Tuesday, August 12, 2008

Britney Spears’ Stint at “Rehab” Leads to Trademark Infringement Lawsuit Against the Hard Rock Hotel & Casino

On August 8, 2008, Jimmy Daniel Alexander, a member of the rock band “Rehab,” filed a trademark infringement lawsuit in the U.S. District Court for the District of Nevada against the owners of the Hard Rock Hotel & Casino (“Hard Rock”) in Las Vegas. See Alexander v. Hard Rock Hotel, Inc. et al, Case No. 08-cv-01035 (D. Nev). A copy of the complaint can be downloaded here.

According to the complaint, Alexander, along with two other musicians, formed “Rehab” in the late 1990s in Atlanta, Georgia (see also Wikipedia write-up). The band has released 5 albums to date (its major label debut “Southern Discomfort” was released in 2000 and sold over 170,000 albums). The band even played in Las Vegas as recently as August 5, 2008 (The Las Vegas Weekly here even noted that "It's not Hard Rock's Rehab but they do rock hard").

CD cover of Rehab's 2005 "Graffiti The World" Album

Alexander also currently owns a federal trademark registration for the mark REHAB for music (August 31, 1999 first use date) and clothing (September 2000 first use date) which he acquired by assignment from Destiny Music, Inc. on January 31, 2005. You can see the “Rehab” clothing line here. Alexander also has an application pending for the mark REHAB for live performances by a musical band.

A REHAB hoodie.

Sometime in 2004, the Hard Rock began hosting Sunday afternoon pool parties under the name “Rehab.” (For those with high-speed modems, click here to check out the Hard Rock’s interactive view into the world of “Rehab” – complete with its own “movie trailer”).

The Hard Rock, through its IP Holding company, HRHH IP, LLC, also holds its own trademark registrations for the design marks REHAB RX and REHAB RX SUNDAYS AT THE POOL -- both for "seasonal poolside party held weekly with food, drinks and entertainment" with first use dates of April 5, 2004. In addition to hosting these parties, the Hard Rock also sells clothing (t-shirts, hats, etc.) ornamentally displaying its Rehab marks.

According to the complaint, sometime in March 2006, a fan of the band “Rehab” forwarded a photo of Britney Spears wearing a “Rehab” shirt thinking that it was referring to the band, but in actuality it was a shirt from the Hard Rock’s “Rehab” party.

Possibly the photo that sparked it all?

On April 7, 2006, Alexander’s attorney at the time contacted the Hard Rock's legal counsel regarding its “infringing use” of Alexander’s REHAB mark. Hard Rock's counsel supposedly told Alexander’s attorney that all infringing merchandise had been removed and offered a $7500 settlement (claiming that the Hard Rock had never grossed more than $13,000 from the sale of such merchandise). The attorneys supposedly reached an agreement on the terms of a settlement involving a $10,000 payment along with an agreement for the Hard Rock to sell Alexander’s “Rehab” merchandise through the Hard Rock’s retail outlet, but the agreement had to be approved by the Hard Rock.

This settlement, however, was apparently never approved and finalized before the Hard Rock was sold to Morgan Hotel Group in 2007. Afterwards, Alexander's attorney was put in touch with Mr. Phillip Shahala, the newly appointed Vice President of Marketing, and the two came to some kind of “agreement” through a series of e-mails whereby Alexander would allow the Hard Rock to continue to use the name “Rehab” in exchange for a $13,000 payment to Alexander, a percentage of all clothing sales from the Hard Rock “Rehab” pool parties, space for Alexander’s “Rehab” clothing to be sold at the retail store located at the Hard Rock, and a promise to schedule 3 performances for the band to play at the Hard Rock’s concert venues.

It is not clear from the complaint whether an agreement was actually reached (and subsequently breached) by the Hard Rock or whether the parties were still in the negotiation phase. While Alexander claims to have acted pursuant to the terms of this “settlement agreement” with Shahala by not pursuing any action to stop the Hard Rock from using the “Rehab” name, it appears that Alexander was never paid the $13,000 nor was there any final written agreement memorializing the terms of any such settlement. [Ed. – Wouldn’t you have been a little suspicious when the Hard Rock didn’t at least pay the $13,000? Is there really an enforceable settlement agreement here if there are only e-mail exchanges negotiating terms of a settlement? Did Shahala have authority to enter into such an agreement? And why didn't Shahala turn the matter over to Hard Rock's legal counsel?] The Hard Rock apparently broke off contact with Alexander and did not take any actions consistent with the supposed terms of settlement.

Alexander claims that the Hard Rock’s use of its “Rehab” mark is likely to cause confusion with its own REHAB mark. Alexander’s causes of action are for registered trademark infringement (15 U.S.C. § 1114), federal unfair competition (15 U.S.C. § 1125(a)), common law trademark infringement, breach of contract, and unjust enrichment.

Alexander seeks an injunction to stop the Hard Rock from using the name “Rehab” (and the request is not limited to just the use on clothing but appears to cover use by the Hard Rock of the name "Rehab" for pool parties as well). Alexander also seeks an accounting of Hard Rock’s profits from any infringement [Query—profits just from the sale of clothing or from the pool parties as well, which is where the real money is likely to be] as well as damages for the “breach” of the settlement agreement, which Alexander values at in excess of $1,000,000 because of the promotional value to the band of the promised concert appearances.

Vegas™Esq. Comments:
With all of the talk these days about celebrities going to “rehab,” I don’t think the mark, at least with respect to clothing goods, is especially strong given that the word "rehab" is well recognized to be short for "rehabilition." In addition, the word “Rehab” appears on the clothing as more of an ornamental feature and not necessarily functioning as a source identifier and it's arguable whether it would even be recognized by consumers as an indicator of secondary source or sponsorship (i.e., recognizing “Rehab” to be a reference to the band “Rehab”) although the PTO was apparently satisfied with the specimens submitted with the application and even with the most recent Statement of Use filed in 2007.

The primary goods/services at issue (pool party entertainment versus rock band music CDs) are different enough that it will probably be enough for Hard Rock to prevail on a likelihood of confusion analysis. After all, the PTO didn't seem to find the marks to be confusingly similar. The Hard Rock's use of the term "rehab" is most likely to be recognized as a suggestive play on "rehabilitation" (i.e., going to the Hard Rock's pool party is like going to rehab) and not likely to be recognized as the official pool party of the band Rehab. But then again, Alexander could play up the rock & roll connection between his band and the Hard Rock.

As for the Hard Rock’s sale of clothing bearing the Hard Rock’s own “Rehab” mark, this may be more of a challenge for the Hard Rock given the similarity of the marks, similarity of the goods, similar marketing channels, low degree of consumer care regarding purchases of clothing, and evidence of actual confusion (however weak), all of which tend to favor Alexander. Of course, given that the Hard Rock's use of the word “Rehab” on clothing is likely to be recognized more as ornamental or as an indicator of secondary source or sponsorship and not as a trademark for such clothing, the Hard Rock may end up having to rely on a more fundamental argument that its use of the word "Rehab" on its clothing does not even constitute "use in commerce" under the Lanham Act. See 15 U.S.C. § 1127.

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