Official-Looking Trademark Solicitations Meant to Confuse Applicants

Several owners of federally-registered trademarks have recently received “official-looking” trademark solicitations from the non-federally affiliated United States Trademark Registration Office (“USTRO”).  The USTRO, along with several other like-minded private, for-profit companies, are not associated with, or approved agents of, the United States Patent and Trademark Office (“USPTO”)—the federal agency officially responsible for issuing patents and trademark registrations in the United States.

Nevertheless, letters from these private, for-profit companies, like the USTRO, are often strategically designed to mimic the appearance of correspondence from an official U.S. governing body.  These letters include highly specific information regarding the registered trademark, including serial number, filing date, international classes, and citations to various sections of the Lanham (Trademark) Act.

Specifically, the USTRO letter demands an immediate payment “NOW DUE” of $375, which upon receipt will purportedly entitle the payor to (1) recordation of the U.S. Trademark Registration with the U.S. Customs & Border Protection, (2) monitoring of the trademark using the USTRO’s proprietary search engine and notifications of potential third-party trademark infringements, and (3) reminder notices of certain future filing requirements.  The letter also provides an inconspicuously-placed notice providing “THIS IS NOT A BILL. THIS IS A SOLICITATION.  YOU ARE UNDER NO OBLIGATION TO PAY THE AMOUNT STATED ABOVE UNLESS YOU ACCEPT THIS OFFER.”

The USPTO’s official website, http://www.uspto.gov, acknowledges awareness of these mailers and warns that these private companies are not affiliated with the USPTO.  The USPTO advises recipients to “read trademark-related communications carefully before making a decision about whether to respond.”  Likewise, all mail correspondence from the USPTO will either be sent from the office in Alexandria, VA, or, if by e-mail, from the domain @uspto.gov.

It is highly advisable that owners of federally-registered trademarks, instead, seek legal advice from an attorney knowledgeable in this particular field before responding to these types of mailers.

Authored by: Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services to individuals, inventors, entrepreneurs, start-ups, spin-offs, universities, research institutes, and small to large public and private companies and businesses.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us at 214-445-4040.  Please follow us on Twitter at @chalkerflores.

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Personal Liability of Officers for Corporate Guarantees

Last January, the 1st District Court of Appeals issued a noteworthy opinion reinforcing the personal liability for loan guarantees made by corporate officers while acting within their capacities as officers of the company.  The court’s ruling in 84 Lumber Co. v. Powers, No.-01009-00986-CV, 2012 Tex. App. LEXIS 590 (Tex. App.—Houston [1st Dist.] Jan. 26, 2012, no pet.), will likely force many corporate officers, including those in larger corporations, to now rethink placing their own necks on the line for those companies to which they owe fiduciary responsibilities.

David Powers, acting within his capacity as president of his company David Powers Homes, Inc., signed a statement that he “UNCONDITIONALLY AND IRREVOCABLY PERSONALLY GUARANTEE[D] [THE] CREDIT ACCOUNT….”  Mr. Powers took the position that he no longer possessed any personal liability for the loan because he signed the guarantee as a corporate officer and he no longer held that position.

In rejecting Mr. Powers’ stance that his personal liability was precluded by the statute of frauds (which requires the guaranty to be in writing and signed by the person to be charged), the court held that liability remained on Mr. Powers, individually, and not merely with the office of president of his company.  As the court noted, generally speaking a guarantor of a debt is an individual who willingly stands for the debt of another.  The court reasoned that had it ruled in favor of Mr. Powers, it would essentially render a guarantor agreement meaningless because personal liability would thereby reside in the same person—i.e., the company would then become both the account debtor and the guarantor of the corporate debt.

Ultimately, the court determined that Mr. Powers remained liable for his “unambiguous” guarantee of personal liability for the company’s debt, largely due to the fact that Mr. Powers was the owner of the company.  The court did, however, leave open the question regarding liability under situations involving more ambiguous contractual terms or where the corporate officer-guarantor owned minimal or no shares in his or her company.

Authored by Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services to individuals, inventors, entrepreneurs, start-ups, spin-offs, universities, research institutes, and small to large public and private companies and businesses.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us at 214-445-4040.  Please follow us on Twitter at @chalkerflores.

Websites’ Terms of Use Agreement Traps

In response to the steady increase in online shopping and cyber-transactions, several website owners have resorted to implementing more precarious measures to increase website activity while still protecting the website’s legal interests.  Generally, “Terms and Conditions” of use for the website are accepted by forcing the user to manually click an “I Agree” or “Accept” button—a method termed in the industry as “Clickwrap” agreements.  This method of acceptance has been highly criticized for the manner in which it seemingly misleads consumers into accepting terms of which they are not fully aware.

More recently, however, many online shoppers have been forced to deal with a newer form of terms acceptance known as “Browsewrap” agreements.  Unlike the more readily-apparent “Clickwrap” agreements, “Browsewrap” agreements allow website owners to indiscreetly cache the content of such agreements somewhere on the website, which then become accessible only by clicking on the hidden hyperlink.

These “Browsewrap” agreements recently came under heavy judicial scrutiny when the online shopping website Zappos.com attempted to compel arbitration in a lawsuit with several customers whose online accounts had been hacked.  See In re Zappos.com, Inc., Customer Data Security Breach Litigation, Civ. No. 3:12-cv-00352-RCJ-VPC (D. Nev. Sept. 27, 2012).  Zappos.com’s “Disputes” section, which was buried within the site’s “Browsewrap” agreement, permitted Zappos to compel arbitration in the event a dispute arose between the website and the purchaser.

Despite the broad and liberal federal policy favoring arbitration, the District Court of Nevada maintained that “arbitration is a ‘matter of contract,’ and no party may be required to submit to arbitration [in] ‘any dispute which he has not agreed so to submit.’”  Id. (quoting Howsam v. Dean Witter Reynolders, Inc., 537 U.S. 79, 79 (2002).

In finding for the plaintiffs, the court struck down the arbitration provision because (1) the purchasers were never prompted to accept those terms and conditions, and (2) the provision permitted Zappos to unilaterally change the terms, thereby rendering the contract illusory.  The court’s ruling reinforced the notion that, notwithstanding the increased popularity of buying and selling on the Internet, such paradigmatic shift may not overcome even the basic principles of contractual formation (i.e., offer, acceptance, meeting of the minds, and consideration).  As such, the Zappos.com opinion appears to have essentially negated the enforceability of “Browsewrap” agreements, barring evidence that the user actually possessed constructive knowledge of their existence and terms of use.

Authored by: Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-866-0001.  Please follow us on Twitter at @chalkerflores.

11th Circuit Finds No Fraud on the USPTO where Declarant had No Personal Knowledge of Use of Similar Marks

The United States District Court for the 11th Circuit surprised several legal commentators with its recent ruling of a trademark infringement case by holding that fraud upon the USPTO was not present if the declarant was personally unaware of other organizations using an identical or near-identical form mark.  Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and Malta v. Florida Priory of the Knights Hospitallers of the Sovereign Order of Saint John of Jerusalem, Case No. 11-15101 (11th Cir. Sept. 11, 2012).  At issue was the standard for cancellation on the basis of fraudulent procurement of a trademark.

The Lanham Act, § 14(3), 15 U.S.C. § 1064(3), permits cancellation of a registered trademark on the grounds that the mark was procured by fraud.  Proving this type of fraud is difficult as there is generally a heavy burden upon the challenger to show that the applicant knowingly made false material representations of fact in connection with an application for a registered trademark.

The 11th Circuit, however, interpreted the declarations to the USPTO made by the applicant’s representative to be a “subjective” good-faith belief of the applicant’s superior rights to use the mark, notwithstanding the possibility the declarant’s belief was mistaken or the cause of “willful blindness.”  Consequently, the court held that that no fraud was present where the declarant lacked any actual, personal knowledge of another’s use of the same or similar mark.  Likewise, proving that the declarant “should have known” was also not enough to cancel the trademark registration on the basis of fraud.

Authored by Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-866-0001.  Please follow us on Twitter at @chalkerflores.

Unlocking Your Mobile Device Without Permission From Your Carrier Is Now Illegal

The Digital Millennium Copyright Act was enacted in 1998 to address unauthorized digital dissemination of copyrighted works.  In October of 2012, the Library of Congress and the U.S. Copyright Office determined that, under the DMCA, it is illegal for mobile device owners to unlock their device without the permission of their carrier.  (https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-26308.pdf). The ruling was based on the determination, among other things, that device owners do not own the software (i.e., copyrighted works) in the device.  The October determination allowed for a 90-day grace period before the enforcement went into effect.  It also held that it only applies to locked devices purchased after the grace period ends.  The grace period ends today.  Therefore, starting January 26, 2013, make sure you obtain permission from your carrier before unlocking your mobile device.

Authored by: Tom Jacks

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4021.  Please follow us on Twitter at @chalkerflores.

New Rule Proposals for Expedited Lawsuits in Texas

In 2011, the Texas Legislature passed HB 274 which, in part, mandated that the Texas Supreme Court promulgate rules for expedited actions.  The intent behind HB 274’s mandate was to facilitate more efficient and speedier resolutions of lawsuits involving disputed amounts of $100,000 or less.

The following highlights of the proposed rules regarding expedited actions will be available for comment through February 1, 2013, and will take final effect on March 1, 2013:

Tex. R. Civ. P. 169 (new)

  • Would mandate the “expedited actions process” to apply in all causes of action where the claimant seeks monetary relief of $100,000 or less (excludes lawsuits seeking non-monetary relief).
  • Would cap the amount recoverable under the expedited actions process to $100,000.
  • Would allow removal from the expedited actions process only with “good cause” or upon filing of an amended or supplemental pleading seeking relief (i) other than monetary relief or (ii) in excess of the $100,000 limit.
  • Would limit the entire trial process (i.e., jury selection, opening statements, presentation of evidence, direct and cross-examination of witnesses, and closing arguments) to a total of 5 hours.
  • Would preclude the court from ordering parties to engage in alternative dispute resolution (such as mediation), unless the parties previously consented to such a process by agreement or contract.
  • Would prohibit challenges to expert testimony unless requested by the party sponsoring the expert.

Tex. R. Civ. P. 190.2 (amended)

  • Discovery period would run from time the suit was filed until 180 days after the first discovery request is served on a party.
  • Would restrict the total time for examination and cross-examination of witnesses in oral depositions to 6 hours.  Time could be increased to 10 hours on agreement by the parties.
  • Would limit written discovery to 15 requests for interrogatories, 15 requests for production, and 15 requests for admissions.
  • Would permit a party to submit additional disclosure requests of all documents, electronic information, and tangible items that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses.  Such additional requests would not count against a party’s requests for production.

Authored by: Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4021.  Please follow us on Twitter at @chalkerflores.

How to Lose Your Trademark Through “Naked” Licensing

Initially utilized as a source or origin indicator, today trademarks further assure consumers about the quality and nature of a product or service.  In other words, consumers may justifiably assume and rely upon the fact that any product or service carrying a specific mark is necessarily of equal quality to that of other products or services carrying the same mark.

Implicit with any trademark, therefore, is a communication to consumers that the owner maintains control over the quality and nature of any sales or distributions of similarly-marked products or services made by third-parties.  Since the mid-1900’s, courts have repeatedly affirmed this implication by imposing an affirmative duty upon registered trademark owners to “take reasonable measures to detect and prevent misleading uses of [their] mark by [third-parties],” or, otherwise, “suffer cancellation of [its] federal registration.”  See Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 366 (2d Cir. 1959).

One manner in which a trademark owner polices uses of its mark is by granting a license to a third-party.  The trademark licensing agreement contractually permits the licensee to sell a product or service carrying the owner-licensor’s mark.  A licensing agreement will be enforceable, however, only where the owner-licensor maintains a certain level of “control” over the quality and nature of those products or services that are sold and/or distributed by the licensee.

Because trademark licensing is generally governed by the laws of contracts, one way licensors can maintain control over a licensee’s uses is by inserting quality-control requirements into the their licensing agreements.  If the licensee then fails to abide by the licensor’s quality specifications per the agreement, the licensor may then assert claims against the licensee for breach of contract and trademark infringement.

“Naked” licensing, however, occurs when a trademark licensor enters into a licensing agreement, but fails to include or fails to enforce any quality control provisions.  For example, the Ninth Circuit held an agreement between the owner-licensor of the “Leonardo Da Vinci” mark and a wine vineyard to be a “naked” license because the owner-licensor: (1) failed to include quality control provisions in the licensing agreement; (2) made only sporadic wine tastings of the vineyard’s products; and (3) merely relied upon the vineyard’s reputation for quality control.  See Barcamerica Int’l USA Trust v. Tyfield Importers, Inc., 289 F.3d 589, 596-97 (9th Cir. 2002).  Consequently, the licensor was prevented “from asserting any rights in the mark.”  See id. at 597.

Additionally, “naked” licensing presents potentially dire consequences for the licensor and licensee, as well as the general consumer-public.  First, the general consumer-public will be deceived by misrepresentations about the quality of or the owner-licensor’s connection to the products or services.  Second, the owner-licensor and licensee may lose their abilities not only enforce their respective rights against each other, but also may lose their abilities to assert rights against any other unauthorized third-party uses.  And, finally, a court may determine that the owner-licensor has forfeited or abandoned its registration which, in turn, may ultimately lead to cancellation of the mark with the United States Patent and Trademark Office.

Authored by: Scott A. Meyer and John Sokatch.