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When fashion fuses with high tech, we see our friends show up with trendy wearables, such as smart watches, fitness bands, and even high-tech, designer purses.  But, trendiness aside, wearables raise numerous questions for designers, manufacturers and consumers relating to intellectual property, data privacy and data security.  For example, how does a company protect the technology for its latest smart watch?  Should they rely on patents, trademarks, copyrights or something else?  Who owns the rights to a designer tote with an embedded charging station—the fashion designer or the circuit designer?  Is your employer allowed to collect location and health data via sensor-infused fabric in your work uniform to improve productivity and wellness?  What happens when your fitness band is hacked, revealing personal health data that makes its way to your insurance company?  Can they raise your rates upon learning you have high blood pressure and have stopped working out?

The questions are unending and some answers are still unclear because laws, courts and contracts have not necessarily caught up with advances in this technology.  Further, the fashion and high tech industries have traditionally approached IP protection differently due to the different nature of their products.  Meanwhile, we have seen high-tech industry leaders (e.g., Apple, Fitbit, and Google’s parent, Alphabet), as well as non-practicing entities, actively amassing patents relating to wearables.  This indicates that licensing and litigation will soon escalate as new wearable products arrive in the marketplace.  We have already seen patent litigation related to products such as Ralph Lauren’s Ricky bag, which has an illuminable interior and charger for electronic devices, and Adidas and Textronic’s shirt with special fibers for sensing vital signs and communicating them to a smartphone.  But merely taking off-the-shelf electronics and making them “wearable,” may not be patentable.  Therefore, companies should consider combining patents on novel innovations that make the electronics wearable with other forms of IP protection for appearance, branding and expression to effectively protect their wearable technology.

Despite its recently soaring growth, wearable technology is not new.  For example, the first electronic hearing aid was constructed well over a hundred years ago.  By the 1980s, we saw digital watches with built-in calculators.  But constraints on size, power, weight, etc., limited the development and adoption of early wearable products.  Now, advances in technology have broadened current applications to include fitness, communication, medical monitoring and more.  In addition, tech companies have learned that widespread adoption of wearables requires that these high-tech accessories fit with current fashion trends.  No one wants to wear something that is clunky and doesn’t match their fashion sense or personality, right?  As a result, tech companies have teamed up with designer brands and hired experts from the fashion industry to co-develop and market wearables.

Today, wearables offer convenience and the potential to monitor and/or increase wellness, safety, productivity, sleep, etc.  But the wearer is often not the only one with access to the data collected, which raises privacy concerns and issues regarding data security.  For example, companies often make a wearer sign up for an account or load an app on a phone to use the wearable.  Then these companies collect, process, and perhaps back up the data along with the wearer’s account information.  These companies could share this information with advertisers who then target the wearer with ads for specific products based on current or past location, health statistics, exercise habits, etc.  We see this user-specific advertising on our phones and computers every day.  For example, since I recently searched for information on a particular car, ads for that car and similar cars are showing up when I use Facebook, browsers and other apps.  This example is rather benign, albeit a little annoying given that I already purchased the car I wanted.

But not all examples are so benign.  Now advertisers and others not only have information on your recent Google searches, but may also be able to gain real-time statistics and other information about your stress level, heart rate, blood pressure, location, etc.  The risks associated with dissemination of your health, location, and financial data are much higher than the mere sharing of information about a car you are interested in purchasing.  These risks also raise additional liability concerns for companies if the data is stolen or misused.  Therefore, it is crucial that companies safeguard against data breaches and understand the privacy rights of their employees and customers.  Some companies are even purchasing cyber insurance as protection against data breaches.  But merely having an insurance policy is not enough.  If your company doesn’t have the proper safeguards in place, such as updated security patches and practices, then the insurance company may not have to pay.

To advise clients in this area, attorneys must be knowledgeable about the technology and the integration of technology with fashion, as well as the legal issues surrounding IP, data privacy and data security.  For a particular client and product, it is critical to develop an integrated approach that effectively provides protection via a combination of utility and design patents, trade secrets, copyrights, trademarks and where appropriate, the lesser-used trade dress protection.  The goal is to use the appropriate IP mechanisms to protect all facets of wearable technology, including the electronics, software, functionality, packaging, marketing materials, appearance and the branding associated with it, while avoiding liability from breaches of data privacy or security.

Crazy Horse was a legendary Native American chief of the Oglala Lakota tribe who lived during the second half of the 1800s.  Unfortunately today, his name may be more familiar as a brand for various products, such as motorcycle gear, whiskey, rifles and strip clubs.  In Russell Road Food & Beverage, LLC v. Spencer, et al., the Ninth Circuit was faced with the issue of the assignability of the trademark “Crazy Horse” in a lawsuit between two strip club operators in Las Vegas, Nevada.

In Paris in 1951, Alain Bernardin, opened the infamous “Crazy Horse Saloon.”  Since that time, the “Crazy Horse” mark has seen numerous trademark battles beginning in 1967 London.  During the 1970’s, Crazy Horse night clubs opened throughout the United States, from Alaska to Florida.

In January 2006, a strip club owner from the Carolinas, Carl Reid, successfully registered the “Crazy Horse” and “Pure Gold’s Crazy Horse” marks with the USPTO for “entertainment services, namely, exotic dance performances.”  Years later, Russell Road and Spencer each attempted to register their respective “Crazy Horse” marks for their strip clubs but the USPTO rejected both of them on the grounds of “a likelihood of confusion with the Reid’s previously registered marks.”  Russell Road and Spencer then pursued different methods to secure the right to use the “Crazy Horse” mark.

Russell Roads obtained the right to use the “Crazy Horse” mark through an agreement with another strip club operator of the “Crazy Horse Too” clubs in Las Vegas.  In September 2007, the owner of that club sought to register the mark “Crazy Horse Too” but like the other “Crazy Horse” marks, the USPTO rejected it. Crazy Horse Too initiated a cancellation proceeding to which Reid, the original owner of the “Crazy Horse” mark, failed to timely respond.  A default was entered but before a default judgment could be rendered in favor of Crazy Horse Too, Reid and the owner of Crazy Horse Too agreed to resolve the dispute through a trademark co-existence agreement.  Under that agreement, Crazy Horse Too agreed to withdraw its challenge to the “Crazy Horse” mark and Reid consented to Crazy Horse Too’s “use and registration” of “any mark that includes the phrase Crazy Horse provided the mark does not contain the phrase pure gold.”  In 2011, Crazy Horse Too encountered financial difficulties and was dissolved.  A year later, Russell Road bought Crazy Horse Too’s rights under the trademark co-existence agreement for $2,500.

Spencer, on the other hand, went straight to the source. In August 201, Spencer formed Crazy Horse Consulting, Inc. (“CHC”) for the purpose of expanding the “Crazy Horse” brand. Later that year, Reid assigned his rights in the “Crazy Horse” trademark to CHC and the assignment was registered with the USPTO.

Following the registration, Spencer learned that Russell Road had a strip club in Las Vegas called Crazy Horse III.  Spencer notified Russell Road that its use of the “Crazy Horse” mark infringed on his trademark rights.  Rather than seeking a license from Spencer, Russell Road entered into a further assignment agreement with the former owner of Crazy Horse Too whereby Crazy Horse Too assigned all of its rights to Russell Road under the September 2009 trademark co-existence agreement.

Russell Road then filed suit against Spencer seeking a declaratory judgment that its use of the “Crazy Horse” mark did not infringe on Spencer’s trademark.  The lower court granted summary judgment to Russell Road finding that it had the right to use the “Crazy Horse” mark under a valid trademark co-existence agreement.  Spencer and CHC appealed that decision to the Ninth Circuit.

The Ninth Circuit began by recognizing that it was undisputed that a trademark owner could assign his or her trademark citing 15 U.S.C. §1060(a)(1).  Furthermore, when a trademark is assigned, the assignee “steps into the shoes of the assignor.”  This means that the assignee not only acquires all of the assignor’s rights, but also assumes any “burdens or limitations” on the use of the mark.  In addition to recognizing the assignability of trademarks, the Ninth Circuit observed that trademark co-existence agreements have long been enforceable.  Furthermore, like other contracts, trademark co-existence agreements could be assignable.

The Ninth Circuit found that the facts showed that it was undisputed that there was a valid trademark co-existence agreement between Reid and Crazy Horse Too.  The Court found that the undisputed evidence showed that Crazy Horse Too had lawfully assigned its rights under that co-existence agreement to Russell Road. Given that Russell Road had obtained the rights that Crazy Horse Too owned, Spencer and CHC had a duty to Russell Road by way of its obligations to Crazy Horse Too “not to oppose each other’s use of the Crazy Horse mark, to make reasonable steps to reduce the likelihood of confusion and so on.” The Ninth Circuit found it significant that the trademark co-existence agreement made it explicit that it would “be binding upon and shall inure to the benefit of the parties hereto, their respective successors, assigns, and licensees.

The Ninth Circuit then turned to various arguments raised by Spencer and rejected each of them in turn.  First, the Ninth Circuit found that the assignment of the trademark rights from Crazy Horse Too to Russell Road was supported by adequate consideration in that Russell Road had paid $2,500 for the assignment.  Next, Spencer argued that because Crazy Horse Too was not using the mark it had essentially “abandoned” it.   The Ninth Circuit found that even if Crazy Horse Too was not using the mark, this did not invalidate the trademark co-existence agreement.  That agreement had no requirement that Crazy Horse Too actually use the mark and therefore the “trademark abandonment” doctrine did not apply.  Spencer also argued that Crazy Horse Too could not assign its rights to Russell Road without Spencer’s consent but the Ninth Circuit rejected this argument finding that Spencer had not raised it with the lower court.

The Ninth Circuit affirmed the lower court’s summary judgment in favor of Russell Road and found that it had properly concluded that there had been a valid assignment of the rights under the trademark co-existence agreement between Reid and Crazy Horse Too.  The Russell Road case is a reminder that parties facing claims of trademark infringement should determine whether there is any basis for their use of a mark, such as through a valid assignment or trademark co-existence agreement.