Case Study 2: D2 Holdings (D2) v MRC II Distribution Company (MRC II)

The Companies


D2 Holdings (D2) is a Massachusetts entertainment goods and services company . MRC 11 Distribution Company (MRCII), is the brand behind the Netflix hit political thriller House of Cards.

The Case


On March 3, 2016 D2 filed a trademark infringement claim against MRC 11, stating it has held the trademark for House of Cards for “entertainment goods and services” since 2009, MRC 11 has tried several times to file a trademark for the phrase, which was rejected but still has proceeded to use the name, to great success with the popularity of the show. Indeed, to such success that the name has been licensed to a producer of gaming machines who now uses that mark on slot machines. D2 also filed suit against IGT, the manufacturer of the slot machines at issue.

The Conclusion


The lawsuit is pending ruling. The verdict of the lawsuit will be based on the law on infringement of intellectual property. The complaint seeks an injunction ordering MRC II and IGT to cease all use of the “HOUSE OF CARDS” name. Given the commercial success of the program, MRC II (and Netflix) do not want to lose the right to use “HOUSE OF CARDS”. Therefore, the case will invariably settle with a significant windfall to D2 via a license agreement allowing use of HOUSE OF CARDS by defendants.

“If D2 Holding proves ownership of the trademark, then it is its responsibility to prove that MRC violated the infringement rights by sharing the trademark with other entities without a license or authorization by D2 Holdings”

Key Takeaways


If the court finds sufficient evidence that MRC violated infringement rights by sharing licensed trademark “House of Cards” with other entities, and rules in favor of D2 Holdings, compensation for damages could be huge.

The “HOUSE OF CARDS” situation illustrates two important points

  • Trademark laws provide the initial user of a trademark with two significant rights and remedies, namely, the right to preclude others from using a mark and the ability to seek a court order requiring a party to cease use of a trademark.
  • The risk of drawing a challenge to use of a mark can be lowered through thorough pre-adoption trademark searching. Through comprehensive searching significant risks – such as another party already using an identical mark for identical services – can be uncovered, understood and potentially averted.

IP Nuggets


Trademarks are vitally important to business. Among the rights a first user of a trademark has against others is the ability to seek injunctive relief, requesting a second user to stop all use of a trademark. This could stop a product launch dead in its tracks or result in significant re-branding costs if a product or service is already in the market. Because of this, businesses should carefully consider trademarks before adopting or using them. It is crucial that all businesses engage in trademark searching before use of a mark.

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PalladiumIP October 18, 2020 0 Comments

IP Case Study 1 : Romag v. Fossil

The Companies


Romag sells magnetic snap fasteners for use in leather goods . Part of the American Fossil Group’s business is their line of clothing accessories including handbags. Fossil designs, markets, and distributes a wide range of fashion accessories.

The Case


In 2002 , the two companies, signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Initially, both sides seemed content with the arrangement. In time, Romag discovered that the factories Fossil hired in China, to make its products were using counterfeit Romag fasteners—and that Fossil was doing little to guard against the practice. Romag sues Fossil, alleging that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag. Romag sought (among other things) an order requiring Fossil to hand over the profits it had earned thanks to its trademark violation.

The Conclusion


After a trial, the jury agreed with Romag citing that Fossil had acted “in callous disregard” of Romag’s rights. The jury determined that Fossil had infringed Romag’s trademark, but rejected Romag’s claim that the infringement was “willful”. Nevertheless, the jury awarded Romag damages based on Fossil’s profits. In a highly split decision the US Court of Appeals Second Circuit pointed out that a plaintiff seeking an award of the defendant’s profits must show willful infringement, failing which the court struck the jury’s award of profits to Romag.

“The jury determined that Fossil had infringed Romag’s trademark, but rejected Romag’s claim that the infringement was “willful”…”

Key Takeaways


The possibility of obtaining profits from an infringing party will definitely set in motion a series of events in the very near future.

  • Increase in trademark infringement lawsuits – As a result of this ruling, it is now easier to obtain an infringer’s profits in trademark infringement lawsuits. This may lead to an increase in trademark infringement lawsuits as it may incentivize companies to initiate
  • Payment demand in addition to cease and desist letters – Previously, before considering litigation, many businesses first attempt to resolve trademarks through cease and desist letters. Now that it’s easier to obtain a defendant’s profits, in a lawsuit, it is very likely that infringers may start receiving cease and desist letters that require payment from the infringer in order to resolve disputes.
  • “Willful infringement” will be easier to prove-Conducting thorough trademark clearance searches before adopting a mark is even more critical. If a business adopts a third party’s mark, without the proper trademark clearance, the third party does not have to prove “willfulness” to recover an award of profits.

IP Nuggets


Now, businesses will have to closely monitor their supply chains and institute robust quality control standards to prevent counterfeit materials from being used in their businesses. Businesses should conduct thorough due diligence of the suppliers that they are contracting with to ensure that the materials provided are not counterfeit.

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PalladiumIP October 18, 2020 0 Comments

Creating an Industry, Organisation and Strategy-specific IP Policy

O

rganisational intellectual property (patents, trademarks, trade secrets, confidential information etc.) can be utilised in different ways either internally by the owners or externally by licensees or third parties. This internal or external utilisation of IP comes with opportunities and challenges to businesses and institutions. These IP related opportunities and challenges require appropriate policies and procedures to avoid the financial costs that come with inappropriate use of IP or IP related disputes.

Well-conceived and well implemented corporate IP policy and procedures are a critical internal element of an organisation’s overall IP Strategy and these (should) become the basic rules that the organisation follows in handling IP

There must be a consistent and effective process of recording, evaluating and protecting IP within an organisation. Template based IP policies are usually a starting point for most organisations but successful IP policies and procedures are those that are well crafted and fully integrated across an organization in line with its vision, strategic goals and a full understanding of the respective industry. Besides an organisation’s vision and strategic goals, a corporate IP policy should be tailored to its industry and specific business approach.

Some key elements of a corporate or institutional IP policy

 

Among several elements, a corporate or institutional IP policy should include and address the following key elements:

  • Important Definitions
  • Aims of the policy
  • Ownership and use of IP (Employees and 3rd Parties)
  • Internal IP disclosure Procedure
  • Departmental Roles
  • Commercialisation/Licensing of IP and how revenue will be shared
    • between the organisation and its employees/researchers/inventors,
    • between departments within the organisation, and
    • with research partners or sponsors of R&D.
  • Internal Training and education
  • Monitoring and Evaluation of IP Policy

Aligning IP Policy with strategic goals

The IP policy should provide a consistent framework within which an organisation’s IP is developed and managed for its benefit, the creators and the public at large in line with the vision and strategic goals. For IP intensive industries, IP creation and utilisation is an essential function of an organization whereas other organisations might consider it as a subordinate function.

In either case, IP remains critical in maintaining business value and competitive edge. As a result, the development of an organization’s IP policy and procedures should always encompass the role of IP in the organization’s strategic business planning, risk management and employee training and education.

As part of the strategic goals, the growth plan of an organisation should also be considered and several questions answered.

  1. How is the organisation going to grow in various markets?
  2. How is organisational and third party IP going to be handled in those markets?
  3. Should the organization consider joint ventures or strategic alliances, how should the organization handle jointly developed IP?
  4. If jointly owned, which party will own which rights and where to any new IP resulting from that combined effort?

The range of questions is non-exhaustive and depends on an organisation’s approach to using their IP for strategic purposes.

Making it your own: Creating an organisation and industry specific IP Policy

An IP Audit is one of the internal elements of the IP Strategy which forms the basis of the overall IP Strategy which is best used as an initial step to feed into the development of an IP policy. Successful corporate IP policies and procedures are to a larger extent hinged on the organization’s culture of addressing and respecting the ownership and use of IP, whether created internally or owned by third parties. An organisation’s culture has significant influence on the successful implementation of a corporate IP policy.

The ability to have an organisation or industry specific IP policy is largely depended on how IP-intensive that specific industry is. For IP-intensive industries with a significantly higher investment in R&D, the policy approach has to be strict since the core of their industry is IP. A good example is the pharmaceutical manufacturing industry. On the other hand, non-IP-intensive industries would have a different IP policy approach.

As indicated above, a template based approach might be a starting point. However, without a full understanding of the specific industry and the particular importance of IP, an organisation will end up with a half-baked product that does not allow extraction of maximum value from IP.

Internal Training and Education

Having a well-developed corporate IP policy is an initial step, having the policy fully understood and embraced by employees is the next crucial part. Training and education is an essential element of implementing an IP policy to clear all IP-related misunderstandings and misconceptions. These misconceptions can result in mistakes which usually lead to IP infringement, misuse, or misappropriation.

Some organisations do have dedicated internal IP departments or Innovation departments which will spearhead the training and education. For other organisations, the human resources department takes the responsibility for implementing IP training and education with the IP Department having an oversight.

For best results, it is recommended to have guidance and assistance from experienced IP consultants who will work together with your in-house counsel and responsible departments’ managers. IP policy related training and education should be organisation wide covering all departments where any form of IP is created or used

IP Policy and employee motivation

An organisation’s employees are critical in the success of an organization’s IP policy and implementation. Their buy-in to the organization’s vision and strategic goals has a bearing on how they embrace and run with the IP policy and procedures.

Although some employees might innovate or be creative because they were employed for that purpose, a well-crafted IP policy should incentivise employees organisation-wide to be creative and innovative to enhance an organization’s competitive edge. Bonuses and awards to innovative employees, departments or business units motivate employees to work towards delivering extra creative value to the organisation.

Commercialisation: IP Value outside the organisation

From our experience, not all IP that is created by employees can be internally utilised by the organisation. These forms of IP can still contribute to an organisation’s bottom line through licensing to third parties.

The responsible department will assist, provide advice, or seek the help of outside professional IP consultants for possible options for commercialisation and technology transfer that may be appropriate in order to best meet the aims of the corporate IP Policy. This should always be done with the vision and strategic goals of the organisation in mind.

Monitoring and evaluation

The corporate IP policy has to be monitored on an on-going basis by the responsible department depending on the agreed departmental roles.  The corporate IP policy monitoring and evaluation periods may vary per organisation but it is recommended on an annual basis and appropriate adjustments and amendments may be done from time to time.  For the purposes of consistency and alignment with previous training and education, IP policy amendments and adjustments should be properly communicated and shared with staff members. The policy itself should also prescribe the appropriate procedures for implementing any changes.

Conclusion

A well-conceived and properly implemented corporate IP policy should provide a consistent framework within which an organisation’s IP is developed and managed for its benefit, the creators and the public at large in line with the vision and strategic goals. Depending on the organisation’s size, industry and strategic goals, the complete process might be quite an expensive one. However, the corporate IP policy process can still be achieved in stages, which in most organisations already exist but are not properly documented.

How can we help?

At PalladiumIP, our aim is to help the organisations to put in place best internal practices for the creation, protection and management of intellectual property. Our priority is assisting clients to better utilise their intellectual capital and implement more effective internal IP management policies and procedures.

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PalladiumIP April 2, 2020 0 Comments