law 227: trademarks & unfair competition loss of rights, due diligence june 27, 2009 jefferson...

Law 227: Trademarks &Law 227: Trademarks &Unfair CompetitionUnfair Competition

Loss of Rights, Due Diligence

June 27, 2009

Jefferson Scher

TM & Unfair Comp — Day 9TM & Unfair Comp — Day 9AgendaAgenda

•Loss of RightsGenericism/GenericideAbandonment

Non-use, assignment in gross, naked licensing, failure to police

•Transactional Due DiligenceHypothetical acquisition of Rodeo

Palms

Loss of Rights: GenericismLoss of Rights: GenericismThe End of the SpectrumThe End of the Spectrum

•Some terms start out genericFilipino Yellow Pages: “what-are-you”HOG (large motorcycles)

•Others become generic through usage (trademark owner’s fault??)Shredded WheatAspirin (with the general public)

Loss of Rights: GenericismLoss of Rights: GenericismJudging GenericismJudging Genericism

•Effect of third party non-trademark use: forced genericide of a mark?Stix Products v. United Merchants

Public still recognized CON-TACT as a mark, so could not use the phrase descriptively

Freecycle Network v. OeyEncouraging genericide isn’t “use” so it

doesn’t violate the Lanham Act

Loss of Rights: GenericismLoss of Rights: GenericismProving Public Perception: SurveysProving Public Perception: Surveys

•Key is the term’s primary significanceAsking about generic names for products

75% call a vacuum bottle “a thermos” – OK70-86% would use TEFLON pan when

referring to a nonstick pan – AMBIGUOUSDo you know a brand name? or classify

as brand name or common nameBetter show “lack of trademark significance”

Loss of Rights: GenericismLoss of Rights: GenericismProving Public Perception: Indirect Proving Public Perception: Indirect EvidenceEvidence

•Evidence of Advertising?Welding Services Inc. v. Forman

Can’t own “Welding Services Inc.” but what about WSI? Possible if public perceives WSI as not merely equivalent to the generic

Advertising the acronym next to the phrase fails to prove independent meaning (if anything it hurts by spelling it out for customers)

Loss of Rights: Loss of Rights: AbandonmentAbandonment“Abandonment” of Trademark Rights“Abandonment” of Trademark Rights

•Involuntary abandonmentCease use without intention to resumeAssign mark without goodwillLicense the mark without maintaining

control of the nature and quality of goods on which it is used

Failure to police third party use (infringements)?

Loss of Rights: Loss of Rights: AbandonmentAbandonment“Abandonment” of Rights via “Abandonment” of Rights via AssignmentAssignment•Clark & Freeman v. Heartland

Co.

Transactional Due DiligenceTransactional Due DiligenceOverviewOverview

•Assess risk of TM-related transactionIP aspect of corporate mergers,

acquisitions, and asset purchasesTrademark licenses

Merchandising, franchising, ingredientSettlement deals

Acquisition (sometimes with “license back”) of a registered or common law trademark


•What is due diligence?Verifying seller representations

Title to assetsProper maintenance of assets

Understanding disclosed liabilitiesIdentifying undisclosed risksDischarging a duty of care (Board to

shareholders; experts to company)


•What is it really?Endless rounds of questioning

Enumerating assets, encumbrances, disputes, other liabilities

Drilling down to specificsIndependent investigationEvaluation: how does it

affect the deal?

Transactional Due DiligenceTransactional Due DiligenceKey Trademark InquiriesKey Trademark Inquiries

•Identify trademark assetsRegistrations and applicationsRights established through useRights obtained by license

•Identify relevant agreementsAssignment and licenseCoexistence, consent, and settlement


•Identify disputesPast and present actual disputesPotential disputes

•Identify trademark-like propertiesTrade names, advertising slogansTrade dress/product designDomain names


•Bottom lineCould you obtain title to the asset?Would you be bound by contractual

limitations on your use?Could you use the asset without

infringing the rights of others?Could you stop others from using it?Could you grow the business?


•The real bottom line: How much should you pay for it?

Transactional Due DiligenceTransactional Due DiligenceHypothetical Scenario: Rodeo PalmsHypothetical Scenario: Rodeo Palms

•Acquisition of the RODEO PALMS business — or maybe just the brandBuyer: Elegant Industries (your client)Target: Rodeo Palms Fashions

•Summary took many billable hours to compile, drew on a variety of sources, mined many unruly documents...

Transactional Due DiligenceTransactional Due DiligenceDisclosures and Follow-on Disclosures and Follow-on InvestigationInvestigation

•Asset PortfolioRODEO PALMS

26 word mark applications in 16 different jurisdictions

Notes/QuestionsInconsistent country selection – why?Refused in CH – why?Consent in US – need a copy of the file


•Asset PortfolioRODEO PALMS FASHIONS Logo

8 special form applications in 8 different jurisdictions

Notes/QuestionsInconsistent country

selection relative to RODEO PALMS – why?


•Asset PortfolioTROPICAL SMARTS tag line

Common law rights based on use in the U.S. and on the company’s web site

Notes/QuestionsNever filed for registration – why?Could be descriptive – enough use for

secondary meaning?


•Asset PortfolioCOOL BREEZE WINDOW

Common law rights based on use in the U.S. and on the company’s web site

Notes/QuestionsNever filed for registration – why?Descriptiveness/secondary meaning issuesStatus on demand letter?!


•Asset PortfolioInterior and Exterior Store Design

Common law trade dress rights based on use in the U.S.; registration refused

Notes:Applications refused – why?Anything distinctive here?Secondary meaning?


•Asset PortfolioBottle and Dispenser Designs

Registered in the U.S.Notes:

How was use established – was an appropriate license in place to the perfume manufacturer?

Ditto re: future control


•Asset PortfolioGeneral questions for each case

What is the prosecution history?Are any applications “dependent”

(for example, Madrid Protocol)?Any disclaimers or exclusions?Any oppositions or extensions of the

opposition period?


•Asset PortfolioMore general questions for each

caseUsed as required to maintain rights in

the relevant jurisdiction?Recorded with the

U.S. Customs service orother applicable anti-counterfeiting authorities?


•Asset PortfolioDomain name notes

What about RodeoPalms.com?Review whois records – show proper

title and control?Follow up on agreements/disputes (our

questionnaire perhaps did not ask for these as explicitly as it should have)


•AgreementsRODEO PALMS CASUALS

FR, IT, UK for “clothing”Licensed back to EuroFashion for

“Europe” and “all other countries bordering the Mediterranean”

RPF not to use the identical mark in licensed territory


•AgreementsIn-store-boutique “guidelines”

Restrictions on mini-store signage and layout may require changes to standard look and feel of the brand (word mark or Logo) and/or retail concept (trade dress)

LicensesShoes, leather goods, sunglasses,

perfume


•InfringementInbound matters

Only Cool Breeze Fashions? Did we phrase our request broadly enough?

Outbound mattersReview counterfeiting cases/strategyReview SMART TROPICAL files –

is the “wait and see” approach justified?


•InfringementContact RPF’s outside TM counsel

Copies of relevant filesIndependent investigation

Trademark searches in relevant jurisdictions: analysis & opinion

Case law and docket searches in relevant jurisdictions

Transactional Due DiligenceTransactional Due DiligencePrioritizing and FocusingPrioritizing and Focusing

•A potential filterHistory is on our sideRevenues first

Ensure that there will be a revenue stream, then worry about expenses

“80 - 20”Disregard brand risk affecting less than

20% of revenues


•Applying the filterFocus on key marks

RODEO PALMS and the RODEO PALMS FASHIONS Logo

Focus on key marketsUnited States

Focus on key questions...


•Key questionsCan Elegant acquire the rights?

RPF’s title to the marksEncumbrances on title

Could Elegant use the marks?Carry on the existing business

Could Elegant stop infringers?Protect market for closely related goods

Transactional Due DiligenceTransactional Due DiligenceUsing a ChecklistUsing a Checklist

•Positive functions of a checklistSets the research agenda

For the acquiror; some parts can be sent to the target

Aids memoryDigression is to be expected, getting

back on course is essentialEnables coordinated delegation

Transactional Due DiligenceTransactional Due DiligenceUsing a ChecklistUsing a Checklist

•Misuses of a checklistUsing it to conduct an interview

Use face time judiciouslyFailing to customize it

Every deal, every target, is differentFailing to follow up on the responses

It’s not about checking off boxes!Have a plan for dealing with revelations

Transactional Due DiligenceTransactional Due DiligenceReal World Problems: “Hard Targets”Real World Problems: “Hard Targets”

•Unable or unwilling to provide infoIgnorance due to turnoverFiles unavailable for acquired brandsActive resistance

•Unable or unwilling to sign offWon’t warrant ownershipUnable to bridge gaps in title due to

departures

Transactional Due DiligenceTransactional Due DiligenceReal World Problems: Mystery & Real World Problems: Mystery & SurpriseSurprise

•Expect the unexpectedAbandoned marksForgotten coexistence agreementsUnanswered demand letters

•Accept real-world limitationsLousy domain search toolsStart early and work fast, but expect

lots of delays

Transactional Due DiligenceTransactional Due DiligencePapering the DealPapering the Deal

•Insist on “Goldilocks” paperworkMerger agreement is too convoluted,

the bill of sale is too skimpy... avoid confusion and disclosure of deal terms

•What does seller need to provide?Sign short form(s) of assignmentAncillary authorizing documents,

particularly for foreign marks


•This can be a big deal...Different rules in most jurisdictions

Witnesses to the assignmentConsiderationSome require corporate seal

Power of attorney for sellerBusiness/corporate authority

certificates, etc.


•Get seller’s signatures at closing!Sellers may retire to a desert island“Further assurances”

don’t guarantee fast turnaround

•But — be practicalConsolidate formsMinimize notarization

TM & Unfair Comp — Up TM & Unfair Comp — Up NextNextTopics and Reading for Day 10Topics and Reading for Day 10

•Trade DressCh. 7, pp. 481-496, Supp. pp. 51-52Ch. 7, pp. 496-541, Supp. pp. 52-54Online

Kendall-JacksonTMEP Excerpts (optional)

law 227: trademarks & unfair competition loss of rights, due diligence june 27, 2009 jefferson...

Documents

party nontrademark use

customersloss of rights

general publicloss of

lanham actloss of rights

party use infringements

usage trademark owners

resumeassign mark

generic names