Thursday, February 28, 2013

The importance of conducting trademark searches.

In starting a company, it is imperative to have a good business name. It is common to think that yours is an original name. But assumed originality should not take the place of due diligence. You should always search to determine whether another company uses the same name. There are a lot of people in the world, and all of them can file for trademark registration in the U.S. There is a reasonable chance that a seemingly original business name is in fact not that original.

Not every company has the same goals. Some have no limitations. Accordingly, they seek to become preeminent in their industry. Some have more modest goals and never intend to extend beyond a small geographic area. If you do not conduct a trademark search, you may be limiting how successful your business can become.

If your company shares a name with a federally registered mark, it depends on the competitive proximity of the products and services, among other things, to determine whether you infringe on their mark. If the competitive proximity of the products is close, the markholder will almost certainly sue you should your company become very successful while using their mark. If the competitive proximity of the products is not close, they may still sue you. The more famous and successful your company becomes using another company's mark, the more likely it is you will get sued by that company for trademark infringement. Ultimately, you may be required to change the company's name. All of the goodwill you built among customers and the community could be gone.

Trademark law is not always intuitive, either. There are circumstances when you would be prohibited from using your own last name as the name of your business. If your last name is already in a federally registered mark in a similar industry as your business, you probably cannot use it. For instance, I would likely be prohibited from using my last name if I were to start a company that sold athletic-wear, because "Russell Athletic" is used in three different federal trademark registrations.

People assume their name is their property. They do not think that another company could prohibit the use of their own name in a company name. But for this and other reasons, it is important to conduct due diligence and search for other marks.

Wednesday, February 27, 2013

Why you should care about the "Copyright Alert System."

What happened:
Major Internet Service Providers ("ISPs") agreed to monitor peer-to-peer file sharing over their networks to identify and prevent copyright infringement. The measure was lobbied for by the Recording Industry Association of America and the Motion Picture Association of America. The "Copyright Alert System" provides for "mitigation measures," which include decreasing Internet access of alleged infringers and directing their searches to "educational" web pages on copyright infringement.

Why you should care:
It is another example of the recording and film industries getting their way through lobbying efforts. Surely, copyright infringement is not a good thing. I am not advocating it. But most large companies are bullies. When it comes to any kind of property rights, they always assert more rights than they have. It is simply smart business to do so. It would not be smart business to claim less rights than you have, because you could get trampled on by other businesses or those with adverse interests to your company. As a result, legitimately protected use of copyrighted material may be limited by this measure, because fair use of copyrighted material is unlikely to be acknowledged by the copyright holders.

This measure is unnecessary, and is in response to failed legislation. I do not see what ISPs get out of the deal. Yesterday, they were unable to monitor their networks for infringing content. As a result, they were afforded the benefit of the safe harbor provision of Section 512 of the Digital Millennium Copyright Act (DMCA) (provided the ISP was "passive"). A passive ISP is transitory, does not have actual knowledge of infringing activity, does not know of facts and circumstances leading it to believe infringement is apparent, and does not gain a financial benefit from the infringing activity. Today, the ISPs can monitor for infringing content, and are doing so for no disclosed benefit.

What changed that ISPs are now able to monitor for infringing content, when they could not before?  Also, why would ISPs agree to limit Internet access of paying customers for the benefit of the recording and film industries? By itself, the measure is relatively innocuous. Copyright holders have access to remedies for copyright infringement, and this is an example of ISPs doing more to prevent infringement. But it just does not add up to me: What do ISPs get out of the deal? Why are they all of the sudden monitoring for infringing activity today when they were unable to do so yesterday?

Tuesday, February 26, 2013

On trademark infringement.

When asserting a claim for trademark infringement, it is necessary to show that you own a valid mark. In the previous post, Johnny Manziel would not be able to show ownership of a valid mark without sacrificing his college football eligibility at Texas A&M.

Registration of a valid mark is prima facie evidence of its validity, which means that a lot of the heavy lifting is already done for the plaintiff. It would be up to the defendant to argue that the mark is invalid.

Following demonstration that a mark is valid, the plaintiff would need to show that there is a likelihood of confusion between the plaintiff and defendant's marks. The various courts of appeal throughout the United States basically use a version of the same test. First, the court looks at the strength of the plaintiff's mark. The stronger the mark, the easier it is to show infringement. If the mark is barely registrable with the United States Patent and Trademark Office, the plaintiff has more work to do to show infringement.

Second, the court looks at the the similarity of the plaintiff and the defendant's marks. Obviously, the more similar they are, the more likely there is infringement. Third, the court looks at the competitive proximity of the plaintiff and the defendant's products. The closer they are to the same industry, the more likely there is infringement. Fourth, the court looks at whether the defendant intended to confuse the public. Fifth, the court examines whether there is actual confusion among consumers as to the source of the products. Sixth, the court looks at whether customers of the markholder exhibit care in selecting that particular item. If customers do not take much time in deciding whether to purchase a product, the easier it is to confuse customers.

If you purchase a car, you are likely to notice that a defendant's mark is confusingly similar, because you take care to notice exactly what you are purchasing. But if you purchase a box of crackers, you do not take nearly that much time or effort in examining the purchase. You may just grab a box based on its look, and later find out that it is not the brand you intended to select. Infringement depends on how the court weighs these factors.

Monday, February 25, 2013

The conflict between U.S. trademark law and NCAA rules: The "Johnny Football" scenario.

To have a valid trademark, one must use the mark "in commerce." Using a mark in commerce means to use the mark in the ordinary course of trade, not merely to reserve a right in the mark. In lieu of actual use, one can file an intent-to-use application, which gives the applicant six to 24 months from the date of the application to use the mark in commerce.

This poses an unique problem for NCAA athletes. For example, Johnny Manziel won the Heisman Trophy in 2012. He has an especially catchy nickname, "Johnny Football." The NCAA has allowed him to protect his rights while competing for Texas A&M University, but he cannot exploit the use of the name "Johnny Football" as a trademark. To do so would require that he use the mark "in commerce," which by definition would render him ineligible to compete in college football.

On November 1, 2012, Manziel's representatives filed an intent-to-use application with the U.S. Patent and Trademark Office. This gave him six months to file allegation of use -- that the mark is being used in commerce -- or to file for an extension of the six month period. If there is "good cause," an intent-to-use applicant can be given 24 months from the initial application during which they must use the mark in commerce to reserve rights in the mark. "Good cause" would surely be granted in cases where the applicant cannot use the mark in commerce due to NCAA rules.

In connection with a lawsuit filed by Manziel against an alleged infringer, Manziel filed a trademark application on February 2, 2013. This application alleged use of the mark in commerce, which requires that he use his nickname in connection with goods for monetary gain. Under Texas law, Manziel might have a stronger argument. States have trademark law that supplements U.S. trademark law. However, I know of no state's trademark law that allows for the reservation of trademark rights without using the mark "in commerce."

The best way for Manziel to get around the issue would have been to file the intent-to-use application, and file the maximum number of extensions so he would have 24 months from the initial application to use the mark in commerce. The 24 month period would have expired on November 1, 2014, during his redshirt junior season. By that time he would be eligible for the NFL Draft. (Football players are required to wait three years from their last high school season before they can declare for the NFL Draft.)

Manziel stands a very low chance of winning any trademark infringement cases before the "Johnny Football" mark can be registered on the Principal Register. One must have ownership rights in a trademark before they can file suit to enforce those rights. It is an unfortunate situation, because it indicates a genuine conflict between U.S. trademark law and NCAA rules. It may only get worse, because collegiate sports figures are more prominent now than they ever have been. In recent years, college sports have exploded in popularity, and people that used to only be known among college sports fans are now household names: RG3, Tim Tebow, etc.

Sunday, February 24, 2013

Liens versus breach of contract.

The last few days I wrote about about liens. If you hold a mechanic's lien, agricultural lien or harvester's lien, there are likely other methods of obtaining payment from someone who is wrongfully withholding it. You may be able to file a claim for breach of contract or quantum meruit. To file a breach of contract claim, there must be an express or implied contract. In cases where you perform work that entitles you file a lien, you may also be able to file a claim for breach of contract. If you do not have a written contract, it would be more difficult to prove the existence of an implied contract and its breach, as opposed to the value of the services you provided.

Quantum meruit is a legal term simply meaning that if you do not have a contract but provided a benefit to another, you can recover the reasonable value of the services provided. You are able to recover the same amount as with a lien -- the reasonable value of the services provided -- but the recovery does not attach to property like a lien.

These rights are not mutually exclusive. It may be prudent to file a lien, breach of contract claim, and for quantum meruit. Generally, the legal procedure of bringing all three claims can be a bit complicated. First, you have to file the lien, perfect it, and file a petition to foreclose it. Depending on the jurisdiction in which you live, you may not be able to bring any claims along with the petition to foreclose the lien. Second, you would file a petition for breach of contract and quantum meruit. Third, you would file a motion to consolidate the cases, which would likely be granted. If your jurisdiction allows you to include other claims in a petition to foreclose a lien, then you could include all three claims in one petition.

Sometimes it may not be prudent to assert all three rights of action. If you have a contract worth $50K but reasonably performed only $20K worth of work, you could stand to make more money by claiming breach of contract. If you have a contract worth $50K, but the reasonable value of the services you provided was $75K, you could make more money by filing a lien.

If you clearly have a contract, you would not likely have a strong case for quantum meruit. That remedy is available when there is no contract. In the last example, the opposing party would likely assert a counterclaim for breach of contract, so the opposing party would attempt to limit your recovery to $50K. It would be a fairly difficult case requiring a lot of evidence and testimony regarding the amount you should recover: $50K, $75K, or nothing. But those are just some considerations you should make if you performed work but did not get paid.

Tuesday, February 19, 2013

Do you have control over your information on The Cloud?

Cloud storage ("the cloud") allows you to store your files online so that you can access them from anywhere. Your files are stored on remote servers at the cloud provider's data center. As a matter of full disclosure: I use the cloud. For me, the advantages of the cloud outweigh the disadvantages. However, I do not upload all of my files to the cloud. With it, you can access your files at any time, as long as you have an Internet connection. Your information is housed in a more secure location than the hard drive on a computer. However, you ultimately lack control over privileged documents. In the event of a legal dispute, the cloud provider determines whether to divulge your information to adverse parties.

The reason there is controversy over the cloud is that your information is housed and controlled by a third party. Typical terms and conditions for cloud providers state that the provider can divulge your information when the company deems it reasonably necessary to comply with a legal request. There is no exception for confidential information.

So, if law enforcement asks the provider for your files, the provider can release them without your consent or input. This is probably the greatest danger to criminal defense attorneys. In other legal cases, the opposing party would ask for the files in discovery before having to resort to a subpoena. Moreover, it would be extraordinarily unlikely that a subpoena would be served on the cloud provider, instead of the account holder with the provider. In the provider's defense, they would not likely divulge your information without a subpoena, since you are one of their customers.

Successful businesses face a tantamount risk as criminal defense attorneys do, if they store confidential proprietary information on the cloud. Competing businesses can theoretically hack into the cloud and access your information, although this risk is lower on the cloud than it is when you store your information on a computer hard drive or local server. But if you are not an individual target, your information is more vulnerable on the cloud, because cloud providers are a much greater target for hacking. If you are part of the cloud, your information could be hacked.

At least publicly, espionage via the Internet is growing. You regularly hear of another country accessing an American company's servers. If your information is part of the victimized company's servers, it is at risk.

Monday, February 18, 2013

Contracting with larger companies.

When making online transactions, hardly anyone reads terms and conditions in their entirety. Some people gloss over them. Some people do not read them at all. But they do have legal consequences, and in most cases those legal consequences are enforceable.

To a mathematical certainty, those terms and conditions will include choice of law provisions. They will probably include choice of venue provisions and an agreement to arbitrate. Choice of law provisions provide that any dispute over the terms and conditions will be decided by the law of a given jurisdiction, often the jurisdiction in which the company is headquartered. Choice of venue provisions provide that any dispute over the terms and conditions needs to be brought in a particular jurisdiction.
Agreements to arbitrate provide that a dispute needs to be submitted to an impartial arbitrator of the company's choosing before the dispute can be submitted to any court's jurisdiction. Agreements to arbitrate sometimes foreclose any opportunity to resort to the legal process. People regularly run afoul of these common provisions. They will be adversely affected by a product or service they purchased, and will bring suit in their home jurisdiction. They are then surprised to find out that the case is dismissed, because one or more of those provisions are enforced by the court.

Unless a contractual term is particularly egregious or unexpected, courts tend to enforce these agreements so long as the consumer had actual or constructive notice. Actual notice is knowledge in fact of a particular provision. Constructive notice does not require actual knowledge. It simply requires that you had the opportunity to read the terms and conditions and should have known that a particular provision was included.

Large companies often try to bully smaller companies and individuals. They have large legal departments whose job it is to do everything they can to prevent the company from any liability. It is just their job. They are not bad people, but they may end up drafting term provisions that adversely affect other peoples' daily lives.

It is likely impracticable to ask anyone to read -- in depth -- the terms and conditions of every online transaction they make. But it is good to be aware of the provisions you almost always agree to -- choice of law and venue, and agreements to arbitrate any disputes. Even though terms and conditions are onerous, it is prudent to give them at least a cursory reading, because when you check the box that says, "I Accept," you are legally assenting to the given company's terms and conditions.

Sunday, February 17, 2013

On Cartels and OPEC.

Cartels are illegal in the United States. They are occasionally in the news, most notably when reference is made to the Organization for the Petroleum Exporting Countries ("OPEC"). OPEC is a classic cartel, which is a formal arrangement of competitors intending to limit competition and/or effect that limitation. Cartelization can occur on an informal basis, such as with the Mexican drug trade. The tamest form of informal cartelization is "oligopolistic pricing," which is when a market only has a few competitors who never intend to cartelize, but essentially do so based on market conditions.

The gasoline industry in the United States is an example of an oligopoly. There are only a few competitors, and their pricing is almost always in concert. The price of gasoline fluctuates rather widely, based on the price of crude oil. Irrespective of the price of crude oil, the formula for the price at which gasoline is sold to consumers remains constant. So, the price fluctuation in gasoline in the United States is affected by the price of crude oil and OPEC's restriction of output.

There is debate whether oligopolistic pricing should be legal or illegal, because not much competition exists in markets with oligopolies. Any lowering of the price by one competitor causes others to meet that price. Any temporary advantage gained by the company who lowered its price is negated when its competitors lower their prices. For instance, if two gasoline stations are across the street from each other, and they both start with a price of $4.00 per gallon for unleaded gasoline, one cannot lower its price to $3.90 per gallon because the other station would clearly do so, putting both stations in a worse position than keeping their prices at $4.00 per gallon.

Hence, profits of the oligopoly are diminished when one company tries to lower its price. The difference between oligopolies and informal cartels is basically academic. Consumers are harmed by both, and oligopolies engage in tacit cartelization. They just do not split profits like classic cartels.

So why is OPEC allowed to operate as a cartel when its effects are felt in the price of gasoline in the United States? In 1981, the Court of Appeals for the Ninth Circuit heard this issue. In district court, the Central District of California concluded that it lacked subject matter jurisdiction over OPEC and could not hear the case. The Ninth Circuit decided the case on different grounds on appeal. The Ninth Circuit concluded that The Act of State Doctrine precluded the court from declaring OPEC's activities illegal.

The Act of State Doctrine provides that a U.S. court will not adjudicate a politically sensitive dispute which would require the court to judge the legality of the sovereign act of a foreign state. International Association of Machinists and Aerospace Workers v. The Organization of Petroleum Exporting Countries, 649 F. 2d 1354 (1981), cert. denied, 454 U.S. 1163 (1982). OPEC is made up of 12 member countries, so the court reasoned that it was not going to infringe on their decision to cartelize. Id.

OPEC's members are primarily in the Middle East and North Africa. They restrict the output of crude oil in order to stabilize prices and keep them higher than they would be in a free market. OPEC's days are numbered however, because two essential characteristics of a cartel are an ability to control output and a lack of alternatives (called "inelasticity of demand").

If OPEC did not restrict output and control prices, then its member countries would compete with each other, making less than they do in OPEC. Clearly, consumers are harmed, because higher pricing finds its way to them at fuel pumps.

OPEC will either adapt or die when alternative energy becomes readily available, or enough oil reserves are opened in non-OPEC countries that allow for free market competition between OPEC and the new entrant into the market. Current inelasticity of demand and the ability to control output allow OPEC to operate in such a way as to harm consumers across the globe. Within 20-40 years that will not be the case. I think it is extraordinarily unlikely that OPEC will find a way to adapt to a competitive market.

Saturday, February 16, 2013

Little things you can do to help yourself from a legal perspective.

There are basically three types of clients: Prepared clients; moderately prepared clients, and clients who are so unprepared that it is prejudicial to their case. Most people and businesses fall within the middle category: Moderately prepared. However, if you can make yourself a prepared client, you have already gone a long way toward helping yourself in a legal dispute.

Lawyers work on facts. The more facts, the better the lawyer can differentiate between meaningful facts and meaningless ones. With meaningful facts, the lawyer can fit them into one or more legal theories on which to base a case.

The difference between being a prepared, moderately prepared or unprepared client is not stark. There are a few simple precepts or principles that people and businesses can implement into their daily lives that will dramatically help them in the event of future litigation. These should begin before legal disputes can be foreseen, not at the 11th hour.

Attorneys have difficulty representing clients when they are unclear about facts and a sequence of events. The lawyer's ability to "think outside the box" regarding finding solutions to issues depends on his or her ability to know as much as he or she can about the facts of a particular issue, and the legal theories into which the lawyer can fit those facts. So here are a few simple things that you can do to help yourself in the event of unforeseeable future litigation:

1. Do not post information or comments about legal disputes on social media.

You would be surprised at how much this edict is violated. People get emotional and lose their better judgment. They post information on a social media site, which is discoverable information. In most cases, the other person in the dispute is watching your social media accounts to see if you say something incriminating. If you do, they will take a screen shot and include that information in their evidence.

Information here includes pictures, which can directly contradict what someone is claiming. For instance, in workers' compensation cases, it is not uncommon to see the person claiming the disability post pictures of waterskiing on Facebook, or doing something else that stops their claim dead in its tracks. The Internet does not forget, and in a dispute, people are watching you as closely as you are watching them.

2. Watch what you say.

It is very easy to meet the technical legal definition of business interference, which can also be known as interference with business relations. It is really, really easy to meet the technical legal definition of defamation. Now, an element to recovery of monies in legal disputes is damages, which is what value of detriment the plaintiff suffered in a suit. So, meeting the technical definition of business interference and defamation does not mean that you would have to pay a lot of money to a plaintiff, but it does mean that in theory, you could have a judgment of business interference or defamation on your record.

Basically, do not spread gossip damaging another person's reputation, and do not try to break up business relationships.

3. Keep records and journals of important and mundane events.

One of the best ways you can help your attorney is to save emails, calendars, and have a timeline of events in a legal dispute. It will save you money in the long run, because the attorney will not have to do as much work in finding information, and it drastically improves your chances of winning. As a client, you do not have to know the law or all the relevant facts of a legal theory. But if you can provide your attorney with the information he or she ideally needs, it can be all the difference in your case.

With today's technology, it is not that difficult. Just do not delete old events off of your calendar, because even unrelated events can rekindle the memory of a forgotten event. In a perfect world, a client will record all of their daily events, but this is not practicable. Just save information, archive emails and keep record of meetings and events.

4. Get things in writing.

Clients regularly think that evidence is easier to obtain than it is. Unfortunately, people lie. People do not want to get involved in the legal process as a witness. People forget. Also, clients retrospectively infer the meaning behind certain statements in their favor. When a client claims that someone said such-and-such, and it purportedly supports the client's position, the other conversant often did not mean what the client thinks he or she meant. It is human nature to look for things in your favor, but it is not always consistent with reality.

Although one can be prosecuted for perjury, rarely does a case go by that someone does not lie on the stand. Maybe they did not even intentionally do so, but they have told themselves a story so many times that they believe it. It is just as George Costanza said, "it is not a lie if you believe it." People always think of themselves as the protagonist, and will unconsciously manipulate stories to make themselves the "good guy." So when a client comes in thinking that a case is cut-and-dry, they are surprised to find out that their opponent's story has changed from what they expected.

So, people forget, lie, and generally try to avoid having to be a fact witness in a case. If you can get something in writing, you drastically improve your chance of success in a dispute.

5. When a dispute arises (long before the institution of the legal process), the less you say is better. This includes in text messages, social media and emails.

Before a lawsuit is filed, or attorneys are consulted, it is prudent to self-impose a gag order when discussing the subject with others. This does not include spouses, who are generally privileged from divulging confidential marital communications. But if you text message someone, or tweet something -- even if it is not directly about the person -- it is discoverable information. This dovetails with my first point, but I cannot stress it enough. If it is recorded, digitally or otherwise, it usually can be admitted as evidence.

Friday, February 15, 2013

The importance of forming a business entity separate from your personal affairs.

Regardless of the field of industry in which you conduct your business, there are clear benefits to forming a business entity. There are a few different options from which one can choose, and they each have their own advantages. Some advantages are tax-related. Some advantages are related to liability. The primary reason one should form a business entity separate from their personal affairs is liability. Every business is vulnerable to legal claims. No matter how you careful you are in conducting business, you can find yourself in trouble because of another person's actions. So it is important to be protected.

If you run your own business, but do not have it set up as a separate business entity, then any legal claims against you can be asserted for the full amount. If you have $100K in household assets, and a $75K judgment is entered against you, the judgment debtor (the person who sued you) can obtain $75K from you personally. Now, consider a situation in which you formed a business entity and kept those assets and liabilities separate from your personal assets and liabilities. If you have $25K in business assets and do not commingle your business and personal finances, then the same judgment debtor who has a $75K claim would only be able to recover $25K from you (provided you formed a business entity with limited liability).

If you have a spouse, and have joint bank accounts, the first scenario penalizes them, because a $75K judgment was entered against you personally and you share a bank account with them. In the second scenario, the judgment is entered against your business, and only up to the value of the business's total assets.

If you step back and look at the big picture -- the effect of business entity formation -- think of it as a form of insurance, but paid with a very small premium. Essentially, you pay a small biennial fee (low three digits), and your liability is limited the value of the business's assets.

If you do not pay the small biennial fee, your business entity is dissolved, and you are personally liable again. To maintain limited liability, you have to select an entity with limited liability. Also, you must keep your personal and business finances separate from each other. I cannot stress that enough.

Specifications causing damage.

Architects and engineers ("AE") are the arbiters when projects involve formal specifications. The AEs determine whether a bid submission is specification-compliant before making an award. It is not unforeseeable that issues with construction arise from faulty design or construction. In such cases, who is at fault depends on how the mistake in design or construction was made. AEs are licensed professionals just like doctors and lawyers. There are clear repercussions when their design causes damage. When damage is caused by contractors or subcontractors, they are clearly at fault. They would be liable for damage caused to the premises.

AEs, like other professionals, are held to the standard of ordinary skill in the industry. In designing the specification, if the AE practices his or her profession below the standard of ordinary skill in the industry, and designs something that he or she should know causes an unreasonable risk of harm, that person subjects their company to liability when harm results. This would be determined through litigation.

The question of who is at fault is generally meted out during the discovery process. It is a fact-sensitive inquiry requiring specific information on the case at hand, as well as requiring the use of expert witness testimony to establish the standard of ordinary care in the industry.

Thursday, February 14, 2013

Unions and labor exemptions in sports.

It is not uncommon to hear complaints about seemingly anticompetitive conduct in professional sports leagues at the nexus of college and professional sports. In professional football, the complaint regards the requirement that an individual be three years removed from their last high school football season. In professional basketball, it is the requirement that an individual be one year removed from their last high school basketball season. In professional baseball, 18-year olds can declare for the draft. But if they choose to go to college, they must remain in college for three years.

In short, the complaints are right. It is literally a restraint of trade to require athletes to wait a certain number of years before they can declare for a professional sports draft. It is literally anticompetitive. But the antitrust laws in the United States are not literal. They are as nebulous as any body of law in the United States. A cursory reading of the statutory antitrust laws in this country would take about five minutes, and afterward one might get the impression that there are enforceable antitrust violations all the time.

While anticompetitive conduct is a fairly regular occurrence, unless something is anticompetitive without any plausible procompetitive justification, courts will generally give an antitrust defendant's argument deference. Antitrust cases are notoriously difficult to predict, and extremely expensive. The antitrust defendant may not win, but unless the anticompetitive conduct is illegal per se -- illegal on its face -- the antitrust defendant will at least be able to provide a plausible procompetitive justification.

You may have heard about labor exemptions in antitrust law, but they are not well-understood. Hence, the abundance of complaints about athletes having to wait a certain number of years before declaring for a professional sports draft. Labor exemptions have been relevant the past few years. In the last two years alone, the NBA and NFL both had labor disputes. The NBA lost 18 regular season games in 2012. The NFL almost lost games in 2011, but came to an agreement at the 11th hour. 

There are two types of labor exemptions: Statutory and Nonstatutory. The Statutory Labor Exemption provides that unions can enter into agreements within the market (sport) that prevent the formation or competition from other unions. Basically, the National Basketball Players' Association (NBPA) or National Football Players' Association (NFLPA) can exist and operate without having to worry about competition from a rival union.

The Nonstatutory Labor Exemption basically provides that agreements made at arms' length between unions and management are exempt from antitrust law. This is called either a "collective bargaining agreement," or "CBA." So long as the NFLPA or NBPA collectively bargained for a particular agreement with the NFL or NBA, respectively, it will be exempt from antitrust law.

One of the items collectively bargained for is the number of years that amateur athletes must wait before declaring for a professional sports draft. The NBA made an agreement with the NBPA to not allow college players, or players from Europe, to enter the league before one year after the player's last high school season. The NFL made an agreement with the NFLPA to not allow college players to enter the league before three years after the player's last high school season. These agreements benefit the NFL and NBA because they are able to obtain more information about the mental capacity and physical capabilities of its future constituents. These agreements benefit the NFLPA and NBPA because preventing players from entering the league until they are more mature enhances player safety. It also protects their current constituency by limiting the number of amateurs that are able to oust current players from their jobs.

In 2002, former Ohio State freshman running back, Maurice Clarett, challenged the rule that a college player had to wait three years before being eligible for the NFL draft. Since the three year requirement was collectively bargained, Clarett's suit ended as quickly as it began. He was given virtually no opportunity to argue his claim, because the three year requirement was the subject of arms' length bargaining by the NFLPA and NFL. Clarett's situation was a vindication of the three year requirement, because he was constantly in trouble with the law, and it would have been a mistake for any NFL team to draft him.

In connection with the 2011 NFL labor dispute, the NFLPA "decertified," which essentially means it disorganized or disbanded. This decertification allowed the NFLPA to sue the NFL under antitrust law. Shortly before decertification, the NFL locked-out the players. Since the subject of the labor dispute was the subject of collective bargaining, it was a legal error that the NFLPA won an injunction at the district court level. The injunction prevented the NFL from "locking out" the players. The effect of this was to continue the previous collective bargaining agreement until a new one was in place. So, the players could go back to their jobs.

Obviously, the NFL would have lost a lot of bargaining power if the injunction remained in effect. But the NFL was able to defeat the injunction and enforce the lockout. If the case had gone to trial, I think it is almost certain that the NFL would have easily won the case. The court would have used the nonstatutory labor exemption to tell the NFLPA, in effect, "you made your bed, now sleep in it."

Are you a non-voting shareholder of a small company?

If you are a non-voting shareholder of a company, your rights are limited if the Board of Directors ("Board") subsequently takes action that you do not like. Ultimately, their conduct may be so egregious that you have rights to take action, but generally they are entitled to run the company in ways they see fit. As long as they are not violating the fiduciary duties of loyalty and care that directors owe a company, your hands may be tied.

If the Board is small, and the misbehavior involves only one or two directors, it is more likely that the duties of loyalty and care are being violated. This is simple human nature. If you have 10 people in a room, the likelihood that they are all taking advantage of their position at the expense of shareholders is fairly low. If you have two people in a room, the likelihood that they are both taking advantage of their position at the expense of shareholders is much higher, relatively speaking.

If you have the opportunity to become a shareholder of a small company, it is best to make sure that you are a voting shareholder. This might involve negotiation if the bylaws have not been written. Or it might involve purchasing a different class of stock. If you are becoming a shareholder of a larger company, it may not be in your best interest to have a vote, because there will be an ample number of voting shareholders overseeing the Board.

If you are already a non-voting shareholder of a small company, you are likely entitled to inspect the books and records of the company, depending on the state in which you are located. You generally have to provide notice of a certain duration as defined by state law, so your inspection does not unduly interfere with the company's business affairs.

When a small number of people enter into business relationships, they have competing considerations and different ideas about how a company should be run. In most cases, these disputes are resolved without resorting to the legal process. But even when people are conducting their business in good faith, they might run afoul of the expectations of their colleagues in the company. This could involve compensation or any number of things. In such cases, it is prudent to have a vote on the matter.

Wednesday, February 13, 2013

Your personal privacy in the digital and mobile worlds.

The privacy of your personal information is very important. The Fourth Amendment protects individuals from unreasonable searches by government officials. It does nothing to protect individuals from unreasonable searches by private persons or entities.

The Federal Trade Commission (“FTC”) is the federal agency overseeing consumer protection in the United States. This includes protection as it relates to privacy and personal information.

In general, the FTC does not regulate what of your personal information is accessible through the Internet via computers and mobile devices. Instead, the FTC enforces company privacy policies to ensure that customers are getting accurate information from those companies. The FTC also requires that businesses safeguard private customer information from unauthorized access. But if you give companies access to your personal information, they pretty much have carte blanche to take whatever information they want. The only proviso is that they must accurately disclose what information they are taking.

In the past two years alone, companies like Twitter, Facebook and Google have been slapped by the FTC over privacy or data security issues. Even though these likely affected you, you may not even have heard about them.

These are not the only companies to be hit with charges from the FTC over privacy or data security. These are just a few of the most prominent ones. Most people in the United States use any or all of Google, Facebook or Twitter. So you were likely affected by their privacy policies, and continue to be affected by them.

The FTC website has good background information on mobile apps. If you allow an app to access your personal information when signing up for an app, they may be able to access: (1) your phone and email contacts; (2) call logs; (3) Internet data; (4) calendar data; (5) location data; (6) the device’s unique IDs; and/or (7) information about how you use the app itself. Earlier this year, the FTC issued “best practices” for mobile app developers. Posterity will show whether mobile app developers will follow these guidelines.

Given how much we use the Internet and mobile devices, it is important that you are aware of just how vulnerable your private information is. The FTC advises people to think of personal information as having monetary value. In other words, even free apps are paid for, because you exchange your personal information to use the app. The app developers use this information for advertising and other purposes. Your personal information is valuable in the hands of app developers and businesses. They consider your personal information a commodity to be bought and sold, so you should treat it the same way.

Tuesday, February 12, 2013

Cybersquatting on the Sooners.

The University of Oklahoma is suing a man in district court for cybersquatting. The story is replete with almost unparalleled levels of irony, because the school's nickname -- Sooners -- refers to settlers who squatted on land in what is now Oklahoma before Grover Cleveland proclaimed the territory open to settlement in 1889.

The University is undoubtedly suing under the Anticybersquatting Consumer Protection Act (ACPA), found in Title 15 of the U.S. Code. "Cybersquatting" occurs when one registers, traffics in, or uses a domain name that is identical or confusingly similar to a famous or distinctive trademark at the time of the domain name's registration, and the individual has a bad faith intent to profit. 15 U.S.C. § 1125(d)(1)(A). "Bad faith intent to profit" (BFIP) is a legal term of art. In determining whether a putative cybersquatter has BFIP, a court considers a variety of statutory factors. Here, the relevant statutory factors will be:

- the defendant's prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
- the defendant's bona fide noncommercial or fair use of the mark;
- the defendant's intent to divert consumers from the University's online location to the defendant's site that could harm the goodwill represented by the mark;
- the defendant's offer to sell the domain name or otherwise obtain financial gain;
- the defendant's provision of false or misleading information in registering the domain name; and
- the defendant's acquisition of any other domain names including famous or distinctive marks.

There are a lot of facts that remain in this case, and the above list will likely dictate the case's outcome. Most of the landmark cybersquatting cases occurred in the 1990s and early 2000s, when people still thought they could get away with taking domain names and selling them to other companies. Unless the site is a parody and it is clear from the outset, in which case there will be no BFIP, these cases do not end well for the defendant.

The University of Oklahoma does own the rights to the mark "Sooner," for clothing, sports apparel, t-shirts, hats, sweatshirts and the like. It also owns a number of other registrations where "Sooner" is juxtaposed with another word. I suspect that this individual registered the second-level domain name "SoonerNetwork" in order to profit off of the school's third-tier media rights, which are reserved to Big 12 member schools. However, if the individual is actually using the site for a bona fide purpose and has no BFIP, he may be able to keep it. I doubt this is the case, because the purported legitimate purpose, a site directing people to elderly care providers in the area, has no connection to the term "Sooner Network." Also, he apparently included information on the site at an earlier date that betrayed his fanaticism for the Texas Longhorns.

I suspect that, in addition to his motive for registering the site, he talked to someone with a rudimentary knowledge of the law, or an attorney, who advised him on the BFIP considerations. I doubt an attorney would have advised him that he should change the website's content, but an attorney might have let him know how a court would look at it (which led the individual to change the content on his own).

Secondary meaning in trademarks.

In the preceding posts, I mention how secondary meaning is a way in which geographically descriptive or deceptively misdescriptive trade names (“marks”) can gain federal trademark protection. I do not delve into the meaning of “secondary meaning.”

Secondary meaning is basically recognition in the marketplace. If a mark is not suggestive, arbitrary or fanciful enough to merit federal trademark protection initially, recognition in the marketplace is a way that a mark can overcome that obstacle. The more descriptive a mark is, the more evidence of secondary meaning is required.

Secondary meaning is established when the primary significance of a mark among consumers is to identify the source of the product rather than the product itself. Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851 n.11 (1982). When a markholder claims secondary meaning for an otherwise unregistrable trademark, the way an applicant substantiates his or her assertion is through:

- Affidavits or declarations
- Depositions or other evidence showing duration of use of the mark in commerce
- Advertising expenditures in connection with use in commerce
- Letters or statements from the trade or public averring recognition in the marketplace.

37 C.F.R. § 2.41(a). There are occasions when a bad mark can overcome descriptiveness, geographic descriptiveness or deceptive misdescriptiveness, but substantial evidence of secondary meaning is required. I cannot foresee a situation when establishing secondary meaning would be easier than having an inherently distinctive trade name from the beginning.

Monday, February 11, 2013

Think you have a good business name?: On primarily geographically misdescriptive trade names.

Generally, a trade name ("mark") that is geographically descriptive cannot gain federal trademark protection under the Lanham Act. There is an exception for wine products, however, and marks that are geographically descriptive can gain federal trademark protection upon showing secondary meaning.

A mark is considered geographically descriptive if the primary significance of the mark is a generally known geographic location, the goods or services originate in the place identified with the mark, and consumers would be likely to believe that the goods or services originate in the geographic place identified with the mark. Trademark Manual of Examining Procedure (TMEP) § 1210.01(a) (October 2012).

If the geographic location is remote or obscure, the mark may not be rejected on the basis of geographic descriptiveness. Consumers are not likely to make associations with particular geographic areas when the location is remote or obscure. Id.

When looking at a mark for primarily geographically deceptively misdescriptive marks, it is the same inquiry as geographic descriptiveness, with two additions. First, the goods or services must not originate in the geographic location described. Second, the misrepresentation of origin is likely to be a material factor in consumers' decisions to purchase the goods or services. TMEP § 1210.01(b).

If you have a business suggesting a connection with a particular geographic origin, it generally cannot receive federal trademark protection. It is not uncommon for me to see business names that falsely suggest a connection with a particular geographic area, because the proprietor wants his or her consumers to see his goods or services as originating from a certain area. If the geographic misdescription is a material factor in consumers' decisionmaking regarding the goods or services, that is precisely the type of proprietor the United States Patent and Trademark Office intends to permanently refuse federal trademark protection.

Saturday, February 9, 2013

Think you have a good business name?: Deceptive and deceptively misdescriptive marks clarified.

In my last post, I discussed deceptively misdescriptive marks and how they cannot be registered (unless they have secondary meaning in the minds of consumers). I wanted to add a little bit for more clarity. Deceptive marks can never be registered. All deceptive marks are deceptively misdescriptive. Not all deceptively misdescriptive marks are deceptive.
If the misdescription of the goods concerns a feature that would be relevant to the decision to purchase the goods or use the services, it is deceptively misdescriptive. If the misdescription is more than a relevant factor in purchasing decisions, but it is a material factor in purchasing decisions, it is deceptive. Trademark Manual of Examining Procedure, § 1203.02(c) (October 2012).

If the examiner is unclear about whether a mark is deceptive or deceptively misdescriptive, he or she is told to refuse registration on both grounds. Id.

Think you have a good business name?: On deceptive and deceptively misdescriptive trade names.

In the line of work in which I was able to gain business experience, it was not uncommon for me to see trade names ("marks") that misdescribed the goods or services ("goods") provided. I would most commonly see marks that misdescribed goods when proprietors would devise one suggesting a connection with an environmentally-friendly or "green" product. In the absence of legal action from another person or business for infringement, people can pretty much use whatever trade name they want. However, that does not entitle them to trademark protection under the Lanham Act.
Title 15 of the U.S. Code contains the Lanham Act, which is the federal statutory scheme for registering and protecting trademarks. In general, "inherently distinctive" marks can gain federal trademark protection via registration, and descriptive or generic marks cannot. As long as a mark is not "merely descriptive" of the goods or services provided, a descriptive mark can become protectable upon showing of "secondary meaning." Inherently distinctive marks are either suggestive of the goods provided, arbitrary or fanciful.
Suggestive marks require imagination, thought or perception to reach a conclusion as to the nature of the goods or services they identify. Trademark Manual of Examining Procedure (TMEP) § 1209.01(a) (October 2012). Arbitrary marks comprise existing words but when used to identify particular goods or services, they do not describe an ingredient, quality or characteristic of the goods or services, e.g., "Apple" for computers. Id. Fanciful marks comprise terms invented solely to function as a mark. Id.
A mark that has attained secondary meaning implies that the mark originally did not have significance in the minds of consumers, but use of the mark in commerce has cultivated a source identifying connection in consumers' minds. If a mark is originally descriptive, but several years later consumers immediately identify the mark with the markholder's products or services, it can be registered and receive federal trademark protection.
The caveats I initially identified are deceptive and deceptively misdescriptive. I commonly see deceptive or deceptively misdescriptive marks in commerce. Now, this will not normally cause an issue unless the proprietor tries to register the mark, but the markholder's decision to select a deceptive or deceptively misdescriptive trade name may have been changed if he or she had known that the trade name they were selecting cannot ever receive federal trademark protection.
When an individual starts a business, it is axiomatic that they will try as hard as they can to make the business as successful as they can. Apple, Microsoft or Coca-Cola were not started with the intention to only compete in a small geographic area. If they had selected a mark that was permanently unregistrable, and could not ever receive federal trademark protection, they would either have had to change their trade name or run the risk of competitors and "knock-offs" incessantly piggybacking off of the source identification or recognition that the trade name had generated in the market place. It is not a stretch to say that those companies may not have survived unless they changed the trade name.
Deceptive marks are permanently unregistrable. Deceptively misdescriptive marks are also unregistrable, but can be registered upon showing of secondary meaning. A "deceptively misdescriptive" mark immediately conveys a false idea of the goods or services it identifies. TMEP § 1209.04. It is not a death knell to a mark if it misdescribes goods or services it identifies. To be deceptively misdescriptive, consumers who encounter the mark on or in connection with the goods or services must be likely to believe the misrepresentation. Id. I commonly see this when proprietors want their business to be identified with the green revolution, and the goods or services they provide are not energy-efficient or "green" at all. Depending on how a prospective trademark examiner would decide a consumer's likelihood of believing the misrepresentation, the mark is either unregistrable or permanently unregistrable.