UNITED STATES: Trademark Trial and Appeal Board Cancels Trademark on Scant Evidence of Prior Use

(Originally published in the International Trademark Association – INTABulletin Vol. 73 No. 16)

Contributor: Mark A. Romance
Verifier: Linda Yan Yang

In a precedential decision issued on May 15, 2018, in Kemi Organics, LLC v. Rakesh Gupta (Cancellation No. 92065613), the U.S. Trademark Trial and Appeal Board (the Board) canceled the respondent’s trademark registration holding that the petitioner proved prior use even in the absence of documentary evidence.

The petitioner, Kemi Organics, LLC (Kemi), filed an action to cancel a registration issued to the respondent for the mark KEMI OYL for cosmetics and other uses in International Class 3. The parties stipulated to resolve the case using the summary judgment model of the Board’s Accelerated Case Resolution Procedures and that the evidence would be presented by affidavit and exhibits thereto. They also agreed for purposes of the case that there would be a likelihood of confusion between the parties’ marks. Thus, the main issue to be resolved would be whether the petitioner proved use of its mark in the United States prior to the respondent’s use of his mark.

The petitioner’s evidence included affidavits of its president, its lawyer, and two distributors of hair and skin care products. Documentary evidence included only two magazine advertisements from 1996 and one from 1999 showing a KEMI OYL product, a copy of an image of the KEMI OYL label found using a Google search, canceled trademark registrations, and an abandoned application for a trademark registration.

The Board held that the canceled registrations were evidence that the registrations were issued but were not evidence of “use” of the marks. Similarly, the Board held that the advertisements showed only that products bearing the KEMI OYL marks were being advertised; they did not show “use” of the mark, and the product label did not show use prior to the respondent’s use of the mark. Thus, according to the Board, the documentary evidence did not support evidence of prior use, leaving only the uncorroborated affidavits of Kemi’s resident and distributors as evidence of prior use.

However, the Board held that although the evidence was “sparse,” in considering evidence of prior use, the Board had to “look at the evidence as a whole, as if each piece of evidence were part of a puzzle which, when fitted together, establishes prior use.” Quoting West Fla. Seafood Inc. v. Jet Rests. Inc., 31 F.3d 1122 (Fed. Cir. 1994). Holding that the president’s affidavit was “far from being a model of clarity or completeness,” and “not accompanied by the type or quantity of documentary evidence that one would expect to be readily available to show the use of the mark,” his testimony was not contradicted, and the record provided no basis to disregard or discount his testimony. Further, the Board held that the third-party distributor witnesses corroborated the president’s testimony on prior use. In the absence of any contrary testimony, fruits of discovery or documentary evidence establishing non-use of the KEMI Oyl mark, the petitioner’s evidence of prior use was unrebutted.

The respondent also argued that the petitioner’s evidence failed to show “continuous” use of the mark. However, the Board held that continuous use is not required. Rather, Section 2(d) of the Trademark Act, 15 U.S.C. Section 1052(d), which authorizes the Board to cancel a registered mark, limits the analysis to whether the mark was “previously used” not “continuously” used.

This decision shows that testimony of prior use can be sufficient to support cancellation even in the absence of documentary support for the testimony.

Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest. Law & Practice updates are published without comment from INTA except where it has taken an official position.

Contributing Attorneys

Romance, Mark A. – Shareholder

Guide for Young Lawyers Going to Trail in Civil Cases

You just received the order advising that your first civil trial will take place in a few months.   Settlement in the case is impossible and this one is really going to trial.  While the idea of going to trial seemed exciting and glamorous before, now that it is really going to happen, the fantasy quickly fades and reality sets in.  Never fear, you can do a great job for your client as long as you work hard, stay organized and prepare.

Review Trial Techniques.  There are many traditional “textbooks” that include generic tips for trial preparation and can refresh your memory from law school on fundamental trial techniques such as developing themes, opening statement, witness examination and closing argument.  Winning at Trial by D. Shane Read and Fundamentals of Trial Techniques by Thomas A. Mauet cover virtually all the technique and strategy issues you will need in an easy to read format.  Take the time to read at least one trial technique book.

In addition to sharpening your techniques, here are some additional tips to help you get organized and prepare your case for trial.

Get Organized.  Make a list of tasks to be done before trial to help you stay organized.   Your list should include major things like court deadlines, a list of additional motions to be filed, witness outlines, and jury instructions, among others. You can use your trial order to guide you.  But you should also include practical items that will make trial easier such as creating a list of supplies you will need during trial, scheduling lunch ahead of time and having courier services available. Identify the team member assigned to each task, include deadlines and review the list regularly to make sure nothing is forgotten.

Double Check Everything.  In federal court, and in many state courts, the parties have certain disclosure requirements, and there are consequences for failing to meet them.  You should double check that you have met your obligations to disclose witnesses and trial exhibits.  In federal court, parties have a continuing obligation to update their Rule 26 Initial Disclosures and discovery responses.  Review your client’s written discovery responses once discovery is finalized, and update them if necessary.  Check your disclosures to make sure that all documents you intend to use at trial and all trial witnesses have been disclosed.  Many courts will exclude exhibits or witnesses not properly and timely disclosed.

Communicate with your client and your witnesses.  After you outline your trial preparation game plan, make sure you speak with your client to discuss what to expect at trial.  Topics should include when and where the trial will take place, and what you will need from the client before and at trial.  Determine who your client representative will be at trial, and speak with that person about what to expect.  Likewise, let your witnesses know about the timing and location of trial, when they can be expected to testify, and schedule times to meet with them to help prepare them for their testimony.  For witnesses who will not voluntarily appear to testify at trial, make sure you have your subpoenas properly issued and timely served.

Visit the courtroom. Visit the courtroom to identify practical or technical issues, and to get comfortable with the size and layout of the room.  Some courtrooms have the latest technology, while others have none.  Make sure that the equipment you intend to use is compatible with the court’s system, and importantly, make sure you know how to use the technology available and have addressed any other practical issues.   Determine whether permission is required to bring equipment into the courtroom, as most federal courts require an order to be entered before trial.  You will also want to determine which counsel table is yours for trial and ensure that you have enough space for your team, equipment and documents.  If possible, introduce yourself to the court staff and court reporter.  The court staff members are an essential [the word “critical” appears already in several places] part of the trial process, and you should get to know them and allow them to know you.  There may be points in time when they can provide critical help or avoid embarrassment.  Most court personnel will know the judge’s preferences and procedures and provide valuable insight into your courtroom.

Talk to other attorneys. Find lawyers who have conducted trials before your judge and ask them what you need to know about your judge’s preferences.  This information can be invaluable to help you avoid pitfalls and allow you to impress the judge with your knowledge of the process.

Master the facts.  Re-read all depositions, pleadings and, exhibits. [The cases and rulings are addressed in the “law” section below] There is no substitute for mastering the facts.  Keep in mind that the complaint and answer establish the burden of proof at trial.  You need to master the allegations and know what evidence supports those allegations to know how the case will be proven at trial.

Master the procedure.  Read the rules of civil procedure and the court’s local rules and standing orders pertaining to trial and know them inside and out.  Identify any potential issues and conduct research needed to interpret the procedural issues.  Where necessary, prepare a trial brief to hand to the judge if the issue arises during trial.  Take a copy of the rules to trial and have it handy.

Anticipate evidentiary Issues.  You should master the rules of evidence before trial.  Read the rules again so they are fresh.  Anticipate objections and be prepared to address them.  Motions in limine can address significant evidentiary issues, but sometimes you may not want to alert your opponent in advance that you have a concern. If the issue is significant, prepare a short memo in advance of trial that you can use as a roadmap for your oral argument when the issue arises during trial.  This trial brief should include legal citations and be presented to the judge during argument on the issue.

Jury instructions – Master the substantive law.  It takes significant time and strategy to prepare jury instructions (or proposed findings of fact and conclusions of law in non-jury cases).  Become a master of the law and prepare jury instructions or proposed findings of fact and conclusions of law well in advance of trial in order to clarify [you use the same phrase below] what you have to prove at trial.  While the deadlines to submit jury instructions may be on the eve of trial, do not wait until the last minute.  Instead, prepare the instructions early and use them as a guide for your trial preparation.

Anticipate appellate issues – know how to preserve error for appeal – In most jurisdictions, failure to raise an issue or an objection during trial constitutes a waiver of the issue on appeal.  You should familiarize yourself with the appellate law in your jurisdiction so that if an issue arises, you will know how to preserve it in the event of an appeal.  In significant cases, you may want to consider having the client hire an appellate attorney to sit with you during trial to guide you on preservation issues.  The most common appellate preservation issues arise during voir dire, exhibit admission, motions for directed verdict and challenges to expert witnesses. Usually you will need to object on the record and specifically ask for relief, such as a curative instruction, striking of testimony or even a mistrial, in order to preserve the error.  Look for a bar article in your jurisdiction to be your guide.

Prepare witness outlines, not questions.  Experienced lawyers often prepare outlines of areas of questions for witnesses rather than a series of prepared questions.  Remember, you are telling a story, which is most effectively presented through a conversation with your witnesses.  Reading exact questions prevents you from presenting a conversational tone with your witness.  The same is true with cross-examination.  Your outline should identify the issues in reasonable detail, but allow you to be flexible and adjust your questions based on the witness’s answers.  There are certainly specific questions on direct that you must ask precisely to establish a fact, or to set up impeachment questions on cross-examination, but those are the exceptions and not the rule.

Prepare for impeachment. Be prepared to impeach adverse witnesses with their prior testimony.  Ideally, you will have a trial consultant available to quickly present a video clip to show the witness’s prior inconsistent testimony.  In the absence of the video clip option, be ready to confront the witness with the page and line from her prior testimony for a proper impeachment.

Use of Demonstrative Aids.  Judges and jurors expect a visual presentation, even in business cases.  Your demonstrative aids should be used during opening, with witness examinations and during closing, to tell your story in a visual way that supports your case.  Your presentation must be flawless though, as judges and jurors will not forgive technical glitches.  Know how to use the equipment, or have a consultant on your team to handle that part of the presentation.  You should rehearse your use of the equipment.  Ask the judge for permission to test your equipment in the courtroom for best preparation.

Prepare closing argument ahead of time.  Your closing argument should cite the evidence and law that supports your theme and the merits of your case.  Do not wait until trial begins to prepare your closing argument.  Prepare an outline before trial begins that cites exhibits and testimony you expect will be admitted at trial, and modify your closing during trial as the evidence evolves.  If you wait until you are at trial to prepare your closing it will look unprepared and patched together.  Plan ahead for a smooth and seamless closing by referring to the evidence you know will be admitted.  It is much easier to edit your closing during trial than it is to create it for the first time.

Watch and Listen.  Watch the jurors and judge’s facial expressions during trial, and listen to the message being sent by judge and jury.  Often-times a judge will ask questions or make rulings that indicate what she thinks is important and whether she wants to hear more from the party who may be winning the argument.  Listen to the questions and comments to gauge what is important to the judge and when she wants to hear from you.   Often the judge does not need (or want) to hear from the winner.  Be alert and try to read what the judge is really asking before deciding whether an argument or question is really necessary.

Learning from trial textbooks is critical to preparing for trial, but be practical in your approach and be prepared for the unexpected.  Ask for help from those who have been through trial.  There is no substitute for experience.

Mark A. Romance is a shareholder in Richman Greer, P.A. in Miami, Flo

Contributing Attorneys

Romance, Mark A. – Shareholder

Plaintiff’s Testimony Too Incredible to Defeat Summary Judgment

By Amy Mattson

A court may make credibility determinations on a summary judgment motion where the facts alleged are so contradictory as to be inexplicable in light of evidence in the record, according to the U.S. District Court for the District of Connecticut. In Gill v. Teva Respiratory, LLC, the court granted the defendants’ motions for summary judgment, reasoning that the plaintiff, in relying exclusively on her own testimony, failed to rebut the defendants’ evidence or correct discrepancies in the record. Although the U.S. Court of Appeals for the Second Circuit has previously held that a credibility determination is warranted where a plaintiff relies on incomplete and contradictory testimony, some ABA Section of Litigationleaders believe this case may spur courts and practitioners to alter their methodology.

Evidentiary Record Undermines the Plaintiff’s Testimony
The plaintiff sued the maker and the retailer of her asthma inhaler after breathing in a thumb tack that became lodged inside the device. The plaintiff claimed she had stored the inhaler in her car’s glove compartment and had aspirated the tack after using the product, which had been in its original packaging. Doctors removed a tack from her lungs several days later.

In support of their motion for summary judgment, the manufacturer submitted evidence of its production processes, which reflected that a tack could not have been introduced into the inhaler while in its control. The retailer relied upon the plaintiff’s admission in her deposition testimony that the inhaler was in its original packaging prior to use, maintaining it could not have tampered with the device. Both defendants also relied upon the plaintiff’s medical records which reflected the plaintiff had kept the inhaler in her purse, its cap had become dislodged, and her children had inserted a push pin into its mouthpiece.

The plaintiff did not provide any evidence to carry her burden in opposing summary judgment. When deposed, the plaintiff admitted she did not know how the tack got into her inhaler and could not explain the statements in her medical records. Nor could she explain why the dosage counter indicated the inhaler had been sprayed thirty-four times when she had not used the inhaler since the incident. The plaintiff also conducted no discovery and did not submit a statement of material facts as required by local rules.

Court Makes Rare Credibility Determination on Summary Judgment
The court deemed the defendants’ facts to be true and granted the defendants’ motions for summary judgment on the grounds there was no genuine issue of material fact. Though the court acknowledged that its role generally did not encompass making credibility determinations, it relied upon the Second Circuit’s decision in Rojas v. Roman Catholic Dioceses of Rochester in concluding that where “the facts alleged are so contradictory that doubt is cast upon their plausibility, the court may pierce the veil of the complaint’s factual allegations and dismiss the claim.” The district court further reasoned that to hold otherwise would “license the mendacious to seek windfalls in the litigation lottery.”

In this case, the district court specifically criticized the plaintiff’s inability to explain the contradiction between the medical records, which indicated the inhaler was uncapped in her purse and accessible to her children, and her own declaration that it was unopened in her vehicle’s glove compartment. The court also noted the discrepancy between evidence that the inhaler’s dosage count reflected thirty-four uses and the plaintiff’s testimony that she had used the inhaler once.

Finding the plaintiff’s account unworthy of belief, the court ultimately rested on the plaintiff’s repeated admissions that she did not know how the thumbtack got into the inhaler. Because of these disavowals, it concluded the plaintiff was “in no position to claim or prove at trial that the defendants were responsible or liable.”

A One-Time Result or a Slippery Slope?
Although ABA Section of Litigation leaders concede that the plaintiff’s case was out of the ordinary, they are divided as to the decision’s broader impact. “It is rare to find a credibility determination about a relatively discrete fact at the summary judgment stage,” explains Paula M. Bagger, Boston, MA, vice-chair of the Section of Litigation’s Commercial & Business Litigation Committee. “Was the inhaler package open or closed? When courts start to make these determinations, they head down a slippery slope. What is considered a bright line rule becomes a little murkier,” she says.

However, not all Section leaders agree the decision has resonance. “Practitioners should take note of the fact that the court emphasized this was a rare and extraordinary matter. I don’t foresee this extending to many other circumstances,” opines Michael S. LeBoff, Newport Beach, CA, cochair of the Section’s Commercial & Business Litigation Committee.

Ultimately, the ruling may be a teachable moment. “This is a cautionary tale for plaintiffs,” states Mark A. Romance, Miami, FL, member of the Section’s Commercial & Business Litigation’s Practice Points Subcommittee. “You need to have evidence in the record that supports your theory of the case beyond your client’s own testimony,” he advises.

Contributing Attorneys

Romance, Mark A. – Shareholder

United States: Trademark Trial and Appeal Board Accepts Misfiled Expert Disclosures as Timely Filed

(Originally published in the International Trademark Association)

By Mark A. Romance

On February 26, 2018, the Trademark Trial and Appeal Board (TTAB or Board) issued a precedential decision in Monster Energy Co. v. William J. Martin (Cancellation No. 92064649), holding that a misfiled expert disclosure was timely filed in the correct case and allowing the expert to testify. The decision highlights the Board’s authority to correct its docket and adjust deadlines to permit experts to testify when mistakes occur in filing.

Petitioner Monster Energy Company filed its expert disclosure on July 5, the deadline to file expert disclosures in the proceeding. Although the notice was served on Respondent William J. Martin, Petitioner’s counsel accidentally filed the notice in an unrelated proceeding. The next day, Petitioner’s counsel realized its mistake and called the TTAB to advise it of the incorrect filing. The following day, July 7, the Board entered the notice in the correct file and assigned it a filing date of July 5, the date it was originally submitted in the wrong file.

Weeks later, on the eve of the close of discovery, Respondent moved to strike the expert disclosure and to preclude the expert from testifying at trial. Respondent argued that the disclosure was untimely because it was not placed into the correct case file until July 7, two days after the deadline. He contended that because of the late disclosure he was precluded from timely completing discovery on the expert witness.

The TTAB held that the notice was timely even though it was filed in the wrong proceeding, reasoning that    the Trademark Rules provide it with the authority to “address and resolve an obvious clerical or typographical error in a filing that conflicts with the clear intent of the filing party at the time the party submitted the filing.” It also noted that “an obvious typographical error” should not derail the discovery process. Citing precedent, the Board also held that an untimely expert witness disclosure is not a ground to exclude the noticed testimony of the witness. It further held that Respondent was not precluded from initiating discovery concerning the late-disclosed expert witness because Trademark Rule 2.120(a)(2)(iii) affords the Board wide latitude to manage a proceeding following disclosure of an expert. The TTAB concluded that it may grant additional time under this wide latitude to complete discovery of the disclosed expert.

This decision shows that the Trademark Rules provide the Board with the flexibility to correct administrative errors and to adjust schedules in order to allow parties a full and fair opportunity to introduce expert testimony and to conduct discovery on those witnesses.

Mr. Romance is a member of the INTA Bulletin Law & Practice – North America Subcommittee. 

Contributing Attorneys

Romance, Mark A. – Shareholder

Key Strategies to Protect Your Client From a Former Employee

(Originally published on the ABA Commercial and Business Litigation newsletter)

By Mark A. Romance

Your client calls in a panic because a key employee just resigned without notice to join a competitor.  The client is fearful that the now former employee has the ability to divert business and possibly employees, potentially harming the client’s operation.  You know you need to act quickly to stem the losses and protect the client.  Having a game plan to keep you on track is critical to your ability to quickly and successfully protect the client.

Investigate the Facts

First, gather key documents.  The client should have an employee file that contains any written agreement with the now former employee as well as employee handbooks and policies.  This first step is designed to identify any contractual obligations and restrictions on the employee’s conduct during and after employment.   These restrictions can be found in written agreements that limit use of company information and post-employment activities, as well as in employee policies and handbooks.    Typical restrictions include limits on the use of company information relating to customers, pricing and other valuable information.  Additional restrictions often include restrictions on the solicitation of business from actual and potential customers.  Finally, many agreements include restrictions on soliciting employees to leave the company.

Now that you know what the employee’s contractual obligations are, it is important to preserve and review the company’s computer system and computer hardware used by the employee.  This enables you to evaluate the employee’s activities before he or she left the company.  Your client’s information technology team can help search for evidence of improper conduct including communications with customers or prospective customers, solicitation of employees, and transfer of company information.  A computer expert should be retained immediately to create a forensic image of the employee’s computer to preserve information, and then help you search for evidence of improper activities.  The company must also turn off any automatic deletion programs in its computer system to ensure that information is preserved.

Finally, you should interview key employees to identify any customers, referral sources, vendors or others that the former employee may have been in contact with to determine if he is attempting to divert business, employees or opportunities.  Follow up with the customers or sources to document the former employee’s activities to identify possible witnesses and evidence.

Identify Potential Claims

Non-Compete – A traditional “non-compete” provision precludes an employee from accepting employment with another person or entity who engages in competition with the employer.  While enforceability varies from state to state, in those states that permit post-employment restrictions, the agreements typically must be in writing, signed by the employee, and be reasonable in time and geographic scope, and the restriction must be supported by a “legitimate business interest.”

Determining the reasonableness of time depends on the industry and the nature of the employee’s duties.  Some states, like Florida, have a statutory scheme that provides some guidance, including a presumption that a restriction of less than six months is presumed to be reasonable and a restriction longer than three years is presumed to be unreasonable.

Non-compete restrictions also must be reasonable in geographic scope.  The public policy behind the geographical limitation is to permit the employee the ability to engage in work in his or her chosen profession, but also to permit the employer to protect its investment in its customer base.   In the medical field, for example, restrictions are often limited to a specified mile radius or county where the patients are likely to reside.  In other industries where employers have a statewide or even nationwide customer base, a restriction on competition within the state or even the entire United States could be enforceable.

Finally, enforcement of non-compete restrictions must be supported by a “legitimate business interest.”  That is, the restriction cannot be simply for the sake of preventing competition, but instead, enforcement must be necessary to protect an important investment of the employer.   States vary as to what constitutes a “legitimate” interest.  The Florida Supreme Court recently held that “a legitimate business interest is an asset that, if misappropriated, would give its new owner an unfair competitive advantage over its former owner.” See White v. Mederi Caretenders Visiting Serv. of Southeast Fla., LLC,  Case No. SC16-28 (Fla. Sept. 14, 2017).

“Whether an activity qualifies as a protected legitimate business interest is inherently a factual inquiry, which is heavily industry – and context – specific.”    Id.  Some examples include an interest necessary to protect trade secrets, valuable confidential business or professional information that does not qualify as a trade secret, extraordinary or specialized training, substantial relationships with prospective or existing customers, patients or clients, or customer good will.  See, e.g., Fla. Stat. sec. 542.335(1)(b).  Most states have fairly developed case law analyzing the extent of a “legitimate” business interest.

The key questions for evaluating a potential non-compete violation include: What activity does the covenant actually restrict (focus on the exact words of the written restriction)?  Is the new employer actually engaged in the same or substantially same business as the former employer?  What is the need to enforce the restriction in this case (i.e. the “legitimate business interest”)?

Non-Solicitation – A non-solicitation provision typically restricts a former employee from soliciting customers and/or employees of the former employer.  Like non-compete provisions, states that permit enforcement require the restriction to be limited to a reasonable period of time and supported by a legitimate business interest.  Enforcing such a provision starts with the actual words in the agreement.  What is restricted and for how long?  Some provisions prohibit solicitation of actual customers as well as prospective customers.

And what evidence is there of solicitation?  Without a non-compete restriction, an employee is permitted to join a competitor and engage in a competitive business, but under a non-solicitation provision, he cannot “solicit” the customers of his former employer.  If customers follow the employee to a new employer, how do you know the former employee “solicited” the customer and how do you prove it?  The customers themselves are one potential source of information about a former employee’s solicitation effort.  Are customers reporting that they were contacted by the employee and asked to move their business?  Or did customers learn from the company that the employee had left?  Many employers understandably do not want to put their customers in the awkward position of becoming witnesses to a lawsuit.  But many employers are willing to ask customers to provide relevant emails, voicemails and text messages to develop a case.  Often the best source of information ultimately comes from the former employee once a lawsuit is filed.

The language of the non-solicitation provision is critical.  Some agreements simply state that the employee is prohibited from soliciting customers or employees from leaving the employer.  More sophisticated provisions define what “solicitation” means, often specifying that a former employee cannot directly contact customers by email, telephone, or in person.  Some also limit advertisements, while others specifically address social media by stating that updating social media pages such as LinkedIn and Facebook to indicate new employment constitutes “solicitation.”   Others go further still and prohibit even the “acceptance” of business from customers of the employer.  Breaking down the definition of “solicitation” contained in an employment agreement and finding evidence to support that specific definition can be critical to proving a violation and protecting the client.

Theft of Trade Secrets and Confidential Information  – A former employee’s post-employment use of important company information for a competitor can devastate a business.   Such information can include customer lists, purchasing history, sales techniques, referral source information and, of course, proprietary product information.  Claims to protect against misappropriation of trade secrets and confidential information are independent of enforcement of a restrictive covenant.   The key to enforcing misappropriation claims starts with the information itself.  Does the information qualify as a “trade secret”?  Most states follow the Uniform Trade Secrets Act, which defines a “trade secret” and requires its owner to take steps to maintain its secrecy.

If the information does not qualify as a trade secret, the material may nevertheless be protectable as confidential business information.   Employment agreements and company policies often define confidential business information and prohibit its use.  Such provisions are enforceable.   The first step is thus to identify the information at issue to determine what kind of protection it is entitled to – statutory or contractual, or both.

The second step is to determine whether the former employee retained or is using the information, and to identify the evidence that exists to prove misappropriation.  Misappropriation is often proven through a forensic examination of the former employee’s company computer, which may show that information was sent by email or downloaded to an external hard drive.  Sometimes customers reveal that the former employee was using customer information to solicit their business.

The third step is to prove that the employer took reasonable steps to keep the information confidential.  An employer cannot claim that its confidential information was misused if the employer itself does not protect its information. Did the employer restrict access to the information?  Did the employer implement mechanisms to periodically check to ensure that the information was not being improperly accessed and used?  Did the company become aware of prior, unrelated improper use of its information and take steps to protect against further disclosure?  Evidence of efforts to maintain the secrecy of the information is critical to proving misappropriation claims.

Tort Claims –  In addition to the contractual and statutory claims outlined above, the employer also may have viable tort claims against the employee.  Breach of fiduciary duty, breach of the duty of loyalty, and tortious interference with business relationships are common claims asserted in competitive hire cases.  These claims can be asserted in addition to, or even in the absence of, restrictive covenants or misappropriation claims.

Key questions to evaluate these tort claims include: Was the employee in a management position who recruited others to leave with her to join the competitor?  Did the employee “test the waters” by reaching out to customers to see if they would follow her to a new company?   These claims are often revealed through a trail of emails located during an examination of the former employee’s company email account.  Inspection of the former employee’s company computer and company email account must occur immediately upon the employee’s resignation and departure.   A forensic expert may be needed to recover any emails the employee deleted and to authenticate the evidence at an injunction hearing or at trial.  Tort claims can be valuable not only when restrictive covenant or misappropriation claims do not exist, but in some states, could support claims against the employee’s new employer as well as punitive damages.

Getting Relief

Now that you have investigated the facts to determine what wrongful acts occurred and evaluated the possible claims, you are ready to take action.  The first step is to prepare a demand letter to the former employee and instruct her to cease and desist from further improper activities.  Your demand must identify the legal basis for the restriction, such as the restrictive covenant or company policies at issue and summarize the basis for believing a violation has occurred.  If your evidence suggests that the new employer may have knowledge of the improper activities, you should consider putting it on notice in a separate demand letter.  Your demand letter should conclude with a specific demand for action and a deadline to comply.

Preparation of a lawsuit should be done simultaneously with preparation of the cease and desist letter.  Although many causes of action are theoretically possible, the complaint should be a focused effort, not a “shot-gun” approach.  Keeping it simple will give you credibility and demonstrate confidence in your case.  Identify the strongest two or three causes of action that you can most easily prove that will give your client the relief it seeks, and allege them.   Leave out the more tenuous, complicated claims.

You also must decide whether to seek injunctive relief, damages or both.  Temporary injunctions are often requested at the outset of a litigation in an attempt to stop the type of harm that may not be capable of measurement later through a damages claim.  In evaluating a request for a temporary injunction, courts often engage in a stringent evaluation of the evidence, often even before discovery begins, to determine if the threatened harm to the employer outweighs the potential harm to the former employee if he or she is enjoined but ultimately prevails.  Attempts to obtain a temporary injunction are often a high stakes process that is critical to the outcome of a case.  In most cases, a ruling on a motion for a temporary injunction results in a settlement of the claims, with one side holding significant leverage after a successful outcome at that early stage of the case.  Requests for temporary injunctive relief require a separate motion and an expedited process, and typically must be filed along with the complaint.  Before filing a motion for temporary injunction, however, you should have your proffered evidence, such as affidavits and electronic or physical evidence, ready to be submitted to the court at the time of filing.

Final Thoughts

Representing a client to redress wrongful conduct of a former employee often requires swift and decisive action.  In such a situation, keeping your strategy simple is the key to success.  Your investigation must be focused and your lawsuit should be simple, tight and well supported by evidence.

Where you regularly represent clients in a competitive environment, you should consider encouraging those clients not to wait for the key employee to leave before taking steps to protect itself.  You should advise the client to require all key employees to execute written agreements that include restrictive covenants and restrictions on the use of trade secrets and other confidential business information.  On-going monitoring of access to and use of company information is also helpful to protect from disclosure and to enforce the employer’s rights in post-employment litigation.  Finally, employment agreements and policies should describe clearly and adequately the job duties of key employees to provide clear paths to asserting breach of fiduciary duty and other tort claims.

Contributing Attorneys

Romance, Mark A. – Shareholder

Miami Lawyers Crunch Hard Candy Cosmetics Infringement Claims

The cosmetics maker asked the court to award treble damages in a lawsuit with a potential price tag of $11.4 million for Anastasia Beverly Hills.

By Samantha Joseph

 

Mark A. Romance and Nate Edenfield, with Richman Greer. Photo: J. Albert Diaz

 

Mark A. Romance jokes he had a secret weapon — his teenage daughter — who helped him understand fierce consumer loyalty to a California makeup brand and win a defense verdict in an eight-figure trademark infringement and unfair competition case.

Romance was part of a defense team of two Miami attorneys and a Texas lawyer, who beat back a lawsuit seeking to disgorge $3.8 million in profits from California-based cosmetics boutique Anastasia Beverly Hills.

Newport Beach, California-based Hard Candy LLC asked the court to award treble damages in a suit that potentially might have cost Anastasia $11.4 million in Miami federal court.

Romance, a Richman Greer Miami shareholder, worked with colleague Nate Edenfield and Austin, Texas, lawyer Travis Wimberly of Pirkey Barber for the defense.

Their client, Anastasia Beverly Hills, is a prestige cosmetics brand marketed with help from Kim Kardashian and other celebrities. It sells in high-end stores, including Sephora and Nordstrom, and has a social media following of 16.1 million on Instagram.

One of its customers is a high school senior, who on drives to school helped her lawyer-father understand how highlighter could multitask as blush and that Anastasia Beverly Hills cosmetics were unlike all others when it came to style and quality.

“She was my secret-weapon research assistant,” Romance quipped. “We felt confident in our position because the whole issue was whether there was likely to be confusion.”

The case turned on the name of a makeup shade in a 2015 Anastasia product, the Gleam Glow Kit. The kit is a $40 compact with four highlighter shades called Mimosa, Crushed Pearl, Starburst and — the color at the center of the dispute — Hard Candy.

Hard Candy LLC, which holds the rights to 14 federally registered marks, sued Anastasia, alleging the rival makeup company infringed on its trademark by using the Hard Candy name and engaged in unfair competition under the Lanham Act and common law.

To prevail in court, Hard Candy had to prove Anastasia’s product name would cause confusion among consumers.

For the defense team, victory hinged on showing otherwise.

Hard Candy and its predecessors have used the name since 1995 and licenses the mark to a third-party for lipstick, nail polish, eye shadow, bronzer, other cosmetics and eyewear sold exclusively through Walmart retail stores and website. The company had retail sales of $59.9 million in 2015, according to court documents.

“It seems so simple, like a simple makeup case, but the legal issues are not so simple,” said Romance, whose team succeeded on a motion to strike Anastasia’s demand for a jury trial, then shifted attention to a more nuanced discussion. “The real issue is not whether or not you own the trademark rights. That’s important, but the real issue is whether the use of the trademark creates confusion.”

Anastasia Beverly Hills sold about 250,000 Gleam makeup kits in nine months beginning in September 2016 for a profit of about $3.8 million.

Plaintiffs in trademark infringement suits often seek two remedies: damages for lost revenue and an injunction against the party misusing their property. Hard Candy sought neither but argued it should be the one to reap the Gleam kit profits and sought to triple that amount under the Lanham Act.

Its strategy proved to be a misstep. By not seeking damages, the defense argued the company presented a case in equity as opposed to a case at law and was therefore no longer legally entitled to a jury trial.

U.S. District Judge Kathleen M. Williams agreed and presided over a three-day bench trial before ruling for the defense.

“Our theory was that they really weren’t harmed, and that the sale of this kit didn’t cause them any harm,” Romance said. “If it was causing harm, they would have tried to stop the sale through an injunction or sought damages. Neither one of those two things occurred.”

Coffey Burlington president Kevin Kaplan, partner Gabriel Groisman and associate Frances Blake represented Hard Candy.

The judge praised the work of both legal teams before finding no likelihood of confusion and no intention by Anastasia Beverly Hills to confuse consumers.

“I appreciated the professionalism and the caliber of the advocacy that was engaged in by both parties,” Williams said at a Feb. 2 hearing. “I have to say throughout the case, the record, and when I had you before me, the presentations by the lawyers, written and oral, were excellent. And I commend both sides and thank you for engaging in the quality of lawyering that makes my job not always easier, but more of a pleasure.”

 

Case: Hard Candy v. Anastasia Beverly Hills

Case No.: 16-CV-21203

Description: Trademark infringement

Filing date: April 5, 2016

Verdict date: Feb. 6, 2018

Judge: U.S. District Judge Kathleen Williams

Plaintiffs attorneys: Kevin Kaplan, Gabriel Groisman and Frances Blake, Coffey Burlington, Miami

Defense attorneys: Mark A. Romance and Nathaniel M. Edenfield, Richman Greer, Miami, and Travis Wimberly, Pirkey Barber, Austin,Texas

Verdict: For the defense

Contributing Attorneys

Romance, Mark A. – Shareholder
Edenfield, Nathaniel M. – Associate

10 Tips for Young Lawyers Going to Trial

By Mark A. Romance

As a young lawyer preparing for trial, you undoubtedly will review Winning at Trial by D. Shane Read, or Fundamentals of Trial Techniques by Thomas A. Mauet. If that is not part of your plan, make it part of your routine before trial. Both books include valuable information on basic trial techniques. Here are ten tips from recent trial experience that are not found in textbooks:

  1. Prepare a “to do” list. Make a list of tasks to be done before trial. Include deadlines, motions to be filed, witness outlines, and practical items such as supplies needed and lunch arrangements. Identify the team member assigned to each task and review the list regularly to make sure nothing is forgotten.
  2. Visit the courtroom. Visit the courtroom to identify practical or technical issues. Some courtrooms have the latest technology while others have none. Make sure you know how to use the technology available and address any other practical issues.
  3. Read everything. Reread all depositions, pleadings, exhibits, key cases, and significant court rulings. Keep in mind that the complaint and answer establish the burden of proof at trial. You need to master the allegations, the evidence, and the law.
  4. Develop your theme. What is the story you will tell at trial? What are your strengths and weaknesses and those of your opponent? Your opening statement, examination of witnesses, demonstrative aids, and closing argument should all tell your story.
  5. Prepare your jury instructions. It takes significant time and strategy to prepare jury instructions (or proposed findings of fact and conclusions of law in non-jury cases). Become a master of the law and prepare jury instructions well in advance of trial and use them as your guide as to what you must prove at trial.
  6. Prepare witness outlines, not questions. Experienced lawyers prepare outlines of areas of questions for witnesses rather than a series of prepared questions. Remember, you are telling a story, which is most effectively presented through a conversation with your witness. Reading exact questions prevents you from presenting a fluid question and answer session with your witness. Of course, there are certain questions on direct that you must ask precisely to establish a fact, or to set up impeachment questions on cross-examination, but those are the exceptions and not the rule.
  7. Anticipate evidentiary issues. You should master the rules of evidence before trial. Read the rules again so they are fresh. Anticipate objections and be prepared to address them. If the issue is significant, prepare a short memo in advance of trial that you can use as a roadmap for your argument. This “bench memo” should include legal citations and be presented to the judge during argument on the issue.
  8. Use of effective demonstrative aids. Judges and jurors expect a visual presentation, even in business cases. Your demonstrative aids should be used during opening statements, with witness examinations, and during closing argument, to tell your story in a visual way that supports your case.
  9. Prepare closing argument ahead of time. Your closing argument should cite the evidence and law that supports your theme and the merits of your case. Do not wait until trial begins to prepare your closing argument. Prepare an outline before trial begins that cites exhibits and testimony you expect will be admitted at trial, and modify your closing during trial as the evidence evolves. If you wait until you are in trial, your closing argument will look unprepared and patched together. Plan ahead for a smooth and seamless closing.
  10. Watch and listen. Watch the jurors’ and judge’s facial expressions during trial and listen to the message being sent by judge and jury. Often-times a judge will ask questions or make rulings that indicates what she thinks is important and whether she wants to hear more from one side who may be winning the argument. Listen to the questions and comments to gauge what is important to the judge and when she wants to hear from you.  Often the judge does not need (or want) to hear from a side who is winning. Be alert and try to read what the judge is really asking before deciding whether an argument or question is really necessary.

Learning from trial textbooks is critical to preparing for trial, but be practical in your approach and be prepared for the unexpected. Ask for help from those who have been through a trial. There is no substitute for experience.

 

Contributing Attorneys

Romance, Mark A. – Shareholder

Five Tips to Reducing the Risk of Litigation

screen-shot-2016-10-14-at-11-49-10-am

By Mark A. Romance and Steven Naclerio

Litigation can have a devastating effect on a company’s productivity and profitability.

Between attorney and expert witness fees, as well as court costs, even simple disputes can quickly cost a staggering amount of money. Aside from the financial costs, litigation is extremely time consuming for company leaders and employees, draining time and energy away from remunerative business activities. Taking time to meet with company lawyers to explain the facts leading to a dispute, evaluate options and plan litigation strategy is only the beginning.

Once a lawsuit is filed, months and even years of depositions, hearings, investigation, document review and management are followed by a stressful trial and verdict and potential appeal which in limited cases can even reach the United States Supreme Court.

Aside from the financial and productivity costs, the final verdict could be crippling to a company depending on what is at stake, not the least of which can be its reputation.

For those reasons, Mark A. Romance and Steven Naclerio of Florida law firm Richman Greer suggest taking active steps to reduce or avoid litigation altogether should be part of every company’s business strategy. Here are five tips that can help:

  • Know your customer. If you are embarking on a new business relationship, do your due diligence and find out as much about your potential partner as you can. An attorney in your jurisdiction can find out if your proposed business partner has been actively involved in past litigation. When the person has filed several lawsuits, and is litigious by nature, this should be a waving red flag in doing business with him or her. People in the trade can provide helpful information as to prior dealings with your proposed new business partner. It is usually easier to perform your research and due diligence at the beginning and get into a good relationship than attempt to extricate yourself from a poor one that includes possible litigation.
  • Exceptional service. Happy customers, vendors and business partners don’t sue companies. Where a customer or business partner has the ability to contact a company and resolve an issue, litigation rarely occurs especially if the company has provided first-rate goods or services in the past. Companies that actively communicate with customers, vendors and business partners to address issues are less likely to find themselves in litigation. This means having trained customer service personnel available to quickly help customers and vendors resolve issues. Sales representatives should know their customers and vendors and develop relationships with them to set expectations properly and to avoid disputes before they happen. If a customer or a vendor knows they are being heard, they are more likely to resolve an issue and less likely to hire a lawyer. When a customer or a vendor has a dispute, ignoring the problem or delaying it rarely avoids litigation. Address the issue head-on before it escalates.
  • Proper contract documents. Many businesses cut corners trying to save costs or relationships by not having proper business relationship documents prepared especially for important transactions. Inadequate, vague or incomplete documentation often leads to uncertainty and ultimately to litigation. Take the time to have a lawyer properly prepare your contracts and purchase and sale documents before you enter into the client relationship and tailor them for each situation. Spending a little money to have an attorney draft an agreement up front can save tens of thousands of dollars in litigation costs if a dispute arises. Make sure that the terms are complete and clear and that they limit your legal liability. Then, when you send a contract document to a customer or a vendor, make sure that it is accepted and keep copies of signed agreements and related materials in your company records. A great document is of no use when a dispute arises if you cannot locate your customer’s assent to the terms. Having a clear, written agreement is key to avoiding litigation because all parties know what to expect from the relationship and what happens if something goes wrong. It is the uncertainty that usually drives litigation.
  • Have a document retention policy. Make sure your employees know what documents they need to keep for regulatory as well as potential litigation purposes. These documents may be useful if a dispute arises. Emails which explain what your customer’s intentions were and how he or she appreciated your service will be useless for the trial attorneys if they have not been properly retained. On the other hand, documents should be discarded if they comply with your internally written policy.
  • Picking the right attorney. When a dispute arises, having the right attorney can be the difference between a quick resolution and expensive, bet-the-company litigation. An experienced attorney will first help you determine what your goals are and will design a strategy to meet your goals without resorting to litigation. Your attorney should be able to evaluate the merits of your position in the dispute, advise you of both your strengths and weaknesses, and approach the other party to the dispute in a way that demonstrates a willingness to resolve the dispute without litigation, but to also show the ability to successfully litigate the issue if necessary. The delicate combination is key to resolving a case without protracted litigation.
  • Litigation can be expensive, time consuming and draining on your time and profits. Appropriate steps should be taken to avoid disputes such as due diligence, focusing resources on exceptional customer relations and ensuring that clear contracts exist with customers and vendors as well as having the proper file materials. When a dispute arises, hire an attorney with the right balance between the ability to quickly resolve a dispute and having the strength to litigate it if necessary.
Mark A. Romance is a shareholder in the Miami office of Florida law firm Richman Greer, where he focuses his practice on commercial and complex litigation. He has significant experience in contract litigation, real estate, employment, product defect, non-compete, trade secret, intellectual property, and estate and trust litigation. He may be reached at mromance@richmangreer.com.

Steven Naclerio is Of Counsel at Richman Greer and focuses his practice on corporate transactions and consulting with high net worth individuals as well as general business matters. He may be reached at snaclerio@richmangreer.com.

To view original article, click here.

 

Trial Preparation: 3 Tips for Starting with the End in Mind

aba
By Mark Romance

Let’s face it, most commercial litigation cases settle before trial as parties often try to avoid the expense and risks associated with a jury trial. But are you prepared to face the jury when your most important client decides to go the distance? Did you take short cuts along the winding path of pre-trial litigation that might make it difficult to try your case? Here are three things you should keep in mind at the beginning of the case so that you are not caught unprepared if your case ultimately goes to trial.

1. What is your theme? At the outset, lawyers in commercial cases often focus on the legal arguments, raising claims and defenses destined to be the focus of summary judgment, and Daubert motions. These issues are, of course, decided by the judge, not a jury. Judges understand the strengths and weaknesses of the law and the expert reports that support or refute the claims and defenses in the case.

But at trial, even in commercial litigation cases, it is the story that most resonates with the jury. With that in mind, you should start developing a theme that will resonate with jurors when you first meet with the client in a new case. At the beginning of your case, identify witnesses, documents, and facts that will best tell your story at trial. Consider what your demonstrative exhibits will look like from the start of the case. Then, as you approach each phase of the case, make sure that you obtain discovery to support your theme and refine your demonstrative exhibits. By the time you get to trial, you will already have witnesses who have testified in deposition, who relied on supporting documents or other evidence, and strong demonstrative exhibits to help you tell your story.

2. Take depositions for use at trial. Depositions are one of the most critical aspects of discovery. Depositions are useful to find out what evidence is out there that will support your side of the case and what you may be facing at trial. Locking down an adverse witness’ testimony in deposition is critical to establish facts needed for summary judgment and to prepare for cross-examination at trial. But depositions also serve a critical function that many lawyers who do not often go to trial overlook. As a matter of procedure, adverse party deposition testimony can be presented to the jury, ideally by video, rather than being read. Adverse party deposition testimony can be a powerful tool at trial as long as the testimony is neatly preserved for use at trial. When you take an adverse party’s deposition you should prepare lines of questioning that can easily be presented to the jury to support your theme of the case.

Similarly, many lawyers do not ask questions of their client during deposition, “saving” their testimony for trial. But a trial-ready lawyer will ask questions in a deposition that are favorable to the established theme because if the adverse party presents the deposition testimony to the jury, parties have the right to designate additional, favorable testimony to also be presented. This is a way to balance some harmful testimony with favorable testimony. While jurors universally dislike video testimony, presenting the video testimony of an adverse party in your case in chief can have an important impact on your ability to present your theme at trial, as can favorable “cross-examination” deposition testimony of your own client.

3. Develop jury instructions early. Jury instructions can be one of the most important aspects of winning a case, whether at trial or on appeal. At trial you will need to introduce evidence to support all your jury instructions, and your ability to do so does not start at trial. Preparing jury instructions should begin when you draft your complaint or your answer. Many lawyers develop what is known as an “order of proof” for trial, which is essentially a checklist of elements of facts needed to be proven to establish claims and defenses. It is critical to know at the beginning of the case what elements must be proven by you and your opposition. Jury instructions will guide you as to what must be proven at trial.

By focusing on what your jury instructions will look like at the beginning you will be able to properly frame your pleadings and tailor your discovery to prepare your case for trial. Developing evidence on the required elements will allow you to frame your jury instructions both legally and factually to support your theory of the case. Develop your instructions early in the case, and refer to them every time you prepare for a deposition, serve written discovery requests or responses, and in preparation for summary judgment. By focusing on your jury instructions early, you will have prepared and followed a game plan that will save you unnecessary stress and last minute preparation, and show you the way to victory.

While most cases never reach trial, starting with the end in mind will allow you to develop a clear game plan that provides you with an easier path to trial, one that is less stressful, and gives you the best chance to present a winning case to the jury.

To view original article, click here.

Contributing Attorneys

Romance, Mark A. – Shareholder

Tips for Businesses to Avoid Litigation

By Mark Romance

Litigation can have a devasting effect on productivity and profitability for company. Between attorney fees, court costs and expert witnesses, even simple disputes can quickly cost a staggering amount of  money. Taking time to meet with company lawyers to explain the facts leading to a dispute, evaluate options and plan litigation strategy is only the beginning. Once a lawsuit is filed, months and even years of depositions, hearings, investigation, document review and management are followed by a stressful trial and verdict.

Aside from the financial and productivity costs, the final verdict could be crippling to a company depending on what is at stake. Taking active steps to reduce or avoid litigation altogether should be part of every company’s business plan.

Here are three tips that can help a company reduce or avoid litigation.

Exceptional service. Happy customers, vendors and business partners don’t sue
companies. Where a customer or business partner has the ability to contact a company and
resolve an issue, litigation rarely occurs. Companies that actively communicate with
customers, vendors and business partners to address issues are less likely to find
themselves in litigation. This means having trained customer service personnel available to
timely help customers and vendors resolve issues.

Sales representatives should know their customers and vendors and develop relationships
with them to set expectations property and to avoid disputes before they happen. If a
customer or a vendor knows they are being heard, they are more likely to resolve an issue
and less likely to hire a lawyer. When a customer or a vendor has a dispute, ignoring the
problem or delaying it rarely avoids litigation. Address the issue head-on before it
escalates.

Proper contract documents. Many businesses cut comers trying to save costs or
relationships by not having proper business relationship documents prepared. Inadequate,
vague or incomplete documentation often leads to uncertainty and ultimately to litigation.
Take the time to have a lawyer properly prepare your contracts and purchase and sale
documents before you enter into the client relationship. Spending a little money to have an
attorney draft an agreement up front can save tens of thousands of dollars in litigation costs
if a dispute arises. Make sure that the terms are complete and clear and that they limit your
legal liability.

Then, when you send a contract document to a customer or a vendor, make sure that it is
accepted and keep copies of signed agreements and related materials in your company
records. A great document is of no use when a dispute arises if you cannot locate your
customer’s assent to the terms. Having a clear, written agreement is key to avoiding
litigation because all parties know what to expect from the relationship and what happens if
something goes wrong. It is the uncertainty that usually drives litigation.

Picking the right attorney. When a dispute arises, having the right attorney can be the
difference between a quick resolution and an expensive, bet-the-company litigation.
An experienced attorney will first help you determine what your goals are and will design a
strategy to meet your goals without resorting to litigation. Your attorney should be able to
evaluate the merits of your position in the dispute, advise you of both your strengths and
weaknesses, and approach the other party to the dispute in a way that demonstrates a
willingness to resolve the dispute without litigation, but to also show the ability to
successfully litigate the issue if necessary. The delicate combination is key to resolving a
case without litigation.

Appropriate steps should be taken to avoid disputes such as focusing resources on exceptional
customer relations and ensuring that clear contracts exist with customers and vendors. When a
dispute arises, hire an attorney with the right balance between the ability to quickly resolve a
dispute and having the strength to litigate it if necessary.

(As published in The Smart Business Magazine) 

Contributing Attorneys

Romance, Mark A. – Shareholder