We’ve seen before how parties have a tendency to drop everything when they sense a chance to do business with the federal government. Authentic Apparel Group et al. v. United States was ostensibly a trademark dispute in the Court of Claims. After the court ruled against them, the plaintiffs appealed to the Federal Circuit.
The case concerned the Army licensing a company called Authentic Apparel the right to use the Army’s trademarks (such as U.S. ARMY) on clothing. The licensee sued the Army for failing to approve certain products. The express provisions of their agreement allowed the Army to agree or not agree, to approve or not approve, anything that was provided to it. Such an approval process certainly makes sense for any trademark licensor, because quality control is a requirement to maintain exclusive control over the rights.
Contracts are made with the assumption that both parties are acting in good faith. So, the Army was effectively required to act reasonably in making any decisions to deny consent to Authentic, notwithstanding the Army’s sole and absolute discretion to approve or disapprove any proposed use of its trademarks.
The most interesting thing about this case was the plaintiffs’ assertion that this is not a matter of contract law. This is a trademark dispute, they argued, and the Army was not approving uses of their trademarks in a way that was for “trademark purposes.”
The court seized on that phrase:
Authentic presents the term ‘for trademark purposes’ as if it is a term of art in the field of trademark licensing law with a well-established meaning. But, although Authentic cites the statutory definition of the term ‘trade mark’ in the Lanham Act…Authentic cites no legal authority that purports to define—or even use—the term ‘for trademark purposes’ in the context of a trademark licensing dispute.
The plaintiffs were likely referring to a much older concept — that only the trademark owner is identified by the trademarks. There’s a more contemporary concept in which the distributor, or the manufacturer, is known as the source of the products, even if they’re bearing trademarks merely licensed to them. The crucial notion of a trademark is that the goods or services emanate from a particular source, not that the consumer can identify the source itself. (For example, the SUBWAY® trademarks are owned by Doctor’s Associates, LLC; not many consumers know THAT, but they certainly know the iconic store logos, etc.)
The Army had approved many other products offered by Authentic. There was no evidence that the Army had been arbitrary or capricious in the way it granted approval. The court affirmed the Court of Claims’ denial of the lawsuit, and it granted summary judgment to the Army.
The takeaway from this case is the same as another case we recently covered involving the Navy: Powerful parties have great leverage, and they can add provisions in the contract that favor them immensely. That’s the risk you take. There’s a great upside, and a terrible risk of not being able to get what you want — these are things to consider before doing business with behemoths.
Mark S. Kaufman
Kaufman & Kahn
kaufman@kaufmankahn.com
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New York, NY 10017
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