Tag: Trademarks

Selling Your Business?

John Smith owned a small manufacturing business.  One day he received a call from one of his competitors who said he was interested in buying John’s business.  John was now 75 and this seemed like the perfect opportunity for him to retire and have that “nest egg” for him live comfortably in retirement.

John met with the buyer and they discussed, in general, John’s business.  After the meeting, the buyer presented a letter of intent to John, which proposed a purchase price of $10,000,000, subject to the buyer’s due diligence investigation of John’s business.  John felt pleased with the letter of intent and signed and returned it to the buyer.

During a long and protracted (and quite thorough) due diligence, the buyer and his accountants and lawyers examined the business and its books and records.  Based upon their examination, they advised the buyer of various legal and financial risks that John’s business was exposed to and which could become issues that the buyer would have to face.

John could not produce all of his current contracts with his customers.  The contracts which he had contained provisions which could cause the contracts to be terminated upon a sale of the business or a transfer of the ownership of the business.  Their key employees had no employment agreements and could compete with the business once they terminated employment.  The leases for the business’s facilities could not be assigned.

Despite the issues with the business, the buyer was still interested in purchasing the business.  The bad news was that the revised purchase price was to be $8,500,000 with a significant portion to be held in escrow pending resolution of various legal issues.

The above scenario is very common with small business owners.  Bigger companies who regularly acquire smaller companies are “professionals” in the acquisition business.  They know exactly what to look for and they know how to “string the seller along” until they present a reduced offer which most sellers feel they have to accept.

If you are thinking of selling your business, make sure that your business is ready to be sold and that you have copies of all contracts and leases and that you understand what they provide and how they will be affected upon a sale.  Have written employment agreements with all your “key employees.”  Pay attention to your inventory, your accounts receivable and other assets which “drive the sales price.”  Protect your intellectual property by obtaining patents, to the extent applicable, and trademarks.

If you are considering selling your business and would like a “legal check-up,” please do not hesitate to contact:

Morris Saunders at:

msaunders@lgattorneys.com or 312-368-0100.

Do Trademarks Create a Brand Monopoly?

We are all familiar with certain brands: Huggies, Apple, M&Ms, Sony, Gucci, Exxon, and more.  We are bombarded with advertisements daily through our mobile devices and televisions that solidify this fame by drawing a strong connection in the minds of the consumers between the products and the companies who produce them.  The law gives heightened protection to the owners of famous trademarks, meaning that these companies may be able to prevent others from using similar marks for a wider scope of products or services than the scope of the goods and services contained within the trademark registrations they own.

But, what is the scope of protection for a famous mark, and where does it end?  Do the owners of famous brands have such broad brand extension so as to create a monopoly on these brands across all categories of products and services?  This article examines the requirements to establish a mark as “famous”, the contexts in which fame comes into play, and the extent to which the owners of famous marks enjoy broadened protection.

According to the Lanham Act, in order for a mark to be considered famous, it must be “widely recognized by the general consuming public of the United States.”  15 U.S.C. § 1125(c)(2)(A).  The degree of fame must exist in the general marketplace, not in a niche market.   Fame that is limited to a particular channel of trade, segment of industry or service, or geographic region is not sufficient to meet that standard.

The breadth of protection and scope of famous trademarks are evaluated differently depending upon the context of the proceeding.  For example, in a trademark infringement case in court, fame is a significant factor in determining the strength of a mark. However, the strength of the mark is only one factor among many.  The likelihood of confusion test is an equitable balancing test and no single factor is dispositive.  The role of fame in Trademark Opposition and Cancellation Proceedings is even more significant, where fame is a dominant factor, and the fame of an opposer’s mark must be “accorded full weight” in Trademark Opposition and Cancellation Proceedings.  Stronger yet, is the role of fame in a Trademark Dilution litigation context, where fame of the trademark at issue is a threshold matter.  Additionally, pursuant to the Trademark Dilution Revision Act, fame is a significant factor in determining whether there is a likelihood of dilution by blurring.

The following factors, if present, tend to suggest that a mark may not qualify as “famous” under the Lanham Act:  (1) extensive third party use, and (2)  whether the terms are in common use as marks, or whether a “distinct brand name” appears alongside the mark.

As more and more brands become “household names”, trademark owners should be aware that choosing a brand that has any connotation or sounds remotely like a famous brand, even if it is not in the relevant industry, may be problematic.

To discuss trademarks and branding generally, please contact:

Natalie A. Remien at:

nremien@lgattorneys.com or 312-368-0100

testimonials

"We've worked with Levin Ginsburg since the 1980s...we have grown with them and have a very high level of comfort and confidence with this firm." Jay Nichols, President,
Badger Murphy
"What has impressed us most about Levin Ginsburg is that they are smart lawyers. They offer fresh perspectives and fresh insights into issues."
Walter E. Smithe III, Tim Smithe, and Mark Smithe,
Walter E. Smithe Custom Furniture
"Astute, responsive and practical. Those are three reasons why we work with Levin Ginsburg." Bryan L. Oyster, V.P. and General Manager,
Bentley Forbes