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They're Using My Trademark On Their Out-Of-State Website, Can I Sue Them In My State?

2012-01-31T09:18:00.001-05:00

Trying to figure out whether a suit can be brought in one's home state can be a key factor in whether a company has the resources or the will to bring a case at all. Obtaining jurisdiction in one's home state can also often be a substantial factor influencing the outcome of the case and, especially, encouraging settlement from out-of-state parties who will have to pursue the case in another state. A recent New Jersey District Court reviewed the Third Circuit standards applied to address this issue.

In Piano Wellness, LLC v. Williams (D. N.J. Dec. 21, 2001), Plaintiff, Piano Wellness (located in New Jersey), alleged that Defendant, Williams adopted the KEYBOARDWELLNESS.COM trademark infringing Piano Wellness' registered trademarks PIANO WELLNESS SEMINAR and KEYBOARD WELLNESS SEMINAR as well as its common law marks PIANO WELLNESS and KEYBOARDWELLNESS. Williams, a citizen of Georgia, argued that the New Jersey court did not have jurisdiction over her since her website was "passive" in that it acted primarily as a bill board, she had no employees in New Jersey and never conducted business through the website in New Jersey. However, the owner of the Plaintiff and the Defendants had prior business dealings with each other in New Jersey that ended in 2008.

The Three-Prong Test. In determining whether a trademark owner can pursue an alleged infringer in the owner's home state, the courts must determine whether there is either "general" or "specific" jurisdiction over the alleged infringer. In analyzing this case, the Court quickly found that it did not have general jurisdiction since the Defendant's general contacts with the State of New Jersey had not been recent.

Figuring out whether specific jurisdiction exists is, however, a little more involved. In the Third Circuit, the courts apply a three part test as follows:

1. Whether the Defendant purposefully directed its activities at the State of New Jersey;
2. Whether the litigation arises out of or relates to at least one of those activities; and
3. If the answers to the first two questions are "yes," then whether the exercise of jurisdiction "comports with fair play and substantial justice."

Passive Website Not Enough. In this case, the Defendant's website was passive. No portion of it was interactive. While the website was, of course, accessible to New Jersey residents, the Defendant did not do anything to encourage New Jersey residents to visit the website and there was no evidence that any New Jersey residents had, in fact, visited the website. As the Court stated, the "mere operation of a passive website, which could be accessed worldwide, is not in itself sufficient to demonstrate that Defendant purposefully directed an act toward New Jersey." So based on the passive website alone, the first prong of the three part test would not have been satisfied.

Cease and Desist Letters Not Enough. However, the passive website alone was not the only contact that the Defendant had with New Jersey. According to the decision, the Defendant had allegedly sent threatening letters to the Plaintiff in New Jersey. Nonetheless, the Court found that there was no evidence that the subject matter of those letters related to the trademarks in this case. Moreover, the court found that the sending of a cease and desist letter is not, by itself, sufficient to obtain specific jurisdiction.

But in twist worth of a paperback novel, the Court found that there was sufficient basis for personal jurisdiction. The Court concluded that the Defendant's active involvement in business in New Jersey with the Plaintiff prior to 2008 was sufficient for specific jurisdiction even if it was insufficient for the purposes of exercising general jurisdiction.

Having satisfied the first prong of the test, the Court next considered whether the Defendant's pre-2008 activities related to the Plaintiff's claims in this case. According to the decision, the Defendant had started the KEYBOARDWELLNESS.COM business back in 2005 to engaged in a business similar to the joint business previously conducted by the Defendant and Plaintiff together. This was enough for the Court to conclude that the Plaintiff's claims were related to the prior activities of the Defendant which were directed at New Jersey.

Fair Play & Substantial Justice Factors. Finally, under the last prong of the test, the Court had to evaluate whether its exercise of jurisdiction over this case would "offend traditional notions of fair play and substantial justice."' The Court enumerated the following factors that are considered in evaluating this standard:

1. The burden on the Defendant;
2. The forum state's interest in adjudicating the dispute;
3. The Plaintiff's interest in obtaining the most efficient resolution of controversies;
4. The interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and
5. The shared interest of the several States in "furthering fundamental substantive social policies."

Lets face it, for most people, this is not a standard that is easily understood or applied. This makes it not terribly helpful to business people trying to evaluate what to do when faced with a potential out-of-state infringer. How, for example, is a business person supposed to figure out whether it will "further fundamental substantive social policy" when deciding how to arrange his or her affairs? Fortunately, however, the standard is accompanied by a default rule that makes it a little easier to apply. That rule is this:

1. If minimum contacts are sufficient to otherwise justify jurisdiction (i.e., if the first two prongs of the three prong test are satisfied), then jurisdiction will be denied only in rare cases; and
2. It is the Defendant's burden to make a compelling case that the Court's exercise of jurisdiction would be unreasonable.

In this case, the Defendant was unable to overcome this burden and the Court found that it had specific jurisdiction over the Defendant. Thus, Williams, the Georgia resident would have to defend against the case in New Jersey.

Key Things to Remember. Some key things to remember from this case are:

1. The mere operation of a passive website accessible worldwide will not, in and of itself, subject the operator to jurisdiction in a state where the website is accessible;

2. The mere sending of cease and desist letters are also not enough to subject the sender to jurisdiction in the home state of the recipient.

Real Estate Development Dispute Over Copyright in Engineering Plans - State Court or Federal Court?

2012-01-20T07:52:00.003-05:00

Who settles copyright disputes in ownership of real estate development engineering plans: State Court or Federal Court? A recent New Jersey District Court case recently answered this question. In Pennoni Associates, Inc. v. Medford Village East Associates, LLC (D.N.J. Dec. 20, 2011) the court was presented with this very issue.

Copyright ownership in engineering plans and architectural drawings are periodically key issues in real estate development disputes. This case involved the development of a 280 acre parcel. Medford Village East Associates, LLC (MVE) was the original property owner who agreed to sell the property to the town, who further agreed to sell portions to third parties. Pennoni Associates, Inc. (Pennoni) was retained by a party involved in the transaction to modify engineering plans. In a complex state court litigation involving many parties, both MVE and Pennoni asserted ownership claims in the plans.

Based on the conflicting claims of ownership, Pennoni tried to remove the case to Federal court, but its attempt was past the 30 day limit imposed by Federal law. Consequently, Pennoni then sought declaratory judgment in Federal court to determine who owned the copyright in the plans. The interesting part of this decision is the analysis of whether the Federal court could take the case in light of the pending state court action.

First, the court had to decide whether Pennoni's claim presented an independent basis for jurisdiction or whether jurisdiction was dependent on the nature of the state court action. Not surprisingly, the court found that Pennoni's claim was dependent on the state court action since the state court action was at the heart of Pennoni's request for declaratory judgment.

Second, the court analyzed whether the state court action involved a claim under federal law. When it comes to this point in the analysis in most declaratory judgment cases, courts usually have to speculate as to a hypothetical legal case that might be brought if the issue presented by the declaratory judgment action is not decided by the court. In this case however, there was already a pending state court action. Ironically, Pennoni's failed attempt to remove the case to Federal court provided the basis for the court to find that the case involved a claim under federal law. In other words, in previously ruling that the case could not be removed to Federal court, the court necessarily had concluded that there was a federal question that triggered the applicability of the time limits to remove the case under federal law.

Based on the first two steps in the analysis, the court found that it had subject matter jurisdiction, but the analysis did not stop there. The court noted that under the Declaratory Judgment Act its exercise of jurisdiction over such an action is discretionary. So, at the end of the day, the court directed the parties to file supplemental briefs explaining why they think the court should or should not exercise its discretion to take the case.

Anybody willing to post a prediction as to what whether the court will (or should) take the case?

Wikipedia to Blackout English Language Version Tomorrow

2012-01-17T16:04:00.000-05:00

Yesterday, Wikipedia announced that it would blackout the English language version of its famous website for 24 hours in protest to pending anti-piracy legislation in both houses of Congress. The legislation is comprised of two pending bills. The House version is entitled the Stop Online Piracy Act while the Senate version is entitled the Protect IP Act.

Unfortunately, the Wikipedia press release was shy on details that might have promoted Wikipedia's cause. Specifically, it would have been nice if the press release included the reasons why Wikipedia objects to the pending legislation in its current form. In fairness, the press release did quote Wikimedia Foundation board member suggesting that Wikipedia's primary objections were based on concerns of censorship. The press release also provided a link to an article published by the Electronic Frontier Foundation criticizing the legislation.

Wikipedia's move is the latest in a swirl of controversy surrounding the legislation. Both bills have alleged corporate supporters (e.g., ABC, Revlon, NFL) and opponents (e.g., Yahoo!, eBay, American Express, Google) of substantial note. The White House has also joined in the action with a press release which appears to call for a balanced approach which would have the legislation focused on criminal activity of foreign-based websites. In a further nod to critics of the legislation, the White House statement went further to say that the legislation must be "transparent and designed to prevent overly broad private rights of action that could encourage unjustified litigation that could discourage startup businesses and innovative firms from growing."

Where this ends up is anybody's guess.

New Years Solicitations - Creative Marketing or Deceptive Advertising?

2012-01-09T08:20:00.002-05:00

With the start of the new year, it's time for trademark owners again to be on guard against solicitations and advertisements that may appear to be "official" or look like invoices. It is prudent to warn your bookkeeping departments to be alert to these types of solicitations and not mistake them for invoices. Please post a comment below if you have received solicitations that you found to be confusing.

I was recently contact by the recipient of two documents with respect to a trademark and asked whether or not these "invoices" should be paid. On closer inspection, neither document was an invoice and both were solicitations for services which, because of the format, the recipient mistook for invoices.

The first (seen below) solicits for payment of a "registration fee" for the service of publishing the registered trademark in the solicitors index.

This format was confusing to the recipient since it looked like an invoice rather than a more traditional form of direct mail advertising, such as a brochure, for example. After you get past the format and the solicitation for a "registration fee," the text of the document, however, expressly provides that the service offered is that of publication of the trademark in the solicitor's catalogue. The only indication of the value of this service is that it provides "a notice to others that your described trademark/servicemark is already taken." The risk here is that recipients who are not well versed in trademark registration or protection may be mislead to think that such a notice is somehow required and simply pay the invoice.

While the solicitation did not contain a phone number for the company, it did contain a URL for the company's website which expressly identifies itself as "a U.S. based privately owned trademark and patent firm." I suspect that changing the format and including this language on the mailing would help avoid confusion.

Another solicitation (seen below) received by the same recipient, was on its surface, quite a bit more confusing.

In this case, the name of the organization, "United States Trademark Registration Office, Trademark Registration and Monitoring Division," lead the recipient to believe that this came from an official governmental agency. For the record, New Jersey law makes it unlawful to operate under a name that implies association with a state of federal governmental agency. See NJSA 56:8-2.1.

Does the use of the name "United States Trademark Registration Office" run afoul of this statute? Interestingly, the only case to address a similar issue found that the use of the name "United States Consumer Council" with an American eagle emblem violated the statute while the use of the same name without the emblem did not. In re Fleet, 95 B.R. 319 (E.D.Pa 1989).

The other confusing aspect of this solicitation is that it is appears to be an invoice. This is especially evident from the listing of the $375 fee as being "DUE NOW." However, at least this company offers a more potentially valuable service. Specifically, for the $375 fee, the company will register your trademark with US Customs and Boarder Protection (CBP), notify you when your goods are blocked and send reminders to you when its time to file maintenance and renewal filings with the USPTO. However, the CBP only charges $190 for the registration and is then obligated by regulation to provide the trademark owner with notice when goods are block. Moreover, in this case, the recipient's mark was a service mark so registration with the CBP was unlikely to have any meaningful value.

The moral of this story is to read all such material carefully before paying anything that appears as an invoice. In each of these cases, a careful reading of the material reveals that these are not from governmental agencies and not mandatory purchases.

In E-commerce, Size Doesn't Matter (but placement sure does)

2011-06-13T18:27:00.000-04:00

Are "browse wrap" agreements enforceable? "Browse wrap" agreements are those website terms and conditions that purport to bind people that surf on the website. A recent New Jersey appellate court had the opportunity to rule on the enforceability of these purported contracts.

In Hoffman v. Supplements ToGo Management, LLC, the New Jersey appellate court was presented with an interesting situation. Briefly, Hoffman (a New Jersey resident) bought a bottle of "Erection MD" brand supplements allegedly advertised, among other things, to "enhance sex drive." He then sued Supplements ToGo and World Class Nutrition, LLC for false advertising in a class action suit. The defendants moved to dismiss the suit on the basis that their website included a forum selection clause requiring all litigation to take place in Nevada. The trial court found that the forum selection clause was sufficiently prominent on the defendant's website to be enforceable and dismissed the case. Hoffman appealed.

On appeal, the appellate court disagreed with the trial court and found that the defendant's website was structured so that buyers were not provided with reasonable notice of the forum selection clause. Now this is the part of this case that I find truly interesting. The trial court judge and the appellate judges looked at the same website (presumably) and came to different conclusions about whether a consumer would have adequate notice of the terms on the web page. So I decided to look at the World Class Nutrition (WCN) website myself.

Here is a snap-shot of WCN website using my default settings in Internet Explorer.

Here is a snap-shot of the WCN website using my default settings in Fire Fox.

In looking at these, you should be aware of a few things. First, they are no where near the size you would see in your browser. Second, they were taken recently and may have changed since the facts in the case. Third, I've highlighted the forum selection clause to make it more prominent.

In both snap-shots, however, look at the relative position of the scroll bar on the page. Note how far down on the page a user would have to scroll in order to see the forum selection clause. This is the issue that the court found to be important.

The appellate court thought that the fact that the term appeared "submerged" (i.e., at a place on the page that the user would have to scroll down in order to see it) made a key difference. In print media jargon, one might refer to this placement as being "below the fold." This placement, when combined with the fact that customers were capable of placing the item in their virtual shopping cart without having to scroll down to see the clause, made the clause unenforceable. The appellate court made a point of emphasizing that the size of the print was not, necessarily, an issue. The court discussed a 1999 case (Caspi v. Microsoft Network, LLC, 323 N.J. Super. 118) at length and specifically noted that, in that case, there was "nothing extraordinary about the size or placement of the forum selection clause text." Caspi, 323 N.J. Super. at 125. In Caspi, there was a click-wrap agreement that the user was required to scroll through and click "I Agree" in order to proceed with the transaction. The Caspi case stood for the proposition that for the forum selection clause to be enforceable, it had to be presented in a "fair and forthright fashion."

The "fair and forthright fashion" standard is all well and good. But as a practical manner, how does a website programmer apply it to ensure that the clause will have its intended goal? From Caspi, we know that a click wrap agreement should work. In the Hoffman case, there was no click wrap agreement. Once a buyer placed the item in their virtual shopping cart, the user was linked to another page which did not contain the disclaimer and this made all the difference.

The moral of this story for e-commerce vendors and website developers is first, use click wrap agreements. Second, if your not going to use a click wrap, make sure that at least your forum selection clause (and probably the rest of your terms) are not "submerged" (i.e., are presented above the fold) before a buyer can proceed with his/her purchase transaction.

When Can You Go To Court Naked?

2010-08-02T14:30:00.004-04:00

Apparently, if you are a trademark licensee it is okay to be naked in the Third Circuit Court of Appeals, but only if you've gone bankrupt. Not physically naked, but legally naked ... no problem. :-> I'm being sarcastic, of course, but I was rereading In re Exide, 607 F.3d 975 (June 1, 2010) the other day (yeah, I know, I should get out more) and I notice something that I hadn't before and thought I'd share it.

Exide was decided a couple of months ago and made a minor splash in the trademark licensing world for being one of a few cases to prevent a trademark licensor from rejecting a trademark license as an executory contract in a bankruptcy proceeding. In short, Exide Technologies sold its battery business to Enersys Delaware, Inc. back in 1991. As part of the deal, instead of selling the trademark, Exide granted a perpetual license to the trademark to Enersys. Here is what the trademark looks like:

In 2002, Exide went bankrupt. In the bankruptcy, Exide sought to reject the license as an executory contract to get the trademark back. In bankruptcy, a contract is considered "executory" (and therefore rejectable or "cancellable" by the debtor) if either party has substantial unperformed material obligations at the time the bankruptcy is filed. Exide argued that the license was executory because in contained three material unperformed obligations:

1) Use Restriction - Under the license, Enersys could not use the trademark outside the battery industry.

2) Quality Standards Requirements - Under the license, Enersys was apparently obligated to meet certain standards for battery products provided by Exide.

3) Indemnity & Further Assurances - Under the asset sale documents, Enersys had some indemnity obligations to Exide (which had expired in 1994) and had some "further assurances" obligations. "Further assurances" generally refers to savings clauses in a contract that, essentially requires the parties to do anything additional (that the parties may have overlooked or find out later that they need) in order to transfer the assets or otherwise complete the deal.

The court found that none of these were material and did not allow Exide to reject the license. But what got my attention was the quality standards requirement.

According to Enersys, under the license, Enersys was obligated to abide by the quality requirements set by Exide before the closing. Yet, no such standards were ever provided by Exide either before or after the closing and Exide never requested and Enersys never supplied samples. In its brief, Enersys argued that the this meant that Exide had waived the quality control requirement.

So here's the rub. Why didn't the court find that the license by Exide to Enersys was a naked license and deem the trademark abandoned? There is plenty of law on this point. The failure of a licensor to impose quality control requirements under a trademark license will result in a forfeiture of the trademark. Clearly, in this case, no such quality standards were actually imposed, either under the written agreement or in practice.

My guess is that the court did not deem the license "naked" and the trademark forfeited merely because that issue had not been presented by the litigants. Rather, the issue before the court was whether the license was executory, not whether it was naked. Nonetheless, with this ruling, it seems to me that Enersys could possibly cancel Exide's registration due to the naked license by asserting that Exide had thereby abandoned its rights in the mark altogether, not merely waived its quality control rights.

Although I'm sure its not that simple, and there are probably other facts, however, if I were Enersys, I'd be thinking about filing a cancellation action and a trademark application right about now.

Keyword Advertising Still at Issue in EU

2010-07-13T14:00:00.001-04:00

The European Court of Justice (EJC) decided a new keyword advertising case last Thursday involving two competitors use of Google's Adword advertising. As it seems with all keyword cases, the result will seem shocking to some and perfectly appropriate to others.

The case (Portakabin vs. Primakabin) involved two sellers of mobile buildings. Make sure you read closely. The plaintiff's corporate name is PORTAkabin and the defendant's name is PRIMAkabin. Got it?

Now, when I read "mobile buildings," I think "trailers." While Portakabin does sell some trailer-like buildings, they also sell some fairly impressive modular buildings, like this:

As you may guess, Portakabin is a registered Benelux trademark of Portakabin, Ltd.

Primakabin, on the other hand, sells new and used mobile buildings as well, although, from their website, it does not appear that the buildings they sell are generally as elaborate as the one above. However, Primakabin does sell used PORTAKABIN brand buildings. Here is a screen shot from Primakabin's website showing used PORTAKABIN brand buildings for sale.

The trouble started when Primakabin started using the PORTAKABIN trademark as a Google Adword to drive traffic to Primakabin's website. When an end user searched on the word "Portakabin," Primakabin's ad was displayed. The header of the ad read "used portakabins."

The Amsterdam trial court judge found that Primakabin's use of the PORTAKABIN mark was not infringement. The Amsterdam appellate judge found just the opposite and held that Primakabin had to stop using PORTAKABIN in advertising and, it could not use PORTAKABIN as a keyword if the ad had a link to a website that offered competing products. As you can see, this is clearly an issue about which reasonable, well informed and educated people can disagree.

On appeal, the ECJ found that it was not trademark infringement. Here are some interesting things to note about the case.

First, Primakabin was not using the PORTAKABIN adword merely to drive traffic to Primakabin's website. Primakabin was (and does) in fact sell used PORTAKABIN brand products.

Second, Primakabin was using the PORTAKABIN word solely to describe and identify the source of origin of the used PORTAKABIN brand buildings that were for sale.

From these first two observations, in the US, we might have said that, in the absence of the use as a keyword, this looks like a fair use. While the ECJ court didn't use the phrase "fair use" it is clear that this was part of the rationale for their holding.

Third, from the trademark owners perspective, clearly the use of the PORTAKABIN trademark as a Google Adword was likely to trade off of the goodwill associated with the PORTAKABIN trademark and result in the use of the trademark to drive traffic to the competitor's website where other brands of competing products were sold. This issue clearly caught the attention of the Amsterdam appeals court judge. The ECJ, however, ruled that the fact that competing goods were being sold on the same website was not enough to stop Primakabin from being able to use the PORTAKABIN trademark as a keyword, unless the volume or quantity of such other competing goods could lead to tarnishment of the PORTAKABIN mark.

On the one hand, this seems reasonably fair for resellers of branded goods. On the other hand, however, it is hardly satisfying compensation to trademark owners who see their brand being used as bait to draw potential customers to buy competing products (even if some of their own products are included in the mix).

Finally, the ECJ evaluated whether there was a likelihood of confusion by referring to the hypothetical "normally informed and reasonably attentive Internet user." However, the court did not indicate that there was any empirical evidence as to the actual end user experience of such users with respect to this particular case. Rather, they seemed to simply intuit what such a user's experience would be. So there you have it. The standard for likelihood of confusion in keyword advertising cases in the EU is now whether the use of the keyword makes it difficult for the "normally informed and reasonably attentive Internet user" to distinguish the trademark owner's goods from other goods.

Somehow, I don't think we've heard the end of this issue in the EU.

Viva La Business Method Patent (sort of)?

2010-06-28T13:15:00.013-04:00

While I know I don't usually write about patent issues, this one is too big to pass up. Today, the United States Supreme Court issued a long awaited patent decision on which the viability of business method patents hung in the balance. While there was technically no dissenting opinion, the decision was far from unanimous. In fact, the only thing that they all agreed on was that Mr. Bilski's invention was not patentable. Bilski v. Kapos, 561 U.S. ____ (2010).

Here are a few key holdings from the "opinion of the court:"

1. The term "process" under the Patent Act may include some methods of doing business.

2. The "machine-or-transformation" test is not the sole test for patentability. In other words, a process is patentable even if it is not tied to a machine and even it if doesn't transform something into something else.

3. Computer programs are not categorically unpatentable.

4. Abstract ideas are not patentable. Certain whole categories or classes of instructions on how to conduct business may be merely abstract ideas and not patentable.

Items 3 and 4 come from a portion of the opinion in which Justice Scalia did not join. So the weight of these portions of the opinion is on much less solid footing.

The absolutely key question raised by the case going forward is; "how do we determine what is an unpatentable abstract idea and what is a patentable process?" I suspect that this is a topic about which myriad scholars and pundits will write volumes for years to come. To some degree, the majority seems to have taken the "we know it when we see it" approach to determining whether the claimed invention in this case was merely an unpatentable abstract idea. In fact, they expressly declined to provide guide lines that would be helpful in distinguishing unpatentable abstract ideas from patentable processes. They simply said that based on three prior cases, the claimed invention looked like an abstract idea to them (apparently each and every member of the court agreed on this point) and so, therefore, it was not patentable. And there you have it.

So ... what we have for guidance are the three prior cases (referred to as Benson, Flook and Diehrand) and now, the Bilski case. According to the majority, then, here is the guidance that the business world has to go on.

Benson - mathematical algorithms are most likely (if not categorically) not patentable.

Flook - a invention which would not be patentable otherwise, is not made patentable merely because the patentability claim is limited to use within a particular technological environment.

Diehr - the application of a law of nature or mathematical formula (or an abstract idea, perhaps?) to a known structure or process may be patentable.

Bilski - mathematical formulas for hedging risk are non-patentable abstract ideas and claims applying them to a particular industry or market do not make them patentable.

Got it? I hope this clears everything up for everybody. :-> (sarcastic smile).

It is interesting (one might even go so far as to say moderately "helpful") that the court seemed to go out of its way to expressly address computer programs (i.e., software). The "opinion of the court" expressly says that computer programs may be patentable processes. Unfortunately, this portion of the majority opinion was not joined in by Justice Scalia and so, may actually represent only a minority view on the issue.

Now here is where it gets dicey. So far, I've been careful to couch what I've said by referring to the "opinion of the court." This is a term of art. While it generally refers to the majority opinion (and thus, the law of the land), in this case it is hard to tell, especially when it comes to the viability of the business method patent. Here is why.

As everyone knows, there are 9 justice on the US Supreme Court. In this case, the "opinion of the court" was joined in by 5 justices (with Justice Scalia declining to join in two key parts). There are also two other "concurring" opinions the first of which is joined by the remaining 4 justices (Breyer wrote an additional concurring opinion although he joined in the first concurring opinion). The main reason why the concurring opinions are "concurring" is because they all agree that Mr. Bilski's invention is not patentable. Where the concurring justices deviate from the majority justices is on the very issue that makes this case so important. Namely, the concurring justices disagree with the majority on the patentability of business methods. In fact, the "concurring" opinion expressly finds that business methods are not patentable. So, here's what we've got.

Roberts, Thomas, Kennedy & Alito (the "opinion of the court") - business methods are not categorically unpatentable and, thus, are potentially patentable.

Stevens, Ginsburg, Breyer & Sotomayor (the "concurring" opinion) - business methods are categorically unpatentable.

Scalia - Agrees generally with the opinion of the court, but declines to join in the portions that contemplate that:

(1) the law on patentability of inventions must evolve with technology;
(2) categorically denying patentability to business methods because they were not historically contemplated by the statute is problematic; and
(3) the unpatentability of abstract ideas is a useful tool in determining patentability.

Essentially, while this is a unanimous decision on the unpatentability of Mr. Bilski's invention, it is, at best, a 5-4 decision on the patentability of business methods. Query whether Justice Scalia could have been (or could be in the future) swayed over to the side of the concurring justices. If so, the decision (and the patent world) could have been completely different.

Now, as the world knows, Justice Stevens has announced that he is retiring. It will be interesting to see if this issue finds its way into the confirmation hearings for Supreme Court nominee, Elena Kagan. If Kagan is confirmed and if she believes that business methods should not be patentable, then it is more likely that another case will be brought on the same issue to see if Justice Scalia can be swayed.

Stay tuned. It ain't over yet.

A New Defense for Brand Owners Against Unwanted Key-Word Advertising

2010-05-29T14:12:00.007-04:00

Just came back from the International Trademark Association (INTA) annual meeting in Boston. Being on the Key-word Advertising Working Group of the Internet Committee, I spent quite a bit of time talking to colleagues from around the world about issues surrounding key-word advertising. From these discussions (and some recent developments in the law), it dawned on me that there may be a new way for brand owners to defend themselves against unwanted key-word advertising.

By way of reminder, key-word advertising (in its most traditional sense) is a dynamic form of advertising where search engine's selling (and advertisers buying) the ability to have the advertiser's advertisement displayed automatically when an end user enters that key-word into the search engine.

There are at least two primary things that frustrate brand owners about key-word advertising. First, companies can purchase the brands of their competitors as key-words and thereby use their competitors' trademark (and arguably their good will) to divert Internet traffic to the competitor's website and divert potential buyers to the competitor's products. Second, search engines are making money using the brand owner's trademark.

One of the significant legal developments in the last year in this area is that the majority of US courts seem to have reached a consensus that a search engine's sale of a trademark as a key-word constitutes a use of the trademark in commerce. The unsettled issue is whether and under what circumstances, that use gives rise to a likelihood of confusion so as to constitute infringement. Reflecting on this, it occurred to me; what if a brand owner used its brand not only as its trademark for its goods, but also used its brand for its own key-word advertising?

Bear with me here. Suppose Widgco, Inc. sells widgets under the brand SPARROW. (What's a widget?). Now, ordinarily, a search engine could then sell SPARROW as a key-word to the highest bidder (e.g., perhaps Widgco's competitor). But what if Widgco also had its own search engine and used the word SPARROW as a key-word to trigger its own advertisements on its own search engine. Under the majority of current cases, this should constitute "use in commerce." As such, Widgco would be using the brand SPARROW not only for widgets, but would also be using the word SPARROW for the advertising service of providing the key-word to trigger advertising displays. Now imagine that Widgco registers its SPARROW brand for "advertising services, namely, use as a key-word to trigger advertising displays." Okay, I admit, the description could use some refining, but you get the point. It would potentially be problematic for any search engine that wanted to use the SPARROW brand as a key-word.

Anyone else think this might work as a good defense against use of a trademark by search engines as a keyword? How long do you think it will be before someone tries this out and brings the first case like this? Just a thought ...

Anonymous Internet Defamation

2010-03-24T14:33:00.005-04:00

If you have any presence on the Internet, sooner or later you will have to cope with anonymous defamation. So ... what can you do about it? The first thing that everyone wants to know, of course, is the identity of the person who posted or emailed the defamatory statement anonymously. However, the First Amendment to the U.S. Constitution generally protects anonymous speech. A recent New Jersey Appellate Division case (A.Z. (a minor) and B.Z. (on behalf of A.Z., as parent) v. John Doe and Jane Doe, Docket No. A-5060-08T3 (App. Div. March 8, 2010)) laid out two key elements that are required to force someone (typically an Internet Service Provider) to divulge the identity of the anonymous person. As lawyers like to do, let's call the anonymous person "John Doe."

In a nutshell, there are two key requirements you must satisfy if you want to force an ISP to tell you John Doe's identity. First, you need to prove to the court that you have all of the elements necessary to prove your case for defamation. Second, you need to persuade the court that your need for John Doe's identity outweighs John Doe's First Amendment right of anonymous speech.

If you are like me, its easy to quickly get bored reading lengthy articulations of intricate facts of legal cases. So, I'll try to keep it short, but this one is worth reading. The case arose when Jane Doe sent an email to a faculty advisor of a high school honors club. The email attached photos allegedly taken from posts on FaceBook showing various students holding beer cans and bottles and a beer funnel and inhaling what appeared to be an illicit drug. In one of the photos, A.Z. (the plaintiff in the case) is allegedly depicted poised to toss a ping pong ball on a table containing several plastic cups and beer cans. The email also alleged that the students depicted were "breaking their contracts [with the school] and breaking the law." The email was then forwarded to the principal, the school superintendent and the police. The police ultimately chose not to prosecute.

The trial court was persuaded that A.Z. had established a prima facie case for defamation (the first requirement), but did not feel that A.Z.'s need for John Doe's identity outweighed John Doe's First Amendment right of anonymous speech (the second requirement). The appeals court disagreed and found that A.Z. had not established a prima facie case for defamation.

In order to establish a case for defamation, one needs to prove that: (1) the defendant made a defamatory statement of fact about the plaintiff, (2) the statement was false, (3) the statement was communicated to a third party, and (4) the defendant knew the statement was false or faild to exercise due care in ascertaining its truth or falsity. In this case, the appeals court was not persuaded that the defendant's statements (i.e., that the students depicted were "breaking their contracts [with the school] and breaking the law") were false. Oddly enough, according to the appeals court decision, A.Z. never provided any evidence that the statements were false; not even a sworn affidavit. Having found this, the appellate court did not bother analyzing the other factors.

Long story short ... if you want to find out who is defaming you on the internet, you had better be prepared to swear under oath that the defamatory statements are false.

To Defense Contractors, Al Frankin Amendment is No Laughing Matter

2010-01-12T10:45:00.015-05:00

Prime contractors who want to be eligible for Department of Defense government contract awards will have to comply with a new law banning arbitration with employees for claims. Compliance with the new law will likely require defense contractors to review, revise and renegotiating existing agreements with many of their independent contractors and subcontractors. On December 19, 2009, President Obama signed a new spending bill into law which implemented this requirement. The amendment to the bill providing for the arbitration ban was originally offerred by Sen. Al Frankin (D- Miss).

Under the new law (Sec. 8118 of HR 3326 ), prime contractors under DOD contracts will have to agree not to "enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 (prohibiting employer descrimination on the basis of race, color, religion, sex or national origin) or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention." The new law goes further to require that such prime contractors will also have to agree not to take any action to enforce any provision of an existing agreement which would require such arbitration. This provision applies only to government contracts in excess of $1,000,000 awarded more than 60 days after the effective date of the Act.

It is not entirely clear what is intended to be covered by phrase "independent contractors." Perhaps it is intended to cover temporary help staffing who are not technically employees. However, does it apply to subcontractors?

A second provision of the new law expressly deals with and uses the word "subcontractors." The fact that the new law uses the phrase "independent contractors" in one section and "subcontractors" in another, might suggest that the phrases were intended to apply to different groups of non-employee workers.

The second provision dealing with subcontractors requires the prime contractor to certify that it requires each "covered subcontractor" (a subcontractor with a subcontract in excess of $1,000,000) to abide by the first provision applicable to prime contractors. This second provision applies to contracts awarded more than 180 days after the effective date.

Prime contractors and subcontractor who have agreements with their employees, independent contractors or subcontractors which contain these types of arbitration provisions may very well have to revise their contracts. Contracts which have general arbitration provisions, will have to be revised to exclude these particular types of claims. This provision has already been construed to apply to all employees, not merely those working on the government contract.

Who Owns the Rights to Santa Claus?

2009-12-15T07:48:00.005-05:00

I was recently asked this question and fell in to the common quasi-misperception that the common Americanized image of of the "jolly old elf" was a creation of the Coca Cola company cut from whole cloth. Well, I was partly correct, but, as it turns out, the history of the image of Santa Claus is a little richer than I had originally appreciated.

Fortunately, you don't have to look far to get some pretty good triangulation of the "modern" history of the Americanized image of Santa Claus. Here is what I found.

While the historical roots of the origin of Santa Clause have been traced to the 4th Century Greek Saint Nicholas of Myra (apparently a resident of what is now Turkey (yes, the food irony is not lost on me)) that was not what I was looking for. I was more interested in the origins of the American iconic image.

The commonly found explanation seems to trace the origins of the American image to Washington Irving who (influenced by Dutch and, quite likely, early British images) first described an image of Saint Nicholas in his History of New York (1809) as "equipped with a low, broad brimmed hat, a huge pair of Flemish trunk hose, and a [long] pipe." This image was greatly enhanced in Clement C. Moore's 1823 poem A Visit from St. Nicholas (aka Twas the Night Before Christmas).

However, the first Americanized visual image of our familiar Saint Nick (which appears to incorporate the narrative attributes provided by both Irving and Moore) is attributed to illustrator Thomas Nast who drew an image of Santa for Harpers Weekly magazine in 1863.

This image is in the public domain and is available from Wikipedia and the Library of Congress. Another Santa image (which starts to look more like our familiar Santa Claus) attributed to Nast can be seen below (also from the Library of Congress) titled "Merry old Santa Claus" from 1889.

So far so good. As long as I am using Washington Irving, Clement C. Moore or Nast as my basis for creating my own image of Santa, I'm pretty safe, right? Not so fast.

The modern version (which would appear to draw significantly from the attributes of those images that came before, especially Nast) that most of us (well ... at least me anyway) think of when we think of Santa Claus is largely attributable to the handy work of one Haddon Sundblom who painted Santa images for the Coca Cola company in the 1930s. The Coca Cola company actual has their own accounting of the history of the Santa image on the Coke website. They state that Sundblom's inspiration came largely from the the Clement C. Moore poem. That said, there are clearly similarities between the 1889 Nast image and the Sundblom images.

So, who owns the rights to Santa Claus? Well, while the Sundblom images are owned by the Coca Cola company (I suspect), the Nast images appear to be in the public domain. Does that help? .... I didn't think so.

The better question is who owns the spirit of Saint Nicholas. Hopefully, the answer to that question is all of us.

Thanksgiving is Dead

2009-11-24T10:15:00.000-05:00

That's right. You read it correctly. According to the U.S. Patent & Trademark Office, Thanksgiving is listed as dead. Officially, it is listed as having died three days before Christmas in 1988. On December 22, 1998, the THANKSGIVING trademark officially died after Alterman Foods, Inc. had failed to file a Section 8 affidavit continuing the mark. The mark was registered for Cooked Fruits, Cooked Vegetables, Hamburger Patties, Ground Pepper and Tea and, according to its owner, had been in use since September 1912. So the rest of it I can understand, but hamburger patties? Please let me know if you or anyone you know has a tradition of eating hamburger patties at Thanksgiving. I'm not offended, just curious.

On a more upbeat note, however, I am happy to report, that THANKSGIVING has been given new life by Hidden Wineries, Inc. who recently applied for the mark in August of this year for one of my favorite beverages: wine.

You'll also be glad to know that Macy's THANKSGIVING DAY PARADE is alive and well on the USPTO trademark roster, although with a claimed date of first use dataing back to 1924, I was surprised to see that it was only recently registered in 1998.

Finally, of all things, HAPPY THANKSGIVING is currently registered to Mattel. Go figure. Fortunately, it is only registered for toys and not bloging services. So hopefully Mattel will not be offended if I wish you all a HAPPY THANKSGIVING!!!

New FTC Guidelines to Address "Astroturfing"

2009-11-07T19:13:00.001-05:00

Ever wonder whether the reviews allegedly posted online by consumers about a product were actually written by independent consumers or by the people on behalf of the company itself? Me too. Apparently, so does the Federal Trade Commission. On October 5, the FTC released its new “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

The previous guides (which were almost 3 decades old) did not expressly address internet based consumer endorsements sometimes referred to as "astroturfing." The new Guides clearly do, by expressly providing that where bloggers, paid by the advertiser, post product reviews, such reviews will be treated as endorsements. As such, the new Guides apply the previous rule (that the “material connections” between the endorser and the advertiser must be disclosed), at least in part, because these are connections that consumers would not expect.

The new Guides also require advertisers who rely on research findings to disclose material connections between the advertiser and the research organization. Similarly, with few exceptions, celebrity endorsers are also required to disclose any material connection between them and the advertiser.

Another key change under the new guide is that the FTC has gotten rid of the safe harbor that had previously existed for product endorsements. Under the old guidance, an advertiser could simply include a statement to the effect that “your results may vary” as a guard against a claim of false advertising if an endorser’s statements were not generally representative consumers’ experience with the product. Not any more. Now, advertisers and their endorsers are required to clearly disclose the results that consumers should generally expect.

Finally, the new Guides expressly provide that the endorser (not merely the advertiser) can be held liable for unsubstantiated claims made in the endorsement.

Much of the new Guides focus on the FTC’s opinion as to what a consumer is likely to perceive with respect to the relationship between the advertiser and the endorser. Unfortunately, there are not a lot of bright line tests that can be used by advertisers to know what is in the mind of the average consumer. It will be interesting to see how advertisers (especially those focusing on advertising in online social media) react to this new guidance.

Software Licensing & Bankruptcy

2009-10-14T22:41:00.002-04:00

Given the state of the economy, companies are more and more focused on bankruptcy issues. In software licensing transactions where the software is a mission critical application for the licensee, it is not uncommon for the licensee to require that the source code be placed in escrow. Typically, the purpose of the escrow is to provide the licensee with a comfort level that the source code will be available for the licensee’s use if certain events occur. These events are typically referred to as “release events.” One release event that is commonly negotiated in technology escrow agreements is the bankruptcy of the licensor. For more on this issue you can listen to my podcast on this topic.

The licensee’s fear arises (at least in part), from the generally accepted perception that bankruptcy is a bad thing. And, as a licensee, if a bad thing happens to my mission critical application licensor, I want a back up plan. On the other hand, licensor’s carefully guard the confidentiality of their source code. Accordingly, they generally resist release events which would allow the source code to be released while the licensor is still in business. In the abstract, however, the bankruptcy of the licensor does not always spell disaster for the licensee.

In an involuntary bankruptcy of a licensor, the licensor can always get out of bankruptcy by paying off or settling with the creditors that put the licensor into the bankruptcy. Of course if the licensor does not or cannot do so, then the bankruptcy will continue. If the bankruptcy continues as a chapter 7 liquidation, then there is an expectation that the licensor will eventually go out of business. In this case, the licensee would be rightfully concerned about the ability of the licensor to continue to support the software. However, if the involuntary bankruptcy is either filed as a chapter 11 reorganization or the licensor converts it to a chapter 11 reorganization, then the expectation is that the licensor will reorganize its financial position and will not go out of business.

In a voluntary bankruptcy, the key risk for the licensee turns on whether the case will proceed as a chapter 7 liquidation or a chapter 11 reorganization. If the licensor voluntarily files for a chapter 7 liquidation, then, as mentioned above, the licensee has good reason to be concerned. If, however, the licensor files for a chapter 11 reorganization, then, as long as the licensor does not otherwise breach it support and maintenance obligations, there is no need for the licensee to have access to the source code (other than the licensee’s general insecurity). Filing for bankruptcy under chapter 11 does not mean that the licensor will go out of business. It is quite possible that the licensor could file for bankruptcy under chapter 11 and “come out of bankruptcy” with a reorganized and stronger financial position, and, without a "hic up" in the performance of its support and maintenance obligations during the bankruptcy.

From the licensor’s perspective, the risk of compromising the confidentiality of its source code (the company’s key asset) can be terribly problematic. This is especially important where the software and source code will perform a pivotal role in the ability of the licensor to reorganize itself in the context of the bankruptcy. When considering bankruptcy as a release event under a source code escrow, analyzing the pros and cons of the possible scenarios may not be as straight forward as it otherwise seems.

They’re Saying Bad Things About My Company. Can I Sue?

2009-08-25T11:05:00.007-04:00

Sooner or later, every company ends up finding negative statements about it published on the Internet in chat rooms, bulletin boards, blogs or otherwise. I periodically get asked, what can I do?

A New Jersey court recently addressed a claim of trade libel. Bovial Corporation vs. SAC Capital, Docket ESX-L-1583-06 (N.J. Law Div., August 20, 2009). Trade libel is similar to defamation. However, where defamation is a claim based on general injury to reputation, trade libel is a claim based on specific injury to the good will associated with particular goods or services. In New Jersey, for example, the claim is sometimes referred to as a claim for "product disparagement." The use of a brand for a specific good or service, however, can actually help to insulate a company from defamation since negative statements about a brand tend more to diminish the brand than the company as a whole.

Both defamation and trade libel involve claims of a false statement being made to others and resulting damages. One key difference, however, is that for defamation, a drop in stock value, for example, can be valid evidence of damage cause by defamation. For trade libel, the claimant must prove lost sales caused by the libelous statements (referred to as “special damages”).

The tough thing about bringing either of these claims is proving damages. In the Bovial case, the plaintiff’s claim was dismissed on the basis that Bovial had allegedly failed to plead special damages with specificity. Why didn’t Bovial claim defamation? Because the statute of limitations had run on any claim for defamation whereas claims for trade libel are subject to a longer statute of limitations. In New Jersey, claims for defamation must be brought within one year, whereas claims for trade libel may be brought within six years.

Inside Google's US Trademark Policy

2009-07-16T09:05:00.001-04:00

It has been a while since Google's new trademark policy allowing the use of trademarks in the text of ads went into effect. This was a big deal when it was announced (ironically during the Annual Meeting of the International Trademark Association). Even the New York Times covered the story. I thought it might be helpful to take a closer look at the limitations on when Google will allow or disallow an advertiser to use a trademark in the text of an ad.

Google's policy places 5 limitations on when an advertiser can use a trademark in the text of its ad (and I'm paraphrasing here):

1. If the ad uses the trademark in a descriptive or generic way not referring to the trademark owner or the corresponding goods or services.

2. If the ad uses the trademark to refer to the trademark owner.

3. If the ad is used in connection with the re-sale of the trademarked goods or services.

4. If the ad uses the trademark in connection with the sale of replacement parts or compatible components corresponding to the trademark.

5. If the ad uses the trademark for informational purposes where the advertiser does not sell competiting goods.

What are your thoughts? Is this adequate to guard against trademark infringement? Take the poll in the right hand margin on whether you think keyword advertising is trademark infringement.

Copyright in Aerial Photos

2009-04-30T13:28:00.001-04:00

In November, the New Jersey district court threw out the $20,000,000 copyright infringement claim of an aerial photographer due to the running of the statute of limitations on the claim. Bruss v. Berger, 2008 WL 5111284. This case is a good reminder that copyright claims must generally be filed within 3 years after the claim accrues and that the damages for copyright infringement in real estate cases have the potential to be significant.

In this case, in 1986 the photographer took aerial photos of the Paramus and Monmouth malls for a real estate developer. The developer allegedly borrowed the negatives with the understanding that he would order prints from the photographer. The developer allegedly used the photos to sell the properties and never compensated the photographer.

The photographer alleged copyright infringement and claimed $20,000,000 in damages.

The case is unclear as to why the photographer waited so long to bring his claim. What is interesting is that the court did not suggest that the photographer's claim was meritless. The court also did not address whether the copyright in the photograph had been registered prior to bringing the case (copyright registration is a prerequisite to filing an infringement law suit). Nonetheless, the court did not hesitate to dismiss the photographer's claim and rightly so. The clear lesson learned here is to be aware of the limited time allowed to bring copyright claims.

It's fun (if you're a lawyer) to speculate as to what the result would have been if the case had been brought before the expiration of the statute of limitations. Assuming that the developer made copies/prints, there may have been infringement. But how much would that infringement have been worth? In a case recently blogged about on the Photo Attorney blog, a photographer obtained a $12 million verdict for the unauthorized use of her photographs to sell high-end homes.

Under the copyright act, the photographer's damages are measured, at first, by the profits obtained by the infringer. In the Bruss case, the damages would, initially, have been the $20,000,000 alleged. It would then have been the burden of the infringer to prove what portion of the profits were attributable to factors other than infringement of the copyrighted work. In a real estate case, its easy to imagine how other factors could be demonstrated to be the driving force in determining the selling price (square footage, condition of the building, location, quality of existing tenants, etc.). However, if the photographer had timely registered his copyright, he would have been entitled to statutory damages of up to $150,000 per infringed photograph without having to prove damages!

Another Poor Name Choice (Only The Lawyers Won)

2009-03-30T13:23:00.001-04:00

The moral of this story is simple. Choosing a trademark is a business decision. It's about managing risk and making money. When choosing a new trademark, there is no good business reason to choose a mark that is in use by others. Not only is it likely to provoke unnecessary and costly legal battles, but also it fails to effectively distinguish your goods/services from others and may result in committing to a name that is not protectable. This case is the classic example.

On December 9, 2008, the New Jersey District Court ruled in favor of plaintiff Heritage Community Bank in a trademark infringement action against defendant Heritage Bank, N.A. Heritage Community Bank v. Heritage Bank, N.A., 2008 WL 5170190. This is a case that never should have happened.

Plaintiff owned a federal trademark registration for "Heritage" for banking services. Defendant ran a trademark search and found several other users of "Heritage." According to the court, there were five other users of the word "Heritage" in the banking industry nationwide and none of them were in the New Jersey area. Nonetheless, the defendant apparently concluded that the banking industry was a crowded field as to the use of word "Heritage."

The crowded field theory is not easily quantifiable. Generally, though, the theory is that if there are several similar marks already in use (i.e., a "crowded field"), then courts will tend to construe the scope of rights very narrowly. That is, for marks in a crowded field to be found confusingly similar, they generally have to be exactly (or almost exactly) the same and for very similar goods.

It is often difficult to effectively evaluate the impact of the crowded field on the rights of the parties to use the mark. For this reason, this theory is typically used as a shield not a sword. That is, it is typically a defense used by a business which has already committed to a name and finds itself in the middle of a dispute.

In the Heritage case, it is hard to understand why the defendant would have relied on this legal theory in committing to a new mark. Even if it were successful, the theory would necessarily have resulted in the defendant's inability to perfect trademark rights (i.e., the right to stop others from using the name). If the defendant won, the court would likely have decided that the word "Heritage" was so weak that the plaintiff's had no ability to stop the defendant from using the "Heritage" name other than in the exact same manner. The corollary to this is, of course, that the defendant would then have no right to stop others from using the "Heritage" mark.

Once the search was run and the plaintiff's registered trademark was discovered, it is hard to understand why the defendant would have chosen to commit to the Heritage name. At this stage, the defendant would have had nothing invested in the Heritage name and could have easily chosen another name.

Second, defendant received a cease and desist letter from plaintiff before starting business. Again, knowing that the plaintiff (holder of the federal trademark registration) objected to the use of the Heritage name, why did the defendant provoke this fight by continuing to use the name? Clearly, the less costly alternative would have been to choose a different name.

Finally, once the case was filed, it must have seemed very unlikely that the defendant would have succeeded in this case. This should have settled.

Obama Trademarks

2009-03-12T12:44:00.003-04:00

Here is some interesting trivia. The "O" design used by the Obama campaign is actually a registered trademark. The New York Times did an interesting interview with the designer that you can read here. The application was filed in May of 2007, but, not surprisingly, did not register until December 2008. Well, he didn't have the registration for the election, but the USPTO did come through in time for the inauguration. :->

As was to be expected, there continues to be an onslaught of people trying to register Obama formative and Obama comprised trademarks. By my count, since the first of such applications was filed in November 2006, there have been 84 applications filed for Obama marks of which 13 have already died and I suspect that most of the others will likely have a similar fate. Most of these applications will be rejected without the President's consent. Under §2(c) of the Trademark Act, in order to register a trademark that contains the name, portrait or signature of a living person, you must obtain their consent. For the record, there are one or two I suspect may obtain such consent (e.g., one filed by the Presidential Inaugural Committee).

Here are some of the more amusing attempts so far:

OBAMA BALM

OBAMA BAHAMA PAJAMAS

OBAMA VODKA

BUSH ROBBED MY MAMA SO I VOTED FOR OBAMA

OBAMA JAVA VICTORY BLEND

BROCCOLI OBAMA

WHO'S YO'BAMA NOW? (for t-shirts, etc.)

and my personal favorite

OB-LA-DI OB-LA-DA O-BA-MA

Another Trap for Consultants in a Down Economy; Unregistered Consultants Barred From Court

2009-02-25T14:45:00.002-05:00

In 2002 and again in 2003, I wrote about the importance of consulting firms making sure to register in New Jersey as temporary help service firms. A new case decided in January makes this point yet again. If you are providing staff augmentation or consulting work, you probably need to be registered. Camo Technologies Inc. v. Pathan, 2009 WL 17890 (N.J.Super January 2, 2009). Here is an excerpt from a piece I wrote in 2002 explaining the dilemma which is even more poignant today.

"In a down economy, companies try to cut costs by limiting their outside consulting. Rather than engage an outside consultant for a full project, they try to save money by fixing the problem [using] mostly in-house [personnel]. However, many companies also seek help from short-term, skilled people engaged on a limited basis. Hungry consulting companies respond by gladly offering up their skilled employees on a temporary basis for whatever projects their customers need. Consulting companies who do so risk becoming subject to the [Private] Employment Agency Act and, therefore, may be unable to enforce customer contracts unless they are licensed or registered under the [Act]."

The first big case on this point was decided in 2001. At that time the New Jersey courts refused to enforce a subcontracor contract entered into by a temporary help service provider who was unregistered under the Private Employment Agency Act. Data Informatics v. AmeriSource Partners, 338 N.J. Super. 61 (App.Div. 2001). Then in 2003, the New Jersey courts refused to enforce a business-to-business non-solicitation provision between consulting companies. Software Int'l v. Real Soft, Inc., Docket No. A-1454-01T3 (Unpublished App.Div. 2003).

The 2009 Camo case confirms some important aspects of the statute and takes this a step further. In Camo, the New Jersey court held that:

1. Registration after the fact doesn't cure the problem for contracts entered into before registration;

2. Employment agreements of unregistered temporary help service providers are unenforceable; and

3. Not only will contracts not be enforced, but also the courts will not enforce other claims arising out of the same circumstances (e.g., torts).

The first holding would seem to fall squarely within the statute.

The second holdings represents a broad reading of the statute, but is consistent with prior case law.

The third holding is an even broader interpretation of the statute than prior cases. The statute only expressly prohibits unregistered companies from using the courts "for the collection of a fee, charge or commission." N.J.S.A. §34:8-45. Arguable, compensatory damages arising out of breach of an employment agreement or a tort are not a "fee, charge or commission." However, since all of the claims arose out of the same set of circumstances which were all related to the temporary help service business, the court concluded that they were all unenforceable.

After Camo, it is harder to imagine a set of circumstances in which an unregistered temporary help service firm would be able to bring any action in any court in the state.

This case (together with its predecessors) send a clear message. Unregistered temporary help service providers will not be provided access to the courts for almost anything related to the conduct of their business.

Mandatory CLE for NJ Attorneys

2009-02-13T08:32:00.005-05:00

I recently distributed an article about the report of the New Jersey Supreme Court's Ad Hoc Committee on Continuing Legal Education as it relates to in-house counsel and inactive attorneys. Below are links to some of the materials reference in the notice.

NJ Court Rule 1:27-2 - Provides that in-house counsel licensed in another state but employed in New Jersey may obtain a limited license (subject to certain restrictions) to practice law in New Jersey solely for his/her employer.

NJ Court Rule 1:28-2(b) - Uses the term "inactive" for the purpuse of excusing inactive attorneys from New Jersey Client Protection Fund payments. Does not define "inactive."

Official Notice of the Ad Hoc Committee's Report dated November 10, 2008, but not published until December 1, 2008.

Full text of the Ad Hoc Committee Report.

Please email me if you would like a copy of the full text of my article.

Keyword Advertising - Trademark Infringement or Not?

2009-02-03T11:06:00.001-05:00

I've been getting inquiries about keyword advertising. This is where a company buys a keyword from a search engine and when someone searches that word, the company's ad is displayed. These ads are also links to the advertiser's website. Google uses their trademark "Adwords" for this service. All in all, this can be an effective way of driving web traffic to your site.

The problem arises when a company buys a keyword which is also a competitor's trademark. Is that trademark infringement or is it good old fair competition? At the 2007 International Trademark Association Annual Meeting presentation on this issue in Chicago, the audience seemed to have as many different opinions as the courts do.

At a high level, courts in the 9th circuit (which includes California) have tended to hold that it is (or at least can be) trademark infringement. On the opposite side of the country (and the spectrum), New York courts have held that keyword advertising using a competitor's trademark doesn't even constitute "use" of the trademark (let alone infringement). To make matters even more confusing, we in the 3d circuit (NJ, PA & DE) have a split among the district court decisions on this issue. In Pennsylvania, this kind of keyword advertising is not trademark infringement, but in New Jersey it is. Go figure.

What do you think? Take the poll below the archive on this site.

Obama to Use the Lincoln Bible

2009-01-20T10:39:00.003-05:00

As many people know, for his inauguration today, Obama will be using the same bible used by Abraham Lincoln. According to the Library of Congress, it is not uncommon for members of Congress to request bibles from the library for various occasions. However, it appears that this is the first time that a president has ever requested the Lincoln bible for his inauguration. The Library of Congress has recently posted some high resolution photos of the Lincoln bible. If you're interested, you can see them and read more at this link. http://www.loc.gov/blog/?p=410

Indemnities Done Well

2008-12-02T10:08:00.001-05:00

Let's face it. Business people can't stand dealing with contract indemnity provisions. Most lawyers aren't particularly fond of them either. Normal people find them extraordinarly confusing. This confusion frequently results in the creation of indemnity provisions that are at best meaningless and at worst can distort the intention of the parties.

In certain transactions, business people may agree that a risk imposed on one party should more appropriately be borne by the other party. When this happens, an indemnity provision is the solution. All indemnities shift risk from one party to another. That is their purpose.

A good indemnity shifts a risk to a party who would not ordinarily be liable for that risk. A poor indemnity purports to shift risk to a party who, in fact, would ordinarily be liable for that risk by law or by contract.

Take, for example, indemnity against breach of contract. Such provisions read something like this: " A indemnifies B against A's breach of this contract." If a contract is breached, the law provides each party with a remedy, namely, the right to sue for breach, recover damages and be made economically whole. In this case, the indemnity generally adds nothing of value to the contract. If B breaches the contract, A can sue B for breach of contract without the indemnity. Thus, no risk has actually been shifted.

But if it doesn't add anything, what's the harm in keeping it in the contract?

An indemnity against breach of contract may be uninsurable. See Indemnification: How to Identify Unacceptable Risks and Get Them Out of Your Agreements by F. David Shipley and David W. Lakamp. Including an indemnity against breach of contract may give an errors and omissions insurer reason to deny coverage that might otherwise have been available. This would not be good for either party.

Moreover, contracts are written, so that judges (who might later be asked to read them) will be able to gleen the intent of the parties. A breach of contract indemnity runs the risk of being construed to mean something unintended. Since the law provides a remedy for breach of contract, there is no need for the parties to agree to indemnify each other for breach of contract. Accordingly, judges are put in the position of either construing the provision to be meaningless (something judges would likely be disinclined to do) or construing that the intent of the parties must have been to provide for some other or additional remedy. The last thing anybody should want (including judges), is putting a judge in a position to guess at what the parties meant.

Madrid System Podcast

2008-11-15T07:50:00.005-05:00

This podcast contains a brief summary of the Madrid System. The Madrid System allows a trademark owners to extend their trademark registrations from one country into numerous other countries through a centralized system. The system gets its name from two international treaties (the Madrid Agreement and the Madrid Protocol). Having the option to extend trademark protection through the Madrid System is clearly a huge benefit to trademark owners. However, whether you file through the Madrid System or file a separate application domestically in a foreign country or file an application through a regional system (e.g., EU Community Trademark system) is frequently a strategic decision.

Click on the title above to listen to the podcast.

Craig's List's "Erotic Services" Similar to Tiffany on eBay

2008-11-10T17:33:00.005-05:00

The New York Times reported on November 6, 2008 that Craig's List had agreed with 40 attorneys general to take action to reduce the listing of prostitution and similar services on the site. So, Craig's List is now implementing business processes to discourage illegitimate service providers. This includes asking for phone numbers and charging a fee for which a credit card will have to be provided.

Back in July, CNET reported a New York court ruled that eBay was not responsible for trademark counterfeiting occurring on its website even if after Tiffany had provided eBay with knowledge of it. Like Craig's List, eBay implemented measures to prevent the unwanted activity. eBay used search engine technology to find keywords that would identify instances of blatant infringement. In addition, eBay provided a mechanism to allow trademark owners to report suspected infringement. As a result, eBay won its court case.

The real issue in both of these cases, is: "To what extent should an online conduit (like eBay and Craig's List) be obligated to police postings on its site or else be liable for the consequences? "

Before you jump to any conclusions, consider the fact that eBay's expert acknowledged that 30% or more of "Tiffany" items sold on eBay were probably counterfeit. Clearly companies like Craig's List and eBay are making money by allowing their sites to be used for such illegal activity. Why shouldn't they bear the cost?

On the other hand, sites like Craig's List and eBay serve a useful purpose and since they are merely conduits, why should they be held liable? In both cases, it seems like the legal results are coming down in favor of requiring these companies to use some reasonable processes to police their sites in exchange for immunity from liability. Is this a good thing?