intellectual property issues affecting the hospitality …...intellectual property issues affecting...

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©2011 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not clients but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500

Intellectual Property Issues Affecting the Hospitality Industry

4:00 p.m. – 5:00 Eastern August 30, 2011

Rick Caron Nir MargalitNorm Rich Leslie Smith

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©2011 Foley & Lardner LLP

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Today’s Presenters Rick CaronFoley & Lardner LLP

Nir MargalitFoley & Lardner LLP

Leslie SmithFoley & Lardner LLP

Norm RichFoley & Lardner LLP

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Troll Cases in Hospitalitypresented by

Nir Margalit


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Troll Cases

Troll Cases–Defined– Plaintiffs – Form of Demand– Review of IP licenses/what is covered

Co-defendants–Differentiating– Considerations– Co-counseling

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Troll Cases

Responding to Demand– Initial communications– Review of licenses– Defenses– Indemnifications

Settlements– Settling vs. litigating (case studies)– Per location amount– Look at prior/future sites– Full release/transferable licenses


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Troll Cases

Preventative Actions– Review of Third Party License Agreements– Full Indemnification Provisions– Watch for exculpatory language (modification)– Include exculpatory language in reps of third

party Management Agreements– Have IT Department maintain thorough log of

all licensable/licensed components/software

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Securing and Protecting Valuable Trademarks

Issue-spotting when Acquiring or Selling Hospitality Properties

presented by

Norm Rich


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Trademarks (or Service Marks)

Defined:– Any word, phrase, symbol, artwork, sound,

color, device or non-functional appearance of an article which … identifies the source of goods/services, and distinguishes that source from other sources

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Trademarks & Service Marks


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Trademarks – Legal/Policy Rationale

Consumer Protection Consumer Choice Quality Assurance Protection From Unfair CompetitionCost and Valuation of Good Will


14Acquiring and Protecting Trademarks

ClearanceRegistrationLicensing –merchandising, co-branding, product

placement, etc.

EnforcementLitigation

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Varying Scope of Protection

How much protection can a trademark provide?


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Distinctiveness of Marks

The scope of protection afforded a particular mark varies with its distinctiveness– In general, the more distinctive a mark, the greater

the scope of protection

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Spectrum of Distinctiveness

Strongest Protection

Weakest Protection

Arbitrary/Fanciful

Suggestive

Descriptive

Generic No Protection


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Registration – Bundle of Rights

Principal Register –presumptions

– Exclusive nationwide rights

– evidence of ownership– Right to use the ®– Ability to register with

Customs (CPB)

Non-registration

– Common law rights only (geographic limitations).

– Must prove ownership– Use of TM or SM only– Cannot register with

Customs

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Registration – Bundle of Rights (cont.)

Principal Register –presumptions (cont.)

– Ability to recover profits, damages and costs for infringement

– Ability to recover attorneys fees in infringement actions

– Incontestable status after five years of use

Non-registration (cont.)

– Actual damages must be proven, which can be challenging

– Attorney’s fees awarded only in extreme circumstances

– Incontestable status , which is helpful for marks that were originally descriptive, cannot be obtained.


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Registration – Bundle of Rights (cont.)

Principal Register –presumptions (cont.)– Notice to others conducting

trademark searches, helps to prevent the adoption of confusingly similar marks by third parties

– Right to sue for infringement in federal courts under Federal Question jurisdiction

Non-registration (cont.)

– Innocent use of the mark is possible, which may cause confusion

– No jurisdiction in federal courts

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International Rights

Geographical scope of desired use

Two useful tools – European Community Trademark

Application – one application covers all 27 member countries of the EU

– International Application under the Madrid Protocol – one application designating member countries for expanded protection


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Trademark Issues: Acquiring or selling hospitality properties

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Due Diligence = Evaluate the details of a potential investment or purchase to verify material facts relevant to that transaction


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Core Elements

Prioritize Objectives

Conduct an Investigation

Analyze/Report the Results

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Prioritize Objectives

Purchase brand only …– … to dissolve it as a competitor?– … to expand or re-shape the brand?

Domestically?Internationally?– Expand the brand outside the U.S.?– Bring the brand into the U.S.?

Purchase location only?Purchase brand and location?


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Prioritize Objectives (cont.)

What are the market share goals?– How does the brand fit into this?– Is the purchase for the purpose of acquiring a

platform that allows creation of sub-brands?Same or different branding for: – Fractional ownership?– Time share?

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Conduct an Investigation

PRIORITIZE ANALYSIS☐ Analyze State of Industry☐ Determine Scope Of Protection☐ Verify Exploitability☐ Review Warranties and Indemnifications☐ Review Other/Special Considerations☐ Establish Value

Does transaction make sense from a TM standpoint?


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Transaction Goals

Buyer’s Goals

Pay a littleGet a lotAvoid Risk

Seller’s Goals

Maximize sale priceAvoid liabilityReserve certain IP rights

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Transaction Goals

Reasonable Time,Place, SubjectMatter Restrictions

No WarrantyAll Related Product Lines

Non-Compete

i) Seller not aware of anyii) Seller disclosedknowledge of allpotentialinfringementsiii) Seller will cooperate indefending suitsrelating to seller’sproduct line

No WarrantyNo Indemnity

Non-infringementof all IP of othersIndemnification

Infringement

CommonCompromises

Seller’s GoalBuyer’s Goal


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Transaction Goals (Cont’d)

i) Seller will cooperate in litigationii) Seller will execute documents necessary to perfect titleiii) Seller hasdisclosed all relevantcircumstances

No WarrantyWarranty to

extent inrecordedassignment documents

All right, title,interest in IPw/rt product lineNo liens

encumbrancesTMs and

applicationsCopyrights

Ownership

CommonCompromises

Seller’s GoalBuyer’s Goal

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Other Factors

Rights to File Additional Applications– no rights reserved by seller

Foreign Rights/Portfolio– careful selection of foreign counsel

CopyrightsTrade SecretsLicenses in/out


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Analyze Results of Investigation

Present findings to decision makers and articulate the benefits and risks of going forward with the transaction.

Create succession plan to continue to meet objectives of the transaction.– Who will oversee the portfolio?– Who will monitor the marks?– How will assignments and licensing be

handled?

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IP Litigation in Connection with Hotel Franchises and

Timeshare Resellers

presented by

Leslie Smith


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IP Litigation

Traditional– Post-Termination Infringement by Franchisees

Lanham Act ViolationsState Unfair Competition Law

– Evidentiary ProofVideo/PhotosCustomer Complaints

– Coordinate Legal Action with Business DepartmentsStop Reservation System AccessStop Franchise Support Post-Termination Inspections to Ensure Compliance

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IP Litigation

Foreclosures– Absence of Notice of Default to Franchisor– If notified pre-suit or early in suit, work with lender to

obtain receiver with hotel management expertise and obtain receiver’s license agreement

– If notified during suit, terminate license agreement immediately to gain leverage with receiver or lender

– If notified post-judgment, terminate license agreement immediately to gain leverage with new owner

If lender-owned facility, demand removal of trademarksIf lender not operating hotel and protests that trademarks not being “used in commerce”, identify sales literature that may reference your marks


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IP Litigation

Timeshare Industry– Reseller Scams

Monitor Secretary of State filings and websitesFollow-up on Customer ComplaintsGuard Customer Lists

– Taking ActionUse an InvestigatorLanham Act Violations, infringement, counterfeiting, false designation, dilution, and Anti-Cybersquatting Consumer Protection ActLittle FTC Act Violations and State Unfair Competition LawsEnlist your state’s Attorney General

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Questions and Answers


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Presenter Contact Information

Rick Caron407.244.3223

[email protected]

Norm Rich202.945.6100 [email protected]

Nir Margalit415.984.9802 [email protected]

Leslie [email protected]

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Thank You

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