Does the COVID-19 pandemic excuse contract performance under the doctrine of force majeure?

A question often asked is whether businesses and individuals can avoid contract performance because of the COVID-19 pandemic? This question permeates all aspects of the business world, from office leases to product purchase and sale contracts to loan contracts and myriad other contractual arrangements.

Here are two recent white papers by some very esteemed lawyers that discuss the topic in detail:

http://www.cblg.biz/resources/force-majeure-and-covid-19/

https://www.bricker.com/resource-center/COVID19/publications/force-majeure-provisions-dusting-off-a-law-school-exam-topic-for-the-covid-19-pandemic

Please call us if you have any questions.

Should American Businesses be More Well-Versed In European Trademark Law?

Set forth below is a highly-recommended recent white paper by INLEX, one of our European trademark associates, about differences between trademark law in Europe and the United States.  Many thanks to Eric Schahl & Lou Marec of INLEX for this white paper.  The INLEX website is at http://www.inlex.com.

Please call us if you have any questions.

While trademark law follows the same logic across all countries, there are local specificities, and in particular differences between the American and European systems.

In the US and the EU, two different systems, in theory
The United States Patent and Trademark Office (USPTO) offers various options for trademark registration. The American system is based, on the one hand, on the choice of filing based on prior use or on the intention to use, and on the other hand, on a dual system. The “Principal register”, which is conditional on the distinctiveness of the trademark, offers maximum protection due to the presumption of ownership and the principle of incontestability. The “Supplemental register“, open to weaker trademarks, provides more limited protection. Is this American system so different from the European system?

At first glance, the European system seems very different. The European Union Intellectual Property Office (EUIPO) offers only a single procedure, based on a single mode of filing and a single regime. A trademark can be filed without any proof of use or even of immediate intention to exploit. Therefore, in order to avoid a third-party request for the lapse of the trademark registration, the trademark must never not be exploited for more than five consecutive years. No proof of exploitation of the trademark is required either at the time of filing, at the time of renewal of the trademark, or even during the registration process.

The necessary taking into account of European specificities
It seems that often, American companies, although theoretically aware of the differences in regimes, do not in practice take into account the particularities of the European system. This apparent ignorance of European law can lead them to undertake unsound strategies whenever a dispute arises between an American trademark and a European trademark (or a European national law). These choices can have farreaching consequences, sometimes even leading to the cancellation or revocation of the trademark.
Recent decisions have highlighted the importance for US companies of knowing European law in order to protect their trademarks.

BONOBO vs BONOBOS Case: French-speaking company court of Brussels, November 21st, 2019[1]

The American company BONOBOS INC. was blocked in its expansion into European market by the 2006 BONOBO trademark from the French group MAGELLAN.

The American company’s attempt to buy without exploiting, despite an ongoing dispute with its European opponent covering identical activities, ultimately backfired.
Specifically, MAGELLAN counter‐attacked in forfeiture for non‐use of the BONOBO WEAR trademark before the Belgian courts (and not in the field of fraud or bad faith).
As the American company was unable to report serious use of the trademark or even proof of any sale of the goods, the court ordered the revocation of the trademark BONOBO WEAR, which will be removed from the Belgian register.

  • It is essential that trademark strategy, both in attack and in defense, be correlated with usage.
  • The trademark revocation action was a judicious choice allowing the French group to reverse the burden of proof (and subsequently giving it the possibility of bringing a subsidiary action for fraud).
  • MONOPOLY vs DRINKOPOLY Case: EU Court of Appeal, July 22nd, 2019[2]

In 2011, HASBRO INC. filed an opposition against the DRINKOPOLY application by Kreativni on the basis of various earlier MONOPOLY trademarks and was successful.
In 2015, Kreativni brought an action for invalidity against the European trademark MONOPOLY, arguing that it had been filed in bad faith and that its registration was intended solely to counter the consequences of a possible revocation for failure to use the other earlier MONOPOLY trademarks.
The Cancellation Division rejected this request as unfounded. Kreativni appealed to the Board of Appeal, which ordered the partial cancellation of the European trademark MONOPOLY. It held that the “repeated” registration of the mark MONOPOLY did not follow a legitimate and justified commercial logic. The purpose of this practice was to extend indefinitely, in an abusive and fraudulent manner, the 5‐year time limit for evading the legal obligation of genuine use of the other MONOPOLY trademarks previously registered.

  • It is essential, in the case of repeated filings, to adopt a strategy that shows a real business logic and to keep any useful document that can demonstrate this.
  • This decision, which is symptomatic of a reversal of position in the European Union, makes the real intention to use the trademark, as a major element, a sine qua non condition.
  • SUPERMAC’S vs MCDONALDS Case: EUIPO, January 11, 2019[3]

In 2015, McDonalds opposed the registration of the Irish company Supermac’s trademark “Supermac’s”, claiming resemblance to its trademark “BIG MAC”.
In defense, Supermac’s filed a nullity action for non‐use of the “BIG MAC” trademark on the grounds that McDonalds had not made effective use of it as a product (sandwich) and service (restaurant) in the territory of the EU from 2012 to 2017.
To justify the use of its trademark, McDonald’s brought some documents (attestation of its own staff and screenshots of the website). However, the Cancellation Division of the Office considered that these elements were insufficient and that the serious use of the “BIG MAC” trademark on the market was not demonstrated (absence of data on turnover, receipts, survey on notoriety, link with customers via the Internet site, etc.).
Similarly, the EUIPO found that McDonald’s did not demonstrate the extent of use of the trademark and declared the Big Mac trademark invalid. As a result, the opposition filed by McDonald’s against Supermac’s could not succeed since it was based on a lapsed trademark. McDonald’s, of course, appealed this decision.

  • It is crucial to ensure that the trademark on which the invalidity action is based is being seriously used on the market, and not partially exploited.
  • No matter how well-known the trademark is, cancellation for non-use can be pronounced, if relevant documents related to use cannot be provided.
  • E&J GALLO WINERY vs SCEV CHAMPAGNE GALLO Case: Court of cassation, September 26th, 2018[4]

E&J GALLO WINERY is the owner of the 1998 Community trademark “GALLO”, claiming the seniority of the French trademark registered in 1968 which has since been abandoned by the company.
The company E&J GALLO WINERY has started to use its Community trademark (but not in France) and has sued SCEV CHAMPAGNE GALLO, producer of “Gallo” champagne since 1984, for infringement.

In defense, the SCEV CHAMPAGNE GALLO raised the “retroactive” revocation of the expired French trademark and obtained the cancellation of the trademark for lack of use. The claim was therefore no longer valid, and the 1996 Community trademark was cancelled on the basis of the SCEV CHAMPAGNE GALLO’s corporate name ‘Gallo’, which had been in use since 1984.

  • The seniority claim offers an attractive savings opportunity. However, it is necessary to be able to prove that the earlier national mark is not liable to be invalid or revoked at the time of the seniority claim.
  • Trademark protection, seniority claims, trademark abandonment and use constitute an alchemy that must be perfectly mastered.

The American and European systems, in practice similar
While European and American trademark laws seem far removed from each other, certain developments, both legislative and jurisprudential, have tempered the particularities of the European system.

In the name of harmonization of the law, the “Trademark Package” reform of 2015 has, in particular, reinforced the requirement of proof of use in opposition proceedings. From now on, the opponent must be able to prove the use of the earlier trademark on which the opposition is based for each of the goods and services concerned. Such a provision thus obliges the applicant to limit his application to the goods and services he actually uses.

The strict assessment of the use of the trademark
In that respect, the European Office very strictly assesses the exploitation of the sign. In addition to the sign, the goods and services, and the territory for which the trademark has been registered, proof of use must be dated and in sufficient quantity. The multiplication of the grounds for cancellation of the trademark thus requires the applicant to be vigilant both regarding the use of the trademark and the preservation of evidence of such use.
Such a novelty must obviously be interpreted in the light of the recent Skykick case law. On January 20th  2020, the Court of Justice of the European Union stated that the registration of a trademark without the intention of using it for each of the goods and services it concerns may constitute bad faith and consequently be annulled for said goods or services.

The severe penalties for fraudulent conduct by trademark applicants
In such a context, the applicant must therefore take care to exploit the trademark without acting fraudulently. It is illegitimate to obtain an exclusive right for purposes other than the functions of a trademark. Such an attitude, once it is established, is punishable by cancellation or revocation of the trademark. This is the case for the repurchase of an earlier mark which has not been used, the repeated registration of a mark to avoid the obligation to use it, the partial use of a trademark, or the Community application under claim of seniority of an abandoned mark.
The protection of a trademark requires thought and anticipation which should not be neglected. With legal support, these situations could have been prevented. It is therefore essential that the brand strategy developed by American companies be adopted in line with current European legislative and jurisprudential developments.

Eric SCHAHL & Lou MAREC

 

[1]https://app.darts-ip.com/darts-web/client/case-results.jsf : darts-999-461-H-en-2
[2]http://vmguidelines.dkpto.dk/media/131469/20190722_r1849_2017-2.pdf

[3]https://res.cloudinary.com/fieldfisher/image/upload/v1574435105/PDF-Files/PDFs%20from%20old%20website/euipo-decision_mzjvve.pdf

[4]https://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000037495373&fastReqId=847777647&fastPos=1

US Supreme Court Resolves Major Dispute in Trademark Law: Willfulness No Longer Required for an Award of Infringer’s Profits as Damages

For many years, there has been a dispute in the federal courts about what level of culpability by a trademark infringer was required to support an award of the infringer’s profits as damages.  The courts in the Second, Eighth, Ninth, and Tenth Circuits required that a trademark owner show that the infringement was “willful” before the infringer’s profits earned from the infringement could be awarded as damages.  In contrast, the law in the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits was that the infringer’s  willfulness could be considered in deciding whether to award profits as damages, but that willfulness was not a requirement for an award of profits.

On April 23, 2020, the United States Supreme Court issued its decision in Romag Fasterners, Inc. v. Fossil, Inc.  by which it resolved the dispute among the circuits and held that willfulness is not a precondition to recovering a trademark infringer’s profits as damages.  Critically, the Court did not completely discount the role of the infringer’s culpability in the damages analysis – the Court expressly stated that “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate.”

The Supreme Court’s opinion in Romag can be found here: Romag Fasteners, Inc. v. Fossil, Inc., 590 U.S. __, No. 18 – 1233 (April 23, 2020).

It usually is the case in trademark infringement cases that it is difficult to prove the profits lost by the trademark owner as a result of an infringement.  Consequently, prior to Romag, it often was difficult for a trademark owner to obtain damages in cases where the infringer did not act willfully.

While recovering profits-based damages in trademark infringement cases may continue to be challenging given the Supreme Court’s instruction that the infringer’s “mental state” still is an important consideration in the damages calculation, the Romag decision has removed a significant legal hurdle to an award of such damages.  It will be interesting to see how the Romag decision affects the settlement value of trademark infringement cases and whether the decision results in an increase in the number of infringement actions filed since the cases now may have more value.

Trademark Trial And Appeal Board Confirms That A Social Media Website Is Not Trademark Use

On October 26, 2016, we posted about a decision from the Trademark Trial and Appeal Board (TTAB) finding that the use of a Twitter handle, by itself, was not sufficient use to establish trademark rights. You can find our October 26 post here: https://affinitylaw.wordpress.com/2016/10/26/a-social-media-handle-alone-may-not-be-sufficient-use-to-establish-trademark-rights/

In the recent case of In Re Florists’ Transworld Delivery, the TTAB confirmed that a social media website, by itself, is not sufficient use to support trademark rights.  In In Re Florists’ Transworld Delivery, the world-famous florist FTD sought to register the trademark “Say It Your Way” for on-line retail store services and creating an on-line community for registered users to interact with other users.  In support of its application, FTD submitted a copy of its Twitter page.

The Trademark Office refused registration on the ground that FTD’s Twitter page was not sufficient evidence of trademark use.  On appeal, the TTAB agreed with the Trademark Office, explaining that a social media website publication like FTD’s Twitter page was neither an advertisement for FTD’s services nor FTD actually providing the services and thus was not sufficient trademark use to support registration.

The lesson to be learned is that while social media advertising can be critical to the development of a brand or trademark, social media advertising alone is not enough to create trademark rights.  Instead, there must be some other way (either on the Web or brick & mortar) by which the trademark owner actually offers its goods and/or services to the public.

Who Owns The Legal Rights To A Tattoo?

This post is courtesy of our law clerk Ashley Franco, an exceptional student at California Western School of Law who just finished her second year:

The answer to the question in the title to this post is the typical lawyerly “it depends.” It is important to distinguish between the ownership rights to the tangible tattoo (the skin itself) and the exclusive rights provided by copyright for the design of the tattoo. The ownership rights to the tangible tattoo (the skin itself) belong of course to the tattoo bearer. However, the “author” of the tattoo (i.e. tattoo artist) may have exclusive copyright rights in the tattoo design.

Under section 101 of the Copyright Act, a creator of original work that is fixed in a tangible medium of expression for more than a transitory duration is given copyright protection for the original elements of the work. A tattoo may be an original work (depending on the design) and of course is fixed to a tangible medium (the body) for more than a transitory duration. Therefore, the copyright doctrine applies to tattoos and may provide the tattoo artists with copyright protection for original designs.

Copyright protection grants the copyright owner six exclusive rights, which he or she may transfer: (1) the right to reproduce (2) the right to prepare derivative works (3) the right to distribute (4) the right to perform the work publicly (5) the right to display the work publicly, and (6) the right to perform the work publicly by digital transmission.
To determine the ownership of the exclusive rights, it is important to determine who is the “author” of the tattoo. The “author” may be the tattoo artist, the tattoo bearer, or both if they both contributed to the tattoo design. The “author” may also be the tattoo artist’s employer, through a doctrine known as the “work made for hire” doctrine.

Most tattoo copyright infringement cases are filed by tattoo artists and are settled. Therefore, the courts have yet to decide what the tattoo bearer has the right to do with his or her tattoo. In Whitmill v. Warner Brothers (a tattoo infringement case), Judge Perry did comment that tattoos could be copyrighted, and that there was a high likelihood of Whitmill prevailing on the merits. In Whitmill, Victor Whitmill designed the famous tribal tattoo for Mike Tyson, which he had tattooed on his face. An exact copy the tattoo later appeared in the movie “The Hangover II”, on Ed Helms’s face. Thereafter, Whitmill filed suit seeking monetary damages for copyright infringement of the Tyson tribal tattoo, and a preliminary injunction preventing the release of the film. However, the parties settled before the court could weigh in on the application of the copyright doctrine to tattoos.

As tattoos have gained popularity, more suits have arisen by tattoo artists claiming copyright infringement. Many of these suits are against the NFL and NBA and/or their marketing partners because athletes’ tattoos are copied and displayed on an array of media (i.e. posters, video games). Consequently, companies are now implementing contracts in which the tattoo artist waives his or her rights to copyright.

We expect that so-called “tattoo infringement” litigation will increase as tattoos continue to gain popularity and prominence among celebrities, athletes and common folk, and tattoo designs become more elaborate and unique. Therefore, for a person spending a lot of money getting a tattoo or a tattoo artist developing unique and original tattoo designs, it is a wise investment to have an attorney draft a contract to clearly state who owns what rights to the tattoo.

Essential Intellectual Property Tips For Startup Companies

Readers may be surprised to learn how often we are consulted by clients who face the following predicament: an individual or group of people get together to start a business.  Working out of a home, or a garage, or a small workspace, they create a product or come up with a service that they think they can sell and proceed through sheer will and hard work to get the product or service to a point where the product really takes off.

Sounds like a success story, right? And it is.  But then what too often happens is problems arise.  Infighting starts about who created what, who owns what rights and who is entitled to what payments.  And of course competitors notice the success of the product or service and before long knock-offs start appearing.

To do as much as is possible to protect against the foregoing problems and other intellectual property issues, we offer the following tips:

  1.  Protect your intellectual property before you do anything else – consult with an experienced intellectual property attorney who can help identify what intellectual property rights exist and how best to protect them.  Make sure you budget sufficient funds for legal advice and intellectual property protection – it will be money well spent in the long run.
  2. Put agreements in place to define specifically who created what intellectual property, who owns what and who gets what payments – such agreements can include corporate shareholder agreements, LLC operating agreements, license agreements, and assignment agreements. Also address at the front end what will happen if one or more of the founders wants out or if the success of the business fades – it is important to consider at the front end what will happen to the business assets and intellectual property down the road.  The key is everything must be in writing – do not rely on trust, handshake agreements, oral agreements or any non-written agreement!
  3. A non-disclosure/confidentiality agreement is essential and must be in place before you discuss your product with anyone – and this includes not only potential vendors, business partners, etc. but also visitors to the place of business, friends, etc. if any protected details of products or services will be disclosed.
  4. Make sure to protect ownership through appropriate agreements – all employees and independent contractors should execute appropriate assignment agreements and work made for hire agreements.    This is especially important with respect to website design and maintenance, marketing activities, outside sales people, and customer lists.  It bears repeating: everything must be in writing!
  5. Put appropriate agreements in place if others will use your intellectual property to make sure there is no question who owns what and what uses can be made of the intellectual property.

A Social Media Handle Alone May Not Be Sufficient Use To Establish Trademark Rights

There can be no doubt that individuals and businesses are becoming increasingly reliant on social media like Twitter, Instagram, Snapchat and the like to market and sell their products and services.  As users of these social media platforms are aware, the individual users are identified by unique “handles” which really are code names.  For example, our firm’s Twitter handle is “@AffinityLaw.”  The question therefore arises whether a use of a social media handle is sufficient trademark use in and of itself to create trademark rights in the word/phrase comprising the handle.

In its recent decision in Nazon v. Ghiorse (Opposition No. 91216729), the federal Trademark Trial and Appeal Board (TTAB) addressed the issue of whether a Twitter handle constitutes sufficient use to create trademark rights.  The claimed trademark in the Nazon case was “Sextrology” for astrological services.  The Opposer opposed an application to register the trademark “Sexy Astrology” for similar services.  Given the similarity of the marks and services, a principal issue was who had priority of use.  Among her other arguments, the Opposer claimed that she had priority of use because she had used the word “sextrology” in her Twitter handle.  The TTAB rejected this argument, finding that the use of “sextrology” as part of the Opposer’s Twitter handle did not constitute sufficient use to create trademark rights.

In so holding, the TTAB was clear that its finding was based on the absence of evidence that the Opposer was actually offering any services using her Twitter handle.  Consequently, it remains to be seen whether the Nazon case announces a bright line rule that no social media handle can create trademark rights (which is not likely) or, more likely, whether the Nazon case stands for the proposition that a social media handle by itself does not confer trademark rights and some additional trademark use in conjunction with the handle is necessary to create rights.

California Halts Efforts to Seek Copyright Protection for Public Records

On June 21, 2016, we published a post discussing an effort by the State of California to obtain copyright protection for public records.  The proposed legislation sought to give copyright protection to public records created using taxpayer funds (such as maps, hearing transcripts, legislative reports, etc.), and would have authorized state and county governments to control and even prohibit their use.  The proposed legislation met with strong opposition, primarily from free speech and open government advocates.  Fortunately, the author of the controversial legislation (Assemblyman Mark Stone of Monterey Bay) saw the error of his proposal and has abandoned the proposed legislation.

What is the Difference Between Business Entity Names, Trademarks, and Domain Names?

One of the most frequent questions we must address in our practice is what is the difference between business entity names, trademarks and domain names in terms of legal protection and intellectual property status.  A recent article in Forbes Magazine (republished from an article in Entrepreneur Magazine) has a good discussion on this topic.  The article can be found at this link:  http://fortune.com/2016/07/05/domain-names-trademarks.

We highly recommend this article to gain insight on this important subject.

Dissolution of California LLCs Will Be Easier and More Common Sense Starting January 2017

Consider the following two situations:

  1.  Two people form a California corporation as equal owners.  One of the owners later decides he/she wants to dissolve the corporation but the other owner objects.
  2. Two people form a California limited liability company (LLC) as equal owners (members).  One of the members later decides he/she wants to dissolve the LLC but the other member objects.

Under current California law, the owner who wants to dissolve the corporation in the first scenario can do so without having to resort to court action because a voluntary corporation dissolution can be initiated by 50% voting power.  However, under current California law, the member who wants to dissolve the LLC in the second scenario must file a costly and potentially time consuming lawsuit to obtain a court order to dissolve the LLC since the vote a majority of the members of an LLC (not just 50%) must vote to initiate a voluntary dissolution of an LLC under Corporations Code sections 17707.01 and 17707.02.  Such an anomaly clearly makes no sense.

Fortunately, Governor Brown recently signed legislation to end this anomaly.  Effective January 1, 2017, the LLC dissolution law will be harmonized with the corporate dissolution law.  Consequently, starting January 1, an LLC member with 50% voting power can initiate a voluntary dissolution of an LLC just as can be done with corporations.  Of course, just as is true with most other aspects of LLC operation and management, the members of an LLC remain free to draft their articles of formation and operating agreements to require a higher voting percentage than 50% for a voluntary dissolution, to require judicial dissolution, or to have other terms and conditions for voluntary dissolution.

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