J.T. Colby & Company, Inc. et al v. Apple, Inc.

Filing 90

MEMORANDUM OF LAW in Support re: 87 MOTION for Partial Summary Judgment.. Document filed by Ipicturebooks LLC, J.Boyston & Company, J.T. Colby & Company, Inc., Publishers LLC. (Chattoraj, Partha)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
J.T. COLBY & COMPANY, INC. d/b/a
BRICK TOWER PRESS, J. BOYLSTON &
COMPANY, PUBLISHERS LLC and
IPICTUREBOOKS LLC,

Case No. 11-cv-4060 (DLC)

Plaintiffs,
-againstAPPLE INC.,
Defendant.

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ MOTION
FOR PARTIAL SUMMARY JUDGMENT AGAINST DEFENDANT APPLE INC.

ALLEGAERT BERGER & VOGEL LLP
Partha P. Chattoraj
David A. Shaiman
111 Broadway, 20th Floor
New York, New York 10006
[phone]
Attorneys for Plaintiffs J.T. Colby & Co., Inc. d/b/a
Brick Tower Press, J. Boylston & Co., Publishers,
LLC, and ipicturebooks, LLC
Of Counsel:
Robert L. Raskopf
Claudia T. Bogdanos
QUINN EMANUEL URQUHART & SULLIVAN, LLP
51 Madison Avenue, 22nd Floor
New York, New York 10010
Telephone: [phone]
Facsimile: [phone]

Page(s)
TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .....................................................................................................1
STATEMENT OF FACTS ..............................................................................................................5
A.

The iBooks Imprint .................................................................................................5

B.

Ibooks, Inc.’s Application for Trademark Registration ...........................................6

C.

Family Systems Ltd. and its Ibook Web Collaboration System ..............................7

D.

Apple’s Registration No. 2,470,147 and the 1999 Consent
Agreement ................................................................................................................9

E.

Apple’s Alleged Purchase of Family Systems’ IBOOK Mark ..............................11

F.

Plaintiffs Notify Apple of Their IBOOKS Trademark ..........................................13

G.

Apple Has No Direct Knowledge or Interest in the Family Systems
ibook Business .......................................................................................................14

H.

Apple’s iBooks App and Related Products and Services ......................................18

ARGUMENT ................................................................................................................................20
I.

Summary Judgment Standard ................................................................................20

II.

Family Systems’ Assignment of the 634 Registration to Apple Was
an Invalid Assignment in Gross .............................................................................20
A.

Under the continuity test, the assignment of the 634
Registration from Family Systems to Apple was an invalid
assignment in gross ....................................................................................22

B.

Under the substantial similarity test, the assignment of the
634 Registration from Family Systems to Apple was an
invalid assignment in gross........................................................................25

CONCLUSION ..............................................................................................................................30

i

Page(s)
TABLE OF AUTHORITIES
Cases
Am. Exp. Mktg. & Dev. Corp. v. Black Card LLC,
No. 10 Civ. 1605 (DLC), 2011 WL 5825146 (S.D.N.Y. Nov. 17, 2011)..................................... 21
Bambu Sales, Inc., v. Sultana Crackers, Inc.,
683 F. Supp. 899 (E.D.N.Y. 1988) ............................................................................................... 25
Berni v. Int’l Gourmet Restaurants of Am., Inc.,
838 F.2d 642 (2d Cir. 1988).......................................................................................................... 22
Clark & Freeman Corp. v. Heartland Shoe Co., Inc. v. The Heartland Co. Ltd.,
811 F. Supp. 137 (S.D.N.Y. 1993).................................................................................... 25, 26, 29
Diarama Trading Co. v. Thompson,
194 F. App’x 81 (2d Cir. 2006) .................................................................................................... 20
Diarama Trading Co., Inc. v. J. Walter Thompson U.S.A., Inc.,
No. 01 Civ. 2950(DAB), 2005 WL 2148925 (S.D.N.Y. Sept. 6, 2005) ....................................... 20
Fitzpatrick v. Sony-BMG Music Entertainment, Inc.,
2010 WL 3377500, No. 07-cv-2933 (SAS) (S.D.N.Y. August 24, 2010) .................................... 23
General Cigar Co., Inc. v. G.D.M., Inc.,
988 F. Supp. 647 (S.D.N.Y. 1997)................................................................................................ 25
InterState Net Bank v. NetB@nk, Inc.,
348 F. Supp. 2d 340 (D.N.J. 2004), ................................................................................... 26-27, 29
Marshak v. Green,
746 F.2d 927 (2d Cir. 1984).................................................................................................... 21, 22
Marshak v. Schaffner,
No. 11 Civ. 1104(DLC), 2012 WL 1658393 (S.D.N.Y. May 11, 2012) ................................. 20-21
Pilates, Inc. v. Current Concepts, Inc.,
120 F. Supp. 2d 286 (S.D.N.Y. 2000)................................................................................ 21-22, 27
Syntex Labs., Inc. v. Norwich Pharm. Co.,
315 F. Supp. 45 (S.D.N.Y. 1970).................................................................................................. 23
Universal City Studios, Inc. v. Nintendo Co., Ltd.,
578 F. Supp. 911 (S.D.N.Y. 1983)................................................................................................ 21

ii

Page(s)
Other Authorities
15 U.S.C. § 1119 ........................................................................................................................... 21
Fed. R. Civ. P. 30(b)(6)................................................................................................................... 3
Fed. R. Civ. P. 56 ............................................................................................................................ 1
KANE ON TRADEMARK LAW § 21:3.1 (2011) ................................................................................ 21
KANE ON TRADEMARK LAW § 21:4 (2011) ............................................................................. 17, 30
Lanham Act, § 37 .......................................................................................................................... 21
MCCARTHY ON TRADEMARKS § 18:23 ............................................................................... 23

iii

Plaintiffs J.T. Colby & Co., Inc. d/b/a Brick Tower Press, J. Boylston & Co., Publishers,
LLC, and ipicturebooks, LLC (“Plaintiffs”) respectfully submit this Memorandum of Law in
support of their Motion for Partial Summary Judgment against Defendant Apple Inc. (“Apple”),
seeking cancellation of Defendant’s IBOOKS trademark registration, pursuant to Fed. R. Civ. P.
56.
PRELIMINARY STATEMENT
Family Systems Limited is an Isle of Man entity that provided wiki-like Internet
collaboration software to individuals and businesses, starting in October 2000. In January 2010,
its flagship product was its “ibook Voice System,” utilizing “shared web accessible memory for
voice conversations for the first time in history,” which it offered through its website
www.ibook.com. Around 2 AM Eastern Time on January 27, 2010, after two weeks of
negotiation, Family Systems agreed to sell to Apple its “ibook” and “i-book” domain names, as
well as its trademark registrations for the trademark IBOOK, including United States
Registration No. 2,446,634 for software “to support and create interactive, user-modifiable
books,” for
Later that same day, Apple’s then-CEO Steve Jobs announced Apple’s new iPad tablet
computer to the world. One of the iPad’s flagship “apps” would be iBooks, which could be used
to purchase, download and read electronic books on the iPad. Apple also announced that the
iPad, and the iBooks software, would be available for sale to the public in April 2010.
The assignment agreement between Family Systems and Apple, dated as of January 26,
2010, recited that, in addition to the domain names and trademark registrations, Family Systems
was also conveying to Apple “all goodwill associated therewith.” This was to be expected,
because “a transfer of goodwill is required in order for an assignment of a mark to be effective,”

a long-established principle set forth, among other places, in the treatise KANE ON TRADEMARK
LAW, authored by one of Apple’s own expert witnesses in this litigation.
Other than that recital, however, the assignment agreement did not expressly provide for
the transfer of any goodwill associated with Family Systems’ trademark:
•

The assignment agreement did not convey any of Family Systems’ other intellectual
property, such as the several patents that Family Systems had obtained for its ibook
“interactive web-collaboration system.”

•

It did not require Apple to continue to offer the same services through the
www.ibook.com website – which URL Apple redirected to the web page
www.apple.com/ipad/built-in-apps/, where the iBooks software appears several screens
down.

•

It did not provide for the transfer of any of Family Systems’ tangible assets, such as
Internet servers, data rooms or offices.

•

It did not include any transfer of customer or email lists, or market research data, or
business plans.

•

It did not call for any of Family Systems’ employees, including the visionary CEO who
founded the company to bring his ideas to the marketplace, to be employed by Apple.

•

And it did not even require Family Systems to desist from operating the same business as
before, with the same interactive voice-based web-collaboration services, under a
different trademark and domain name – which Family Systems did, in fact, do, under the
name VERBOL. (See Declaration of Partha P. Chattoraj in Support of Plaintiffs’ Motion
for Partial Summary Judgment (“Chattoraj Decl.”) Ex. 76, at January 29, 2010 entry.)

2

And, consistent with the document itself, no such transfers or changes of conduct actually
occurred, as Thomas La Perle, Apple’s in-house trademark counsel and the Rule 30(b)(6)
representative designated by Apple to testify with respect to the Family Systems transaction (see
Chattoraj Decl. Ex. 77, Defendant Apple Inc.’s Amended Responses and Objections to Plaintiffs
Notice of Deposition of Defendant Apple Inc. Pursuant to Fed. R. Civ. P. 30(b)(6), dated July 16,
2012; see also Chattoraj Decl. Ex. 78, La Perle Dep. 20:13-14), admitted. (See Chattoraj Decl.
Ex. 23, La Perle Dep. 125:10-126:9; see also Chattoraj Dec. Ex. 79, La Perle Dep. 132:9133:13.)
Indeed, as each of Apple’s fact witnesses has testified, Apple never had any interest in
Family Systems’ business, and Apple never had any intention of continuing the business or
selling the software that Family Systems had offered under the IBOOK mark. When Apple
contacted Family Systems to arrange the purchase in mid-January 2010, Apple had already
decided that it was going to release an application to purchase, download and read books on the
iPad, and that the application would be called “iBooks.” Instead, as one of Apple’s trademark
lawyers wrote to Family Systems during their negotiations over the purchase price, “Apple is
really only interested in the marks and domains associated with IBOOK. They are not trying to
purchase any of the underlying goods or services that may be associated with the mark or
domain.”
Even though the business associated with the mark before February 2010 had literally no
relationship with Apple’s iBooks app, Apple maintains that it owns the Family Systems IBOOK
trademark registration, including its 1996 priority date (based on Family Systems’ initial “intent
to use” application). In May 2010, Apple made an effort to adapt the Family Systems mark to
reflect the present reality, and asked the PTO to amend the Family Systems registered mark

3

IBOOK (which Family Systems had previously used for its “interactive web collaboration
system”) to the mark IBOOKS, on the grounds that the addition of the “S” “creates the
impression of being essentially the same mark.” In April 2010, when the iPad and the iBooks
app were released, Apple also filed a new trademark application for the mark IBOOKS for
“software for reading electronic publications on digital electronic devices” and “for authoring,
downloading, receiving, editing, displaying, storing and organizing text, graphics, images and
electronic publications,” which it predicated on Family Systems’ first use of the IBOOK mark in
commerce, in October 2000.
This motion seeks partial summary judgment that the January 2010 assignment of the
IBOOK trademark registration from Family Systems to Apple, executed hours before the iBooks
announcement and recorded with the Patent and Trademark Office several days later, was a
textbook “assignment in gross” under well-established trademark law, requiring cancellation of
Apple’s United States Trademark Registration No. 2,446,634 (the “634 Registration”). Although
other substantive issues in this case – such as infringement, damages, and Apple’s fraudulent
filings with the PTO, among other things – are disputed and must ultimately be determined by a
fact-finder, this Court can already determine, based on undisputed facts, that the trademark
assignment from Family Systems to Apple was invalid as a matter of law. Stripped of the 634
Registration, Apple is not entitled to rely on Family Systems’ alleged priority over Plaintiffs in
use of the IBOOKS mark, and Plaintiffs, who operate a business that has used the IBOOKS
imprint on print and electronic books since 1999, are the senior users of the mark. The
remaining issues in this case should be scheduled for trial.

4

STATEMENT OF FACTS
A.

The iBooks Imprint
Ibooks, Inc. was founded in 1999 by Byron Preiss, who intended to build a new paradigm

for book publishing companies by, among other things, simultaneously distributing its books,
bearing the imprint “iBooks,” in traditional trade paperback and hardcover formats through its
print distributor, Simon & Schuster, and in various electronic formats. (See Chattoraj Decl. Ex.
40, COLBYHD0458339.) The company soon was considered an established “brand within the
[publishing] industry” (Chattoraj Decl. Ex. 39, Freese Depo. 105:21). On March 7, 2005,
Publishers Weekly named the company one of the ten outstanding independent publishers of the
year. (See Chattoraj Decl. Ex. 88, Jim Milliot, Bucking the Odds: Indie Publishers Tap New
Channels to Spur Growth, PUBLISHERS WEEKLY, Mar. 7, 2005, available at
http://www.publishersweekly.com/pw/print/20050307/29773-bucking-the-odds.html.) Between
1999 and May 2012, books published under the iBooks imprint have had net sales of
. (See Chattoraj Decl. Ex. 41, Summary of Plaintiffs’ Supplemental Response to
Interrogatory No. 9, dated August 20, 2012.)
In 2005, Byron Preiss was suddenly and tragically killed in a car accident, and, without
his leadership, his companies, including Ibooks, Inc., entered into bankruptcy. (See Chattoraj
Decl. Ex. 42, Colby 30(b)(6) Dep. 23-24). Plaintiffs purchased all of the assets of Preiss’s
companies, including Byron Preiss Visual Publications Inc. and Ibooks, Inc., from the
bankruptcy trustee. (See Chattoraj Decl. Ex. 80, Colby 30(b)(6) Dep. 43:25-55:9.) Through a
Bill of Sale, dated December 13, 2006, Mr. Colby purchased all of the tangible and intangible
assets of Ibooks, Inc., including the IBOOKS mark. (See Chattoraj Decl. Ex. 43,
COLBYHD0233074.) Mr. Colby then continued the iBooks business, selling books from its

5

back catalog and publishing new titles. On December 12, 2006, because his companies intended
to continue to do business as “ibooks,” Mr. Colby registered the name iBooks with the New
York Department of State fictitious business name directory. (See Chattoraj Decl. Ex, 81,
Certificate of Assumed Name.) Since Colby’s purchase of Ibooks, Inc. and the IBOOKS mark,
Plaintiffs have continued to offer over 1200 titles for sale under their iBooks imprint. (See
Chattoraj Ex. 89, Colby 30(b)(6) Dep. 171:7-12.) The company currently sells both electronic
and “paper” books, through Amazon’s Kindle Store, Barnes & Noble, and other retailers. (See
Chattoraj Ex. 90, Colby 30(b)(6) Dep. 194:7-23.)
B.

Ibooks, Inc.’s Application for Trademark Registration
On August 27, 1999, upon the declaration of Byron Preiss, Ibooks, Inc. filed an Intent to

Use Application for the mark “IBOOKS” for use in commerce in connection with books in Class
016 and for e-commerce book retail services in Class 042. (See Chattoraj Decl. Ex. 2, U.S. PTO
Serial No. 75786491, Intent to Use Application, dated August 25, 1999.) On March 4, 2002, the
examining attorney issued an Office Action suspending the prosecution of Ibooks, Inc.’s
application based upon the alleged likelihood of confusion between the proposed IBOOKS mark
and the prior IBOOK registration by Family Systems, as well as another registrant1. (See
Chattoraj Decl. Ex. 49, Response to Office Action, dated September 4, 2002). In response,
Ibooks, Inc. argued, among other things, “Applicant’s sales have been over $5,154,493 through
June 2002, nearly $253,083 has been spent on advertising, and there has been no actual
confusion.” (Id.) This filing has been publicly available ever since. Although the company
continued to sell many thousands of books with the iBooks imprint, its federal trademark

1

The other registrant, the University of Illinois Board of Trustees, owned a registration for the mark I BOOK in
connection with “calendar handbooks,” first used in August 1988. (U.S. TM Reg. No. 1,723,733.)

6

registration application was deemed abandoned on July 21, 2003. (See Chattoraj Decl. Ex. 50,
Notice of Abandonment, dated July 21, 2003.)
C.

Family Systems Ltd. and its Ibook Web Collaboration System
Family Systems Ltd. (“Family Systems”) is a company founded and run by Brian

Reynolds, the former head of a technology corporation called Micro Systems, to function as a
“business entity for his projects and ideas” after Micro Systems went public. (See Chattoraj
Decl. Ex. 44, Goldhor Dep. 14:5-13.) On October 8, 1996, Family Systems submitted an Intent
to Use Application to the PTO for the mark IBOOK for “computer hardware and software used
to create interactive, user modifiable electronic books.” (56.1 Statement ¶ 1) Family Systems
later notified the PTO that it had begun using the IBOOK mark in commerce on October 27,
2000. (See id.) The Registration was granted to Family Systems on April 24, 2001. (See id.)
In connection with its ibook software, Family Systems obtained at least two patents; one
filed on February 28, 2004 and awarded to Family Systems founder Brian Reynolds
(“Reynolds”) and consultant Richard Goldhor on November 4, 2008 (the “748 Patent”) (see
Chattoraj Decl. Ex. 4, U.S. Patent No. 7,447,748.), and one filed on May 14, 2003 and awarded
to Reynolds, and Mark J. Hanover on August 4, 2009 (the “212 Patent”) (see Chattoraj Decl. Ex.
68, U.S. Patent No, 7,571,212). The 748 Patent was awarded for the invention of an
“[i]nteractive web book system.” The patent abstract defines Family Systems’ ibook product as
follows:
An interactive Web book (‘ibook’) system is provided that allows material
to be contributed to the World Wide Web. An ibook is a self-extending,
self-sustaining information-redistributing Web robot, which is resident on
a data network such as the Internet or an intranet. Users may enroll with
an ibook as viewers or contributors. Viewers may view ibook material,
such as text or multimedia content. Contributors may contribute original
material to the ibook or may create derivations of existing ibook material. .

7

. . The ibook system keeps track of how often users access each work
within an ibook. (56.1 Statement ¶ 3, U.S. Patent No. 7,447,748.)
The 212 Patent was awarded for the invention of “[i]nteractive web collaboration systems and
methods.” The Background of the Invention section of the patent explains that the ibook system
relates to “the Internet, and more particularly, to techniques for creating and viewing material on
the World Wide Web in the form of an interactive website, and to techniques by which multiple
individuals can communicate with each other and work collaboratively on content and materials
in an interactive web site.” (56.1 Statement ¶ 4, U.S. Patent No, 7,571, 212 (internal quotation
marks omitted).) (Notably, in its alleged acquisition of the Family Systems IBOOK trademark,
Apple did not purchase or license these or any other patents underlying the Family Systems
ibook technology.)
When Mr. Goldhor – the only deposition witness who offered sworn testimony about the
Family Systems business based on personal knowledge – was asked to describe the Family
Systems ibook product during his deposition in this matter, he stated:
A:

Q:
A:
Q:
A:

Family Systems ibook was a system and architecture for allowing a
community to create materials. Including text, but not limited to text, and
to publish it using web technologies, but also to make it possible for
multiple members of the community to edit that material, comment on it,
create their own versions of it and so forth.
In some ways it sounds like a precursor to Facebook; would that be it?
More like a precursor to Wiki.
Wikipedia?
Yeah.

(56.1 Statement ¶ 5, Goldhor Dep. 20:4-16.) Family Systems also contracted with a Silicon
Valley based consulting group2 to market the Family Systems ibook product to businesses as a
system to “support individuals and distributed product groups as they work and collaborate
2

See Chattoraj Decl. Ex. 45Press Release, dated August 21, 2001, Family Systems and Tong McCandless Group
Sign Business Development Agreement: Silicon Valley Consultants to Provide Marketing and Sales Services for
International Web-Based Collaboration Tools Developer, at Goldhor Dep. Ex. 5, pp 117-18.

8

wherever they are”, allowing “any non-technical user to [to] publish their documents and other
standard personal and office files to the Web for private or public access.” (56.1 Statement ¶ 6,
Press Release, dated March 12, 2002, Family Systems launches the ibook® Family of Software
Products for a Better Way of Working Together, at Goldhor Dep. Ex. 5, pp 113-14). Several
businesses contracted with Family Systems for use of the Family Systems ibook product.3
Neither the IBOOK mark, nor the underlying technologies, were ever used to allow users to view
existing published works of fiction. (See 56.1 ¶ 7, Goldhor Dep. 44:17-45:19). Family Systems
built goodwill in connection with the IBOOK mark over the course of at least ten years of
continuous operation and distribution of the ibook collaboration system. (See 56.1 Statement ¶
1.)
D.

Apple’s Registration No. 2,470,147 and the 1999 Consent Agreement
On November 6, 1998, Apple submitted an Intent to Use Application for the mark

“IBOOK” for “Computers, computer hardware, computer peripherals and users manuals sold
therewith.” (Chattoraj Decl. Ex. 82, Intent to Use Application, Ser. No. 75/584,233.) On June
23, 1999, the examining attorney issued an Office Action suspending the prosecution of Apple’s
application based upon the prior application of Family Systems, discussed above. (See 56.1
Statement ¶ 12, Response to Office Action re: Serial No. 75/584,233, dated July 22, 1999.) In
order to obtain a registration for their use, Apple enlisted outside counsel, Anthony Lupo
(“Lupo”) to approach and purchase the Family Systems IBOOK mark. (See 56.1 Statement ¶ 12,
Lupo Dep. 31:19-22.)

3

See Chattoraj Decl. Ex. 45, Press Release, dated August 21, 2001, Norton Practice Launches ibook®-Based Client
Website Using Family Systems Technology, Consulting Services, at Goldhor Dep. Ex. 5, pp. 115-16; Chattoraj Decl.
Ex. 45, Press Release, dated June 4, 2001, Family Systems Offers Radiant Communications Hosting Services for
ibooks®, at Goldhor Dep. Ex. 5, pp. 119-20.

9

Even though Apple wished only to use the mark on its notebook computer, Mr. Lupo
initially offered Family Systems

for the outright purchase of the Family Systems

trademark for its web collaboration software (see 56.1 Statement ¶ 12, Goldhor Dep. 68:9-24).
This initial offer was rejected out of hand. (See id., Goldhor Dep. 68-69.) Soon after this initial
rejection, Mr. Lupo disclosed that his client was Apple, whereupon “serious negotiations began.”
(Id., Goldhor Dep. 70:11-13.) After some time, the parties reached a deal, calling for Apple to
pay

, as the junior user of the mark, to Family Systems, in return for Family Systems’

consent to Apple’s registration of IBOOK for use with its notebook computer. (See id., Goldhor
Dep. 71.) In their agreement, Apple represented that it intended to use the mark IBOOK “in
association with computer hardware . . . excluding software and software related goods and
services,” and Family Systems represented that it would use the mark IBOOK for “computer
hardware and software used to support and create interactive, user-modifiable electronic books
and related goods and services.” (See 56.1 Statement ¶ 12, Consent Agreement, dated as of May
7, 1999, ¶¶ 1-2.). Each of Apple and Family Systems agreed that the other’s use was not likely
to cause confusion with its own use of the mark, and therefore that Family System’s use should
not block Apple’s registration from proceeding to publication. (See id. ¶¶ 6, 9.) Apple filed the
consent agreement with the PTO (omitting the “Appendix” that provided the payment terms) as a
Response to Office Action. (See 56.1 Statement ¶ 12, Response to Office Action with regard to
Serial No. 75/584,233.) A registration was then issued to Apple for its IBOOK hardware mark,
on July 17, 2001. (See Chattoraj Decl. Ex. 83, U.S. TM Reg. No. 2,470,147.) Thus, although
the 1999 Consent Agreement solved Apple’s problem in registering the IBOOK trademark for its
notebook computer, it created a potential future conflict if Apple ever decided to use the IBOOK
mark in connection with software.

10

On October 1, 2008, Reynolds contacted Apple’s trademark counsel to gauge its interest
in purchasing the Family Systems IBOOK mark, which Reynolds would then seek to license
back. (56.1 Statement ¶ 13, APPLE-IBOOKS0020321.) Reynolds stated that Family Systems
was “about to relaunch Ibook Systems V4 and V5 as cooperative projects along with
Cooperative License and Verbol, a language framework for talking to objects” which could
“potentially reshape how the Ibook trademark is used.” (Id.) Reynolds noted that Apple had, by
that time, ceased to use its own IBOOK hardware mark in connection with notebook computers,
and he speculated that Apple might wish to use the IBOOK trademark in other ways
complementary to Family Systems’ use of the mark. (Id.) Reynolds received no response to his
overture until January 2010. (Id.)
E.

Apple’s Alleged Purchase of Family Systems’ IBOOK Mark
In late 2009, two names were being considered for Apple’s contemplated e-book

application for the iPad -- “iBooks” and

(See 56.1 Statement ¶ 10, La Perle Dep. 45-

46.) Ultimately, Steve Jobs, the late CEO of Apple, “decided he did not want to go with
and wanted us to look at ‘iBooks’.” (Id., La Perle Dep. 48:18-19.) In January 2010, it
was decided, upon the recommendation of Thomas La Perle, Apple’s trademark counsel, that in
connection with the planned use of “iBooks” for an E-book reading application, Apple should
seek to acquire Family Systems’ registration in the mark IBOOK, Registration No. 2,446,634
(the “634 Registration”). (See 56.1 Statement ¶ 11, La Perle Dep. 80:8-18, 83:6-12.)
Since the consummation of the 1999 Consent Agreement, Apple’s communications with
Family Systems had been limited to the occasional request for consents required for international
trademark applications, and the aforementioned 2008 attempt by Reynolds to sell the ibook
business. (See 56.1 Statement ¶ 13, La Perle Dep. 108:5-109:9.)

11

Acting on behalf of Apple, Arent Fox attorney Anthony Lupo reached out to Family
Systems’ counsel, Brewster Taylor, on or about January 13, 2010, to see if Family Systems
would consider an assignment of its rights in the Family Systems IBOOK mark and domain
names4. (See 56.1 Statement ¶ 14, APPLE-IBOOKS0022066.). Reynolds responded the
following day, asking for clarification of Apple’s intentions:
It was not clear from talking to Brewster which of Family Systems ibook
assets Apple are interested in. There are multiple domain names and
trademark registrations as well as software technology and patents which
reference ibook systems.
I would appreciate an indication of the extent of Apple’s interest in our
ibook assets, and a rough timescale and price range from Apple’s
perspective. Also, if we proceed I would appreciate an introduction to a
principal of Apple, Inc.
(56.1 Statement ¶ 14, APPLE-IBOOKS0022065.) Although Reynolds did not receive an
introduction to a principal of Apple, or an offer price, Lupo did respond to Reynolds and explain
Apple’s lack of interest in Family Systems’ “ibook assets” in an email later that day:
thanks for the email. Apple is really only interested in the marks and domains
associated with IBOOK. they are not trying to purchase any of the underlying
goods or services that may be associated with the mark or domain.
(56.1 Statement ¶ 14, APPLE-IBOOKS0022064.) Concurrently with the price negotiations,
Taylor and Lupo were actively negotiating revisions to an assignment agreement which had been
drafted by Glenn Gundersen (“Gundersen”) and Hal Borden of Dechert, LLP, Apple’s outside
counsel, who had conducted the clearance of the iBooks mark. (See Chattoraj Decl. Ex. 51,
APPLE-IBOOKS0023639-41; see also Chattoraj Decl. Ex. 52, Gundersen Dep. 148:9-13;
Chattoraj Decl. Ex. 53, Borden Dep. 136:20-137:6.) Lupo testified during his deposition in this
matter that a deal was reached late in the evening on January 26, 2010, with a negotiated price of
4

In addition to the IBOOK mark, Family Systems owned the domain names IBOOK.COM; IBOOK.NET;
IBOOK.ORG; I-BOOK.COM; I-BOOK.NET; and I-BOOK.ORG. (See 56.1 Statement ¶ 14, APPLEIBOOKS0022063-64.)

12

(See 56.1 Statement ¶ 14, Lupo Dep. 117-19; see also APPLE-IBOOKS003342132.) Apple’s attorney Glenn Gundersen similarly noted that he received PDF copies of the
executed Assignment Agreement “late on, I believe, January 26, 2010 . . . it was about 2:00 or
3:00 in the morning eastern time.” (56.1 Statement ¶ 14, Gundersen Dep. 153:10-14.)
Hours after the execution of the Assignment Agreement, reflecting the transfer of Family
Systems’ American, Japanese, and Jamaican registrations for the mark IBOOK, and the
aforementioned domain names, the iBooks app was announced by Steve Jobs during the iPad
product announcement on January 27, 2010. (See 56.1 Statement ¶ 9, APPLEIBOOKS0021840-42; see also 56.1 Statement ¶ 14, APPLE-IBOOKS0033421-32.) However,
by January 29, Apple had still not paid Family Systems. (See Chattoraj Decl. Ex. 54, APPLEIBOOKS0022179.)
F.

Plaintiffs Notify Apple of Their IBOOKS Trademark
Because Plaintiffs had been selling their electronic and print books with the iBooks

imprint for more than a decade, Plaintiffs’ principal John T. Colby, Jr., was concerned when he
saw Apple’s announcement that its iBooks app, to be released in several months, would permit
the user to purchase, download and read electronic books. On January 29, Mr. Colby, having
seen Apple’s announcement, sent an email to Steve Dowling, the Apple publicist named in
Apple’s press release, stating:
I’m trying to find the right person to talk with at Apple. We are book publishers
and have used the imprint “ibooks” since the mid 1990s in the book trade. ibooks
are distributed through National Book Network but had been distributed by Simon
& Schuster for many years. S&S helped build the brand in the book trade taking
over from Diamond Comics in the late 1990s.
We also license book product to Harper, S&S, Penguin, Macmillan, and Hachette
among many others under our Byron Preiss Visual Publications (BPVP) imprint.
Our ibooks are also in ebook format, sold through six different ebook distributors
under our ipicturebooks entity. We have several thousand titles in the backlist.
13

I was hoping you could pass this along to the right person at Apple in order to
discuss our ibooks brand and ebook titles for use on the new iPad.
(Chattoraj Decl. Ex. 55, APPLE-IBOOKS0024021-22.) Instead of taking Mr. Colby up on his
effort to discuss a potential business arrangement, Steve Dowling forwarded his email to Kevin
Saul, an attorney at Apple, less than four minutes later. (See id.) Within ten minutes the email
had reached La Perle, and three hours later was forwarded by La Perle to Gundersen. (See id.)
Gundersen contacted Mr. Colby shortly thereafter, and asserted that Apple had a federal
trademark registration for its IBOOKS app. (See Chattoraj Decl. Ex. 69, Colby 30(b)(6) Dep.
370.) Apple finally paid Family Systems on February 4, 2010 (see 56.1 Statement ¶ 14, APPLEIBOOKS0023912-15), and recorded the assignment with the PTO later that same day.
(Chattoraj Decl. Ex. 73.)
G.

Apple Has No Direct Knowledge or Interest in the Family Systems ibook
Business
Apple had no interest in Family Systems’ business, and the assignment of the IBOOK

trademark bore no relationship to the business that Family Systems had conducted over the
preceding ten years. Instead, Apple apparently viewed the Family Systems “assignment” as part
of its purported “trademark clearance” process, so it is not surprising that none of the indicia of a
transfer of goodwill exist:
Visitors to the ibook.com domain through which Family Systems offered its products
were re-directed to Apple’s web page, describing apps available for the iPad – the iBooks app
appeared several items down on the list. (56.1 Statement ¶ 22.) No Family Systems employees
were hired by Apple, and Apple did not offer for sale “the web collaboration system” innovated
by Family Systems after the January 2010 assignment. (56.1 Statement ¶ 17.) Now that
discovery is concluded, no evidence whatsoever has been adduced showing that Apple actually

14

offered any product or service that Family Systems had offered in connection with its use of the
IBOOK mark. To the contrary, no fact witness offered by Apple in this litigation has been able
to testify to any personal knowledge about the Family Systems ibook product, or any interest by
Apple in the Family Systems ibook service or customers, at all:
•

Steve Gedikian, the product line manager for the iBooks App (see Chattoraj Decl. Ex. 60,
Gedikian Dep. 30:6-24) and a designated Rule 30(b)(6) witness, stated during his
deposition, “Outside of the context of counsel, I have no information about what Family
Systems did. I wasn’t aware of them until recently.” (Id., Gedikian Dep. 204:1416). Mr. Gedikian further testified, “I can’t say whether or not Family System’s
customers were considered in the creation of any of our products.” (Id.,Gedikian Dep.
204:23-25.)

•

Thomas La Perle, the Apple in-house attorney who was Apple’s designated Rule 30(b)(6)
witness on the Family Systems transaction, stated, “I haven’t -- I never created a Family
Systems ibook and modified it or followed one to see the changes, so I don’t have
personal knowledge of that.” (Chattoraj Decl. Ex. 61, La Perle Dep. 246:5-8.) He further
testified that he was not aware whether any Apple employee had ever downloaded or
used Family Systems’ ibook software. (Id., La Perle Dep. 164:10-12.) When asked if
Apple’s iBooks software was an “interactive Web collaboration system” (like Family
Systems’ product), Mr. La Perle responded simply, “No.” (Id., La Perle Dep. 168:21-24.)

•

Lisa Widup, another Apple in-house attorney also testified that her knowledge of Family
Systems’ ibook product, if any, was based solely on communications with others and not
upon personal knowledge. (See Chattoraj Decl. Ex. 62, Widup Dep. 72-73.)

15

•

Linda Taylor, the product manager for Apple’s iBook notebook computer (see Chattoraj
Decl. Ex.63, Taylor Dep. 15), had never heard of Family Systems either in the context of
the Assignment Agreement or of the 1999 Consent Agreement. (See Chattoraj Decl. Ex.
64, Taylor Dep. 60: 16-22.)

•

Grace Kvamme, another Rule 30(b)(6) witness designated by Apple, stated that she had
no knowledge about Family Systems’ ibook product and that Apple did not actively
market to the customers of Family Systems or even attempt to discern who those
customers might be. (See Chattoraj Decl. Ex. 65, Kvamme Dep. 61-62:8.)

•

Hal Borden, an associate at Dechert LLP (Apple’s outside trademark counsel) and a Rule
30(b)(6) witness designated by Apple, stated that, to the extent he had any knowledge of
Family Systems’ ibooks product or services, it would be “based on seeing the [Family
Systems] Web site,” without any further inquiry into the nature of Family Systems
services or its customers. (Chattoraj Decl. Ex. 66, Borden Dep. 140:15-141:2.)

•

Glenn A. Gundersen, a Dechert partner who supervised Borden, and who claimed that he
had have visited the Family Systems website around the time of the Assignment, could
not recall any specific characteristics of the Family Systems ibook product or services.
(See Chattoraj Decl. Ex. 67, Gundersen Dep. 144:5-145:15.)

Indeed, Apple’s designated Rule 30(b)(6) witness on this topic, Thomas La Perle testified that
“Family Systems used the mark for some time, so there was some – we would think there would
be some goodwill associated with the – with the mark. We didn’t really care how much
goodwill. We just wanted all of the goodwill to be assigned with the marks to Apple.”
(Chattoraj Decl. Ex. 84, La Perle Dep. 129:10-15).

16

Moreover, Robert Scherer, Plaintiffs’ expert witness on trademark clearance, industry
custom and practice, and practice before the PTO, opined that Apple did not obtain the goodwill
associated with the 634 Registration, and he testified that his opinion was based largely on the
fact that “Apple did not acquire the tangible assets necessary to meet the standard of goodwill
transfer.” (Chattoraj Decl. Ex. 85, Scherer Dep. 150:3-25.) By contrast, no attorney expert
witness retained by Apple in this litigation testified or opined that the January 2010 agreement
between Family Systems and Apple did not constitute an assignment in gross.5 (See Chattoraj
Decl. Ex. 76, Scherer Dep. 124-125.)

Defendant’s legal expert Siegrun Kane testified that, “the

transfer of good will in connection with the mark is required in order for an assignment to be
valid,” and that in determining whether an assignment is valid, “a useful touchstone is whether
the assignee has obtained what he needs to carry on the business of the assignor”(see Chattoraj
Decl. Ex. 86, Kane Dep. 46:7-25). In Ms. Kane’s deposition, Defendant’s counsel objected to
this line of questioning and represented that Defendant’s rebuttal legal expert, Phillip G.
Hampton II, Esq., would be offering an opinion on assignment in gross. (See id. 57:919) However, in his report, Mr. Hampton did not actually offer an opinion on the assignment in
gross issue, and he did not do any investigation to determine whether the assignment of the 634
Registration from FS to Apple was valid or not. (See Chattoraj Decl. Ex. 87, Hampton Dep.
54:5-18.) Mr. Hampton did testify, however, that he agreed with Ms. Kane’s statement in her
treatise, KANE ON TRADEMARK LAW § 21:4 (2011), that “an assignment without goodwill is
invalid, and the assignee cannot rely on the assignor’s right.” (Id., Hampton Dep. 29:10-30:13.)

5

Defendant’s non-attorney expert witness Gregory Carpenter did offer his opinion as a
“marketing professional,” disclaiming any “legal conclusions,” that the transaction was not an
assignment in gross, in rebuttal to Mr. Scherer. (Chattoraj Decl. Ex. 77, Rebuttal Report of
Gregory Carpenter, ¶ 44, dated October 26, 2012.)
17

H.

Apple’s iBooks App and Related Products and Services
On January 27, 2010, in conjunction with the announcement of its iPad tablet device,

Apple announced “the new iBooks app for iPad, which includes Apple’s new iBookstore, the
best way to browse, buy, and read books on a mobile device.” (56.1 Statement ¶ 9, APPLEIBOOKS0021840-42) (emphasis added). In connection with their §§ 8 & 9 Declaration,
discussed above, Apple submitted a specimen of use depicting the iBooks page in Apple’s
iTunes store to the PTO which states:
iBooks is an amazing way to download and read books, designed exclusively for
iPad. iBooks includes the iBookstore, where you can download the latest bestselling books or your favorite classics -- day or night. Browse your library on a
beautiful bookshelf, tap a book to open it, flip through pages with a swipe or a
tap, and bookmark your favorite pages. (56.1 Statement ¶ 29, §§ 8 & 9
Declaration (emphases added).)
On June 7, 2010, the same day they filed their §§ 8 & 9 Declaration, Apple presented the iPhone
4, announcing the availability of the iBooks app on its iPhone and iPod touch:
The new iBooks® app will be available for iPhone 4 as a free download from the
App Store and includes Apple’s new iBookstore, the best way to browse, buy and
read books on a mobile product. The iBooks app will sync your current place in a
book, along with any bookmarks, highlights and notes you have created, between
copies of the same book on your iPad, iPhone or iPod touch®. (56.1 Statement ¶
31, APPLE-IBOOKS0021101.)
The iBooks app allows users to purchase books through the iBookstore and download
them to an iOS mobile device or desktop computer to be read using the iBooks app. (See id.; see
also id., Gedikian Dep. 110:8-12.) Once a user has downloaded a book to a device, he or she can
change the way the book looks on their device’s screen, bookmark pages, or annotate them.
They can, for example:
•

change the font and point size (see 56.1 Statement ¶ 32, Gedikian Dep. 106:22-109:3);

•

change the visual “theme” and background color (see id., Gedikian Dep. 109:8-12);

18

•

bookmark, annotate, and highlight passages (see id., Gedikian Dep. 114:8-152); and

•

share the title of a book and their highlights or annotations by email (see id., Gedikian
Dep. 221:1-7).

If a user chooses to sync an iBooks account across all their iBooks enabled devices, then the
visual presentation of the books, as well as the user’s bookmarks and annotations, will be
reflected on all of the user’s devices. (See 56.1 Statement ¶ 33, Gedikian Dep. 114:17-115:14.)
None of these visual changes, highlighting or annotations in any way modify the actual
digital file of the actual book that was downloaded from the iBookstore and stored on the device
using the iBooks app; they are instead kept in a separate metadata file that does not actually
modify the digital book. (See 56.1 Statement ¶ 34, Gedikian Dep. 110:24-111:17.)
Additionally, the user’s viewing choices, bookmarks and annotations will not automatically be
seen by other users reading the same book, unless such users are accessing the same title through
a shared account. (See 56.1 Statement ¶ 33, Gedikian Dep. 219-220.) The Terms of Use of the
iBooks app do not allow users to share accounts, however (see 56.1 Statement ¶ 35, iBooks
License Agreement § 2(A)), and the sharing of accounts is not advocated or encouraged by
Apple either implicitly or through its marketing communications to the public. (See 56.1
Statement ¶ 36, Gedikian Dep. 220:8-13; Kvamme Dep. 45:16-17 (“Apple doesn’t encourage the
sharing of [iTunes] accounts”).) Accordingly, the only way such bookmarks and annotations can
be “shared” is through email or another ubiquitous means of electronic communication, like any
other information that can be transmitted by individuals over the Internet. Thus, Apple’s
contention that the iBooks app somehow comprises anything even vaguely similar to the Family
Systems “interactive Web collaborative system” software must be rejected as a matter of law.

19

ARGUMENT
I.

Summary Judgment Standard
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment is

appropriate where there are no genuine issues of material fact in dispute and the moving party is
entitled to judgment as a matter of law. Summary judgment is appropriate when, “after drawing
all reasonable inferences in favor of a non-movant, no reasonable trier of fact could find in favor
of that party.” Diarama Trading Co., Inc. v. J. Walter Thompson U.S.A., Inc., No. 01 Civ.
2950(DAB), 2005 WL 2148925, at *5 (S.D.N.Y. Sept. 6, 2005) (granting summary judgment
cancelling federal trademark registration), aff’d sub nom. Diarama Trading Co. v. Thompson,
194 F. App’x 81 (2d Cir. 2006).
II.

Family Systems’ Assignment of the 634 Registration to Apple Was an Invalid
Assignment in Gross
The entire history of Apple’s interactions with the 634 Registration, from Apple’s initial

offer to buy the Family Systems mark wholesale for

in 1999 for use in connection with

the iBook notebook computer (see Goldhor Dep. 68:9-24), to its eventual procurement of the
Assignment Agreement as of January 26, 2010 -- one day prior to Apple’s announcement of the
iBooks app by Steve Jobs during the iPad product announcement (see Rule 56.1 Statement ¶¶
12-13) – without any of the assets, intellectual property or customers of the Family Systems
business (see 56.1 Statement ¶ 15), to the total lack of any personal knowledge on the part of any
of Apple’s witnesses concerning Family Systems products or services (see 56.1 Statement ¶ 33),
shows that Apple did not have any interest in the goodwill associated with the Family Systems
IBOOK mark. To the contrary, Apple made no effort to, and did not, acquire that goodwill or
continue to provide consumers with the same products or services, which Family Systems itself
continued to provide. Cf. Marshak v. Schaffner, No. 11 Civ. 1104(DLC), 2012 WL 1658393, at
20

*6 (S.D.N.Y. May 11, 2012) (“use of the mark . . . in connection with a different goodwill and
different product would result in a fraud on the purchasing public who reasonably assume that
the mark signifies the same thing, whether used by one person or another”) (quoting Marshak v.
Green, 746 F.2d 927, 929 (2d Cir. 1984). As Apple’s expert witness Siegrun Kane has written,
“The cardinal rule of a valid trademark assignment is that the mark must be assigned with the
goodwill of the business.” KANE ON TRADEMARK LAW § 21:3.1 (2011). According to this longestablished principle, the transfer of the IBOOK federal trademark registration from Family
Systems to Apple constituted an invalid assignment in gross.
Under § 37 of the Lanham Act, a court “may determine the right to registration [and]
order the cancellation of registrations, in whole or in part,” 15 U.S.C. § 1119, and cancellation is
appropriate when a court determines that the mark was not entitled to registration. See Am. Exp.
Mktg. & Dev. Corp. v. Black Card LLC, No. 10 Civ. 1605 (DLC), 2011 WL 5825146, at *7
(S.D.N.Y. Nov. 17, 2011) (trademark cancellation granted on summary judgment).
Because a trademark is not a right in gross, it cannot be transferred except by means of a
supervised license or in connection with an ongoing business or some aspect of that business.
See Universal City Studios, Inc. v. Nintendo Co., Ltd., 578 F. Supp. 911, 922 (S.D.N.Y. 1983)
aff’d, 746 F.2d 112 (2d Cir. 1984) (trademark assignment held to be an invalid assignment in
gross on summary judgment where the court found that the assignor had failed to transfer the
goodwill associated with “King Kong” trademark). Goodwill is “the value attributable to a
going concern apart from its physical assets -- the intangible worth of buyer momentum
emanating from the reputation and integrity earned by the company. A trademark or service
mark is merely the symbol by which the public recognizes that reputation and hence has no
independent significance apart from the owner’s goodwill.” Pilates, Inc. v. Current Concepts,

21

Inc., 120 F. Supp. 2d 286, 310-11 (S.D.N.Y. 2000) (transfer of exercise instruction service mark
held to be an assignment in gross where assignee intended only to use the mark exclusive of its
associated goodwill) (internal citation omitted).
Accordingly, where a trademark is assigned “in gross,” without its accompanying
goodwill, the assignment is invalid. Berni v. Int’l Gourmet Restaurants of Am., Inc., 838 F.2d
642, 646-647 (2d Cir. 1988) (finding assignment in gross where assignees did not intend to
continue in business associated with mark).
As formulated by the Second Circuit, two alternative tests may determine whether the
transfer of a mark includes the passing of the goodwill pertaining thereto. The first is known as
the continuity test, in which the goodwill of a company is viewed as making a transition from the
assignor to the assignee if there is a continuity with the past, including continuity of
management. See Marshak v. Green, 746 F.2d 927, 930 (2d Cir. 1984) (sale of singing group’s
trademark found to be an invalid assignment in gross as there was no continuity of management
or continuity of quality and style of music) (internal citation omitted). Second, under the
substantial similarity test, an assignment of a mark may be valid when the assignee is producing
a product or providing a service that is “substantially similar” to assignor’s product , such that
consumers will not be deceived or harmed by the use of the mark with the assignee’s product or
service. See Pilates, Inc. v. Current Concepts, Inc., 120 F. Supp. 2d 286, 311 (S.D.N.Y. 2000)
(citing Marshak v. Green, 746 F.2d at 930). Apple’s purchase of the Family Systems IBOOK
Mark does not satisfy either of these tests.
A. Under the continuity test, the assignment of the 634 Registration from Family
Systems to Apple was an invalid assignment in gross.
In determining whether the goodwill of a business has passed from assignor to assignee
under an assignment, the transaction must be one in which “the assignee can go on in real
22

continuity with the past.” Fitzpatrick v. Sony-BMG Music Entertainment, Inc., 2010 WL
3377500, *3, No. 07-cv-2933 (SAS) (S.D.N.Y. August 24, 2010) (assignment valid where the
trademark was used in same manner and for same purpose after assignment, and where assignor
continued as CEO of the underlying business both before and after the assignment) (internal
citations omitted). The goodwill of the assignor’s business may be deemed to have passed to the
assignee where physical inventory, manufacturing facilities, technical know-how, and/or
customer lists are transferred so as to allow the assignee to provide both existing and new
customers with the same product or service they have come to expect from the assignor of the
mark. See MCCARTHY ON TRADEMARKS § 18:23; Syntex Labs., Inc. v. Norwich Pharm. Co.,
315 F. Supp. 45, 54-55 (S.D.N.Y. 1970), aff’d on other grounds, 437 F. 2d 566 (2d Cir. 1971)
(goodwill passed to support assignment where assignor agreed to provide assignee with “all
technical information, know-how and data relating to the manufacturing and marketing of”
trademarked drug).
Family Systems produced a suite of software products, along with a web-based
collaboration system, similar to a “wiki” like Wikipedia, which it sold under the IBOOK mark.
(See 56.1 Statement ¶¶ 3-4.) This suite of software products was proprietary to Family Systems
and was covered by patents issued to Reynolds and Richard Goldhor. (Id. at ¶ 3.) Additionally,
Family Systems had an established customer base of businesses to which it marketed its IBOOK
software products as a system to “support individuals and product groups as they work and
collaborate wherever they are”, allowing “any non-technical user [to] publish their documents
and other standard personal and office files to the Web for private or public access.” (Id. at ¶ 5.)
The IBOOK product and Family Systems as a whole was also inextricably linked to Reynolds,
who had founded the company as a vehicle to give his ideas life. (See Goldhor Dep. 14:5-13.)

23

Here, Apple did not acquire any of the patents or software upon which Family Systems’
business was predicated. (Id. at ¶ 15.) In fact, when Reynolds asked Apple’s attorney negotiator
Lupo whether Apple was interested in purchasing any assets of Family Systems beyond the
IBOOK mark, such as the associated patents or software, Lupo expressly declined, explaining,
“Apple is really only interested in the marks and domains associated with IBOOK. they are not
trying to purchase any of the underlying goods or services that may be associated with the mark
or domain.” (Id. at ¶ 12 (emphasis added).) Indeed, Apple’s “use” of the domain names
associated with the IBOOK mark is antithetical to a showing of continuity. Today, if one
attempts to go to any of the domain names conveyed as part of the Assignment agreement, they
are redirected to a page within the Apple website iPad page for built-in apps where the iBooks
app can be discovered only after scrolling past two other apps. (See id. at ¶ 18.) (This web page
does not even allow a direct link to download Apple’s iBooks app but rather directs visitors to
the iTunes store. (See id.)) Likewise, Apple did not acquire any customer lists from Family
Systems (see id. at ¶12), nor did they actively market to the customers of Family Systems or
even attempt to discern who those customers might be. (See Kvamme Dep. 62:2-8.) That
neither Reynolds nor any other Family Systems employee has any involvement with the 634
Registration since the sale to Apple only confirms the lack of continuity. (See id. at ¶ 15.) The
idea that Apple somehow expected to continue the Family Systems business, and benefit from its
ten years of accumulated goodwill, is demonstrably absurd – Apple’s software application, its
business model, and even the timing of its announcement were all in place before Apple
concluded its

deal with Family Systems. The undisputed facts show that Apple –

really, Steve Jobs – needed nothing from Family Systems, other than perhaps its registered

24

trademark, in order to conceive, execute, announce and release the iBooks app as part of the iPad
software ecosystem.
There is absolutely no evidence in the record to support a finding that Apple is currently
using the 634 Registration in a manner that evidences continuity between the businesses of
Apple and Family Systems, or that Apple ever intended to use the 634 Registration in continuity
between the two businesses. All of the undisputed evidence developed in discovery weighs
against such a finding. Accordingly, the assignment from Family Systems to Apple does not
pass muster under the continuity test, as a matter of law.
B. Under the substantial similarity test, the assignment of the 634 Registration from
Family Systems to Apple was an invalid assignment in gross.
In the alternative, courts have upheld assignments without finding continuity in the
underlying businesses when “the assignee is producing a product or performing a service
substantially similar to that of the assignor and that the customers would not be deceived or
harmed.” Clark & Freeman Corp. v. Heartland Shoe Co., Inc. v. The Heartland Co. Ltd., 811 F.
Supp. 137 (S.D.N.Y. 1993) (assignment of mark HEARTLAND by manufacturer of women’s
pixie boots to assignee who applied mark to men’s shoes was invalid assignment in gross,
because the goods were not substantially similar and goodwill did not pass with assignment).
To be sure, where the products or services sold by the assignee are identical to those
offered by the assignor prior to the assignment, the court will generally find that there is no risk
of consumer deception. See, e.g., General Cigar Co., Inc. v. G.D.M., Inc., 988 F. Supp. 647, 659
(S.D.N.Y. 1997) (substantial similarity found where cigar sold by assignee under COHIBA mark
was identical to cigar sold by assignor); Bambu Sales, Inc., v. Sultana Crackers, Inc., 683 F.
Supp. 899, 905 (E.D.N.Y. 1988) (substantial similarity where cigarette paper manufacturer

25

assigned BAMBU mark to its former distributor, which “maintained the identical business it had
for the previous eight year period—that is, sales of cigarette paper under the BAMBU mark”).
By contrast, courts have found insufficient “substantial similarity,” and held a trademark
assignment to be an invalid assignment in gross, where the goods or services offered by the
assignee have differed in even the most minor respect from the goods or services offered by the
assignor. For example, in Heartland, the defendant argued that the plaintiffs in a trademark
infringement action were not the senior users of the trademark HEARTLAND, and the court
agreed, because the plaintiffs had acquired the trademark through an invalid assignment in
gross. The plaintiffs had previously been using the trademark on men’s shoes, and then acquired
the HEARTLAND trademark registration by assignment from a third party, Sears, which had
been using the mark on woman’s pixie boots. See Heartland, 811 F. Supp. at 138-39. The
plaintiffs subsequently sued the defendants for infringement, and claimed priority of use based
on the earlier use and registration of the mark that Sears had assigned to plaintiffs. See id. The
court held that plaintiffs could not rely on Sears’ previous use of the mark on women’s pixie
boots to establish priority, holding that the plaintiffs’ products were “substantially distinct” from
those of Sears, even though both plaintiffs and Sears used the mark in connection with footwear,
rendering the assignment an invalid assignment in gross:
The markets for the two goods are substantially distinct; it is unlikely that men
buying plaintiffs’ “Heartland” shoes would be considering a reputation for
footwear generally that Sears built by selling women’s boots. That plaintiffs were
using the “Heartland” mark before the assignment is also relevant, in that it tends
to show that plaintiffs sought only to gain the ability to use the name “Heartland”
rather than the goodwill associated with it. This is further supported by the fact
that plaintiffs did not attempt to obtain the assignment from Sears until after Sears
threatened to bring opposition proceedings to prevent plaintiffs from registering
the “Heartland” trademark. Id. at 141 (internal citations omitted).
Even more striking, in InterState Net Bank v. NetB@nk, Inc., 348 F. Supp. 2d 340 (D.N.J.

26

2004), the New Jersey district court, citing this Court’s decision in Pilates, Inc. v. Current
Concepts, Inc., found an invalid assignment in gross when the assignor had used the NETBANK
mark for an Internet service similar to PayPal “designed to appeal to vendors seeking to buy and
sell low cost items and information over the internet using electronic ‘pocket change,’” but the
assignee offered traditional banking and payment methods, like checking accounts and paper
checks, in connection with the mark. Net Bank, 348 F. Supp. 2d at 349. The court therefore
held that the defendant-assignee did not acquire a valid mark, despite buying the mark and
domain name from the assignor, because it did not offer a service “substantially similar” to the
assignor, and ordered the cancellation of the assignee’s trademark registration. Id. at 350-51.
It is overwhelmingly clear from the undisputed evidence obtained through discovery in
this action that Apple’s use of the 634 Registration for its iBooks app is not substantially similar
to Family Systems’ use of the 634 registration for its ibook product. The Family Systems ibook
product “was a system and architecture for allowing a community to create materials . . . like a
precursor to Wiki[pedia].” (56.1 Statement ¶ 5.) It was marketed to businesses as a system to
“support individuals and product groups as they work and collaborate wherever they are”,
allowing “any non-technical user [to] publish their documents and other standard personal and
office files to the Web for private or public access.” (Id. ¶ 6.) The Family Systems ibook
product allowed users to “enroll with an ibook as viewers or contributors” -- “Viewers may view
ibook material, such as text or multimedia content” while “Contributors may contribute original
material to the ibook or may create derivations of existing ibook material.” (Id. ¶ 3.) The
technology underlying the Family Systems ibook service was an “interactive Web book
(“ibook”) system . . . that allows material to be contributed to the World Wide Web. An ibook is
a self-extending, self-sustaining information-redistributing Web robot, which is resident on a

27

data network such as the Internet or an intranet.” (Id.) It was an “interactive web collaboration
system.” (56.1 Statement ¶ 4.) The Family Systems ibook product did not permit users to search
for or purchase books, or to access a downloaded “book” when the user was not connected to a
network. (See 56.1 Statement ¶ 3 (“An ibook is a self-extending, self-sustaining informationredistributing Web robot, which is resident on a data network such as the Internet or an intranet”)
(emphasis added).)
By contrast, Apple markets its iBooks app to consumers as “an amazing way to download
and read books” and “includes the iBookstore, where you can download the latest best-selling
books or your favorite classics -- day or night. Browse your library on a beautiful bookshelf, tap
a book to open it, flip through pages with a swipe or a tap, and bookmark your favorite pages.”
(Id. at ¶ 25.) The iBooks app was designed to be utilized on mobile devices, and to permit the
user to read downloaded books on such devices even when not connected to a network. (See La
Perle Dep. 158:3-17.)
Furthermore, the Family Systems ibook product was touted for its ability to allow users
to work collaboratively (see 56.1 Statement ¶ 6), and its technology was said to comprise a “web
collaboration system.” (56.1 Statement ¶ 4.) By contrast, Apple’s own Rule 30(b)(6) witness,
designated by Apple to testify about the marketing of the iBooks app because of her personal
involvement in the development of the iBooks marketing strategy, stated, “I wouldn’t
characterize it as a collaborative system.” (Kvamme Dep. 62:20-63:11.) The iBooks app is not
expressly designed for “collaboration” -- it allows users to download a book, generally a prior
published work, and, within their own personal downloaded copy, change the font and point size,
the background color or theme, bookmark or highlight a section, and share the title of the book
they are reading or their annotations via email. (See 56.1 Statement ¶ 29.) No other user

28

accessing the same book through a different account from that of the original user will see these
changes (id. ¶ 30), and the terms of use for the iBooks app do not allow users to share accounts.
(See id. ¶ 31.)
Under the relevant case law, therefore, the products and services offered by Apple in
connection with the 634 Registration are not substantially similar to those of Family Systems
when it owned the 634 Registration. As in Heartland, the market for the two goods is distinct;
Family Systems’ consumers were individuals and businesses seeking a collaborative, web-based
system that would be conducive to creative expression or inter-office workflow, while the
consumers of Apple’s iBooks app are individuals searching for an easy way to find, purchase,
download, and read electronic books. As in Net Bank, the functionality of the iBooks app is
totally different from that of the Family Systems ibook product, notwithstanding their common
connection to the abstract concept of books. A consumer who attempted to access ibook.com to
download or utilize the Family Systems ibook product following the assignment would be
confused on many accounts, not the least of which would be the redirection of their web browser
to a page advertising an Apple hardware product, the iPad. (See 56.1 Statement ¶ 22.)
As the assignment of the 634 Registration from Family Systems to Apple meets neither
the continuity nor the substantial similarity test, it was a naked assignment in gross -- no
goodwill was transferred with the IBOOK mark. Because the assignment from Family Systems
to Apple was invalid, Apple’s registration must be cancelled, and Apple cannot claim to rely
upon Family Systems’ constructive use of the IBOOK mark from its intent-to-use application in
1996 for purposes of trademark priority. As one of Apple’s expert witnesses has written
eloquently:
Whatever it is called, an assignment without goodwill is invalid, and the
assignee cannot rely on the assignor’s rights. For example, the assignee
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cannot tack on the assignor’s period of use. Inability to rely on the
assignor’s use could be critical to the outcome of an infringement action
where the assignor’s use is needed to establish priority. When the priority
rug is pulled out from under the assignee because of an invalid
assignment, the assignee may find himself branded as the infringer.
KANE ON TRADEMARK LAW § 21:4 (2011) (footnotes omitted). That is the result the law requires
here.
CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that their Motion for Partial
Summary Judgment be granted in its entirety, that the Court order the cancellation of the 634
Registration, and that the Court grant such other and further relief as it deems just and proper.
Dated: New York, New York
December 21, 2012
Respectfully submitted,
ALLEGAERT BERGER & VOGEL LLP

By:

s/ Partha P. Chattoraj
Partha P. Chattoraj
David A. Shaiman

111 Broadway, 20th Floor
New York, New York 10006
[phone]
Attorneys for Plaintiffs J.T. Colby & Co., Inc. d/b/a
Brick Tower Press, J. Boylston & Co., Publishers,
LLC, and ipicturebooks, LLC
Of Counsel:
Robert L. Raskopf
Claudia T. Bogdanos
QUINN EMANUEL URQUHART & SULLIVAN, LLP
51 Madison Avenue, 22nd Floor
New York, New York 10010
Telephone: [phone]
Facsimile: [phone]
30