Posts Tagged ‘Trademark’

The Bratz Are Back

Thursday, July 29th, 2010

Did You Miss Me?

They suffered a legal whipping, but the Bratz are back with more attitude than ever.

A federal appeals court last week reversed a decision in Mattel v. MGA Entertainment handing ownership of the billion-dollar brand of high fashion, high attitude, multiethnic dolls to Mattel, home of archrival California beach blonde Barbie.

As reported earlier, after Mattel proved at trial that its former employee, Carter Bryant, came up with the concept, name, and preliminary sculpture and sketches for the Bratz while still employed by Mattel, Judge Stephen Larson dropped a legal bomb on the Bratz’ owner, MGA Entertainment, and ordered:

  • MGA to pay damages of $100 million for copyright and trademark infringement
  • MGA to transfer ownership of the Bratz dolls and their molds to Mattel
  • MGA to withdraw infringing product from store shelves
  • a receiver to monitor MGA’s finances and collect royalties pending full transfer of ownership to Mattel

However, the Ninth Circuit Court of Appeals put the transfer on hold pending its review of the decision, and last week reversed major parts of that decision, leaving Mattel with little choice but to retry major portions, and probably the entire, trial from scratch.

The appeals court first questioned Judge Larson’s determination that Bryant’s employment agreement with Mattel transferred all his “ideas” to Mattel, including the name “Bratz” and the name of one of the original dolls, “Jade.” That error by itself would compel a retrial, the panel ruled. But even assuming that the trial judge’s reading of the contract was correct, the appeals court ruled that Judge Larson’s transfer of the entire Bratz trademark portfolio, which included dozens of other doll names, was excessive and unfair, because MGA had created a multi-billion dollar brand by virtue of its own added development, marketing, and investment since 2000. Rather, only those specific trademarks devised by Bryant while a Mattel employee (presumably just “Bratz” and “Jade”) could be transferred to Mattel, assuming that Bryant’s contract actually vested ownership in Mattel.

The appeals court also questioned Judge Larson’s determination that almost all Bratz dolls infringed Mattel’s copyrights in Bryant’s preliminary sketches and sculpture of the Bratz dolls. Again, the appeals court ruled that the trial judge was too sweeping in his interpretation of Bryant’s employment agreement with Mattel. The judge had determined that the agreement transferred ownership of any “design” devised by Bryant during his employment with Mattel. But it was also possible to interpret that the agreement only transferred ownership of designs devised during Bryant’s working hours and/or within his normal working duties as a collectible Barbie fashion and hair stylist, not a doll designer, and the appeals court ordered Judge Larson to make that distinction at the retrial. The appeals court further ruled that even if the agreement had clearly transferred ownership of the preliminary sketches and sculpture from Bryant to Mattel, it was an error for Larson to then rule that virtually all Bratz dolls infringed Mattel’s copyrights. The main similarities between the preliminary sketches and most of the later Bratz dolls was a certain “bratty” attitude, and big-headed, pouty appearance, however, both attitude and general appearance are “ideas,” and ideas are not protectable by copyright. In the retrial, the jury would need to find similarities among specific physical details of faces, hairstyles, body features, clothing, etc. in order to support a finding of copyright infringement.

Takeaway: MGA gets the Bratz back, and has announced plans to relaunch the line in August, but it is a somewhat bittersweet victory. The question is whether there is much left of the brand after almost two years in legal limbo. In addition, there is a second, separate trial pending in which Mattel has accused MGA of racketeering and theft of trade secrets. Which gets back to our original point: when accepting contributions of intellectual property, especially from independent contractors and new employees, know who originally created it, and where it really came from, and back it up with documentation.

Update, 4/25/11: A California jury last week gave the Bratz something to pout about, big time. In 2008, Barbie maker Mattel not only put the Bratz out of business but also won $100 million in damages against MGA, but that was overturned on appeal (above). After a retrial, the jury found that on the contrary not only had MGA not infringed Mattel’s rights, but that Mattel had stolen MGA’s trade secrets, and awarded MGA $89 million in damages. In addition, the jury ruled that Mattel’s theft was willful and malicious, raising the possibility that the court could award punitive damages that would increase total damages to three times the initial verdict. In doing so, the jury implicitly rejected Mattel’s argument that all IP rights in the Bratz belonged to Mattel because Bratz designer Carter Bryant developed the names and images while still a Mattel employee, and subject to an employment agreement that transferred all his ideas and designs to Mattel. However, the jury’s precise rationale was not apparent from the jury verdict sheet. Despite incurring an estimated $400 million in legal expenses to date, a bloodied but not bowed Mattel has declared that it will make a motion for a retrial, and reserved its right to appeal. So take that!

Sports Licensing Corner: They Call Alabama The Crimson Tide (TM)

Thursday, July 22nd, 2010

"The Sack," by Daniel Moore

If an artist depicts a trademark in his work, is it art or trademark infringement?

In a case that has already been in litigation for five years, a federal trial judge has ruled in University of Alabama vs. New Life Art, Inc. that artist Daniel A. Moore infringed the University of Alabama’s trademarks when he sold paintings, posters, mugs, calendars, and other Bama sports memorabilia, but also ruled that the paintings and posters were nevertheless exempt as artistic expressions protected under the First Amendment.

Given the large amounts of money generated by college sports licensing, the case has struck a nerve– Alabama has filed an appeal to the federal Eleventh Circuit Court of Appeals, and 27 other universities have requested to file an amicus brief in support of the university.

Moore has estimated that his football art tallied sales “in the low millions,” during his 30 year career. From 1991 until 2000, Moore’s company New Life Art, Inc. had a license agreement under which it paid royalties to the University of Alabama, but then Moore insisted that the law did not require his paintings to be licensed, especially when his posters in most cases depicted no explicit trademark material.

Not so, replied the University of Alabama, arguing that all of Moore’s artwork at least portrayed Bama’s famous crimson and white “Crimson Tide” team colors, which the University argued is its trade dress –packaging that identifies University of Alabama sports products and services in the public mind– and that Moore’s depiction of it would likely mislead the consuming public into thinking his paintings were manufactured, sponsored, endorsed, or affiliated with the University.

Judge Robert Propst agreed that Bama’s team colors had attained trade dress status, and that there was some, albeit small, likelihood that the public would be confused as to the University’s creation or sponsorship of Moore’s art.

However, he ruled that at least as regards his large scale paintings and posters, Moore’s work had “high artistic skill” and expressive content; his use of the Bama colors had artistic relevance to his work, and did not intentionally mislead the public as to the University’s sponsorship or affiliation with it; therefore it was protected by the First Amendment, which superseded the University’s trademark infringement claims made under the Lanham Act.

The mugs, calendars, and other souvenir paraphernalia did not contain significant artistic content and therefore were held to be infringing.

As support, the judge quoted at length from another famous sports art case, ETW Corp. vs. Jireh Publishing, Inc., in which the Sixth Circuit Court Of Appeals held that an artist’s limited edition poster portraying Tiger Woods’ historic first Masters golf tournament championship was not an infringement of Woods’ trademarks in his name and images, because some of Woods’ claimed trademarks were not actually trademarks at all, while the use of other trademarks was either de minimus or protected by the artist’s exercise of his First Amendment rights.

Even if Moore ultimately prevails, it is unlikely that there will be a huge economic impact on university sports licensing. Both Moore’s paintings and the Tiger Woods posters were not mass-market items, but more of the “limited edition/collectors item” variety, with high artistic skill and a relatively high price tag. However, Bama and other big sports universities are playing to win.

Entertainment Licensing Corner: Darth Laser

Thursday, July 8th, 2010

Don't call this bad boy a "lightsaber": Wicked Lasers' Spyder III

It is one of those fun stories that gets widely published by the mass media and the tech-oriented blogosphere: the maker of the Star Wars movies threatening to sue the maker of “the world’s most powerful portable laser” because of its supposed resemblance to a Star Wars lightsaber. (For officially licensed Star Wars candy lightsabers, see here. For non-Star Wars candy Lifesavers, see here.)

But not only Star Wars geeks, but also we IP geeks like this kind of story because: 1) Lucasfilm, Ltd. is one of the most successful licensors of all time, earning an estimated $24 billion in revenues from Star Wars licensed merchandise; and 2) there are lots of neat IP angles to the story.

So is Lucasfilm the righteous Luke Skywalker here, just trying to protect what belongs to it, or an evil Darth Vader, trying to intimidate a brave entrepreneur with its legal storm troopers?

First, some background. Hong Kong-based Wicked Lasers recently began selling its $197.97 Pro Arctic Spyder III laser, which it describes as “the most dangerous laser ever created.” With a tubular white grip, it inevitably prompted excited coverage in the blogosphere as, “your own personal lightsaber.” But nowhere on Wicked Lasers’ website or advertising are either Star Wars or lightsabers mentioned.

That was quickly followed by both a Lucasfilm press release and a Lucasfilm attorney cease-and-desist letter to Wicked Lasers, demanding that they stop selling, “a highly dangerous product… that is designed to look like a lightsaber from Star Wars.”

Unfortunately, only portions of Lucasfilm’s cease-and-desist letter were published, so it is impossible to say precisely what legal claims Lucasfilm is making against the Spyder III. But that won’t stop us from speculating:

1) Trademark infringement, for giving the impression that the Spyder III is an official Star Wars lightsaber endorsed by or affiliated with Lucasfilm. The problem with that claim is that all of the lightsaber comparisons are being made by third parties. As mentioned above, Wicked Lasers nowhere mentions Star Wars or light sabers in connection with the Spyder III.

2) Trade dress infringement. Trade dress is elements of product packaging or promotion that the public perceives as a product identifier– think of the appearance of the striated, green glass Coca-Cola bottle or the contour of a Corvette Stingray. The problem with that claim is it is difficult to argue that the handle of the lightsaber is actually part of its packaging, and not a functional part of the product itself. In fact, in Kellogg Co. vs. National Biscuit Co., the US Supreme Court ruled that the pillow shape of shredded wheat cereal was functionally dictated by cost and quality considerations, and therefore, not eligible for trade dress protection.

3) Copyright infringement. Lucasfilm has registered the handle of various lightsaber models as a form of “sculpture” with the US Copyright Office. So if another sculpture were substantially similar to the Star Wars lightsaber handle, it could be copyright infringement. The problem with that claim is that Wicked Lasers could reply that the handle of its laser is not an ornamental “sculpture,” but a functional, utilitarian device not subject to copyright. In fact, a British seller of Star Wars stormtrooper armor prevailed against Lucasfilm in an English court with a similar defense under UK law (below).

So Lucasfilm does not have a slam dunk case here.

But Star Wars is one of the world’s most lucrative licensing franchises, and Lucasfilm has aggressively defended its franchise with legal action.

In 2006, Lucasfilm sued Maryland-based High-Tech Magic for selling light sabers, and obtained a $250,000 settlement. High-Tech Magic had prominently advertised its lightsaber as, “a Star Wars Lightsaber that looks as good as those in the movies.”

Lucasfilm was not so fortunate when it sued the original designer of the Star Wars glossy white storm trooper armor helmets, who had begun selling helmets and body armor from his own website. Lucasfilm won a $20 million default judgment for copyright and trademark infringement against industrial designer Andrew Ainsworth in a Northern California court, but when it attempted to enforce the judgment in the UK, an appellate court ruled in December, 2009 that there was no copyright infringement because the storm trooper armor was not an ornamental, expressive work of art, but rather intended to be a functional, utilitarian object, and therefore not copyrightable as a sculpture. (This ruling surely pleased Star Wars fans, for whom this stuff is REAL.) Under UK law, Ainsworth is eligible to request that Lucasfilm pay his £2.5 million in attorneys fees.

Update, 8/5/10: Wookies of the universe, rejoice! Peace reigns once again in the Star Wars Empire, as Lucasfilm General Counsel David J. Anderman has sent a letter to Wicked Lasers CEO Steve Liu, offering to withdraw his prior cease and desist demand if Wicked posts a disclaimer on all web pages or advertisements related to the Spyder III: “THIS PRODUCT IS NEITHER LICENSED NOR ENDORSED BY LUCASFILM LTD.” Meanwhile, CEO Liu claims that sales of the Spyder III have tripled as a result of the publicity.

Fashion Licensing Corner: Legal Protection for Fashion Designs

Tuesday, June 15th, 2010

Fashion Pirate

This is truly the age of Fast Fashion.

Within days of an innovative new design appearing on a fashion runway in a global metropolis, that design is tweaked, manufactured in China, and loaded on the racks of Forever 21, H&M, Uniqlo, and other fast fashion retailers for under $50 in suburban malls around the world.

Can designers do anything to stop knockoffs? Under existing US intellectual property law, not much, but that could change.

Below is a thumbnail guide to US and European law protecting fashion designs.

The two most relevant forms of intellectual property protection for fashion designers are copyright and trademark law.

Current US Copyright Law

US copyright law protects “original expressions,” such as text or graphics, but not functional elements. Fashion accessories such as belt buckles or jewelry are considered decorative non-functional items that are eligible for copyright protection, while the shape and silhouette of apparel are considered to be “utilitarian” and therefore not eligible for copyright protection. Accordingly, copyright normally protects only the completely decorative elements of apparel, such as graphic images or patterns (including stitching) on fabric. Even then it is often easy to design around any potential copyright infringement claim. The standard of copyright infringement is substantial similarity between the original and the knockoff, specifically whether the knockoff has the same aesthetic appeal as the original to an ordinary observer. But if the knockoff has a distinguishable variation from the original, and is not merely a slavish copy, it will not infringe the original.

Proposed Amendment to US Copyright Law

The above state of affairs would change under the proposed Design Piracy Prohibition Act (HR Bill No. 2196), which would grant copyright protection for a term of three years to most varieties of apparel, handbag, and eyeglass frame designs (defined to include “the appearance as a whole” of an article of apparel) registered with the Register of Copyrights, and impose liability on designs that copy them, except if the accused design: 1) is original and not closely and substantially similar in overall visual appearance to a protected design; 2) merely reflects a trend; or 3) is the result of independent creation. The penalty for copying would be the greater of $250,000 in the aggregate or $5 per copy, and secondary liability could be imposed on parties that benefit from the infringements, including sellers and distributors.

The arguments for and against the bill echo the usual open source versus closed source IP arguments. Supporters of the bill, including many high-end fashion designers, argue that the ability of designers to profit from their designs is the greatest driver of fashion innovation, while opponents argue that the free exchange of ideas has always been the greatest driver of fashion innovation, and in any case, it is unlikely that a purchaser of a $100 Diane von Furstenberg knockoff would pay 10 times that amount for an original if the bill were enacted.

The debate may be moot. Similar bills have been introduced in the previous two sessions of Congress without passage, and no companion bill to HR 2196 has been introduced in the Senate during this session of Congress, so it has slight prospect for enactment in the near future. Update, 8/11/10: Senator Charles Schumer has introduced a fashion design copyright bill in the Senate (Senate Bill No. 3728), that he hopes to have enacted during the current session of Congress.

European Copyright Law

The European Community has already enacted an even higher level of IP protection for designers under the Community Design System than that proposed by the Design Piracy Prohibition Act. The Community Design System gives exclusive rights to the creator of a design (including but not limited to fashion designs) for three years in the case of unregistered designs and five years in the case of registered designs (renewable every five years to a maximum of 25 years). Some individual EC countries such as France have even more stringent laws. However, while they may disagree about the reasons, many analysts agree that the Community Design System has done little to deter knockoffs. In fact, three of the world’s biggest “fast fashion” retailers — H&M, Topshop, and Zara — are all headquartered in Europe.

US Trademark Law

While the purpose of copyright law is to protect original creations, the purpose of trademark law is to prevent consumer confusion as to the source or quality of goods and services. Thus, trademark law primarily protects the integrity of a designer’s name. Trademark law can also protect a design element of apparel, but not a single season design innovation, rather a design element that has become associated with a particular designer over time such that it is the designer’s “trademark.” Think for example of the Burberry beige, black, and red tartan pattern, or the Louis Vuitton gold “LV” initials and geometric shapes against a dark brown background. But in the case of Wal-Mart Stores v. Samarra Bros. Inc., the US Supreme Court ruled that there is a higher evidentiary hurdle to establish trademark protection for an apparel design element compared to a word or a packaging design trademarks. Conversely, it is comparatively easy to secure trademark protection for the words or logo on a fashion label. Which explains why many famous fashion designers often use their “label” as a prominent design feature of their fashions. They are fully aware that copyright law is unlikely to prevent knockoffs of the cut or silhouette of their designs, but that trademark law is likely to punish pirates of their names. The standard of trademark infringement is whether the challenged trademark (label, packaging, design element) is likely to confuse consumers that the product or service was produced by or originated with the owner of the accusing trademark.

Takeaway: unless copyright law changes, it will be difficult for fashion designers to knock out knockoffs, but trademark law gives them plenty of ammunition to sink label pirates.

License Drafting Rule No. 1: Don’t Say 専用使用権 Unless You Mean It

Thursday, June 3rd, 2010

Just like Alberto-Culver, we don't know what 専用使用権 means, but our hair looks great!

日本語訳はこちらへ>>>

We have said it before, because it is true. Seemingly small differences in contract wording lead to major differences in real-world consequences.

This rule especially applies when the contractual wording is in a foreign language, as Alberto-Culver, the makers of Alberto VO5 hair care products, discovered when they lost an appeal of a breach of trademark license case which turned on a Japanese legal phrase that Alberto-Culver did not completely understand and was not otherwise defined at the time of drafting the license agreement.

With licensing increasingly utilized as a tool of expansion into international markets, the case is a good lesson in what NOT to do.

In 1980, for lump-sum royalty payments of $10 million, Alberto-Culver gave Sunstar a 99 year exclusive license to manufacture and sell hair care products in Japan under the VO5 trademarks, after which Sunstar would own the registrations. The license agreement had appendices showing which VO5 logos and marks Sunstar could use. The agreement said that Sunstar’s license would have the status of a “senyoushiyouken” (専用使用権), which translates literally from Japanese as “exclusive use right.” But the license did not include an English definition of “senyoushiyouken.” Under the Japanese Trademark Act, the “senyoushiyouken” is exclusive even against the trademark owner, and the holder has other rights nearly equal to the owner, including the right to sue infringers in its own name.

Sunstar clashed repeatedly with Alberto-Culver over its ability to modernize the VO5 logos for the Japanese market. Against Alberto-Culver’s wishes, Sunstar went ahead with updated logos once in 1989, which led to a negotiated settlement with payment of an additional $10 million by Sunstar. When it happened a second time 10 years later, Sunstar refused to negotiate, arguing that under Japanese law, a licensee with “senyoushiyouken” status is legally entitled to use a registered trademark with minor format changes. For example, Article 50.1 of the Japanese Trademark Act, which deals with rescission of unused registered trademarks, recognizes that holders of “senyoushiyouken” are authorized to use:

“登録商標(書体のみに変更を加えた同一の文字からなる商標、平仮名、片仮名及びローマ字の文字の表示を相互に変更するものであって同一の称呼及び観念を生ずる商標、外観において同視される図形からなる商標その他の当該登録商標と社会通念上同一と認められる商標を含む…)。”

“…a registered trademark (including a trademark deemed identical from common sense perspective with the registered trademark, including a trademark consisting of characters identical with the registered trademark but in different fonts, a trademark that is written in different characters, hiragana characters, katakana characters, or Latin alphabetic characters, from the registered trademark but identical with the registered trademark in terms of pronunciation and concept, and a trademark consisting of figures that are considered identical in terms of appearance as those of the registered trademark…).”

This set up an interesting legal hall of mirrors for the lawsuit. Alberto-Culver argued that the only reason that the word “senyoushiyouken” was used in the contract was that in 1980 the negotiating parties wanted to give Sunstar language it could use to register the license with the Japanese trademark office. (Many foreign governments require trademark licenses to be registered to be effective.) Since the agreement provided that it was to be interpreted under Illinois law, the Japanese meaning of “senyoushiyouken” and any rights granted by it were irrelevant, said Alberto-Culver. Rather, the agreement should be interpreted as an exclusive license under Illinois law, which would require the licensee to attain prior consent to even minor format changes per explicit provisions in the license agreement.

Alberto-Culver won at trial, but that decision was forcefully overturned on appeal by the Seventh Circuit Court of Appeals in Sunstar, Inc. v. Alberto-Culver Co. (decision available here by entering case number 07-3288), where Judge Richard Posner wrote that when sophisticated parties use technical terms in a contract, they must be presumed to use and understand them in the technical sense. In so doing, the court followed a common rule of contract interpretation that whenever possible, courts should interpret contracts as a reasonable third party would by looking only at the words within the four corners of the contract, and without researching the history of the negotiations or other extrinsic evidence of the parties’ subjective intent. In other words, Alberto-Culver would be presumed to understand and consent to the meaning of any Japanese legal terms included in the license agreement, and therefore Sunstar was not in breach for using modernized VO5 marks.

Takeaway: in any license or other agreement regarding the disposition of valuable intellectual property rights, avoid vague letter agreements or memorandums of understanding, especially those that contain undefined technical words and other shorthand terminology. The contract should include a definitions section with detailed definitions for any technical terminology or terms of art. It will take a little bit longer to negotiate the contract, but 注意一秒、けが一生. [Translation: “An ounce of prevention is worth a pound of cure.”]

Sunstar VO5 commercials featuring 1989 version of updated logo, with song advising, “Don’t cry about split ends,” because the conditioner’s UHM Silicon will fix them.

(more…)

The Uncertain Law of Dead Celebrity Goods, Sexy Einstein Edition

Thursday, May 27th, 2010

E = mc squared, baby

Thank you, Albert Einstein, for making our point.

Great minds think alike.

Unknown to The Licensing Law Blog, one day before we posted “The Uncertain Law of Dead Celebrity Goods,” representatives of the estate of Albert Einstein sued General Motors Company for an advertisement featuring the head of the Father of Relativity Theory photoshopped onto the ripped, tattooed naked torso of an underwear model, with the caption, “IDEAS ARE SEXY TOO.”

The ad ran in the November 30, 2009 “Sexiest Man Alive” issue of People Magazine to promote the GMC Terrain SUV, explaining, “THAT’S WHY WE GAVE IT MORE IDEAS PER SQUARE INCH.”

GMC was sued in federal court in Los Angeles by The Hebrew University of Jerusalem (HUJ), which was the beneficiary of all of Einstein’s intellectual property rights in his will, for trademark infringement and misappropriation of Einstein’s rights of publicity. (HUJ also claimed a subsidiary cause of action for unfair competition.) Einstein is the fourth highest grossing deceased celebrity property, earning about $18 million annually, according to Forbes magazine.

What makes this case interesting from a legal point of view is the rights of publicity issue as applied to dead celebrities. HUJ sued GMC under both New Jersey common law rights of publicity and California common law and statutory law rights of publicity.

New Jersey case law is clear that rights of publicity are property, and survive the death of the owner, as mentioned in the previous blog post. What is not clear is how long after death the rights survive. Einstein died in 1955 in Princeton, New Jersey. Did his rights of publicity survive 55 years after his death? The judge in the 1981 case Estate of Presley v. Russen said he had no idea what the survival period was without further guidance from the New Jersey State Legislature (which has not addressed the issue to date), although he suggested in a footnote that a good reference point might be postmortem survival periods under copyright law, which would be at least 70 years after death.

Also, there is the question whether California or New Jersey law controls. Usually (but not always) choice of law principles dictate that the law in rights of publicity cases is controlled by the state of the celebrity’s domicile at the time of death. But after cases involving Marilyn Monroe’s postmortem rights of publicity, in which courts in both New York and Los Angeles ruled in 2007 that the law of New York (Marilyn’s domicile) not California (Marilyn’s place of death) applied, California revised its rights of publicity law in an attempt to preserve postmortem rights of publicity for “personalities” regardless of date or domicile at death. In the unlikely event that this case ever reaches the decision stage, it will be interesting to see whether the court applies New Jersey or California law on rights of publicity.

By the way, no one will accuse GM of being Einsteins in the licensing field. A GM spokesperson said she believed GM had paid a “reputable organization” for rights to run the Einstein ad, but our guess is that they only paid for a copyright license for the Einstein photo, and not for rights of publicity or trademark licenses. In 2005, New England Patriots quarterback Tom Brady also sued GM for using his image in an advertisement without a license.

P.S. In case you are wondering about the impact of GM’s bankruptcy on the Einstein lawsuit, there is none. GM filed for Chapter 11 bankruptcy on June 1, 2009, and sold its assets to a new entity on July 10, 2009, which then took the General Motors Company name, and left the “old GM” to settle its debts with the proceeds it received from selling its assets to the “new GM.” So the entity that published the ad at issue on November 30, 2009 was never involved in bankruptcy, therefore the HUJ lawsuit will in no way be restricted or impeded by bankruptcy law.

‘Scuse Me While I Sue This Guy: The Uncertain Law of Dead Celebrity Goods

Thursday, May 20th, 2010

Jimi sez: "Businessmen they drink my...vodka?!?"

What do Jimi Hendrix, Elvis Presley, Marilyn Monroe, and Princess Diana all have in common?

If you guessed that all of them are dead celebrities, you are only half right.

More importantly, all of them were subjects of messy postmortem lawsuits against sellers of celebrity-branded goods.

Because of great variations in the laws, as well as “favorite son/daughter” influence on local courts, using the name or image of a dead celebrity to sell products without a license is risky business.

Doing so may put a businessperson in violation of two categories of legal rights, rights of publicity laws and trademark laws.

The more direct threat is the law of rights of publicity. Generally speaking, rights of publicity laws prohibit the commercial use of the name (and usually image and signature) of another person without his permission. But that is about all one can say with certainty — the laws are state-based, not federal, and beyond the basics, there are great variations in the laws of the states that recognize rights of publicity. In fact, it is not even certain how many states do recognize rights of publicity, with estimates ranging from the mid-20’s to close to 50.

One of the biggest variables among state laws is whether the right of publicity survives the celebrity’s death, and if so, for how long. States that characterize the right of publicity as a personal right naturally conclude that it is extinguished on the person’s death. New York is one such state. States that characterize the right of publicity as a property right, like New Jersey, naturally conclude that it survives the person’s death, and is descendible to her survivors.

That seems simple enough. So where is the problem?

1) Which state law decides the survivability of a dead celebrity’s right of publicity, a personal right state or a property right state? The estate of Marilyn Monroe has claimed for years that property right based rights of publicity laws in both California and Indiana gave them the right to charge royalties to would be users of Marilyn’s name or image, but they were dealt a severe surprise in 2007 when judges in both Los Angeles and New York ruled that since Marilyn was a New York domiciliary at the time of her death in California in 1962, then New York’s personal right based law controlled, and her right of publicity did not survive her death. Similarly, a Washington court ruled that the heirs of Jimi Hendrix did not inherit his rights of publicity, because Jimi was a New York domiciliary at the time of his death in England in 1970. A broad rule of thumb is that survivability is decided by the state of the celebrity’s domicile (generally the state of legal residence) at the time of the celebrity’s death. But there are many exceptions to this rule, making it risky for a celebrity-oriented business to try to guess without legal assistance. Big band singer Louis Prima died in 1978 after two years in a nursing home in Louisiana, which is a personal rights state, but nevertheless, a New Jersey federal court held that the issue of the survivability of his right of publicity was controlled by the law of New Jersey, where Prima had never lived, and allowed his widow to sue the Olive Garden restaurant chain and its advertisers for use of a Prima sound-alike singer in a television commercial.

2) Even in a property right state, it is not always clear how long after death the right survives. In a case decided four years after Elvis Presley’s 1977 death, a New Jersey court ruled that the state’s case law supported a property right based right of publicity, and ruled that a local Elvis impersonator had misappropriated the King’s right of publicity. However, the court admitted that it had no idea how long the right survived Elvis, and that the state legislature would need to clarify the issue. (It has not to date.)

In addition to rights of publicity law, trademark law may also require a seller of celebrity paraphernalia to take a license from a dead celebrity’s representatives. Here, the issue is usually not survivability after death (because trademark rights normally do survive death), but whether the celebrity’s name has in fact become a trademark — an identifier of the source or origin of goods or services — and if so, for which specific categories of goods or services.

A company called Electric Hendrix LLC (“EH”) decided that it could sell Jimi-Hendrix-branded vodka without a license from Hendrix’s estate, because courts had already decided that Jimi’s rights of publicity did not survive his death (above), and his estate had not filed trademark registrations in any category remotely related to alcoholic beverages, and in fact had vowed it would never license alcohol-related products, so there was no likelihood of consumer confusion as to the source of the vodka, or so EH thought. Nevertheless, a Washington court found that EH was liable for trademark infringement, after performing an eight factor infringement analysis, emphasizing that: (a) consumers would be likely to assume that any Hendrix-branded products came from or were authorized by the Hendrix estate; and (b) evidence of the intent of EH to free-ride on Jimi’s fame was overwhelming. The court ordered the defendants to halt all sales of EH vodka, and to remove all product from store shelves. It is possible that Jimi’s celebrity status in his hometown of Seattle was a factor in the decision.

Startup Corner: Tips To Protect Your IP

Sunday, April 25th, 2010

Intellectual property and other intangible assets constitute 80% of the market capitalization of S&P 500 companies. Nowadays, it is as critical for companies to properly maintain their patents, copyrights, trademarks, and trade secrets as it is to maintain their plant and equipment.

Below is a quick checklist of eight items your company should follow to protect and preserve its IP.

1. Implement Intellectual Property Ownership Agreements

For most forms of intellectual property, the default rule is that whoever created it, owns it, so have all employees sign employment agreements and independent contractors sign service or consulting agreements that stipulate all intellectual property they create while working for your company is either a work made for hire, or if not, that the creator automatically assigns ownership of its IP to you as of the time of its creation. For similar reasons, on joint projects that could result in patentable inventions, have co-researchers sign agreements assigning ownership of all IP to your company, or if that is not possible, specifying the terms of co-ownership of any patents. Having these agreements in place will save you from a claim that someone else owns valuable IP that you paid for.

2. Put All Licenses and Assignments in Writing

You should not allow other parties to use your inventions, creative content, software, logos, confidential information, etc., nor should you use theirs, without a license agreement in place. If there is a dispute, then at best it would be hard to prove who was allowed to do what for how much money, and at worst, you may lose ownership of your IP in part or in whole. Furthermore, where ownership in patents, copyrights, or trademarks are transferred (an assignment), then often a signed writing is required to make it legally binding.

3. Preserve Confidentiality of Trade Secrets

Trade secrets are valuable commercial information or formulas that maintain their protected status only so long as their owner takes reasonable measures to preserve their confidentiality. Therefore, companies should implement policies that require employees to preserve confidentiality of confidential information, and follow good housekeeping procedures, including: placing “confidential” or “proprietary” stamps on documents; requiring employees to sign nondisclosure agreements; requiring password protection for all computer-stored trade secrets; restricting physical access to areas containing trade secret information and implementing sign-out log procedures; and conducting exit interviews with departing employees. And before release of any valuable confidential information to an outside party, require the recipient to sign a nondisclosure agreement that requires the recipient: 1) to take at least reasonable steps to maintain confidentiality of the information; and 2) to only utilize it for the purposes allowed in the agreement.

4. Register Important Copyrights

Original, creative works such as text, images, music, websites, and software come under copyright as soon as they are fixed in a tangible medium, but in order to get meaningful enforcement capability against infringement, registration with the US Copyright Office is advisable.

5. Register Important Trademarks

Words, logos, or jingles that identify your company’s goods and services often qualify as trademarks. Some degree of protection exists even without registration, under the doctrine of common law trademark. But as with copyrights, in order to receive the maximum degree of protection, registration with the US Patent and Trademark Office is advisable. Furthermore, purchase all domain names that your company is likely to use in the future, including common variations.

6. Challenge Infringing Uses of Your IP

Perform periodic Google and eBay searches to make sure that others are not misappropriating or abusing your company’s copyrights or trademarks. If evidence of infringement is found, consult with your attorney about the advisability of a cease and desist letter or even a lawsuit. Especially in the case of trademarks, ignorance is not bliss — it can lead to forfeit of your IP.

7. Use Copyright and Trademark Notices

Use standard copyright notices, such as “© 2010 Your Company, Inc. All Rights Reserved,” for text, graphics, music, software, websites, and other original creative content, and standard trademark notices, such as “® Your Company, Inc.” or “®” (for registered trademarks) or “™ Your Company, Inc.” or “™” (for common law trademarks) next to words or logos that identify your goods or services. Better yet, have your attorney work with your marketing people to draft comprehensive guidelines for proper use of copyright and trademark notices for all products, product packaging, and company communications. This shows the outside world that you are knowledgeable and vigilant about your intellectual property rights, and also eliminates an “innocent infringement” defense in enforcement litigation. Or as Ali G says when pitching his idea for an ice cream glove to a venture capitalist, “That’s a ©, which means you can’t nick it.”

8. Post Effective Rules for Your Website

Website Terms of Service and Privacy Policies are important means of limiting your company’s legal risk and earning your customers’ trust. Although technically not IP protection devices, they are critical legal safeguards, especially for companies that engage in e-commerce.

Why IP Assignment Agreements Matter, Part 2

Tuesday, January 5th, 2010

Beat on the Bratz, Beat on the Bratz...

A cautionary tale for start-ups, or any company that deals in intellectual property, is offered up by the Barbie versus Bratz tussle, otherwise known as Mattel v. MGA Entertainment in federal District Court in Riverside, California.

If you have a pre-teen daughter, you can skip this paragraph, because you already know that Bratz are the pouty-lipped, multi-ethnic, high attitude, high fashion rivals to Mattel’s perennial favorite leggy California beach blonde. Sales of the Bratz line have have topped $3.1 billion since their 2001 launch, and have also spawned several movies, a television series, video games, and even a line of diamond jewelry.

The crux of the case was Mattel’s allegation that Bratz designer Carter Bryant came up with the idea, name, and many of the original Bratz sketches while he was still employed as a Barbie designer at Mattel. Mattel claimed that (like most companies that create intellectual property) it requires employees to sign agreements assigning all their rights to any IP created during their employment to Mattel, that Bryant had signed such an agreement, and that Bryant had created Bratz while under Mattel’s employment.

Unfortunately for MGA, Mattel proved its allegations, which meant that not only did MGA lose the case, it lost its entire multi-billion dollar product line! Trial judge Stephen Larson entered orders which among other things:

  • transferred ownership of the Bratz dolls and their molds to Mattel
  • required MGA to withdraw infringing product from retail shelves
  • appointed a receiver to monitor MGA’s finances and collect royalties from sales of Bratz products pending full transfer of ownership to Mattel

In short, a devastating turn of events for the once flush MGA. Now the Bratz dolls really have something to pout about. They got a legal b*-slapping from Barbie.

The transfer of ownership was supposed to occur this month, but an eleventh hour ruling from the the federal Ninth Circuit Court of Appeals put a hold on the transfer until it completes a full review of the trial court’s orders.

Takeaway: when accepting contributions of intellectual property, especially from independent contractors and new employees, know who originally created it and where it really came from, and back it up with documentation.

Entertainment Licensing Corner: Licensing and the Music Business

Monday, January 4th, 2010

Chili #1: "We shoulda licensed..." Chili #2: "Now you tell me?!"

The music business has been hard hit.

Total revenue for US music sales in all formats has decreased from a high of $14.6 billion in 1999 to $10.4 billion in 2008 to a forecasted $9.2 billion in 2013.

The most profitable part of the music industry is no longer the sale of music, but what were once considered ancillary parts of it—concerts and music publishing.

But the music industry has largely overlooked another important revenue-generating tool—licensing.  Not just licensing the band name, which is common, but for smart bands, licensing album and song names as well.

The extent to which this is not done is shocking.  UK law firm Pinsent Masons has found that none of the album titles in Rolling Stone’s Top 10 Greatest Albums of All Time have been registered as trademarks in either the US or the UK by the artists or their record companies.

But there are registrations galore from third parties capitalizing on famous album and song names, from the silly (“Sgt. Peppers Only Hot Dog Stand”) to the enormously lucrative (“Ruby Tuesdays”).

To explain how and why this matters, a little brush-up on IP law is in order.

Trademarks are symbols that communicate the source and quality of goods and services.  So in the usual case, a band’s name and associated logo serve as a trademark for its music and live performances.  It is highly advisable for the band to formally protect its trademark with a trademark registration, but some degree of legal protection exists even without a registration via the doctrine of common law trademark.

So far, so good.  So what’s the problem?

1) Even a registered trademark on a band name won’t prevent someone else from using the same mark for goods other than music or for services other than live performances, because you only get trademark rights for the goods or services that you sell or license.

2) Even a registered trademark on a band name won’t protect others from using album or song names that have enormous public recognition and good will, because you only get trademark rights in symbols that represent source indicators for goods or services that you sell or license.

Are you beginning to notice a trend here?

The Red Hot Chili Peppers learned both lessons the hard way when Showtime broadcast the popular series “Californication,” which also happened to be the name of the Chilis’ most popular album, but the show didn’t take a license from the band.  (The series also contained several other references to Chilis’ song titles and lyrics to remove any doubt that they were drawing on the album’s name for the series name.)  The Chilis sued Showtime for trademark infringement in November, 2007, but the network replied that there was no infringement because (among other reasons) Californication the show was a different category of product than the musical recordings on Californication the album, and that the Chilis had never used Californication in a trademark sense, to indicate the source and quality of goods or services.  At this writing, the case is still pending, but most experts don’t give the Chilis good odds of winning the whole enchilada, errr, winning anything more than a token settlement.

What the Chilis and other bands should do is a bit of brand extension.  First, license not only the band name, but also popular album and song names to manufacturers in fields like apparel, eyewear, jewelry, leather goods, and food products, who will pay the band for the right.  Second, follow up by applying for trademark registrations covering these categories.  (Or this could be the first step if the band files an intent to use application.)  Third, if the band skipped the first two steps, and someone has started cashing in on its band’s album or song names, then it should file a trademark registration application before the interloper.  The Chilis didn’t, but the Sex Pistols did when an ice cream company started marketing “God Save the Cream,” a conscious play on the Pistols’ notorious song, “God Save the Queen” (“God save the Queen/ She ain’t no human bein’.”)

Takeaway: with the music industry hurting and bands starving, licensing is a smart strategy.