Intellectual Property & Franchising Law

Capri Jewelers: Trademark Reminders

November 5, 2012, 4:06 PM

On October 2, 2012, Judge Henry Hudson of the U.S. District Court for the Eastern District of Virginia issued an order granting a preliminary injunction to Richmond-area jeweler BFI Holdings, dba Capri Jewelers, enjoining North Carolina-based Diamonds Direct USA from using the service mark DIAMONDS DIRECT in expanding to the Richmond area. The decision is not momentous, but it was unusual in at least two respects. First, Diamonds Direct had used DIAMONDS DIRECT as a mark for many years prior to Capri, which did not use DIAMONDS DIRECT until 2012. Previously, it had only used somewhat similar slogans, like Buy Direct, Save Direct. Second, Capri prevailed in large part based on its Virginia state registration of DIAMONDS DIRECT, secured in 2012 after it learned that the North Carolina company planned to expand to Richmond. The dispute and the result, albeit preliminary, provide some useful reminders about trademark rights and strategies:

Franchisees Should Consider Negotiating the Renewal Provisions of Their Franchise Agreement at the Time They Sign Their Initial Franchise Agreement

October 22, 2012, 1:44 PM

Virtually all franchise agreements contain provisions governing renewal; many require the franchisee to renew only by entering into the then-current franchise agreement offered by the franchisor. Franchisees should consider negotiating this provision at the time they sign their initial franchise agreement. Franchisees should certainly consider requesting that the monetary provisions of the franchise agreement (e.g., royalty, advertising fees, etc.) remain, during the renewal term of the franchise agreement, at the same level charged during the initial term of the franchise agreement.

Additional Provisions of New U.S. Patent Law are Now in Effect

October 11, 2012, 10:42 AM

When the Leahy-Smith America Invents Act became law on September 16, 2011, some of its provisions went into effect immediately, others were scheduled to take effect on the first anniversary of the laws enactment and still others were deferred until March 16, 2013.

Can You Hear Me Now: Part Deux?

October 2, 2012, 1:50 PM

What happens when a small company backed by a big investor is kicked to the curb by the Phone Company? Throw in a multiple-year courtship of that company gone bad along with a preemptive suit by the Phone Company to squash the companys major customer and you can get the kind of facts that can lead to a multimillion dollar jury verdict. That is exactly what happened in a recent jury trial in the Norfolk Division of the Eastern District of Virginia where a small company, ActiveVideo Networks, Inc. (ActiveVideo), sued several Verizon entities claiming the Phone Company infringed a series of ActiveVideos interactive video technology patents. The result was a message that even the non- 4G, now leather clad T-Mobile girl could hear and understand: an historic $115 Million verdict against Verizon that was augmented by an injunction and post-judgment royalties that swelled the verdict too over $260 Million. This blog has followed the case with great interest in several posts.

One Pill Makes You Larger and One Pill Makes You Small

September 21, 2012, 2:40 PM

Pharmaceuticals make up a big part of our health-care system and a major contributor to the growth in health-care costs. According to one study, purchases of prescription drugs rose from $12 billion in 1980 to $231 billion in 2008, rising from 4.7% to 10% of total health-care expenditures. Drugs are big business. Much of the growth of the pharmaceutical industry, and its profitability, are attributable to patent protection for drugs as well as aggressive patent strategies by Big Pharma.

Monetary Damages for Copyright Infringement

September 12, 2012, 11:11 AM

The Copyright Act provides a variety of relief for a copyright owner. Injunctive relief, impoundment, seizure and destruction are available in addition to monetary damages. The copyright owner may seek actual damages, which can be difficult to prove. Prior to the entry of a final judgment in an infringement action, the copyright owner may elect to receive statutory damages without proof of actual damages. Statutory damages are awarded per work, and not per infringement, and may not be recovered if the infringement occurred prior to the date upon which the work was registered, regardless of whether the infringement occurred after registration. For non-willful infringement, the minimum award is $750 per work and the maximum award is $30,000 per work. In the case of willful infringement, the maximum award is $150,000 per work. A court may also award costs and fees to either party to an infringement action. --Nicole J. Harrell

Franchisors Need to Exercise Caution to Avoid Vicarious Liability

September 7, 2012, 10:45 AM

Individuals injured at franchise locations often attempt to sue the franchisor, in addition to the franchisee, claiming the franchisor is vicariously liable for the injury. (The franchisor often has greater financial resources than the franchisee with which to settle the claim or pay a judgment). The vicarious liability standards vary among the states, but courts commonly look at the degree of actual control exercised by the franchisor over the operations of the franchisee, particularly in the area giving rise to the lawsuit. (For example, how much control the franchisor exercises over the franchisees hiring of its employees, if the injury claim arises out of the alleged negligent retention of an employee). Recent decisions make clear that while it is absolutely necessary for the franchisors franchise agreement to state that the franchisee is an independent business entity making its own business and hiring decisions, such contractual language is not sufficient to immunize and protect the franchisor from vicarious liability claims. In addition, the franchisor must critically examine the other provisions of its franchise agreement, as well as how it actually interacts with the franchisee, to minimize its control over the day-to-day aspects of the franchisees operation that are more likely to result in a successful vicarious liability claim, while, at the same time, preserving the operational uniformity of its franchise system. If you would like more information on this subject, please contact Steve Story at --Stephen E. Story

When No Means No - Not in a Reexamination

August 29, 2012, 8:30 AM

On July 31, 2012, in 01 Communique Laboratory, Inc. v. LogMeIn, Inc., the United States Circuit Court for the Federal Circuit (Federal Circuit), reversed a decision of noninfringement issued by Senior Judge Claude M. Hilton of the Eastern District of Virginia based on a faulty claim construction. Part of the Courts decision took issue with a limitation to the claim language imposed by Judge Hilton based upon an alleged disclaimer made by the Plaintiffs expert in reexamination proceedings. In doing so, the Court follows its recent trend in rejecting the use of so called disclaimers in all but the clearest of situations.

Comment Period Extended for Applications for New Generic Top-Level Domains

August 22, 2012, 2:28 PM

As explained in prior posts, the Internet Corporation for Assigned Names and Numbers (ICANN) is making available new generic top-level domains which include different types of words in different languages. The public comment period for the new generic top-level domain applications began on June 13, 2012 and originally was scheduled to end on August 12, 2012. During the public comment period, the public has a chance to express any concerns to the evaluators as part of the application evaluations. ICANN decided that the public comment period should be extended because the public sought more time to review and comment on the more than 500 applications received for new generic top-level domains. ICAAN has given the public an additional forty-five days (until September 26, 2012) to submit comments.

A New Twist on Trademark Licenses in Bankruptcy

August 16, 2012, 8:36 AM

What happens when a company takes a license to manufacture and sell a product under anothers mark, only to discover later that the licensor has entered bankruptcy? Can the bankrupt estate reject the license and deny the licensee the ability to continue using the mark in its business? The problem can arise, and sometimes has, to the detriment of trademark licensees. Yet, a recent Seventh Circuit decision takes an interesting new approach to the problem. In the short term the decision creates uncertainty, but it opens the door to reconsideration of the effects of a licensors bankruptcy on IP licenses.

Franchise Industry Focuses Heavily on Veterans

July 30, 2012, 8:30 AM

The franchise industry, and its trade association, the International Franchise Association, continues to heavily promote franchising for veterans in the VetFran program. The IFA recently introduced its VetFran Toolkit and a new Veterans Mentor Network. These two initiatives are designed to complement the IFAs announced commitment to the White House Joining Forces Initiative to hire as team members and recruit as franchise business owners 75,000 returning veterans, military spouses and 5,000 wounded warriors by the end of 2014. To recruit veterans as franchisees, a large number of franchise systems offer special deals to veterans, including waiving or reducing the initial franchise fee and offering reduced royalties. For further information, go to --Stephen E. Story

What is Not Protected by Copyright Law?

July 25, 2012, 8:17 AM

It is well established that copyright protection extends to literary, musical, dramatic, pictorial, graphic and sculptural works, motion pictures, sound records and architectural work. There are several categories of work that are not eligible for copyright protection, including titles, names, phrases or slogans; listings of ingredients or contents; ideas, methods, processes and systems. Titles, names, phrases or slogans may be eligible for trademark protection and ideas, methods, processes and systems may be eligible for patent protection. On the other hand, consider recipes the list of ingredients cannot be protected and it is even questionable whether copyright protection will extend to the instructions. That determination depends on whether there is substantial literary expression in the instructions. --Nicole J. Harrell

Area Developers Beware of Cross-Default Provisions in Franchise Agreements

July 18, 2012, 10:47 AM

Anyone considering becoming an area developer (sometimes also called multi-unit developers) should beware of cross-default provisions in their unit franchise agreements. These cross-default provisions generally state that it will be grounds for termination of the franchise agreement if the franchisee breaches any of its other agreements with the franchisor. However, area developers often breach the terms of their area development agreement by failing to fully complete their build-out schedules, for example, by building only four of five required units. Under those circumstances, that breach of the area development agreement, standing alone, could give the franchisor the right to terminate the other established unit franchises, even if those franchises are in full compliance with the terms of their individual unit franchise agreements.

Show Cause or Show Time: Contempt Standard for Patent Infringement Relaxed

July 11, 2012, 3:10 PM

In the face of an award of an injunction, those accused of infringing a patent often redesign their product to avoid infringement. How much change is enough and how much change will land you in hot water with the Court? Traditionally, the Court looked at the changed product to ascertain if it was colorably different than the product found to infringe the patent. If the issue raised a substantial question, the patent holder had to institute a whole new lawsuit; if the change was insubstantial, the Court could summarily hold the adjudged infringer in contempt. The rigid standard required the moving party to prove that the difference was insubstantial and presented a difficult hurdle to overcome when enforcing a patent even after winning an expensive lawsuit. Recently, that has all changed.

The Changing Face of Online Privacy

July 3, 2012, 9:00 AM

Concerns about online privacy are much in the news. Businesses, consumer advocates and governments debate what online privacy means, and what practices should be adopted by web site operators to address privacy concerns. It is an issue for all web site operators, not just the likes of Google and Facebook.

What are Moral Rights?

June 28, 2012, 10:28 AM

Moral rights relate to copyrights and are a special set of rights that are owned by the creator of a work. Moral rights protect the reputation and integrity of the creator. The right of attribution provides that no matter who gets to exploit the economic rights in a copyrighted work, the creator still has the right to be named as the creator. The right of integrity provides that the creator gets to prevent any action that would undermine the creators creative intent or vision. U.S. copyright law grants moral rights to creators of visual works, but moral rights do not extend to other types of works, such as literary or musical works. --Nicole J. Harrell

Careful Drafting of Arbitration Provisions in Franchise Agreements

June 25, 2012, 9:19 AM

A recent decision by the United States District Court for the Western District of Virginia, Roanoke Division, Devin Hamden v. Total Car Franchising Corp. d/b/a Colors on Parade, Case No. 7:12-cv-00003, underscores how important it is for franchisors to carefully draft any arbitration language used in their franchise agreement. In that case, a former franchisee filed suit attempting to establish that the post-termination covenant not to compete in the franchise agreement did not prevent it from engaging in another business, after termination of the franchise agreement. The franchisor disagreed and moved to arbitrate the dispute, pursuant to an arbitration provision in the franchise agreement. Notwithstanding that courts presumptively favor referring matters to arbitration, if arbitration is called for by the franchise agreement, in this case, the Court found that the way in which the arbitration provision was drafted indicated that the parties intended the arbitration provision to apply only to disputes between franchisees, and not to disputes between the franchisor and the franchisee. Accordingly, the Court denied the motion to compel arbitration. --Stephen E. Story

Trademark and Domain Name "Service" Offerings: Beware and Ignore

June 21, 2012, 8:21 AM

It has been some time since we have reminded everyone of the problem of unsolicited offers to provide trademark and domain name "services" that are designed to look like official notices from governmental agencies and/or invoices that need to be paid.