Trademarkology: The Law of the Brand

Trademarkology: The Law of the Brand

Family Feud

Posted in Brands, Trademarks

You may be familiar with the old adage that “the best defense is a good offense.” A recent case decided by the Trademark Trial and Appeal Board (the “TTAB”), Azeka Building Corp. v. Bryan Kenji Azeka, Opp. No. 91218679 (May 3, 2017) suggests that a good offense requires a good defense as well.

In Azeka, the president of the opposer and the applicant were relatives, though they couldn’t even agree on the nature of their relationship (whether second cousins or first cousins once removed). The applicant sought to register the mark AZEKA’S RIBS for use with barbecue sauce. The opposer opposed registration of applicant’s mark on multiple grounds, including likelihood of confusion and that applicant’s mark was primarily merely a surname. The opposer prevailed on the latter claim. The application had been filed on an intent-to-use basis and the applicant could not prove use and amend the application to seek registration on the supplemental register after the TTAB rendered its decision. Therefore, the TTAB’s decision meant that the application would go abandoned. In many cases that would be the end of the story. But here, the applicant asked the TTAB to decide the likelihood of confusion issue (and especially applicant’s abandonment defense) as well.

Hawaiian Sauce

Images of applicant’s product

The TTAB perceived that the primary dispute between the parties revolved around priority. Though the opposer alleged likelihood of confusion, the applicant countered that the opposer had abandoned its rights in the mark AZEKA’S RIBS, leaving it free for applicant to use. Therefore, the TTAB agreed to decide the likelihood of confusion issue. Ultimately, the TTAB found that the opposer had abandoned its rights in the mark because it had not used the mark in over a decade, and the sporadic (and unsuccessful) attempts at licenses during that period of time were insufficient to overcome the presumption of abandonment that arose from three consecutive years of non-use.

Thus, having won the surname argument, the opposer found itself in the unenviable position of having been found to have no rights in the mark it sought to protect. This seems like the more painful loss, like somehow losing the war just as you win the last battle. While the applicant may file a new application and seek registration on the supplemental register, the finding of abandonment prevents opposer from claiming priority to stop the new application from registering.

The Azeka case may be instructive on a number of issues. But perhaps one of the bigger take-aways should be: prepare for likely defenses and counterclaims prior to opposing registration of a mark or petitioning to cancel registration of a mark. If there are obvious weaknesses in your claims of ownership of the mark or registration, ability to prove use (or defend against alleged nonuse), or priority over the other party, pause and think carefully about whether and how to proceed. For example, could the opposer have resumed use prior to filing the notice of opposition? Could the opposer have made a strategic decision to limit the claims in the opposition? To be fair, hindsight is 20/20. The opposer may well have considered these issues. For example, it could reasonably have decided that it would be unlikely for the TTAB to decide the likelihood of confusion issue if it was not necessary to resolving the case and that having multiple claims in the opposition might sufficiently intimidate the applicant to prompt a rapid settlement. But for anyone contemplating an opposition, it is worth thinking carefully about what one can do to avoid or be prepared to defeat a defense or counterclaim the applicant might raise.

As a post-script, the applicant appears to be proceeding with his business plan by promoting his product online. But when a recent visitor to his website attempted to shop for barbecue sauce, she received the notice below:
Out of Stock
For the sake of fans of the barbecue sauce, the Azeka family, and the TTAB, let’s hope that “temporarily” refers to a period of time that is much shorter than ten years.

Twinning the Kentucky Derby

Posted in Brands, Trademarks

This weekend marks the first Saturday in May. Being a Louisville native, this means you are off to the races for the 143rd running of the Kentucky Derby at Churchill Downs, which they bill as “the longest continually running sporting event in America.” The iconic Twin Spires, which perch atop the grandstand of Churchill Downs, can be seen far and wide and are promoted internationally as a symbol of both Churchill Downs and the Kentucky Derby.

The Twin Spires were constructed in 1895. The architect felt the then-new grandstand needed an architectural focal point. His vision has endured for more than a century, during which time Churchill Downs has turned the Twin Spires into a trademark brand. Churchill Downs is no stranger to branding and has an array of licensed merchandise for the Kentucky Derby that could rival a college sports team. People collect the annual commemorative Derby Glasses released each year to hold your Mint Julep, and true collectors are known to scour flea markets for older glasses that command a high price. The Twin Spires have likewise come to hold a strong place among Churchill Downs brands.

Churchill Downs Incorporated owns several trademark registrations associated with the Twin Spires, including protection for the words, the designs and more recently as a three-dimensional design as shown below. In this regard, the appearance of the Twin Spires is protected similar to the protection afforded to the shape of a Coke bottle:
Ky Derby logos
Here is an excerpt of a marketing ad submitted by Churchill Downs with its trademark registration that covers the three-dimensional trade dress for the spires themselves. You can also see use of the two-dimensional logo which appears at the bottom of the ad that represents the Twin Spires:

KY Derby horses

So grab yourself a Mint Julep and get ready for the greatest two minutes in sports. Who knows, you might even win big.

Techniques for Building Goodwill for Products Marketed to New Parents

Posted in Trademarks

I have just returned from a visit to meet my new nephew. He is adorable; see for yourself:

alex baby

Over the past few days, as I spent time with my sister and her husband, I realized that new parenthood opens the door to a whole new world of brands, and that brands marketing to new parents have some advantages and disadvantages in building up goodwill with new consumers.

Apparently, hospitals give out sample packs of formula, as do pediatricians. But which formula a parent starts using first might matter a lot in terms of purchases over the long term because healthcare providers caution that switching brands may cause discomfort for babies. It seems hospitals understand that, and therefore may implement a policy of alternating the brands they give out to avoid the appearance of endorsement. But whichever brand a parent starts with is likely to be the brand the parent continues to use.

What an advantage! Being the first to market is one thing. Being the first in a consumer’s household is another. And in the case of newborn products, that may be the deciding factor for brand loyalty if there is a risk in switching brands.

 

enfamil similac

 

 

 

 

 

 

 

 

 

The fact that healthcare providers use certain branded products in the course of providing services also carries an implicit message to patients, however unintended. For a new parent unfamiliar with the various manufacturers of products for newborns, the brands encountered in the hospital or a doctor’s office can influence later purchasing decisions. Facing a store shelf full of products, a new parent could easily decide to select the brand encountered at the hospital either because of a perceived endorsement or simple familiarity. medela

 

Manufacturers of baby and new parent products have a distinct advantage over competitors if they can convince healthcare providers to use their products. That sends a message to new parents of trustworthiness and may incline them to purchase other products bearing that brand when they otherwise have no basis for selecting one product over another. The advantage increases for certain products if they can convince healthcare providers to give away free samples of the product. That alone might be enough to capture the ‘loyalty’ of a new parent if switching brands might disrupt the baby’s peace or development. Of course, the flip side of that is that manufacturers of certain baby products may have an especially difficult time convincing a new parent to try a different brand of a product that seems to be working well.

Competitors in every industry have to put in the time, money, creativity, and other resources necessary to build the goodwill in their brands with consumers. Each industry will also have its unique opportunities that might give brand owners an extra advantage in building a consumer base. It is up to each brand owner to identify those opportunities and make the most of them.

 

 

 

 

The Brawny Woman #StrengthHasNoGender

Posted in Brands, Trademarks

Brawny woman

Greetings from Stites’ newest member of the Trademarkology family! My name is Rachel and I am so honored to be making my debut as a guest blogger on Trademarkology this week! I work in our Nashville office and I love finding ways to have fun while trying to figure out this crazy little thing called the practice of law. I love my job and the people I work with so you will almost always see me with a smile on my face and usually laughing. I love Tennessee football (Go Vols!), puppies, chocolate, long walks on the beach, etc.

Another fun fact about me is that I watch NBC’s TODAY show religiously as part of my daily morning routine. A few days ago, one of the trending stories caught my eye and I was so intrigued that I stopped mid-mascara application to grab the remote, back the program up 30 seconds, crank the volume, and watch the whole segment over again to learn more. Watch the clip here.

In honor of Women’s History Month, Brawny has produced a limited edition pack of paper towels that has The Brawny Man® stepping aside to give women the spotlight as part of the #StrengthHasNoGender campaign.

This is the second year of Georgia-Pacific’s “Strength Has No Gender” initiative. However, this year, in addition to the limited-time packaging, Brawny will be showcasing a series of short films on its website that highlight women in STEM fields, such as: Vernice Armour, the first black female combat pilot in the U.S. military; Dr. Anna Kornbrot, the first woman to graduate from Columbia College and now an oral surgeon; Brittany Wenger, a college senior who taught herself to code and invented Cloud4Cancer, an artificial intelligence program for breast cancer detection; and Dr. Patty Lopez, a veteran computer scientist and advocate for minorities in STEM. Brawny has also made a $75,000 donation to Girl’s Inc., an advocacy group focused on inspiring young girls to enter these fields. Learn at Girls, Inc.

“There are women and girls everywhere who exhibit strength and resilience in their lives, and that’s the inspiration behind the Brawny #StrengthHasNoGender campaign,” Frances Morgan, senior brand manager at Georgia-Pacific, said in a statement. “STEM is among many areas of society that are underrepresented by females, and we felt this would be a powerful platform to address this issue. Our partnership with Girls, Inc. will help promote girls’ interest in these fields and empower them to break gender stereotypes” Morgan said.

I must admit, I’ve always been more of a Bounty select-a-size kind of girl, but there is no denying the familiarity and brand recognition that Brawny has created with its burly, flannel-wearing man. The iconic Brawny Man® has a rich history that dates back to the brand’s original launch advertising in the 1970s.

Brawny history

(source of photo:)

The Brawny Man® has received several makeovers over the years, but one thing has remained the same – the Brawny Man® is one of the most recognizable men in the history of advertising. In fact, according to the Art of Manliness (yes, that is a real website) the Brawny Man is one of the manliest brand icons of all time. Undeniably, the clad-in-plaid Brawny Man is just as recognizable to consumers as the company’s own name. Indeed, the Brawny Man has become an intrinsic part of the company’s brand identity. I think the fact that Brawny was willing to “wipe” its iconic Brawny Man from its packaging in favor of the Brawny Woman, even if only for a month, speaks volumes about the company’s commitment to promoting women in STEM.

I am all about women’s empowerment and think it’s so cool to see a powerful-looking woman in a plaid shirt rocking it on the front of Brawny’s paper towels (plus, red is a great power color). I am such a fan of Brawny’s #StrengthHasNoGender campaign that I had to get in on the action and buy a pack for myself (sorry Bounty). Congratulations Brawny, your commercial gimmick totally worked on me.

Brawny Woman - photo 1

I support Brawny’s campaign and I like to focus on positive messaging; however, as expected, not everyone is happy about the change or the execution of the campaign. If you want to see what the critics have to say, just search the #BoycottBrawny hashtag on Twitter.

These limited edition Brawny Woman rolls are available in an eight-roll pack throughout the month of March in Walmart stores across the country. To learn more about the #StrengthHasNoGender campaign and see the real stories about real women in STEM visit Brawny’s website.

Connect with me on LinkedIn.

How to Avoid Sadness in March Madness

Posted in Trademarks

I must admit it had not even occurred to me that the March Madness season was upon us. As such, you will not find bracket busting tips, upset picks, or predictions in this post. But don’t click away just yet. If you read on, you will learn something much more valuable (and much more accurate): how to avoid being sued for trademark infringement by the NCAA this maddening March.

The NCAA has registered numerous marks that relate to the upcoming basketball tournament, including the following:

  • First Four
  • NCAA Sweet Sixteen
  • Elite Eight (and Women’s Elite Eight)
  • Final Four (and Women’s Final Four)
  • The Big Dance
  • March Madness

In recent years, the NCAA has ramped up its trademark enforcement efforts, sending hundreds of cease-and-desist letters to those who use its trademarks in even the most innocuous ways. According to the NCAA, it does not matter that an accused infringer’s business has absolutely nothing to do with athletics. Indeed, the NCAA has demanded that travel booking websites take down offerings that advertise Final Four trips. The NCAA was also successful in a trademark dispute with an adult website that displayed a bracket featuring porn stars alongside naughty plays-on-words utilizing the NCAA’s trademarks. The NCAA even convinced NASA to cease the use of its bracket-style tournament entitled “Mission Madness,” which allowed space exploration fans to vote on matchups of various NASA missions and included basketball icons within the bracket.

It is unlikely that anyone would think the NCAA is affiliated with or sponsors a bracket-style tournament of porn stars. Stated another way, there is no likelihood of confusion between the two entities simply by virtue of an adult website’s punny use of the NCAA’s trademarks. Rather, the NCAA’s enforcement efforts are targeted at preventing dilution of its marks. And it is vigilant in its anti-dilution campaign.

In sum, unless you want to get beat worse than Hampton playing Kentucky, think twice before you start promoting your March Madness charity event, your Sweet Sixteen drink specials, or your Big Dance adult entertainer bracket, because the NCAA will not hesitate to lay the smack down.

Rebuilding Goodwill

Posted in Trademarks

A week ago last Sunday, millions of Americans watched The Oscars. As everyone now knows, “Moonlight” won the best picture award, but only after “La La Land” was first accidentally announced as the winner. Also, as many people now know, this mistake occurred because an envelope was misdelivered by one of the co-ballot leaders from the accounting firm that handles the voting process for the awards show.

PriceWaterhouseCoopers (“PwC”) has held the balloting responsibility for the Oscars for decades. PwC’s promotional materials tout the relationship to bolster its reputation:

This video is an example of how associations with events, organizations, causes, and people can develop the connotations associated with a brand. We have seen this happen when brand owners launch advertising campaigns to signal support for various political or social causes.

Another way that mark owners extend the reach of their brand is to enter into license agreements that associate the mark with new goods and services in the minds of consumers. In this case, PwC’s video links the attributes that make it a successful accounting firm with those that made it a choice for handling the balloting responsibility for the Oscars. PwC says it was asked to take on this role because of its “integrity, accuracy, and confidentiality.” In the video, the co-balloters explain the importance of their responsibility for maintaining the confidence of the ballots in their possession until the time the winner is to be announced.

Linking the accounting firm’s reputation with this particular task, one that is seen by more of the public than most of PwC’s other daily work, may have helped build the goodwill of PwC’s name and reputation…. until the mistake at the most recent awards ceremony. Having spent all this time and effort to associate the good name of PwC with the balloting work for the Oscars, how is PwC to repair its reputation after the public error witnessed by millions of viewers?

PwC is not the first mark owner to suffer unexpected injury to its goodwill in this way. And it is possible to rebuild the goodwill in a brand even after much greater injuries. Perhaps the most well-known (and successful) brand rehabilitation campaign was Johnson & Johnson’s recovery after Tylenol capsules on store shelves were poisoned, resulting in deaths of seven consumers in the early 1980s. The brand owner moved quickly. First, it protect consumers’ interests with an unprecedented recall of the product and implemented new safety features in the packaging to reassure consumers that the capsules they were about to consume were free of tampering. Then it communicated this clearly through advertisements that emphasized Tylenol’s good reputation.

Fortunately for PwC, it is not facing nearly as dire a scandal. It need not go through the same steps to recover from this injury, but it can consider applying some of the same principles that made brand rehabilitation possible.

First, take responsibility. PwC promptly apologized, twice. In its second apology, it clearly accepted the blame. Second, take action. Apologizing does little if the brand owner does not take steps to prevent the error from happening again. For Johnson & Johnson, that meant a issuing a recall and implementing new packaging. For PwC, it might mean something much less drastic. For example, improvements to protocols and procedures (or ensuring adherence to them) could provide the necessary reassurance in this case. Third, tailor the response and messaging to the nature of the damage. This is where PwC’s judgment will be most tested. The Oscar scandal was very public, and embarrassing, but the severity and permanence of the damage suffered by third parties is relatively low. PwC will have to assess how much damage was done to its reputation among its core audience and focus its rehabilitation efforts accordingly.

Trademarks are symbols of goodwill and reputation. Brand owners choose strong marks and spend years and dollars building up the strength of the goodwill associated with those marks. Few companies escape the occasional mistake, embarrassment, or unfortunate association. How companies respond to such circumstances can determine whether and how successfully a company repairs and rebuilds its brand and reputation.

 

Branding Lessons Learned from Bond. James Bond.

Posted in Trademarks

Growing up, my dad and I watched a lot of Bond movies. You all know the line: “Bond.  James Bond.”  [Cue music and Bond girl].  That line was introduced in the 1962 film Dr. No. Over more than 50 years, Bond has endured as an iconic brand.  The Bond actors and array of Bond girl actresses have changed throughout the decades, but the brand stands the test of time to Die Another Day.   The heart of each Bond movie is constant and shares the same key characteristics of a spy with a License to Kill for whom The World is Not Enough.  The way Bond looks, however, has changed over time with several actors playing the role.  My favorites are Sean Connery and Daniel Craig.  To see them all, click here for the official 007 website.

Just like Bond, your brands and trademarks may change looks over time. You may want to change fonts, tweak your design, add or remove punctuation or spacing, change colors or make other changes to your mark.  Two easy steps will maintain your brand and avoid becoming a Spectre. First, you need to make sure that the new version of your trademark is covered by your trademark registration.  And second, you need to make sure that your marketing and branding materials consistently use the same version of your mark so you communicate a consistent message and avoid a Skyfall.

Changes to your brand are not For Your Eyes Only.  You may need to file an updated version of your mark with the U.S. Patent and Trademark Office to make sure your updated version of your mark is protected with an existing registration.  If the changes are non-material and don’t change the overall commercial impression of the mark, you can simply amend an existing registration to update the appearance of your mark.  If, however, you are making a change that would be noticeable to a consumer, then you probably will need to file a new registration application. Diamonds are Forever, but trademark registrations must be updated.

Second, you need to ensure that all uses of your mark are consistent. This is true whether you adopt a new updated version of your mark or whether you have marketing or promotional materials that display your original mark in different ways.  For example, maybe your mark has a hyphen in some places but not others, or maybe your mark is shown as a one-word term in some places but as two separate words in other places.  This inconsistency can cut against your brand identity.  Don’t just Live and Let Die.  Review your marketing, your website, your business cards, and other materials to ensure that you have a strong, consistent trademark message.  After all, You Only Live Twice.

When you have a consistent brand, your message is clear and capable of stronger brand recognition among consumers. On the flip side, you are at greater risk of mockery.  Bond is not immune.  Check out this clip from Saturday Night Live featuring Tim McGraw in a parody of the classic Casino Royale.

 

Trump and his Trademarks

Posted in Trademarks

The slogan “MAKE AMERICA GREAT AGAIN” are four simple words that nobody (except for maybe President Trump himself) could have predicted would help launch our new president into the White House. However, President Trump had been sitting on this slogan for years. In fact, on November 7, 2012, the day after Romney lost the election to Obama, Trump decided not only that he needed to run for President, but that he needed a brand to do so.

Sitting in his golden tower, he threw out a number of phrases, deciding on MAKE AMERICA GREAT AGAIN, and he immediately took his slogan to his attorneys to file an intent to use trademark application. At least, that is what he told the Washington Post. Now, every politico knows that Trump didn’t coin this phrase. Ronald Reagan used “Make America Great Again” as his 1980 campaign slogan. He plastered it, much like Trump is did, on everything from buttons to posters and even included it in his acceptance speech.

Regardless, five days later, Trump filed an intent to use application, which allowed him to claim rights in the mark as of the date of filing the application. Once he actually started using the mark in commerce in “political action committee service, namely, promoting public awareness of political issues and fundraising in the field of politics,” he was able to file a statement of use and allow the application to proceed to registration.

Note that Reagan did not claim rights in the mark. Trump just chalks this up to him being someone that understands marketing. In fact, Trump is the owner of more than 800 trademarks in over 80 countries.

Trump is already planning his 2020 slogan, though he can’t quite decide whether he should use an ! or not at the end; to use KEEP AMERICA GREAT or KEEP AMERICA GREAT? That is the question. To give himself options, Trump filed applications for both:

KEEP AMERICA GREAT KEEP AMERICA GREAT!

This time around, Trump filed the applications for everything from bumper stickers to political campaign services to online social networking services.

Trump isn’t the only one taking advantage of his MAKE AMERICA GREAT slogan. Countless other individuals have filed similar applications, trying to trade off what little goodwill President Trump has.

Even NFL Vince Young is jumping on the bandwagon and has filed an application for registration of “MAKE VINCE GREAT AGAIN”. Apparently Young is trying to make a football comeback. Even though he has not taken a snap since the 2011 season, he has hired an agent, followed President Trump’s branding lead, and has prepared a comeback campaign with these trademark applications:

MAKE VINCE GREAT AGAIN 1 MAKE VINCE GREAT AGAIN

 

 

Branding 101: It’s Like Cheers: Where Everybody Knows Your Name – But Everybody Pronounces It Differently

Posted in Trademarks

For those of you faithful Trademarkology readers out there, you may recall that I last posted to the blog Christmas week – and reveled in the honor of getting to write about SANTA trademarks:

Santa trademark

Well, I have a confession to make. Instead of blogging about Dear St. Nick, I almost wrote about the GRINCH:Grinch

While the USPTO has over 2,000 active registrations and applications where SANTA is all orpart of the mark, the GRINCH has only 32 – and all of them are owned by none other than Dr. Seuss Enterprises, L.P. and Geisel-Seuss Enterprises, Inc. (with the exception of Reg. No. 3,436,739 for M.K.G. MONEY-KILLA-GRINCH which may be the topic of another post later this year).

Why, you may ask, did I opt to stiff the GRINCH? Simply put, I’m holding a grudge.

You see, my law firm has offices in Louisville, Kentucky. For more than three decades, Louisville has held an annual festival called “Light Up Louisville” where the community kicks off the holiday season. It’s a free event designed for families and children which culminates with Santa and the Mayor pulling the ceremonial switch turning on the holiday lights in the city.

My grudge with the Grinch started in 2008, the year the city had planned its Light Up Louisville celebration to include a children’s area called “LouWhoVille” with costumed characters from the classic “How the Grinch Stole Christmas” including Cindy Lou Who, other citizens of Who-Ville, and the Grinch. Well, the Grinch would have none of it. The Grinch’s lawyers sent Louisville a trademark cease and desist letter (and not one of the nice ones like Jack Daniels is famed for sending). It was a mean-spirited one. It threatened suit if the city did not pull the plug on its plans. Eventually the city relented and renamed the child area “Lou-Ville” and then-Mayor Jerry Abramson was quoted in the local press as saying, “It appears these lawyers’ hearts are two sizes too small.”

The play on words of LouWhoVille by Louisville was inspired by the fact many people – including lifelong residents of the city – pronounce the city’s name differently. It is a problem which is sometimes faced by brand owners. Rather than launching an educational campaign to teach people the “correct” way to pronounce Louisville, the city and its Visitors and Convention Bureau took a totally different approach. Instead, Louisville embraced the diversity of pronunciations and celebrated the multiple ways people pronounce the its name and made it the theme of their community branding campaign:

Luhvul

In fact, the city even filed its own application to federally register LOOAVUL LUHVUL LOUEVILLE LOOAVILLE LOOEYVILLE LOUISVILLE as a mark and is the proud owner of Reg. No. 4,079,605.

They just won’t be calling it LouWhoVille, and I won’t be writing about the Grinch.

Keeping Your Cool in the World of Trademarks and Bankruptcy

Posted in Trademarks

January in Nashville has been a roller coaster of temperatures. One day hints at spring and the next punishes all who failed to wear earmuffs. Adaptability and resilience are key in the current climate. The same is true in the worlds of trademarks and bankruptcy, as we can see with the roller coaster of news that reaches you in the scenario below:

Good news!: You have entered into a marketing agreement with the owner of some valuable intellectual property. In the agreement, the intellectual property owner granted you the exclusive right to sell certain goods in certain territories, a non-exclusive license to use certain intellectual property rights, and a limited license to use certain trademarks. You operated under the agreement for some time.

Bad news: Someone filed for bankruptcy.

Good news!: It wasn’t you.

Bad news: It was your trademark licensor. Not only that, but the trademark licensor filed a motion seeking permission to reject the marketing agreement between you and to sell substantially all of its assets free and clear. The Bankruptcy Code has a provision that permits debtors in bankruptcy to reject executory contracts (contracts under which each party has ongoing obligations to the other).

Good news!: The Bankruptcy Code also has a provision that protects intellectual property licensees (allowing them to either consider a rejected contract terminated or to keep the licensed rights – and duties– for the duration of the contract). You make an election under that provision and object to the licensor’s motion, saying the sale of those assets should be subject to the marketing agreement and claiming that you retain rights of exclusive distribution, permission to use the intellectual property rights, and permission to use the trademarks as described under the marketing agreement.

Bad news: The Bankruptcy Code’s definition of intellectual property does not expressly include trademarks. The bankruptcy court permits the debtor to reject the contract subject to your election to preserve your rights under the Bankruptcy Code provision protecting intellectual property licensees. But you and the trademark licensor cannot agree on what that means. The bankruptcy court explains that this means your rights with respect to the licensed patent, trade secret, and copyrights under the agreement are protected, but your rights to the licensed trademarks and the exclusive distribution rights are not. You appeal.

The foregoing scenario is a simplified version of facts from a case (Mission Prod. Holdings, Inc. v. Tempnology LLC, Case No. 15-065 (BAP, 1st Cir., 2016)) recently decided by the bankruptcy appellate panel for the U.S. Court of Appeals for the First Circuit.

MCOOLCORE

 

 

 

In Tempnology, the panel affirmed the bankruptcy court’s finding of protection of the licensed patents, trade secrets, and copyrights, affirmed the finding that there was no protection for the exclusive distribution rights under the Bankruptcy Code, and  affirmed the finding that the Bankruptcy Code protecting the licensed intellectual property rights did not protect the licensed trademark rights. But, it still found that the licensed trademark rights did not terminate upon the debtor’s rejection of the marketing agreement. Instead, those rights are determined by the terms of the marketing agreement and applicable non-bankruptcy law.

The First Circuit panel’s reasoning aligns with that of the Seventh Circuit in another case (Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)), and contrasts with the reasoning of the Fourth Circuit in the case that prompted Congress to enact the provision of the Bankruptcy Code protecting (certain) rights of intellectual property licensees (Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985)).

In Lubrizol (decided prior to the enactment of the Bankruptcy Code provision protecting the interests of intellectual property licensees), a debtor’s rejection of an executory contract was considered a breach, and the licensee’s remedies were limited to money damages. The licensee could not retain the licensed rights, even though that might have a type of remedy afforded it if the debtor had not been in bankruptcy. Applying this reasoning to a trademark license would mean that a trademark licensee simply could not retain the trademark license if the debtor rejected the executory contract in which the license was granted.

The circuit split makes it hard for a trademark licensee to keep cool in this climate of uncertainty. Some groups are working on crafting a legislative fix that would specifically address trademark licenses. In the meantime, trademark licensees will need to factor this consideration into the negotiation of their licensing agreements and prepare themselves for potential inclement weather.