South Carolina Intellectual Property Litigation

Intellectual Property & Litigation SC

Beware of the FaceBook Support Group Naked License

Posted in General, Injunctions, Licensing, Policy, Trademarks

Most people seeing or hearing, “naked license,” for the first time will wonder what does nudity have to do with intellectual property or business? Well, the concept that this term / phrase denotes is likely one of the most basic in IP, and it is limited to trademarks?

A quick Google search for “naked” and images shows that Americans are fascinated with the term, naked. For example, have you ever really considered …

2016-01-13__golf naked or 2016-01-13__fish naked ??

The latter involves hooks and line and is dangerous enough fully clothed.

So what in the heck is a “naked license”?

A naked license occurs when a trademark or servicemark owner fails to police their brand. Yes, it is that simple. The license is bare. A naked license can arise when a trademark owner grants a written, de facto or verbal license to another party with no provisions allowing / requiring the trademark owner to ensure the quality of the goods sold or services rendered.

A naked license can also occur, arguably, when there are unenforced quality control provisions in place, or when a trademark owner benefits by the third-party use and acquiesces without any controls. The famed treatise, McCarthy on Trademarks, describes the naked licensing (paraphrased to shorten, italics emphasis added) as follows:

Uncontrolled licensing whereby licensee places the mark on any quality of goods [causing] mark to lose significance. Such uncontrolled licensee use raises a grave danger the public will be deceived.

While the concept prohibiting uncontrolled licensing is rooted in the Lanham Act at 15 U.S.C. 1055, circa 1946, the term naked license appears to have first been used in caselaw in 1959 in the Dawn Donut case, which is better known for its holding limiting trademark injunctions. In Dawn, the Second Circuit cited to a 1948 legal battle between chemical powerhouses DuPont and Celanese, and stated:

But even in the DuPont case the court was careful to point out that naked licensing, viz. the grant of licenses without the retention of control, was invalid. (bold emphasis added).

For those still curious, the issue of abandonment by naked licensing was remanded to the district court. The Dawn Donut court stated, “I would direct the district court to order the cancellation of plaintiff’s registrations if it should find that the plaintiff did not adequately police the operations of its licensees.”

Quality Control (“QC”) and Brand Power

A trademark owner must exercise Quality Control over its own services and those of its licensees. Why? Well, for example, to ensure their customers that a Ramada Inn in Butte, Montana maintains the same standards or service, cleanliness, etc., as another Ramada in Spokane, Raleigh, Savannah, Lubbock, Memphis or Santa Fe. Ok, so maybe expectations are not so high for a Ramada anymore. So change the example …

What if you have a reservation for the weekend at a Westin, Hilton or a Four Seasons? In the dining world for traveling workers, consider an Applebee’s restaurant. Ok, another brand arguably on the decline, maybe an Outback Steakhouse, or a Bonefish Grill? If you are a weary Interstate traveler … Cracker Barrel? You get the picture. You expect them all to be pretty similar to each other, and the Lanham Act says you have a right to that expectation.

For a recent S.C. District Court case on naked licensing, The Trademark Blog reports on Goliath Nike’s recent fueling the fire with allegations of a naked license by FUEL for apparel (by David) via use of co-existence agreements with other FUEL mark users. The district court’s order rejecting Nike’s naked licensing claim and discussing reverse dilution, a topic for another day, is available here.

As a consumer, when out of town, do you not gravitate to brands that you know, absent a strong recommendation to dine or stay somewhere else? Be honest, you know you do, unless you just have a thing for food poisoning. That is an example of the power of a brand. The policy behind the required QC helps consumers minimize their risks of a bad experience, and avoids deception of the public.

FaceBook Support Groups?

So what does this have to do with FaceBook support groups? Think for a moment, use your imagination, it is not really a hard question. Better yet, let’s look at the example that prompted my investigation recently.

Whole30® is a New York Times bestselling book seeking a trademark registration in Class 16 in the field of diet and nutrition. Whole30 also owns a registered servicemark in Class 44 for dietary and nutritional guidance; [and] providing a website featuring information about health, wellness and nutrition. The brand manifests itself for me initially by word of mouth (my lovely wife), then as the book (that I bought for her). However, as noted above, it also includes a web-site, and its enthusiastic readers then start their own FaceBook Support Groups (we will not even get into The Twitter handles).

You mean to tell me that Whole30® is responsible for how its customers spread the word about their program? Well, the best way to answer that is to refer you to to the Whole30 FaceBook Support Group “Guide” page. So what does Whole30® require of its readers / support group promoters:

  • use a name that “distinguishes” your group from “official” Whole30® sites; and

That’s pretty much it, the rest of their guidelines are just to “help you help them.” Below is their warning / trademark statement from the Guide page:

Tip: Please respect our registered trademark, and make sure your group name clearly identifies you as an independently-run community. Group names like “Whole30 Ireland” or “Whole30 Support” make it seem like you are a group run by Whole30 HQ, and creates confusion in the marketplace. We will ask you to change your group name if we find there is such confusion.

Take Aways

If you have a brand that is subject to being hi-jacked by your well-meaning supporters, and possibly watered-down by them despite their good intentions, you’d likely do well to copy some of these guidelines from Whole30®, very politely enforce them, and keep a record of it. Probably not a bad idea to encourage the support groups to link back to your official page either ;-).

If you are an enthusiastic supporter of a brand and if you run afoul of their guidelines, you may find yourself saying, “sorry, dude,” when they send you a cease-and-desist requiring you to not-so-much change, but “distinguish” your name. Pizza, btw, is not only not allowed in Mr. Hand’s class, but it is also not allowed on Whole30®, but you could pick the sausage off of Spicoli’s pizza, if the label says it has was grass-fed, has no sugar, etc. (p. 68). Actually the grass-fed comment is not a Whole30® requirement, but it is a good / bad / innocent example of how a support group or Twitter user could change the brand’s true message.

By the Way, btw …

The Whole30® book bought for my wife is now in good use (by me and our daughter). After being pretty overwhelmed by all of the information at first, my daughter and I give it two-thumbs up. She not only now will eat what I cook, she is cooking, planning, learning and having fun with me, which is pretty darn awesome.

 

FaceBook Defamation – WARNING: you may not “like” this

Posted in Copyright, Defamation, General, Libel, Mediation, Policy, Slander, Trademarks

If this title, FaceBook Defamation caught your attention, chances are you already use FaceBook, Twitter, LinkedIn, Instagram, SnapChat or other social media platforms. Consider this, FaceBook alone claims as many as 968 million average daily users, and over a billion users on busy days. Yes, that is average daily FaceBook use equal to three times the 2014 U.S population of 318.9 million. How do you “like” that?

According to EbizMA, Twitter is second in users with over 300 million users, followed by LinkedIn, Pinterest, Google+, Tumblr and fast growing Instagram. You (or your business) could be defamed today by someone in a remote Asian village, or by an domestic online avatar. More likely, one of your so-called FaceBook friends will defame you. Online defamation also occurs in obituaries, comments to news / sports articles, Yelp reviews of your business, the RipOff Report, or anywhere on the Internet.

Let’s look at how defamation on FaceBook happens and on other social media platforms.

What can you do about Twitter / Internet / FaceBook Defamation?

Good question! In the U.S., the constitutional right to free speech effectively equates to the right-to-defame-and-be-sued. The comments may be malicious, stupid, reckless, rash, passionate, mistaken, negligent, etc., but they can give rise to an action for general, special, and punitive damages. There is a possibility of obtaining a permanent injunction with a final judgment of defamation, however, even then, the speaker could say the same thing in a slightly different way.

You may also ask the search engines (e.g., Google, Yahoo, and Bing) to De-Index the URL.

Assuming a court finds that follow up comments are defamatory and violate that court’s order, you could presumably have the speaker / writer placed in jail for contempt of court. However, ask yourself, when was the last time you read a story where this occurred in the U.S.? Likely “never!” The Seventh Circuit recently addressed the libel injunction issue to provide some clarity. As noted in the article by Professor Volokh in the preceding sentence, as was noted here before, the context of a defamation, particularly if per quod instead of per se, is difficult to address in a forward-looking rule that is necessarily “narrowly tailored.”

The Biggest Problem with most social media defamers

They have no accessible assets. Damnit you say. What about that big house in the gated neighborhood? mortgaged. Lakehouse? also mortgaged. Mercedez-Benz S-Class? leased. 401(k)? untouchable! Damnit you say again! Judgment proof? Practically, Yes, the average Joe or Jane has little to nothing to lose. When was the last time you “negotiated” with a 3-year old over a popsicle on hot summer day? As Churchill stated, “never engage in a battle of wits with an unarmed man.”

For this reason, the typical ‘Merican notion: “we’ll sue them into the next century, take every dime, then go after Grandma,” is ill-fated. No sensible attorney will take a defamation case on a contingency if the defendant is insolvent. So those with financial resources have an advantage, because they can afford competent counsel and pay hourly to pursue a case to judgment, or otherwise into oblivion.

If sued, an asset-free defendant may be wise to take a default judgment, confess to judgment on better terms, or even worse, they may answer and defend pro se. When was the last time you prepared for and travelled to a deposition only to discover the defendant / witness does not show up? At least you got to know the court reporter a little better.

Can I get some concrete options, please? Sure, Here are Seven (7) …

1. Do Nothing: Yes, that is right. We tend to think first about how everything affects us. Often what seems a mountain today is a mole-hill next week. Engaging in a dispute over these matters is will require a tremendous amount of emotional energy, time, money and more. Ask yourself:

(i) Does your son, daughter, or elderly parents need you?

(ii) Is there any fruit on the tree, or mostly just more despair and distractions?

(iii) How else can I come to terms with this?

2. Call and Speak to the Person: Many people cringe at this, however, if the defamation to an individual, much useful information can be obtained from a telephone call. This is information you might not ever from a an impersonal or threatening email or a letter. The whole affair could be a misunderstanding, which is likely if the statements are from a friend / former friend. The call may resolve the dispute and you have your friendship back, even better than before.

3. “Mediate” the Matter with a Mutual Friend / Respected Colleague / Minister / Counselor / Trained Neutral, etc.: This option is similar to #2 above, except you will be using the power of a mutually respected “mediator” to help you both resolve the dispute, misunderstanding, etc. The mediator must be able to help, not hurt the situation, and a professionally licensed and trained mediator, with clear ground rules is recommended. Face-to-face contact is not required, but reconciliation and apologies probably should be mediation goals.

4. Send a Cease-and-Desist Letter: As discussed above, this may just serve to kick the sleeping tiger who was growing tired of defaming you and cause them to go on yet another passionate tirade against you. This can be a very good option for a business defamation, or if the potential defendants have assets or possibly insurance to cover the defense of actions in question. many defamation actions will involve intentional conduct of the defendant and, therefore, will not (in theory) be subject to defense or indemnity by insurance.

5. File a Lawsuit: This may get the attention of the defamer, however, again, if they have no assets, they have nothing to lose and could simply take a default judgment, or worse, answer and defend the case pro se. Any injunction you may obtain will likely be too late and too narrow. If the defamation is to your business, the identity of the defendant (Jane Doe) may take months to discover, and could require legal action / subpoenas in multiple states.

6. Utilize Platform Policies to Request a Take Down of Offensive Comments: Sounds promising, however, platforms are only “required” to act on infringement of registered trademarks or copyrights. Defamatory comments, on the other hand, will only be taken down according to platform policy. Policing for defamation generates no $ and no liability (see CDA below), so it is not done. To get offensive comments taken down by FaceBook, Twitter, LinkedIn, Pinterest, etc., you need to show a defamation per se, false statements and respectfully ask for take down per their terms of service.

7. “Ask” the Search Engines to “DeIndex” the Offensive URL: This option was formerly the subject of published Google procedures, but now is left to their discretion, much like social media policies referenced above and discussed further below. The search engine may remove very specific URL’s adjudged by a court to be violations of law. Once a judgment is obtained (perhaps by default, confession, etc.), providing it and ask in as narrow a fashion as possible for DeIndexing the URL’s.

The URL’s may still be there on the “www” but if not reported in the search engine results, good luck finding them.

Social Media Terms of Service / User Agreements

The social media User Agreements / Terms of Service will limit liability contractually for content posted by third-parties, and will also reserve rights to take down material in violation of the User Agreements and / or Professional Community Guidelines (LinkedIn). As the cases show, even though the Communications Decency Act of 1996 (“CDA”) grant of “immunity from suit” is broad and almost bullet-proof, lawsuits continue attempting to expand upon / create further exceptions.

Twitter, LinkedIn and Pinterest terms of usage all specifically mention “defamation” or “defamatory” comments, however FaceBook does not. Instead, FaceBook’s Terms of Service provides more generally as follows:

  1. You will not post content or take any action on Facebook that infringes or violates someone else’s rights or otherwise violates the law.
  2. We can remove any content or information you post on Facebook if we believe that it violates this Statement or our policies.

As you can see, FaceBook maintains discretion to remove content that violates their policies, so you may get a remedy by convincing them that the statements about you violate the law or the rights of others and should be removed.

The Communications Decency Act – Immunity (from Suit) for Service Providers

It is almost impossible to sue the social media platform for damages relating to any defamatory or otherwise false information posted by a third-party. This is due to immunity from suit (not just damages) provided to the online service providers by the CDA. While this may seem frustrating and create unjust results in certain circumstances, arguably, this immunity was necessary to create the free exchange of information on the Internet and its growth since 1996.

It should be noted that there is an exception in the CDA for intellectual property rights, which some courts have interpreted to exempt only federally protected IP rights. Criminal acts, such as online obscenity and child pronography violations are not immune. Also, the ISP’s are not immune for defamatory content they post or republish, only content of third-parties. For this reason, what you get from social media is a platform / forum to communicate with other “third-parties.”

You don’t have to “like” it

The above list of options is not exclusive, and we would always suggest you consider any reasonable way to resolve your disputes without the need for utilizing options 4-7 above. Thinking creatively to resolve difficult disputes is what lawyers do, and you can too, even though you may not “like” it.

If the matter is still troubling you after careful consideration and consultation with trusted friends and relatives, causing loss of business or reputation, you may want to speak to a lawyer to explore the above options, or others. When the defamation is to your business online and can be viewed by potential clients or customers, your special damages could be accumulating so fast that you can’t afford not to take action.

If you believe you have been the victim of a defamation on FaceBook or otherwise, call our firm for a free initial consultation at 803-223-6942.

 

 

Ordinary Care, Reasonable Care and The Fiduciary Duty – The First in a Series of “Spectra” Posts

Posted in Confidential Information, ERISA, Fiduciary Duty, General, Jury Issues / Trial, Non-Disclosure Agreements, Policy

We like to put things in order, right? It helps us understand the concepts and the analytical process further identifies distinguishing characteristics. In the legal world, however, complex concepts are more appropriately placed on a spectrum, rather than a list. Dictionary.com provides a non-physics definition of “spectrum” as follows: “a broad range of varied but related ideas or objects, the individual features of which tend to overlap so as to form a continuous series or sequence, e.g., the spectrum of political beliefs.”

Key words: range, related and overlap. Today, we look at the following three related legal duties, each of which overlap, but are also unique and distinct:

1. Ordinary Care, e.g., as owed by a bank to its depositors and customers in the handling of their checking transactions (likely a result of privity of contract and statute);

2. Reasonable Care, most commonly found in auto accident cases (arises the moment you turn the key and engage a pedal), medical malpractice, and other so-called “negligence” cases;

3. The Fiduciary Duty, e.g., as owed by a Trustee to a beneficiary, a lawyer in a lawyer-client relationship, or a by a 401(k) plan fiduciary to the participating employees (limited generally to special relationships, but also created by statute, as in case of ERISA and 401(k) plans).

To begin to illustrate how these three duties are related and can overlap, we introduce a fourth: The duty of confidentiality is generally included within The Fiduciary Duty. This duty can also arise in conjunction with all three duties identified above by: (a) special relationship; (b) contract, for example as a non-disclosure agreement (NDA); (c) court order; or (d) statute, as in duty to protect personal information such as social security numbers, etc., to the extent that hackers do not already have all that.

How Do These Three Legal Duties Differ?

Ordinary Care is characterized by what is customary in any given context. In other words, are you doing what others like you in your field are also presently doing? For example, just because average speed on a Detroit-to-Novi freeway is 96 mph, making such conduct “customary,” that speed is still likely a violation of applicable law. As such, the person driving 96 mph causing an accident violates her duty of Reasonable Care. Recall from the link above, Reasonable Care is defined as, “the level of care that someone of ordinary prudence would have exercised under the same circumstances.” Note that establishing evidence of the Ordinary Care standard will likely require “expert” testimony. For example (back to banking), what if the expert witness testifies that Bank of America is doing something to protect your accounts that Wells Fargo is not doing? Would Chase or JP Morgan then be held to the Ordinary Care standard set by BoA, or could that be an issue for the jury?

So how do we determine what is prudent (Reasonable Care) vs. what is customary (Ordinary Care)?

Assume a “hypothetical utopian” community has 100% of its citizens acting with the utmost level of care, liability under a Reasonable Care standard is still evaluated by what would a reasonable person have done, not as compared to the hyper-vigilant utopians. In contrast, if a “hypothetical” community of reckless people is used to establish Ordinary Care, then the level of care owed under an Ordinary Care could be far less than that of Reasonable Care.

So how does The Fiduciary Duty differ from Reasonable Care and Ordinary Care?

The Fiduciary Duty, arguably, subsumes the Duty of Reasonable care and adds to it the Duty of Loyalty. One held to a Fiduciary Duty standard is required to act with respect to the affairs of the client-beneficiary in the same manner he or she would act with respect to their own affairs. Avoidance of conflicts of interests is implicit in The Fiduciary Duty.

So does this mean that the person owing The Fiduciary Duty, if a reckless person in their own right, then only owes the client the same recklessness for which they would apply to their own affairs? Certainly not. In fact, one of the primary differences between a Reasonable Care Duty and The Fiduciary Duty is that The Fiduciary Duty is owed to a specified individual or group of people, whereas, the duty of Reasonable Care is generally owed to all persons in any particular context, e.g., all persons driving or riding on the road in which you drive your vehicle.

Can the conduct of the client or beneficiary of the duty owed negate or reduce the duty owed?

Yes. For example, in banking law, frequently referred to as the UCC, the bank owes a duty of Ordinary Care unless the customer has failed, ironically, to exercise Reasonable Care by inspecting returned checks for forgeries, or for forgeries by the “same wrongdoer.” Similarly, in a common law negligence case where the duty of Reasonable Care is owed, if the plaintiff is negligent or “comparatively negligent,” then he or she may also lose the benefit of the legal duty owed as the cause of the injury is attributed to their own actions.

The Fiduciary Duty necessarily implies that the party owing this duty must act in the best interests of the beneficiary (loyalty), and no such legal concept like comparative fault can be used to mitigate or eliminate The Fiduciary Duty owed. This is true of lawyers and their clients, of a Trustee for children who have lost their parents and have trust funds to care for them left behind, and also recently covered when a party takes on the “fiduciary” responsibility to ensure that a company’s 401(k) plan is managed in a way that is in the best interests of the employees and not to provide for unnecessary fees or unnecessarily excessive management charges over and above what would have been customarily available.

What to do if you think you have a claim for breach of a legal duty owed?

If you or someone you know has a claim or thinks you might have a claim for breach of Fiduciary Duty, contact me to discuss it and learn what options may be available to you. While past results are no guaranty of future performance, our firm has the experience and ability to handle these types of cases and take them to trial, if necessary.
[Future “spectra” series posts will include: (1) standard of review for appellate matters including / ranging from any evidence, to abuse of discretion, to de novo review; and (2) trademarks including from fanciful, to arbitrary, to suggestive, to descriptive, to generic.]

Fish Tank Trade Secrets

Posted in Confidential Information, Jury Issues / Trial, Non-Disclosure Agreements, Policy, Trade Secrets

Sammy, Nuk or Tiger

I. Background Fish Tank Facts:

In September of 2012, our family had plans to host several families at our house to watch the Clemson v. Florida State football game being played in Tallahassee. My wife loves people and entertaining. To create a fun, festive, and pleasant environment for the game, she and the children, while running errands that Saturday, decided to purchase a small fishbowl. Included in this “small” fishbowl were three Orandas. An Oranda, as shown above, is a bright “orange” and white fish from the goldfish family, pretty hearty but they do require a decent amount of space, oxygen, etc. (more than provided in a 2.5 gallon fishbowl). Continue reading “Fish Tank Trade Secrets”

Are Employee Non-Competes Good Policy? Many ways to Skin a Cat, Trade Secrets, Non-Solicitations, Confidential Information / NDA

Posted in Confidential Information, Injunctions, Jury Issues / Trial, Non-Disclosure Agreements, Policy, Trade Secrets

At least two states, Michigan this year and Massachusetts in 2014, have proposed legislation to curtail / eliminate the rights of parties (i.e., employers) with respect to non-compete agreements. The Michigan proposal would make “void” any non-compete agreements not related to the sale of a business. California has banned these agreements for years and agreements in restraint of trade have been banned going back to 1414 in Dyer’s case, so presumably any constitutional challenges to such a ban have been vetted and failed, or else it has just been chalked up to being … California. But the California ban is not exclusive to employees residing in California, as parties and their lawyers often seek the application of Conflicts of Laws to have the law of one state applied in another state. In addressing the potential constitutional issue, courts have held that the employee’s right to be freely employed trumps the right to contract.

In contrast, in Wisconsin, there is a pending bill that would change that state’s history of restricted enforcement of restrictive covenants. So why all the attention to noncompete agreements in the employment context? Will these bills pass or are they just one of the many events of posturing or pandering that can be expected in all legislative branches? To highlight that this is an issue that makes a difference, we refer you an older post by Jonathan Pollard where the lawyers fought over whether or not Florida (favorable to noncompetes) or Minnesota (noncompete likely unenforceable) law would apply.

Recently, bloggers, including Christopher McKinney and Eric Meyer, have addressed this subject. Apparently the state legislatures believe there is sufficient evidence of employers being heavy handed (i.e., Jimmy Johns) in the application of non-competes, Continue reading “Are Employee Non-Competes Good Policy? Many ways to Skin a Cat, Trade Secrets, Non-Solicitations, Confidential Information / NDA”

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