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Category Archives: Trademark

Trademark Information For Business Owners, Executives and Managers

Today at 12:30 Eastern, Eric Osterberg will be discussing A Business Owner’s Guide to Trademarks and Service Marks with Jaqueline Crosby on the Blog Talk Radio show Legalocity.  The discussion will be useful for business owners and managers with questions about how to consider trademarks as part of their business planning.

IP Licensing Checklist

Here is a general checklist of things to consider when licensing IP, in no particular order. If you spot any significant omissions, please comment.

1)    What precisely is being licensed?

2)    What will be the term of the license?

a)     any automatic renewal?

b)    options?

c)     fee changes in subsequent license periods?

d)    termination rights?

3)    What will be the fee?

a)     how calculated? flat fee? percentage of sales? gross or net?

b)    how often paid?

c)     what currency?

4)    What territory?

5)    Exclusive or non-exclusive?

6)    Licensee’s Rights and Duties

a)     Accounting

b)    Reporting

c)     Branding

d)    Training

e)     Updates

f)     Quality control

g)     Right to modify materials?

h)    Who owns licensee modifications?

i)      Any right to sublicense?

j)      Any right to assign license?

k)    Any sell off of any materials at the end of the term?

l)     Any minimum sales quota or other duty to exploit the IP?

m)  How will complaints be handled?

7)    Licensor’s Rights and Duties

a)     Warranties or Indemnities (duty to defend licensee?)

b)    Training

c)     Updates

d)    Provision of materials

e)     Trouble shooting?

f)     Right to inspect/monitor/approve product and/or marketing materials

8)    Choice of law, choice of forum, mediation or arbitration?

9)    IP registrations, how will they be handled?  Licensee acknowledges licensor’s IP?

10)  Who sues infringers?  If license is exclusive, will licensee have any right?

Good News For Brand Owners Seeking Injunctions

A  judge in the Western District of New York (think Buffalo) wrote last week in a case between two beauty pagaent promoters, Mrs. United States and Miss United States of America :

The potential loss of good will and customers by plaintiff, and possible damage to its reputation, as a result of defendants’ alleged infringement of plaintiff’s marks is not easily quantifiable or remediable by damages, and supports a finding of irreparable harm.

This is more evidence that concerns that the Supreme Court decision in eBay v. MercExchange rejecting the presumption of irreparable harm in patent cases would raise the bar to obtaining injunctions in all IP cases, were overblown. Potential loss of good will and customers  and possible damage to reputation are likely to be present in the majority of trademark infringement cases. 

The court in the Mrs. United States case went on to give the following useful summary of the state of the presumption of irreparable harm law in IP cases.

It is unclear whether a court may presume irreparable harm upon a finding of likelihood of success on a trademark claim. The Supreme Court has held that such a presumption is improper in patent or copyright cases, see eBay, 547 U.S. at 392 (noting that Court’s ruling with respect to patent cases “is consistent with our treatment of injunctions under the Copyright Act”); see also Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989, 996 (9th Cir. 2011) (“under eBay, a presumption of irreparable harm is equally improper in a case based on copyright infringement as it is in a case based on patent infringement”); Salinger, 607 F.3d at 82 (“After eBay, … courts must not simply presume irreparable harm”) (copyright case). To date, however, no consensus has emerged as to whether that holding applies to trademark infringement cases as well. See Peoples Federal Sav. Bank v. People’s United Bank, 672 F.3d 1, 9 n.11 (1st Cir. 2012) (finding it unnecessary, and declining, to decide issue); Southern Co. v. Dauben Inc., 324 Fed.Appx. 309, 318 n.13 (5th Cir. 2009) (same); North American Medical Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1228 (11th Cir. 2008) (same). At least some district judges from within this circuit have applied eBay to trademark cases, however. See, e.g., Ascentive, LLC v. Opinion Corp., ___ F.Supp.2d ___, 2011 WL 6181452, at *5 (E.D.N.Y. 2011) (“Although prior to Salinger, courts in this circuit presumed irreparable injury in trademark cases where a likelihood of confusion was shown, post-Salinger, this presumption is no longer applicable”); Tecnimed SRL v. Kidz–Med, Inc., 763 F.Supp.2d 395, 402 (S.D.N.Y. 2011) (applying Salinger to a trademark claim), aff’d, 462 Fed.Appx. 31 (2d Cir. 2012). The Second Circuit has not yet spoken directly on this question, though it has suggested that the presumption may still have some force in trademark cases; see Zino Davidoff SA v. CVS Corp., 571 F.3d 238, 246-47 (2d Cir. 2009) (noting presumption in trademark cases, without referencing eBay or Salinger, but finding that even without benefit of presumption, plaintiff had shown irreparable injury).

 

Why Brand Owners Don’t Donate Counterfeits to Charity

In reaction to recent stories of destruction of bridal gowns and other clothing that could have gone to the needy, people are asking why brand owners don’t donate seized counterfeit goods.  Four reasons. 

First, U.S. trademark law provides for the destruction of counterfeit goods; it does not permit donation.  Second, counterfeit goods are by their very nature inferior.  A trademark owner has a responsibility to insure that inferior goods bearing its brand do not circulate.  This principle is known as the duty to maintain quality control.  One can lose trademark rights for failing to exercise quality control.  Third, once goods leave the hands of the brand owner or retailer, even with the best of intentions, it is difficult to ensure that donated goods do not end up being resold.  Fourth, for many brands, the cold, hard fact is that the brand may suffer if consumers see it worn by the needy because the selling point is exclusivity. 

So, before you point the finger at a brand-owner for failing to donate counterfeits or even legitimate goods to the needy, ask yourself: would consumers want the product as much, at the same price, if he did?

Post-License Use of Trademark Is Counterfeiting

A former trademark licensee’s continued use of a trademark after termination of the license constitutes trademark counterfeiting. That is the holding in a recent District of Indiana default judgment case, Century 21 v. Destiny Real Estate.

The court explained:

If an unrelated entity had created an identical trademark and provided authorized goods or services (or the kind provided by the owner of the mark) under that mark, there would be no question that there was counterfeiting. The Court can conceive of no reason why an ex-franchisee should escape liability for counterfeiting simply because that person had access to a franchisor’s original marks because of the former relationship and therefore did not need to reproduce an identical or substantially similar mark.

Other courts have come to differing conclusions on this issue, in various contexts. In a 1997 case, the 6th Circuit held that a franchisee’s holdover use of a trademark was not counterfeiting. The 9th Circuit held that the licensee’s holdover was counterfeiting in a 2005 case involving continuing use of the Idaho potato certification mark.

The significance is that pursuant to 15 U.S.C. 1117(b), if he is found to be a counterfeiter, the former licensee can be liable for statutory damages (up to $2 million in cases of willful counterfeiting), and will be liable for three times profits or damages, whichever amount is greater, together with a reasonable attorney’s fee unless the court finds extenuating circumstances. If he is merely an infringer, statutory damages are not available and treble damages and attorneys’ fees are less certain to be awarded. They may be awarded subject to the principles of equity.

The Century 21 court’s damage, injunction and individual liability analyses also are noteworthy. Century 21 sought its actual damages plus treble damages. The court held that such an amount would be quadruple, rather than treble damages, one multiple too many. The court further reduced the award to two times damages, on the ground that the liquidated damages provided for in the license agreement and awarded by the Court coincided with the actual damages, and therefore to awarded treble damages in addition would again result in quadruple recovery.

On a cheerful note for trademark owners, the Court granted a permanent injunction, finding that the injury especially justifying injunctive relief is the loss of control over and harm to its valuable name and trademark, in which it has invested substantial effort and money over time to develop goodwill. If that is going to suffice under Ebay, trademark owners may not need to be as concerned that injunctions against infringers will be harder to come by.

The court declined to impose liability on Destiny Real Estate’s principal. After surveying the law on individual liability for corporate trademark infringement, the Court found that Century 21’s allegations that the individual was President of the company and authorized or approved of the misconduct were not sufficient bases to hold the individual liable for the corporation’s infringement.

No Presumption of Irreparable Harm in False Advertising Cases Either

Irreparable injury cannot be presumed in Lanham Act false advertising cases. That was the ruling in Leatherman Tool v. Coast Cutlery, a case decided in October in the District of Oregon. In that case the court found that Leatherman made a preliminary showing that its competitor, Coast Cutlery, deliberately included in advertising literally false statements concerning the sharpness of its knife blades. The court did not issue a preliminary injunction, however, because it found Leatherman’s affidavits avowing concern that sales would be diverted were speculative, and insufficient to prove that Leatherman would be irreparably harmed by its competitor’s literally false advertising.

On the heels of cases within the past five years expressly ruling a presumption of irreparable harm does not apply in patent and copyright cases,  a recent decision from the First Circuit in a trademark case and a one from the District of Arizona concerning another Lanham Act case, it is now seems likely, to the extent it was not after the Supreme Court’s decision in Ebay, that  the days in which plaintiffs can count on a presumption of irreparable harm in an IP case of any type may be numbered.

The challenge now, for intellectual property owners, scrupulous advertisers and courts, is to prevent us from sliding into a culture of infringe now, pay later. Infringers will no doubt in every case assert that irreparable harm cannot be proven because the wrongdoing can be remedied by payment of damages, in the form of a license fee or, in the case of false advertisers and trademark infringers, payments for proven diverted sales. That leaves the plaintiff with a difficult task to prove otherwise, the danger the presumption of irreparable harm was designed to prevent. And so the battle lines are re-drawn.