As most business owners know, running a business is extremely difficult. Aside from all the internal decisions that must be made in order to operate a company successfully, business owners must also handle a wide variety of external problems that arise. One external issue that companies often deal with relates to its trademarks. It is not uncommon for new, competing businesses to try and exploit an established brand’s reputation by using a similar name or logo in order to gain recognition and grow its own brand within a marketplace. This infringement activity can be damaging to an existing brand’s reputation, as consumers may associate and confuse the two brands when making a purchase or utilizing its services. This post will explain what trademark infringement is and how deal with infringing activity should it take place.
What is trademark infringement?
Trademark infringement occurs when an unauthorized party uses a trademark or service mark, or a substantially similar mark, in connection with goods and/or services in a manner that is likely to cause confusion as to the actual company that produced the product or service. In a trademark infringement matter, a junior mark holder – the second business to adopt and use a particular mark with its goods or services – attempts to use a mark that is confusingly similar to senior mark holder’s – the first business to adopt and use a particular mark with its goods or services – mark without the senior mark holder’s approval. This confusion between the companies is problematic to the senior mark holder, as it can lead consumers to buy the junior mark holder’s products or services, resulting in lost profits or damage to the senior mark holder’s brand.
Do I have a claim for trademark infringement?
When determining whether you have a viable claim for trademark infringement, you should first ask yourself if you hold the rights to the specific mark. For maximum protection, it is best to have your mark registered with the United States Patent and Trademark Office (“USPTO”), but trademark owners are still afforded some limited protections under common law. Common law trademark rights start once a mark is used in commerce for the first time within a geographic region. These rights allow to trademark owners to stop competing businesses in their area from using a confusingly similar mark, but it is much more difficult to recover any monetary damages without federal protection. Sophisticated business owners should strongly consider registering their mark with the USPTO, as there are a number of benefits to completing this process.
Next, trademark owners should ask themselves, at a basic level, if there is a likelihood of confusion between the alleged infringing mark and their mark. Would consumers in the relevant markets confuse the two marks? In most situations, trademark owners who ask this question already believe that the similarity between the marks causes a degree of confusion, but it is prudent to ask an independent party (or multiple) for an impartial perspective. This basic assessment should further solidify a trademark owner’s belief in any potential infringement claim.
Having an understanding of how courts evaluate claims for trademark infringement will also help trademark owners analyze their situation, and allow them to evaluate their claim more thoroughly. Courts use an eight-factor balancing test when determining whether there is a likelihood of confusion between two marks. Each factor used in the test is important when measuring the possibility of trademark infringement; however, the first three factors are arguably the most heavily weighed in a court’s evaluation:
Other factors include: (4) evidence of actual confusion; (5) the likelihood that the prior owner will “bridge the gap” in the marketplace; (6) intent of the junior user; (7) sophistication of buyers in the marketplace; and (8) quality of the junior user’s products or services. All of these factors will play a significant role in the court’s evaluation since no single factor is determinative, but doing an elementary assessment using first three factors should provide trademark owners with a strong foundation in assessing the strength of their own potential infringement case.
What do I do now?
If a trademark owner believes that someone is infringing upon its mark, there are a couple of options available to facilitate a resolution. Generally, the first step that can be taken to stop the infringement is to send the infringing party a cease and desist letter. The goal of this letter is to inform the infringing party that the use of its mark infringes upon the trademark owner’s rights and to ask it to discontinue its use. This letter should describe any ownership rights in a specific mark and explain how the junior mark is infringing upon these rights. The letter should also clarify what remedy is sought. Along with the request to stop the use of an infringing mark, some parties may also ask for compensation for past use or pose an offer to license the mark for future use.
Typically, a cease and desist letter will at least start a conversation between the two parties. However, this method is not always well received and can be ineffective, as the letter poses no immediate legal implication on the infringing party. Oftentimes, trademark owners will reach out to the infringing party multiple times before deciding to escalate the matter to its next step - litigation. Once litigation proceedings have commenced, trademark owners will then be able to ask the court for a preliminary or temporary injunction, which if granted, will order the alleged infringer to stop using the mark in question pending the outcome of the lawsuit. As with most litigation, fees for trademark infringement cases can be costly, so trademark owners should consider exhausting all available options before filing a claim.
Trademark infringement can be extremely harmful to a brand and must be dealt with as soon as a trademark owner becomes aware of any infringing activity. After analyzing the infringing activity to determine whether it is actually infringement, trademark owners should try to communicate with the infringing party and inform it of its unlawful activity. In order to make sure there is a record of these correspondences, a cease and desist letter would likely be the most effective form of communication. If these attempts are unfruitful, litigation may be imminent to in order to stop the infringing activity. While this may be a costly endeavor, it is necessary to prevent any further damage from being done to your brand by the infringing party.
Analyzing and fighting trademark infringement claims tend to be a complicated matter. If you have any questions regarding trademarks or potential trademark infringement, please feel free to contact us.
(This post was submitted by Patrick Hankins, a rising 3L at Marquette University Law School and an intern at Quiles Law)
In the recently filed complaint against FaZe Clan, Turner “Tfue” Tenney alleges that FaZe signed H1ghSky1, an eleven-year-old gamer, and lied about the minor’s age (claiming that he was thirteen, which has proven true) in order to meet the minimum age requirements for Twitch streaming and competitive Fortnite events. It has been alleged that to maintain the charade, FaZe Clan also pressured H1ghSky1 and his family to maintain the lie. Unfortunately, H1ghSky1’s Twitch account has been banned, presumably due to his actual age not satisfying Twitch’s terms of service.
Given the recent discussion of underage players triggered by this incident, this blog post explores the various potential legal issues of signing a minor to a player contract and methods to prevent these issues from affecting an organization.
Minors Can Disaffirm a Contract
Minors only have the capacity to enter voidable contracts. Generally, jurisdictions allow minors to “disaffirm” a contract before or reasonably after turning 18 years old or if the minor dies within the contract’s effective period.
Disaffirming a contract is any conduct or statement by the minor giving notice of intent to disaffirm, or otherwise leave the contract. To disaffirm a contract, express notice is not required. Typically, this is accomplished by the minor’s oral or written declaration of intent not to fulfill the contract.
Void vs. Voidable Contracts
Void contracts, as the name suggests, mean that a contract is void from the beginning. There is no need for a party to disaffirm the contract because the contract is not enforceable. Contracts that delegate the minor’s authority to contract, any contract by a minor relating to interests in real property (i.e. land ownership), and contracts relating to personal property not in the minor’s immediate possession are considered void at their inception.
In contrast, voidable contracts have the status of potentially becoming void at the request of the wronged party. A contract with a minor is a voidable contract, but it is not void until the minor disaffirms the contract. If the minor does not void the contract, it remains effective even if the contract is voidable.
Generally, parental consent (along with additional terms for the parent) is included in contracts with minors to retain the parent as a guarantor for the minor’s services. Should the minor disaffirm a contract, the disaffirmance does not also apply to the parent’s obligation as a guarantor. The parent would remain liable, based upon the terms of the contract, regardless of the minor’s disaffirmance.
Legally emancipated minors may enter into contracts as if they were 18 years old. Emancipation is the permanent release of parental control and authority over a minor. Effectively, this allows a minor to collect personal earnings and terminates legal parental duties to support the minor. Some states allow minors to emancipate through an express agreement by parent and minor, or an implied agreement from acts and conduct that indicate consent. Other states even have laws that outline procedures which require court petitions that confirm the minor’s emancipated status.
Misrepresentation of Age
Generally, a minor who misrepresents their age will not be bound to a contract. The voidability of the contract depends on the minor’s actual age; the misrepresented age has no effect on whether the minor can disaffirm the contract. In fact, some courts allow minors, despite their fraud, to seek recovery of the consideration paid or seek other equitable remedies.
However, a minority of jurisdictions have established statutes that prevent a minor from disaffirming a contract based on age misrepresentation or if the other party had good reason to believe the minor was able to enter the contract. In those locales, a party’s reliance on a minor’s statements regarding age can serve as the basis of recovery. There, the minor must be retaining benefits provided by the contract which causes substantial harm to the other contracting party.
Some states allow a minor’s contract related to art, entertainment, and professional sports if a court has approved the contract. Once a minor’s contract has been approved by a court, disaffirmance of the contract is only permitted in statutorily provided instances. The states that require court approval also require a parent or legal guardian to establish a trust that keeps a percentage of the minor’s earnings which are not distributed until the minor turns eighteen or otherwise obtains a court order.
What can esports orgs do?
Contracting with a minor is a risky business practice. If an esports organization is seeking to sign a minor player, they should ensure that their contracts adhere to local law not only where the organization is operating, but also where the minor is located, to ensure that sufficient changes to the contract are made, if necessary.
Further, organizations should maintain a rigorous age screening process as misrepresentations of age, even a seemingly insignificant leap from eleven to thirteen years old can have larger ramifications such as violations of streaming platforms’ terms of service or games’ competitive rules. A violation of these terms means ineligibility for streaming or competition, which can have a significant negative impact for the organization.
Thus, esports organizations should not fully shy away from signing minors to player contracts, but keep in mind the extra steps required to establish an amicable agreement that serves both players’ desires as well as organizations’ needs to compete, stream, and influence across multiple platforms.
Quiles Law is an esports and sports law firm based in New York City.
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