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What the %@#&? Supreme Court Strikes Down Ban on Immoral or Scandalous Trademarks

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The Supreme Court struck down the Lanham Act’s prohibition on registering “immoral or scandalous” trademarks in its recent decision in Iancu v. Brunetti. Erik Brunetti is an artist who created a clothing line that uses the trademark FUCT. When he sought to register the mark, the U.S. Patent and Trademark Office (“USPTO”) denied his application, citing the Lanham Act’s prohibition on registering trademarks that contain immoral or scandalous matter. It is not hard to imagine that the mark would bring to mind perhaps the most famous four-letter curse word in American culture. Brunetti appealed and argued that the prohibition violates the First Amendment.

The Supreme Court agreed with Brunetti and held that the Lanham Act’s prohibition on registering immoral or scandalous trademarks is unconstitutional because it discriminates on the basis of viewpoint. By way of example, the Court pointed out how the USPTO registered the mark “D.A.R.E. TO RESIST DRUGS AND VIOLENCE” but refused to register “BONG HITS 4 JESUS” because it “suggests that people should engage in an illegal activity [in connection with worship]” and since “Christians would be morally outraged by a statement that connects Jesus Christ with illegal drug use.”

The Supreme Court’s rationale follows the same line of thinking from its decision in Matal v. Tam, two years ago, when the Court held that the ban on registering marks that “disparage” any person living or dead was unconstitutional. In that case, the Court also held that if a trademark registration bar is viewpoint-based, then it is unconstitutional under the First Amendment.

Does this mean that American consumers are likely to see an influx of brand names containing lewd, sexually explicit, and profane slogans? Not necessarily. While the Lanham Act’s prohibition had prevented the registration of immoral or scandalous marks, there is nothing that previously prevented individuals or businesses from using immoral or scandalous marks in commerce and enforcing the mark against potential infringers. Registration simply provides trademark owners with additional, valuable benefits such as the legal presumption of national ownership of a trademark. In other words, the landscape for offensive marks being used in the marketplace is unlikely to change too much, but owners will have an easier time protecting and enforcing these types of marks.

Questions? Let Eric know.

Eric ClendeningEric Clendening is a member of Flaster Greenberg’s Intellectual Property and Litigation Departments. He focuses his practice on intellectual property litigation and commercial litigation, including contract disputes, employment litigation, and other commercial disputes. He also advises clients on protecting and enforcing intellectual property rights online, including the resolution of domain name disputes and matters concerning e-commerce, online speech and conduct, and related intellectual property issues involving trademarks and copyrights.

It’s Her Party, But Can Miley Cyrus Write What She Wants? Miley Cyrus Sued for Copyright Infringement Over 2013 Hit We Can’t Stop

Miley Cyrus topped the 2013 charts with hit song ‘We Can’t Stop,” which begins with the lines “It’s our party we can do what we want, It’s our party we can say what we want, It’s our party we can love who we want” but a new lawsuit, filed on March 14, 2018 in the United States District Court for the Southern District of New York, suggests that while it may be her party, the song may not contain her lyrics.  Jamaican artist Michael May, who performs under the stage name Flourgon, has asserted that Ms. Cyrus, and her co-writers, producers and distributors infringed on a line from his 1988 song “We Run Things.” In particular, May’s song contains the lyric “We run things. Things no run we.”  May claims that Cyrus’ lyric “We run things. Things don’t run we.” infringes on May’s earlier lyric.

May asserts in his lawsuit that Cyrus’ song owes its “chart-topping popularity and its highly-lucrative success” to May’s lyrics and that “the entire theme of ‘We Can’t Stop’ would be hollow in sound and impact.”  May further also cited a 2015 interview by co-writer Theron Thomas, where he indicated that his music is influence of Caribbean culture as proof that the lyrics were copied.  May is seeking to enjoin Cyrus from selling, distributing and performing “We Can’t Stop,” as well as monetary damages.  While the complaint does not specify the exact amount sought, his attorney told CNNMoney that $300 million would be “reasonable compensation.”   What a mench.

What is Copyright Infringement?

For those of you unfamiliar, a copyright arises from the creation of an original work that is fixed in a tangible medium of expression, described as “when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”  While the mere creation of the composition is enough to establish a copyright, registration affords the author/publisher additional protections. The courts often look to whether the composition contains a minimal spark of creativity. The spark can be in the chord progression, rhythm, melody or lyrics. In order to establish the infringement, a comparison of the songs must be done, often by an expert, and a judge or jury must then determine if such an infringement, or unauthorized borrowing or use of the same chord progression, rhythm, melody or lyrics, has occurred. Since such proof is often subjective to the fact finder, most cases are resolved prior to a final determination in Court.

Prior Precedent 

Copyright disputes between musicians, writers and publishers have been part of the music landscape for decades. In 1971, former Beatle George Harrison had a number 1 single on his hands with ‘My Sweet Lord.’ Yet, while that single was still in heavy rotation, Harrison was hit with a lawsuit by publisher Bright Tunes Music, which held the rights to the Chiffons’ 1963 hit ‘He’s So Fine,’ written by Ronnie Mack. Harrison tried unsuccessfully to settle the matter and, ultimately, lost at trial, having to pay Bright Tunes damages in the amount of $1,599,987! As only a former Beatle could, Harrison did, however, turn the experience of tortuous litigation into another hit called ‘This Song.’

More recently, Robin Thicke, Pharrell Williams and Clifford Harris, Jr. were found to have infringed on the work of Marvin Gaye, in particular the song ‘Got To Give It Up.’ Thicke, Williams and Harris pre-emptively filed suit against the Gaye family and Bridgeport Music, in an attempt to have the court determine Thicke and company had not infringed on Gaye’s work. The suit backfired, with the Court finding that Thicke and company infringed on Gaye’s work and awarding $5.3 million in damages.  Thicke and company have appealed to the United States Court of Appeals for the 9th Circuit where they argued that there can be no infringement for a “groove,” which it sought to differentiate from a lyric, rhythm, etc.  No decision has been reached by the 9th Circuit as of yet, but Thicke, Williams and Harris have a tough road ahead to overturn the lower court’s verdict.  On the other hand, Taylor Swift prevailed in a California copyright dispute earlier this year with facts similar to those in the Cyrus action.  The plaintiffs in that action alleged that Swift’s lyrics in the hit “Shake it Off” infringed on the lyrics to their song  “Playas Gon’ Play.”  Swift’s lyrics included the phrase “[T]he players gonna play, play, play, play, play and the haters gonna hate, hate, hate, hate, hate.” which plaintiff compared to its earlier lyrics  “Playas, they gonna play / And haters, they gonna hate.”   The presiding judge summarily dismissed the complaint against Swift stating “The allegedly infringed lyrics are short phrases that lack the modicum of originality and creativity required for copyright protection.”

As recently as this past January, Lana Del Rey tweeted that Radiohead was bringing a lawsuit against her claiming that her song, “Get Free” infringed on Radiohead’s hit 90s song, “Creep.” To date, no such lawsuit has actually been filed, although Radiohead’s lawyers have admitted to being in discussions with Del Rey’s representatives where they requested that the band be credited on Del Rey’s song.

Does May Have a Case?

After reviewing the lyrics and listening to both songs, May has a significant uphill battle in his copyright dispute, if the New York court follows the precedent of the California Court.  As with the Swift case, this dispute involves only a seven-word line in a more substantial composition.  While the lyrics are very similar, with six out of the seven words being identical, the Court will likely find the allegedly infringing lyrics in Cyrus’ song are merely short phrases that lack the modicum of originality and creativity required for copyright protection.”

While the outcome will likely favor Cyrus, if the Court were to rule in May’s favor, a $300 million award is very unlikely.  Copyright infringement damages fall into three main categories…actual damages, profits and punitive damages. Damages are governed by 17 U.S.C. § 504(b), which provides that “The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. In establishing the infringer’s profits, the copyright owner is required to present proof only of the infringer’s gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.”  In addition, the Court may impose punitive damages, in an amount in excess of the actual damages and profits.  Without proof that Cyrus’ song caused him to lose money and opportunity, May, if victorious, would likely only receive Cyrus’ profits, which would likely be exponentially less than the $300 million suggested by May’s counsel.

Questions? Let Jeff know.

Jeff Cohen is a member of Flaster Greenberg’s Litigation, Intellectual Property, Corporate and Real Estate Practice Groups. He has been a trial attorney for more than 23 years, counseling and representing a diverse range of clients in matters related to commercial contracts, shareholder and partnership agreements, trademarks, copyrights, patents, including Hatch-Waxman, insurance coverage, franchise disputes and commercial construction.

Lana Del Rey May Have Creeped too Close to Radiohead’s Melody, Copyright Infringement Suit Nears

A tweet sent by Lana Del Rey earlier this week (likely to the chagrin of her attorneys) informed her 8.3 million followers that Radiohead is claiming that the song ‘Get Free’, off her recent album ‘Lust for Life’, infringed on Radiohead’s 1993 hit song ‘Creep.’ The 90’s band is seeking 100% of the profits related to the publishing of the song, which Del Rey is credited with co-writing along with songwriters and record producers, Kieran Menzies and Rick Nowels.

Fast forward to a few hours after the tweet was sent when Del Rey then repeated this sentiment at a subsequent concert in Denver, CO, where she referred to the song as her “personal manifesto.”  As an aside, it was a questionable move for Del Rey to go so public with this dispute, let alone state terms of settlement offers, as settlement negotiations are often confidential…unless where published in the manners Del Rey has done, and could taint the available jury pool. Check out a clip of Del Rey addressing the crowd here.

Does Radiohead have a case?

I’ve never been much of a gambler, but after listening to both songs I would say that Radiohead has a strong case in this copyright dispute. For those of you unfamiliar, a copyright arises from the creation of an original work that is fixed in a tangible medium of expression, described as “when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”  While the mere creation of the composition is enough to establish a copyright, registration affords the author/publisher additional protections. The courts often look to whether the composition contains a minimal spark of creativity. The spark can be in the chord progression, rhythm, melody or lyrics. In order to establish the infringement, a comparison of the songs must be done, often by an expert, and a judge or jury must then determine if such an infringement, or unauthorized borrowing or use of the same chord progression, rhythm, melody or lyrics, has occurred. Since such proof is often subjective to the fact finder, most cases are resolved prior to a final determination in Court.

In fact, the very song Radiohead is now claiming Del Rey has infringed upon, was itself the subject of a claim of infringement by Albert Hammond and Mike Hazlewood, regarding the 1972 song ‘The Air That I Breathe,’ sung by The Hollies. As a result of that claim, Hammond and Hazlewood received co-writing credits and a percentage of the royalties of Radiohead’s ‘Creep.’ While one might ask whether Hammond and Hazlewood should really be making the claim against Del Rey, it is too soon to tell whether it is the very same chord progression, rhythm, melody or lyrics involved in the Del Rey-Radiohead dispute as the Radiohead-Hollies dispute, as every song is made up of many different such elements. Time will tell whether Radiohead’s lawsuit will go anywhere, although my money would be on Radiohead winning, if it went to trial. However, odds are that there will be a similar result to the Radiohead-Hollies out of court settlement, with Radiohead sharing writing credits and royalties.

You Be The Judge: Take a listen to both songs here:

Prior Precedent 

Copyright disputes between musicians, writers and publishers have been part of the music landscape for decades. In 1971, former Beatle George Harrison had a number 1 single on his hands with ‘My Sweet Lord.’ Yet, while that single was still in heavy rotation, Harrison was hit with a lawsuit by publisher Bright Tunes Music, which held the rights to the Chiffons’ 1963 hit ‘He’s So Fine,’ written by Ronnie Mack. Harrison tried unsuccessfully to settle the matter and, ultimately, lost at trial, having to pay Bright Tunes damages in the amount of $1,599,987! As only a former Beatle could, Harrison did, however, turn the experience of tortuous litigation into another hit called ‘This Song.’

More recently, Robin Thicke, Pharrell Williams and Clifford Harris, Jr. were found to have infringed on the work of Marvin Gaye, in particular the song ‘Got To Give It Up.’ Interestingly, it was Thicke, Williams and Harris who pre-emptively filed suit against the Gaye family and Bridgeport Music, in an attempt to have the court determine Thicke and company had not infringed on Gaye’s work. The suit backfired, with a finding that Thicke and company had infringed on Gaye’s work and awarded $5.3 million in damages.  Thicke and company have appealed to the United States Court of Appeals for the 9th Circuit.  At oral argument, Thicke and company argued that there can be no infringement for a “groove,” which it sought to differentiate from a lyric, rhythm, etc.  No decision has been reached by the 9th Circuit as of yet, but Thicke, Williams and Harris have a tough road ahead to overturn the lower court’s verdict.

Questions? Let Jeff know.

 

Jeff Cohen is a member of Flaster Greenberg’s Litigation, Intellectual Property, Corporate and Real Estate Practice Groups. He has been a trial attorney for more than 23 years, counseling and representing a diverse range of clients in matters related to commercial contracts, shareholder and partnership agreements, trademarks, copyrights, patents, including Hatch-Waxman, insurance coverage, franchise disputes and commercial construction.

 

New Jersey Toughens Laws for Divorced Parents Wanting to Relocate their Children Out of State

Moving boxes with family.jpgA major New Jersey Supreme Court decision has made it more difficult for custodial parents to move their children out of state. The ruling calls for stricter legal standards to be applied by the New Jersey Judiciary in order to establish “cause” in all cases when a divorced or separated parent seeks to relocate from New Jersey with the minor children of the marriage without the consent of the other parent.

Prior to this decision, there were two standards that were applied:

  1. A lesser, more flexible standard when one parent is the parent of primary residence and the other is the parent of alternate residence, and
  2. One when the parties equally share legal and residential custody.

In the former, the lesser requirement was that the parent only had to demonstrate “good cause” for the move and that the move was not “inimical to the interests of the child”, and the burden to oppose the move then shifted to the objecting parent. In the latter, the parent had to demonstrate that the move was in the best interests of the child.

In the recent Bisbing v. Bisbing decision, the Court repealed the separate standards. The Court mandated that in all cases where a parent seeks to relocate from New Jersey with the minor child(ren) of the marriage without the consent of the other parent, the courts must conduct a best interests analysis to determine “cause” to determine whether the relocation is in the best interests of the child(ren). The Court is to apply the statutory factors set forth in N.J.S.A. 9:2-4 and other relevant considerations to determine whether the relocation is in the best interests of the child(ren) involved. This analysis must be performed whether custody is equal or whether one parent is primary.

The Court noted in its decision that adopting this singular standard may avoid disputes as to who should be the primary parent when it is clear that one parent is in a better position to serve that primary role. It would further avoid accusations that the designation was sought to facilitate the ability to move the child(ren) out of state.  The decision to move must now be proven to be in the best interests of the child(ren), rather than the parent.

The impact of this decision will have far-reaching effects, and will likely raise questions among divorced parents considering and/or opposing a proposed out-of-state move. For more information on this decision, or if you have questions on how your family may be impacted, we invite you to contact Steven B. Sacharow, or any member of our Family Law Group.

Flaster Greenberg’s Family Law Practice draws on decades of experience in the ever-changing legal landscape that affects the family dynamic. Our family law attorneys serve as advocates for our clients, providing guidance on virtually all family law-related issues including divorce, custody and parenting time, child support, spousal support (alimony), equitable distribution of property, same sex relationships, prenuptial agreements, adoption and family formation, and mediation and arbitration. 

Steve Sacharow, Flaster GreenbergSteven B. Sacharow has substantial and extensive experience in family law and is nationally recognized for his work. His representation of clients includes matters involving child custody, parenting time, child support, alimony and equitable distribution of assets. It also consists of legal aspects of relationship formation including cohabitation and prenuptial agreements. His family law practice further includes representation of individuals involved in same sex relationships, including cohabitation agreements and dissolution of relationships, involving both civil unions and non-formalized relationships, as well as mediation (as a mediator and representing clients in mediation) and collaborative divorce.  Additionally, his adoption practice is comprised of domestic and interstate adoptions, agency or private, and he has extensive experience in the litigation of contested adoption matters. He can be reached at 856.661.2272 or via email.

5 Things to Keep in Mind When Planning for a Divorce

Part I of a II part article 

As Neil Sedaka said, breaking up is hard to do. When planning for a divorce, a careful and calculated approach is required to protect your interests. This article will highlight 5 things to consider based on our firm’s decades of handling these cases, both in court and in private resolutions. These tips focus primarily on New Jersey’s divorce laws and procedures. Divorce laws vary from state-to-state, but these tips are generally helpful to a wide range of divorce situations.

  1. Keep Good Records

Maintaining good records is incredibly important when facing a divorce. You should anticipate that your pay history, assets, and liabilities will be thoroughly analyzed. Be prepared to exchange hundreds of pages of documents during the divorce process. If you have a financial advisor, accountant, or investment broker, let them know you’re getting divorced and ask for their assistance in putting together an outline of your assets and liabilities. A caution, however: check first to determine whether your professional, due to company policies, will feel or be obligated to advise your spouse of the contact, especially if they are a joint professional. You should also determine if your professional will be required to place a freeze on the liquidation of your assets once they are informed of a pending divorce. If your divorce is litigated in the courts, you will need to prove, usually through documentation, your assets and debts. The more organized you are, the more credible you will look at a trial. It is also a cost-saving benefit to you if you can provide the information to your counsel rather than expending attorney or paralegal fees to obtain the information.

  1. Don’t Hide Things

This is the flip side of item 1, but it’s a concept that needs to be reiterated because it surfaces time and again in these disputes, usually to the detriment of the “hider.” In divorces, the other side is entitled to complete transparency and full disclosure with respect to your income, assets, and debts. A broad “discovery phase” in divorces allows each side to obtain documentation and information from the other side, and pretty much nothing is off limits, especially financially. In high asset cases, you can anticipate that the discovery phase will be lengthier and more complex as the other side tries to uncover as much information as possible. It can be tempting to try to hide things, such as a significant upcoming bonus or a recent investment acquisition. Any semi-attentive attorney on the other side is going to look for these types of omissions. Once a judge learns that you have tried to hide something, your entire case will be tainted and you will have negatively affected your credibility. If your case goes to a trial, a judge may have a hard time ruling in your favor if he or she thinks you have purposely tried to mislead your spouse and the court by hiding assets or income. Therefore, it’s best to be open and honest about your income and assets with your attorney, and leave it up to her or him to work with you to fashion the strategy to achieve the best outcome for you.

  1. Don’t Understate Your Marital Standard of Living

As part of the divorce process, you will be required to complete a document that outlines your marital standard of living. In New Jersey, this document is called a Case Information Statement, or CIS. In the CIS, you must list what you spend each month on fixed expenses, such as a mortgage, car payment, and utilities, as well as your fluctuating expenses, such as food, clothing, and entertainment expenses. These expenses are then tallied to determine your approximate monthly marital standard of living. Courts use the marital standard of living mostly to determine a party’s spousal support (alimony) entitlement or obligation. To try to lower the alimony, it is not uncommon for one spouse to purposely attempt to under-value their monthly expenses. For example, although they may know that the family eats out several times a week for $150 per dinner, a spouse might claim on their CIS to only spend $100 per month on dining and restaurants, when in reality the figure is closer to $1,000. Under-stating the marital lifestyle can lead to excessive litigation as the courts will require proofs to determine the true expenses. It is usually not that difficult for the other side to prove the marital lifestyle, either through receipts, credit card statements, or witness testimony. Here again, if a judge realizes that a party has purposely tried to under-value the marital standard of living, that person’s credibility will be greatly damaged. Therefore, when outlining the marital standard of living, carefully analyze what happens with your net monthly income and make sure that the monthly standard of living is on par with that figure. If you bring home $20,000 net per month and you claim your marital standard of living is only $7,500 per month, be prepared to show the court that you have accumulated approximately $12,500 per month in savings. Otherwise, something won’t add up.

  1. Make Sure Your Standard of Living Matches Your Historical Earnings

Similar to the tip above, you should also be careful that the marital standard of living you disclose to the court is not so high that your purported income could not satisfy that type of lifestyle. This is most common for entrepreneurs and business owners who are not typical W-2 wage earners. If you or your spouse tell the court that your marital standard of living is $8,000 per month ($96,000 per year), but your tax returns show gross income of only $65,000 per year, it becomes obvious that you have not fully disclosed your income. Courts are savvy to the many ways that business owners and sole proprietors can decrease their gross income “on paper,” so don’t expect the judge to simply rely on your tax returns for income determination purposes. If your spouse can prove that you’ve enjoyed an upper-middle-class lifestyle for the past ten years, it’s going to be very difficult to convince a judge that you earn minimum wage. Once again, if you attempt this approach, your credibility is shattered.

  1. Understand the Expanding Definition of Income

Many professionals have complex compensation packages that become particularly relevant during a divorce. Things like paid vehicles, expense reimbursements, travel and accommodations, or stock options can all be analyzed and included as part of your income when determining your alimony or child support entitlement or obligation. It is not uncommon to find yourself in court arguing over whether or not a particular benefit should be included or excluded from your income when determining your financial entitlements or obligations incident to a divorce. It is helpful to provide your attorney, and often the court, with your complete employment contract and any other documentation that demonstrates your salary and perks. Bonuses are another frequently-litigated issue. Don’t assume that just because your bonus is “discretionary,” it will be excluded from your income. The court will instead look to prior years; if you’ve consistently earned a bonus, you can expect that it will be included in your income. To the extent that you can demonstrate that your bonuses have fluctuated over the years, the court may average them and then increase your base pay by the average bonus figure. To assist your attorney in limiting your spouse’s attempts to overinflate your income during the divorce process, be as candid and detailed as possible about the myriad ways you are compensated for your work.

** Part II of this Installment Series will be presented in Flaster Greenberg’s next Litigation Newsletter, due out in early spring. **

 

Angie Gambone is a member of Flaster Greenebrg’s Family Law Department concentrating her practice in the areas of complex family law, divorce and custody matters. She also focuses her practice on adoption, family formation and the family law needs of nontraditional and LGBT families. She can be reached at 856.382.2217 or angie.gambone@flastergreenberg.com.

 

 

New NHL Las Vegas Team Issued Initial Refusal for “Golden Knights” Trademarks, But Registration Is Still Possible

The United States Patent and Trademark Office issued an initial refusal to the new NHL franchise in their efforts to trademark “LAS VEGAS GOLDEN KNIGHTS” and “VEGAS GOLDEN KNIGHTS” – citing a likelihood of confusion with the registered mark “GOLDEN KNIGHTS COLLEGE OF SAINT ROSE.”  Each mark was registered for entertainment services (ice hockey exhibitions) and clothing.

Importantly, this is a common initial outcome when applying for a mark that has competitors in the same market using a similar mark.  While some media sites opted for more incendiary headlines in stating that the trademark has been “denied,” registration is still quite possible as the Vegas franchise is now given six months to respond to the Trademark office’s initial refusal.

Sports teams using the same nickname as one another is nothing new.  There are many examples of professional and college teams sharing the same name – e.g. Boston Bruins (NHL) and UCLA Bruins (college).  The Simpsons weighed in on the subject years ago, poking fun at the overuse of “Wildcats” as a team nickname:

To overcome the initial refusal, the Vegas franchise will need to show, among other things, that likelihood of confusion will not be an issue.  One problem is that “GOLDEN KNIGHTS” is displayed in both marks more prominently than any of the other words or descriptors.  In addition, the College of Saint Rose and the Vegas franchise will be using the marks in connection with the same goods and services – sporting events and clothing sales.

Another problem is that the College of Saint Rose registered the mark in connection with a particular design and stylized type face.  The Vegas franchise attempted to register their mark in standard characters, which would allow them to display the words in any design and type face – meaning that the two marks could be presented and displayed in the same manner, a “likelihood of confusion” issue which is explicitly cited by the trademark examiner in the initial refusal.

In response to the Trademark office, the Vegas franchise will most likely cite the numerous examples of professional and college teams sharing nicknames, as well as professional teams in different sports sharing nicknames – e.g. Arizona Cardinals (NFL) and St. Louis Cardinals (MLB).  In this case, it may also be crucial that the College of Saint Rose does not have an ice hockey team.  The Vegas franchise is also likely to disclaim “Las Vegas” and “Vegas” as unregistrable portions of their marks, because exclusive rights cannot be obtained in wording that is primarily geographically descriptive of the origin of the goods or services identified in the trademark application.

It remains to be seen whether the Vegas franchise will ultimately be successful in registering the “GOLDEN KNIGHTS” marks, but the matter is far from over, as the initial refusal is just the beginning.

For more information on registering trademarks and intellectual property law, contact Eric Clendening, a member of Flaster Greenberg’s Intellectual Property Department.

Eric R. Clendening is a member of Flaster Greenberg’s Intellectual Property and Litigation Departments. He focuses his practice on intellectual property litigation and commercial litigation, including contract disputes, employment litigation, and other commercial disputes. He also advises clients on protecting and enforcing intellectual property rights online, including the resolution of domain name disputes and matters concerning e-commerce, online speech and conduct, and related intellectual property issues involving trademarks and copyrights.

 

 

 

 

Hiring A Competitor’s Employee? Proceed With Caution!

For the first time since its enactment over four years ago, a federal court has interpreted a provision of the New Jersey Trade Secrets Act (the “Act”).  The decision, unfortunately, leaves New Jersey employers who are considering hiring a competitor’s employee on uncertain ground.

In Baxter Healthcare Corp. v. HQ Specialty Pharma Corp., Baxter, a pharmaceutical company, sued its competitor HQ for patent infringement, tortious interference with the non-competition provision of its former employee’s employment contract, and breach of the Act for misappropriation of its trade secrets.   The court refused to dismiss the claim under the Act, despite finding Baxter could not prove HQ knew the employee was subject to a non-compete agreement or had knowledge of the former employer’s trade secrets.

George Owoo worked as a scientist for Baxter before leaving to work for its competitor, HQ.  He was a specialist in esmolol premixed injectable bag drug delivery systems.  At the time it hired him, HQ was not a participant in that market.  However, HQ soon filed several patent applications, listing Owoo as the inventor, for new esmolol products that would compete with Baxter’s similar products.

Before hiring Owoo, HQ had interviewed him extensively to inquire about his experience at Baxter.  He repeatedly denied he had an employment contract with Baxter or any knowledge of Baxter’s trade secrets, insisting that his knowledge in the esmolol premixed injectable bag market was in the public domain.  Based upon his representations, HQ hired Owoo and put him to work on developing esmolol products.

To prove its interference with contract claim, Baxter needed to show that HQ had acted with “malice”, i.e., an intention to interfere with its former employee’s contractual obligations to Baxter.  Because there was no evidence HQ had any knowledge of the employment contract, and, to the contrary, had been repeatedly assured by Owoo he had no contract, the court ruled Baxter could not show HQ acted maliciously and, therefore, could not prove tortious interference.

By contrast, a claim under the Act requires neither an employment agreement nor knowledge of it by the new employer.  Baxter claimed HQ misappropriated Baxter’s trade secrets by using them without authorization to develop its own competing products.  The court stated HQ could be liable for breach of the Act if Baxter could show HQ had used Baxter’s trade secrets at a time when HQ either knew or should have known Owoo had acquired them through improper means.

The question before the court,therefore, was whether HQ knew or had reason to know that its new employee’s esmolol formulation for HQ was derived from his knowledge of Baxter’s trade secrets.  Significantly, the court found there was some evidence that suggested HQ knew of Owoo’s prior involvement in developing Baxter’s esmolol program.  Most troubling, the court found HQ’s interrogation about his work history at Baxter revealed a concern on HQ’s part that he might have been privy to Baxter’s trade secrets and might have been preparing to use them at HQ without Baxter’s authorization.  Thus, the very investigation by HQ that formed the basis for the court’s decision to dismiss the interference with contract claim became the key fact in the court’s conclusion not to dismiss Baxter’s Trade Secrets Act claim.

What can companies do in light of the Baxter decision to protect themselves from Act claims when they are considering hiring a competitor’s employee, who might have knowledge of its trade secrets?  The Baxter decision suggests that perhaps HQ was damned if it did and damned if it didn’t investigate.  Despite that HQ did investigate, and, in fact, at least in part, because it did investigate, the court refused to dismiss the Trade Secrets Act claim against it.  On the other hand, although not addressed by the court in Baxter, had HQ not investigated, the court almost certainly would have refused to dismiss the Trade Secrets Act claim, and perhaps the interference with contract claim, as well.  In other words, choosing not to investigate new employees’ backgrounds is not a wise strategy for avoiding future liability.

There are ways a new employer can enhance the benefit of its investigation in the hope of avoiding claims under the. Act.  First, HQ could have had its new employee sign a written statement following the investigation certifying that he (1) was not under any contractual obligations to Baxter, and (2) either had no knowledge of Baxter’s trade secrets, or, in any event, agrees not to use that knowledge in his new position.

Second, HQ accepted without attempting to verify Owoo’s claim that his information was in the public domain. Had it done so, it would have had a stronger argument to avoid liability under the Act.

Finally, employers can reduce exposure to liability by insulating their new employees from working in competition with their former employers.  That tactic might make the new employee less valuable to the new employer, so each employer will have to perform its own risk/reward analysis comparing the potential benefits of no restrictions on its new employee to the legal costs of an expensive lawsuit alleging violations of the Act.

There is no one-size-fits-all solution to the Hobson’s choice presented by the Baxter decision.  Companies considering hiring a competitor’s employee should proceed with caution, especially when the employee may know the competitor’s trade secrets.

Questions? Let Phil know.

 

Philip Kirchner is a shareholder in and former chair of Flaster/Greenberg P.C.’s Commercial Litigation Practice Group, a member of the Labor & Employment and Construction Litigation Practice Groups, and member of the Restaurant & Hospitality, Construction, Nonprofit & Charitable Organizations, Gaming and Alternative & Renewable Energy Industry Groups.

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