Lesson Learned

This is a story that makes lawyers groan "if only I could’ve been there." The plaintiff, Miller, had an idea for a four-way induction unit for an air handling system. He told his idea to Shutes, who introduced him to defendant M&I Heat Transfer Products, a company that designed and manufactured induction units. M&I, working with Miller, arranged four preexisting single induction units in a square. Miller didn’t believe it accomplished his goals, but continued to work with M&I on the product. M&I and Miller installed the prototype in a room to demonstrate it and Miller didn’t think it worked properly. Miller and Shutes subsequently bought four induction units from M&I and continued to work on the invention on their own.

Miller (with Shutes) and M&I filed separate patent applications about two weeks apart. M&I’s application was for placing four air handlers in a square configuration; Miller's presumably for an invention with more refinements. M&I initially listed Miller as an inventor and asked Miller to sign the power of attorney and assignment. Miller didn’t sign, mentioning something about getting no benefits in exchange for signing, and also saying “The patent application does a good job of describing your induction units, but other than showing them in a square configuration it does not have anything to do with my design and you don’t need to have my name on the application.” He didn’t mention the M&I application to his own patent lawyer. M&I took his name off the application.

Several years later M&I threatened Miller with a lawsuit for patent infringement. Miller filed a declaratory judgment action.

Miller tried several tactics to invalidate or claim some ownership of the M&I patent, none successful. Miller claimed the M&I patent, covering the fundamental premise of placing four induction handlers in a square, was obvious under § 103, but no luck. Miller asked to have the M&I patent corrected under § 256 to have his name added as an inventor, but was defeated by laches. He claimed that the M&I patent was invalid under § 102(g) on the basis that he was the first to invent and had not abandoned, suppressed or concealed it. There were documents that equivocated in both directions (in favor of Miller, a letter from M&I that credited Miller with the design; in favor of M&I, Miller's use of the plural first person, meaning M&I and himself, and calling it "the M&I product"). Miller therefore couldn't show that there was a substantial enough question of invalidity to avoid a preliminary injunction, so one model of his air handling unit (already discontinued) was enjoined. Fortunately, the other model, a different design, was not infringing and not enjoined.

As the judge put it, “Before concluding its discussion of Plaintiff’s validity challenges, the court is constrained to note that had Miller timely informed his patent attorney of even the possibility that [M&I] would be filing a patent application for a design that included four induction units in a square configuration, this entire lawsuit may have been avoided.”

Nuclimate Air Quality Sys., Inc. v. M&I Heat Transfer Prods., Ltd., 5:08-CV-0317 (NPM/GJD), 2008 U.S. Dist. Lexis 56708 (N.D.N.Y. July 24, 2008).

Mrs. Butterworth's Right of Publicity

In some jurisdictions the deceased have a right of publicity. Do you suppose Mrs. Butterworth does too?

Oklahoma City or Seattle Supersonics?

There is some consternation in Seattle. The Seattle Supersonics are moving to Oklahoma City. One news report said "the SuperSonics are headed to Oklahoma City with Bennett leading the way, leaving behind the team name, colors and 41 years of history." More accurately, another report said a binding agreement would "keeps the SuperSonics' name, logo and colors available if Seattle gets a replacement franchise." Nevertheless, the Seattle Trademark Lawyer reported that applications to register the trademark OKLAHOMA CITY SUPERSONICS were filed, albeit expressly abandoned shortly thereafter.

The Memorandum of Understanding between the team and the City of Seattle says specifically that the team "agrees that it will not use the 'Seattle Sonics/Supersonics' team name or any logos, symbols, designs, trade dress (including, but not limited to, team colors) or other indicia associated with the Seattle Sonics/Supersonics (the 'Intellectual Property') for purposes of identifying its NBA team in game competition, marketing, promotional or other similar purposes following relocation of the team to Oklahoma City . . . ." It also says that if the NBA approves a new team for Seattle, the Oklahoma City team will "transfer at no cost all right, title and interest in the Intellectual Property" to the new owner in Seattle.

Note that the MOU says specifically that the Oklahoma City team may not use "Seattle Sonics/Supersonics," not "Sonics/Supersonics" or "anything confusingly similar to Seattle Sonics/Supersonics." As the Seattle Trademark Lawyer points out, using the name OKLAHOMA CITY SUPERSONICS is "predictable," which is why the MOU could be read to mean exactly what it says - if the intention of the parties was that "Sonics" or "Supersonics" were not to be used at all, the parties would have said so. There's also no suggestion that the owners of the team were trying to pull a fast one by filing applications; the applications were filed by NBA Properties, Inc. (here and here), the NBA entity that manages trademark registration for all the teams.

Who knows why the agreement was worded so narrowly, or why the applications were filed and then abandoned. It could be that the owners weren't willing to give up the name and would only agree not to use "Seattle" as part of the name. But abandonment is also a potential concern. The agreement could have been worded this way to ensure that the Supersonics name was not expressly abandoned by the terms of the agreement. This situation is not like the Cleveland Browns', where there was a promise for a new Cleveland team before the old team moved to Baltimore, so manifestly an intent to resume use easily defeating an abandonment claim. And putting team spirit aside, isn't a trademark in use stronger than one that's not, so wouldn't Seattle ultimately benefit from the use of SUPERSONICS by Oklahoma City during a period of non-use in Seattle? Couldn't filing the applications also be merely a defensive move, to forestall a St. Louis Rams situation?

But it's an interesting law school exercise if the Oklahoma City team was to begin using OKLAHOMA CITY SUPERSONICS, a new SEATTLE SUPERSONICS team is started in Seattle, and Oklahoma City won't give up its name. Would there be likelihood of confusion at that point? Consumers of professional sports teams goods and services are sophisticated about their teams, wouldn't they know the difference? Would it depend on how many years it was before Seattle was hosting a new team? Assuming this is the only agreement governing the relationship, could the OKLAHOMA CITY SUPERSONICS claim abandonment of the SEATTLE SUPERSONICS marks and that the resumption of use by Seattle was an infringement of its rights in OKLAHOMA CITY SUPERSONICS (like this previous post)? Is Oklahoma City estopped from claiming abandonment? Or is the agreement evidence of an intent to resume use of the name? Certainly not by the current owners; the team is moving to Oklahoma City, and I'm not aware of any abandonment case that considers what an unrelated party, like the City of Seattle, thinks about the situation.

Would instead the new Seattle team be able to tack on to the OKLAHOMA CITY SUPERSONICS use? There's no question that formal rights must to be transferred back to Seattle and it appears all the elements for tacking are met, except perhaps the similarity of the marks. Would the Oklahoma City team be the infringer then? It's all such interesting food for thought.

Litigation over past and potential sports names happens so often that it might be considered a niche area of law. It happened in Baltimore (twice, see also Maryland Stadium Auth. v. Becker, 806 F. Supp. 1236 (D. Md. 1992)), St. Louis, New Jersey (National Football League Properties, Inc. v. New Jersey Giants, 637 F. Supp. 507 (D.N.J. 1986)) and New York (Major League Baseball Properties, Inc. v. Sed Non Olet Denarius, Ltd., 817 F. Supp. 1103 (S.D.N.Y. 1993), vacated 859 F. Supp. 80 (S.D.N.Y. 1994)). There's even been a bill proposed, the Sports Heritage Act of 1996 (S. 1598, 104th Cong. 1996), sparked by the Browns threat to move to Baltimore.

Seattle Trademark Lawyer posts here and here.

More Bratz

The Bratz story just keeps getting more interesting. Seems one of the jurors commented that Iranians are "stubborn, rude", and as "thieves" who have "stolen other persons' ideas." The CEO of MGA, the company with the Bratz line of dolls, is Iranian. Juror dismissed, motion for mistrial filed.

AP story here.

Previous entries on Bratz here.

Who Owns a Dead Mark? Ask River West Brands

We've all encountered clients who believe that when a mark is unregistered, or the registration lapses, the client can immediately start using the trademark and take advantage of its residual goodwill. Brand significance can live on for many years and a newcomer may see an opportunity to leverage the goodwill in an unused mark to its advantage.

It's really a policy balancing that plays out in the trademark law of abandonment. Do we protect a company's original investment, but one that is going to waste and may entirely dissipate, or do we allow another company to leverage from an asset it has not built? And what role should consumer protection have?

River West Brands LLC, profiled by the New York Times here, is one company that deliberately identifies unused trademarks that have strong consumer association and creates new product lines for them (see a River West PowerPoint that includes a case study for the Coleco brand here). River West's business model is bold: it files intent-to-use applications for marks that are still active on the register and, after receiving an office action refusing registration, files a petition to cancel the mark on an abandonment theory. See River West application for BURGER CHEF and cancellation action against the Hardee's Food Systems registrations for BURGER CHEF; River West application for MISTER DONUT and cancellation action against the Mr. Donut of America registrations for MISTER DONUT. Sometimes River West readily abandons its application upon proof that the mark is still used by the original owner (see HAI KARATE and GAINES). No River West action has yet been decided on the merits.

River West isn't always so concilliatory. It was sued in federal court by the J.M. Smucker Co. when Smucker objected to River West's attempted "revival" of the PURITAN brand of cooking oil (complaint here). The district court case was filed in May, 2008, after a contested cancellation proceeding against the Smucker trademark registration had been going on for some time. The district court case was provoked by a fair showing of hubris by River West, which had demanded that Smucker cease using the PURITAN brand. There's nothing wrong with the River West legal theory as follows: Smucker abandoned the mark, River West filed an intent-to-use application giving it a constructive use date, and Smucker's resumption of use after that date was an infringement. River West could not have gotten an injunction to force Smucker to stop until its mark was registered, but there's no reason not to put a future infringer on notice. Nevertheless, arguing that a mark was abandoned and then protesting its use is pretty provocative. The district court case settled 11 days after it was filed (copy of docket here) and River West expressly abandoned its PURITAN application the same day.

Smucker found some interesting legal theories for its complaint, too. River West hadn't started using the mark itself yet, so there was no straight infringement theory. Instead, Smucker's allegation of infringement was "Defendant’s use of the PURITAN mark, in connection with its scheme to traffic in the marks and goodwill owned by others, is likely to deceive and cause confusion and mistake among consumers as to the source of origin of the goods provided by Smucker and the sponsorship or endorsement of those goods by Defendant." (highlighting added). It's an interesting theory, raising the same problem currently causing disarray in the internet world "keyword" cases, which is whether and when there is "use" of a mark qua mark.

There are some other interesting points in the Smucker complaint. It alleges a dilution theory, at first blush an odd theory for a potentially abandoned mark, but one that makes sense since River West picks marks exactly because they are arguably famous. Smucker also argued fraud, caused by River West's execution of a declaration stating that to its knowledge no other entity had the right to use the mark. Presumably River West had plenty of evidence that it believed the mark was abandoned; one assumes it does a lot of investigation before taking on this kind of challenge. The documents it files when dismissing petitions to cancel often have self-serving language that mentions how little use the trademark owner has made of a mark, e.g., "After discussions with the Attorney of Registrant, Registrant provided invoices showing the T.V. Time mark has been discontinued, but was sold within the last three years." (Available here).

Smucker also makes the argument that River West can't even fundamentally be a brand owner (all emphasis in original):

24. Upon information and belief, RWB does not have any manufacturing or production facilities.
25. Upon information and belief, RWB does not actually make, sell, or distribute any goods.
26. While it maintains no capacity to make, sell or distribute anything, since 2002 RWB has filed no fewer than 121 intent-to-use trademark applications according to records maintained by the United States Patent and Trademark Office (“USPTO”).
27. An intent-to-use application permits a company, or individual, to seek protection for a trademark even though that person or company has not yet sold a product in commerce in connection with the trademark. Significantly, a required element of every intent-to-use application filed with the federal government is a sworn statement that the party seeking it has a “bona fide intention to use the mark in commerce.” Prior to the actual registration of an intent-to-use trademark, the party must also submit a sworn statement attesting to its actual use of the mark in commerce.
28. While RWB has submitted a sworn statement regarding its intent-to-use trademarks no fewer than 121 times, it has failed to file any statement of actual use in connection with more than half of those applications [ed. comment - this doesn't strike me as a particularly low percentage for many companies regularly filing ITU applications].

The River West web site shows that, if doing what it claims, it may well be performing all the acts of a trademark owner. It has several brand-specific joint ventures (see third slide here) and appears to be no different from any other trademark holding company that we find legitimate. The real controversy about River West is the origin of the trademarks it is exploiting, not what it does with them.

But Smucker saved it strongest language for its vehement disagreement with River West's business model:

29. Upon information and belief, unlike Smucker, RWB core beliefs have little to do with either quality or ethics.
30. Upon information and belief, RWB’s entire business model is premised upon the pirating of the goodwill developed by others in an attempt to deceive the consuming public.
31. As stated on RWB’s website, the company’s sole purpose is to:

[A]cquire rights to dormant consumer brands, revitalize them for modern relevance, reconstruct the business model for today’s marketplace, and ultimately return these brands to the consumer.

32. RWB admits on its website that its business model is premised on using the previously developed goodwill in these “dormant” brands to sell new products to unsuspecting consumers:

If you’re a manufacturer and are developing a better mousetrap, and you think that a base of consumer awareness and excitement can help your product launch and line extension, or if you are a retailer or distributor or you think that a proven credible real brand can help you drive pricing, turns and consumer loyalty, we look forward to hearing from you.

33. The RWB business model is contrary to the very purpose of the Lanham Act. The Lanham Act was enacted to protect consumers and competitors from a wide variety of misrepresentations related to products and services in commerce. Indeed, as specifically set forth in the Lanham Act:

The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce…to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks…

34. Indeed, RWB has admitted on its website and in numerous interviews to the press, that its business model is premised on deceiving the public as to the source and nature of new, unrelated goods sold in connection with famous brands. As RWB’s own Founder and President, Paul W. Earle, Jr., admitted in an interview in 2004, “you can uninstall software from a computer but you can’t uninstall a brand name from someone’s head.”

If River West stays around long, it could generate some interesting new case law on trademark rights and abandonment.

POLAROID

I've been driving past the former Polaroid building in Waltham, Massachusetts on my way to work. The building is empty, the windows taken out, and what caught my eye is that the POLAROID sign is down. The company moved its headquarters to Concord at the end of 2007. Polaroid had already sold its landmark Art Deco building in Cambridge in 2000.

The latest move is from 864,000 square feet to 30,000 square feet and the company is down to between 100 and 200 employees, from 17000 people in the late 70's and 8800 people before declaring bankruptcy in 2001. Polaroid is remembered in this area for underfunding its pension plan, which meant that when Polaroid filed for bankruptcy former employees lost substantial pension benefits they had worked decades for.

Polaroid announced in February that it was ceasing manufacture of its instant film; it had already discontinued the cameras. There are Polaroid-branded, foreign manufactured DVD players, TVs and other electronics, and now a new Polaroid-branded palm-sized printer manufactured by Zink called Pogo. But no more instant cameras or film.

When I drive past the building I think about how strong the Polaroid brand was. "'Polaroid,’ plaintiff's trademark and its trade name, is a coined or invented word, it has never been used as a trademark or trade name by any other individual or corporation, and it has acquired the status of a famous-brand trademark. . . . Plaintiff's trademark, ‘Polaroid,’ has acquired such fame that it has appeared in many dictionaries, encyclopedias and textbooks, has been referred to in a number of United States patents issued to other than plaintiff, and has been coupled with ‘Kodak’ and other famous trademarks as an outstanding example of a technically strong, coined famous mark." Polaroid Corp. v. Polaraid, Inc., 319 F.2d 830, 831-32 (C.A.Ill. 1963). I think it still is, a testament to the remarkable resiliency of a brand. Here's hoping for its survival.

When Not to Assign Intent-to-Use Applications

The TTABlog reports on a successful trademark opposition because of an invalid assignment of an intent-to-use application. I mentioned yesterday that U.S. trademarks can be assigned without any tangible assets, but the U.S. trademark system has a carve-out for intent-to-use applications - they can't be assigned without at least part of the ongoing business to which the trademark pertains. The TTABlog tells the story of some New Mexico government agencies who didn't appear to be aware of that.

Invention Made for Hire

The Patent Prospector reports on an inventor who invented, changed companies, and the new employer filed the patent applications. Didn't work out so well for the patent infringement claim, but that's not even the end of the worries.

Patent Prospector here.
News story here.

Assigning "Goodwill"

In the United States, an assignment of a trademark is invalid if the "goodwill" is not also assigned with the mark, but there's no requirement that any tangible assets be transferred. So what exactly does it mean when agreements recite something like "Assignor does hereby assign to Assignee all rights, title and interest in and to said mark, including the goodwill of the business symbolized by said mark"?

What makes a "trademark" more than just a word or a pretty picture is the goodwill, its association in the consumer's mind with a particular entity. In the U.S. case Bouchat v. Baltimore Ravens, a court found that the Baltimore Ravens football team logo was a copyright infringement of a design Bouchat had submitted to the team. Bouchat claimed damages for the sales of goods with the Ravens logo, but the court held that the revenue from logoed goods was attributable entirely to factors other than the infringement of the copyright, specifically, to business and consumer interest in NFL football. It's this consumer association that is the "goodwill" in the mark.

Assigning the "goodwill" in a mark is therefore a redundancy; what else would the assignee getting when it acquires a "mark" rather than a word or design? But in some countries trademarks are assigned expressly without the goodwill, which is contrary to this understanding: how could one be getting a "mark" if one is not getting the goodwill?

I can think of several answers: first, the "goodwill" NOT assigned in other countries is not the goodwill associated with the mark, but other business goodwill, i.e., arising from location, customer lists, favorable trading or governmental relationships, etc. The statement that the goodwill is not being assigned means only that these other types of goodwill remain with the assigning business. Or it could be simpler; it means simply that the trademark is being assigned without any tangible assets (but then why call it "goodwill"?). Another theory is that an assignment without the goodwill is just the equivalent of obtaining a forbearance from suit from the original trademark owner; the former owner will be barred from making a trademark-based claim against the assignee but is not ratifying that the consumer association necessarily exists or that the assignee will be able to successfully exploit the benefits of it (such as, for example, a case where it is using the mark for unrelated goods). Third, and somewhat related, is that the assignment is only of the government grant of rights and all the advantages arising from it.

What does it mean in various countries to assign a mark without the goodwill? Is there really any difference between U.S. practice and practice in other countries, other than we have to insert specific words in our agreements?

Who Owns the Mark?

There are few disputes more difficult to solve than deciding who owns a trademark after co-owners have a falling out. Family businesses seem particularly susceptible, my guess would be because they are started more casually without formal documents that even contemplate trademark ownership. European trademark blog Class 46 reports one way to solve the problem - an auction. Two brothers argued over who owned the trademark, so the court auctioned it off. It sold for 17.2 million Euro, but the good news is that the brother who bought it only had to pay half, since he already owns half. Class 46 report here.

Sold! Or Just Licensed?

It's perhaps a bit off-topic for this blog to post about ownership of tangible property, rather than the ownership of the IP itself. But the disagreement over when an object that contains copyrighted work is sold or merely licensed is heating up. There are three recent district court cases in the 9th Circuit that have considered it.

In Vernor v. Autodesk, Inc., the articles transferred were packages of previously used Autodesk software, purchased from an architectural firm. The "Software License Agreement" signed by the architectural firm said that it was a grant of a “nonexclusive, nontransferable license to use the enclosed program . . . according to the terms and conditions herein,” and contained various restrictions, like regulating the number of computers and the number of users, prohibiting copying, use outside of the western hemisphere, modification or reverse-engineering of the software, removing labels, and the “rent, lease, or transfer [of] all or part of the Software, Documentation, or any rights granted hereunder to any other person without Autodesk’s prior written consent.”

Following 9th Circuit precedent the court held it was a sale of the software, not a license. The 9th Circuit case the court relied on was United States v. Wise, 550 F.2d 1180 (9th Cir. 1977), a case about the transfer of ownership of film prints. Wise did an extensive survey of cases about whether film copies were sold and found that the copyright owner (the studio) retained title to the films where the contract reserved title to the studio and required return of the prints at the expiration of some term. There was a transfer of title, though, where a recipient paid a fee and didn't have to return it, even though she could use the print only for her "personal use and enjoyment," was required to retain possession of the print "at all times," and could not sell, lease, license or loan the print to any other person. This, the Wise court found, was a "sale with restrictions on the use of the print." The Vernor court decided that, based on Wise, the critical factor is whether the transferee was allowed to keep the copy. Therefore Autodesk's transfer of the software to the architectural firm was a sale, possession of the software in exchange for a single up-front payment. Autodesk may have a remedy in contract against the architectural firm, but the tangible copies sold by Vernor were in Vernor's lawful possession and his sale of them was not a copyright infringement.

The second in our survey is UMG Recordings, Inc. v. Augusto, where "promotional" music CDs given to music industry insiders, without their prior consent, had the following language on them: "This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws." Augusto, not a music industry insider, had acquired the CDs from music shops and online auctions and resold them. Like Vernor, the UMG court looked at Wise and the right to perpetual possession. The promotional CDs sent to the insiders did not have to be returned, could be kept forever, and could be destroyed, all permitted acts that would be inconsistent if UMG was the true owner. Further, the "license" did not provide any recurring benefits to UMG, other than to restrain the transfer of the music. This was a transfer of ownership of the music CDs and Augusto in lawful possession of them.

Most recent is MDY Industries v. Blizzard Entertainment, Inc. This case considered the use of a bot called "Glider" in the World of Warcraft multi-player game, which allows players to continue game play while they are away from their computers and thus advance more quickly in the game. World of Warcraft has both server end and user end software; users enter into both an End User License Agreement (EULA) and a Terms of Use Agreement (TOU) before being allowed to play the game. The EULA/TOU clearly forbade the use of bots to play the game. The case is notable for its squirrelly analysis of the contributory copyright infringement claim (discussed by Professor Patry here) premised on the theory that the user end software is licensed, not sold.

Section 117 of the Copyright Act provides that

Notwithstanding the provisions of section 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided: (1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner.

Note the key word "owner" here. The court decided that the end users are not owners but licensees; thus, when the licensee-user loads the game into RAM to play the game using the bot, the player is outside the scope of the license and therefore the RAM copy an unauthorized infringing copy. Section 117 is of no help to the end user, since s/he isn't the owner of the software. (As an aside, I am curious that WoW couldn't come up with a better infringement theory than this - Glider did nothing whatsoever to modify the end user software, therefore creating an unauthorized derivative work?)

The court came to the conclusion that the end users are licensees based on prior cases in the 9th Circuit that set a low bar for finding a license relationship rather than a sale. Wall Data Inc. v. Los Angeles County Sheriff's Department, 447 F.3d 769 (9th Cir. 2006) says there is a license if the copyright holder (1) makes clear that it is granting a license to the copy of the software and (2) imposes significant restrictions on the use or transfer of the copy. The first requirement was easy, that WoW claimed to be only granting a license was clearly stated in the EULA. The second prong, restrictions, was sufficient because the contracts included limitations on transfer of the copy (the original media and all documentation had to be transferred, the original owner had to delete the software, and the transferee had to accept the EULA) along with other restrictions, e.g., on the use of bots, modifying files, intercepting proprietary components of the game, etc. To me, the language in the EULA looks very much like an acknowledgment that the end user had a right to transfer the tangible copy under the first sale doctrine (making it a sale, not a license), but the court nevertheless held the users were only licensees and specifically rejected the reasoning in Vernor and Wise.

And there's a brand new case that may be exploring this same territory, Apple Inc. v. Psystar Corp. filed July 3. Apple has a limitation in its Software User Agreements that prohibits the installation of Apple software on computers that are not branded as Apple. Psystar began selling non-Apple computers running Apple's Mac OS X operating system. In addition to copyright infringement claims, the third count of the complaint is for breach of contract, alleging that Psystar used authentic purchased software, opened the packaging (thus accepting the terms of the agreement), and installed the software on non-Apple computers. Presumably Psystar will be making a first sale argument for any purchased software it installed.

This promises to be a hot area; to say there is disagreement is an understatement. Is the appropriate measure a requirement for return, as in Vernor? Recurring benefits to the licensor, as in UMG? Executory contract terms or mutual restrictions? The lower courts look like they are teeing it up for the 9th Circuit to clarify the enforceability of terms in EULAs and transfer of title in tangible goods.

Vernor v. Autodesk, Inc., available here, blogged here and here.
UMG Recordings, Inc. v. Augusto, available here, blogged here.
MDY Indus., LLC v. Blizzard Entertainment, Inc., available here, blogged here.
Apple Inc. v. Psystar Corp., complaint available here, blogged here.

Mattel Wins Bratz!

Following up on a previous post, in an unsurprising outcome the AP is reporting that the jury found that the designer of the Bratz dolls conceived of the idea while employed at Mattel, hence the concept is owned by Mattel. It's not quite clear from the AP article what exactly Mattel owns, since the article says that "jurors must still decide if Mattel owns any copyrights involving Bryant's drawings. If so, the jury must rule on whether the dolls infringe on those copyrights."

Previous post here.

Update:

Verdict uploaded here.

The jury decided whether various pieces of evidence, the idea for the Bratz dolls, and the name "Bratz" were "conceived or reduced to practice" while the designer was at Mattel. The answer was "yes" to largely all (and not responding on the four remaining items). There were also various findings in favor of Mattel for MGA's intentional interference with contract, aiding and abetting breach of fiduciary duty, and breach of duty of loyalty, all presumably related to the designer's employment agreement with Mattel. So no verdict specifically for copyright, but what should follow is a holding that Mattel is the owner of the designer's work on Bratz, and to the extent it is protected by copyright MGA an infringer.

Combining Trademarks in a Jointly Owned Holdco

The May-June 2008 Trademark Reporter has an article entitled "Combining Trademarks in a Jointly Owned IP Holding Company," by Lanning Bryer and Matthew Asbell. It discusses the risks and advantages of using jointly-owned trademark holding companies for management of "combined" trademarks, i.e., where one trademark is used by unrelated entities (like Volvo) or the trademarks of two entities are used both separately and together (like Sony Ericsson). It looks like a timely, thoughtful and thorough consideration of the topic.

Lanning Bryer and Matthew Asbell, Combining Trademarks in a Jointly Owned IP Holding Company, 98 Trademark Rep. 834 (2008) available here (membership login required)

Exclusive Licensee Doesn't Have Standing, No Matter Who Claims It Does

Iris Corp. Berhard v. U.S. is a fairly routine analysis of an exclusive licensee's standing to sue for patent infringement. Of course, an exclusive licensee only has standing if the patentee has conveyed all substantial rights in the patent to the licensee. There's a bit of a twist here, though; the patent owner had indeed filed suit, but the defendant United States claimed that the U.S. exclusive licensee was the proper plaintiff. A fairly easy decision for the court:

Under the express terms of this agreement, [patentee] IRIS Malaysia was acknowledged to be the owner of, as well as the party responsible for maintaining, the ‘412 patent and retained a right to develop, market, and sell the invention claimed by the ‘412 patent. Further, [licensee] Williams’ license was set to expire seven years before the ‘412 patent’s expiration date, reverting all rights in the patent to IRIS Malaysia for that time period. So too, IRIS Malaysia had the right to terminate the agreement if Williams failed to pay royalties or achieve certain production milestones in specified timeframes. Finally, both IRIS Malaysia and Williams had the right to sue to enforce the patent on the date this suit was filed.

Thus, the plaintiff had standing. Partial victory for the United States, though; exclusive licensee Williams was joined as a plaintiff.

Iris Corp. Berhard v. U.S. available here.

Lassie Speaks!

Professor Patry's primer on the termination provisions of copyright (straightforward to him, convoluted to the rest of us). Don't miss his "About Me" portrait on this one -

Updated August 5, 2008: Here is a link to the decision in Classic Media, Inc. v. Winifred Mewborn that I have posted since it is no longer available through Professor Patry's blog. Sadly, Professor Patry has decided to end his blog and, at the moment, has removed all the archived stories. The silencing of his public voice on copyright is a huge loss for those of use who relied on his intelligent, thoughtful and readable blog for unequaled insight on copyright matters. I will miss his blog every day.

Updated August 10, 2008: Responding to numerous requests, Professor Patry restored the archives for his blog and the link is operational again. While we won't have the benefit of his thoughts on future cases, at least we haven't lost the old ones.

Works Are Never Made for Hire

Malibu Textiles, Inc. v. Carol Anderson, Inc. is a good demonstration of the confusion that, almost 20 years after CCNV, still surrounds whether a work is a "work made for hire." In Malibu, designs for lace were created by an independent party but Malibu filed copyright applications for the lace designs listing ownership as works made for hire. Early in the lawsuit Malibu said that the registrations were correct, although four months later, the day before moving papers for summary judgment were due, it filed Forms CA to change the ownership claim to ownership by assignment.

Luckily for Malibu the parties who created the designs agreed that Malibu owned the designs, executed after-the-fact written assignments ratifying the oral transfer, provided testimony that assignment of the copyright in lace designs was both their and industry practice, the case was in the 2nd Circuit which accepts a writing that is dated after the actual assignment, and the judge was one who was not going to entertain a challenge on the basis of formalities rather than substance. The court therefore held that Malibu was the owner of the copyrights in the lace designs; the defendants had already conceded substantial similarity. The case may not have even been litigated but for the problematic ownership.

An overexpansive view of when a work is a "work made for hire" is the most common misunderstanding about intellectual property ownership I run across. Malibu is educated and buttoned up now.

Malibu Textiles, Inc. v. Carol Anderson, Inc., No. 07 Civ 4780 (SAS), 2008 U.S. Dist. LEXIS 51783 (S.D.N.Y. July 8, 2008).

Ownership of Music in Snow White

The Los Angeles Intellectual Property Trademark Attorney Blog reports here that there is an ownership dispute over the music in a 1987 live-action version of Snow White. The blog reports:

MGM asserts that defendant, Arik Rudich, is an individual now residing in Israel, who composed certain music and/or songs included in the picture, which picture MGM’s predecessor distributed to the home video market beginning in 1988 and MGM has continued such distribution. The complaint alleges that almost twenty years after the picture’s first distribution, Rudich’s counsel sent a cease and desist letter to MGM accusing it of copyright infringement in music and demanding payment of publishing royalties. On May 9, 2008, defendant or his counsel issued a press release repeating claims against MGM and referencing another lawsuit filed against MGM by the same counsel. On June 5, 2008, defendant’s counsel once against sent a letter to MGM threatening a lawsuit if a response was not received. Thus, MGM filed the declaratory judgment lawsuit . . . .

IMDb gives Mr. Rudich credit for original music and interestingly also says that the movie was filmed in Israel. How will ownership plays out; will it be as determined under the laws of Israel?

Justia docket for the declaratory judgment in the Central District of California here. Mr. Rudich has also filed a case against MGM in the Western District of Wisconsin, second-filer in what one would assume is the matching infringement suit. Justia docket here.

Warner/Chappell Still Happy on Birthdays

I'm a little late to the game, but I just got around to reading Robert Brauneis' "Copyright and the World's Most Popular Song," available here, blogged here, here, and here. It's an interesting and thorough investigation into whether "Happy Birthday" is still protected by copyright. The telling of the story covers initial ownership of all kinds, sole, joint, and work made for hire, the layers of copyright ownership in derivative works, the transfer of ownership under the Copyright Acts of 1909 and 1976, and failure to comply with formalities forfeiting copyright. It's a fascinating lesson in how difficult it can be trying to untangle copyright ownership. One takeaway for me was that the problem will only get worse because of the extension of copyright term; not only does copyright outlast the life of the author, but also anyone who might have firsthand knowledge about the creation of the work. Professor Brauneis has some suggestions on what can be done.

Similar story on the "Footprints in the Sand" poem here, HT to Techdirt.

Summer Reading

A friend reminded me to read Paul Goldstein’s “Errors and Omissions” (he was reminded by the publication of Professor Goldstein’s new book, "A Patent Lie"). I brought it for my summer beach reading and was highly entertained to read a novel about the topic of the blog, ownership of IP. The premise is that a film studio needs an assignment of the copyright in a screenplay, the first of a series of successful spy movies, or it can’t make the next in the series because the insurance company won’t issue a policy. It was an entertaining read; I loved the introduction of the main character in the first chapter and thought it was great fun that Professor Goldstein could take what some would consider a dry legal topic and turn it into a thriller.

I would appreciate anyone’s help explaining what I thought was an error in the legal premise, though, involving what effect a certain Supreme Court case would have on the ownership of a screenplay written in the 1950’s. Comments welcome.

Hot N' Ready For All

Pinnacle Pizza Co. v. Little Caesar Enterprises, Inc., does some contract interpretation on ownership of trademarks in a franchise relationship - not the trademarks originally licensed, but a trademark created by a franchisee.

Pinnacle Pizza was a franchisee for Little Caesar Enterprises pizza (I'll use "Little Caesar" to refer to the company; the trademark is with an "s," "Little Caesars"). In 1997 Pinnacle developed a successful promotion called "Hot N' Ready," where it guaranteed customers could purchase a medium pepperoni pizza for four dollars every Tuesday, ready within five minutes. By 1999 Little Caesar was promoting the program itself with all its franchisees, providing advertising materials for the program and asking the franchisees to report sales information on the program. Little Caesar registered the trademark for HOT N' READY with the USPTO, using Pinnacle's first use date in the application. Pinnacle sued in 2004; the matter was before the court on cross-motions for summary judgment.

The ownership of the trademark was controlled by the franchise agreement, with what Pinnacle argued were competing clauses. First, Section V., entitled "Proprietary Marks and Inventions," stated:

A. Franchise Owner acknowledges that the name "Little Caesars" and such additional names and marks as have been hereinabove recited are in themselves, or incorporated and included with them, valid trademarks or service marks, solely owned by LITTLE CAESAR, and that LITTLE CAESAR and its licensees have the sole right to use such trademarks, service marks, and trade names, presently existing or to be acquired in the future, in the operation of a restaurant or food service business in connection with products and services to which they are applied by LITTLE CAESAR [.]

B. Franchise Owner expressly acknowledges that any and all goodwill associated with said Proprietary Marks, including any goodwill which might be deemed to have arisen or to arise in the future through the activities of any Licensee of LITTLE CAESAR, inures directly and exclusively to the benefit of LITTLE CAESAR.

F. Any and all improvements or modifications in the LITTLE CAESAR System, franchise trade secrets, or know-how licensed hereunder whether made by LITTLE CAESAR or by Franchise Owner or by another LITTLE CAESAR licensee, shall be and become the sole property of LITTLE CAESAR which shall have the sole and exclusive right to patent, copyright, register, or otherwise protect the same; provided, however, that in no event shall advertising created by Franchise Owner be considered to be an "improvement or modification in the LITTLE CAESAR System."

The "LITTLE CAESAR System" was defined in the recitals as "a business plan and method in connection with the operation of such restaurants for providing products and services, utilizing certain standards, specifications, methods, procedures, techniques, management systems, identification schemes and proprietary marks and information."

Section XII.D., pertaining to advertising, stated:

Franchise Owner, at its sole expense, may utilize LITTLE CAESAR's television and radio advertising materials (for its sole benefit or jointly with other LITTLE CAESAR Franchises), by dealing directly with LITTLE CAESAR's advertising agency. LITTLE CAESAR may not use the original advertising materials created by Franchise Owner without its prior written consent.

The question was whether the "Hot N' Ready" mark was "original advertising materials" that could not be used by Little Caesar without consent. Using standard contract interpretation principles, the court found that the advertising clause in XII.D. was a reference to any written materials or audio or television materials, not the underlying related ideas or concepts. Instead, the ownership of the slogan "Hot N' Ready" was controlled by Section V, particularly Section F, which placed ownership of "improvements or modifications in the Little Caesar System . . . or know-how" with Little Caesar. The court was right to not read V.A. as the operative section; Section V.A. is the trademark license grant and its reference to "future" trademarks is only a grant of a license to them, not a provision that describes how it might come to own them in the first place.

Once the slogan was deemed an improvement, modification or know-how of the "Little Caesar System," it was forgone that the goodwill associated with it inured to Little Caesar per Section V.B. And because the goodwill in the mark inured to Little Caesar, the trademark application was not invalid because it used Pinnacle's first use date.

The agreement was not very clear on ownership of marketing slogans developed by franchisees but the outcome seems right; the concept of a franchise is that the consumer perception is of a unitary organization. Consumers would probably believe that "Hot N' Ready" was a slogan for the Little Caesars brand, not the individual franchise owner, and so Little Caesar the rightful owner.

Pinnacle Pizza Co. v. Little Caesar Enter., Inc., No. Civ 04-4170-KES, 2008 WL 2381678 (D.S.D. June 5, 2008), available here.

Devil in the Details

In Angel Flight of Georgia, Inc. v. Angel Flight America, Inc., the 11th Circuit decision left open more questions than it answered. Two entities with an admirable purpose, providing free transportation for donated organs and medical patients, were using the same trademark, ANGEL FLIGHT, in the same territory - plaintiff Angel Flight Georgia (AF-GA) and defendant Angel Flight Southeast (AF-SE). AF-SE was a member of national organization and intervenor Angel Flight America (AFA) but AF-GA was not. The suit had cross-claims for trademark infringement; clearly it was a case about priority of use. The 11th Circuit decision said nothing about priority though; the only issues for appeal were a hearsay objection, an appeal of the laches defense, the scope of the injunction, and the cancellation of AFA's trademark registration. The lower court had held for AF-GA on priority and likelihood of confusion but there was no appeal on these issues.

The decision doesn't even mention in passing the obvious question - that it could hardly be a coincidence that both parties adopted the same mark. Digging into the trial record, it turns out it is an oft-told tale of trust and cooperation eventually displaced by bickering and turf wars, with the trademark caught in the middle. It's a situation that trademark law is ill-equipped to deal with in a way that seems fair to all concerned, the trademark combatants and the public.

Below is a summary of salient facts gathered from the trial court's Findings of Fact and Conclusions of Law (adopting the Plaintiff's Proposed Findings of Fact and Conclusions of Law) and the Defendant's Proposed Findings of Fact and Conclusions of Law. I have tried to make it clear where the parties disagree (which is often) and also to make my editorializing clear. Links to both documents are at the end of the post.

In this case, the first entity to use ANGEL FLIGHT was a Nevada organization started by Jack Welsh. "American Medical Support Flight Team" (AMSFT) used the mark ANGEL FLIGHT and a caduceus logo in 1982, below:

The plaintiff started its organization in 1983, also calling it "American Medical Support Flight Team" and using ANGEL FLIGHT as a trademark. There were other organizations formed in the early 1980's that were also called "American Medical Support Flight Team" and that used the ANGEL FLIGHT mark. The plaintiff's version is coy: "several organizations based loosely on Welsh's concept formed independently in different areas of the country"; the defendant says "Mr. Welsh recruited volunteers in the early 1980s to form the AMSFT chapter in Los Angeles. He also recruited Mary Webb to form AMSFT-Central Florida [which became defendant AF-SE] and he recruited James Shafer to start AMSFT-GA [which became plaintiff AF-GA]." The plaintiff agrees that it helped Mary Webb start AMSFT-Central Florida. It was formed in 1986.

AF-GA acknowledges that it used both ANGEL FLIGHT and the Welsh caduceus logo from its inception. There quickly was some distancing placed between Mr. Welsh and at least the LA chapter (plaintiff's version) if not all of them (defendant's version), but they all continued to operate. At least four other organizations using ANGEL FLIGHT formed by no later than the 1990s: East, Oklahoma, South Central, and Mid-Atlantic. Ultimately all organizations' corporate names were "Angel Flight" with a geographic indicator.

In 1986 the Nevada organization dissolved. The LA organization, after learning that the Nevada organization was gone, filed a trademark application for ANGEL FLIGHT and Design (modified from the original Nevada logo), below:

There was no formal assignment of rights from the Nevada organization to the LA organization.

(NB there was a successful challenge to the registration based on fraud. It is irrelevant for the purposes of this discussion, though, since the plaintiff's first use date was prior to the date of registration and it only sought the right to use its mark in the territory in existence at the time of registration.)

For several years beginning in the mid-1990s, by express written agreement AF-SE coordinated flights for AF-GA. There were also discussions about the merger of the two entities during that time, but it didn't happen. For some period of time, everyone agrees, AF-GA used the LA logo as well as the ANGEL FLIGHT mark. There was testimony that during this time the various entities, including the trademark owner LA, thought that LA's trademark rights extended only to the design and that no single entity had the right to use the words ANGEL FLIGHT.

Reading between the lines it looks like AF-GA and AF-SE were cooperating and working towards a merger, but in 1999 had a falling out and started to work independently again. Around the same time, some of the organizations were trying to form a national organization. Eventually six of them, including AF-SE, formed intervenor AFA. AF-GA, as well as the Oklahoma and East organizations, did not join. There is no explanation why some joined and some did not. The six organizations that became members of AFA divided the country into territories that included areas covered by the non-members. LA assigned its trademark registration to AFA.

In 1999, at the time AF-GA and AF-SW parted ways, AF-GA modified its logo to this:

Bitter warfare ensued. AFA was trying to create a unified national organization, and it appears that member AF-SW undertook a deliberate campaign to supplant non-member AF-GA in its territory. For 20 years there had been no confusion, but in 2001 AF-SW opened an office in Georgia for the first time, circulated false rumors that AF-GA was "closing their doors," and staged promotional activities in AF-GA's hometown of Atlanta. The court found that there were hundreds of incidents of actual confusion. It ultimately held that AF-GA was the senior user in a six-state territory and enjoined AFA and its members, including not only defendant AF-SE but two other non-party AFA members, from using the mark in the AF-GA territory.

So, everyone copied ANGEL FLIGHT from the long-defunct Nevada organization. It is a situation where multiple entities deliberately adopted the same mark (not to mention the same corporate name) in order to gain the benefits of recognition of the mark. When there was a failure of cooperation, trademark law was ill-equipped to find an equitable solution. On one hand we have an organization that is admirably trying to establish a unified nationwide organization to exploit the benefits of scale for a charitable organization. On the other hand, we have an entity that is being deliberately stripped of a mark it has used for 20 years, and used first. Nevertheless, although AF-GA was technically first, both organizations likely started at Mr. Welsh's instigation and AF-GA merely hit the lottery because it was up and running earlier than AF-SE was.

Defendants tried almost all conceivable defenses to infringement (note that it also argued confusion as the senior user, but failed to prove it was senior user). It argued that AF-GA was not the owner of the mark, but instead a licensee of either AMSFT-Nevada or LA; the court held there was insufficient proof of control by either to show they were licensors. Defendants argued that AF-GA abandoned its mark during the period that AF-SE was coordinating AF-GA's flights, but AF-GA did not discontinue use and there was no intent not to resume use. Defendants argued laches and acquiescence, but AF-GA successfully countered progressive encroachment. Defendants argue unclean hands based on a Georgia state registration but did not convince the court there was any fraud in procuring the state registration. Defendants did not argue genericism, but that would have been a poison pill since Defendants also claimed trademark rights in ANGEL FLIGHT.

The most natural argument in a case where one entity copies another's mark was not raised at trial. AF-GA was junior to the Nevada entity's use and clearly copied that entity's mark, but there was no argument that AF-GA was NOT a junior user in good faith because it lacked the "good faith" element of the defense. "With respect to the good-faith requirement, courts are divided on whether the junior user must establish a lack of actual knowledge that the mark was already in use, see 4 J. McCarthy, supra, § 26:9 (majority view), or merely that there was no intent to infringe, see id. at § 26:10 (minority view)." Emergency One, Inc. v. American Fire Eagle Engine Co., Inc., 332 F.3d 264, 271 (4th Cir. 2003). What's missing here, of course, and perhaps why it was an argument not made, is that the owner of the trademark copied does not exist. There was no true successor to the Nevada rights; LA claimed to have successor rights (the fraudulent date of first use was Nevada's first use, not its own) but it was in no better a position to claim it was a successor than AF-GA. I do not recall seeing a case where the defense was raised when the third-party owner was absent from the proceeding; please comment if you know of one.

A complicated set of facts, even more complicated in full. Here they are.

District Court Findings of Fact and Conclusions of Law (not published), available here.
Defendants' Proposed Findings of Fact and Conclusions of Law (not published), available here.
District Court summary judgment opinion, Angel Flight of Georgia, Inc. v. Angel Flight Southeast, Inc., 424 F.Supp.2d 1366 (N.D. Ga. 2006), available here.
Angel Flight of Georgia, Inc. v. Angel Flight America, Inc., 522 F.3d 1200 (11th Cir. 2008), available here.

News report on court's decision on likelihood of confusion here.
Blog report here.