Business Disputes; Trademark Infringement; Unfair Competition and Consumer Protection.

With the recent downturn of the economy, many businesses have either dissolved amicably or in dispute. Many disputes can become contentious and involve some complicated legal issues. A frequent problem upon dissolution involves the legal rights surrounding the identification and ownership of certain elements of the business more commonly referred to as intellectual properties. Disputes arise regarding who owns trademarks and logos, domain names, rights to customer and client lists, copyrights and patents, basic office equipment and general assets and liabilities. There are a few common claims that are appropriate where a former partner or employee fails to observe the propriety surrounding the dissolution of a company.

Trademark Dilution and Infringement.

Trademark dilution and infringement generally occurs where a party engages in improper use of a logo or a distinctive mark identified with the company in commerce with the specific intention of confusing consumers between the two companies in order to profit from the use of the descriptive name and goodwill associated therewith. Improper exploitation of such a Mark constitutes trademark infringement and unfair competition, in that consumers may erroneously believe that such marks and/or services are licensed, sponsored, or authorized by you. The false commercial exploitation of the goodwill of a company's Mark, to another's financial benefit and to your detriment, can be extremely damaging. In addition, the infringing use dilutes the distinctiveness of the Mark by trading on the reputation that the public associates with the Mark. Such acts of unfair competition also substantially interfere with the merchandising and licensing of the Mark. The Lanham Act sets forth the federal rights and remedies one may pursue in prosecuting the unauthorized use of a Mark. Section 1125 of the Lanham Act regarding "False designations of origin, false descriptions, and dilution forbidden" provides as follows:

(a)(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which -

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. See 15 U.S.C. 1125 et. seq.

Section (c) (1) further provides as follows:

(c) Remedies for dilution of famous marks

(1) The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection. See 15 U.S.C. 1125 et. seq.

Typically, where a party engages in trademark dilution and infringement, it's appropriate to send a cease and desist letter requesting that said party immediately relinquish any further use of the Mark. If the party then persists in using the Mark without licensure or authorization, it may be appropriate to file suit under the federal act and seek all appropriate damages including an injunction restraining the party from further using the Mark.

Unfair Competition.

Unfair competition is generally defined as the act or practice of engaging in a number of actions including false advertising; "bait and switch" selling tactics; unauthorized substitution of one brand of goods for another; use of confidential information by former employee to solicit customers; theft of trade secrets; breach of a restrictive covenant; trade libel; and false representation of products or services. See generally Restatement Third of Torts Section 13, pp. 37-38.

The Restatement of Torts is an academic volume generally referred to as a legal treatise. The Restatement defines various forms of unfair competition and sets forth damages for such violations. In pertinent part, the Restatement provides as follows:

One who

(a) fraudulently markets his goods or services as those of another, or

(b) infringes another's trademark or trade name, or

(c) markets goods with an unprivileged imitation of the physical appearance of another's goods is liable to the other for relief appropriate under the rules stated in Sections 744-748.

Restatement Second of Torts, Section 711.

In pertinent part, Section 745 provides the following:

One who is liable to another under the rules stated in Sections 711-743 is liable for the pecuniary loss to the other resulting from the harm to his business caused by the actor's conduct, if, but only if, the actor engaged in his conduct with the purpose of securing the benefit of the reputation in the market of the other, or his goods, services, business, trademark or trade name or the physical appearance of his goods.

Restatement Second of Torts, Section 745.

Finally, the Restatement provides for two means of recovering damages when a violation of the above sections are at issue. First, Section 746 sets forth the following:

The pecuniary loss for which damages may be recovered from a defendant under the rule stated in Section 745 includes

(a) profits or reductions of losses which would have resulted to the plaintiff if he had made the sales lost by him because of the defendant's conduct, except when the defendant's profits are recovered under the rule stated in Section 747,

(b) loss on sales made by the plaintiff at prices reasonably reduced because of the defendant's conduct,

(c) harm to the reputation in the market of the plaintiff's goods services or business,

(d) expenditures reasonably made by the plaintiff to prevent prospective purchasers from being misled by the defendant's conduct.

Restatement Second of Torts, Section 745.

Alternatively, a plaintiff may seek relief under Section 747 as follows:

On who is liable to another under the rules stated in Sections 711-743 is liable for the net profits earned by him on profitable transactions by means of the conduct which subjects him to liability, if

(a) he engaged in his conduct with the purpose of securing the benefit of the reputation in the market of the other, or his goods, services, business, trademark, or trade name or the physical appearance of his goods, and

(b) the profits result from the marketing of goods or services

(i) of a kind which compete with those marketed by the other, and

(ii) in markets which the other's goods or services are available for purchase or in which the actor attempts to forestall their sale, and

(c) the other does not recover damages for loss of the sales with reference to which he seeks to recover the profits made by the actor.

Restatement Second of Torts, Section 747.

As such, the damages can be very severe. Similar to trademark infringement, it's typically appropriate to first send a cease and desist letter to the offending party. If the damages are immediate and severe, however, a party may seek an injunction against the offending party restraining any further usage.

Violations of various Consumer Protection laws in numerous states.

Modeled after the federal statutes, many states have consumer protection statutes that govern the allegations concerning intellectual property matters. Most statutes afford recovery for double and treble damages as well as attorney's fees and costs. Under Massachusetts law, such conduct is prohibited by Mass. Gen. Law c. 93A. In pertinent part, Chapter 93A: Section 2 concerning "Unfair practices; legislative intent; rules and regulations" provides as follows:

(a) Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

(b) It is the intent of the legislature that in construing paragraph (a) of this section in actions brought under sections four, nine and eleven, the courts will be guided by the interpretations given by the Federal Trade Commission and the Federal Courts to section 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. 45(a)(1), as from time to time amended.

In pertinent part, Chapter 93A, Section 11 concerning "Persons engaged in business; actions for unfair trade practices; class actions; damages; injunction; costs" provides as follows:

Any person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, real or personal, as a result of the use or employment by another person who engages in any trade or commerce of an unfair method of competition or an unfair or deceptive act or practice declared unlawful by section two or by any rule or regulation issued under paragraph (c) of section two.

Finally, the statute further provides for damages:

If the court finds for the petitioner, recovery shall be in the amount of actual damages; or up to three, but not less than two, times such amount if the court finds that the use or employment of the method of competition or the act or practice was a willful or knowing violation of said section two. For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence regardless of the existence or nonexistence of insurance coverage available in payment of the claim. In addition, the court shall award such other equitable relief, including an injunction, as it deems to be necessary and proper. See Mass. Gen. Law c. 93A, Section Eleven.

Under Massachusetts law, trademark infringement and dilution, defamation and unfair competition clearly constitute a violation of Section Two of Mass. Gen. Law c. 93A. As such, an aggrieved party may seek damages under Mass. Gen. Law c. 93A in order to recover treble damages and attorney's fees. Protection of your Intellectual Property rights is essential. A competent attorney with experience in Intellectual Property matters and litigation will be able to prosecute your rights successfully. We specialize in these matters.


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