breach of trademark license case exactly six years ago today on january th th if the court will permit me i would like to address the following topics in the following the water st the granting of the army's motion for summ rubens claims with respect to the st topic counsel didn't see me do exactly what he had a right to do to to reject items that it didn't just didn't want to approve no it did not your honor and respect that i would like to direct the court's attention to its decision on december twenty three of two thousand and twenty in a case called b g t holdings versus the united states  counts is in this agreement but this agreement must be used in a reasonable fashion write it in the case to which i just referred at page eleven of the slip opinion which is a veiled in the course website it page twelve it's it says that says the correct interpretation of quote shall consider and this contract does not give the government absolute discretion but instead to hold the government to a duty of good faith and a reasonable guess at page beginning at the bottom of page twenty seven dollars of our principle brief pairing over we point out that the for the st two years a little better than two years of the contract well we were obliged to pay a guaranteed minimum royalties the the army would not approve any designs that were merchantable thus leaving us in the position of having the obligation to pay a guaranteed minimum loyalties and no revenue with which to pay them is correct i just found out last night ok did you tell opposing counsel that you were going to rely on it this morning no your honor i found out last night around four hundred and forty five o'clock in the afternoon and i observed that he represented the government in the case i don't think he i think he knows more about this case than i do you are still obligated under our rules to advise opposing counsel new cases that you plan to rely on an oral argument all right i will not refer to it anymore the answer to the question however remains the same it is not reasonable for the army to have insisted that we pay guaranteed loyalties while refusing to approve any merchantable product from which to generate revenues from which to pay those pay those more importantly this is a trademark license agreement the quid pro quo we paid guaranteed minimum royalties and initial payment and then running relatives in consideration of the use of the trademark for trademark purposes a trademark by statutory definition is an indication of source the trial court found in so many words and correctly that the army categorically refused to permit its licensing fee to use the trademarks for tra purposes but instead insisted that they be used merely for decoration indeed it is deposition mr sullivan it needed as much in so many words so while the army has discretion like every trademark owner to approve and disapprove the use of its mark in a way that is consistent with the best interests of the trademark holder it cannot categorically refuse a license clear there were discussions ongoing discussions about the army's continued rejection initially of merchandise that was callously over marked and was an  entire conversation about the use of the mark is limited to the submissions to which your honor refers is an accurate once once the army said listen more more more trademarks more trademarks there's no stores no sense for authentic to continue to submit proposals requests for approval that it would be denied there was an ongoing discussion between two thousand and ten and essentially the end of two thousand and twelve respect to the appearance of the good then your honor here is the issue of merchandising a trademark has value only with respect to the in a relationship between the trademark and the consuming public and you don't get to that point until you have something to merchandise to trade the license started in tw to authentic as the contracting party and it is the trial court's opinion does not discuss it and more than a single sentence is undisputed that they would not permit that they the army would not permit use of the trademark for trademark purposes namely to a dentist life the license or as the source of the license goods or the endorser of the license goods that's an express finding by the trial court it is well ee has a right to use the license mark for trademark purposes that is the principal issue in this case it's been the principal issue since the st conference in two thousand and fifteen and remains for this court to decide it's not the issue is not do they have a right to exercise control because as we point out in our brief to free trade mark owner does not exercise control becomes a naked license the trademark o i'm sorry absolutely not the validity deed under the licensee estoppel rule authentic could never challenge the trademark right assuming it's challengeable but that's got nothing to do i suggest with the contractual obligations of the army as a trademark license or it agreed it didn't have to enter into this license the secretary of defense did not have to exercise discretion to permit the licensing of marks within his decided to license their trademarks they were obliged to permit licensees to use them for trademark purposes for whatever reason you question the numbers that i mentioned to you well you have the numbers what percent of requests were granted your honor you are correct with respect to the submissions that is a correct number but what two hundred style line to take to market and then developing merchandising materials the army would not permit us to advertise approved licensed goods as being from the army as a source or the minimum as it endorser and that's what this case is about not about the approval of garble it is in part about the approval of garments because it's our contention that it troubles me is a completely ignores the breach of the st license the negotiation of a compromise the forty percent reduction in the royalty rate so w the forty percent i'm sorry your honor i didn't hear you broke up would you please repeat your question the forty percent reduction in the growth rate is for your benefit is and this is for our benefit if but only if they permit us to use the trademark for trademark a license agreement for the purpose of trading on the goodwill of the united states army with respect to license goods that was the principal object of the trademark license as it is the principal object of any trademark and how many the critical christmas holiday season we submitted requests and in october and it took them until march and the precise citations that are in our briefs and again the issue is merchandising issue is selling this goods not getting it approved so we can manufacture it the issue for any trademark licensee is trading on the goodwill that it in quote purchases via the trademark that's correct ok as i read your position the government had no obligation under this agreement to approve any proposed design is that your position that is correct but with the caviar the way this agreement is set up the army has a contractual obligation to substantively analyze and consider the licensee submission so if the army fails to do that if the army simply takes and submissions and says you know what licensee we don't like you we don't care what your submissions look look like we are just going to disapprove them out right if if the army had done that then that could possibly be a cause for a breach of contract claim because that is outside the realm of the exculpatory provision suppose there arbitrary rejection there's no remedy for an arbitrary rejection if the army had substantively reviewed the submissions and rejected them arbitrarily if i understand the hypothetical then ye clause would kick in and it would not allow a damages claim against the government the reason is your honor because there has to be some added value from the exculpatory clause if the court provision that gives the army discretion because as we explain in our brief discretionary decisions are reviewed under that deferential standard but this contract not only has a provision to give the army discretion it also has a again as long as the government substantively reviewed and considered the licensee submissions then yes it would still be no liability and your honor i would refer you back to the wells brothers case  clause applied because the government had that discretion over delay the government could not be sued for damages that were occasioned by the delay but that is that case only involves one feature the delay feature of the government's asians whereas here you're saying the government has no obligations other than to consider this i mean it seems like i'm likely interpretation of the contract given the covenant of good faith and fair dealing to say the government can act in bad faith in a stable liability that that seems extremely odd but in any event i understand your position is that the government nonetheless acted over approval that provision must have meaning as as the supreme court said of brothers it cannot be treated as meaningless and futile and right out of the contract and we ask that the court do that here as well  rational going back to the perils primary argument that it was not allowed to use the trademarks for a trademark purpose and that seems to go back to supported endorsed or sponsored by owner so it agreed that it cannot represent to the general public that the army either supports or door says or sponsors its products in any way  broader point about trademark licensure the view that authentic apparel has presented to this court through its brief and again today is the old view of trademark licensing that has not applied in this country for many decade under the modern view trademark licensing is permissible even when trademarks are used as decorations and even when those trademarks are not used to identify the primary source of the goods as long as a license store imposes some quality control over its marks and this can be seen in merchandising agreements that are very much prevalent in today's economy if you consider for instance an organization like the new york yankees that has a trademark over its logo the yankees license their trademark to companies that make all kinds of items from posse mugs to key chains earrings all bearing the new york yankees logo and those are all decorative uses of the mark that do not indicate the primary source of the item no one thinks that the new york yankees are manufacturing earrings but they are all permissible uses of the trademark so long as the yankees impose some quality controls over the use of the mark and that is exactly what the army did here there is no indication  did not properly impose quality controls in fact if anything the opposite is true because authentic apparel has alleged that the army to strictly try to preclude certain uses of its marks which is  rademark usage when the trademark is license can properly signify only the secondary source which is the license or authority to use the mark there is a lengthy discussion of this in the preeminen treatise on trademarks at the treatise that the supreme court has cited many times it's called mccarthy and trademarks and unfair competition and in sections eighteen colin thirty nine to eighteen colin forty one there's a long discussion of those terms have been used interchangeably sometimes but there's a distinction between what makes a trademark license a naked license and a trademark assignment and they get a sign it is true that when a license had essentially deprived the trademark of lanham act protection because it did not indicate the source of the mark because you know different companies could say that they are the manufacturer of this strong to transmission fluid instead of g m and the court said that does not deprive the trademark of lanham act protection because a trademark can properly be used without displaying the license or is named can simply display the trademark process under the license agreement imposes not only discretion on the army and its ability to approve or disapprove marks but it also has a lengthy discussion of the various stages of the approval process the fact the army had discretion to disapprove those items at every single stage of that process so what section five point one establishes is precisely the type of quality control that are required for a valid trademark like but the court found just recently that the shall consider language did not give the army discretion and the reason is because the c t a contracted issue there did not have a provision that express the contracting officer has discretion whether to give an equitable adjustment to the contract or that is d in direct conflict with the agreement we have here which section five point one  and again section fourteen dollars expressly says that the army has sole and absolute discretion over approvals in this case we have a provision that expressly provides discretion to the government and when that is the case even if authentic apparel was able to overcome the exculpatory clause the court really should review that discretionary decision under the highly deferential a a standard and yet earlier in your argument you said there's no review at all how is that consistent that's correct it's essentially an argument of the alternative so there is no review under the copa tory clauses but in the event authentic a paralysed somehow able to overcome the exculpatory clauses which again as we explained it should not in the event that it is the appropriate standard of review is the rational basis the standard of review according to which if the army articulated a rational basis for its discretionary decision then the court must affirm that discretionary decision without nd guessing the army's considerations so in the event authentic apparel can somehow overcome the it's called a tory clause that would be the appropriate standard of consider unquote and this contract setting does not give the government absolute discretion but instead holds the government to a duty of good faith and reasonableness unquote that is what the b g case holes and license the rd iteration prepared after this lawsuit is now called quote us army brand guidelines for licensed products i ask that you consider in reaching your decision because you will see that the brand guideline with respect to packaging does not particularly address merchandising gives licensees exactly what we claim we are entitled to namely to merchandise as our product as part of the u s army brand part of the u s army brand and that's exactly what that document shows next with respect to the wells decision and the compound both of those cases involve contracts to construct something in which the possibility of delay was known to the contracting parties the allocation of the risk of loss was assigned to the contractor and the contract was enforced according to terms in this case the object of the contract is not the construction of something but rather the licensing of trademarks and if we were not permitted to use the trademark erpreted the contract in a way that frustrated its very object that is all i have by way of rebuttal i had no further questions so i thank you both counsel and the case is submitted