The Battle for Yosemite National Park's marks: Lessons for brand owners.
Is a stay at The Majestic Yosemite Hotel on your bucket list? Never heard of it? Here's why. On March 1, the National Park Service made the unusual decision to change the names of several historic designations within Yosemite National Park to avoid a trademark infringement claim from the park's departing concessionaire, Delaware North. The revered The Ahwahnee Hotel, an iconic institution that dates back to 1927, is now The Majestic Yosemite Hotel--and that name change is just one of many. The Park's trademark woes offer several good lessons for businesses that want to outsource their service operations or license their brands and still retain their valuable intellectual property rights.
Congress established Yosemite National Park in 1890. From its inception, private companies were awarded the right to run various visitor services within the Park. In 1899, Curry Co. began operating the Park's concessions. Over the years, Curry built a number of facilities within Yosemite, including The Ahwahnee Hotel and Curry Village (a campsite leading to Half Dome) in which Curry claimed it had an exclusive possessory interest. Drawing on Park history for inspiration, Curry used, and in some cases registered, several trademarks and service marks associated with its Park operations, including "THE AHWAHNEE" for its hotel and restaurant services. The Park never objected to Curry's registrations.
In 1993, Curry lost the right to renew its contract with the Park when the U.S. Interior Secretary declared that foreign-owned corporations could not run concessions at a national park. (Curry corporate parent MCA had been sold to Matsushita of Japan.) To capitalize on its investment at the Park, Curry sold its stock to Delaware North, another concessionaire, for $61.5 million. As part of the deal, Delaware North acquired Curry's vending rights at Yosemite, including Curry's "possessory interest in improvements" and "other property." The asset transfer contract did not define what was included in the term "other property."
Delaware North renewed its vending contract with the Park several times over the next twenty-two years. However, its reign came to an end on June 16, 2015, when the Park announced Aramark as the successful bidder for the Park's concessions contract. Under the Park's contract with Delaware North, a subsequent concessions vender had to purchase Park-related property from Delaware North for "fair value." An initial dispute arose between Delaware North and the Park over the "fair value" of Delaware North's property, which the included the value of the trademark portfolio, Internet domain names, and other assets. The government valued the property at $3.5 million; Delaware estimated it at $51.2 million. The Park did not originally object to including the trademark portfolio in Delaware North's property; that dispute came later.
On Sept. 17, 2015, Delaware North sued the U.S. government for breach of contract in the U.S. Court of Federal Claims, claiming that the National Park Service had failed to meet its contractual obligation to help it sell its assets to Aramark by, among other things, substantially undervaluing the assets.[i]
Delaware North offered the Park a royalty-free license to use the Yosemite trademarks, with the right to sub-license to Aramark, for the duration of the litigation. The Park declined the offer. Instead, on Feb. 26, the Park filed a petition with the U.S. Patent and Trademark Office to cancel Delaware North's Park-related trademark registrations, claiming, among other things, that: (i) the marks created a "false association" with "persons institutions, or national symbols" under 15 U.S.C. [sec][sec] 1052(a), 1064; and (ii) Delaware North has abandoned the marks pursuant to 15 U.S.C. [sec][sec] 1125(c), 1064.
On March 1, the day Aramark began its term as the Park's concessionaire, the Park formally changed the names associated with its concession facilities to protect Aramark from a threatened trademark infringement suit. In addition to sacrificing The Ahwahnee Hotel and Curry Village, a number of other famous Yosemite marks have been put to rest, at least temporarily: The Wawona Hotel became the Big Trees Lodge; Yosemite Lodge at the Falls is now Yosemite Valley Lodge; and Badger Pass Ski Area has been renamed Yosemite Ski and Snowboard Area.
What brand owners can learn from the Yosemite National Park dispute
The roots of the Yosemite National Park trademark dispute reveal several critical lessons for businesses who want to outsource their service operations or license their brands. Had the Park done any of one of the following, visitors to the hallowed grounds might still be sojourning at The Ahwahnee or roughing it at Curry Village.
* Clearly Identify All Intellectual Property Related to the Contract or License:
The National Park Service's contract with its concession vendor never identified the "other property" that was associated with the agreement and apparently never specified who owned any intellectual property rights associated with that "other property." This led to disputes now being litigated in both federal court and the USPTO, because when the Park chose a new vendor it was unclear which "property" the outgoing vendor was required to sell to the incoming vendor, and at what price. The Park could have avoided some of these issues by clearly identifying the specific types of property covered under the agreement as well as the nature of the parties' rights with respect to that property. In addition, the agreement should have clearly spelled out what types of "other property" were required to be conveyed under the agreement. The description of "other property" should have been broad enough to encompass the different intellectual property at stake (e.g., "unregistered and registered trademarks and service marks") but also specifically identify any intellectual property existing at the time the contract was entered (e.g., an itemized list by mark and USPTO registration and/or serial number).
* Specify Whether Licensees are Permitted to Register Any Intellectual Property Related To The Service Contract or License, Require Vendors/Licensees to Gain Approval for Intellectual Property Filings Relating to the Contract/License
The National Park Service's contracts with its vendors were silent about whether vendors had the right to file registrations for any intellectual property associated with the concession license and certainly never specified that the Park would have the right to notice and approval for intellectual property filings, including trademarks. Consequently, third party vendors were able to file trademark applications and obtain registrations without any notice to or input from the Park. In its Complaint, the vendor alleged that the Park had "actual or constructive knowledge" of the marks, because they were publicly filed with the USPTO and published for opposition by third parties without any opposition from the Park. By failing to restrict the concessionaire's right to file for registration or even outline an intellectual property approval process in its contracts with vendors, the Park effectively buried its head in the sand and engendered the current trademark dispute.
A contract or license with a vendor should always expressly specify whether the licensee has the right to file registrations for intellectual property related to the license or contract. As an additional safeguard, the contract should also expressly require the licensee to seek approval before any intellectual property filings related to the subject matter of the license. This will protect the licensor from being blindsided when the license ends and the licensee claims intellectual property relating to the license. In addition, this allows the licensor to determine whether or not it claims any ownership of the intellectual property in a timely manner and by taking the appropriate steps. In the case of the Yosemite marks, the government could have filed a trademark opposition proceeding challenging ownership. At the very least, by gaining knowledge of its vendor's intellectual property filings, the government could have incorporated that information into its contracts and contract renewals to have a clear understanding of what assets would need to be transferred in the event a new vendor was engaged.
* Monitor Intellectual Property Filings by Licensee
It's not clear whether the National Park Service actually knew that its vendors had registered Park-related marks before the 2015 bidding process that resulted in Aramark's award of the vending services contract. If the Park had realized that its vendors were filing for intellectual property protection, it may have stepped in much earlier to challenge ownership. It may be more difficult to challenge an intellectual property registration that has already issued. For example, if a trademark has been registered for five years, it is deemed "incontestable" and attacking the mark becomes much harder.[ii] Therefore, regardless of whether the license specifies that the licensor must give approval for intellectual property filings, it is wise for the licensor to preemptively monitor all intellectual property filings by its licensee.
* Specify What Happens to Intellectual Property When the Contract Ends
Although the Yosemite vendor contract spelled out certain steps for winding up the contract: the outgoing vendor was to sell its "possessory interest" and "other property" to the incoming concessionaire for "fair value" -- it failed to specify how that process was to take place. The term "fair value" was not defined in the contract. If a contract obligates an outgoing licensee to sell intellectual property associated with the license, having a procedure in place to determine the value of that intellectual property is critical to ensure a smooth transition to a new vendor/licensee. This is particularly important in situations like the Yosemite trademark dispute, where it may be difficult to apportion the trademarks' value versus the significance of the location and unique surroundings.
In addition, to the extent that the marks cover goods, not services (such as Delaware North's mark "THE AHWAHNEE", USPTO Reg. No. 2772512 covering goods in classes 021, 024, and 025), the contract should be clear on what is to happen to any leftover merchandise when the contract terminates. Parties to the contract should define whether the outgoing vendor may sell off existing merchandise bearing the mark, destroy any remaining merchandise existing when the contract expires, or is obligated to sell remaining inventory to the incoming licensee -- and for how much. The contract should also set production limits to prevent the outgoing licensee from ramping up production prior to the contract's expiration.
The U.S. government was able to stick-handle around a potential trademark infringement problem by changing the names of several historic properties. Changing the name of an established mark is a costly endeavor and generally not an effective strategy for other licensors who want to retain the goodwill associated with their brands. Businesses looking to outsource their operations or their brands should be mindful of potential intellectual property issues as they negotiate with vendors/licensees, and should consult with intellectual property counsel before entering into any contracts that have the potential to impact their intellectual property assets.
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|Publication:||Inside Counsel Breaking News|
|Date:||Mar 9, 2016|
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