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How to Sell a Trademark and Avoiding Infringement [e119]

Nasir and Matt start the week by discussing Ohio State University suing a t-shirt company for trademark infringement and unfair competition after t-shirts were sold with school names, logos, and slogans.  They then answer, “Many years ago we bought up a bunch of trademarks for potential names for new product lines. Someone approached us to buy one we didn’t use. Is it possible to sell the trademark?”

Transcript:

NASIR: All right, welcome to our podcast where we cover business in the news and answer some of your business legal questions that you, the listener, can send in to ask@legallysoundsmartbusiness.com.
And my name is Nasir Pasha, and I am the host of Legally Sound Smart Business. And, joined with me as a co-host for the second time, I believe…
MATT: I guess that’s me – Matt Staub. I thought I was going to be a featured player this week, but that’s all right; co-host is fine.
NASIR: No, you are now a co-host. It’s the second episode that you’ve been a co-host.
MATT: Well, this is exciting.
NASIR: Not really, but second, yeah. So, it’s 117 episodes of you being a guest, and now you’re an official co-host.
MATT: Well, I don’t know who to thank. Glad to be here!
NASIR: Thank the people. Thank the people.
MATT: It would be interesting if you had a different co-host every single time.
NASIR: I know; I wish I did.
MATT: Ah, that kind of hurts.
NASIR: I didn’t mean any offense for you. I just, in general, think it would be a good idea to not have you on.
MATT: Fair enough. Well, speaking of not liking things, we’re going to talk about a place I don’t like to leave this off and that’s, as they like to call it, the Ohio State University.
NASIR: The Ohio State University.
MATT: Which you’re familiar with.
NASIR: Yeah, I almost went there for my undergrad.
MATT: Oh, you did?
NASIR: Okay, yeah.
MATT: I did not because I don’t like Ohio State but how close were you to Columbus?
NASIR: About an hour west.
MATT: Okay. So, yeah, I imagine everyone there is a huge Ohio State fan.
NASIR: Most definitely. But, for some reason, there are a lot of people from Michigan, too. So, it’s like, whenever you went to those big games at someone’s house, there’d be, like, a third of the people wearing yellow.
MATT: It’s actually “maize” is the color but it’s all right. We’ll let that slide.
NASIR: Maize?
MATT: Yeah, their color’s officially maize – some sort of navy blue and maize. But, yeah, that’s the color of their yellow. Anyways…
NASIR: That’s amazing. Hey!
MATT: All right, that’s good. So, we’re talking about Ohio State in a battle with an online t-shirt company. The title is pretty creative – “Ohio State tries to buck online t-shirt company.” They’re they Buckeyes.
NASIR: I got that.
MATT: I like a good Monday morning pun.
So, I’m sure this happens with a lot of universities but this one’s a little bit different. It’s online so it’s not like it’s somewhere that’s on the campus or in Columbus necessarily, I guess. So, the company is Teespring Inc. and basically Ohio State says they’re using unlicensed versions of Ohio State’s trademarks, logos, buckeye leaves, pictures of Urban Meyer who is their football coach, the chant they have, and I guess this business is doing well.
Another thing too is Ohio State’s definitely known for being one of the bigger following, huge stadium. They obviously make a ton of money so they probably make a significant amount of money on that as well so I can see why they’re a little bit upset.
NASIR: Yeah. It’s one of the biggest campuses, for sure. I mean, I’ve been there. It’s huge. It’s like its own city within Columbus.
MATT: Yeah.
NASIR: Well, you’ve heard of Teespring, right? I mean, there’s these other companies out there, too. But, basically, it’s a t-shirt printing company where you literally upload your art then you can sell it to other people and then Teespring gets a percentage of it. And so, it’s a good way to raise money for non-profits. You can do that or just do it as a profit and so forth. And then, of course, you know, when you upload your images, you’re also – just like going to Kinko’s which is now a FedEx business or whatever – you can’t make copies of copyright but FedEx isn’t necessarily responsible for that unless they’re taking part and contributory to the actual printing.
So, that’s the question here; that Ohio State has been sending letters to Teespring and requests for certain products to be taken down and this happened a couple of years ago. And then, Teespring was engaged in quite a bit of a process to make sure that any images that do contain Ohio State-related material or whatever that may be infringement that they take it down as soon as possible. But Ohio State is saying they’re not doing a good enough job of it. There’s a lot of these that are still going through.
MATT: If it’s something that’s still infringing then they probably aren’t doing a good enough job. It’s not even putting something that you’d have to license; it’s illegal and inappropriate things submitted on t-shirts which you obviously don’t want.
NASIR: Yeah. So, I’m not sure where this is going to go, but Ohio State is basically saying that somehow Teespring is contributing to the actual infringement. Of course, Teespring says, “How can we actually be contributing to that when we’re actually trying to take this stuff down?”
MATT: Yeah.
NASIR: Really, you can compare it to, I mentioned Kinko’s earlier, there’s actually a case that is pretty seminal to this particular issue in the sense that it was a case that protected Kinko’s from liability for students that were actually using the copy machines to copy whatever textbooks or whatever – because, you know, those things are so expensive – and actually protected Kinko’s from doing so. After that time though, however – and I can’t remember the exact holding to that, but I do know that – Kinko’s and other printing companies started making sure that anything that’s being copied, that the person who’s doing so signs that they are the rightful owner of the copyright or they have permission to actually copy or if it’s under some sort of fair use. I’m talking about when you actually bring in a book that needs to be copied and so forth. Sometimes, they just won’t do it out of precaution. In the same way, when this is something where you just upload, they seem to have some kind of filter and some kind of method of doing so. But, beyond that, to what extent are they supposed to prevent this from happening?
MATT: Yeah, and Ohio State’s asking for obviously a permanent injunction, stopping them from doing this and then they’re estimating lost profits of about $1 million per counterfeit item sold which seems high but…
NASIR: That doesn’t even make sense. Per counterfeit item? Like, that is so weird.
MATT: That seems high.
NASIR: That’s a weird calculation. Maybe, like, $1 million in general, but to make it per item? That seems strange.
MATT: Yeah, and I would guess that Teespring is not going to enter into any sort of licensing agreement with them.
NASIR: Yeah.
MATT: I would just think they would remove it and if someone that’s specifically looking for Ohio State licensed material and just deny it.
NASIR: But the problem with that then it’s almost created a precedent. Now, they have to hire somebody to look at every single image to see if it infringes on anyone, and the problem with that is that there’s unlimited number of trademarks and unlimited number of images and so forth that could be infringed upon. And so, unless the laws against this type of business model in the first place, you know, which I don’t think it is, then I think it’s too cumbersome to put that kind of liability on the actual printers when the person who’s uploading the images is in the best position to prevent it. And so, if Ohio State cares about it, they should be going after those individuals. I think they mentioned that. They have a “terms of service” that provides that very clearly that they can’t push infringed material on the website. The reality is that they know that wouldn’t be very popular and it’s not very effective to go to each individual that’s actually uploading these images so they’re just going through where it’s going to hurt the most. And there’s other companies; Teespring is not the only one that does this so I’m sure Ohio State has other companies in their target as well.
MATT: Well, they did have a big win last week so I was kind of upset about that.
NASIR: Against who?
MATT: Michigan State. It’s like the top two teams in the big ten. Ohio State had a terrible loss at the beginning of the year and now have been pretty lights out since. So, let’s see what happens. Might make that new 14 playoff that’s starting this year.
NASIR: I have no idea what you’re talking about.
[MUSIC]
MATT: Question of the day.
“Many years ago, we bought up a bunch of names for new product lines. Someone approached us to buy one we didn’t use. Is it possible to sell the trademark?”
NASIR: Yes, it is.
MATT: It comes from Ohio State.
NASIR: Does it? Really? No. I thought, oh, I know what you mean, yeah.
Yeah, it’s possible to sell or assign the trademark. The only thing with that is, to make it effective, the question is whether or not the trademark with its goodwill is being sold, and goodwill is kind of the – how do I explain goodwill, Matt?
MATT: It’s the store where you can donate stuff and then, like, people can go and sell it and get it for cheaper, eh?
NASIR: Yeah, goodwill is very similar to a thrift store.
MATT: It’s like an intangible asset, basically. I guess it’s like a business’ reputation.
NASIR: Yeah, actually, I just looked it up and I should know this off the top of my head but, just to be able to describe it perfectly, it’s the established reputation of a business regarded as a quantifiable asset. In other words, if you’re just selling the name itself and not what it’s associated with, then it may not be an effective assignment and so, therefore, not effective. And so, they call those “assignment in gross” where, you know, it’s made without the company’s goodwill and those are completely invalid in the US courts and they’ve analyzed whether an assignment was made in gross in different ways by taking into consideration the trademark, whether it’s protecting customers from deception and confusion is the primary motivation behind the actual assignment. So, those are some things to consider but, as far as the legality of actually selling it, that’s one thing. But one thing I noticed that he/she has said, “I bought a bunch of trademarks for potential names for new product lines. Someone approached us to buy one we didn’t use.” So, there’s also a question of whether or not you actually have an enforceable trademark because there is something called “abandonment of a trademark” and, if you don’t use it, you lose it – I believe that’s the common term. So, if you stop using it, especially with no intention to use it again, then you are basically abandoning the trademark. And so, this is often how sometimes these trademark rights are unintentionally lost, right? So, often, when you file a trademark, you have to choose whether you’re going to be using it now or you intend to use it later and those are different types of filings. And so, if you file something that you’re actually using then you do have to actually use it in the marketplace. But, once you stop and you stop intending to use it, then someone can easily grab it and basically allege that you abandoned it. And so, assigning a trademark that you’ve possibly already abandoned, it may be effective, but not if the trademark’s not valid anymore. So, that’s more of a consideration from the buyer’s perspective, I suppose.
MATT: Yeah, I was just going to tell them to license it out and then you can keep it and make money.
NASIR: Yeah, that’s a good idea, too, for sure. But, see, again, you still have to make sure you actually have an enforceable trademark. I would just start using it again just to make sure and then sell it. All right.
Okay, thanks guys. Thanks for joining us.
MATT: Keep it sound and keep it smart.

Nasir Pasha & Matt Staub

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