New York Business Litigation Lawyer Blog

May 26, 2016

Lack of Damages No Bar to Rescinding Contract to Purchase Condominium

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.

March 31, 2016

Lack of “Use” Undermines Common-Law Trademark Claim

by The Silber Law Firm LLC

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.

March 21, 2016

Apple Refused Trademark Registration for IPOD Mark on its Instructional Pamphlet

by The Silber Law Firm LLC

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.

December 29, 2015

Finding No Consideration Court Refuses to Enforce Non-Compete Agreement

by The Silber Law Firm LLC

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.

December 28, 2015

Recent News on Arson Science

by The Silber Law Firm LLC

A short while back, we wrote about fire science being debunked. Recent news highlights this phenomenon.

December 15, 2015

Long-held Beliefs about Arson Science Have Been Debunked

by The Silber Law Firm LLC

The ABA Magazine has a fascinating write-up about arson and fire science that has been called into question by subsequent research. And while it is freeing long-convicted people from jail, some fire investigators are reluctant to move past the outdated science.

For more information about Han Tak Lee’s appeal that freed him from prison after 25 years for allegedly setting a fire that killed his daughter, look here.

December 10, 2015

Court Grants Discharge of Residential Mortgage after Foreclosure Action Is Dismissed

by The Silber Law Firm LLC

In 2005, a property owner borrowed $452,000 with which to buy a residential property. After the borrower’s default, that lender assigned the loan to HSBC. HSBC commenced a foreclosure action which was dismissed in 2007 for failure to serve the borrower. HSBC waited until 2009 to file a second foreclosure action. That action was conditionally dismissed in 2012 because HSBC had not shown proof that a Notice of Default had been served upon the borrower, as required by the loan documents. The conditional dismissal allowed HSBC 60 days within which to provide the required proof, or the case would be dismissed automatically. In 2013, noting that no such proof had been filed with the court, the second foreclosure lawsuit was formally dismissed. In 2014, the borrower sold the property to plaintiff, Ellery Beaver, LLC. Fourteen months after the case was dismissed, HSBC sought its restoration against the borrower. The court denied HSBC’s request.

Thereafter, Ellery Beaver, LLC sought a court order discharging HSBC’s mortgage claiming that the statute of limitations for a foreclosure action to be commenced had expired and the property should not be encumbered by an unenforceable lien. HSBC argued in opposition that because the first lawsuit was dismissed for failure to serve the borrower the time period to sue could not have commenced when that first lawsuit was filed. The Court disagreed, finding that the date of service was not relevant to the statute of limitations consideration. What mattered was the date when HSBC accelerated the loan, which could not have been later than when HSBC commenced the first foreclosure action, in 2005. Thus, the six year limitation period expired in 2012, six years from 2005, and HSBC’s loan would be discharged and the mortgage canceled.

Ellery Beaver, LLC v. HSBC Bank USA, N.A.

December 3, 2015

Laws Struggle to Keep Up as Hoverboards’ Popularity Soars

by The Silber Law Firm LLC

The New York Times has an important write-up, with information that may not be widely known, including the assessment of fines on riders.

Laws Struggle to Keep Up as Hoverboards’ Popularity Soars

October 26, 2015

Court Compels Cablevision to Disclose Identify of Parties Posting to Yelp.com

by The Silber Law Firm LLC

Gerald L. Cohen, D.D.S sought to force Cablevision to disclose the identity of an individual who posted negative comments to Yelp.com. Cohen intended to use that information to commence a lawsuit for defamation against the poster. Previously, Yelp.com had been compelled to provide to Cohen the IP address of the poster, which lead Cohen to discover that Cablevision had set up the account at that IP address. With that information in hand, Cohen asked the Court to force Cablevision to disclose that person’s identity. The Court found that Cohen had demonstrated an injury and meritorious claim and was entitled to this information notwithstanding the ordinary expectation of a poster’s privacy. The Court would not allow unchecked speech, finding that the “use of electronic speech requires a balancing of the two interests, namely free expression versus the right to respond to such expression. Free speech in the electronic age is not unfettered.”

October 8, 2015

Guest Post: Avoid LegalZoom

by The Silber Law Firm LLC

This post was authored by Trippe Fried, Esq., and appeared at http://www.sourcedgeneralcounsel.com/news/2015/8/16/its-like-the-plague-why-entrepreneurs-should-avoid-legalzoom.

Though LegalZoom purportedly offers a low-cost alternative for routine legal matters, in reality it sells only one thing: A false sense of security. And let’s dispense at the outset with the myth that it is self-serving for a business lawyer to be critical of an incorporation service. There is usually more to be made in attorneys’ fees helping clients clean up the messes LegalZoom (or Clerky, or the like) leave behind than handling routine incorporations. But it still needs to be stressed: LegalZoom’s “why use a lawyer when you don’t need one” logic is disingenuous, misleading, and potentially very costly.

You don’t need a lawyer, accountant, or service to incorporate. Anyone can do it by visiting the official government website of the jurisdiction of formation. Some states like New York and New Jersey offer self-explanatory online filing; others like Delaware and California provide easy to complete forms that you submit by mail. Follow the instructions and . . . Voila! . . . you’re business is incorporated.