McHale & Slavin, P.A. - Intellectual Property Attorneys

KEEP YOUR EYE ON YOUR TRADEMARKS
LESSONS FROM THE AUTOMOTIVE INDUSTRY

by Carl J. Spagnuolo

The prudent business owner or corporate officer keeps a finger on the pulse of their enterprise, carefully watching marketing trends, sales figures, profits, losses, and productivity levels. So often overlooked however, is a business’s intellectual properties, especially trademarks. These properties are easily taken for granted, or their importance is underestimated. Be aware of what you own and be aware that you may own something without even knowing it, or, as Volkswagen learned during its pursuit of Rolls Royce, spend ample time to determine what you are buying before you sign on the dotted line. To do otherwise could place you, your company, and your potential business transactions in peril. Just ask Volkswagen.

Volkswagen is one of Europe’s strongest and wealthiest companies. With ownership in its own brand, Audi and Porsche, among others, Volkswagen dwarfs German automotive legend BMW. But because of what became the automotive blunder of the 1990's, BMW got the better of its giant counter-part in a battle for the English luxury car company, Rolls Royce / Bentley. And it all happened because Volkswagen did not keep its eye on the trademarks involved in the transaction while BMW did.

Since 1931, Rolls-Royce and Bentley have been one company and the two marks have been indelibly linked ever since. Rolls produced luxury automobiles and aircraft engines. In 1973, Rolls-Royce suffered major losses and, as a result of a government bail-out, a corporate split was implemented, creating the Rolls-Royce automotive company separate from the aircraft company. For whatever reason, during that separation, ownership of the trademarked Rolls-Royce grill, the “Spirit of Ecstasy” hood ornament, and the Rolls-Royce name itself, became the exclusive property of Rolls-Royce, PLC, (the aircraft company). Rolls-Royce Motor Cars maintained ownership of the Bentley trademarks. In 1980, Rolls-Royce Motor Cars was acquired by Vickers Corporation. All was fine with Rolls Royce Motor Cars and Rolls-Royce PLC, (aircraft), for 17 years, after which time Vickers placed Rolls-Royce Motor Cars for sale on the open market.

BMW, long interested in acquiring an ultra-luxury brand, wanted Rolls-Royce. At the same time, Volkswagen was also looking to get into the ultra-luxury car market. But in April 1998, Vickers accepted a $575 million dollar takeover of Rolls-Royce/Bentley by BMW. Volkswagen, not to be out done, forced BMW into a bidding war for the marque and, in the end, cash-strong Volkswagen won the bid, offering $795 million. But alas, Volkswagen was in such a hurry to beat its German rival, that it overlooked the essential question of what exactly it would get for its $795 million. BMW, it seemed, already knew the answer.

BMW, having done its homework, knew that the aircraft company owned the valuable Rolls-Royce trademarks. No doubt, this is one reason why BMW stepped aside and allowed VW to “win” the bidding war for Rolls-Royce. BMW, already a partner with Rolls-Royce PLC (aircraft) in an aerospace venture, purchased the Rolls-Royce trademarks from the aircraft company for a mere $65 million dollars.

Volkswagen, after shelling out 795-large, discovered that they owned the tools, dyes, sheet-metals, buildings, assembly lines, automotive designs, and the rights to build one of the world’s most elegant luxury cars, so long as they didn’t use the grill, hood ornament, or the legendary name! They were indeed, all dressed up with nowhere to go.

A subsequent court battle resulted in what was deemed an equitable resolution. In January, 2003, for the first time since 1931, Rolls-Royce and Bentley will once again become two separate companies; Rolls-Royce owned by BMW and Bentley owned by Volkswagen. Volkswagen keeps the Rolls-Royce factory, and BMW will move its operations elsewhere. All this, because of three trademarks!

As if this story isn’t enough to urge any reasonable business owner or corporate officer to heed the advice of keeping a discerning eye on its intellectual property, tragedy repeats itself, this time at Ford.

In the 1960's, Henry Ford II became obsessed with beating Enzo Ferrari at his own game: Le Mans endurance racing. Henry Ford II, whose attempt to purchase Ferrari was scorned by its owner and namesake, Enzo Ferrari, became determined to beat Ferrari because of his refusal to sell. Ford set aside development money and a team of automotive race engineers and charged them with one duty: to deliver to Henry Ford a car able to defeat Enzo Ferrari at Le Mans. By the mid 1960's, Henry’s dream was realized when, in fact, his new Ford race car, known as the GT-40, (for it’s 40 inch height), became a 4-time Le Mans winner, over Ferrari.

Fast forward to 2002. Retro is in and its paying huge dividends to the American car companies. Chrysler’s PT Cruiser looks like a 1940's panel truck. GM is about to introduce a 50's style small truck. Ford, already a proven winner with retro after the restyled Mustang which captures much of the legendary 1965 styling cues, and the new Thunderbird, decided to enter the super-car arena with a slick, super-fast, retro GT-40. The new GT-40 has the same general shape as its legendary predecessor, and a potent new drive-train to make it every bit the winner that it once was. There’s only one problem: Ford never bothered to trademark the GT-40 name. Instead, in 1985, Safir Engineering, Ltd, in England, registered the trademark for its original Ford GT-40 after-market parts business. Safir now holds the trademark hostage, demanding a reported $40 million to license Ford’s name back to FORD! So, in 2003, Ford sets out to re-introduce its new incarnation of its one-time legend, amidst all the pomp and circumstance and glitter of a new car launch, but now named the “FORD GT,” absent the “40.” It has all the charm of a bright smile with 2 teeth missing. But that’s the nature and power of a trademark. Beware!

LITTLE KNOWN, SELDOM USED PROTECTION
IN THE BOATING INDUSTRY
by Carl J. Spagnuolo

          What was once considered merely functional, and therefore, not subject to federal copyright protection, is now protectable under Title 17, United States Code

The Vessel Hull Design Protection Act, (Title 17, Chapter 13), provides copyright protection for "Vessel Hulls." Chapter 13 oddly creates an apparatus, which loosely resembles a cross between copyright, patent and trademark. The Act positions copyright protection in opposition to patent protection, as copyright design protection is not available for hulls, which have been patented.

          The Vessel Hull Act differs in many aspects from traditional notions of copyright registration and protection. Deposit material is limited to drawings or photographs of the boat hull, but the design must exist in an actual vessel hull that is publicly exhibited, distributed or sold to the public after October 18, 1998. No protection is available under the Act for drawings of hull designs, which have yet to be built.

          If a songwriter desires to register a song she wrote 20-years ago, there is no time bar to copyright registration but the same is not true with boat hull registration. Chapter 13 Registration creates a two (2) year window of opportunity within which to register a hull design. If a design is not registered within two (2) years of the hull's creation, the opportunity to register for design protection is lost.

          The typical duration of copyright for a work is that of the life of the author plus 70-years. However, the same is not so for boat hull designs. The Act provides only 10-years of protection for boat hull designs.

          Another difference between traditional copyright and boat hull design copyright is the level of review given to the subject design. A song, book, article or painting, will typically not be highly scrutinized for copyright eligibility. The trade-off in those examples is that the Copyright Office makes no claims of originality for the works, or even that the work is not an infringement of another work. With the boat hull design application, however, an administrator will determine whether or not the application relates to a design, which on the face appears to be subject to protection. If the design does not, the registration will be refused. The application process takes on the flavor of a trademark or patent application at that point wherein the applicant may respond to a refusal, upon which response, the administrator may accept the amended application or issue a final refusal.

          Publication marks another distinct difference between the typical copyright registration procedure and boat hull copyright. Boat hull design protection, like trademark, is announced by publication.

          Unlike conventional copyright provisions, Chapter 13 contains language, which tracks, in large part, the Trademark Act's cancellation provisions. Section 1313(c) provides that any person who believes he or she is or will be damaged by a registration may apply to the Administrator to cancel the registration on the ground that the design is not subject to protection, stating the reasons for the request. The cancellation process then takes on a Trademark Cancellation flavor except that, under the Boat Hull Act, the cost of the cancellation shall be borne by the non-prevailing party; a sanction which is not mandatory with trademark.

ON THE PATENT SIDE
by C. Fred Rosenbaum

          In view of the Vessel Hull Design Act, this firm will elicit the necessary information regarding a vessel hull copyright filing as part of our initial patent interview when the subject matter of the patent application concerns boats and hulls. Also, the firm will suggest that the inventor build a hull as soon as possible.

          The significant distinction between a patent application and the copyright application is that a patent application does not require a hull to be in existence, as does the copyright registration. Patent law, 35 USC 101, does require that the patent be for a new and useful device. However, the, "usefulness," may be theoretical, if supported by calculations and/or drawings.

          If the patent application is submitted to the U.S. Patent & Trademark Office (PTO) before a hull incorporating the invention is built, there would be no filing for copyright protection. But, upon building a hull incorporating the invention, our law firm would recommend filing for copyright protection in the Copyright Office, Library of Congress. In this vein, it is not clear that the hull has to be the full size contemplated by the originator. Could the actual hull be a model?

          A major benefit of this strategy would come into play if the inventor would build a hull and then file for a patent. In this situation, a copyright registration could be filed simultaneously with the patent application. The PTO has a backlog of at least nine (9) months to a year before the patent application receives an initial review. The total patenting process may take at least 18-months. In the meantime, the inventor may enjoy the legal protection of copyright registration. In the long run, the 20-year patent protection would extend beyond the 10-years protection of the copyright registration.