Transcript Top Ten “Hits” Regarding IP Management Concerns

Top Ten “Hits”
~~~
Key Considerations In Drafting And Interpreting
U.S. Intellectual Property Agreements
Gary J. Rinkerman
Drinker Biddle & Reath LLP
1500 K Street, N.W.
Washington, D.C. 20005-1209
[email protected]
202 321 9179
October 23, 2008
© 2008 Gary Rinkerman. All Rights Reserved.
Note: The images in this presentation are solely for use in the teaching context in which they are offered. Please do not
assume that you can further reproduce, distribute or otherwise use any of the images. Sample contract provisions are for
illustration purposes only and may be unsuitable for a particular use or transaction.
1
Co-Existence, Licensing and Transfers
The Tip of the Iceberg Presentation
Before
After (maybe)
2
Some Introductory & Cautionary Words
Rollin White Patent
Going Broke Enforcing Patents
The Licensee “Bait & Switch”
Sam Phillips Loses The Elvis Contract By Ignoring Licensing Requirements
3
Strategic Thinkers
Avoiding “IP Tunnel Vision”
Copyright “Trumps”
Trademark(?)
4
Walls & Bridges
Convergence and Synergies in IP Strategies
Rights of Publicity
Trademarks and Trade Dress
“Kim’s Wall”
Design Patents
Trade Secrets & Know
How
Utility Patents
Copyrights
5
Innovative
Intellectual Property Strategies


Modern Licensing Explosion
New Images and Ready-Made
Target Audiences
6
No. 1
Determining Core Grants
I need more….
Iggy Pop
CD: Soldier
 Scope – e.g., Field of Use Limitations, Listing of Specific Rights
 Territory – e.g., “Throughout the Universe … and Beyond!!!”
 Time – e.g., Milestones, Triggers and Breach
 Exclusivity – Non-Exclusivity
7
Co-Existence Field of Use – Part I
1.2 “Apple Computer Field of Use” means (i) electronic goods, including but not limited to computers,
microprocessors and microprocessor controlled devices, telecommunications equipment, data
processing equipment, ancillary and peripheral equipment, and computer software of any kind on
any medium; (ii) data processing services, data transmission services, broadcasting services,
telecommunications services; (iii) ancillary services relating to any of the foregoing, including
without limitation, training, education, maintenance, repair, financing and distribution; (iv) printed
matter relating to any of the foregoing goods or services; and (v) promotional merchandising
relating to the foregoing.
1.3 “Apple Corps Field of Use” means (i) the Apple Musical Artists; the Apple Catalog; personalities or
characters which appear in or are derived from the Apple catalog; the names, likenesses, voices or
musical sounds of the Apple Musical Artists; any musical works or performances of the Apple
Musical Artists; (ii) any current or future creative work whose principal content is music
and/or musical performances; regardless of the means by which those works are recorded,
or communicated, whether tangible or intangible; (iii) promotional merchandise relating to any
of the foregoing; …
8
Co-Existence Field of Use – Part II
1.3 “Apple Corps Field of Use” means (i) the Apple Musical Artists; the Apple Catalog;
personalities or characters which appear in or are derived from the Apple catalog; the
names, likenesses, voices or musical sounds of the Apple Musical Artists; any
musical works or performances of the Apple Musical Artists; (ii) any current or future
creative
work
whose
principal
content
is
music
and/or
musical
performances; regardless of the means by which those works are recorded, or
communicated, whether tangible or intangible; (iii) promotional merchandise relating
to any of the foregoing; …
4.3 The parties acknowledge that certain goods and services within the Apple
Computer Field of Use are capable of delivering content within the Apple Corps
Field of Use. In such case, even though Apple Corps shall have the exclusive right
to use or authorize others to use the Apple Corps Marks on or in connection with
content within subsection 1.3(i) or (ii), Apple Computers shall have the exclusive right
to use or authorize others to use the Apple Computer Marks on or in connection with
goods or services within subsection 1.2 (such as software, hardware or broadcasting
services) used to reproduce, run, play or otherwise deliver such content
provided it shall not use or authorize others to use the Apple Computer Marks
on or in connection with physical media delivering pre-recorded content within
subsection 1.3(i) or (ii) (such as a compact disc of the Rolling Stones music).
9
Defining “Non-Exclusive” And
Accompanying Restrictions
3.2 Without limiting the generality of the term “non-exclusive” as used in Section 3.1,
nothing contained in this Agreement shall be deemed to impair, restrict or limit, in any
manner whatsoever, (i) Licensor’s or its Affiliates’ right or ability to enter into
promotional license agreements with third-party promotion partners for the
manufacture, sale or distribution of premium items of merchandise that
promote the Properties or utilize the Branding provided that such activities are
not likely to cause consumers to believe that there is any relationship between
Licensee and third-party promotion partners, or (ii) the right or ability of any
theme parks, live entertainment production, retail stores, specialty stores, catalogs,
websites or other facilities or venues that transact business with consumers using the
“Licensor” name or any other trademarks or copyrights or other intellectual property
owned by or licensed to Licensor and/or any Licensor Affiliate as part of its retail
name, including, without limitation . . . Nothing herein shall be deemed to give
Licensor or any Licensor Affiliates the right to infringe or make an
unauthorized use of any intellectual property owned by Licensee, or to permit
Licensor or its Affiliates to, with respect to a purchase order placed by
Licensee with Licensee’s vendors, purchase Products pursuant thereto.
10
No. 2
Determining Royalty –
Part 1 (Basic Character)
Money … It’s A Gas
Pink Floyd
CD: Dark Side of the Moon

Up Front

Minimum

Escalating

Decreasing
11
No. 3
Determining Royalty –
Part 2 (How Determined)
Do You Really Want to Hurt Me?
Culture Club (Boy George)
CD: Kissing to be Clever






Net Sales
Per Unit
Gross Manufactured Cost
Metered Use
Extent of Use
Bundled or Unbundled
12
Defining “Net”
As used in this Agreement or in any Schedule(s), “Net Retail Sales” shall mean the
number of units of each Product actually sold to the public by Licensee multiplied by
the actual price paid by the customer for each unit of Product, exclusive of VAT or
any other applicable taxes levied at the point of sale and which are separately
identified on the customer receipt or invoice, at Licensee’s retail stores or through its
catalogs and website or as otherwise permitted under this Agreement, less any
refunds or credits for actual returns of any Products to Licensee, and less applicable
sales taxes.
All amounts payable to Licensor under this Agreement shall be made in full without
reduction for taxes (including, without limitation, income, consumption, withholding,
sales, use, value added, excise or other similar tax) or customs, duties, claims,
counterclaims, deductions and demands against Licensor.
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No. 4
Determining Royalty –
Part 3 (When Triggered)
This Magic Moment….
Jay and the Americans
CD: Come a Little Bit Closer

Manufacture & Inventory Dates
 Actual Sale
Invoice?
Delivery?
14
No. 5
Audits
Every Breath You Take … Every Vow You Break …
I’ll Be Watching You
 Duty to Preserve Records
The Police
CD: Synchronicity
 How Long?

Put in Litigation Extension Exception
 Right to Inspect Records

How Frequent?

Put in Exception for Cause
 Inspect and Copy
 On Site or Delivered?
 Who Pays for the Audit?

Watch out for contingency issue
15
Reporting Royalty Base
Except where a different procedure is identified on any Schedule, within
thirty (30) days after the end of each calendar quarter (i.e., March 31, June
30, September 30 and December 31 of each year) (each calendar quarter
being a “Royalty Payment Period”) during the Term, Licensee shall pay to
Licensor all Royalties owed in connection with the Products and shall
furnish to Licensor a full and accurate statement showing all information
requested by Licensor, detailed on a monthly basis, including, but not
limited to, quantities of Products received, total Landed Cost of Product
received with stock number and Product name, any corresponding Licensor
assigned product number, the Royalties payable, the royalty rate, quantities
sold and total sales and returns of Product. . . . Licensee’s statements
shall also include all relevant information concerning any foreign tax
withheld, including the dates, amounts withheld, countries where such tax
has been withheld, and under what Schedule(s) such tax was withheld. All
information and documents provided to Licensor by Licensee or its Affiliates
pursuant to this Section are subject to the confidentiality provisions set forth
in of this Agreement.
16
Records & Audits
Licensee agrees to keep accurate records of all transactions relating to this
Agreement, including, without limitation, shipments to Licensee of Products from
factories, production service orders, purchase orders and invoices pertaining to such
shipments, records of sales and shipments by Licensee, and records pertaining to
any foreign tax withheld in connection with Products, and to preserve such records
for two (2) years after the expiration or termination of this Agreement. Licensor, or its
representatives, shall have the right from time to time during the Term, but not more
than one time during any twelve (12) consecutive month period, and for two (2)
years after expiration or termination of the Agreement, during Licensee’s normal
business hours and upon reasonable notice, but only for the purpose of confirming
Licensee’s performance under this Agreement, to examine, copy and make extracts
from all such records. The scope of any audit hereunder shall encompass any and
all Schedules in effect for any part of the subject audit period. Licensee shall not be
audited hereunder more than once for any given audit period.
Licensor’s
acceptance of statements or payments does not preclude Licensor from a
subsequent challenge of the statement’s or payment’s accuracy. If in an audit of
Licensee’s records it is determined that there is a shortfall of ten percent (10%) or
more in Royalties reported for any calendar quarter, in addition to Licensee’s
obligation to pay to Licensor the amount of any shortfall, Licensee shall reimburse
Licensor for the out-of-pocket costs of the audit, including the cost of employee
auditors calculated at $100 per hour per person for travel time during normal working
hours and actual working time. All information provided by Licensee to Licensor
pursuant to any audit shall be confidential information subject to the terms set forth
in this Agreement.
17
No. 6
Licensee’s Sales, Transfers and Ancillary
Activities
Suspicious Minds
Elvis
CD: Suspicious Minds

Defining “Sales”

Promotional Items
and Allowances

Sales to Affiliates
Trick
18
No. 7
Obtaining Value from Licensee – Beyond
Royalties
You Better Be Good To Me
Tina Turner
CD: Private Dancer

Best Efforts

Grantbacks, Improvements,
Derivatives & Adaptations

Leveraging Trademark Value

Benefiting From Licensee’s
Goodwill

Naked Licensing

Social Concerns
19
Best Efforts and Material Breach
In challenging the district court's summary judgment decision,
Rawlings argues that it was excused from complying with the
contract's thirty day notice and cure provision because Matrix had
already materially breached the contract by failing to use its best
efforts. . . .
Here, the license agreement's thirty day notice and cure provision
speaks directly to this dispute. The unambiguous text of that provision
applies to “any” breach (other than those addressed in the immediate
termination provision). The thirty day provision does not exclude
“material” breaches from its required notice and cure period. If only
nonmaterial breaches required notice, the word “any” would be
nullified. Rawlings was thus not excused from giving Matrix notice
and the period to cure.
Matrix Group Ltd., Inc. v. Rawlings Sporting Goods Co., 477 F.3d 583
(8th Cir. 2007)(Application of Delaware Law); See also, Fleetwood
Folding Trailers, Inc. v. Coleman Co., Inc., 38 Kan.App.2d 30 (Kan.
App. 2007) (Breach Need Not Be Material To Trigger Termination).
20
Restrictions Beyond The Lanham Act
The various subclauses accompanying subparagraph (f) of the “Marks”
definition provide additional confirmation that the parties intended their
agreement to govern the use of marks that would not be protected under
trademark infringement law alone. The contract defines “Marks,” for
example, to include “any and all variations” of “Gloria Vanderbilt,” “all
manner of representation” of “Gloria Vanderbilt,” and “any and all
variations” on any “manner of representation” of “Gloria Vanderbilt.” (P.Ex.
3.) This language plainly sweeps more broadly than the Lanham Act's
trademark infringement provisions, which restrict the use of marks that are
“likely to cause confusion, or to cause mistake, or to deceive.” 15 U.S.C. §
1114(a). Regardless of whether Glo itself falls under any of the terms cited
in this paragraph, the terms evidence a general intent to create a definition
of “Marks” that is not confined by trademark rules of confusing similarity.
Netherby Limited v. Jones Apparel Group, Inc., 2007 WL 1041648
(S.D.N.Y. 2007) (Unpublished)
21
Ownership Of Intellectual Property
Licensee shall not acquire or assert copyright ownership or any other proprietary rights in the
Licensed Material or in any derivation, adaptation, variation or name thereof. Without limiting the
foregoing, Licensee hereby assigns and agrees to further assign, or to cause to be assigned, to
Licensor or its Designee for no charge or royalty all of Licensee’s worldwide right, title and interest in
the Licensed Material and in any material objects containing, consisting of, or to the extent that they
incorporate Licensed Material, or other adaptations, compilations, collective works, derivative works,
or variations of Licensed Material, heretofore or hereafter created by or for Licensee (collectively,
“new materials”). All such new materials shall be deemed to be works commissioned by Licensor and
shall be included in the definition of "Licensed Material" under this Agreement, all copyrights and other
proprietary rights in and to which are owned by and reserved to Licensor or its Designee. The
foregoing assignment and agreement to assign to Licensor or its Designee new material shall not
include that portion of Licensee’s displays, catalogs, or promotional material not containing Licensed
Material, or the physical items constituting the Products, unless such items are in the shape or design
of the Licensed Material.
22
Restrictions on Product Technology
Licensee shall be, and be deemed to be, the sole and exclusive owner of all Product
Technology that is exclusively invented by Licensee and does not contain any
Licensor Design Element(s) or Licensed Material, and with respect to which
substantially all development costs and expenses have been borne by Licensee
(“Licensee Product Technology”), provided that: (i) during the Term or for a period of
three (3) years from initial release of each Product for sale to the public utilizing the
Licensee Product Technology, whichever is shorter, the Licensee Product
Technology will be used only in connection with such Product; and (ii) following the
Term or such three (3) year period, as applicable, Licensee shall be free to use
and/or sublicense the use of such Licensee Product Technology as it determines in
its discretion. However, to the extent that the subject Licensee Product Technology
is embedded in component parts of a Product, Licensor shall have the right to
purchase or to permit its Affiliate(s) or its third party designee to purchase such
component parts, in commercially reasonable quantities, at Licensee’s direct cost for
same, plus 10%, over the 12-month period following the termination or expiration of
the Term or such three (3) year period, as applicable, to use as Licensor or its
Affiliate(s) or designee determine. Except as licensed herein for use with the
Products and except for Licensor’s purchase rights specified herein, Licensor hereby
assigns to Licensee all right, title and interest it might otherwise have in and to such
Licensee Product Technology owned by Licensee.
23
Standards for Suppliers – Part I
Throughout the Term, Licensee shall purchase Products only from suppliers who
meet the requirements of Licensee’s factory certification program. Licensee shall
also, during the Term make commercially reasonable efforts to purchase or
manufacture Products in accordance with Licensee’s Standards for Suppliers (as
amended or replaced by Licensee from time to time (the “Standards”) a copy of
those which are in effect as of the date of execution of this Agreement and
appended to this Agreement as Attachment 12). The use of the term “Products” in
this Section 13 also includes components of Products and any other item related to
the Products if they bear or depict Licensed Material, but not otherwise. The
Standards may be amended or replaced by Licensee from time to time; Licensee
agrees to give prompt notice to Licensor of any amendment or replacement of the
Standards. Licensor shall have the right to terminate this Agreement immediately
upon written notice to Licensee if Licensee eliminates the Standards in whole or
materially alters the Standards and/or chooses to discontinue its factory certification
program. In the event of a termination under this Section, the applicable Sell-Off
Period shall be ninety (90) days.
24
Standards for Suppliers – Part II
Licensee acknowledges that Licensor is relying on Licensee’s commitment
to enforce the Standards in factories and facilities used to produce the
Products.
Licensee agrees to investigate any claimed or observed
violations of the Standards and, if it finds there have been material
violations of the Standards, to take appropriate and prompt steps to correct
the situation. If requested by Licensor, Licensee will reply to inquiries from
the public and others that Licensee’s third-party manufacturers of the
Products are contractually responsible to Licensee for adherence to its
Standards, and that Licensor has, in good faith, relied upon Licensee to
assure compliance with the Standards. Nothing in this section shall require
Licensee to issue a press release in relation to the above matters. All
communications between the parties relating to the matters subject to this
Section of this Agreement shall be subject to the confidentiality provisions of
Section X, except Licensor may report to third parties the compliance status
of any particular factory or facility used to manufacture the Products
hereunder provided Licensor does not disclose Licensee as the source of
the compliance status information.
25
Naked Licensing – Abandonment – Part I
“The only effective way to protect the public where a trademark is used
by licensees is to place on the licensor the affirmative duty of policing in
a reasonable manner the activities of his licensees.” Doeblers, 442 F.3d
at 823, citing Dawn Donut Co. v. Hart's Food Stores, Inc., 267 F.2d 358,
367 (2d Cir.1959).“Failure to provide quality control may constitute
naked licensing, leading to abandonment of the mark.” Doeblers, 442
F.3d at 823, citing Ditri v. Coldwell Banker Residential Affil., Inc., 954
F.2d 869, 873 (3d Cir.1992). In applying the standard above, the Court
will be mindful of the fact that “abandonment, being in the nature of a
forfeiture, must be strictly proved.” Philadelphia Jaycees, 639 F.2d at
139, citing P.A.B. Produits et Appareils de Beaute v. Satinine Societa in
Nome Collettivo di S.A. e. M. Usellini, 570 F.2d 328, 332-33 (C
.C.P.A.1978). Indeed, “[e]vidence of abandonment must be clear and
convincing.”
Zinn v. Seruga, 2008 WL 482324 (D.N.J. 2008)
26
Naked Licensing – Abandonment – Part II
The Court agrees with Defendants that there remain, at this stage,
genuine issues of material fact as to whether the '276 Mark had
been abandoned. In particular, there remain genuine issues of
material fact with respect to any intent to abandon the mark, any
perception by the public that the mark has been abandoned, and the
existence of a quality-control system to monitor RK & Zinn's use of
the ARTOFEX license prior to the parties' divorce. Plaintiffs have, at
this stage in the proceedings, failed to set forth evidence sufficient to
justify a summary judgment of abandonment.
Zinn v. Seruga, 2008 WL 482324 (D.N.J. 2008)
27
No. 8
Representations, Warranties and
Indemnities
Signed, Sealed, Delivered … I’m Yours
Stevie Wonder
CD: Signed, Sealed, Delivered

Absolute v. “To the Best of Knowledge”

Warranties of Merchantability, Fitness for a
Particular Purpose, Non-Infringement AND NO
INJURY (Remember: Dilution, Defamation, Etc.)

No Asserted Claims Against Licensee’s products
or Services

Indemnification – For Claims and/or Awards?

Disclaimer of Special, Consequential and Indirect
Damages – A Good Idea?
28
Warranty and Indemnity
Licensor warrants to Licensee that it has the full corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
Licensor shall defend and indemnify Licensee, and its affiliates, successors, and it
and their officers, directors, employees and agents (“Licensee Indemnified Entities”)
against and hold them harmless from any and all claims, actions, liabilities, losses,
expenses of any nature (including without limitation reasonable attorneys’ fees),
and costs arising out of any third party claim that Licensee’s use of any of the
Licensed Material approved in accordance with the provisions of this Agreement
infringes the copyright rights of any third party, or any right granted by Licensor to a
third party, except those claims excluded under the following Section.
Licensor shall not be liable for any claim for indemnity under this Section which
arises out of Licensee’s or its permitted sublicensee’s failure to obtain the full
assignment of rights referenced in Section X or wherein Licensee knew or should
reasonably have known that its use of the subject Licensed Material would infringe
a third party’s rights by reason of any prior rights acquired by such third party (other
than prior rights acquired from Licensor) or would otherwise violate such third
party’s rights.
29
No. 9
Unenforceable and Void Provisions
I Can’t Go For That … No Can Do
Hall & Oates
CD: Flowers in the Attic




Severability and Removal
Modification to Retain as Much as Possible
Effective Only Where Provision is Actually
Unenforceable or Void
No Waiver of Appeal
30
Severability
If any provision(s) of this Agreement is deemed void, invalid or otherwise
unenforceable in a determination by a body with proper jurisdiction, the
Parties agree (without waiving rights of appeal) that the subject provision(s)
shall be: (i) reconstituted to approximate as closely as lawfully possible the
evident intent of the original provision(s); or (ii) if option (i) above cannot be
implemented, the subject provision(s) shall be excised from the Agreement
and the Parties shall negotiate in good faith with respect to their modification.
If the Parties cannot agree to a modification, this Agreement shall be
enforced, without the subject provision(s), in a fair manner and without undue
prejudice to either Party. The void, invalid or otherwise unenforceable status
of a provision in a particular jurisdiction, and its reconstitution or excision in
that jurisdiction, shall not cause the provision to be reconstituted or excised
from this Agreement as it applies in any jurisdiction in which the provision is
not void, invalid or otherwise unenforceable.
31
No. 10
Dispute Resolution
We Can Work It Out
Beatles
CD: Rubber Soul
 Choice of Law
 Any Disclaimers?
 Potentially Ineffective?
 Choice of Venue (Location)
 There must be jurisdiction

(If a court is designated)
 The “Who Filed It?”
Penalty
 Mediation and Arbitration
 Requirement for “Top Level”
Management Involvement in
Negotiations
 Damages Limitations – For
Claims and/or Awards
32
Choice of Law and Venue
This Agreement and all disputes arising from or related to it, its
interpretation or its subject matters shall be governed by,
resolved and remedied in accordance with the laws of the State
of New York, USA (without resort to conflict of law principles) as it
applies to agreements entered into and to be performed entirely
within such State and to acts or omissions occurring wholly within
the State. Any claims arising from or related to this Agreement or
its subject matters shall be brought and resolved only in the
appropriate State or Federal courts located in the Manhattan,
New York and the Parties expressly consent to the jurisdiction
and exclusive venue of said courts.
33
New York Law – Contract Interpretation
Where, as here, the parties agreed in plain and unambiguous terms that the
Contract could be terminated for cause for “any dissolution,” there is no place
for inquiry into the materiality of the plaintiff's dissolution. Contract § 23(b)(iii).
The plaintiff concedes that the law requires the Contract to be afforded its
plain meaning. Yet, the plaintiff seeks to have this Court read into the
Contract the word “involuntary” to qualify the term “any dissolution” and
change the termination clause to permit termination based on dissolution due
to insolvency. To support its position, the plaintiff argues that [t]he drafters [of
the Contract] are sophisticated corporate attorneys. They know that a
dissolution based on insolvency has the potential to devalue their clients'
assets, while an asset sold or transferred to an affiliate as part of a voluntary
dissolution does nothing to change its value. In short, they understand the
difference between a voluntary and involuntary business reorganization.
Andrx Therapeutics, Inc. v. Mallinkrodt, Inc., 2007 WL 1362778 (S.D. Fla.
2007)(New York Choice Of Law In License)
34