• Notice and Communication:  Contracts are a form of communication in which the parties state their intentions and expectations while also providing each other with notice regarding what they care about and how they are wiling to work together. 
• Accountability:  Contracts not only provide the parties with information, they also provide an objective standard which third parties can consider and use to evaluate whether the parties to the contract have performed under the contract.

When parties engage in a relationship which constitutes a contract, they are engaging in a bargain where each party gives something in exchange for something else.  Presumably, each party is giving something of less value to get something they value more resulting in a net gain by both sides.  However, in order for the parties to actually get what they want, while giving away what they can, the parties have to actually understand and know what it is they are giving and getting.  There has to be a meeting of the minds between the parties, and this only occurs when each side both effectively communicates with the other side, and understands the other side’s position. 

The end goal of any contract is performance.  Hopefully, the parties do not have any disputes, but sometimes a party needs to get out of the contract or the parties cannot agree about their rights or responsibilities required by the contract.  This is when the contract performs its second function of being the standard a third party will use to hold the parties accountable if they cannot resolve their differences on their own.  How disputes will be resolved is not only important at the end of the day, it is important for calculating the value of the bargain at the beginning of the process.  A parties’ understanding of how disputes will be resolved, and the risks and costs associated, will affect their choices and behavior long before there is a full breakdown of the deal, and may in fact be essential to whether a deal can be reached in the first place.

Here, I want to address two optional provisions of a contract which are sometimes overlooked, but which can be essential for parties in establishing the right allocation of risks and benefits of a deal.  These are provisions on Alternative Dispute Resolution and Attorney Fees.

Alternative Dispute Resolution

By default, if parties are unable to resolve a dispute themselves, the recourse is to go to court.  This often means attorney fees, costs, delay, uncertainty, and emotional expense.  A party has to consider the costs of this process as a part of determining how they will proceed.  Sometimes, this is the best option for parties, but it is not the only option.

In the contract, parties can agree about how they will resolve a dispute.  While there are many ways this can be done, a basic first approach is to require the parties to engage in a mediation. 

A mediation is essentially a conference where a third party is selected by the parties to work with each of them to see if they can resolve the dispute.  While parties may be required to conduct a mediation in good faith, neither party can be required to resolve the dispute at a mediations. Sometimes mediations can take days of back and forth to get to a resolution, and sometimes mediations will be over in only an hour or so without any resolution.  The primary value of a mediation is getting a third parties take on the situation, and this is sometimes enough to get the parties to compromise.

A second basic option is for parties to agree to an arbitration.  An arbitration is essentially a mini-trial before one or more private decision makers and is usually binding on the parties.  It is usually binding because the parties agree that it is binding and the decision can be submitted to a court to be enforced without the court second guessing the decision.

Arbitrations are supposed to be quicker, more efficient, and less expensive than a court trial.  This is not always the case, but often can be.  One of the advantages of an arbitration is that it is not subject to the procedures and rules associated with trials, and a decision generally cannot be appealed.  Arbitrations do have their own rules depending on what arbitration organization is used.  Of course, the things that make an arbitration better can also make it worse.  The fact that an arbiter might misapply the law or misinterpret the contract is not a basis to overturn an arbitration decision because the parties have agreed to abide by the decision of the third party. Parties generally have to pay for an arbiters time and the cost of the process at an hourly rate while courts do not have such charges.  Parties often have legal representation in arbitrations such that the cost of attorney fees may not be less than in court.

An alternative dispute resolution provision can state what organization will conduct a mediation or arbitration, what rules might apply, how costs and fees will be allocated between the parties or awarded in a decision, where the mediation or hearing will take place, what law will be applied, how many mediators or arbiters will be involved, the timing for an arbitration, and how the decision will be enforced.  Such provisions may also state whether only one, or both parties, can require a mediation or arbitration.  Generally, arbitrations are private and the parties can keep the existence and content of an arbitration confidential.

Attorney Fees

In general, each party will be required to pay its own attorney fees in any dispute.  There are some statutes and situations where a party can recover attorney fees.  One of those situations is when the parties agree in a contract about who will be responsible for which attorney fees.

Including an attorney fee provision can be extremely important for a party who is successful in a dispute, whether in court or before a third party.  An obligation by a loosing party to pay attorney fees to the prevailing party changes the calculation for what a party may be willing to do both in potential settlement negotiations or in the litigation or arbitration process.  In short, when a party is likely to succeed, they have leverage over the other party to require a higher settlement and less incentive to resolve the matter before trial or without a substantial recovery.  On the other hand, a party that is likely to loose will be responsible for both their own attorney fees and that of the other party, and the party will have an incentive to resolve the matter for less than the combined liability and to shorten the time in which attorney fees are accruing.

Attorney fees also make a big difference in negotiations of a contract.  When a party has the right to recover their attorney fees for enforcement of the contract, it lowers the risk of entering the agreement in the first place because they will have a better chance of recovering not only their damages, but the cost of getting their damages.  In many ways, an attorney fee provision increases the pressure on the party that is considering a breach to perform by increasing the cost of a failure to perform.

Conclusion

Both Alternative Dispute Resolution and Attorney Fee provisions are key to properly balancing the give and take of a contract. It is important to realize that the failure to consider such provisions is a decision about the nature of the bargain in question and creates a certain balance or imbalance.  It is one thing to consider such provisions and affirmatively decide not to include them, and quit another to never consider them at all.

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In the meantime, most of the 6th floor is being redone to accommodate the arrival of a new tenant next door.  As a result, the floor is currently under construction and there are the typical signs of construction on the floor as walls are demolished and rebuilt.  Visitors are advised to be aware that construction is taking place and is clearly obvious when visiting the offices.  The Firm can still be reached by going to the 6th floor and entering through the main glass doors to the north of the building.  Upon entering the glass doors, the offices of the Brown Gold Firm, as well as The Griess Law Firm are immediately to the right of the main doors.

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Introduction to the Topic

All businesses have an image which is presented to the public.  Some businesses actively manage their image while others do not.  Some of the businesses which managing their image treat their image as an asset in which they invest and which has a monetary value.

While a business may present its goods or services under the business name alone, businesses can also create identities for their goods or services which are distinct from the business name.  For example, Twinkies® are made by Hostess®, but both Twinkies® and Hostess® are different in the minds of consumers.

The most basic presentation of the image of a business, good, or service is through its name.  Beyond the name, a business can have a logo, colors, packaging design, a look and feel, and so on.  Depending on who you talk to, the totality of the identity of a business, good or service is its brand.  That brand communicates something to the public about the business, good, or service.  This can be as little as the type of good or service, to as much as a consistent experience, a certain level of quality, support of specific values, a kind of lifestyle, or even participation in a common belief.

Legal Protections for Brands and Marks

The law provides a tool businesses can use to protect their marks and brands.  The law does not create the marks or brands, it recognizes what is there, and gives the owners the ability to use the legal system to protect it.  However, the law is concerned with consumer protection more than protecting businesses.

Consumer Protection

Consumer protection in trademark law is about preventing unfair competition and stopping the deception of consumers.  When a businesses works to communicate with consumers through its name, goods, or services, the law allows businesses to prevent others from misappropriating the marks of the business.

When others use the marks, they get the advantage of the value and meaning associated with the mark because of the work of the original company even though they have not built that value and meaning themselves.  This is unfair competition and inappropriately diverts business away by deceiving consumers.  Other businesses can also undermine the value and meaning associated with a mark by providing similar goods or services which do not match the quality or consistency of the originals.  This has the effect of diluting the inherent value and meaning of the mark by deceiving consumers to the detriment of the original company.

Source of Goods or Services

As the primary issue for trademark protection is consumer protection, the mark is about telling the consumer the source of the goods or services.  In short, the mark is about the identity of the business presented to the public or market about its particular goods or services.  The law helps businesses maintain and manage their identity with the public on their terms, and without intrusion from others. Registration of a mark with the federal government helps to establish those identities, and give notice to the others within the Unites States of the claims of various businesses and individuals.

Distinctiveness

In addition to the source of the goods or services, in order to be legally recognized, a mark must be distinctive.  This means that the mark, logo, colors, and so on, must be unique to the business, industry, and its activities in commerce.  Different marks have different levels of protection from very narrow to very broad, most often associated with the kind of terms used in the mark.  Generally, the law recognizes different levels of a mark:

• Generic: A generic mark is one which is commonly used in the industry or in commerce and is not at all distinctive.  For example, Gas Station is a generic term used by the public and businesses to refer to a particular type of service or product.  A business cannot obtain protection for the use of generic terms as these terms are freely available to everyone.
• Merely Descriptive: A merely descriptive term is one that simply describes the good or service at issue.  An example is Chocolate Fudge.  This describes the good, but it is not distinctive.  However, a descriptive term may become distinctive and can be a protected mark if it comes to have a secondary meaning associated with a particularly product or service.  In other words, if consumers come to identify the descriptive term as being unique to a particular good or service from a particular source, the law will provide protection to that extent.  For example, Staples inherently describes the type of goods at the store and is descriptive.  However, the company has succeeded in building a secondary meaning into the term so that consumers recognize the name as unique to a particular source of office supplies. Accordingly, the store has been able to obtain protection to that extent.
• Suggestive:  Another type of mark is one which does not describe the product or service, but which creates a mental suggestion about what the product or service is, or does.  An example is Spic and Span which suggests what the product or service is.  Use of the mark does not prevent the use of the suggestive language by others, but it does create protection to the extent that consumers come to recognize the term in relation to a particular product or service.
• Arbitrary: Some marks are considered arbitrary because they have no intuitive relationship to the actual business, product or service.  For example, an apple is a recognized fruit, but in the context of computers and software, Apple is a mark for a company which has nothing to do with fruit.
• Fanciful:  Marks which are made up and have no relation to anything specific are considered fanciful marks.  An example is Kodak which is meaningless except for its relationship with the film company, and which derives its meaning from this association.  Fanciful terms have the greatest and broadest protection as there is generally no other generally accepted use of the term outside of the context of the business, good or service at issue.

Businesses can develop their identities, and the identities of their goods and services, as well as their banding strategies in conjunction with the legal standards regarding distinctiveness to create and develop strong protection for their marks.

Use in Trade or Commerce

In addition to source and distinctiveness, Trademark law only applies to goods or services actually used in commerce.  It is not just a mark, but a trade mark.  Because the focus is on consumers in the marketplace, not merely entities in existence, registration of a mark is dependent on the mark being used in trade or commerce to identify to consumers the source of the goods or services.

During registration, one can apply for a mark with the intent to use the mark in trade or commerce.  The Patent and Trademark Office will allow the registration on the contingency that the business establish that it is actually using the mark within a certain amount of time after the registration.  If the business fails to do this, the registration does not continue.

Enforcement

Registration of a trademark does not prevent others from infringing on the mark.  It gives the public notice of the use of the mark and provides certain presumptions to the register of the mark to use litigation to stop others who inappropriately use the mark.  Accordingly, after registration and use of a mark, it is the owner’s obligation to actually take action to stop others from using the mark.  If the owner fails to do so, and others use the mark, it is possible the owner will loose the exclusive rights to use the mark as the mark may become diluted and the public may no longer associate the mark with the particular owner.

Owners of marks need to treat their marks as marks, and not allow the term to become generic.  The widespread use of a mark in a generic sense, without activities by the owner to protect its mark can have disastrous consequences.  For example, aspirin was originally a trademark for Beyer’s product to treat headaches.  However, people began to call all such medicine aspirin and the association of aspirin with Beyer disappeared.  The courts then decided that the term aspirin was generic.

In contrast, Kleenex, Coke, and Xerox have engaged in activities to try to train consumers and others to recognize that their mark refers to a particular type of product, not the product type as a whole.  Kleenex is a particular type of tissue paper, Xerox is a product that makes copies, and Coke is type of soft drink.  Not all tissue paper is Kleenex, not all copies are Xeroxes, and not all soft drinks are Cokes.

It is also important to realize that once a business has a mark, the value of the mark is somewhat dependent on the business building the brand so that consumers recognize the mark and understand the communication of the source of goods and the meaning behind the mark.  This, in addition to enforcement, can be very expensive, but is the intrinsic purpose of the mark.

Conclusion

Trademarks in business can be extremely valuable and important methods of communication with consumers.  With a strong strategy and intentional activities, a business can invest in its mark to create an asset with its own value.  Hostess may go bankrupt, but Twinkies as a product and mark recognized by consumers has its own value as an asset which will continue whether under the name of Hostess or someone else.

It is important for businesses to recognize the legal structures in place for protection of marks and the identify of businesses, goods, and services so they can utilize those tools to maximize their business and value as a part of their business operations and interactions with other businesses and consumers.

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