And Why Sometimes You Have to “Go to Legal”

Trademarks and copyrights are really, really, really different. They do different things; they protect different interests. But they overlap in one area of subject matter: logos. The overlap is coincidental. It doesn’t mean that they have anything in common. But the overlap itself is real, and it leads to a lot of confusion and heartache.

Or we could pretend like it’s 2005 and call it a challenge or an opportunity to learn the difference between copyright and trademark! And, boy, do I have an example for you! It involves Kawhi Leonard, who is currently one of the best basketball players (if not the best) right now1, and Nike—and you know what Nike is. We don’t know all the facts. We just have Leonard’s recently-filed complaint to work with, plus this useful background by blawg-deity Michael McCann (who doesn’t got much into the IP aspects but the provides a lot of context). It’s highly unusual for a complaint to contain bald-faced lies, though it will present the best case for the plaintiff and may selectively leave out inconvenient facts.

According to the complaint, Leonard long ago designed his own logo, based on a nickname that was itself based on his freakishly big hands: the Klaw. These days, the logo looks like this:

I say “these days,” because what the logo looked like when Leonard first designed it and what it looks like today is one of the big issues. If you look carefully, that’s Leonard’s initials (KL) and his number (2) incorporated into the hand design. Alas, I cannot find an image of Leonard’s original design. But there are a number of sites that monitor basketball shoe design obsessively, and there seems little doubt that Leonard originally designed the logo himself and Nike “refined” it to put on Air Jordan brand shoes.

If that’s the case, and assuming there’s no relevant contract between Leonard and Nike (there is, but baby steps, ok?), we are left with this fairly awful situation:

  • Leonard owns the copyright in the design.
  • Nike might own a derivative work in the design, based on its “refinements.”
  • Nike owns the trademark rights in the design for shoes.

Does this seem counterintuitive to you? Congratulations! You’re a normal person and not an IP lawyer. Under copyright and trademark law, however, this unfortunate and untenable result just reflects the utterly different interests copyrights and trademarks protect.

Copyrights vs. Trademarks: Fight!

Copyright protects expression. When Leonard created his logo, he was expressing himself. The law gives Leonard the right to stop (“exclude”) others from using the logo in any context that’s not a fair use2. You can think of it as an absolute law: the law gives the copyright owner rights regardless the owner’s relationship with anyone else. Copyright belongs to the creator—in copyright-speak, the “author”—of the work, unless it’s a work made for hire, which doesn’t mean what you think it means. I’ll get that in a moment. For now: Leonard owns the copyright in the logo, unless it was a work made for hire.

Trademark protects a relationship between the public and a product. It’s a shorthand way to convey all the things the consuming public thinks and feels about a product, preferably for better but sometimes for worse. They’re compact, but they can be mighty! Contrary to anything you might’ve heard, they’re not created by any kind of government fiat, but by use in commerce. The public has to encounter the trademark “in the wild” so that relationship with the product can be formed. Trademark exists in a complex social and commercial web. Not only must we be concerned with competitors horning in on the trademark owner’s business, but also with the public’s right to know what it’s buying (i.e., avoid confusion).

Importantly, it follows from all this that trademarks belong not to the person who first created them, but to the person or company that uses the trademark in commerce to create that relationship with the product. Being the one who came up with clever trademark doesn’t mean much (unless, of course, you are the one to use the trademark in commerce). Just as important, trademarks are limited to their context. The right extends only as far as the products the trademark is used in commerce with. This is why we can have DELTA owned by three different big companies, because the contexts are different: air travel, faucets and dental services.

So, this is how the logo could, in a sense, be owned by two different people in two different ways. Leonard authored the logo, so he owns the copyright. Nike used the logo in commerce to sell shoes, so it owns the trademark in the logo.

As you can imagine, splitting the “ownership” like this is really, really awkward. Leonard can stop Nike from copying and publicly displaying the logo, or even from selling the shoes that bear the logo. Dang! Nike’s powers a little more limited but substantial. Leonard can’t use his own logo to sell shoes, so he can’t put it on shoes. He might not be able to put it on other items of clothing either because, although Nike only used it for shoes, consumers might assume that a company that makes shoes might also make clothing.

This is unfortunate, but not that hard to understand. But, wait! There’s more. Oh so much more!

A Refined Mess

It’s not as though Leonard and Nike are strangers to each other. In fact, Leonard used to endorse Nike products, and they entered into an endorsement contract. The terms of that contract are tantalizingly obscure. It would be unusual for it cover something like a logo the player created, though. The relationship in an endorsement deal goes the other way: the player is required to wear the shoe company’s logo.

Let us assume, therefore, that the endorsement contract doesn’t explicitly address the logo. It probably has some general language that reserves all intellectual property (including copyright and trademark) to Nike, even if the player makes a contribution to the logo somehow. Thus, if a player made some alteration to a Nike logo, the player automatically transfer any copyright and trademark rights to Nike, just in case.

We do know that Leonard submitted his logo to Nike with the idea that Nike (1) would “refine” it, and (2) use the “refined” version on shoes (to help promote those shoes). Since we don’t know what Leonard’s original version looked like, it’s hard to judge what Nike contributed to the logo. According to Leonard’s complaint, he rejected several iterations before accepting the one we all know. And we know Nike used that one to sell shoes.

The trademark analysis isn’t altered, even though Leonard’s complaint says he supervised and controlled Nike’s use of the logo. Why does Leonard make a big deal about “supervision and control”? Because that’s how trademark owners can let others use the trademark while keeping ownership of the trademark. It should be impossible for two parties to use the same mark for the same products at the same time. “There can only be one.” But we make an exception if the trademark owner maintains quality control over the use of the mark and the products it’s used with.

This makes sense. A trademark reflects the public’s perception of a product’s qualities—e.g., fast, durable, tasty, clean, light, flexible, cheerful. If the trademark owner makes sure that its licensees are maintaining the right qualities at the right levels, then all is well. What’s more, the licensees’ uses of the trademark actually count as though the trademark owner was using the trademark. They’re doing the heavy lifting to make the trademark stronger.

But Leonard didn’t own the trademark when he let Nike use the logo. Why not? Because he didn’t use it in commerce. He had no trademark rights in the logo because trademark rights only arise when the trademark is used in connection with one’s own products. But even according to Leonard’s complaint, the logo wasn’t used with shoes (or anything else) until Nike started using it with shoes.

What Leonard has is a copyright in the logo. But here things get complicated. If I take your design and, with your permission, alter or adapt it, I’ve made a derivative work based on your design. You still own the copyright in the original design, but I own any contributions I made to the derivative work.

Did Nike make a derivative work of Leonard’s logo? We don’t know! But let’s say it did. Can it continue to use the “refined” version of Leonard’s logo without Leonard’s permission? Uh…. oh, boy. But the short answer is: no. It’s safe to say that Nike can’t copy, display or distribute the refined logo without infringing on Leonard’s copyright in the underlying original version of the logo. It also means Leonard can’t use the refined version of the logo, though he can build upon his own original version, and use that, if he wants.

Registering Disapproval

And, yet, Nike registered the logo with the U.S. Copyright Office, which understandably torques Leonard. Here’s the online record of Nike’s registration. Perhaps Nike was only registering the refinements it made to the original logo?

No! Nike registered it as though one of its employees had created the logo from whole cloth, as a “work made for hire.” Nike either believes that Leonard was one of its employees even before his relationship with Nike3 or Leonard’s original logo never existed. Either is a falsehood.

How do we know? If Nike were seeking protection of only the refinements, it would have disclaimed the original logo from its work. On the application form, you’d find this under a heading called “Pre-existing Material.” But Nike seems to have left this blank. The most charitable explanation is that whatever Nike employee handled the application just didn’t know about Leonard’s role and just assumed the logo was made entirely in-house.

Meanwhile, Leonard has applied for and obtained a trademark registration for the logo, for use with “Hats; shirts; pants; shorts; jackets; sweatshirts; sweatpants; jeans,” but not shoes… If Nike attacks this registration with effort, they can cancel it. Leonard appears to believe that by excluding shoes, his registration is OK. After all, Nike only used the logo with shoes, right? Excluding shoes was necessary because there’s no question that Nike has the trademark rights in the logo for shoes. But the test for trademark registration is whether consumers will likely assume that the logo on the shoes is from the same folks (“source”) as the logo on the clothing. Since the makers of athletic shoes also often make athletic clothing, I’m pretty sure consumers will likely make this assumption.

So the current state of play is: Nike has a registration for a copyright it probably doesn’t own, and Leonard has a registration for a trademark he probably doesn’t own.

Nike and Leonard will, of course, work something out. Nike has no real continuing interest in the logo, since Leonard is no longer affiliated with Nike. And, despite Leonard’s prowess on the basketball court, the logo probably hasn’t been used so extensively as to become a significant asset to Nike. So I suspect Leonard will end up with both the copyright and all trademark rights in the logo, once whoever at Nike is driving this thing gets over himself or herself.

Nobody Likes Going to Legal

It goes without saying this could all have been avoided with proper written agreements. One might surprised that a major company like Nike might’ve screwed this up, but this is a case where being big doesn’t help. Nike has form contracts and processes set up by its legal department, so that the lawyers don’t need to be involved in every transaction. The problem was the Leonard’s situation was unusual and didn’t fit the forms or the processes. Instead of Nike developing the design entirely in-house, it was refining something the player first created, and the forms and processes can’t deal with that.

The Nike employee involved might not have even been aware of any legal issues. Remember the context: Nike and Leonard first entered into the endorsement deal, then later, Leonard gave Nike his design for Nike to work on. This is kind of exciting, really! Of course, the novelty should’ve tipped off the Nike employee that “legal” needed to be involved. But nobody likes going to “legal.” Legal just slows stuff down and takes the fun out of everything. And here was Leonard with this really cool design, so why risk having legal ruin everything?

Still, somebody should’ve “gone to legal.” And this is what legal would’ve done. They would’ve asked Leonard if he wants to keep the copyright in the logo or if he’d rather sell it. And if didn’t want to sell it, they’d ask for an exclusive license to reproduce, adapt and distribute the design for a few years, with a perpetual non-exclusive license to at least keep distributing the logo (or some provision allowing Nike to sell the inventory of shoes even after the exclusive license expired). And they would’ve explained to Leonard that Nike would get the trademark rights in the logo for shoes and related goods, and honestly, there’s nothing they could do about that, unless Leonard wanted personally to get into the shoe business.

Now that I think about it, Nike would be crazy to use the logo without owning the copyright or some very robust exclusive license. Otherwise, it would invest heavily into building up the logo as a trademark, only to have the rug pulled out when it lost the right to copy and distribute the logo.

In short, there would’ve been several ways to solve the foreseeable problems that all eventually came to pass, but it would’ve involved some dialogue with Leonard, listening to what he wants, and explaining what Nike wants.

From Leonard’s perspective, he’s got to protect what’s his. The copyright is his. He seems to have acted like it, which helps a lot. But it’s important to get Nike to acknowledge that in writing, preferably in a contract. Also, since the copyright is his, he needed put boundaries on what Nike could do with his design.

The trademark issue would’ve been a tougher nut to crack, without some advance planning. He would’ve needed to have used the logo to sell shoes himself to create trademark rights for himself in the logo, then licensed the trademark (preferably registered) to Nike. Failing that, maybe a right to purchase the trademark rights (and attendant goodwill) from Nike at the end of the license period, for a certain price? That price would be less than the fair market value because, without the copyright license, Nike couldn’t continue to use the logo, so its value as a trademark would diminish.

As you can see, the negotiations would’ve been tricky, but not impossible. And certainly a lot better than the current embarrassing mess.

Thanks for reading!

Bonus Content: What Copyright and Trademark Registrations Are & Aren’t

P.S. One final thing. I’ve been talking about “registering” copyrights and trademarks. I need to clarify what that means. The most important thing is that registration has nothing to do with the existence of copyrights and trademarks. You can only register copyrights and trademarks that already have an independent existence.

When you create an expressive work and “fix” it to a “tangible medium,” you automatically gain copyright in the work. No government action is required. However, if you want to enforce the copyright, you must first register it with the U.S. Copyright Office. Once you know the pitfalls, it’s not hard, and it’s not very expensive. In addition, if you register the work before an act of infringement (or within three months of publication, whichever is later), you are entitled to statutory damages (i.e., damages you don’t have to prove) and become eligible to recover your attorney’s fees. One final bonus: if you register within five years of publication, you don’t have to prove ownership or validity of the copyright (though the other side can attack the ownership and validity, but it’s the other side’s burden, not yours). Sometimes these benefits are game-changers, and sometimes they’re meaningless, depending on the context.

When you register a trademark, you are giving notice to the rest of the U.S. that you own this trademark for certain good and services. This is important because, otherwise, someone else could use the same trademark for the same goods and services in a geographic area remote from your use of the trademark, and you’d both be owners of the trademark but only within your geographic markets. If you have big plans, this could cramp your style. A trademark registration (similar to a copyright registration) is sufficient proof of validity and ownership of the trademark (which, again, can be attacked, but at least that burden is not on you). Proving validity of trademarks can be very difficult, so this benefit is valuable.