Application as Registration

William Patry is vocal in his disagreement with Nimmer about whether § 411(a) of the Copyright Act requires the issuance of a Certificate of Registration before suit can be filed. Patry says "yes," Nimmer says "no." 2 Nimmer on Copyright § 7.16[B][1].

CHM Industries v. Structural & Steel Products, Inc. demonstrates the mischief that can happen when a statute is stretched beyond its plain meaning. As Patry notes, the 5th Circuit has adopted the Nimmer position, i.e., one only has to file an application for registration, not actually receive the registration, before filing a lawsuit. 

In CHM Industries, the plaintiff and defendant were competitors in the manufacture of large outdoor lighting fixtures. A number of employees left plaintiff to work for defendant, including a draftsman. The defendant then began making lighting fixtures that were similar to the CHM Industries fixtures. CHM Industries sued for copyright infringement of the technical drawings for the lights, misappropriation, conversion and other causes of action.

The court said that the drawings were "registered" with the Copyright Office one day before the complaint was filed - the use of the word "registered" in this case means that the application was filed one day before and, in the Fifth Circuit, this is good enough to be "registered" by operation of § 410(d) (which states that the effective date of a copyright registration is the day on which a complete application has been received in the Copyright Office, assuming that the Copyright Office decides the work is entitled to registration). From the remainder of the discussion in the case, it's clear that the plaintiff had not received its certificates of registration.

The mischief results when CHM Industries tries to claim that the registration is prima facie evidence of its ownership of the copyright in the drawings. Under § 410(c), "In any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate." CHM Industries' theory goes that if, under § 411(a) as interpreted by the Fifth Circuit it has "registered" its work upon receipt by the Copyright Office of the application, fee and deposit, then it should also be entitled to the presumption of ownership at the same time. This is a theory that worked in In re Napster, Inc. Copyright Litig., 191 F. Supp. 2d 1087, 1101 (N.D. Cal. 2002).

The theory, of course, doesn't make sense. The Copyright Office hasn't passed on the copyrightability of the work by its mere receipt of the application, so logically no presumption should arise; indeed the Copyright Office might reject the application. Even Nimmer disagrees with the plaintiff's theory. 2 Nimmer on Copyright § 7.16[B][1] ("To the contrary, however, one court concluded that an application alone suffices for a prima facie presumption to arise. [citing Napster] It is submitted that its summary determination was incorrect.").

The CHM Industries court disagreed with Napster; the certificate is required before the presumption inheres. CHM Industries therefore had to prove ownership without relying on the prima facie proof of a certificate of registration. 

The defendants cast doubt on CHM Industries' ownership claim by questioning whether the drawings were derivative works not claimed as such in the applications, so that the registrations might be fraudulent (N.B. that this wouldn't have stopped the certificates from issuing, since the Copyright Office doesn't investigate the truth of the statements in the registration), defeated a claim of ownership by assignment because it was raised only in the reply brief, and raised doubt about the originality of the works.  CHM Industries' motion for preliminary injunction denied.

CHM Industries, Inc. v. Structural & Steel Prods., Inc., Civ. No. 4:08-CV-454-Y, 2008 U.S. Dist. LEXIS 86131 (N.D. Tex. Oct. 24, 2008).

© 2008 Pamela Chestek

Bad News Two Days In a Row

Adding insult to injury after yesterday's post, in which the Court of Appeals for the Federal Circuit affirmed a decision that Oren Tavory wasn't a co-owner of the NTP patents, in a separate decision the Federal Circuit affirmed that he also owed NTP the attorneys' fees it incurred defending against his copyright suit. Mr. Tavory claimed infringement of source code used in the patent application, but his copyright application was defective because the deposit copy wasn't a bona fide copy of the original software.

Tavory claimed that NTP wasn't the prevailing party because the copyright claim was dismissed for lack of subject matter jurisdiction. Wrong; $37,000 in attorneys' fees on the copyright portion of the suit affirmed.

Tavory v. NTP, Inc.

© 2008 Pamela Chestek

Invention and Assignment of Patents

A couple of ownership cases of interest. First, Oren Tavory failed in his effort to join in the NTP jackpot also known as the RIM settlement - he's not a co-inventor because he didn't have evidence that his contribution to the invention was more than simply the exercise of ordinary skill in the art.  Tavory v. NTP, Patent Hawk here, Patently-O here.

And from Thorn Security Ltd v Siemens Schweiz AG [2008] EWCA Civ 1161, the IPKat brings a tail of registration of a patent after merger.  The Court of Appeal (England and Wales) held that the registration of the "assignment" of a patent as described in Patents Act 1977 section 33(3), a necessary step before one could collect damages for patent infringement by operation of section 68 (now amended to cover only costs), includes acquisition of ownership by any means, including merger.

© 2008 Pamela Chestek

Trade Dress and Copyright

This is the final post in the series on Tacori Enterprises v. Rego Manufacturing. As well as claiming copyright in the ring design, Tacori also claimed that the ring design was Tacori's protected trade dress and sued for trademark infringement. Tacori has filed a trademark application for registration of the trade dress in the ring design:


The trade dress is described as "the appearance of portions of two essentially concentric rings, with one of the rings having a larger diameter than the other. Embedded between the rings are repeating semi-circles or arcs which appear contiguous to each other. A space is created between the contiguous semi- circles or arcs. The dotted lines show the placement of the mark on the goods."

At the time of the decision, Tacori had received a Notice of Publication for the design but the design had not registered (ed. note: registration has been opposed by a company called EMMI, Inc. and the opposition is stayed pending resolution of a pending federal case between EMMI, Inc. and Tacori in the Central District of California, Civ. No. 08-00552. The court in this case also mentions two more pending consolidated cases in the Central District of California, between Tacori and Beverlly Jewellery Co., Civ. No. 06-5170, and Pink Diamond, Civ. No. 07-3939).

Tacori submitted evidence through an affidavit from Tacorian that the mark had acquired distinctiveness, including exclusive use since 1999, emails and letters from consumers recognizing the design as a source indicator, $6 million spent in advertising, $30 million in sales, unsolicited media coverage, use by others of the term "Tacori inspired" to describe similar designs of jewelry, and over 125 cease and desist actions. (The evidence of secondary meaning submitted in the registration process can be found here in the December 18, 2006 Response to Office Action).

Rego Manufacturing asked for summary judgment on the trade dress claim on two theories: first, that the Tacori couldn't assert a trade dress infringement claim without a registration; and second, that the trade dress is not distinctive. It failed on both theories. Tacori's infringement claim was under § 43(a) for infringement of an unregistered trademark, not under § 32 for infringement of a registered trademark, so it stands. Tacori had also offered enough evidence to make acquired distinctiveness a question of material fact sufficient to defeat summary judgment.

Tacori Enter. v. Rego Mfg., Civ. No. 1:05cv2241, 2008 U.S. Dist. LEXIS 73686 (D. Ohio Sept. 25, 2008)

© 2008 Pamela Chestek

Mongols Trademark Seizure

There have been a lot of posts about the government's seizure of the MONGOLS trademark, used by a biker gang. You can find blogging about it here, here and here, and commentary here and here on what it means under trademark law principles.

Ryan Giles at the Law Vegas Trademark Attorney had the comment that interested me the most, which is the potential for abandonment of the mark. A trademark is abandoned after a period of nonuse with an intent not to resume use - abandonment is presumed after three years of nonuse.

The government seems to be in a pickle though, to the extent it needs to rely on trademark law to stop people from using the trademark. The significance of the mark is that it stands for a motorcycle gang that the government has characterized as outlaw. I assume the government's position is that it wants to eradicate use of the mark, or in other words, it will cease use of the mark and has no intent that use be resumed. If so, the mark is abandoned and freely available for others to adopt at the moment that becomes true - waiting three years not required.

If the government says it has an intent to resume use through the sale of the mark, query whether it can even be sold in a way that's of value to the purchaser. To claim priority to the Mongols' use, the new user would have to "tack" to it, but:

The standard for "tacking," however, is exceedingly strict: "The marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked." In other words, "the previously used mark must be the legal equivalent of the mark in question or indistinguishable therefrom, and the consumer should consider both as the same mark."

Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1048 (9th Cir. 1999) (citations omitted). The goods or services offered under the mark post-assignment must essentially remain the same:

Inherent to the rules involving the assignment of a trademark is the recognition of protection against consumer deception. Basic to this concept is the proposition that any assignment of a trademark and its goodwill (with or without tangibles assigned) requires the mark itself be used by the assignee on a product having substantially the same characteristics.

PepsiCo, Inc. v. Grapette Co., 416 F.2d 285, 288 (8th Cir.1969). The government may have been willing to sell a trademark for a whorehouse, but that was a legal enterprise. But the government could hardly sell the mark for an outlaw biker gang, the "commercial impression" that the mark currently has. Just fun to think about.

© 2008 Pamela Chestek

Cherry and Jerry Garcia

Awhile back I did a survey on ice cream flavors.  One of the flavors in the survey was Cherry Garcia, a Ben & Jerry's flavor.  According to the PTO records, the trademark was originally registered by Ben & Jerry's but was later assigned to Jerry Garcia's estate in 1997.

The Grateful Dead's attorney passed away recently and I just ran across a piece about him that mentions the assignment.  The dates don't jibe with the PTO records, but it's an interesting tidbit of a story.  I can't summarize it succinctly, just go read it for yourself.

© 2008 Pamela Chestek

Originality in Copyright

I blogged here about the defendant's attack on the validity of an assignment and registration in Tacori Enterprises v. Rego Manufacturing. As a refresher, there were two parties that participated in the design of a ring, Haig Tacorian, acting as the President of Tacori Enterprises, and Garo Karounian, a designer for his sole proprietorship Anais Fine Jewelry Manufacturing.
In addition to the attacks on the assignment and registration, accused infringer Rego Manufacturing also argued that the work wasn't copyrightable because it wasn't original.

Originality encompasses two concepts: that a work was independently created by the author (i.e., the author didn’t copy) and that the work has a minimal degree of creativity. Rego’s expert opined that the ring design was just a reworking of similar and identical designs that had existed for thousands of years. He identifyed a bracelet design by Saara Hopea-Untracht in particular, saying “Without any stretch of the imagination, it easily appears that her jewelry was the prototype for the design that Tacori submitted to the Copyright Office. One cannot look at this artist’s work and not conclude that the Tacori rings are derivatives of the Untracht design.” In response, Tacori offered detailed evidence on how Karounian and Tacorian developed the design and submitted declarations that they did not base the design on any other works, were not aware of any similar works, and had not seen the jewelry in defendant Rego’s expert report.

Rego’s argument wasn’t good enough to survive summary judgment. The Tacori design was sufficiently different from the designs in the expert report to have the requisite level of originality; further, the expert’s conclusion that the Tacori work was not independently created wasn’t enough to raise an issue of material fact since Rego had no evidence rebutting Tacorian’s and Karounian’s statements that they had not seen the works in the expert declaration. The ring design was copyrightable.

Tacori Enter. v. Rego Mfg., Civ. No. 1:05cv2241, 2008 U.S. Dist. LEXIS 73686 (D. Ohio Sept. 25, 2008)

© 2008 Pamela Chestek

Implied, Irrevocable, Nonexclusive, Royalty-Free License to Retain, Use and Modify

The IP Law Blog digests an interesting software licensing case. An independent contractor software developer worked for a number of years writing applications for his client. When the relationship ended the copyright (and trade secret) lawsuit ensued. The Ninth Circuit found that the client had not just a license to use the software, but an unlimited, non-exclusive, irrevocable license to retain, use and even modify the software.

© 2008 Pamela Chestek

Pay Me Now or Pay Me Later

Tacori Enterprises v. Rego Manufacturing is such a meaty case that I'll do separate posts on the various trademark and copyright issues in the case. This post is a lesson on how not to assign ownership of a copyright and register it – the plaintiff spent tens of thousands of dollars defending attacks on the validity of its ownership and registration during the lawsuit, instead of a few hundred getting legal advice way back in the beginning.

Haig Tacorian is the President of Tacori Enterprises and Garo Karounian is an independent designer. At different times that are relevant in the case, Karounian was the sole proprietor of a business called Anais Fine Jewelry Mfg. and later Anais Designs, Inc. The lawsuit is about a very successful design for a ring, shown below:

The history of the copyright in the ring is something like this:

• 1994: Tacorian and Karounian began working together on ring designs. They had an oral agreement that Tacori would own any ring designs and Anais Fine Jewelry would manufacture the rings.
  
• 1999: Tacorian and Karounian worked together to design the ring in suit.
  
• September 30, 1999: the first ring was ordered.
  
• November 16, 1999: the ring was shipped.
  
• July 31, 2001: Tacori registered the copyright in the ring design. The application had four errors: (1) it listed Tacori as the author of a work made for hire; (2) it did not list Tacorian or Karounian as authors; (3) it did not state that Tacori was owner by virtue of assignment; (4) the dates of creation and publication were listed as 2000, not 1999.
  
• May, 29, 2003: Karounian incorporated Anais Designs, Inc.
  
• December 23, 2003: Tacori and Anais Designs, Inc. executed an assignment confirming the oral assignment, but the document did not list the copyright in the ring as one of the assigned works.
  
• December 29, 2003: A Supplemental Registration was filed that listed Anais Designs, Inc. as a co-author of the ring design and that Tacori's ownership was by assignment, not as a work-made-for-hire.
  
• August 18, 2005: A second Supplemental Registration was filed, changing the dates from 2000 to 1999.
  
• February 20, 2008 (During briefing on cross-motions for summary judgment) Tacori and “Anais Designs, Inc., as the successor-in-interest to Anais Fine Jewelry Mfg.” entered into an amended copyright assignment assigning the ring in suit and stating it was an inadvertent error that it was previously omitted.
  
• Later in the litigation: Karounian signs a declaration stating that it was his intent that Tacori own the copyright in the ring.
  

You’ve probably already seen where this is going. In what should have been a fairly routine copyright infringement case, defendant Rego was able to make all sorts of hay with the comedy of errors in the assignment and registration history for the ring. Luckily for Tacori, nothing worked.

Rego’s theory was that Karounian as an individual was the sole author of the design and, since he was not employed by Tacori, he was the owner of it. Thereafter, Karounian never transferred his ownership interest to Tacori or Anais Designs, Inc. by a written assignment as required under section 204(a). Thus, the 2003 and 2008 assignments were ineffective because the assignor, Anais Designs, Inc., owned nothing to assign.

The court wasn’t buying it. First, the court refused to even entertain the theory, finding that Rego had no standing to challenge the validity of the assignment where there was no dispute between the transferring parties – instead, the purpose of section 204(a) of the Copyright Act, requiring a written assignment, is to resolve disputes between owners and transferees.

Second, even if Rego did have standing, and even if the 2003 and 2008 ratifications of the 1999 oral transfer weren’t effective, the declaration Karounian had signed for the litigation stating that he had transferred the ownership was good enough to serve as the writing for purposes of 204(a).

Finally, for good measure and in a footnote, the court noted that Rego didn’t dispute that Karounian had the right to take actions on behalf of Anais Fine Jewelry, his sole proprietorship, or that Anais Designs, Inc. was the successor in interest of Anais Fine Jewelry. Since, though, the court had relied on the declaration for the assignment of ownership, it didn’t decide whether the 2003 and 2008 assignments were also therefore effective.

So there was no question that Tacori owned the copyright in the work, but under U.S. law the owner must have a registration to bring suit. A collateral attack on the validity of a registration, and thus the plaintiff’s standing, is a popular tactic in a copyright litigation. Given the number of errors in Tacori’s registration, it was surely worth raising here.

But still no luck for Rego. Even though the written assignments were executed after the work was initially registered, the effective assignment (in the court’s analysis, the declaration) was operative as of the date of the original transfer, in 1999. Therefore the owner as originally listed in the copyright registration was correct and the original registration valid.

Rego also claimed that the registration was procured through fraud on the Copyright Office by Tacori’s fraudulent misrepresentations in its applications, original and supplemental, of its ownership claim. This argument didn’t work for three reasons: Rego hadn’t pleaded a fraud defense; it had provided no evidence of fraudulent intent; and, Tacori’s original misstatement that it came to be owner as a work made for hire wasn’t a material misrepresentation.

A lot of opportunity for Rego to get rid of the infringement claim for reasons having nothing to do with the meat of the case, substantial similarity, but none that worked.

Tacori Enter. v. Rego Mfg., Civ. No. 1:05cv2241, 2008 U.S. Dist. LEXIS 73686 (D. Ohio Sept. 25, 2008)

© 2008 Pamela Chestek

Political Signs

When was the last time that a political campaign had a logo that was famous enough no name was necessary?

And have some fun at the same time?

© 2008 Pamela Chestek

A Crocodile Has a Skinnier Snout

For a foreign take on the amount of use needed to preserve trademark rights,  the IPKat offers a post on use of the word mark CROCODILE by Lacoste in the UK here.

© 2008 Pamela Chestek

No Payments Should Have Been a Tip Off -

A quick lesson in bringing a claim for copyright ownership - there's a three year statute of limitations from when you knew or had reason to know about the disputed ownership, and a registration that covers your work but doesn't name you as an author, a copyright notice not listing you, and no royalty income, are all tip-offs. Dressing your claim up as one for infringement of your own subsequent copyright registration doesn't adequately hide that it's really an ownership dispute that's time-barred.

Jose Ortiz composed the score for a motion picture called "Don Dinero - Su Vida y La Calle." He was identified as one of the "producers" of the musical score in the closing credits and on the DVD packaging, which read "Original music scored by da compadres (JAO [defendants] and Noodles)." The DVD had copyright notices that said "(P) & (C) 2003 UNIVERSAL MUSIC LATINO/GUITIAN BROTHERS MUSIC." The copyright in the motion picture was registered effective December 24, 2003, claiming the "Entire Cinematographic Work/Pictorial Matter/Line Notes." There were three previously released, previously registered songs used in the motion picture; they were listed separately on the back cover of the DVD and identified as "Preexisting Material" in the copyright registration. Ortiz was never paid any royalties for his work.

Ortiz obtained his own registration for the score on August 3, 2005. He sued for copyright infringement in May, 2007.

Even though two of the three defendants defaulted, ownership was not conceded because the defendants had their own copyright registration for the work. Instead, copyright ownership was actually the gravamen of the complaint. The public distribution in November, 2003 of the DVD with a copyright notice on the DVD label and packaging that didn't list Ortiz was enough to put Ortiz on notice of the defendants' ownership claim and started the statute of limitations clock ticking. The registration in December, 2003 was also something that should have put Ortiz on notice; he should have exercised reasonable diligence in looking at the registration. Not getting any royalties from the public distribution should also have clued Ortiz in that there was an ownership dispute.

Ortiz argued that the score was a preexisting work and therefore not covered by the defendant's copyright registration; the facts, including the way that the three previously released works were listed on the DVD and his admission that he prepared the music for use as the "background instrumental score for the motion picture," showed otherwise.

Ortiz's copyright infringement claim, in truth a dispute over ownership, was time-barred.

Ortiz v. Guitian Bros. Music Inc., 07 Civ. 3897, 2008 U.S. Dist. LEXIS 75455 (Sept. 24, 2008).

© 2008 Pamela Chestek

ConsumerInfo Owns the Mark

Consumerinfo.com, Inc. v. Money Management Intl, Inc. is a short opinion with two of the rarer trademark ownership issues - whether the registrant is the true owner of the mark, and the quantum of use necessary to establish a date of first use of a mark.

Unfortunately, the decision doesn't contribute a lot to the jurisprudence. Discussion of the first issue is very brief; a few more facts explaining the defendant's theory would have been helpful in understanding the court's conclusion. Defendant MMI alleged that ConsumerInfo wasn't the owner of its PLUS SCORE mark because the mark is promoted under the "Experian" brand name:

My search found uses of the mark on pages that on first blush appear to be different sources with different look and feel, although on closer inspection they all bear the Experian mark:

The court relied on Section 5 of the Lanham Act to find for ConsumerInfo. Section 5 says "Where a registered mark ... is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant ..., and such use shall not affect the validity of such mark or of its registration.... If first use of a mark by a person is controlled by the registrant ... of the mark with respect to the nature and quality of the goods or services, such first use shall inure to the benefit of the registrant . . . ." Note that Section 5 doesn't require that the parent be the registrant in a parent-subsidiary relationship, only that there be control by the registrant. The court stated,

Here, it is undisputed that ConsumerInfo is a wholly owned subsidiary of Experian Holdings, Inc., and that ConsumerInfo is also known as Experian Consumer Direct. (Def.'s SGI ¶ 2.) It is also undisputed that ConsumerInfo, as the registrant of the PLUS SCORE mark, controls the nature and quality of goods sold under the PLUS SCORE mark. (Def.'s SGI ¶¶ 5-9 ("The ConsumerInfo employees on the team specified the nature and quality of the scoring model.... [I]n its PLUS Score product, ConsumerInfo provides the consumer the three digit number in combination with analysis and other educational information supplied by ConsumerInfo that helps the consumer understand their credit score.”).) Accordingly, ConsumerInfo is entitled to the presumption of validity [because it owned a federal registration].

Without proof that the mark isn't actually controlled by ConsumerInfo, or that it has lost its significance as a mark, it's validly owned by ConsumerInfo.

Second, MMI alleged that it was the senior user of its mark, MY SCORE+. MMI claimed it had distributed brochures with the mark, advertised in the yellow pages and on its website, and taught educational sessions under the mark. Despite the fact that date of first use is a factual inquiry based on the totality of the circumstances, the court managed to find ways to discount all of MMI's evidence and hold that no fact finder could find that MMI was the senior user of its mark.

Since likelihood of confusion was admitted, summary judgment on the Lanham Act and common law trademark infringement claims was decided in favor of ConsumerInfo.

Consumerinfo.com, Inc. v. Money Mgmt. Intl, Inc., CV 07-04275 SJO (Ex), 2008 U.S. Dist. LEXIS 79303 (Sept. 2., 2008).

© 2008 Pamela Chestek

Love Letters

Martin Luther King's heirs are arguing over the ownership of the love letters Dr. King wrote to his wife Coretta.  The King couple's daughter, Bernice, is refusing to turn them over to her brother, Dexter, for use in a book to be published by Penguin Group.  Penguin has threatened to pull out of the book deal if it doesn't get the letters. 

The Atlanta Journal Constitution reports that in 1997 Mrs. King assigned the rights to any tangible or intellectual property involving Dr. King to King, Inc., the corporation that handles the rights to Dr. King's works.  While Mrs. King was presumably the owner of the physical letters and could give ownership to King, Inc., the article does not say how she would have become the owner of the copyright, which would have originally vested with the author, Dr. King.

HT to WSJ.com.

© 2008 Pamela Chestek

Patsy's Restaurant Wars

The never-ending saga of competing "Patsy's" restaurants in New York simmers on. I count 13 decisions in the Westlaw database from at least three separate suits, plus there have been four petitions to cancel filed at the PTO. The latest decision, resolving all outstanding issues between the parties at the trial court level, starts this way:

More than five years ago, the Court of Appeals for the Second Circuit admonished the major parties in this litigation "that henceforth they would be well advised to minimize the risk of confusion by identifying their restaurants by the complete names: 'Patsy's Italian Restaurant' and 'Patsy's Pizzeria.' This lengthy Opinion and Order is written because the parties have largely ignored that admonition. During the intervening years, the parties have instead continued on an oftentimes labyrinthine course of litigation. As noted by the Court of Appeals, one source of this litigation's "unavoidable confusion" has been the fact that, for over sixty years, the major parties and their predecessors have shared the mark PATSY'S for nearly identical restaurant-related services, both within the same New York City market. Additional confusion occurred during proceedings before the Patent and Trademark Office (the "PTO") and the Trademark Trial and Appeal Board (the "TTAB"). These proceedings have been alternately described as "protracted and convoluted," and "a procedural morass," "tortured" and "resulting in confusion and mistake." Such was the muddled state of affairs that formed the starting point for this case.

There were three Patsy's Pizzeria locations involved in the lawsuit, the original location in East Harlem owned by the trademark owner, I.O.B. Realty, and licensees on Staten Island and in Syosset. The latter two were originally named as defendants in separate suits. The suits were consolidated and I.O.B. Realty intervened on the side of the Staten Island and Syosset defendants.  The first use of Patsy's Pizzeria in East Harlem was senior to the plaintiff's use of Patsy's Italian Restaurant, and no infringement was alleged against the East Harlem location. The Staten Island location was open only about a year and Syosset is still in operation.

The decision is long and complex, but of interest to me in particular was the court's discussion of the naked licensing doctrine, which was spot on. I've blogged before that the naked licensing doctrine is not a doctrine unto itself but should be grounded in the law of abandonment.

The court instructed the jury that, as a matter of law, the Staten Island and Syosset defendants had entered into a valid license agreement with I.O.B. Realty that allowed them to use the marks PATSY'S and PATSY'S PIZZERIA in connection with operating a pizzeria. The jury found, though, that the Staten Island and Syosset defendants used the marks PATSY'S and PATSY'S PIZZERIA beyond the scope of their license agreement with I.O.B. Realty (because they offered broader services) and the jury also found that I.O.B Realty abandoned its mark. The court concluded that it was abandonment through naked licensing, since this was the only theory of abandonment presented to the jury. Plaintiff Patsy's Italian Restaurant argued that the jury's finding should act as a forfeiture of all rights in PATSY'S and PATSY'S PIZZERIA. 

The court first correctly identified the three bases for abandonment described in the two subsections of the Lanham Act: (1) intentional non-use; (2) actions or omissions that cause the mark to become generic; and (3) actions or omissions that cause the mark to lose its significance. It was the last basis that the court considered relevant here.

Quoting McCarthy, the court said "uncontrolled licensing in some cases may be of such a limited nature that it has little impact of weakening the mark and thus does not result in a loss of all rights." (emphasis in original). It then held that:

I.O.B. Realty has not engaged in conduct that necessitates a finding of total abandonment of all rights in the marks PATSY'S and PATSY'S PIZZERIA. Most crucially, Plaintiffs have failed to submit any evidence that the marks PATSY'S and PATSY'S PIZZERIA as used by the original East Harlem location have lost their significance as an indicator of the source of Defendants' pizzeria services. See Lanham Act § 45, 15 U.S.C. § 1127. The Court therefore grants, in part, Defendants' motion to limit the jury's finding of abandonment to only the incidents of naked licensing as described above [i.e., at the Staten Island and Syosset locations, but not other locations].

The Court is also persuaded that, to hold otherwise, would turn the marks PATSY'S and PATSY'S PIZZERIA as used for pizzeria services into the public domain, when these marks have been continuously associated with the East Harlem Location for over seventy-five years. This would cause undue hardship to not only Defendants, but also to consumers. Such a result would therefore be egregious and is not supported by the facts presented at trial.

The Syosset location's use of the mark for restaurant services other than for a pizzeria could not claim the benefit of East Harlem's senior use because it was outside the scope of the license. Since Syosset's use was confusing similar to Patsy's Italian Restaurant's use, the use of PATSY'S and PATSY'S PIZZERIA for other than a pizzaria by the Syosset defendants was enjoined.

The abandonment finding also rippled through to the petitions to cancel both parties' trademark registrations. The Patsy's Pizzeria registration was cancelled because the jury found it was obtained through fraud and because of the naked license, but the loss of the registration was not fatal - the two Patsy's Italian Restaurant registrations were also cancelled as likely to be confused with the pizzeria's senior common law, unabandoned trademark.

It's a complicated case procedurally but the trial court seems to have resolved it all carefully and correctly. Patsy's Italian Restaurant, Inc. v. Banas, Civ. No. 06-CV-0729 (RER), 06-CV-5857 (RER), 2008 WL 4146212 (E.D.N.Y. Sept. 9, 2008). More blogging on the case here.

© 2008 Pamela Chestek

"Lebanon Claiming Only It Owns Hummus, Falafel, Tabouleh And Baba Gannouj"

Here.  Nothing I could add.

HT to Gap.

"Museum Agrees to Ax Lizzie Borden Name"

Not my headline, this newspaper's.  Defendant True Story of Lizzie Borden Gift Shop and Museum, sued over the use of "Lizzie Borden" by plaintiff Lizzie Borden Bed and Breadkfast (case previously blogged here), will change its name.  The museum can mention Lizzie Borden in a tagline and can phase out sales of promotional goods.  More news reporting here.

The surviving museum

© 2008 Pamela Chestek

Patent Ownership and Joint Development Agreements

It was big news when Lucent Technologies won a $1.5 billion patent infringement suit against Gateway, Dell and Microsoft.  Less memorable was when the jury award was tossed on a motion for judgment as a matter of law (Lucent Technologies Inc. v. Gateway, Inc., 509 F.Supp.2d 912 (S.D.Cal. 2007)).  Now, the Court of Appeals for the Federal Circuit has affirmed the JMOL.  Of interest for this blog, the case discusses the intersection of patent and contract law in exploring whether technology is the fruit of the joint development work and, if so, who will own how much of the patent rights.

In 1988, AT&T Bell Labs, now Lucent Technologies, entered into a joint development agreement (JDA) with a German company, Fraunhofer Gesellschaft, to work on digital compression technologies.  The JDA defined the parties' "Existing Technology" as that which was "the result[] of" each parties' independent prior work in the field, described in exhibits to the agreement in papers with technical information, patents, and patent applications.  Each party was to continue to solely own their respective existing technologies.  The "New Work," technology developed under the JDA after April, 1989, was to be jointly owned:

All New Work is treated as a joint work.  The intellectual property rights to that work will be jointly owned by AT&T and [Fraunhofer].  Each party has the nonexclusive right to make use of the results of New Work (including intellectual property rights), and may grant nonexclusive licenses to others to use the results of such New Work.

A Fraunhofer scientist, Brandenburg, worked with James Johnston of AT&T under the JDA.  Johnston and Brandenburg worked on setting the industry standard for MP3 coding and implementing it.  By 1997 Frauenhofer was licensing companies to software for the standard and Microsoft became a licensee, using it in the Windows Media Player.

James Johnston had been an inventor on a patent application filed in 1988 before the joint work under the JDA, the 598 application.  Johnston was also listed as the sole inventor of the 938 patent, filed in 1994 (claiming priority to a 1992 application), which later reissued in 2006 during the litigation as the 080 patent.  Claim 2 of the 938 patent was cancelled during the reissue and at the same time the patent was amended to claim priority as a continuation-in-part to the 598 application, giving it a priority date of 1988 for some of the claims.

Lucent Technologies sued Gateway, Inc. and Dell, Inc. in separate suits for infringement of the 938 patent and another.  Microsoft intervened as the manufacturer of the accused software and the cases were consolidated.

Microsoft argued that Lucent had no standing to sue on the 938 patent in the absence of Frauenhofer - it claimed the asserted claims 2 and 4 of the 938 patent were New Work, so Frauenhofer should be a joint owner of the reissue 080 patent and thus a necessary party to the suit.  If the 938 patent consisted only of Existing Technology, however, Frauenhofer would have no ownership interest and Microsoft would be an infringer.  

Lucent disagreed; even though the matter claimed in claims 2 and 4 wasn't described in the 598 application, Lucent argued it was in the public domain before April, 1989 and therefore, because it was "the results of" the Existing Technology, it was not New Work.  The court sided with Microsoft; nothing in the attachments suggested that the agreement should be interpreted so broadly. Second, the specification showed that the material was New Work; since the 598 application was only a continuation-in-part, whether the claims could benefit from the priority of the 1988 application had to be ascertained.  Since the original 598 application did not show possession of the subject matter claimed in the 938 patent, even though it might have been obvious, the court concluded claims 2 and 4 could not claim priority to the 598 application.

Claims 1 and 3 of the 938 patent were Existing Technology and 2 and 4 were New Work, so the court continued by examining exactly what Frauenhofer owned.  Lucent argued Fraunhofer was a mere licensee of the patent - some of the claims were to Existing Technology, which were to be exclusively owned by Lucent, but one can only own an entire patent, so Fraunhofer must only have a license to the claims covering the New Work. Not correct; the court held that Frauenhofer was an owner because the claims were invented during the period covered by the JDA and were New Work.   Since Lucent was in control of filing applications it could have segregated the Existing Technology out in a separate patent to avoid giving Fraunhofer any ownership of claims covering Existing Technology.  Further, it could have cancelled claim 4 during the reissue, as it had done with claim 2, to eliminate Fraunhofer's ownership interest, but did not.

Frauenhofer therefore was an owner of the 938 patent and its reissue 080 patent; Lucent did not have standing to bring suit for infringement of the 938 patent.  The Court of Appeals didn't discuss Microsoft's license defense.

A discussion of the noninfringement of a second patent-in-suit can be found here.  Analysis of the implications of this decision on patent drafting here.

© 2008 Pamela Chestek

Mattel Moves for Everything

A little behind in my reporting on the Bratz case.  New reports are that Mattel filed a motion for a permanent injunction to enjoin MGA from making and selling Bratz dolls and from using the Bratz name and trademarks.

There are a slew of motions.  First for declaratory judgment:

[T]he Court should now issue a declaratory judgment pursuant to Mattel's thirteenth claim for relief that Mattel owns all right, title and interest in and to the Bratz-related works, ideas and concepts the jury found Bryant had conceived or created while employed by Mattel, including the Bratz drawings, Bratz sculpts, the ideas for the Bratz characters and the name "Bratz." Furthermore, the Court should declare that MGA does not have any rights in or to such works, ideas or concepts and that Bryant's purported transfer of the rights to such matters to MGA was invalid and void ab initio. Finally, the Court should declare that all Bratz-related works Bryant created or conceived while employed at Mattel, and MGA's copyright registrations of the Bratz works, are subject to a constructive trust in favor of Mattel. In the alternative, the Court should declare that those copyright registrations are invalid because MGA is not -- and never was - the true owner of those works.

Brief here.  It refers only to the works the doll designer created while at Mattel, i.e., the "gen one" dolls, but there are also "gen two" dolls.  A motion for permanent injunction enjoining the manufacture of all dolls, gen one and gen two, was also filed: 

The only issue even arguably open to debate is the scope of the injunction. MGA all but concedes that the four Bratz dolls released in June 2001 are substantially similar to Mattel's copyrighted works, but contends that no later Bratz dolls infringe. No such line can be drawn among the Bratz dolls. The original four dolls and all later dolls are based on the same sculpt - the sculpt that was developed from Mattel's designs, and infringes Mattel's copyrights in those designs. The infringing sculpt, which gives every core Bratz doll its unique look and feel, is still used for all Bratz dolls today. Accordingly, every one of those dolls necessarily bears substantial similarities to the elements of Mattel's copyrighted works which this Court ruled are protectable.

MGA has made clear that it intends to continue to produce and sell infringing dolls in the future. . . . A permanent injunction against further infringement is required. 

Brief here.  A constructive trust for the trademarks under California law is another separate motion:

This Court should impose a constructive trust for Mattel’s benefit on the Bratz and Jade marks, order that the rights in the marks be transferred to Mattel and enjoin MGA from further use of the Bratz and Jade names and marks.

Brief here.  Finally, there was also an ex parte motion by Mattel (opposed by MGA) to expedite the hearing, currently scheduled for November 10.  Here's the reason:

Mattel makes this Application on the grounds that the sale of infringing Bratz products during the holiday season poses an enormous, but largely unquantifiable, threat to Mattel's holiday sales. The months of September, October, November, and December are the most important months of the year for Mattel. Mattel ships thousands upon thousands of toys to retailers during these four months, garnering the majority of its annual revenues in the process. The continued presence of infringing Bratz products on the market poses a significant threat of irreparable harm to Mattel's sales during this crucial time of year.

Brief here.  MGA, outraged, says

[O]n the day when its papers were due, and the clock began ticking for MGA's response, Mattel filed an ex parte application seeking to alter the schedule by slashing the time for MGA's opposition to 11 days, enlarging the time for Mattel's reply by three days, and cutting by two weeks the Court's time to consider the papers on what could be the most important motion in this case. Mattel's request, outrageous on its face, should be summarily rejected.

Opposition brief here. Somehow I expect we'll still see Bratz dolls on the shelf at Christmas time.

© 2008 Pamela Chestek

Patents in the Ether, Admission to the Rescue

THERASENSE, INC., Plaintiff, v. BECTON, DICKINSON AND COMPANY, Defendant.
No. C 04-02123 WHA
Consolidated with No. C 04-03327 WHA, No. C 04-03732 WHA,No. C 05-03117 WHA
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
2008 U.S. Dist. LEXIS 76716

July 14, 2008, Decided
July 14, 2008, Filed 

OPINION 
ORDER DENYING DEFENDANT'S MOTION TO DISMISS

Abbott Laboratories filed this action alleging infringement of U.S. Patent No. 5,628,890 in March 2005. Over three years have since passed. Now, one week before the trial on the '890 is set to begin, BD/Nova moves to dismiss Abbott's infringement claim on the newly discovered allegation that Abbott is not the owner of the '890 patent and therefore has no standing to sue for infringement. Despite being in litigation for three years, BD/Nova contends that it only discovered the ground for its motion within the past month. For the reasons set forth below, BD/Nova's motion is DENIED.

The '890 patent was assigned to Medisense, Inc., in 1996. Abbott was Medisense's sole owner and shareholder. Medisense dissolved on December 31, 1998. BD/Nova's motion is entirely premised on the fact that there is no written document evidencing a transfer of ownership rights in the '890 patent from Medisense to Abbott. But BD/Nova has previously stipulated that Abbott is the owner of the '890 patent. Specifically, in the joint pretrial order BD/Nova stipulated that "Abbott Laboratories owns the '890 Patent" (Parties' Joint Proposed Pretrial Order at 16). A joint pretrial order lays out those issues that are disputed for trial and stipulations therein are binding at trial. See Malhiot v. S. Cal. Retial Clerks Union, 735 F.2d 1133, 1137 (9th Cir. 1984). In addition, while a party may not stipulate to federal subject matter jurisdiction, it can stipulate to facts from which jurisdiction can be inferred. See United States v. Mathews, 833 F.2d 161, 164 (9th Cir. 1987).

Ordinarily when a company dissolves, its assets are distributed to its shareholders or to its owner. Here, Abbott was the sole shareholder of Medisense at the time of its dissolution. It appears therefore that Abbott would have become the de facto owner of the '890 patent after Medisense's dissolution. BD/Nova contends otherwise. The contention must be rejected. Under BD/Nova's logic, nobody owns the '890 patent and it is instead simply floating in the ether. Fortunately, we do not have to get into metaphysics for BD/Nova has already stipulated that Abbott is the owner of the '890 patent -- a stipulation for which BD/Nova has shown no cause to withdraw from. The only argument BD/Nova makes is that its stipulation was written in the present tense -- i.e., "Abbott Laboratories owns the '890 Patent" -- and the relevant inquiry for standing purposes is whether ownership was established at the time the complaint was filed. See Gaia Tech., Inc. v. Reconversion Tech., Inc., 93 F.3d 774, 777 (Fed. Cir. 1996). BD/Nova's pedantic argument is without merit. BD/Nova has not explained how Abbott could be the owner of the '890 patent today and not the owner of the patent in March 2005. They have also not given any significant justification for its failure to raise this issue earlier (even in the joint pretrial order) rather than on the eve of trial. Given the immediacy of the impending trial, the prejudice to Abbott is clear. Prejudice to the Court's calendar is also manifest. The Court informed the parties two months ago that it would reserve the time to try this case now and that it would otherwise have to wait until sometime in 2009. For these reasons, BD/Nova's motion must be DENIED. 
      
IT IS SO ORDERED.
Dated: July 14, 2008.
/s/ William Alsup
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

How to Make Money on Dow Futures

Most trade secret cases, in evaluating whether there is a trade secret or not, are looking at the degree to which secrecy was maintained, or analyzing whether the particular subject matter is of a type that may be protected through trade secret. Fishkin v. Susquehanna Partners G.P. (a declaratory judgment action) is a more unusual case where a claimed trade secret was learned through observation.

 

An employee of DJ defendant Susquehanna International Group (SIG), Wisniewski, worked in the the Dow pit on the floor of the Chicago Board of Trade. The court described the development of the trade secret this way:

45. Around September 1999, after he had been trading unsuccessfully in the Dow pit for a month using an arbitrage fair value strategy, Wisniewski began observing what other, successful traders in the pit were doing. He observed other traders looking up at the electronic wall board near the Dow Futures pit and watching the values for the S&P Index. He noticed that when the values for the S&P Futures were going up, these traders were buying, and when the values went down, they sold. He also noticed that when the value of the S&P Future went up a dollar, the value of the Dow Future would go up nine dollars, an amount proportional to the different underlying cash values of the two indexes. He also observed that these traders appeared to be making money.

46. Based on what he observed these other traders doing, Wisniewski wrote out the formula for Dow Fair Value, set out in Figure 9. He based this formula on what he deduced the traders whom he had been observing were using as the basis for their trades. Wisniewski did not believe his formula was anything novel or unique, and drafting it did not take him much time. He viewed it as a simple algebraic expression of the concept that he observed other traders using. This concept was that, when the S&P Futures were trading over (or under) their banking fair value the Dow Futures should trade over (or under) their banking fair value in the same proportional amount.

Wisniewski taught the system to Fishkin when they were employed together at SIG. They started out doing the calculations in their heads but ultimately used the system on handheld computers after seeing other traders using handheld computers in the pit. Both Wisniewski and Fishkin contemplated leaving SIG and so sued SIG seeking to invalidate restrictive covenants in their employment contracts; SIG counterclaimed against Fishkin, but not Wisniewski, for misappropriation of trade secret. Wisniewski ultimately stayed at SIG.

SIG claimed the formula as a trade secret, as well as using an Excel spreadsheet on a handheld computer to execute it. The court didn't buy either argument, even though SIG had maintained the secrecy by taking such steps as displaying dummy values on the handheld computers in case other traders looked at the screens. The formula wasn't a trade secret because it was learned through observation and other traders were using it; the use of handheld computers was learned from others also.

 

So despite the fact that secrecy was maintained, and Fishkin took the information (albeit in his head) with him, no misappropriation of trade secret.

 

It's also a good case to read as a road map for the types of claims that can arise in the common situation where an employee who had a nondisclosure/noncompete leaves. Tortious interference, breach of contract, conversion, trade secret, they're all in there.

 

Fishkin v. Susquehanna Partners, G.P., 563 F. Supp. 2d 547 (E.D. Pa. 2008).

 

© 2008 Pamela Chestek