A Very Short License

The Trademark Blog reports on a new case where two companies claim to own the same mark. In the complaint, the plaintiff and trademark registrant claims that it licensed the mark to the defendant but later terminated the license. The defendant's website says that it acquired the business from the plaintiff. Here is the relevant agreement and termination letter, you be the judge:
Scala License and Termination

The defendant has also filed its own trademark application. One defense theory, based on the parties' correspondence, will be abandonment.

Complaint here.
Full set of exhibits to complaint here.
Motion for TRO here, thanks to the Trademark Blog.

© 2009 Pamela Chestek

Making Your Bed

The 7th Circuit decision in Sunstar, Inc. v. Alberto-Culver Co. is interesting in two ways: it provides some insight into how one company is managing the Japanese market, and also provides a little education on Japanese trademark licensing law.

Alberto-Culver, owner of the VO5 family of marks, wasn't having any success in the Japanese market, so in 1980 it sold the Japanese marks to plaintiff Sunstar, Inc. for $10 million.

Sunstar wasn't allowed to keep them though; instead it had to transfer them to Bank One Corporation to hold in trust for 99 years. Bank One Corporation would grant back a senyoshiyoken license - exclusive-use right - to Sunstar royalty-free, and at the end of the license Sunstar would regain full ownership. If, though, during the 99 years Bank One Corporation

had a "reasonable ground" for thinking Sunstar had committed an act that created "a danger to the value or validity of LICENSOR's [i.e., Bank One's] ownership and title in Licensed Trademarks," Sunstar would have to stop using the endangered trademarks until the trustee "reasonably determined" that the danger had passed. In the event of an actual breach of the license by Sunstar, the trustee was to rescind the license and return the trademarks to Alberto-Culver.

In 1989, the two parties had a dispute over whether Sunstar could use this modification to the mark:


Sunstar thought it didn't need permission but Bank One Corporation said it did, so ultimately another $10 million was forked over. Ten years later Sunstar adopted this mark:

Again Alberto-Culver said it couldn't. This time, though, Sunstar sued.

At trial, Alberto-Culver argued that it hadn't really granting a senyoshiyoken license, but instead used the term to mean that Sunstar could register the trademarks with the Japanese Trademark Office. The district court agreed and didn't instruct the jury on what rights a licensee in a senyoshiyoken license would have. The jury returned a verdict for Alberto-Culver, so the district court ordered the agreement terminated and the marks returned to Alberto-Culver.

But not so fast, said the Court of Appeals; the appeals court disagreed that the use of the term "senyoshiyoken" as the term is used under Japanese law didn't describe the license granted. The court therefore had to decide whether, under Japanese law, a senyoshiyoken licensee could make this type of alteration to the mark.

According to the court, a senyoshiyoken licensee can modify the mark if the change is insignificant enough that one could tack on to the earlier use. This rule makes sense particularly in the case of a 99-year license, where the mark would need to change to remain effective in the market. Indeed, the court even speculated that Sunstar might have created "a danger to the value or validity" of the marks if it hadn't modernized the mark.

So from the case we learn that a senyoshiyoken license is exclusive within the geographic scope even as to the licensor, and that it confers the right to register the mark and to sue in the licensee's name. The Court of Appeals includes another right - to make small variations to the mark.

And the inimitable Posner, J.: "Apparently Sunstar has done better in Japan than Alberto-Culver expected, and, as in 1989, Alberto-Culver has tried to use a hypertechnical, but more important an unsound, interpretation of the licensing agreement to extort additional compensation." Indeed, it's a bit unbelievable that a licensor would grant a 99-year license, with the licensee to acquire full ownership at the end, and not allow the licensee to update the mark for a century. If Alberto-Culver is concerned that the VO5 mark in Japan will be different from the rest of the world, that's the natural result of the deal that Alberto-Culver struck in 1980 when it assigned the marks in all but name.

Sunstar, Inc. v. Albert-Culver Co., Nos. 07-3288, 07-3289, 08-3835, 08-3836, 08-3931, 08-3936, 2009 WL 3447450 (7th Cir. Oct. 28, 2009) (Posner, J.)


© 2009 Pamela Chestek

The Twenty Year Registration Is Dead*

No more twenty year registrations.

*Well, except for the grace period. Docket six months.

© 2009 Pamela Chestek

Copyright Infringement Masquarading as Ownership

The Tennessean, in an article entitled "'Atomic Dog' singer wins claim to phrase," reports that "The phrase 'bow wow wow, yippie yo, yippie yea' belongs exclusively to funk legend George Clinton, a panel of federal judges ruled this week."

Well, no. The question was whether three musical elements - the use of the word "dog" in a low voice as "musical punctuation," rhythmic panting, and the refrain "Bow wow wow, yippie yo, yippie yea" - were original enough to be copyrighted, to which the answer was yes:

As noted previously, the standard for originality is a low one, and the “vast majority of works make the grade quite easily.” Feist, 499 U.S. at 345. In this case, expert testimony presented at trial was sufficient to permit the jury to conclude that Clinton’s use of the three disputed elements in "Atomic Dog" met this minimal standard.

There's a big difference between owning words and finding that a particular combination of words and music has been infringed. George Clinton has no exclusive right to barking, panting, "bow wow wow, yippie yo, yippie yea-ing," or even his particular expression of those phrases. The case only says that Public Announcement's use of George Clinton's work was unexcused infringement. There no "ownership" here, even in the loosest meaning of the word.

Original work here:

Accused work here:

Bridgeport Music, Inc. v. UMG Recordings, Inc., No. 07-5596 (6th Cir. Nov. 4, 2009).

© 2009 Pamela Chestek

The Coinco Strategy

Mars, Inc. v. Coin Acceptors, Inc., first blogged here, demonstrated what can go wrong with ownership of patents within a corporate enterprise. As a refresher, in Mars the defendant, "Coinco," successfully attacked the chain of title of the patents in suit. Mars had transferred ownership of the patents between family members during the lawsuit, a move that Coinco used to successfully challenge standing and limit Mars to reasonable royalty damages rather than lost profits. Mars subsequently had to defend itself agains a similar challenge in another suit, blogged here and here.

Plaintiff Novartis in Novartis Pharmeceuticals Corp. v. Teva Pharmeceuticals USA, Inc. is having similar problems. The chain of title was this:

* Pre-issue: Inventors assign to Beecham Group PLC
* August 30, 2000: Novartis Pharma, AG (NPAG) and Novartis Pharmeceuticals Corp. (NPC) purchased assets, which included the patent in suit, from SmithKline Beecham PLC, SmithKline Beecham Corp. and SmithKline Beecham (Cork) Limited (SKB) in a document entitled "Asset Sale Agreement"
* December 20, 2000: SKB assigned the patent to Novartis International Pharmeceutical Ltd (NIP)

The identity of the original assignor (whether it was Beecham Group PLC or SKB) was not an issue, but the ownership within the Novartis family was. All three of the Novartis companies were plaintiffs: NIP is a holding company (but perhaps a manufacturing company), NPAG is a manufacturer, and NPC is a distributor. Teva moved to have NPAG and NPC dismissed from the suit for lack of Article III standing since they weren't owners of the patent. The benefit to Teva would be the remedies angle; with the operating companies out of the picture both injunctive relief and lost profits would be off the table.

The Novartis companies first argued that the "Asset Sale Agreement" was the grant of an exclusive license to NPAG and NPC. The court didn't buy it; it would have been an exclusive license from SKB, not NIP. The license would have also been undone by the subsequent assignment of the "entire right, title and interest" from SKB to NIP. Alternatively, NIP would have taken ownership subject to the undefined licenses. Thus, there was at least a question of fact on the exclusive license theory.

Next the Novartis parties claimed NPAG and NPC had an implied exclusive license from NIP based on their behavior. But the court didn't have sufficient evidence to decide whether NPAG and NPC were exclusive licensees or bare licensees, so the the issue would remain to be tried to the fact finder.

The court also offered this insight on why it wasn't going to dismiss NPAG and NPC:

At the same time, if each entity holding an interest in the patent is a wholly owned subsidiary of the parent corporation, resolution of this issue may not be of immediate need. "Another policy consideration is to prevent a party with lesser rights from bringing a lawsuit that may put the licensed patent at risk of being held invalid or unenforceable in an action that did not involve the patentee[,]" or by extension, the parties with a right to relief under the patent. Therefore, if each entity controls a divided, but undefined interest in the patent, policy favoring the prevention of multiple lawsuits and inconsistent judgments disfavors dismissal of NPC and NPAG at this time.

Teva also tried to get an early take from the court on the remedies question, but no luck there either: "the Court will not speculate as to the scope of remedies available in this matter until the foregoing issues of fact have been resolved."

Teva's Coinco strategy isn't dead, but the issues remain to be tried to the factfinder. But it's a good strategy if it works, and I anticipate a lot of close examination of corporate family ownership in the future.

Novartis Pharm. Corp. v. Teva Pharm. USA, Inc., No. 05-cv-1887, 2009 WL 3447232 (D.N.J. Oct. 21, 2009).

© 2009 Pamela Chestek

The Restaurant Owns It, of Course

When the dispute over the ownership of the name of the famous restaurant "Tavern on the Green" started, I posted a poll asking whether the restaurant or New York City owned the name. The results are in, with responses overwhelmingly in favor of the restaurant, 93% to 6% (okay, well there were only 15 votes). I'm a bit surprised, I thought it would be a little closer than that.

© 2009 Pamela Chestek

Contract Interpretation Quiz

Interpret this contract, reproduced below in full:

In consideration of the sum of One Dollar ($1.00) and other good, valuable, and adequate consideration, the receipt and sufficiency of which is acknowledged, the undersigned does hereby sell, assign, transfer, and set over to Bridgeport Music, Inc., its respective successors and assigns, fifty percent (50%) of his interest now owned or subsequently procured in the universe-wide copyright in and to the following musical composition(s) set forth in Exhibit A attached hereto, and all of the universe-wide right, title, and interest of the undersigned, vested or contingent, therein and thereto, including all claims for infringement of the copyrights whether now or hereafter existing, for the maximum terms of copyright, including any extensions and/or renewals thereto, throughout the universe.[*]

The assignor sues for copyright infringement. Does the assignor have standing, or did it assign all claims for copyright infringement to the assignee?

According to the Eastern District of Texas, the assignor didn't have standing. According to the Fifth Circuit, it did.

The appeals court said that the assignment had two clauses, the clear assignment of half interest in the copyright and the second clause assigning "all of the universe-wide right, title, and interest of the undersigned, vested or contingent, therein and thereto, including all claims for infringement." The district court concluded that the plain language of this second clause assigned all interest in copyright infringement claims, but the appeals court decided that the lower court's interpretation "ignores the language of the clause as a whole and renders the contract contradictory."

If the second clause is read to mean that [the assignor] assigned all of its rights to pursue copyright infringement claims related to the compositions, then it would also necessarily mean that [the assignor] had assigned all of its interest in the compositions, given that the second clause also stated that [the assignor] assigned 'all of [its] interest' in the compositions. This result would contradict the clear language of the first clause, which states that [the assignor] assigned only 50% of its interest in the musical compositions.

The court explained that "The proper reading of the two clauses is that the second clause operates as a clarification of the 50% interest assigned in the first clause. Thus, the second clause clarifies that the 50% share is a full share, rather than an income, participation, royalty, or some other limited share in the copyright."

Ambiguous is an understatement for the contract, but it does seem the intent was that the second clause was meant to explain exactly what kinds of interests were assigned in half, i.e., all of them. Therefore, the plaintiff had standing. The assignee was also to be joined, so all parties in interest were represented in the suit.

* See here for discussion of assignments "throughout the universe."

In re Isbell Records, Inc., No. 09-40343, 2009 WL 3386546 (5th Cir. Oct. 22, 2009).

© 2009 Pamela Chestek