UK: New Kids Back On The Block – And Grown Up All Litigious

Daniel Wood, Donald Wahlberg, Jonathan Knight, Jordan Knight, Joseph McIntyre (c/o Cortina Business Management) v SM Productions Partnership

In the matter of CTM Registration No. 4701413 for NEW KIDS ON THE BLOCK in the name of SM Productions Partnership and in the matter of application for declaration of invalidity under OHIM reference No. 2944C by "the band members", c/o Cortina Business Management. OHIM Cancellation Division (Ref 2944C) of 04/12/2009. Rebecca Tilbury reports.

OHIM confirms that bad faith is to be assessed at the date the proprietor files the CTM application and that all contractual agreements and evidence pertinent to the case is to be taken into account.

OHIM cancels CTM registration as Intellectual Property rests with the original band members and the economic value of the mark NEW KIDS ON THE BLOCK remained high, despite varying activity levels. The registrations were filed in bad faith by US company, SM Productions Partnership.

Background

New Kids on the Block (NKOTB) are an American boy band who enjoyed a phenomenal level of success in the 1980s and 1990s and it is estimated that they have sold 80 million records worldwide. NKOTB was formed in 1984 and produced five albums up until 1991.

The five band members filed a declaration of invalidity on 11/06/2008 against CTM Registration No. 4701413 for NEW KIDS ON THE BLOCK covering Classes 9 and 41 which was filed on 4th November 2005. The invalidity action was principally based on the absolute ground under Article 52(1)(b) of Council Regulation (EC) 207/2009 on the basis that SM Productions Partnership (the CTM proprietor) was acting in bad faith when it applied to register the trade mark.

Article 52(1)(b) states as follows:

"A Community Trade Mark shall be declared invalid on application to the Office or on the basis of a counterclaim in infringement proceedings, where the applicant was acting in bad faith when it filed the application for the trade mark".

The other grounds upon which the action was based were:

  • CTM was registered in the name of an agent or representative as per Article 53(1)(b) in relation to Article 8(3) – assuming the registration was without proprietors consent and agent/representative cannot justify their actions.
  • CTM was registered in breach of an earlier unregistered right in pursuant to Article 53(1)(c) in conjunction with Article 8(4) – such rights were invoked with regards to the UK (passing off), Germany (a commercial designation under Section 5 of German Trade Mark Act, a names' right under the German Civil Code, a constitutional right to a name, and copyright in the band name).
  • CTM registered in breach of Article 53(2)(c) because it violates the applicants' copyright to a US protected work under the French copyright legislation and in accordance with the Berne Convention. The applicants also invoked French copyright to the logotype, an album title, a song title and lyrics of a song, all containing the words "New Kids on the Block".
  • The applicants also claimed that the mark NEW KIDS ON THE BLOCK is entitled to protection as a well-known mark under Article 8(2)(c) as per Paris Convention.

The Case for the Applicants

NKOTB was formed in 1984 by Maurice Star and signed an exclusive production agreement with Big Step Productions (BSP), which was jointly owned by Maurice Starr and Richard Scott. BSP dealt with the commercial affairs of the band, such as negotiation of merchandising licences. In 1992, BSP terminated its contract with the band. The termination allowed for a continuation of the recording and merchandising licences put in place by BSP, involving Scott as a receiver of future licence revenues. But crucially, the termination also included an assignment to all five band members of all BSP rights in and to the band's name and logo including all trade mark and copyright rights. After this termination, NKOTB continued to perform and a sixth album was released by them in 1994.

NKOTB did not produce any further albums before the date of filing of the CTM on 4th November 2005. The artistic body of work which they had created continued to receive exposure on radio and television after the filing date in question because of the fan base and hit records they put into the market and a range of greatest hits albums were produced. NKOTB argued that this exposure continued to generate goodwill under the mark "NEW KIDS ON THE BLOCK" which duly accrued to the individual band members as owners of the mark, as well as generation of royalty payments. The television programmes MTV and VH1 tried to reunite the band members and this generated publicity and in or around 2007, the band started come back concerts in the United States.

The CTM proprietor, SM Productions Partnership, principally consisted of partners Richard Scott and Denny Marte. At the time when the application was filed on 4th November 2005, Richard Scott (formerly of BSP) was no doubt aware of the history of the band given his former relationship and indeed the assignment of the IP rights to the individual band members. Just because certain trade mark registrations had lapsed did not mean the abandonment of the band members rights but rather to the contrary, in that the mark "NEW KIDS ON THE BLOCK" was still in full commercial use, as evidenced by revenue and royalty payments.

Although the CTM proprietor was never a contracted agent/representative under Article 8(3), Richard Scott did allege in a statement to the USPTO that he was submitting a US application in his own name but on behalf of the individual band members. Thus, the applicants argue that he essentially did the same with regards the CTM registration.

The mark "NEW KIDS ON THE BLOCK", the right to which vests in the applicants, argued that this consisted of "more than mere local significance" and thus in connection with the UK, they could prohibit the proprietor under the common law tort of passing off.

The applicants submitted significant evidence showing use of the mark worldwide and in vast areas of the member states of the EU. This evidence included extracts from the fan club website, press articles, royalty payment schedules from Sony BMG and an extract from Wikipedia.

The Case for the Defendants

The CTM proprietor argued that at the time of filing the application for registration, the band had not been active for 11 years and that Richard Scott had sent the attorneys acting for the band a message detailing the filing in the US, thus they argued that they did not have a dishonest intention. The CTM proprietor disputed the statements made by NKOTB, in that the band had ceased to exist in 1994 and had not been promoting itself or recording new material thus they argued that the mark had been long abandoned by the time of filing the CTM application on 4th November 2005. In relation to Article 8 (3), the CTM proprietor argued that they had never been agent or representative and the applicants failed to support this ground through evidence.

In relation to the claim under the tort of passing off, the proprietor made reference to the decision in Star Industrial Co Ltd V Yap Kwee Kor, where the action for passing off was dismissed on a finding that the plaintiff had indeed abandoned its goodwill. The CTM proprietor argued that the vast majority of record sales would have taken place pre-1994 and although in relation to the termination agreement, the clause grants the band all "right" and "interest" in the band's name the word "goodwill" was not present, thus the proprietor argued that this remained with BSP. In relation to the invoked German rights, commercial designation, title rights and rights to a name are all argued by the CTM proprietor to be inapplicable since the applicants had abandoned such rights since 1994. This issue of abandonment was also raised again in relation to the "well known mark" under Article 6bis of the Paris Convention due to the 11 years of non-use, thus this claim should fail.

The Decision

  1. Bad Faith

    Of course, neither the CTM regulation nor the implementing regulation provides any guidance on what the term "bad faith" actually means in the legal sense and in practice. OHIM has indicated that bad faith can be considered to be "dishonesty which would fall short of the standards of acceptable commercial behaviour" which is in line with UK case law. The cancellation division stated that "bad faith generally implies or involves, but is not limited to, actual or constructive fraud, or a design to mislead or deceive another, or any other sinister motive. Conceptually, bad faith can be understood as a dishonest intention".

    Thus, did the applicant at the time the CTM application was filed lack any honest intention?

    In the recent Chocolate Bunny case "Lindt Goldhase", the ECJ decided that "the mere fact that the CTM proprietor, at the time of filing of the contested mark, knew of the earlier use of the same sign by a third party, is not sufficient to constitute bad faith". All other factors pertinent to the case should be taken into account and OHIM decided that the argument put forward by the proprietor relating to the phrase "any and all right, title and interest" was a "twisted construction" because it was contrary to any normal reading of the phrase.

    OHIM concluded that the termination contract contained explicitly clear and unambiguous textual content and the economic interests of the band in the name NEW KIDS ON THE BLOCK were prevalent at the time when the CTM proprietor filed the application, thus there was no question that they had shown their entitlement to make use of the ground Article 52(1)(b).

    Richard Scott, a former shareholder of BSP, had definite knowledge of the earlier use made of the mark by the five band members and the commercial use through merchandising and royalty payments. It was not disputed that this knowledge was with the proprietor when the CTM application was filed

    OHIM detailed that Richard Scott, as a share holder of BSP, should be viewed as having had a post-contractual relationship with the band members, not least because at the time of the termination of the contract, Scott remained as a perpetual receiver of license revenues from record sales and merchandise thus he was "in a position where a high degree of attentiveness and precaution should have been present in order not to harm the interests of the applicants".
  2. Economic Value of the Sign

    The fact that the CTM proprietor actually submitted the CTM application for "NEW KIDS ON THE BLOCK" is a high indication that it was aware of the remaining economic value of the sign, given that the reunion attempts created public interest and the evidence put forward by the applicants highlighted that there was and is a substantial degree of recognition and recollection by people of the band name, thus a new band with the same name would have taken advantage of the public resonance with the sign. Thus, the conclusion is twofold:

    1. clear indication of existing goodwill of the sign; and
    2. CTM proprietor must have known that the rights vested with the applicants, due to the clear wording of the termination agreement.

    The fact that the proprietor contacted the attorney for the band members and advised of the US trade mark application does not conclude that consent was given and if the proprietor had been interested in instigating formal negotiations to use the band name then a meeting should have occurred with all five band members, not just allegedly one band member Donald Wahlberg.

    The band enjoyed massive commercial success in the late 1980s and early 1990s with more than 30 million records sold, which OHIM detailed as a "phenomenon out of the ordinary". At the time the proprietor filed the CTM application, the mark had considerable economic potential and because of the historical connections which the proprietor had with the band and also the music industry, they would have readily known this.

    "CTM proprietor's sole aim in taking advantage of the rights conferred by the CTM constitute an unfair act in relation to the applicants and the legal protection still valid for the mark "New Kids on the Block"".

Comment

OHIM confirmed that no aspects of the case indicated a legitimate interest or objective of the proprietor and thus revoked the mark in its entirety in accordance with Article 52(1)(b) on the basis of bad faith. Because the CTM was declared invalid on this ground, OHIM did not provide guidance in relation to the other grounds.

In accordance with Article 85(1) and Rule 94, the CTM proprietor was ordered to bear the fees and costs of the other party.

This decision confirms the approach to be taken when looking into issues concerning bad faith and the meaning of bad faith. This decision affirmed the decision of the ECJ in Lindt that the relevant date for determining bad faith is the date of filing of the application in question. This decision also confirms that historical information regarding contracts and evidence of use of the mark to establish goodwill is crucial for OHIM to assess the merits of the ground properly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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