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Developments in Intellectual Property Law

Supreme Court to Address Effect of Bankruptcy on Trademark Licenses

By David A. Jones
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The Supreme Court recently agreed to hear a case that bears monitoring, particularly if licensing the trademarks of another brand owner is a significant aspect of your business. The case is Mission Product Holdings, Inc. v. Tempnology, LLC, and the primary issue to be decided is whether or not a brand owner that files for bankruptcy can revoke the rights of its licensee to use a trademark.

By taking this case on, the Supreme Court is expected to settle a split amongst the circuit courts in how they interpret a certain provision of the Bankruptcy Code that permits a debtor to decline to perform future obligations under a contract if the cost of performance outweighs the benefit. A revision was made to this section of the bankruptcy laws in the mid-1980s specifically permitting a licensee to keep its rights to “intellectual property” in the event a debtor/licensor elected to reject a license agreement.  However, the Bankruptcy code does not specifically name trademarks within the statutory definition of “intellectual property,” although other types of intellectual property, such as patents and copyrights, are included.

As a result, circuit courts have been left to their own devices to determine what the absence of trademarks from the definition of “intellectual property” means, and whether a trademark licensee’s rights are protected or not. On one side are circuits such as the Seventh Circuit, which ruled that the rejection of a trademark license did not strip the licensee of its rights to use the mark.  In a 2012 ruling (Sunbeam Products, Inc. v. Chicago Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)), the Seventh Circuit Court ruled that rejection was merely a breach of the rejected contract, and that in cases of breach of contract, the “other party’s rights remain in place.” That is, the licensee could continue to use the bankrupt party’s trademarks.  Conversely, in the Mission Products case, the First Circuit took the opposite approach, holding that when Tempnology rejected its contract with Mission Products, Mission Products lost all rights granted to it under the agreement that were not expressly protected under the Bankruptcy code – which included trademark rights.

This is clearly an important question, and on the circuit split highlights a potential concern that licensees may lose the right to use the licensor’s trademarks when the licensor is in bankruptcy. Depending upon how the Supreme Court rules, it may continue to be a possibility that a company that contracts to use someone else’s trademarks could have the rug pulled from beneath them if that company files for bankruptcy.

Does “I agree” really mean “I agree”?

Considerations for user consent to website terms and conditions

By Patrick Monahan
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Companies designing or redesigning their websites may face uncertainty about the manner in which their terms & conditions should be presented to be considered enforceable in the event a user violates them. A recent decision in the United States District Court for the Eastern District of New York, applying a recently-established test for enforceability, may prove instructive in this regard.

 

In Adwar Casting Co., Ltd. v. Star Gems Inc. et al, 2018 WL 5084826 (E.D.N.Y. October 18, 2018), Civil Action No. 2:17-cv-06278-DRH-SIL, the Plaintiff (“Adwar”) accused Defendant Star Gems Inc. and its CEO Anish Desai (collectively, “Defendants”) of infringing Adwar’s copyrighted jewelry designs, images of which were posted to Adwar’s website. Defendants moved to dismiss the complaint, claiming the Court lacked personal jurisdiction over Defendants. One of the issues the court considered in deciding the motion was whether Defendants had consented to jurisdiction in New York federal court by acceptance of the terms and conditions on Adwar’s website, which were accessible using links located at the bottom of each page, purported to confer “exclusive jurisdiction of federal and/or state court located in New York to enforce this Agreement or for any other purpose in connection with this website.” Adwar at *6.

The Court reviewed the categories of electronic adhesion contracts examined by the courts and the four-part enforceability test detailed in a prior decision in the same district, Berkson v. Gogo LLC, 97 F.Supp.3d 359 (E.D.N.Y. 2015).

Types of Electronic Adhesion Contracts

  • 1. Browsewrap

Browsewrap refers to situations in which the website contains a notice that the user agrees to the site’s terms and conditions just by using the site, without any affirmative consent. Berkson at 395. These types of agreements are typically only enforced against “knowledgeable accessors”, such as corporations, and not against individuals. Id. at 396.

  • 2. Clickwrap

Clickwrap agreements “require a user to affirmatively click a box on the website acknowledging awareness of and agreement to the terms of service before he or she is allowed to proceed with further utilization of the website.” Berkson at 397 (internal citations omitted). Clickwrap agreements have generally been found enforceable when challenged. Id.

  • 3. Scrollwrap

Scrollwrap agreements are similar to clickwrap agreements in that they require the user to affirmatively acknowledge and agree to the terms and conditions of the site before permitting further use, but they go further in that they require the user to physically scroll through those terms and conditions before they are permitted to click the button or checkbox indicating agreement. Berkson at 398-99. These agreements have also traditionally been enforced.

  • 4. Sign-in Wrap

Sign-in wrap agreements notify the user of a site of the existence and applicability of that site’s terms of use as they proceed through the site’s sign-in or login process. Berkson at 399. These agreements have typically been enforced when a court determines the user had sufficient notice and access to the terms of use. Id. at 401-02.

Enforceability of Electronic Adhesion Contracts

If your company is considering how users should be required to accept your terms and conditions, the following questions should be considered:

    • – Aside from clicking the equivalent of sign-in (e.g., log-in, buy-now, purchase, etc.), will the user be aware that she was binding herself to more than an offer of services or goods in exchange for money?
    • – Does the design and content of the website, including the homepage, make the “terms of use” (i.e., the contract details) readily and obviously available to the user?
    • – Are important details of the contract obscured or minimized by the process of agreement required for a consumer to purchase or subscribe to a service or product? Or are they highlighted or otherwise featured, such as by boldface type?
    • – Do you clearly draw the consumer’s attention to material terms that would alter what a reasonable consumer would normally understand to be her rights in an online transaction? These rights may vary from state to state, but might include the rights to (a) not have a payment source charged without notice (i.e., automatic payment renewal); (b) bring a civil consumer protection action; and (c) participate in a class or collective action.

Berkson at 402.

In the Adwar case, the court determined that Adwar’s terms and conditions, accessible only if one clicked the links located at the bottom of each page, were browsewrap, because they did not require any act of affirmative assent from site visitors. In light of this classification, the Court further determined that because the user’s attention was not drawn to the jurisdiction consent provision, either by a font change, or a mechanism such as “***”, it could not be enforced against the Defendants. Adwar at *6.

This decision highlights the importance of giving the user sufficient notice of the terms, particularly terms that may affect their rights, such as consent to jurisdiction. When designing a website, service providers should consider including some form of affirmative assent, whether clickwrap, scrollwrap or sign-in wrap. The provider should also keep records of the user’s agreement if possible. Providers should also consider bolding or highlighting key provisions of their sites’ terms of use, including clauses relating to: mandatory arbitration; class actions; damages; and jurisdiction.

Trademark Considerations: Scams and Solicitations

By Jason H. Kasner
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Some of the most common inquiries we receive from our clients concern scams in the form of unsolicited letters or notices received after their federal U.S. trademark applications are filed.

Since the information in federal trademark applications (including the trademark owner’s address) is accessible to the public, scammers collect the contact information of new applicants and use it to send what appear to be official correspondence regarding the trademark application. These solicitations take many forms, and most have the look and feel of official notices from government agencies or are styled to look like invoices.  These notices commonly include (false) instructions to make payments or offers to publish or monitor the trademark application for a fee.  The purpose of these scams is to create a false sense of urgency that the trademark application is at risk (it is not) or that the superfluous services offered will benefit the trademark owner (they will not).

This is yet another reason to work with a good trademark attorney to file federal trademark applications. Not only will an attorney help minimize common filing mistakes, but as the appointed attorney and correspondent, your attorney will also receive all official notices and correspondence from the U.S. Patent and Trademark Office (“USPTO”) regarding your application directly.  You can then rest assured that your attorney is receiving all official notices and anything you receive directly regarding the trademark application is either a scam or a superfluous service you do not need. Here are some more tips for dealing with and recognizing these scams:

  • – All official notices sent by postal mail from the USPTO will have a return address of Alexandria, Virginia. Similarly, all official notices sent by electronic mail from the USPTO will be sent from an e-mail address ending in “uspto.gov”

If there is any doubt about the validity of a notice you receive, you should contact your attorney before taking any action. Your attorney can help you weed out these scams so you can concentrate on what’s important – building your brand and growing your business.

How can we help you?

New Case before U.S. Supreme Court to Determine Whether Government Can Challenge Patent

By Fritz Klantschi

On October 26, 2018 the United States Supreme Court granted certiorari in Return Mail, Inc. v. United States Postal Service, 868 F.3d 1350 (United States Court of Appeals, Federal Circuit, 2017, “Return Mail v. USPS”) to determine whether the federal government can challenge patents under a provision of the U.S. patent law known as the America Invents Act (AIA).  Specifically, the Court will decide whether the federal government is a “person” who may petition to institute review proceedings under the AIA.

Background

AIA Section 18(a)(1)(B), which covers Covered Business Method (CBM) patents, reads “[a] person may not file a petition for a transitional proceeding with respect to a covered business method patent unless the person or the person’s real party in interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent.” (emphasis added)

Return Mail filed suit against the United States Postal Service (USPS) for patent infringement in the U.S. Court of Federal Claims (“USCFC”). The USCFC is authorized by statute to award compensation to a patent owner for the government’s unauthorized use of the invention, as the government cannot be sued for patent infringement in federal court. The USPS then petitioned the Patent Trial and Appeal Board (PTAB) of the USPTO for a CBM review of the challenged claims of Return Mail’s patent.

Before the PTAB, Return Mail challenged the USPS’ ability to petition for CBM review on the basis that the USPS was not a “person” under the statute. The PTAB’s final written opinion held that the USPS had statutory standing to challenge the claims. Return Mail appealed to the United States Court of Appeals for the Federal Circuit.

Federal Circuit Decision

In a 2 to 1 decision, Federal Circuit affirmed the PTAB’s decision, holding that the meaning of “person” in the statute “does not exclude the government.”

Under the AIA, a party to a post-grant PTAB proceeding that reaches a final decision cannot later in federal court or before the International Trade Commission challenge the validity of the same patent claims. The dissent to the majority’s decision was concerned that including the federal government in the definition of “person” would circumvent the estoppel provision as to the government because the government can challenge the patent before the USCFC.

The dissent noted that “[t]he estoppel provision applies to petitioners litigating in district court or the ITC, but is silent as to petitioners litigating in the Claims Court.” This would allow the government to petition the PTAB, and later again re-litigate the same grounds raised during the CBM review proceeding before the USCFC. Return Mail argued in its petition for certiorari before the Supreme Court that this would give the government an advantage over all other litigants of being able to challenge a patent twice on the same ground.

Conclusion

The government is a frequent participant in the patent system and USCFC’s patent infringement actions are similar to those in district court in that they allow validity to be raised as an affirmative defense. Without defining whether the government is a person or not, the government would have two bites at the apple regarding claim validity. If the government does not like how the PTAB ruled, then it still can raise the same arguments at the USCFC, which does not have to give deference to the PTAB ruling. This can result in different outcomes and increased litigation cost and time for the patent holder.

TTAB Decision Offers Guidance on Trademark Consent Agreements

By Jason H. Kasner
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A recent precedential decision of the Trademark Trial and Appeal Board (“TTAB”) sheds some light on how the TTAB evaluates consent agreements between parties with potentially conflicting trademarks. In the case In re American Cruise Lines, Inc., the TTAB held that the mark AMERICAN CONSTELLATION for cruise ship services was not likely to be confused with the prior registered mark CONSTELLATION for the same services. In Re Am. Cruise Lines, Inc., 128 U.S.P.Q.2d 1157 (T.T.A.B. Oct. 3, 2018).

What are consent agreements?

The U.S. Patent and Trademark Office’s Trademark Manual of Examining Procedure (“TMEP”) defines a consent agreement as “an agreement between parties in which one party (e.g., a prior registrant) consents to the registration of a mark by the other party (e.g., an applicant for registration of the same mark or a similar mark), or in which each party consents to the registration of an identical or similar mark by the other party.” TMEP §1207.01(d)(viii). These agreements are often presented as evidence in favor of registration of the junior user’s mark following a USPTO refusal to register based on a likelihood of confusion with the senior user’s registered mark. Consent agreements typically include provisions such as limitations on the goods and services to be offered under the respective marks, requirements for presenting the marks (i.e., in a particular font/style and/or with a design element), and the measures the parties will take to avoid confusion in the marketplace. The evidentiary weight and probative value of consent agreements are generally determined on a case-by-case basis, with some limited guidance offered in the TMEP. Id.

The TTAB decision: Do consent agreements need to include provisions for avoiding confusion?

The TTAB considered various consent agreements entered into between the applicant and the owner of the cited CONSTELLATION trademark registration. The USPTO Examining Attorney who had reviewed and rejected the application argued that the consent agreements were not probative on the question of likelihood of confusion since they contained no provision that the parties make efforts to prevent confusion or to cooperate and take steps to avoid any confusion that may arise in the future. The TTAB disagreed, holding that such provisions are not required.

Provisions of this nature are typically seen in trademark consent agreements, but this precedential decision clarified the TTAB’s position that while these provisions may render the agreement more probative in a likelihood of confusion analysis, they are not mandatory.

Consent agreements are a common tool for owners of potentially-conflicting trademarks to allow them to co-exist without causing confusion to consumers and obtain important protections of trademark registration. If your company’s trademark registration has been refused on the basis of a prior registration, we can assist with overcoming the refusal, which can include filing an appropriate consent agreement.