In GMG Health Systems v. Amicas, Inc., 1st Cir April 10, 2012, the court had occasion to address a dispute between a software licensor / developer, and a licensee, in which more typical contractual language was in issue (for example, use of the term “go-live” and the phrase “substantially conform to Documentation” and typical warranty limitations).
GMG is a medical services provider – they typically have several systems to manage their billing, processing and other business functions. Here, GMG contracted with a third party (Amicas) for its software – which had to interoperate with software from an already existing vendor used by GMG. Like so many disputes, this one arose because of finger pointing between two vendors as to whose software was causing the error. As an added twist here, and something we have litigated on at least one occasion here – GMG had decided to leave Amicas and go with another vendor, and was desperately trying to find a way out of the long term agreement.
Normally in such disputes, the licensee (client) makes some effort to produce a viable claim of breach of the agreement by the licensor / software developer. In this case, however, GMG, which had not negotiated the agreement and signed a pre-printed form provided by the software company, produced a sole witness to fight the motion for summary judgment filed by the software developer. This witness had no IT or software training, was not a project manager, was not familiar with the function of either of the software systems at issue, and could not provide any details beyond that the “interface did not work.” GMG feebly tried to argue that the merger clause – a clause that states that all prior agreements including verbal understandings between the parties are “merged” into the agreement, did not apply because it had not negotiated the agreement. The court dismissed that argument without any discussion.
Without the ability to provide evidence of what the parties intended – the so called “seamless integration” with the other system – GMG was unable to overcome the warranty limitation in the agreement, which stated that Amicas did not promise that the software would work for GMG in its environment. Not surprisingly, GMG lost on all counts . . . and that loss was affirmed on appeal.
What is the moral of the story?
First, negotiate large scale enterprise resource planning agreements! Yes, the negotiation can be expensive, but far, far less than the litigation costs and potential damages. For example, in the GMG case, it was forced to pay an additional $700,000 for software it had abandoned, it was subject to an attorney fee award, it lost all kinds of time dedicating resources to fight the case, it had to pay its own lawyers, and it ended up taking 5 times as long to reach it s goal (of an integrated system).
Second, even if you do not want to hire a lawyer to negotiate, at least make sure that the party providing the service has stated clearly in the agreement, the deliverable, what it will do, and what you expect from the service. We have reviewed too many scenarios to count where a client has signed a pre-printed form that had NO promises or very light ones, like this agreement. If it is a critical result that software X must interoperate with software Y, state that in the agreement.
Third, consider the remedy. Many contractual negotiations can get hung up on the representations, warranties, disclaimers and so on – when they can be resolved by thinking in the opposite direction – assuming a performance representation is not met, what is the remedy? Remedies range from the “nuclear” option (total contract termination), to some form of “notice and cure” to a repair, re-perform remedy.
Fourth, consider the term of the agreement. In the GMG case, the parties amended their agreement and made it a longer term agreement. Many vendors will offer more significant fee discounts, or less escalation, if the term is longer. These can be attractive deals – but consider that as with GMG, you may desire to move away from that solution. So, my rule of thumb on this point is . . . the longer the fixed term of the contract, the more closely you must negotiate it – and the more you must pay attention to escape hatches and “relief valves” if something changes. Technology changes very fast – locking into a vendor for 5 years (as was done in GMG) is almost unheard of. A three year deal presents enough technology-change-risk to be the outer limit of most of these deals.
I could go on, but if you made it this far . . . well, thanks!
For more information, contact Mike Oliver.
Low barriers to entry in certain businesses breed rapid response and quick-to-market products that capitalize on “in the moment” mania. Often the in-the-moment-mania products derive from long standing famous trademarks owned by aggressive trademark enforcers. Buyers should be beware of these types of aggressive trademark enforcers prior to making costly investments.
Here is a hint. The National Football League is one of them.
An enterprising sports fan who almost a year ago saw an investment opportunity in the term “HarBowl” recently got more than he bargained for when the NFL’s lawyers came knocking.
The term “HarBowl” emerged into popular sports conversation around Thanksgiving of 2011, when brothers John and Jim Harbaugh became the first siblings in NFL history to lead their teams against one another as head coaches. The first “HarBowl” was a media frenzy of a family affair staged on national television during one of the country’s favorite family meals. Older brother John’s Baltimore Ravens won the inaugural “HarBowl”, yet Indiana resident Roy Fox remained interested in the term even after the final whistle had blown.
The two teams would go on to have very successful seasons before each fell a game short of meeting once again in the only scenario possible that year; the Super Bowl. Despite the super rematch of the “HarBowl” not coming to fruition, Fox liked his chances of the possibility enough to invest in filing for a trademark in hopes of eventually profiting from the phrase.
He filed trademarks for “Harbowl” and “Harbaugh Bowl” on February 21, 2012. The marks, filed as intent-to-use, were allowed and published for opposition.
The NFL contacted Fox in August of 2012 stating concern that his recent trademarks could easily be confused with the NFL’s trademark of the term “Super Bowl.” It was reported the NFL encouraged Fox to abandon the marks shortly thereafter, which he did.
According to ESPN, the league refused to provide Fox with any remedy for his investment in the marks when he asked the league to reimburse him for his costs to file for the trademarks. He was also reported to have requested several other simple consolations such as season tickets and an autographed photo of league commissioner Roger Goodell.
Fox reported that instead of honoring his requests, the NFL chose to aggressively shift direction with its efforts and suggested that not only would the league oppose his filings, but they would also seek to have him pay its legal bills. Fox would eventually fold his hand. At least three more similar marks have been filed over the past month. They will likely meet the same fate.
The legal issue is not that Fox necessarily had a losing hand. The issue is that the NFL holds a lot more chips.
Many would argue that the NFL’s claim is not a legally strong one. “HarBowl” is certainly no less confusing to Super Bowl than other trademarked phrases such as “Sugar Bowl” and “Lingerie Bowl” which are also used to describe football games.
In reality, “HarBowl” is probably no less confusing than “cereal bowl” or “toilet bowl.”
Legal professionals who have publicly commented on the case have noted that the odds of a jury agreeing that the two phrases are confusingly similar are relatively poor. However, mere likelihood of confusion is only one aspect of the legal issues – Super Bowl is unquestionably a world famous trademark. Famous trademarks enjoy a much wider berth – even non confusing but tarnishing or blurring acts can dilute a famous trademark.
The NFL basically smoked Fox out of the hole by signaling their intention to be aggressive in pursuit to stop him. The NFL is an organization with essentially unlimited financial resources. Mr. Fox presumably does not have the type of financial capabilities as a multibillion dollar company. As a result, the question became – are the trademarks financially worthwhile to combat a lawsuit that could potentially cost six figures? Fox made the reasonable decision that no amount of revenue the trademarks could yield would justify that investment.
The moral of the story is an important message for anyone who considers pursuing a low barrier to entry business that expects to profit from the fame or notoriety of someone else or someone else’s trademarks, particularly famous trademarks. Legal review and anticipation of probable legal action is part of the going-into-business decision process. At the end of the day, legal costs in high risk activities should be considered as possibly significant line items on a budget just like any other expense. If the potential return of the expense is not equitable to the potential cost, it may not be a wise investment of resources.
For Fox, a few thousand dollars in filing costs for trademarks may have been worth the prospect of making some money off of clothing sales should the Harbaugh brothers inevitably meet in the Super Bowl. However, the cost of defending those trademarks against a force such as the NFL was not worth the legal bills.
For more information on trademark law, contact Mike Oliver or Kimberly Grimsley.
The U.S. Patent and Trademark Office (“PTO”) is warning business owners and individuals who own federal trademark registrations to be wary of unsolicited mail and emails that look official but are really are the work of scam artists. Here’s how the scam works. The scammers find your contact and official registration information using the public PTO database and then use it to create official-looking correspondence that appears to be from the PTO.
The official-looking correspondence sometimes requests that fees be paid to maintain the validity of a registration, or that fees be paid for trademark monitoring services. Note, however, that the PTO’s trademark communications are always from, “The United States Patent and Trademark Office” in Alexandria, Virginia, and PTO email is always from the domain, “@uspto.gov”.
Bowie & Jensen’s trademark attorneys can quickly spot a trademark scam and so your safest course is to check with the firm before responding to any PTO or official-looking correspondence, and particularly before paying any fees requested by mail or email. Of course, ignoring correspondence that you believe to be a scam also has its risks because failing to pay maintenance and other legitimate PTO fees puts a registration at risk of being canceled.
For more information contact Mike Oliver or Kimberly Grimsley.
FAIR USE FIASCO – BE CAREFUL USING *ANY* IMAGE ONLINE by Mike Oliver
The internet is littered with millions of images – taken by professional and amateur photographers alike, that contain NO identification of the author of the image. In part, this may be because it is not known, and in part it could be that the “meta data” in the image – which if done professionally will typically have the author’s name and the claim of copyright embedded as text inside the file (known as EXIF data) – is stripped off.
A recent decision in the 3rd Circuit (Pennsylvania, New Jersey, Delaware, and the Virgin Islands), Murphy v. Millennium Radio Group, LLC, [https://www.ca3.uscourts.gov/opinarch/102163p.pdf] demonstrates how dangerous it is to post on your website an image that does not contain this “copyright management information.”
In Murphy, a professional photographer took a picture of two radio show shock jocks, partially nude, for a print publication. The photographer maintained copyright. A radio station employee scans the image, posts it on the radio station website, and invites people to “photoshop” the image in a contest. No attribution identifying the photographer is given.
The photographer sues and loses in the trial court – essentially because that court believed the use was a fair use or licensed. The appellate court, however, reverses. It holds that under the Digital Millennium Copyright Act, the “copyright management information” includes identification of the author of the image. Of important note – the DMCA for the purposes of this provisions, has no “fair use” defense – in other words, the copyright management information must always be included.
The take away here is that if you are electronically displaying images in which you are not the author, the EXIF file data – the data that is embedded in the image and can be read by software to see the copyright management information – cannot be stripped off the file. In addition, if you are using stock photography, or manage a stock photo site, the EXIF data must be retained in the image.
For more information, please contact Mike Oliver.
In University of Alabama v New Life Art, the 11th Circuit Court of Appeals resolved a portion of a long standing dispute over the protection afforded authentic reproductions of college uniforms. A painter made paintings (and calendars) accurately depicting University of Alabama games. For many years this practice was unlicensed, but done with the knowledge of the UofA. Later, the painter began using the paintings he created on mugs, towels, t shirts and so on. Eventually the University of Alabama required use of accurate depictions of the uniforms to be licensed, and the artist refused. Therein ensued litigation, now in its 7th year.
The 11th Circuit held that “An artistically expressive use of a trademark will not violate the Lanham Act “unless the use of the mark has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless it explicitly misleads as to the source or the content of the work.”
Thus the paintings were held to be protected under the implied fair use rights under the 1st Amendment, even though they depicted the uniform colors. The other issues were remanded as the record had not been developed on them (somewhat surprising after 7 years of litigation!)
It should be noted that the University had licensing agreements with the artist in some respects (they gave him press credentials to access games and allowed him to create a painting live on air at one point – without however licensing his subsequent sales of reproductions of those paintings). The terms in the license agreement were very broad, but not broad enough to cover the colors on the uniforms when shown on a uniform.
This case demonstrates that the cost of fair use determinations is substantial, and the findings can be somewhat limiting – indeed, it is not clear the artist will prevail on the other claims – he apparently did not raise fair use on appeal as to them, and there is an argument that the licensing agreements he had signed did cover those items.
Use of an aggressive trademark holders marks, even trade dress, without a license, and even with a fair body of case law finding fair use, can be very risky.
For more information, contact Mike Oliver or Kimberly Grimsley.