Monday, December 23, 2013

On copyright ownership.

If you create a work that you can otherwise copyright, you would not be able to copyright it if you assigned your rights in the work to someone else, created it for hire, or created it within the scope of your employment. Unless you are well-versed in copyright law, you may not know if you did this.

If you do not own the work, you can seek a license from the owner. If you own the work, you can license it to others.

Thursday, December 19, 2013

Choosing the right business entity when starting a company.

Choosing an organizational structure is one of the more important decisions you will make in starting a business. You only want a partnership if it is a limited liability partnership (LLP) or limited liability limited partnership. You may want a limited liability company (LLC), which has characteristics of both LLPs and corporations. In fact, LLCs are not recognized by the IRS. If you are a one-person LLC, the business entity will be disregarded for federal tax purposes. If you are in a multiple-member LLC, you will be taxed as a partnership by default. If you, your lawyer and accountant determines it is economically advantageous to be taxed as a corporation, you can elect to be taxed as such.

If numerous stakeholders are involved, you might want a corporation. As common sense indicates, corporations are taxed at the federal corporate tax rate. For any business entity, state tax rates may differ, so individual considerations will predominate in deciding what the best organizational structure is for your business.

Wednesday, December 18, 2013

Iowa head football coach Kirk Ferentz likely has a defamation claim against a former player.

Embattled former University of Iowa wide receiver Derrell Johnson-Koulianos (a/k/a "DJK") went on a recent Twitter rant leveling defamatory allegations against his old coach and current Iowa head football coach, Kirk Ferentz. DJK got in plenty of trouble at Iowa, and was kicked off the team in 2010 after a drug arrest. He never played again for the school, did not play in the NFL, and was unsuccessful in tryouts with the Arena Football and Canadian Football Leagues.

DJK alleges that Ferentz once required DJK to wear a trash can on his head during a practice, and was responsible for arranging the drug arrest that resulted in DJK's removal from the football team. DJK claims that all of this will be included in a book to be released in Iowa and Ohio in 2014, but no book deal has been arranged.

For a public figure to have a viable claim for defamation, the defendant must have said or written a false and defamatory statement of fact about a third person, with recklessness or malice, and no First Amendment privilege to do so. DJK's assertions are statements of fact that are likely false. If they are true, Ferentz has no claim, but DJK's veracity has been shown to be less than reliable in the past.

The statements were published via Twitter, and appear to have been published for the sole purpose of damaging Ferentz's reputation. If Ferentz can show he suffered damages because of the statements, which will not be easy, he has a viable defamation claim against DJK.

Tuesday, December 17, 2013

Employees vs. Independent Contractors vs. Franchisees.

When starting a business, you must decide whether you will work with employees, independent contractors, or franchisees. All are different and each has a different relationship with the principal of a business. Principals or bosses have the most potential liability with employees; they have the least potential liability with independent contractors.

If you have a business, it does not really matter whether you call your workers employees or independent contractors. The specifics of the relationships matter, most importantly the amount of control you exercise over the workers and how they conduct their daily tasks. The more control you exercise over them, the more likely you have employees. If the workers control their hours and how they do their job, and pay for their own supplies, you are more likely to have independent contractors.

The IRS provides guidance on the distinction between employees and independent contractors. As you would expect, there are more tax requirements with employees than with independent contractors. An attorney can help if you are unsure whether you have employees or independent contractors, or you can file a Form SS-8 with the IRS, which is a request for a formal determination. There is risk in filing a Form SS-8 if you have been calling your workers independent contractors, because you may be required to pay past employment taxes if the IRS determines that you have employees. But it does provide certainty for your business going forward.

If you want to franchise your business, the requirements are much different. Federal law requires a business owner to provide the prospective franchisee with a Franchise Disclosure Document at least two weeks before the Franchise Agreement is signed. The Franchise Disclosure Document has many requirements, but all are designed to protect the franchisee's investment, by providing transparency before the franchisee invests money in the franchise.

Additionally, each state's laws differ on what other disclosures may be necessary. The formalities and specific requirements are strict in franchise law. If you get one wrong, your entire Franchise Agreement may be void.

Wednesday, December 11, 2013

The prerequisite of "commonality" in class actions.

It is axiomatic that class actions must involve common questions of law or fact. Otherwise, a class action would be inappropriate. This is called "commonality," and requires that the questions of law or fact are similar enough that a just result can be obtained without litigating multiple cases. In other words: different people, same story.

Tuesday, December 10, 2013

Limited partners have limited liability but general partners have unlimited liability.

Limited partners in a limited partnership are not liable for the partnership's debts and obligations. General partners in either a general or limited partnership are liable for the partnership's debts and obligations. A general partnership is between two or more persons who are actively involved in the management of the partnership. A limited partnership has one or more general partners and one or more limited partners. Only general partners are actively involved in the management of a partnership. General partners are agents of the partnership, and can enter into contracts and carry on the partnership's ordinary business. Limited partners cannot; they are not agents of the partnership.

If you are a limited partner in a limited partnership, you are in the clear. If you are a general partner in either a general or limited partnership, you are subject to potential liability, including for the actions of other partners. If you are a general partner, it is important to file the necessary documents to effect a limited liability partnership (for general partnerships) or a limited liability limited partnership (for limited partnerships).

If you do not know whether your partnership has limited liability or not, it probably does not. You have to take affirmative action with the filing authority in your state to obtain limited liability. Unlimited liability is the default rule for general partners.

Friday, December 6, 2013

MDL sought in NCAA concussion litigation.

In the past I discussed multidistrict litigation (MDL) and when it is strategically advantageous. MDL is similar to a class action, but distinct. MDL is appropriate when there are one or more common questions of fact involved in different lawsuits that are pending in different judicial districts. In such cases, the actions may be transferred to any district for consolidated pretrial proceedings.

Certification as a class action requires common questions of fact -- or law -- and more. It requires a proposed class too large to join all the members in the pending lawsuit, the same or similar claims and defenses among the class members, and the lead plaintiffs must fairly and adequately represent the entire class's interests. A class action also requires either the risk of inconsistent or preclusive results in other lawsuits if the class is not certified, or that the common questions of law or fact predominate over those affecting only individual members.

The latest NCAA concussion litigation is a good example of a case where consolidation for MDL is sought. The first case was filed in 2011, and several more have been filed this year.

Wednesday, December 4, 2013

On the new concussion class action lawsuit against the NHL.

Concussion lawsuits against sports organizations are in vogue. The NFL recently settled a class action lawsuit for $765M. The NCAA is currently facing one. Now, former NHL players filed a class action complaint against the NHLThe number of plaintiffs started at 10, but has grown to more than 200. All of the concussion lawsuits center around a condition called Chronic Traumatic Encephalopathy (CTE). The NHL players' suit alleges the same culpable conduct on the NHL's part as the former NFL players' suit alleged against the NFL: that the league withheld information and research on the effects of repeated head trauma.

With the NHL suit, it is pretty simple. If the NHL withheld information from the players, then it will likely be found liable or will pay a lot of money in settling. The opposite is not true. If the NHL does settle for a lot of money, it does not necessarily mean that it would be found liable if the case went to trial. When the NFL settled its class action, it admitted no liability.

The players will still need to file a motion for class certification. At this point, they just filed the class action complaint, which leaves the door open for class certification. Individual federal district courts set their own rules regarding deadlines for class certification.

Tuesday, December 3, 2013

On show-cause orders in college football.

When a college coach or staff member commits serious violations of the NCAA constitution or bylaws, the NCAA can impose a show-cause order on that person for a specified period time. Show-cause orders are issued by the Committee on Infractions (COI). The COI is the judge and jury in NCAA enforcement proceedings.

Any school that hires a coach subject to a show-cause order must demonstrate to the COI why the school should not be penalized for simply hiring that coach. In effect, a show-cause order is contagious; hiring an "infected" coach can infect the school that hired him or her.

At this time of year, the college football regular season is ending. Unsuccessful coaches are fired and successful coaches leave schools for better employment. This leaves fans questioning who their team's next coach will be. While coaches under show-cause orders are not technically prohibited from coaching, they are effectively prohibited from doing so.

The two most prominent former college football coaches subject to show-cause orders are Jim Tressel and Chip Kelly. Tressel was the head coach at Ohio State University from 2001 through the 2010 season, and Kelly was the University of Oregon's head coach from 2009 through the 2012 season.

Tressel is under a five-year show-order until December 19, 2016. If any school hires him before then, additional penalties can be summarily imposed on the school. Tressel is also unable to participate in any conference championship, bowl or playoff games during the time the order is effective, and he would have to sit out the first five games of his first season back in coaching.

Kelly's show-cause is less burdensome, but still essentially prevents him from coaching before the order expires at the end of the 2014 football season. If any school hires him before then, it will be subject to any number of penalties simply for hiring him.

Tuesday, November 26, 2013

The biggest college football story no one talks about: The Johnny Football trademark paradox.

By definition, a trademark is being used in commerce. To get a federally-registered trademark, the applicant must submit an affidavit of use stating that the mark is being used in commerce. An affidavit is subject to the penalty of perjury. If you submit an affidavit that you know is not true, you can be punished by up to five years in prison.
 
Use in commerce of a trademark entails making money from it. This is inapposite with the NCAA's principle of amateurism. Any college athlete with a federally-registered trademark admits to breaking NCAA rules. This can be easily alleviated by first filing an intent-to-use application and later filing an affidavit of use once the athlete is done playing college sports. This is not what Manziel did. He filed for a trademark on the Principal Register, and submitted an affidavit stating that "Johnny Football" is being used in commerce.
 
Apparently, the NCAA did not allow Manziel to obtain a federal registration, but just to protect his common law trademark rights until he could use the Johnny Football mark in commerce after he was done playing football at Texas A&M. Protecting common law trademark rights does not entail submitting an affidavit saying you are using a trademark in commerce. As it is, Manziel either committed a fraud on the United States Patent and Trademark Office by submitting the affidavit, or is admitting to breaking NCAA rules in submitting the same affidavit. The only other conceivable explanation is that the NCAA is allowing Manziel to play by a different set of rules than anyone else, by letting him have his trademark and play football too.

Monday, November 25, 2013

If you breach a contract, it is unlikely that you can simply walk away.

You should not sign a contract unless you are prepared to complete it, even if you encounter unforeseen circumstances. Things happen; people lose their job, die, and get sick. But if you sign a contract, you consent to the possibility of a lawsuit or arbitration to enforce its terms. It is common for people to sign an agreement without reviewing it, or to think they can rescind their acceptance after signing.

If you sign a contract but do not complete it, you may be forced to perform (specific performance). You may be forced to pay the other party the money it spent in relying on your completion of the contract  (reliance damages). Or you may be required to pay the other party the amount it would have received if you completed the contract without breaching it (expectation damages).

Expecting people to read the entire terms and conditions of every contract they sign is probably impractical. But every time you sign your name in exchange for something of value, you should consider what the contract requires. If you breach the contract's terms, it is highly unlikely that you can simply walk away.

Thursday, November 21, 2013

Student-athletes file motion for summary judgment in NCAA likeness antitrust litigation.

The student-athletes in the partially certified class action against the NCAA filed a recent motion for summary judgment. Summary judgment is granted when the parties agree on the important facts, and there is only one possible result from a legal perspective. Here, the student-athletes' motion for summary judgment will be denied, because even though there is no dispute on the important facts, more than one legal outcome can result from them. If NCAA rules were not upheld in the past, summary judgment may be granted. But courts have upheld NCAA rules before, and that precludes entry of summary judgment here.

Wednesday, November 20, 2013

The general prohibition on hearsay increases the importance of getting things in writing.

Tangible evidence is really important. Get things in writing when you can. If you are in a legal dispute, third parties typically do not want to get involved. This is true even though you can require them to testify with a subpoena. If you think a third party said something to support your case, they may not remember it that way. They may remember it differently, or not at all. This is common.

The general prohibition on hearsay compounds the importance of getting tangible evidence. The simplest definition of hearsay is that it is something someone else said, offered into evidence. There are some exceptions, but you can rarely testify to what someone else said.

Tuesday, November 19, 2013

If you are in a general partnership, make sure it is a limited liability partnership.

If you are in business with someone else, you do not want to form a general partnership. There is no limited liability for general partners, so you are personally liable for the actions of the partnership. A partnership agreement can be oral, so if you are in business with someone else and making money, you are likely in a general partnership (unless you purposely formed a different business entity).

If you have to be in a partnership, make sure it is a limited liability partnership. As you would guess, you get limited liability.

Thursday, November 14, 2013

What is a "fixed" work of authorship in copyright law?

To get copyright protection, you must have a fixed and original work of authorship. To be "fixed," a work must be perceptible for more than a short period of time. For instance, if you are talking with a friend, your statements are not fixed. But if you have the same conversation and record your statements, they are fixed because they are perceptible after the conversation ends, by listening to the recording.

Wednesday, November 13, 2013

What is a "declaratory judgment"?

In earlier posts, I quickly mentioned declaratory judgments. A declaratory judgment is an action in state or federal court where a plaintiff requests determination of the rights of parties, either before a dispute arises or before a lawsuit. For instance, a defendant in patent or trademark litigation often counterclaims for a declaratory judgment of non-infringement and/or invalidity. "DJ" actions can also arise from contract disputes, when two or more parties disagree on the meaning of a contract, and they seek court intervention to resolve the dispute before a party breaches the contract.

Basically, DJ actions are available whenever parties are or will be involved in a civil dispute, they have a bona fide controversy, and a declaratory judgment would resolve the uncertainty. A court will not simply adjudicate a dispute unless there are rights at stake. In other words, if you have a disagreement with a friend, family member or colleague about something trivial, you cannot file a DJ action.

Trademarks in one minute (podcast).

Here is a one-minute podcast on the very basics of trademark law.

Tuesday, November 12, 2013

What is an "S Corp"?

You do not form an "S Corp" with your state government. It is an election you make through the federal government that allows your corporation to pass corporate income, losses, deductions and credit to its shareholders. This avoids double taxation on corporate income.

The decision to elect S Corp status is often best decided by your accountant, but the attorney who helped you form the organization will need to apprise you of the requirements so you are eligible for an S Corp election. An S Corp must have fewer than 100 shareholders who are individuals, estates, exempt organizations or certain trusts. Among other requirements, it must also have only one class of stock, no nonresident alien shareholders, a tax year meeting certain requirements, and each shareholder must consent to the S Corp election.

Monday, November 11, 2013

Trade dress must be nonfunctional and distinctive to be protectable.


 
Trade dress tends to be forgotten within intellectual property law. Trade dress is similar to a trademark, but different. It can be protected through federal registration, but does not have to be.

To be protectable, trade dress must be nonfunctional and distinctive. A great example of nonfunctionality is seen at right. The shape of the Mrs. Butterworth's pancake syrup container is completely nonfunctional. In other words, the shape of the bottle serves no purpose when a consumer pours the syrup on food.

Nonfunctional trade dress will usually be distinctive and thus protectable. If a company does not protect its trade dress, however, nonfunctional trade dress could be determined indistinct. For instance, see the Sue Bee Honey container at left. Much like the Mrs. Butterworth's bottle, the shape of the bottle serves no purpose when a customer pours honey on food. Provided it is source-identifying, the honey container would also be distinct and thus protectable.

By itself, the honey bottle is distinct, but there is a Des Moines barbecue restaurant that stores its barbecue sauces in empty honey bottles and serves them to customers. Allowing another company to do this diminishes the likelihood that you have protectable trade dress in a court of law, because you are allowing another company to be associated with your honey containers.

Wednesday, November 6, 2013

Proposing changes to contracts, if you are an individual or small business.

In arms' length transactions, red-lining is the process by which parties or their attorneys agree to a final contract. The first party sends a contract. The second party returns the contract with any proposed changes. The first party either accepts or rejects the changes, and the parties negotiate further modifications. It can take one exchange, or it can take a hundred before a final agreement is made.

If given a contract by a larger company, you can always propose changes to terms you do not like. The company is not obligated to accept those changes, but it might. Usually, the worst that can happen is that the proposed changes are rejected and you know you are dealing with an adhesion contract. If it is an adhesion contract, its enforceability is limited in court. It is unlikely that the company will rescind the contract simply because you proposed changes. If it does, you probably do not want to deal with that company anyway.

Just be aware that you can always propose changes to contracts that require your signature. You may or may not be successful.

In a lawsuit, time is often your best friend.

If you get in a legal dispute, the hardest thing to do is wait. You want the situation resolved immediately, and it is understandable why. Litigation is very stressful. That being said, the best thing for your case is often the elapse of time. It takes time for the truth to work itself out.

For example, let's say you file a lawsuit. The defendant answers your complaint with a version of events inapposite with yours. This is standard, but it stresses you out. Through discovery requests, depositions and nonlegal factors like the defendant's economic situation, the truth will come out. It just takes time.

Where a lawsuit involves preliminary injunctive relief, or in a business dispute with multiple and varied economic considerations, a "rocket docket"may be preferable. Otherwise, time is usually your friend.

Tuesday, November 5, 2013

Reverse engineering of a trade secret or patent.

As discussed elsewhere, a trade secret is confidential information deriving independent economic value from being a secret, is not easily discoverable using proper means, and is subject to reasonable secrecy efforts. A patent includes the discovery or invention of a new and useful process, and must be disclosed. Patentable information can be protected as a trade secret. Before a patent application is filed, it starts out as a trade secret. Confidential information protectable as a trade secret can often be patented.

The discovery or invention cannot be both a trade secret and patent. Trade secrets require secrecy, while patents require disclosure. A proprietor of such information must choose one or the other. If the invention or discovery has been on-sale or otherwise in the public for one year, it is no longer patentable. If it is not new and useful, but it derives economic value from being a secret, it is not patentable but is protectable as a trade secret.

Whether to seek patent protection or protect the information as a trade secret is an economic consideration. If your information is likely to be discovered within 20 years by reverse engineering, then you should seek patent protection. If you have a patent and someone reverse engineers it, they are still guilty of patent infringement. You would be able to get damages from infringers and licensing revenue from competitors during the 20-year period.

If you choose not to seek patent protection, and protect the information as a trade secret, it is theoretically protectable in perpetuity. This is much longer than the 20-year period for a patent. That being said, there is risk in that another party can reverse engineer your discovery or invention. Reverse engineering is a proper means of discovering a trade secret, and you would have no recourse against that party.

Monday, November 4, 2013

Placing "TM" next to your company name or logo when you do not have a registered trademark.

I previously discussed in greater depth the distinction between "TM" and R-Circle, when placed immediately next to a logo or trade name. Keep in mind that R-Circle can only be used if you have a registered trademark with the United States Patent and Trademark Office. But if you have a pending application with the USPTO, or simply want to claim common law trademark rights in your logo or business name, you can use "TM."

Friday, November 1, 2013

The power of the affidavit, even in everyday life.

An affidavit is submitted in state court. A declaration is submitted in federal court, but they are the same thing. They are sworn testimony, subject to the penalty of perjury. Both support a plaintiff or defendant's position. The person who signed the affidavit [or declaration] must testify consistently in a courtroom with what the written testimony in the affidavit says.

An affidavit does not need to be submitted in connection with a lawsuit. It can be submitted independently of a lawsuit to give more credibility to someone's position. For instance, let's say you are in a dispute with a company over one of its products, and you claim the product is defective. The company is skeptical about your claim, and thinks you may have caused the defect. To support your position, you could offer to submit an affidavit stating that you did not cause the defect and it was present when you purchased the product. This adds immense credibility to your position, because this is what you would say if the issue found its way into court. And as the affidavit would say, if you are lying, you could get into a lot of trouble.

Conversely, if you own a company and are skeptical about a customer's claim, ask them to submit an affidavit with their version of events. If they are reticent, they may not be telling the truth, although it is possible they just do not understand what an affidavit is. If they do not have an issue with it, it suggests that they may be telling the truth.

An affidavit is simply the adult version of a kid telling another kid, "I swear on ________'s life, that this is true." Contrary to popular belief, an affidavit does not always to have to be notarized. In many jurisdictions, including federal court, it only needs to include language like the following above the signature: "I certify under penalty of perjury and pursuant to the laws of the state of ______, that the foregoing is true and correct."

Thursday, October 31, 2013

Preventing enforcement of a district court judgment pending an appeal.

I previously discussed injunctive relief and the basics of an appeal. In appealing a district court judgment, a party can move to stay or for an injunction of the judgment until the appeal is completed. In this context, a stay of the judgment is effectively the same as an injunction. Both prevent the winning party from enforcing the district court judgment until the appeal is over.

A motion to stay or for an injunction of the judgment is generally filed in district court. Such a motion is only filed with the court of appeals if it is impracticable to file it in district court, or if the motion has already been denied in district court. If a party files neither a motion to stay nor for an injunction, the district court judgment is effective on appeal.

In deciding whether to grant a stay or injunction pending appeal, the court's considerations include the likelihood of success on appeal. If the same judge who presided over the case in district court rules on the motion (which is likely), he or she will not likely consider the likelihood of success on appeal to be very high. This weighs in favor of filing the motion in the court of appeals. However, if you file the motion in district court first, you get two chances for the motion to be granted. This weighs in favor of filing the motion in district court.

Tuesday, October 29, 2013

A primer on NCAA enforcement rules and related issues.

Here is an overview of current NCAA enforcement rules and related issues. As NCAA rules change, this primer will be updated from time to time.

NCAA seeks Supreme Court intervention on First Amendment argument in student-athlete likeness antitrust litigation.

On October 25, 2013, the NCAA filed a motion for review by the U.S. Supreme Court of the Ninth Circuit's decision on the NCAA's First Amendment argument in the student-athlete likeness antitrust litigation. The Ninth Circuit determined that the First Amendment argument did not apply, because the NCAA did not change the likenesses of the football players enough in the NCAA Football series of video games. The NCAA contends that the argument does apply, and wants the Supreme Court to decide the issue. As mentioned yesterday, certiorari is infrequently granted.

If certiorari is granted, the Supreme Court would review the decision concurrently with the likeness antitrust litigation. This sort of review is analogous to when a football coach calls timeout in a game so he can challenge a referee's decision and obtain further review. Upon doing so, the referee consults instant replay and decides whether his decision is confirmed, stands, or is reversed. Here, the difference is that the referee does not review his own decision; the Supreme Court would review the Ninth Circuit's decision.

Monday, October 28, 2013

The very basics of appeals.

Appeals are fairly complex and differ from district court proceedings. There is no new evidence in an appeal, which means that witnesses are not called and exhibits are not entered. A party often gets a new attorney on appeal, and is sometimes required to do so. If you are the losing party and appeal a judgment, your new attorney orders the transcript from the prior case. The attorney from the trial is typically the one who files a notice of appeal in the district court. There is a strict timeline for filing an appeal. A party commonly has only 15-30 days to file a notice of appeal.

Appellate courts ordinarily review the thought-process of the judge or jury's district court decision. If the judge made an error of law or the jury came to a conclusion that no reasonable jury could conclude, and you are the losing party, you can appeal (so long as the error is preserved). Preservation of error requires an objection in district court or other notification that the trial attorney disagrees with a decision on a particular issue. In some cases, appeals are standard procedure, and the losing party does not need to preserve the error.

Sometimes, you can appeal a non-dispositive order, which is one that does not end a case in its entirety. Not all non-dispositive orders permit an appeal. For instance, if a motion for class certification is denied, the aggrieved party can immediately appeal, and must do so within a limited time. If an order is entered that partially decides a case, the aggrieved party need not appeal until after the entire case is finally decided at the district court level.

As you can see, there are many considerations in an appeal, and this is simply when it comes to initiating an appeal. After an appeal is initiated and the transcript has been ordered, the appeals court will set a timeline for writing legal briefs and oral argument (if requested and/or necessary). State and federal jurisdictions differ on the appeals process. In some states, filing a notice of appeal sends the case to the state's supreme court, who might resolve an appeal or send it to its court of appeals, if that state has a court of appeals. Some smaller states do not have courts of appeals.

Under federal law, the procedure is different. Filing a notice of appeal in district court sends the appeal to the regional circuit court of appeals. Then, depending on the disposition of the case at the circuit court level, a party can petition for certiorari to the U.S. Supreme Court. "Cert," as it is commonly called, is infrequently granted.

Friday, October 25, 2013

No surprise: NCAA's motion to dismiss student-athlete likeness antitrust lawsuit was denied.

It is no surprise that the NCAA's motion to dismiss the student-athlete likeness antitrust lawsuit was denied. The NCAA is the lone remaining defendant; all others have settled. The NCAA's attorneys who filed the motion could be sanctioned by the court, because there was no chance the motion would be granted and they filed it anyway.

If an attorney files a document in a lawsuit for an improper purpose like harassment or to needlessly increase the cost of litigation, the court can sanction the attorney who filed it. As you would expect, an attorney who files a motion for sanctions raises the personal stakes of everyone involved.

Thursday, October 24, 2013

Aggravating and mitigating circumstances in NCAA enforcement.

In addition to lacking subpoena power and legal standards, the presence or absence of aggravating and mitigating circumstances affects the penalties levied in NCAA infractions cases.

Aggravating circumstances warrant the imposition of more severe penalties in an infractions case. Mitigating circumstances warrant the imposition of less severe penalties in a case. Aggravating circumstances include but are not limited to an institution's history, and the school's cooperation with the NCAA during an investigation. If you fail to cooperate or try to conceal violations, you are subject to more severe penalties. Conversely, if you exhibit exemplary cooperation or have little to history of rules violations, you may be given less severe penalties.

It may seem axiomatic that cooperation mitigates potential penalties in an infractions case, but without subpoena power the NCAA must put a premium on openness. Otherwise, it would be extremely difficult for the NCAA to discover relevant information in a given case, because there would no incentive for schools to do so.

Wednesday, October 23, 2013

On the Trademark Trial and Appeal Board and the "Redskins" mark.

I previously discussed the Washington Redskins' trademark. It is being challenged by a group of Native Americans who find the mark disparaging, offensive and/or scandalous. More than a decade ago, the mark's federal registration was challenged on the same grounds. The reasoning was that the mark is entitled to registration, basically because more people associate the mark with the football team than with its offensive meaning.

This is a good background article to the Trademark Trial and Appeal Board, the group charged with making such decisions. The TTAB oversees petitions opposing and to cancel a trademark, along with interference and concurrent use proceedings. The TTAB does not decide whether a mark can be used or is being infringed; it only determines whether a certain mark is entitled to federal registration.

Wednesday, October 16, 2013

The use of affirmative defenses for summary disposition.

Upon service of a complaint, the defendant must answer it or move for dismissal. A motion to dismiss will be denied unless:

- there is no jurisdiction;
- the location of the lawsuit is improper;
- there was insufficient service of process or the original notice was deficient;
- a necessary party was not included; or
- the complaint fails to state a valid claim.

The defendant must usually file an answer, along with affirmative defenses (often included as boilerplate and not argued during the case). Sometimes, the applicability of an affirmative defense is apparent in the complaint. If so, it may lend itself to summary disposition. In such a case, the defendant will answer the complaint, but shortly thereafter files a motion for summary judgment. Some of the most effective but underutilized affirmative defenses for summary disposition are laches, equitable and promissory estoppel, and estoppel by acquiescence. They are all similar, yet distinct.

If you are sued, but think to yourself, "it's not fair," then one of these affirmative defenses (or a different one) may apply.

1. Laches.

Applicable when (a) the plaintiff delays filing a lawsuit for an unreasonable and inexcusable length of time, and (b) the delay injures the defendant.

2. Equitable estoppel.

Applicable when (a) the plaintiff does or says something the defendant relies on, (b) the plaintiff later changes his/her mind and sues on it, and (c) it is inequitable to allow the plaintiff's claim to proceed. In other words, the plaintiff must "bait-and-switch."

3. Estoppel by acquiescence.

Applicable when the plaintiff expressly or impliedly consents to the defendant's conduct.

4. Promissory estoppel.

Applicable when (a) the plaintiff makes a promise that the defendant relies on, and (b) the plaintiff later reneges on the promise and brings a lawsuit based on it. This is comparable to equitable estoppel, but does not require the degree of bad faith that equitable estoppel does.

Wednesday, October 9, 2013

Why is it more difficult to win a lawsuit than it is to defend an NCAA investigation?

1. Subpoena power.

In court, plaintiffs and defendants have subpoena power, which is the ability to require someone to testify or produce information in a lawsuit. If you fail to comply with a subpoena, you can be held in contempt and placed in jail. If you are served with a subpoena but consider it an improper request, you can move to quash it. You must file a motion to quash and set the matter for hearing before the date specified in the subpoena. You can try this by yourself, but it is unlikely to be successful without an attorney's help.

A subpoena can be quashed when it seeks privileged information or protected matter; fails to allow a reasonable time to comply; requires excessive travel to comply; or otherwise imposes an undue burden on the party subject to it. The NCAA has no subpoena power. Accordingly, it has no way to force a party to divulge information.

In court and in NCAA investigations, there is a duty to speak truthfully. If you do not in court, you can be charged with perjury. If you do not in an NCAA investigation, you can lose your eligibility if a player, or issued a show-cause order if a coach or administrator. If you do not speak to the NCAA at all when information is requested, you will likely be penalized to a similar extent than if you had lied to the NCAA. Accordingly, you should speak to the NCAA when requested, even if you are not obligated to do so.

2. Legal standards.

As discussed elsewhere, there are no legal standards in enforcing NCAA rules. A criminal defendant must be proven guilty beyond a reasonable doubt. A civil plaintiff generally must prove his or her case by a preponderance of the evidence. Sometimes, the standard is "clear and convincing." Without legal standards for determining guilt of a party, it is exceedingly difficult for the NCAA to find a school or involved individual guilty, because the school or individual can simply claim there is insufficient evidence.

Tuesday, October 8, 2013

What is a "lack of institutional control" in NCAA Bylaws?

To encompass a variety of conduct, the NCAA's definition of "institutional control" is broadly written. When a school exercises control and responsibility over its intercollegiate athletics programs, it has institutional control. Accordingly, a school lacks institutional control if it does not exercise control and responsibility over its intercollegiate athletics programs. Under the new Division I violation structure, a lack of institutional control is a severe breach of conduct (Level I violation). A failure to monitor is usually a significant breach of conduct (Level II violation) unless severe enough to be a Level I violation.

When the NCAA conducts an investigation after an alleged violation, a primary factor in determining whether there is institutional control is the compliance measures in place at the time of the violation. Basically, an NCAA investigation is a process audit, and a charge of a lack of institutional control is a failing grade.

Most violations do not result from a lack of institutional control. If a school has adequate compliance measures in place, properly educates and monitors relevant personnel, and takes action when alleged violations are discovered, it will not be charged with a lack of institutional control. However, if a school does not establish adequate compliance measures, does not properly oversee or educate relevant personnel, does not fix ineffective measures, or suffers some other defect preventing it from monitoring compliance, it will be charged with a lack of institutional control.

Wednesday, October 2, 2013

Impermissible financial inducements in college football recruiting.


Those following college sports know that a school representative cannot provide financial inducements to a prospective student-athlete, or the friends or relatives of such athlete. This holds even if the athlete does not eventually attend that particular school.

If the school’s representative had a pre-existing relationship with a family member of the athlete, the representative can provide a benefit to the family member so long as it is consistent with the nature and level of benefit provided to the family member before the athlete reached ninth grade.

If there is no pre-existing relationship, prohibitions on the financial aid a school representative can provide include but are not limited to:

- Employment for a prospective student-athlete’s relatives;
- Gifts of clothing or equipment;
- Co-signing of loans;
- Providing loans to a prospective student-athlete or his or her friends;
- Cash or like items;
- Any tangible items, including merchandise;
- Free or reduced-cost services, rentals or purchases of any type;
- Free or reduced-cost housing;
- Use of an institution’s athletics equipment;
- Sponsorship of or arrangement for an awards banquet; and
- Expenses for academic services.

Article 13 of the NCAA Operating Bylaws is broadly written to prohibit financial inducements not specifically mentioned. For instance, “cash or like items,” and “any tangible items” are prohibited.

Tuesday, October 1, 2013

On one of the University of Alabama's few losses.

Unlike its football team, the University of Alabama lost a recent court battle with an artist who has painted realistic scenes of the school's football games since 1979. The school sued the artist for trademark infringement, unfair competition and breach of contract. In 2012, the district and appellate courts sided with the artist on the trademark infringement and unfair competition claims. The school argued that the artist could not sell reprints of the painted scenes, because they contained the Alabama trademarks. The artist said both the artwork and reprints were protected speech under the First Amendment. The courts agreed with the artist on those claims.

In 2013, the district court sided with the artist on the breach of contract claim, because it found the school effectively waived its right to sue. The court said one of the licensing agreements was breached, but the University lost its right to claim a breach of contract when it sold the artist's reprints to which it was objecting in the lawsuit. The court basically said the school could not have its cake and eat it too.

Monday, September 30, 2013

EA and Collegiate Licensing Co. settle with former players in NCAA likeness litigation; NCAA only remaining defendant.

EA Sports and the Collegiate Licensing Company, defendants in the NCAA student-athlete likeness antitrust litigation, settled all claims with former and current college players. The defendants are paying the plaintiffs $40 millionThe case has not been certified as a class action, so this was a good time to settle. If the defendants waited until a ruling on the plaintiffs' motion for class certification, they could have lost a significant amount of leverage in settlement negotiations, and they did not have much leverage at this point anyway.

The NCAA has not settled. It is the only remaining defendant, and publicly shows no indication that it intends to settle. I would be surprised if the NCAA allows the case to go to trial. The NCAA is banking on denial of the plaintiffs' motion for class certification. It also expects more public support as the case draws closer to trial.

Publicly, the NCAA claims it is prepared to go down with the ship; either college sports stays the same or the current model will be replaced with a minor league sports model. To college sports fanatics, of which there are many, this existential threat should garner the NCAA more public support as trial draws closer. Privately, the NCAA must be examining its options for settlement and how it would affect the current NCAA model.

Wednesday, September 25, 2013

The use of state consumer protection laws to curb litigation by "patent trolls."

There is a recent trend among states to try and use state consumer protection laws to prevent patent trolls from suing in their federal courts. I briefly discussed patent trolls elsewhere. When states use their own laws to inhibit the operation of federal law, such as here, federal pre-emption is implicated. The pre-emption doctrine comes from the Supremacy Clause of the U.S. Constitution. Under it, state laws that conflict with federal law are ineffective.

In this context, state consumer protection laws may or may not be pre-empted. There is another reason they may be unconstitutional: the burden on interstate commerce. Under the Commerce Clause, the federal government has the right to govern interstate commerce. Even though the federal government has not spoken directly on this issue, states cannot enact or use legislation that discriminates against interstate commerce. Using state consumer protection laws this way burdens interstate commerce, because one cannot avoid suing in a particular state if jurisdiction or venue requirements mandate that a lawsuit be filed there. Accordingly, a plaintiff entitled to redress could be foreclosed an opportunity to bring a lawsuit.

This does not mean that patent trolls are not a problem. It means that states likely have to wait for the federal government to address the issue. State consumer protection laws could be a valid way to defend an infringement lawsuit by a putative patent troll, but they cannot preclude a party from bringing the lawsuit.

Friday, September 20, 2013

On direct and indirect patent infringement.

There are two types of patent infringement, direct and indirect. Direct infringement occurs if you make, use, offer to sell, sell or import any patented invention in the U.S. without authorization of the patent holder. Indirect infringement occurs in two scenarios. First, you are guilty of induced infringement if you induce someone else to infringe another person's patent. Second, you are guilty of contributory infringement if you offer to sell, sell or import a component of a patented invention, and know that the component will be used for infringing purposes.

Direct infringement is a strict liability tort, which means you can be held liable without intending to do anything wrong. Induced and contributory infringement are not strict liability torts; both require the alleged infringer to know he or she is doing something wrong.

If the claims of a patent cover a product or apparatus, direct infringement will always be present. If a patent claims a method (method patent), you can also have divided infringement, which is a type of induced infringement. With divided infringement, a defendant can be held liable if he or she performed some steps of a claimed method and had others do the remaining steps, or if he or she had others to collectively perform all of the steps of the claimed method but no single party did all of the steps individually.

Thursday, September 19, 2013

NCAA moves to dismiss student-athletes' claim in likeness antitrust litigation.

Yesterday, the NCAA moved to dismiss the plaintiffs' antitrust claim in the NCAA student-athlete likeness antitrust litigation. In moving for dismissal, a defendant must show that there is no factual scenario on which a plaintiff could win the case. Usually, a plaintiff can show some factual basis that would entitle him or her to relief.

The NCAA relied on NCAA v. Board of Regents of the University of Oklahoma, which deregulated college football television broadcasts and paved the way for conference realignment. The NCAA argues that Board of Regents categorically approved NCAA rules on amateurism. The student-athletes argue the opposite. The student-athletes are right, because the legality of the NCAA amateurism rules was not in question in Board of Regents. Only the legality of the NCAA rules on television broadcasts was under consideration. Accordingly, anything the court said about NCAA amateurism rules in Board of Regents was non-precedential.

Filing a motion to dismiss was an odd move by the NCAA, because it will be denied. Proper motion practice is to file a motion only when there is a chance it will be granted. Otherwise, it is a waste of time. The NCAA would have been better off filing a motion for summary judgment. Although unlikely, it would have at least had the possibility of being granted.

Tuesday, September 17, 2013

If fired for the 2011 audio tape, Nebraska football coach Bo Pelini has a claim for business interference.

In October 2011, University of Nebraska head football coach Bo Pelini delivered a post-game press conference shortly after his team completed the biggest comeback in school history. Nebraska had just defeated Ohio State, 34-27, after being down 21 points in the second half. In an off-the-record conversation prior to the press-conference, Pelini lambasted the fans who left the game early, and journalists from the Omaha newspaper. Pelini's comments included numerous instances of the "f-word." They were ill-advised, and some people are understandably offended.

Basically, Pelini called Nebraska fans "fair-weather," which is completely untrue. If there is any fan-base that is not "fair-weather," it is Nebraska football fans. The team has been mostly successful for the last 50 years, but it has also sold out every home game since 1962. No other school comes remotely close. Even in down years, the fans still show up for games. The anger toward the journalists was for leaving press conferences early.


Surely, Pelini's contract has a "morals clause" that might justify dismissal for those type of comments. But even if the school has cause for firing Pelini, the person who released the tape does not have the right to release the tape for the purpose of getting Pelini fired.

If the audio tape had been released shortly after the tirade occurred, there would not necessarily be a claim, because the motives of the person who released the tape would not be so clear. But two years after the fact and after a bad loss at home, the person's motives could not be clearer. The person wanted Pelini fired, and any jury could see this. Business interference requires:

(1) a contract;
(2) that a defendant has knowledge of the contract;
(3) that the defendant intentionally and improperly interfered with the contract;
(4) the interference caused the third party not to perform or to stop performing the contract; and
(5) that the plaintiff was damaged.

The person who released the tape surely knew that Pelini has a contract with the school. Releasing the tape to get the coach fired constitutes "improper interference." If Pelini is fired, he could recover the amount he would earn if there had not been improper interference, i.e., if the tape had not been released for the purpose of getting him fired. He could not recover that amount from the school, but from the person who released the tape. Accordingly, the person who released the tape could be liable for millions of dollars of actual damages, as well as punitive damages if his or her conduct is deemed particularly willful and wanton.

Whether Pelini can recover depends on if he loses his job due to the audio tape. In another post, I warned readers of the ease with which you can be guilty of business interference.

Monday, September 16, 2013

The "Johnny Football" trademark could get sacked.

I have written about Johnny Manziel's "Johnny Football" nickname/mark several times:

- The conflict between U.S. trademark law and NCAA rules: The "Johnny Football" scenario.
- On trademark infringement.
- Use of a trademark "in commerce" and the redux of the Johnny Football example.
- Agency, Cam Newton and Johnny Manziel -- Part 2: Teaching basic legal analysis through college football.
- What is the NCAA enforcement team looking at when investigating Johnny Manziel's eligibility? Part 3: Teaching basic legal analysis through college football.
- By definition, a college athlete with a federally registered trademark is violating NCAA rules.
- Illustrating the difference in legal standards through the NCAA and Johnny Football autograph situation.

Manziel is unique among college athletes because the NCAA allowed him to protect his "Johnny Football" mark prior to the expiration of his eligibility. Being able to protect his mark does not mean that he can use the mark in commerce. If he did use the mark in commerce, he would be violating NCAA rules.

The United States Patent and Trademark Office recently issued an office action illustrating its concern that the "Johnny Football" mark is not being used as a trademark. Manziel is in a difficult position, because he cannot use the mark in commerce and maintain eligibility. But he must use the mark in commerce to obtain a valid federal registration. Manziel's people made a big mistake by not pursuing an intent-to-use application followed by affidavit of use once his eligibility expires. That would have solved this problem.

Wednesday, September 11, 2013

On false patent marking.

False patent marking occurs when someone marks an unpatented article as patented, intending to deceive the public, and it results in "competitive injury." Though undefined in the false marking statute, competitive injury can be loosely defined as "actual monetary damages." Before September 2011, competitive injury was not required to bring a false marking suit. In fact, a plaintiff could sue any defendant for false marking on behalf of the United States (which is called suing "qui tam").

The Leahy-Smith America Invents Act amended the false marking statute by requiring competitive injury. It is not that difficult to show competitive injury, provided you have "standing."

Showing an intent to deceive is more difficult. False marking alleges fraudulent conduct, and fraud requires "particularity" in the complaint. Accordingly, a false marking complaint must explain the "who," "what," "when," "where," and "why" of false marking conduct. This is incredibly difficult before discovery, and jurisdictional discovery may be required.

Basically, you have to explain your allegations in more detail than an ordinary case when suing for false marking or fraud. If you do not sufficiently explain yourself and the false marking conduct, your complaint could be dismissed.

Tuesday, September 10, 2013

A re-introduction to trademarks.

If you visit this blog with any regularity, you will notice I write about trademarks fairly frequently. Some posts are terse and simply link to another article. Some are lengthy and include my own commentary. I thought it might be beneficial to link to the introductory posts I wrote on trademarks, to go back to basics.

- Introduction to trademarks, part one.
- Introduction to trademarks, part two.

Friday, September 6, 2013

Opting out of a class action: The NFL publicity rights example.

As discussed previously, class certification is required before a case is a class action. If a case settles after class certification, court approval is needed before the case can be dismissed. Class members who object to terms of any settlement can opt out of the class. If a class member opts out, he or she is not precluded from bringing another suit against the defendant. If a class member does not opt out, he or she is precluded from bringing another suit against the defendant (unless new facts or events are involved).

This happened in a case filed August 30, 2013. The plaintiffs are former NFL players, and they opted out of a previous class action, Dryer v. NFL. The plaintiffs argue that the NFL and NFL Films used their likenesses without compensation or their consent, like the plaintiffs are arguing in the NCAA student-athlete likeness antitrust litigation. Before approving a class action settlement, a court must make sure five requirements have been met:

- Reasonable notice must be directed to all class members bound by the proposed settlement;
- If the proposed settlement binds class members (which it usually would), the court can approve it only after a fair and adequate hearing on the settlement;
- The parties seeking approval of the proposed settlement must file a statement identifying the terms of any agreement;
- Any class member has a right to object; and
- The court can refuse to approve the settlement if a second opportunity for class members to opt out is not afforded, even if those class members previously had an opportunity to opt out.

Thursday, September 5, 2013

Former NFL star Jim Brown made a strategic error in suit against EA Sports.

NFL hall-of-famer Jim Brown lost a recent appeal against EA Sports, in which Brown alleged that EA Sports used his likeness in the Madden series of video games without his consent. EA Sports is also a defendant in the NCAA student-athlete likeness antitrust litigation, and there are similarities between the two cases. The plaintiffs in the NCAA student-athlete likeness antitrust litigation alleged that their likenesses were used in video games without their consent. In the NCAA and NFL video games, names were not used, but other aspects of the players were imitated. The video game players shared the same jersey number, size, physical skills, skin color and other attributes with their real-life counterparts.

The names of most players are used in the Madden series of video games, because they are licensed by the NFL players' union (NFLPA). Player names that were not licensed by the NFLPA were not included in the game unless consent was given. There is no college football players' union, so no player names were used in the NCAA Football video game.

Brown made a strategic error in his lawsuit. The student-athletes' lawsuit alleged that the use of their likenesses was an antitrust violation. Brown alleged that the use of his likeness was a violation of federal trademark law, which was largely inapplicable to his case.

If Brown sued under common law rights of publicity, his claim would have survived dismissal because a different legal analysis would have applied. Instead, EA Sports filed a motion to dismiss, which was granted and affirmed on appeal.

Basically, in addressing the claim under trademark law, the court only considered the publicity rights issue insofar as it pertained to a violation of trademark law. Since Jim Brown's likeness is not a federal trademark, trademark law was largely inapplicable in his case. Brown should have known of the pending NCAA student-athlete likeness antitrust litigation, and amended his complaint to include a publicity rights claim.

If Brown had done this, when the trademark claim was dismissed, he could have still litigated the publicity rights claim. Since he did not, and the dismissal has now been granted, he is precluded from bringing the publicity rights issue in a new lawsuit.

Thursday, August 29, 2013

Illustrating the difference in legal standards through the NCAA and Johnny Football autograph situation.

- Do we know that Johnny Manziel took money for autographs by a preponderance of the evidence? In other words, is it more likely than not that Manziel took money for autographs?
- Do we have clear and convincing evidence that Manziel took money for autographs?
- Is there reasonable doubt whether Manziel took money for autographs?

One of the biggest differences between the American judicial system and NCAA enforcement is the former's use of legal standards. The legal standards in the United States are: (1) proof by a preponderance of the evidence; (2) proof by clear and convincing evidence; and (3) proof beyond a reasonable doubt.

For a plaintiff to win in a civil case, proof by a preponderance of the evidence (more likely than not) is usually required. In some cases, such as juvenile or family law, proof is required by clear and convincing evidence. Only in criminal law is proof required beyond a reasonable doubt.

The NCAA enforcement bylaws provide no legal standards for guidance. As a result, lawyers for big-money schools can exonerate student-athletes alleged of wrongdoing as long as the student-athletes deal in cash. It is really that simple: If you deal in cash, it does not matter how brazen the violations are. If you are a big enough school with enough money, you can buy your way out of trouble. The NCAA is complicit in the alleged wrongdoing, because it tries to protect its economic interests in handing out penalties. The NCAA will rarely penalize an athlete if it can make money from him or her.

The rule prohibiting Manziel from signing autographs for money should be changed. He should be able to sign autographs and retain eligibility, just like Olympic athletes can sign autographs for money but still compete in the Olympics. But current NCAA rules prohibit signing for money, and Manziel should have abided by those rules. He was not forced to play college football.

Manziel allegedly signed thousands of autographs. The NCAA's rationale in not penalizing him was that it could not prove that Manziel took money for autographs? By what standard?

It is much more likely than not that Manziel took money for autographs. There is also very likely clear and convincing evidence that he did. This is without subpoena power, which the NCAA lacks. Witnesses said he took money. There are thousands of Manziel-signed items available. There is a picture of him signing autographs in a seedy hotel room with people he did not know. He admittedly hates signing autographs. Also, there is allegedly an audio recording where Manziel basically admits to receiving payment for the autographs.

There might not even be reasonable doubt whether Manziel took money for autographs. It would be for a jury to decide. Public opinion certainly suggests that there is no reasonable doubt, although it is sometimes difficult to determine exactly how much evidence the NCAA could use. Anonymous sources cannot be used. This is analogous to the criminal justice system where a defendant has the right to face his or her accuser.

Despite evidentiary limitations, there is no reason Manziel should not have been penalized. The NCAA even changed its definition of "agent" in January 2012 after the Cam Newton situation, which should have applied here. Manziel's handler allegedly told people that Manziel would not sign autographs for free. The NCAA could have penalized Manziel even without proving he accepted money. It did not do so.

We can be thankful that the American judicial system is more impartial than the NCAA's enforcement process.

Wednesday, August 28, 2013

The ongoing debate over misuse of copyright.

A copyright owner has the exclusive right to reproduce, adapt, publish, perform and display his or her copyrighted work. You regularly can find people posting copyrighted content on the Internet. Sometimes, these people will say that their conduct is not copyright infringement, because they are not making money. That is not really true. Not making money from copyright infringement is a factor in determining whether fair use applies, but it is not dispositive.

If you reproduce, adapt, publish, perform or display a copyrighted work, and you do not meet one of the exceptions (like fair use), you are infringing another's copyright.

The more content that is fair use, the less speech is inhibited. The less content that is fair use, the more speech is inhibited. Larger companies tend to have greater power in getting content removed than smaller companies or individuals. This can lead to abuse, and there is an ongoing debate over copyright misuse inhibiting free speech.

The latest example is a copyright professor who used a copyrighted song during lecture for instruction, and the video of the lecture was posted on YouTube. The recording company of the song complained to YouTube, and YouTube removed the lecture. The professor's lecture is clearly fair use, because it was for nonprofit educational purposes, and would not have affected the market for sales of the song.

Monday, August 26, 2013

Former football players' concussion lawsuit against the NCAA.

The student-athlete likeness antitrust litigation is not the only high-stakes case the NCAA is facing. In July 2013, the plaintiffs in a concussion lawsuit against the NCAA filed a motion for class certification. The requirements for class certification have been discussed in another post.

The concussion lawsuit is under a stay (which essentially means a timeout), because the parties are hoping to settle. Simply filing a motion for class certification before a stay gives the plaintiffs leverage, because it provides the NCAA incentive to settle. If the NCAA does not settle while under a stay and the plaintiffs' motion for class certification is later granted, then the NCAA is in a much worse position for settlement. If the NCAA does not settle while under a stay but the plaintiffs' motion for class certification is denied, the NCAA is not really in any better position than before the ruling on class certification.

Friday, August 23, 2013

On trade dress: Texas Roadhouse example.

The restaurant Texas Roadhouse is alleging trademark and trade dress infringement against Amarillo Roadhouse and Texas Corral, restaurants operated in Michigan and Indiana. Although I have discussed trademarks and trademark infringement elsewhere on this blog, I have not done so with trade dress.

Trade dress refers to the visual characteristics of packaging, décor, shapes, designs or site layout. Trade dress can be registered as a trademark if it is source-identifying and otherwise meets the requirements of a trademark, but it is usually protected without registration. Additionally, the trade dress must be nonfunctional in order to be protected. For instance, the décor and design of the Cheesecake Factory may be protectable as trade dress; but to the extent that any of that décor or design is functional (e.g., relating to shelter or architecture), it is not protectable.

Monday, August 19, 2013

A possible breach of contract action arising out of the dispute between the New York Yankees and Alex Rodriguez.

Recently, New York Yankees' third baseman Alex Rodriguez was suspended for 211 games by Major League Baseball (MLB) for performance-enhancing drug use. Rodriguez appealed, but the appeal is not likely to be decided until after the 2013 season. The suspension was not due to a failed drug test, but due to records and statements provided by a performance-enhancing drug distributor.

Rodriguez alleged that the Yankees worked with MLB to suspend him, because the team wanted a reason to void the remainder of Rodriguez's contract. Rodriguez recently returned from injury. He is aging and arguably not producing at the level the Yankees are obligated to pay him. Per Rodriguez,
"[W]hen . . . people are finding creative ways to cancel your contract, I think that's concerning for me. . . . "
The Yankees denied the allegations. I would not be surprised if this ends up in litigation, even if it is not the most likely scenario. If the 211-game suspension is upheld on appeal, the Yankees may be able to avoid full payment on Rodriguez's contract. If Rodriguez's allegations of collusion between the Yankees and MLB are true, he would have a breach of contract action against the Yankees.

The obligation of good faith and fair dealing is implicit in a contract. If a party enters into a contract and later engages in subterfuge to impede the contract's function, it is a breach of contract. In other words, if the Yankees contract with a player, they cannot secretly sabotage the player to avoid making payment on the contract.

Rodriguez's contract likely has a choice of law provision (preference for New York law). It may also have an agreement to arbitrate all disputes arising out of the contract. To prove a breach of contract, Rodriguez would have to show that he did what the contract required, and the Yankees breached the contract. If Rodriguez ends up suing, the Yankees would counterclaim for breach of contract. The Yankees would argue that Rodriguez's performance-enhancing drug use was a breach of the contract. As an affirmative defense to Rodriguez's claim, the Yankees would argue that Rodriguez's performance-enhancing drug use excused the team from having to fully perform the contract.