The National Labor Relations Board (“NLRB”) is seeking comment through mid-December on its proposed rule establishing a joint employer standard, as set forth in 83 FR 46681.  One of our Fox Rothschild partners, Tami McKnew, submitted the following comment to the NLRB, which speaks to the implications of the joint employer rule on trademark licensors/licensees:

“The proposed rule specifically acknowledges the effects of the 2015 shift in joint employer analysis evident in the Board’s decision in Browning-Ferris Industries, 362 NLRB No. 186 (“Browning-Ferris”). Following the Browning-Ferris decision, franchisors, temporary employment firms, contract employers and others whose businesses necessitate some degree of interaction with and arguable control over non-employed workers found themselves as joint employers, despite decades of precedent otherwise. The effect on such businesses was immediate and profound.

With this proposed rulemaking the NLRB more clearly defines the conditions under which joint employment may be evident, and largely restores the pre-Browning-Ferris analytical framework. This is entirely appropriate, given the decades of business relationships and industries whose very structure incorporated and depended upon the prior established analytical framework. As recognized in the Notice, the proposed rule also reflects the pre-Browning-Ferris well-established and long-standing joint employment analytical framework.

However, that the Notice fails to adequately address, by specific acknowledgement or by example, the concerns of licensors and licensees of intellectual property, in particular patent, trademark or service mark licensors. Owners of such intellectual property rights must police and protect those rights; failure to do so may render such rights unenforceable. In legal jurisprudence, a patent owner’s policing obligations have been whittled down, especially given the elimination of a laches defense in infringement actions, SGA Hygiene Products Aktiebolag v. First Quality Baby Products, 137 S.Ct. 954 (2017), but affirmative action must be undertaken by the licensor to protect against infringement. The policing obligation remains for trademark owners, however. 15 U.S.C. §1064(5)(A).

Patent and trademark owners may license rights to practice patented technology or use trademarks or service marks. Such licenses require the licensee to abide by standards and/or to adhere to particular practices. Certain types of patents, for instance, process or method patents, may dictate an entire process and all the operations required to perform the method or process; the licensee has little or no choice as to the operations governed by the patent license.

Similarly, trademark or service mark licenses may dictate extensive quality control standards, processes and procedures. The most obvious example is the central role that trademark and service mark licensing have in a franchise system. But such licenses are not limited to the franchise industry. A dealer or distributor may sell products bearing the trademarks of one or more licensors; it may service products pursuant to licenses from different licensors; and it may lease products under license from yet a third licensor. The scenario is not unlikely. A tire dealer may be licensed to sell multiple brands; it may be licensed to provide recapping services, as directed in the license, by a different licensor; it may lease products under the service marks of yet a third licensor. Each of the licenses will include mandated procedures and operations over which the dealer has no control.

In each of these cases, control over significant operations in the licensee’s business is dictated by the licensor. Will the efforts of the licensors to police and enforce the licensed rights expose them to the risk of being considered the joint employer of the licensee’s employees whose employment is to perform such operations? And for a licensee who holds licenses from multiple licensors, as in the distribution example above, are multiple licensors potential joint employers? In each situation, the licensor can be said to offer “direct and immediate” control over the licensee’s employees, in that the licensor dictates the operations that form the central part of their employment. The ability of an owner of intellectual property to reap the potential financial benefits of a patent or trademark/service mark is ephemeral at best if enforcing those rights exposes one to the risk of becoming a joint employer of the licensee’s employees. More importantly in the context of the NLRB’s proposed rulemaking, it makes little sense to include such licensors at the bargaining table. Absent specific recognition in the proposed rule of the unique position of intellectual property licensors and licensees, the application of the joint employer analysis is unclear.

I respectfully suggest amending the proposed rule to include language which provides that the status of joint employment is inappropriate based solely on a licensor’s policing or enforcement of its patent, trademark or service mark requirements and standards. Intellectual property owners should not be dissuaded from enforcing their rights to control, police and enforce their patent, trademark or service mark rights.”

Credit: Tami’s comment was originally posted on Fox Rothschild’s Franchise Law Update blog.

 

As I previously blogged about, there is a circuit split as to whether, when a trademark owner/licensor files for bankruptcy, the licensee of the trademark can legally continue use of the mark or whether the trademark owner/licensor can reject its obligations under the licensing agreement and effectively prohibit the licensee’s continued use of the mark.  A case arising from the First Circuit, Mission Product Holdings, Inc. v. Tempnology, LLC N/K/A Old Cold LLC, involves this precise question and has made its way to the United States Supreme Court.

At the end of last week, following the submission of briefs from the parties and others, the Supreme Court decided to grant certiorari in the case.  According to SCOTUS blog, the issue presented is: “Whether, under Section 365 of the Bankruptcy Code, a debtor-licensor’s “rejection” of a license agreement—which “constitutes a breach of such contract,” 11 U.S.C. § 365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law.”

Not surprisingly, the Supreme Court did not provide any reasoning or insight into its decision to grant cert.  Nor did it directly respond to the parties’ positions regarding a recent order in Tempnology’s underlying bankruptcy case, which Tempnology argued (and Mission Product Holdings disagreed) may have a bearing on the Court’s decision to do so.

 

When a trademark owner/licensor files for bankruptcy, there is an open question as to whether the licensee of the trademark can legally continue use of the mark or whether the trademark owner/licensor can reject its obligations under the licensing agreement and effectively prohibit the licensee’s continued use of the mark.  When it comes to the licensing of patents and copyrights, the question is already closed: Congress created an exception in U.S. bankruptcy law that allows licensees of such intellectual property to retain their rights even after a licensing agreement has been rejected by the intellectual property owner who has filed for bankruptcy.  However, whether purposely or not, Congress did not mention trademarks in the exception, thereby leading to the current question.

The U.S. Supreme Court is currently considering whether to grant certiorari in a case that would answer this question and resolve a circuit-split on the issue.  That case is Mission Products Holdings, Inc. v. Tempnology, LLC N/K/A Old Cold LLC, which was decided by the First Circuit early this year in favor of the trademark licensor, Tempnology.  The First Circuit held that Tempnology’s rejection of its licensing agreement with Mission Products Holdings caused the latter to lose its trademark rights under the parties’ agreement in light of Tempnology’s bankruptcy.  Now Mission Products Holdings, Inc., the trademark licensee, has filed a petition seeking review by the Supreme Court and a ruling that a trademark licensee’s rights to use a trademark cannot be revoked upon the trademark owner/licensor filing for bankruptcy.

The International Trademark Association (INTA) has already filed an amicus brief asking that the Supreme Court take the case and resolve the dispute in favor of trademark licensees, who make significant investments in their businesses using the licensed marks.  According to INTA’s brief, trademarks “are the most widely used form of registered intellectual property” and a ruling in favor of trademark licensees “enhances the value of trademark licenses and promotes the stability of the trademark system.”  Tempnology’s response to Mission Product Holdings’ petition is due in early September, and the case is set for conference in late September, after which the justices may decide to hear the case (or not).

At most public universities, student organizations are permitted to license various university trademarks to designate the organization’s involvement with the university and the organization’s status as a registered student organization.  My colleague Chris Beall previously wrote blog posts here and here about a dispute stemming from this practice that involved the First Amendment, Iowa State University, two of its students, and their chapter of the National Organization for the Reform of Marijuana Laws (“NORML”).  As a reminder, the case involved Iowa State University’s refusal to continue to license university trademarks to NORML because the organization was using the university’s mark on pro-marijuana t-shirts.  The federal district court, and later the Eighth Circuit (twice), ruled in favor of the students, finding that the First Amendment trumps normal trademark licensing principles for public universities and that Iowa State University violated the students’ First Amendment rights.

According to the Des Moines Register last week, the State of Iowa agreed to pay $150,000 to the two students as emotional distress damages and $193,000 in legal bills to their two law firms.  But apparently this agreement only resolves attorneys’ fees related to the Eighth Circuit aspect of the parties’ dispute, not the district court work for which the students plan to request an additional amount in attorneys’ fees from the court.

As my colleague previously wrote, this case stands as an important reminder that trademark licensing principles are different for governmental organizations because of the overarching constraints of the First Amendment.

Rashanda Bruce writes:

Social media megaphone cartoonIn a growing world of technology, companies are employing social media platforms to attract new customers and grow their online presence.  #Hashtags and @Handles – made popular by Twitter – have proven to be effective sources for growing business.  Hashtags label words, making it easier for customers to find themed information or specific content.  Handles create unique identifiers, making it easier for companies to create and market their brand.

Celebrities also rely on hashtags and handles to market their brands.  With followers ranging in the thousands to the millions, celebrities use these social media tools to maintain and boost engagement with fans.  Additionally, celebrities rely on social media when they enter into partnerships with companies.  The partnerships typically require celebrities to reference companies on social media platforms.  These references increase a company’s awareness and provide brand validation for celebrity followers.  Recognizing this trend, some companies have started to reference celebrities via hashtags and handles – even where the celebrity and company do not have a partnership.  Although a profitable marketing strategy, companies should understand how this strategy could lead to a celebrity claiming a right of publicity violation.

The right of publicity prevents the unauthorized commercial use of an individual’s name, likeness, or other recognizable aspects of one’s persona.  Although not governed by a federal statute, the right of publicity is actionable and protected by state common or statutory law.  The right of publicity is a property right, thereby prohibiting others from using an individual’s identity for a commercial gain.  Companies who use social media for marketing purposes should take precautionary steps to avoid possible violations.

For example, companies desiring to use a celebrity’s name for marketing purposes should consult with the celebrity.  Best practice is to obtain consent from the celebrity in writing with clearly defined language and detailed rights regarding name use on social media platforms.  Where a celebrity is unavailable or unresponsive, companies should think about whether it is better to simply refrain from using the celebrity’s name.  Companies should also develop policies for employees who use social media on behalf of the company.  Establishing protocol will help alleviate concerns and risk.

Social media marketing using celebrity names can be profitable for companies when appropriately used.  However, this same marketing tool can also prove to be burdensome and costly if celebrities feel their publicity rights have been violated.  In a growing world of technology, companies need to exercise caution and good judgment when making these marketing decisions.


Rashanda Bruce is a summer associate, based in the firm’s Minneapolis office.

Yesterday, on February 13, 2017, the Eighth Circuit issued a resounding affirmation of First Amendment principles in a case raising the question of just how far a public university can go in preventing the use of its marks by student organizations whose views the university may oppose or object to. We previously discussed the dispute in early December, before the court heard arguments in the case.

ISU NORML t-shirtIn the opinion, the unanimous appellate panel held that the First Amendment trumps normal trademark licensing principles for public universities, ruling that Iowa State University violated the First Amendment rights of students at the ISU chapter of NORML, the National Organization for the Reform of Marijuana Laws, when ISU barred the chapter from using ISU’s marks in conjunction with images or messages that advocated in favor of marijuana.

In this case, Gerlich v. Leath (8th Cir., No. 16-1518), the court ruled that the university’s trademark licensing program for student organizations – which otherwise allows student groups at the university to use certain of the university’s marks on a royalty-free basis, subject to standard trademark licensing arrangements – constituted a “limited-purpose public forum” in which student organizations could take advantage of the university’s marks to advance their own causes.

The court then ruled, applying standard and well-settled First Amendment principles, that because the trademark licensing program is a public forum, the First Amendment prohibits the university from discriminating against or between speakers in that forum on the basis of the speakers’ viewpoints.

That conclusion necessarily means, the court held, that ISU violated the First Amendment when it prevented the NORML chapter at ISU from taking advantage of the university’s trademark licensing program in the wake of public controversy surrounding the chapter’s advocacy in favor of reforming marijuana laws:  “The defendants’ rejection of NORML ISU’s designs discriminated against that group on the basis of the group’s viewpoint. The state engages in viewpoint discrimination when the rationale for its regulation of speech is ‘the specific motivating ideology or the opinion or perspective of the speaker.’ . . . The defendants’ discriminatory motive is evidenced by the unique scrutiny defendants imposed on NORML ISU.”

Although ultimately unsurprising in terms of its application of First Amendment law, the Eight Circuit’s decision is likely to have a significant impact on public universities and colleges in how they handle trademark licensing requests.  The holding in this case means that when a university establishes a typical trademark licensing program, especially one for student organizations, the university may not distinguish between licensees (and potential licensees) on the basis of those licensees’ public statements or viewpoints.  The bottom line is that public unviersities and colleges may not do what any other trademark owner could otherwise do in controlling who gets to use the trademark owner’s marks, at least when the public institution has established a trademark licensing program that is otherwise available to certain classes of licensees, such as student groups.

The case stands as an important reminder that trademark licensing principles are different for governmental organizations because of the overarching constraints of the First Amendment.

Next week (12/14/2016), in a marble tiled courtroom in frosty St. Paul, Minnesota, a panel of judges of the Eighth Circuit Court of Appeals will wrestle with a question that is both as new as the campaign to legalize marijuana and as old as the First Amendment: When can a public university protect its brand, and its valuable trademarks, from being associated with viewpoints or messages that it rejects?

In the case of Gerlich v. Leath (8th Cir., No. 16-1518), a pair of students at Iowa State University are pursuing the provocative position that public universities have no power to discriminate in their trademark licensing practices so as to prevent their marks from being used by student groups that espouse positions the university regards as objectionable.  In that sense, the Gerlich case pits classic trademark rights – the power of a trademark owner to control how his mark is used – against the First Amendment’s prohibition of government discrimination based on a speaker’s viewpoint.

At Iowa State, as is the case at most public universities, student organizations are permitted to license various university trademarks to designate the organization’s involvement with ISU and the organization’s status as a registered student organization.  So long as these student groups comply with standard trademark usage guidelines, such as not altering or modifying the look of the university’s marks, the student groups are permitted to use the university’s marks under royalty-free licenses.  Iowa State has authorized trademark licenses to hundreds of student organizations, including those as varied as the Iowa State University Students for Life, an anti-abortion group, and the Iowa State Democrats, a group supporting abortion rights.  The university’s trademark licensing practices even extended to CUFFS, a sexual bondage student club that was a recognized student organization on campus and which used the university’s trademarks in conjunction with the club’s logo displaying a set of handcuffs.

In the context of these licensing practices, when the university came under fire for publicity garnered by the Iowa State chapter of NORML (the National Organization for the Reform of Marijuana Laws), which was using the university’s marks in combination with NORML’s logo displaying a distinctive cannabis leaf, the university put its foot down.  The university revoked any prior authorization for the ISU NORML chapter to use the university’s marks on the student group’s t-shirts – which bore the slogan “Freedom is NORML at ISU” along with a cannabis leaf.  And thereafter, the university prohibited the use of the university’s marks in connection with “illegal” products.

ISU NORML t-shirt

In the face of these actions, the student leaders of ISU NORML brought a First Amendment civil rights suit against Iowa State’s university president and other university administrators, contending that their First Amendment rights were violated by the university’s trademark licensing actions.  The students argued – and Senior District Judge James E. Gritzner, in the trial court in Des Moines, Iowa, agreed – that the university’s exercise of standard trademark licensing powers violated the First Amendment because it constituted “viewpoint discrimination” based on the university’s objections to the student organization’s political views.

Under a robust and well-developed line of judicial decisions, courts have routinely held that one of the most hallowed functions of the First Amendment is to prevent the government from discriminating between speakers on the basis of what they say.  Such “viewpoint discrimination” is per se prohibited by the First Amendment because the essence of this constitutional provision is to prevent the government from favoring one speaker over another on the basis of agreement or disagreement with the content of the speaker’s messages.

In contrast, however, standard and equally well-settled trademark law requires a trademark owner to control a licensee’s use of the owner’s marks, and allows the trademark owner to discriminate in his selection of licensees for his marks on the basis of the trademark owner’s assessment of whether the licensee will undermine the reputation or goodwill of the trademark owner’s brand.

Confronted by these two doctrines, the district court sided with the students in a decision in January this year, issuing an injunction prohibiting the university from refusing to license its marks to the ISU NORML chapter.  Now, on appeal, the university is attempting to escape the strong First Amendment prohibitions against viewpoint discrimination by focusing on how the use of its marks by various student groups can reflect negatively on the university, and as a result, the university’s trademark licensing practices should be regarded as a form of government speech.  (If so, then there is no First Amendment violation because the government is entitled under the First Amendment to say whatever it likes.)

With a bevy of First Amendment scholars and advocacy organizations lining up against the university through various amicus briefs, as well as a vigorous argument on behalf of the students from noted Washington, D.C., First Amendment litigator Robert Corn-Revere, it seems likely that the Eighth Circuit will affirm the injunction and endorse the students’ position that the First Amendment trumps trademark licensing norms when dealing with a public university.

Such a ruling would be another cautionary tale for public institutions with regard to their trademarks, perhaps demonstrating once again that they are “damned if they do, and damned if they don’t.”

It would also be another instance in the perennial tension between the First Amendment and trademark law demonstrating that in such battles, it is usually the First Amendment that wins.

Stay tuned.  Literally.  The Eighth Circuit posts same-day audio of its oral arguments online.