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Provided by Vihar R. Patel and Sponsored by Enterprise Law Group, LLPArchive for Trademark Law Updates
Buying and Selling a business (Mergers and Acquisitions)
Properly negotiating and structuring a purchase or sale of a business can be a challenging endeavor. Having a good team of accountants, legal advisers, valuation experts, tax advisers, lenders or investors is crucial to successfully buying or selling a business. There are a variety of considerations in buying or selling a business, but there are two major ways to structure a deal: an asset purchase or a stock purchase.
An advantage of an asset purchase is that it allows the buyer to be selective in terms of the assets that it wants to acquire from the target company. Also, the buyer is generally not liable for the seller’s liabilities, unless the asset purchase agreement has such language. Some disadvantages of an asset purchase are that the bill of sale must be comprehensive enough to ensure that no key assets are overlooked and third party consents will likely be required.
Some advantages of a stock purchase are that the business identity, licenses, permits can be preserved, and continuity of the business may be maintained. However, the buyer may be liable for unknown or contingent liabilities, and may be forced to contend with the seller’s minority shareholders.
Also, there are variety of employment and intellectual property law considerations that go into structuring a proper purchase or sale of a business. Such as the following:
a) negotiating key employee agreements and non-competition restrictions;
b) contending with collective bargaining agreements;
c) resolving anticipated or outstanding claims by employees;
d) acquiring the desired intellectual property (business name or marks, copyrights, patents or trade secrets);
e) restricting the other party from using the intellectual property (business name or marks, copyrights, patents or trade secrets); and
f) recording assignments or transfers of intellectual property (business name or marks, copyrights, patents or trade secrets).
Properly, structuring a purchase or sale of a business can often mean the success or failure of the venture. If you have any concerns or questions regarding the purchase or sale of a business, then please feel free to contact us.
Failure to contest arbitration properly, can waive access to courts!
Plaintiff was acquired by a new company and sued the defendant on a breach of contract theory in an American Arbitration Association (“AAA”) Complaint. The AAA Complaint alleged breach of a written agreement; however, Defendant counterclaimed requesting reformation or rescission of the contract from the arbitrator. The Defendant asserted a mutual mistake of fact as the basis for seeking a reformation remedy, and alternatively sought rescission of the contract.
In the arbitration proceeding, the Plaintiff asserted that reformation was not necessary as there was no mutual mistake of fact and no scrivener’s error. However, Plaintiff did not argue that an arbitrator could not reform a contract. Subsequently, Plaintiff filed a motion with the trial court to vacate the arbitration award asserting that the arbitrator lacked the authority to reform the 2004 written contract.
The trial court held that Plaintiff’s failure to assert at arbitration that the Arbitrator lacked the authority to reform the contract was a waiver of the argument. The trial court held that to object to arbitration, a party must object to the arbitration proceeding in a timely manner. The appellate court affirmed and stated that there is a mandate by the Illinois Supreme Court that arbitration awards should be construed as to uphold their validity whenever possible.
The presumption is that an arbitrator did not exceed his or her authority, and grant a petition to vacate an arbitration award only in extraordinary circumstances. Judicial review of an arbitration award is extremely limited. Consequently, litigators must be more cognizant and advise their clients of the need to assert all claims and arguments in arbitration proceedings.
See: First Health Group v. Ruddick, N0 1-083236; 2009 WL 1940702 (1st Dist). First Health Group Corp_Arbitration.
Single Source, Related Companies and Section 2 (d) rejections for Trademarks!
The USPTO will typically issue a section 2 (d) rejection for any mark that is confusingly similar to the mark described in your trademark (“TM”) application. Often times, through a merger, sale, acquisition or reorganizations companies have different names and structures, but maintain a unity of interest in their intellectual property (such as a TM).
However, unless a proper assignment or transfer is recorded with the USPTO, a derivative version of a mark owned by a prior company will be the basis of section 2(d) rejection. Fortunately, the Federal Circuit has stated that if the applicant and the prior company are related companies that qualify as a single source of a good or service, then there is no likelihood of confusing the consumer. In re Wella A.G., 787 F.2d 1549 (Fed. Cir. 1986).
An examiners section 2(d) rejection may be overcome by filing an affidavit from the appropriate owner(s) asserting that the prior company and the applicant are related and share unity of control over their trademarks. Unless there is contradictory evidence, the Examiner will usually accept the affidavit and withdraw the USPTO’s objection to registration of your mark under section 2(d).
Understanding how to properly apply for intellectual property (trademark) rights in the face of a merger, acquisition, sale or reorganization is often crucial to the continued growth of a business enterprise.
The Antitrust side of IP Litigation
Antitrust counterclaims are once again viable options for defendants involved in Intellectual Property (IP) litigation. Often a Plaintiff is utilizing a patent infringement suit as a method of interfering with the business relationship of a competitor.
However, if the patent was obtained by knowing and willful fraud or the lawsuit is a sham for interfering with competitors’ business relationships, then the patent may be invalid and subject the Plaintiff to an antitrust violation. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177 (1975); In re Independent Service Organizations Antitrust Litigation, 203 F.3d 1322, 1326 (Fed. Cir. 2000); and Hazelquist v. Guchi Moochie Tackle Co., 2004 U.S. Dist. Lexis 13991 (W.D. Wash. May 12, 2004).
The risk of an antitrust violation and counterclaim is not limited to sham patent litigation. Plaintiffs attempting to utilize trademark infringement suits to maintain a monopoly (price control) or restrict competition face a similar risk of an antitrust violation. In Marketing Displays, Inc. v. TrafFix Devices, Inc., 200 F.3d 929, (6th Cir. 1999), the court permitted an antitrust counterclaim against a plaintiff asserting trade dress infringement after the expiration of patent.
If the litigation is objectively baseless in the sense that no reasonable litigant could expect success on the merits, then it may be the basis for a antitrust violation. Professional Real Estate Investments, Inc. , v. Columbia Pictures Industries, Inc. , 508 U.S. 49, 60 (1993). However, this does not mean that a product’s different qualities cannot be protected simultaneously, or successively by more than one statutory means for protection of intellectual property. Kohler Co. v. Moen, Inc. , 12 F.2d 632, 638-39, (7th Cir. 1993).
Understanding the nuances of the scope of intellectual property protection that can be obtained for a product is crucial to your ability to protect your market and your investments.
Tricky Settlement Agreements in Seventh Circuit…
If you are a litigator in Illinois, the Seventh Circuit decisions in Lynch, Shapo, and Blue Cross have just made your job a lot more difficult. Especially, if your practice involves business, employment or intellectual property matters, where settlement agreements often contain a payment plan for royalties, profits, backpay or future earnings.
It used to be that based on Kokkonen you could simply enter a dismissal order with prejudice that allowed the court to retain jurisdiction to enforce the settlement agreement. However, based on the 7th Circuit’s recent rulings in Lynch, Shapo, and Blue Cross entering such an order will deprive the court of jurisdiction to enforce the settlement agreement.
In which case, your client may be standing outside the courtroom trying to find a way back in by filing a new lawsuit for a breach of contract. The other common alternative is to enter a dismissal order without prejudice to allow the court to retain jurisdiction to enforce the settlement agreement.
Unfortunately, entering such an order may deprive your client of the res judicata effect of a dismissal order that is with prejudice. In this scenario, your client will be back in the courtroom defending against claims that it believed were resolved, and may have helped fund its opponent’s lawsuit.
Understanding how the drafting of settlement agreements has changed in light of the US Supreme Court’s decision in Kokkonen and the Seventh Circuit’s decisions in Lynch, Shapo, and Blue Cross is crucial to properly representing your client’s interests.
Amendments to Trademark Rules of Practice
The USPTO has adopted some new rules of practice that will impact the way attorneys can register your business name or logo for trademark or servicemark registration. The following is a summary of some of the new Amendments:
1) an application under section 1 or section 44 must be in English to receive a filing date;
2) if more than one good or item is specified within a particular class of goods or services in section 1 (a) application, then only 1 date of use is required (as long as the corresponding good or item is provided); and
3) the filing of an amendment to allege use does not extend the deadline to respond to an Office Action, an appeal to the Trademark Trial and Appeals Board (“TTAB”) or a Petition to the Director.
These and other Amendments will have both a substantive and procedural impact on the registration of a trade or service mark. For the exact language and additional amendments, please see attached: Amendments to Trademark Practice with USPTO
If you have any additional questions or concerns, then please feel free to contact me.
Trademark Law Treaty Implementation Act-Summary
The Trademark Law Treaty Implementation Act (TLTIA) has several important changes that trademark owners, practitioners and litigators should know. The following are important provisions of the act that can impact your mark(s):
1) the requirement in section 1(a) and 1(b) for the applicant to state the mode or manner in which the mark is to be used or in connection with goods is eliminated;
2) an application based on foreign trademark no longer has to be accompanied by a certificate or certified copy of the foreign registration at the time of filing is eliminated;
3) to revive an application under 12 (b) the applicant must now demonstrate an unintentional delay in filing a untimely response to an Office Action instead of showing an unavoidable delay; and
4) a section 8 affidavit of continued use or excusable nonuse must be filed in the 9th year of mark’s registration and every ten years thereafter. Section 9 no longer requires a declaration of continued use or excusable nonuse in a renewal application. Thus, every tenth year, the owner of a registration must file both a §8 affidavit and a §9 renewal application. However, a section §8 affidavit must still be filed between the fifth and sixth year after the date of registration.
For additional changes see: tlt_summ
On-line Auction Sites and Trademark Infringement!
On-line auction sites have become a popular method for selling, buying or bidding for many consumer items. This raises questions about the sale of counterfeit or infringing goods being provided by anonymous sellers via on-line auction sites. Often the on-line auction site is sued for direct and contributory trademark infringement.
However, this raises concerns about shutting down an entire on-line auction site due to a few bad actors or anonymous sellers. In Tiffany v. E-bay, the court dealt with this scenario and found that E-bay was not liable to Tiffany on its claims of direct trademark infringement, contributory trademark infringement, dilution, unfair competition or false advertising.
The Court focused on E-bay’s extensive policies for investigating, reporting and removal of infringing or counterfeit goods from its sites. The Court also went to on to find that the sale of actual Tiffany goods was protected under the nominative fair use defense. Thus, on-line auctions sites were protected assuming they met their affirmative duty to police the sale of infringing and counterfeit goods.
This ruling will provide for an increase in the number of on-line auction sites and allow for numerous resell opportunities. Whether you are the trademark owner, a consumer or an on-line auctioneer, understanding trademark law and how it impacts your business practices or purchasing behavior is crucial to avoiding liability for trademark infringement.
If you have any concerns or questions regarding these matters, then please feel free to contact us.
New Amendments to USPTO Trademark Filing Requirements
The United States Patent and Trademark Office (USPTO) passed several new rules that became effective in January 2009 relating to filing for trademark or servicemark rights in the United States (U.S.). The amended rules will impact how trademark attorneys may apply for protection of marks used by individuals, entrepreneurs, small business owners, partnerships, joint ventures, foreign and domestic corporations.
Some examples of the requirements of the new rules are illustrated below:
1) All international applications filed under section 1 or 44 of the Trademark Act must be written in English;
2) Domestic Partnerships filing for trademark rights must have the name and citizenship of all general partners;
3) Domestic Joint Ventures filing for trademark rights must have the name and citizenship of all active members of the Joint Venture;
4) If the mark includes a foreign word, then the application must have a English translation for the foreign word; and
5) The application no longer requires a verified statement that the applicant has “adopted and is using the mark shown in the drawing.” Instead a statement that “the mark is in use in commerce” will be sufficient.
There are several other amendments that may be found here: http-wwwagstateilus-pressroom-2009_03-20090305
Should you have any concerns or questions regarding the amendments or filing for trademark or servicemark rights in the U.S., feel free to contact us.
Trademarks, Servicemarks and the Costs of Delay
In a recent opinion, Judge Shadur gave new life to the “laches” defense to trademark and servicemark infringement. Judge Shadur granted summary judgment to the City of Chicago and dismissed Rudolfo Garcia’s claim for servicemark infringement of the name “Graffiti Blasters.” See. Rudolfo v. City of Chicago, 2009 U.S. Dist. Lexis 7437 (N.D. Ill.).
Judge Shadur focused on the following facts: 1) Rudolfo was aware of the City of Chicago’s use of “Graffiti Blasters” for fourteen (14) years before filing suit; 2) Rudolfo waited ten (10) years after his lawyer sent a Cease & Desist letter to the City of Chicago; 3) the City of Chicago immediately responded with a letter disputing Rudolfo’s rights to “Graffiti Blasters”; 4) the City of Chicago cleaned over 200,000 buildings and expanded the program by investing millions into it after Rudolfo’s delay; and 5) Rudolfo’s delay was approximately five times the three year statute of limitations for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.
Judge Shadur held that considering these facts and circumstances Rudolfo had slept on his rights and unreasonably delayed in brining suit against the City of Chicago. This ruling reaffirms the need for trademark and servicemark owners to police infringing uses of their mark and timely file claims to ensure the strength and validity of their mark.
Attached is the case for your consideration: name_rudolfo_garcia_and_city
