agrees to assist ASM in patent prosecution relating to the Sherman Patents at no cost to ASM."). Sherman argues that the paragraph about litigation contains no reciprocal language because he is the inventor of the patent and would not need any assistance from ASM in prosecuting a patent. That is plausible, but it is no more plausible than ASM’s suggestion that the parties did not intend for Sherman to do any litigating.

What!? The court thinks that the language about "prosecuting" patents is further elaboration on the preceding sentence about litigating patents?

It's easy to understand how this happens. When I talk about "prosecuting" patents to anyone but a patent lawyer, I follow up with an explanation of what that means. Apparently no one helped the judge out with that part of it here. Nevertheless, the court otherwise had adequate reason to find that Sherman & Associate's didn't have the right to sue and dismissed the case.

Sherman & Associates, Inc. v. Oxford Instruments, PLC, No. C 11-8827 CRB (N.D. Cal. Jan. 10, 2012).


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Assignment or License?

I last wrote about the licensing rights of a joint copyright owner as discussed in Corbello v. DeVito. The same case also had two agreements that the court needed to construe before deciding who owned what rights in the copyright.

Plaintiff Corbello is the widow and heir of Rex Woodard, who wrote an authorized biography about Tommy DeVito, a member of the Four Seasons musical group. It was never published. Corbello alleges that DeVito provided the book to the producers of the Broadway musical Jersey Boys and the show is a derivative work of the book.  Corbello brought a number of claims against DeVito and various entities related to the production, including for copyright infringement and an equitable accounting.

Woodard had entered into a brief letter agreement with DeVito over the rights to the book:

December 1, 1988 Mr. Tommy DeVito [street address] Las Vegas, Nevada [zip code] Dear Tommy: I am making progress on the taped interviews we did. You suggested that I prepare a written memorandum of our arrangement for future reference. I will do so by this letter. I agreed to write your authorized biography based on the recorded interviews you gave me, plus any other relevant information which would benefit the book. You and I will be shown as co-authors, with you receiving first billing. I will do all of the actual writing, but you will have absolute and exclusive control over the final text of this book. We have further agreed that we will share equally in any profits arising from this book, whether they be in the form of royalties, advances, adaptations fees, or whatever. This agreement will be binding upon our heirs, both as to obligations and benefits, in the event one or both of us should die. If this letter accurately sets forth our agreement as you understand it, sign the enclosed photocopy where indicated and return it to me in the enclosed self-addressed, stamped envelope. Keep this original letter in your own file. Thank you for asking me to work with you on this project. I look forward to working with you over the next several months. Sincerely, [signed] Rex Woodard Rex Woodard RW/ml Enclosures APPROVED: [signed] Tommy DeVito TOMMY DEVITO

The first question was whether DeVito was a joint copyright owner of the book or Corbello, as Woodard's heir, owned the copyright in its entirety. The agreement between Woodard and DeVito doesn't say; it says that Woodard and DeVito would share equally in any profits but that doesn't necessarily mean that DeVito was a copyright owner. "If the Work were Woodard's alone under the law of copyright, the Letter Agreement would still constitute an assignment of 50% of Woodard's rights to receive profits from the Work, i.e., a partial assignment of royalties, but it would not appear to constitute a partial transfer of copyright." Nevertheless, Corbello had admitted that DeVito was closely involved in editing the book, so the court found that DeVito was a co-author since he contributed non-de minimis creative edits. Corbello therefore wasn't the sole owner of the work but only a joint owner, which meant that  DeVito had the rights of an owner to grant a license for the production of Jersey Boys.

But what kind of license in the book did DeVito give? DeVito had granted extensive rights to his co-band members Frankie Valli and Robert Gaudio to exploit undefined "Materials," thus:

In consideration of the foregoing payments, you grant to us the exclusive right to use and incorporate the Materials in one or more theatrical productions, and any and all ancillary and subsidiary exploitations thereof including, without limitation, cast albums, motion picture and televised versions, merchandise and/or other works.... You hereby consent to any such use and agree that the Works may be exploited throughout the world in all media now existing and later devised, and you further acknowledge that you shall not receive any compensation for the use of the Materials or in connection with any of the Works other than the compensation expressly set forth herein. The rights granted by you to us hereunder shall continue in perpetuity if the rights in the Play have merged with each other pursuant to the production contract between us and the initial commercial producer. .... The rights granted to us herein are irrevocable and not subject to rescission or injunction under any circumstances.

A transfer of copyright ownership doesn't have to say "transfer" or "assign," but simply must indicate an intent to effect an outright transfer of the copyright. The court found that the above language in the Valli-Gaudio agreement was expansive enough to demonstrate an intent to assign the copyright, with one not-so-minor problem - the agreement didn't describe what the "Materials" consisted of. Valli and Gaudio testified that at the time they entered into the agreement they didn't know the book manuscript existed and, indeed, had never seen it until their depositions in 2011. Hence,

the Valli/Gaudio License was not a transfer of copyright from DeVito to Valli and Gaudio, because although the instrument purported to give exclusive rights in the Materials irrevocably and perpetually, it did not sufficiently identify the Work to transfer DeVito's 50% ownership of copyright in the Work to Valli and Gaudio. At best, the instrument is ambiguous with respect to intent to transfer copyright, and the parol evidence indicates that there was no intent to transfer copyright, particularly as Valli and Gaudio appear not to have known specifically about the Work itself at the time they entered into the Valli/Gaudio License with DeVito.

The court therefore found that it was DeVito, not Valli and Gaudio, who owed Corbello a duty of accounting for her ratable share of the profits realized for the use of the book. That's not as easy as it might sound, though; DeVito had provided a number of "Materials" and so there remains a question of fact about what percentage of DeVito's royalties under the license is attributable to the book and what percentage is attributable to other works or assistance DeVito provided under the license.

There's even more to this decision if you're interested: some juicy details about DeVito's claim that he alone authored the book and some elucidation on supplemental registration - who can make it and how it's indexed with respect to the original registration.

Corbello v. DeVito, Civ. No. 2:08-cv-00867 (D. Nev. Oct. 27, 2011).


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Sybersound Records Takes Some Hits

Sybersound Records, Inc. v. UAV Corp. is a 2008 Ninth Circuit decision on joint copyright ownership that wasn't well-received by either Nimmer on Copyright or Patry on Copyright. In Sybersound, the court held that the transfer of an interest by one joint owner of a copyright could only be a non-exclusive license, not an assignment or exclusive license. In a post entitled "Death of Divisiblity," William Patry described the flawed reasoning in the Sybersound decision this way:

Where there are multiple authors, Congress intended that one co-owner could offer non-exclusive licenses in the whole, but could not offer an exclusive license/assignment/conveyance in the whole without all co-owners' permission . . . .  At the same time, Congress permitted one co-owner to convey his or her proportional share in the whole, regardless of whether that conveyance was called an assignment or a license. This follows from the plain language of the statute and from the lack of any process for resolving disputes among co-owners: what if one co-owner wants to sell his or her interest, but the other doesn't want him or her to? Are co-owners stuck together in a marriage that isn't working? Long after non-fault divorces became common, Congress provided for them through divisibility. All was fine for a long time, until a spate of bad decisions. Sybersound is the most recent.

More recently two district courts, one in the Ninth Circuit and one in the Seventh, whittled away at Sybersound. First up, out of the Eastern District of Wisconsin we have Brownmark Films, LLC v. Comedy Partners, the "What, What, In the Butt" ("WWITB") decision that is best known for a copyright fair use win on a motion to dismiss (original video here and South Park spoof here: best remark on the court's decision here). However, before the court reached fair use it had to decide whether the plaintiff had standing to bring the infringement claim. The copyright in the video was originally owned by three individuals, but only two assigned their interest to plaintiff Brownmark Films. Under Sybersound, as a nonexclusive licensee Brownmark Films wouldn't have standing.

But the Wisconsin court wanted no part of Sybersound. It criticized the Ninth Circuit's reasoning, concluding:

In sum, while the Sybersound Records decision is most definitely authoritative, it is far from persuasive. Instead, this court agrees that "[t]he determination of whether a grant is exclusive or non-exclusive depends on the grant." [Cites to Nimmer and Patry.] Here, accepting the allegations in the complaint as true, Messrs. Ciraldo and Swaint's grant of their interest in WWITB was a complete assignment of rights to Brownmark and, accordingly, Brownmark has standing to sue for infringement of the underlying copyright.

More recently, the District of Nevada had to deal with the same problem. Corbello v. DeVito is a meaty decision about the copyright ownership of an unpublished biography of defendant Tommy DeVito, one of the original Four Seasons. Plaintiff Donna Corbello is the widow and heir of Rex Woodward, the author of the biography (or co-author, more on that in another post) and alleges that the Broadway musical "Jersey Boys" is a derivative work of the book. Corbello sought a declaratory judgment that a purportedly exclusive license DeVito granted to the "Jersey Boys" production couldn't have been exclusive under Sybersound.

Since the District of Nevada is in the Ninth Circuit, the court had to work harder than in Brownmark Films to distinguish Sybersound - nevertheless, it managed to. It examined what the 9th Circuit meant by the term "exclusive," deciding that the exclusivity is only as to the grantor of the right, not all the co-owners:

In the context of intellectual property, the difference between "exclusive" and "nonexclusive" licenses concerns the continuing ability of the grantor to use or further license to others the licensed property during the period the license is in effect. An "exclusive" license is "[a] license that gives the licensee the sole right to perform the licensed act . . . and that prohibits the licensor from performing the licensed act and from granting the right to anyone else . . . ." Black's Law Dictionary 1003 (9th ed.2009). A "nonexclusive" license does not impose this limitation on the licensor. A joint owner of a work may consistent with Sybersound grant a license that is exclusive as against him, i.e., he may no longer exploit or further license the work. But such a licensee cannot prevent the other joint owner(s) from using or further licensing the work. In a sense, then, such a license is both exclusive and nonexclusive.

Therefore, DeVito could have granted an exclusive license as to his own rights, but not to the exclusion of the plaintiff's right to exploit the copyright in the work, a situation that the court coined as a "selectively exclusively license." The Corbello court rationalized the Sybersound court's decision as "guilty at most of imprecise syntax or some minor equivocation, as opposed to outright copyright-law heresy. . . . Surely the Ninth Circuit will clarify that it meant something like this if given the chance, and perhaps it will have the chance in the present case."

But as a joint owners, DeVito owes Corbello a duty of accounting for her share of his profits from the licensing of the book. Which perhaps is not as easy as it seems, since he had licensed a number of works to the Jersey Boys production and Corbello is only owed royalties for the portion attributable to the unpublished book.

Brownmark Films, LLC v. Comedy Partners, Civ. No. 10-CV-1013 (E.D. Wisc. July 6, 2011).
Corbello v. DeVito, Civ. No. 2:08-cv-00867 (D. Nev. Oct. 27, 2011).


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Walter Mercado Still Losing

Walter Mercado can't get a break - but then he's trying to fight two separate district court decisions that both went against him. Odds in the appeals court were slim and he didn't beat them.

The dispute is over an agreement between Mercado, an astrologer, and Bart Enterprises International Ltd., a company to which Mercado

• "irrevocably assign[ed] ... all right, title and interest, including all copyrights" to Preexisting Materials;
• "grant[ed] ... the exclusive right and license ... to develop, produce, distribute and copyright" New Materials;
• "irrevocably assign[ed] ... all right, title and interest in and to the [WALTER MERCADO] Mark, together with that part of the goodwill of Mercado's business connected with and symbolized by said Mark, for use in connection with the Pre-existing Materials and the New Materials"; and
• "grant[ed] ... the right and license ... to use Mercado's performance, name, signature, photographs, voice, picture, likeness and other indicia of his identity" subject to Mercado's approval.

Mercado was to provide psychic and astrological services for the creation of the new materials, but retained the right to conduct his radio, newspaper, magazine and personal consultation services. In exchange for all of this, Mercado was to get $25,000 per month, $5,000 per month for costumes, and some other monies.

What $5,000 a month for costumes gets you

The parties had a falling out, with Mercado refusing to provide the services and Bart Enterprises refusing to pay him. Two different federal courts held that the agreement assigned the WALTER MERCADO mark to Bart Enterprises and that the mark would revert to Mercado upon termination of the agreement, but the agreement had not been validly terminated (more details in a post here). Mercado was preliminarily enjoined from using the WALTER MERCADO mark. Mercado appealed.

The court reviewed the opposing positions on whether the mark had been assigned:

The district court adopted Bart's view that Mercado fully assigned the trademark to Bart because the Agreement plainly uses the term "assign." Section 2(b) of the Agreement states that "Mercado hereby irrevocably assigns to Bart . . . all right, title and interest in and to the Mark, together with that part of the goodwill of Mercado's business connected with and symbolized by said Mark." This unequivocal language is contrasted with Section 3(b), in which Mercado "grants to Bart the right and license . . . to use Mercado's . . . Name and Likeness." This contrast in language, the district court noted, suggests that the parties intended to grant Bart a full assignment of the trademark. Still, the district court acknowledged language suggesting otherwise: the text of Section 2(b) includes the subsidiary phrase "for use in connection with the Pre-existing Materials and the New Materials." The district court reasoned, however, that this language is merely purposive and does not restrict the scope of the assignment. The district court also noted that the Agreement stipulates that Bart has the right to register the trademark in its own name and the right to enforce the trademark in court. Such rights typically inure to assignees, not licensees. There was evidence that the parties took actions consistent with this reading. Not only did Bart file an application for the "Walter Mercado" trademark with the U.S. Patent and Trademark Office (PTO) in 1996, but Mercado filed at least three documents that ratified Bart's right to do so.[*] Mercado, however, urges adoption of the magistrate judge's reading that the Agreement grants Bart only a limited license to use the trademark. The magistrate judge concluded that because the Agreement consistently limits the use of the trademark to uses "in connection with" the Preexisting and New Materials, the grant is a limited license.

But on the deferential review of a preliminary injunction:

We do not say that the issue of the scope of the trademark transferred has been resolved, only that there was no abuse of discretion as to preliminary injunctive relief.

Further, even if Bart was only a licensee, not an assignee, it was entitled to a preliminary injunction, having demonstrated likelihood of confusion and irreparable harm.

Mercado-Salinas v. Bart Enter. Int'l, Ltd., No. 10-2359 (1st Cir. Dec. 20, 2011) (Scrib'd link here).

* One consent in this document.


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