Intellectual Property & Franchising Law

Tip for Franchisors Ask your Franchisees for a Release

March 22, 2013, 8:21 AM

As a best practice, franchisors should get in the habit of asking for releases throughout the lifecycle of the franchisors relationship with franchisees. While some franchise agreements contain a release, depending on the jurisdiction, and the circumstances, releases in franchise agreements may be difficult to enforce. However, releases entered after the execution of a franchise agreement are much more likely to be enforced, and can prevent expensive and time-consuming litigation for the franchisor. Accordingly, franchisors should look for opportunities to obtain releases from franchisees, that will protect the franchisor from old, often stale, claims of fraud and misrepresentation during the initial franchise sales process, which are often asserted only years later, after an initially good franchisor-franchisee relationship has soured. Examples of the type of events that lend themselves to franchisors seeking a release include, among other things, franchisor extensions of a franchisees time to open additional franchises under an area development agreement, franchisor approval of a transfer, and franchisor waiver(s) of franchisee defaults, including delay or deferral of royalty payments or advertising fees.

Forming an Entity? Check for Infringement Before Formation.

March 20, 2013, 8:34 AM

Even if you do not intend to use your companys name as a trademark, service mark, domain name or trade name, you should perform some basic due diligence before you file the necessary paperwork with the state to form the company. The Patent and Trademark Office and most domain name registrars have free online searchable databases. The time and effort put into performing these searches before the company is formed can save you from the headache and cost of finding out later than your companys name is infringing on someone elses registered trademark. --Nicole J. Harrell

Mad, Mad Men and Their Fleeting Misappropriation of a Womans Youth

March 14, 2013, 11:30 AM

By now most of you have read the glib articles that recount the suit by 1960s star, Gita Hall, against the iconic Mad Men television production company, Lionsgate. Seems that in inculcating the look and feel of the 1960s ad agency program in its opening credits, Lionsgate misappropriated for a fleeting couple of seconds the distinctive, likeness of Ms. Hall from a Revlon hairspray commercial of yesteryear without her permission. In most states, the unauthorized use of an individuals (dead or alive) name, likeness and even voice is a tort stitched together from vestiges of the right to privacy, the right to publicity (in some states) and common law property rights. Most state statutes and common law rights are almost strict liabilityno authorization, no defense. Ms. Hite, by all accounts, may very well will win her claim. But should this area of the law adopt a rule similar to that of copyright law that limits exposure if the use is de minimis? In our high tech, cellphone camera-ready society, it seems that the law is evolving in that direction.

Do You Want Them To Pin It?

March 7, 2013, 9:37 AM

Pinterestis one of the fastest growing social media websites with millions of visitors each month. On Pinterest, users can pin things that they see on different websites and blogs and then organize their pins by topic on boards. They can provide access to their boards to other users, and follow other users who have similar interests. The Pinterest app allows users to pin things from their mobile phones and iPads.

Internet Domain Name Renewal Traps

March 4, 2013, 9:48 AM

We generally do not reserve Internet domain names for our clients, but instead encourage them to do that themselves for various reasons cost, direct control, efficiency, etc. However, in a few cases our clients have asked us to reserve domain names for them, and we have accommodated those requests. As some of these were coming up for renewal this year, we began looking into doing that and found that without our authorization or knowledge the registrar had implemented an auto-renew feature that resulted in a charge to our account to renew a number of expiring domain names for three years. When we called them on this, they had no satisfactory explanation, but at least reversed the charge and said they would remove the auto-renew instructions they had imposed on our account.

Exceptional Expenses - Timing of Attorneys Fees in Patent Cases

February 21, 2013, 9:00 AM

In patent cases, a prevailing party may recover attorneys fees only if the court declares the case exceptional under 35 U.S.C. 285. However, Federal Rule of Civil Procedure 54(d)(2)(B) requires that a party file a motion for attorney fees no later than 14 days after the entry of judgment. The Federal Circuit has made clear that a motion to declare a patent case exceptional pursuant to 35 U.S.C. 285, must comply with the timing requirements of Rule 54. IPXL Holdings, L.L.C. v. Amazon.com, Inc. Only a showing of excusable neglect pursuant to Federal Rule of Civil Procedure 6(b) will allow a court to extend the time to file past this 14 day period. The harsh reality of this rule was recently felt by defendants in Hamilton Beach Brands, Inc. v. Sunbeam Prods. On July 13, 2012, the Richmond district court judge granted summary judgment in favor of defendant Sunbeam finding no infringement and declaring the patent invalid. Sunbeam filed a motion to declare the case exceptional and to collect over $300,000 in attorneys fees on August 2, 2012, twenty days after the entry of the courts Final Order and six days past the filing deadline. The district court rejected Sunbeams argument that the judgment was not truly final until the Patent Determination Report was transmitted to the PTO. The court explained that the Patent Determination Report was inconsequential to the determination of when judgment was entered and does not itself dispose of the case or have any effect on the parties. Because Sunbeam made no attempt to seek to extend the 14 day filing deadline prior to its filing and because misinterpretation of the Federal Rules does not constitute excusable neglect, the district court denied Sunbeams request for attorneys fees. Hamilton Beach Brands, Inc. v. Sunbeam Prods. --Lauren Tallent Rogers

IP Due Diligence in M&A Transactions

February 18, 2013, 9:00 AM

Intellectual property due diligence by a buyer is important to obtain information about the nature and quality of a targets assets. A general identification of the targets IP is critical patents, trademarks, copyrights, trade name filings, internet domain names, software and databases and trade secrets.

Are Franchise Agreements Negotiable?

February 14, 2013, 8:30 AM

Franchisors sometimes tell franchise prospects that their franchise agreements are totally non-negotiable. However, in practice, franchisors frequently agree to an addendum to clarify any material ambiguities found in their franchise agreement, and to memorialize certain concessions granted to the prospective franchisee to incentivize that prospective franchisee to sign the franchise agreement. A franchisor is highly unlikely to ever negotiate core issues related to how the franchise system operates, but many other issues, including issues related to timing of unit openings under area development agreements, territory issues, initial support issues, transfer provisions, and guarantees, among other provisions, may more routinely be negotiated.

Get Thee to the Patent Office, and Quickly Too: The Importance of Filing U.S. Patent Applications by March 15, 2013

February 12, 2013, 10:28 AM

The changeover of the U.S. patent system on March 16, 2013, from one in which priority of rights to a patent is determined based on who first conceives an invention, to one in which it is determined by which inventor files the first application on the invention, will be disadvantageous to many owners of rights in patentable inventions. This means that for inventions that have progressed to the point where valid patent applications can be filed on them, it will be advisable in many cases to get those applications filed on or before March 15, 2013, so they will be subject to the old rules rather than the new ones established by the America Invents Act (AIA) that come into effect on March 16.

Reminder: Generic Terms Cannot Be Protected As Trademarks

February 8, 2013, 4:15 PM

A recent decision by the U.S. Eleventh Circuit Court of Appeals serves as a reminder that generic terms cannot be protected as trademarks or service marks for the products or services that are generally referred to by the terms in question. In its December 20, 2012 decision in the case of Millers Ale House, Inc. v. Boynton Carolina Ale House, LLC, the Court followed the ruling of an earlier Fourth Circuit Court of Appeals decision that, despite geographically broad and longstanding use of the term Ale House for its bar and restaurant establishments, Millers Ale House did not and could not have any trademark/service mark rights in this term because the words ale house are generic words for a facility that serves beer and ale with or without food.

What is Obvious is Often Factual or Why Summary Judgment of Invalidity Based on Obviousness is Often Elusive

January 30, 2013, 4:20 PM

No matter how clear an invalidity case of obviousness may seem, theissue often must be reserved for a jury. Such was case in the recent Eastern District of Virginia matter of Morpho Detection, Inc. v. Smiths Detection Inc., No. 2:11-CV-498, 2012 U.S. Dist. LEXIS 170561 (E.D. Va. Nov. 30, 2012) where Judge Mark S. Davis denied a motion for summary judgment on the issue of obviousness.

Most Important Change to U.S. Patent System Under America Invents Act (AIA) will Occur March 16, 2013

January 24, 2013, 9:39 AM

Many of the changes to the U.S. patent system effected by the Leahy-Smith America Invents Act of 2011 (AIA) have already been implemented, but the most important of them will not take effect until March 16, 2013. This is the change of the U.S. patent system to one in which the right to obtain a patent on an invention will belong to the first inventor to file an application with the U.S. Patent and Trademark Office, instead of the first inventor to have conceived the invention. There is some anticipation that the change will result in races to the patent filing office, or give an unfair advantage to large companies over their smaller competitors, or lead to new strategies for the timing of public disclosures of inventions. But just how many of these consequences will occur, and their extent, remains to be seen.

Are You on Foursquare?

January 18, 2013, 8:30 AM

As social media continues to expand at such a fast pace, there are so many places that your business can be discovered online. One such website which I recently discovered is called Foursquare. It encourages users to sign up through Facebook to [s]hare and record the places you visit, save money, and get personalized recommendations based on where you and your friends have been. Wikipedia describes Foursquare as a location-based social networking website for mobile devices, such as smartphones where users check in at venues using a mobile website, text messaging or a device-specific application by selecting from a list of venues the application locates nearby.

Investing in a New Franchise - Always Riskier but Worth the Risk?

January 15, 2013, 8:30 AM

Investing in a new franchise concept is inherently more risky than investing in an established franchisor. Established franchisors have a track record of (hopefully) successful operations, have (more than likely) worked out the inevitable hiccups faced by a company starting a new franchise system, and, most importantly, have a number of existing franchisees who can comment on the strength (or weakness) of the franchise system. All of these factors dramatically improve a prospective franchisees thorough due diligence process. Conversely, new franchise systems offer virtually none of these attributes. While some new franchise systems will grow rapidly, many more will languish with a relatively small number of franchises, often for a long period of time. Accordingly, a prospective franchisee should spend significantly more time on its due diligence process for a relatively new franchise system, and should be sure its due diligence process includes use of trusted advisors (e.g., attorneys and accountants) familiar with franchising.

When Should Your Expert Be Skilled in the Art?

January 11, 2013, 5:20 PM

Seems like a basic question that answers itself: when you want the expert to opine on non-infringement positions, invalidity and scope of the prior art in a patent infringement case, your expert should be skilled in the art. Unfortunately, in patent cases, some parties are forced to find experts that bridge two areas of art. In the process, the person may be very expert in one thing but not technically skilled in the art at issue. That was the case in the recent Eastern District of Virginia case of Morpho Detection, Inc. v. Smiths Detection Inc., No. 2:11-CV-498, 2012 U.S. Dist. LEXIS 170561 (E.D. Va. Nov. 30, 2012).

Narrow Fourth Circuit Reading Hampers Cybersecurity

January 3, 2013, 11:03 AM

In July of 2012, the Fourth Circuit joined the Ninth Circuit in adopting a narrow reading of one of the principal statutory tools for combatting computer and cybercrime, the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. 1030, broadening a split among courts of appeal in interpreting the reach of the statute. In late October, the unsuccessful appellant in the Fourth Circuit, WEC Carolina Energy Solutions, LLC, filed a Writ of Certiorari in the hope that the Supreme Court will reverse the court of appeals and resolve the split in authority. The crux of the issue is when an employee exceeds his authority in violation of the CFAA by accessing his employers computer and obtaining data for improper means, such as for a new employers benefit.

Trade Secrets The Other Intellectual Property

December 20, 2012, 9:18 AM

When our thoughts turn to protection or enforcement of intellectual property rights in technology, most of us think first of existing or potential patent rights in the technology. Trade secret rights are often an afterthought. A federal court case that began in 2009 and has had some unusual twists and turns over the past year illustrates the potency under the right circumstances of technology protection through enforcement of trade secret rights. At issue was a dispute between the U.S.-based DuPont chemical company and a Korean competitor, Kolon Industries, Inc., over trade secret technology utilized in the production of para-aramid synthetic fiber products, most notably body armor marketed by DuPont under its Kevlar brand name and by Kolon under its Heracron brand.

Veterans Business Fund

December 14, 2012, 9:48 AM

The International Franchise Association (IFA) has launched the Veterans Business Fund. This funds mission is to provide low interest loans to veterans interested in starting a business. Information on the Veterans Business Fund can be found at http://www.veteransbusinessfund.org/. The Veterans Business Fund is part of the IFAs Operation Enduring Opportunity initiative, which has a goal of having the franchise industry employ 80,000 veterans (and military spouses) by the end of 2014. According to a recent IFA report, the franchise industry has employed 64,000 veterans and military spouses since the IFA launched its Operation Enduring Opportunity initiative in 2011. -- Stephen E. Story

Trademark Licenses and Bankruptcy

December 4, 2012, 4:57 PM

The principle categories of intellectual property under U.S. law include patents, copyrights, trademarks and trade secrets. However, the definition of intellectual property under the Bankruptcy Code is different and includes patented inventions protected under the Patent Act, patent applications, plant varieties, copyrighted works protected under the Copyright Act and trade secrets. Trademarks are specifically excluded from the definition of intellectual property under the Bankruptcy Act. If the debtor is the trademark licensor and the debtor rejects the trademark license in the bankruptcy process, the trademark licensee is not entitled to retain the license or use the mark under Section 365(n) of the Bankruptcy Code. For intellectual property as defined by the Bankruptcy Code, after a debtor licensor rejects an intellectual property license, Section 365(n) allows the licensee to either continue using the intellectual property and retain its rights for the duration of the license agreement or to treat the license agreement as terminated. The intentional omission of trademarks from the definition of intellectual property under the Bankruptcy Code is significant and can create substantial risk for a trademark licensee whose business is structured around the goods or services they offer under the licensed mark.

Reviewing the Federal Courts Jurisdiction and Venue Clarification Act of 2011

November 20, 2012, 4:32 PM

Clients and lawyers who handle intellectual property disputes in federal court regularly face jurisdiction and venue issues in such cases. In order to address such issues, it is important to be knowledgeable about the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (Act). While the Act was signed into law by President Obama on December 7, 2011 and took effect on January 6, 2012, there is not yet much case law addressing the changes made through the Act. Such changes are divided into two sections which address jurisdictional improvements and venue and transfer improvements. The full text of the Act is available from many sources including http://www.gpo.gov/fdsys/pkg/PLAW-112publ63/pdf/PLAW-112publ63.pdf. -Kristan B. Burch