Plaintiff as tenant entered into a five year commercial lease, commencing March 1, 2006. The lease provided that the space would be used as an office for a recruiting firm and nothing else, and would not be used in a manner that would violate the certificate of occupancy (the “CO”), which would result in the tenant’s breach of the lease. In December 2007, the tenant learned that the CO required that the building be used only as residential space. The tenant asked the landlord to correct this, but the landlord refused. The tenant vacated on May 8, 2009. Thereafter, the tenant sued claiming that the lease was invalid and illegal. The landlord claimed that it was an innocent mistake and counterclaimed for breach of contract, claiming that the lease provided that it was the tenant’s obligation to provide for all permits and licenses in connection with the leased space and that the landlord did not make representations as to the legality of the space.

In reversing the lower court, the First Department held that the landlord could not hide behind that lease provision while also representing that commercial use was permitted in the building, specifically as an office. Allowing the landlord’s argument would mean that the tenant was in breach of the lease on the day it moved in. Even if the landlord’s mistake was innocent, the tenant did not get what it bargained for, and may thus be entitled to rescind the lease. The court clearly saw the landlord as the offending party and seemed skeptical of its arguments in refusing to correct or update the CO, to the extent that was even possible.

Notably, the court did not address the tenant’s ability to check public records for the building’s permitted use, which would have informed the tenant of the building’s limited use. It seems that the court was not going to allow the landlord to hide its conduct behind the lease terms, no matter what.

The mark “Dickman’s” could not be registered as it was deemed a surname and ineligible for registration, despite the fact that the applicant’s last name was not Dickman.  This write up provides the details, and illustrates why blindly filing a trademark registration application is not always as straightforward as it seems.

During or after a divorce, the plaintiff alleged that the defendant had terminated a joint annuity account and withdrawn the money, leaving him with a $37,000 tax liability.

The defendant moved for summary judgment dismissing the case, claiming that when the plaintiff agreed to enter into joint annuity contract, he “necessarily assumed the risk of pecuniary injury.”

The Second Department rejected that argument, finding that the assumption of risk argument was limited to claims involving “athletic or recreational activities.”

Parties fighting about the proceeds of a life insurance policy agreed to proceed before a beth din. Although the Second Department’s decision which reversed the lower court does not provide details, it seems that the losing party before the beth din was unhappy with that decision and sued the beth din and one of the rabbis involved. Because the lower court had earlier found that the beth din had exceeded its authority and vacated its decision, that court denied the beth din’s motion for summary judgment dismissing the case.

The Second Department held that unless the rabbinical beth din arbitrators “acted in the clear absence of all jurisdiction,” they were immune from being sued in their roles as arbitrators. The fact that the lower court had previously found that the rabbinical court acted in excess of its authority did not alter their arbitral immunity.

This outcome is unsurprising which leaves the question as to the real motivation behind this lawsuit.

In preparing to purchase a condo unit, the buyer informed the condo board that she was not going to conduct any business in that unit. After she closed, the buyer sought board approval to renovate the unit to accommodate a children’s play group. The condo board filed an action seeking to rescind the contract based on fraud and breach of contract.

The buyer claimed that because State law allows a day care facility in a condo unit, which was to be the actual use of the unit, the board could not point to damages as a result of the buyer’s fraud which was required to recover the unit. The First Department rejected that argument, finding that equitable rescission based on fraud requires no damages, only a misrepresentation that induces the other party to enter into a contract “resulting in some detriment.” Even intent to defraud is unnecessary for rescission.

With that, the Court granted the board’s request to rescind the contract.

Following our last article about “use” and its relationship with the trademark application process, another case we came across further illustrates this concept, albeit in a more limited manner.

Weld-Tech and Aquasol Corp. both sell a plumbing apparatus called “EZ-Purge.” After Aquasol filed for and received trademark registration for the EZ-PURGE mark, Weld-Tech sued claiming that it was the first to use that mark, although without trademark protection, and that Aquasol’s use infringed on Weld-Tech’s common-law trademark, obtained through Weld-Tech’s use. Weld-Tech argued that even if Aquasol had obtained a trademark registration, Weld-Tech’s prior use entitled it to some protection so long as the mark was eligible for registration.

The timing was as follows: Weld-Tech began marketing its product in late 2003 or early 2004 and made its first sale in late 2004. It filed a patent application in March 2004. On April 30, 2004, Aquasol filed a trademark application, based on Aquasol’s intent to use the mark in commerce. The question before the court was which party had priority over the mark, Weld-Tech’s common-law use or Aquasol’s intent to use application.

Late in 2015, Apple’s trademark application for “IPOD,” as used in connection with the pamphlet or instruction manual that accompanies an iPod, was found by an appeals panel to not be “used in commerce” in connection with any good, and denied registration by the United States Patent and Trademark Office (“USPTO”). The brief discussion of how this decision was reached is instructional as to what an applicant must establish to satisfy the “use in commerce” element that is part of a trademark application process.

Apple had filed for a trademark for the IPOD mark as used on its iPod instruction manual inserts. The USPTO denied Apple’s application, finding that the manual was merely instructional and not used in commerce as a “goods in trade.” Apple appealed.

The Trademark Trial and Appeal Board (“TTAB”) discussed generally the qualifications necessary for the issuance of a trademark registration. As part of that, the applicant must show either a use or intend to use of a good in commerce. Because a trademark is put in place by an owner of a good “‘to identify and distinguish” that good and to indicate its source, those goods must be “used” in commerce. This ties that good to the producer in the marketplace and allows that producer to alone be associated with a specific good. To do that, it must be deemed a “good in trade” or commerce. Apple’s IPOD pamphlets were not stand-alone goods in trade, but simply sold “incidental” to the iPod itself. As such, the IPOD mark as used on the pamphlet did not qualify for registration. The same refusal would be issued if an application sought protection for letterhead, for example.

NBTY, Inc. is a manufacturer and seller of vitamins and nutritional products. Piping Rock Health Products, LLC is a competitor run by NBTY’s former CEO. Between the end of 2014 and the middle of 2015, a number of high-level NBTY employees resigned and went to work at Piping Rock. In 2011, while already employed, these individuals signed stock-option/trade secret agreements with Alphabet Holding Company, Inc., NBTY’s parent. Under these agreements, the individuals were (i) able to purchase a number of shares of the common stock of Alphabet, vesting over a period of time, and (ii) learn NBTY’s trade secrets. These agreements also contained restrictive covenants prohibiting the individuals from competing with NBTY for a one-year period following the end of their employment with NBTY and from revealing any of NBTY’s business secrets. After they resigned and went to Piping Rock, NBTY sued to enforce these individuals’ non-compete agreements.

Judge Emerson, sitting in the Commercial Division of Suffolk County, refused to enforce the non-compete provision. The court considered Delaware law (as provided for in the parties’ agreements but noted that it largely tracked New York law), and found that the non-compete restrictions were not supported by valid consideration. This meant that these individuals received no additional benefit for agreeing not to compete and the agreements were therefore not enforceable against them. NBTY argued that the options and access to NBTY’s trade secret were sufficient consideration. The court disagreed and stated that there was no evidence that these individuals did not have access to these secrets before they signed, and the options expired, unexercised, 90 days after they left NBTY. Thus, the court held that because the individuals had a choice between their continued employment with NBTY and exercising their benefits, or foregoing those benefits and competing, which they did, resulted in the individuals receiving no benefit in exchange for the non-compete agreements. The court noted further that while Delaware law allows consideration to be in the form of continued employment, the language of the agreements with NBTY specifically provided that NBTY made no promise of continued employment.

Finally, the court also invalidated the non-compete agreements, finding that they were overbroad in restraining competition in North America, Europe and China.

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