Intellectual Property

Loose Threads? Jay-Z, Roc Nation, And Reliance On An Implied License

He's got 99 problems and this IP case is definitely one of them.

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Jay-Z

Licensing intellectual property is never something to take lightly — it requires an understanding of the underlying rights subject to the license, as well as a certain attention to detail. Although licenses convey certain rights to licensees, the rights retained by the licensor are equally important to both understand and protect. Licenses convey specific intellectual property rights that are woven into a fabric through the license to be exploited by the licensee according to the terms of the underling license. In most cases, they also hold back specific rights for the licensor to retain and exploit. If not done carefully, the entire intellectual property wardrobe can unravel, leaving the courts to sort out the mess. This appears to be the case involving the “ROC” brand, and it seems there are plenty of loose threads to blame.

Shawn “Jay-Z” Carter is a rap singer and music mogul, selling over 100 million records and earning over 21 Grammy Awards (as well as a spot on 2017 Time Magazine’s 100 most influential people list). Apparently, he has sold the most No. 1 albums by a solo artist, and only the Beatles have more No. 1 albums by artists in the history of recorded music. That is an incredible record of accomplishment, and Jay-Z has applied such talent equally well in establishing a brand empire. This track record makes the current dispute all the more intriguing.

First, some background is in order. In 1999, Jay-Z, along with his friends Damon Dash (“Dash”) and Kareem “Biggs” Burke, founded the fashion brand ROCAWEAR to appeal to the “fan base for Jay-Z’s music and lifestyle, and general appeal.” By all accounts this clothing line was a real success, and the trio eventually expanded the brand in clothing and apparel focusing on the term “ROC,” used “as the surname for a burgeoning brand reflecting the “‘Roc’ lifestyle” in various goods and services.

As is not uncommon in such situations, Rocawear Licensing, LLC was created as an intellectual property holding company to commercially exploit the ROCAWEAR brand. And the ROC-based marks — and exploit it they did. According to the plaintiffs, “Rocawear Licensing LLC, developed a worldwide portfolio of over two-hundred and fifty (250) registered and common law trademarks” for various goods (such as clothing) “including, without limitation: ROCAWEAR, ROC, ROCA, ROC BOYS, TEAM ROC, BELLA ROC, ROCA SPORT, ROCABEAR.” Here is where things get murky. In 2007, Iconix paid Rocawear Licensing in excess of $204M ostensibly for all the rights to the IP held by Rocawear Licensing to Iconix (which would seem to include the “ROC”-based marks), and by all accounts has (and continues to) successfully commercially exploit the brand.

In 2008 (less than a year after the sale to Iconix), Jay-Z entered into an a venture with Live Nation and another company using the name Roc Nation LLC, and thereafter began using the phrase “ROC NATION” on clothing products, leading to a dispute with Iconix that was eventually resolved with a consent and co-existence agreement that allocated rights between Roc Nation LLC and Studio IP (a wholly owned subsidiary of Iconix that holds some intellectual property rights of Iconix). What rights were allocated, however, are disputed by the parties — Iconix insists that it (or its wholly owned subsidiaries) own the “ROC”-based marks, while Roc Nation LLC (as well as Roc Nation Apparel Group and other defendants) insist that is not the case. That license expired under its terms in 2016, but according to defendant Roc Nation Apparel Group, LLC (“RNAG”), not really.

Thereafter (and sometime prior to March 2017), RNAG entered into an agreement with New Era (a licensee of Major League Baseball) to manufacture and promote special edition baseball hats bearing the ROC NATION mark. Ultimately Iconix brought the present lawsuit, claiming that Iconix was never consulted on the deal and that Jay-Z, RNLLC, RNAG and other of his business entities undermined the rights Iconix originally obtained in 2007. In its answer, RNAG not only disputes this position, but is countersuing Iconix and its wholly owned subsidiaries for breach of implied license.

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You read that correctly — RNAG claims that it has been operating under an implied license since 2016. According to RNAG, it was formed, in part, “to develop, market, promote and sell ROC NATION apparel with Plaintiffs subject to the terms and conditions of the [consent and co-existence Agreement.” RNAG claims it consented to the plaintiffs’ use and registration of the ROC NATION mark under that agreement, but only “for certain limited categories of goods including apparel” subject to certain conditions and limitations including but not limited to “Roc Nation’s control over the quality of the goods produced under the ROC NATION mark.” In fact, RNAG asserts that it was granted exclusive rights to the “ROC NATION” mark for certain “Licensed Products” that include clothing (and so, baseball hats). To make a long story short, RNAG claims that the parties recognized that a renewal of the 2013 agreement would not happen in 2016 and that its continued use of the ROC NATION mark was “with the full knowledge and consent of Plaintiffs,” pending agreement on the terms of a new business arrangement or realization that one could not be reached.

By their very nature, implied licenses are unwritten — licenses that are implied by law or otherwise based upon the conduct of the licensor that leads the licensee to believe that a license is (or remains) in place. Such rights are not expressed — they are interpreted by the facts and circumstances surrounding them. To that end, such rights are normally construed very narrowly by the courts. In the present case, these rights will need to be educed from the convoluted history of ownership and licensing of the ROC NATION marks (no easy task). RNAG makes an interesting argument in its countersuit to avoid this morass — it simply asserts that Iconix (and its subsidiaries) were fully aware of RNAG’s continued exclusive use of the ROC-based marks on certain apparel (i.e., baseball hats) and did nothing to discourage or prevent it until it filed suit. Whether this is true or not remains to be seen, but such truth is essential to RNAG’s counterclaim.

From my perspective, the present lawsuit was likely filed because Iconix wanted leverage in the negotiations, probably due in no small part to the previous disputes between the parties. That said, it is highly instructive on the importance of having licenses that are not only as clear and unambiguous as possible, but that interoperate accordingly. I have not had an opportunity to review all the underlying agreements, but given the history of disputes over the ROC-based marks between the parties, clarity is likely not their strongpoint. Implied licenses are resorted to when no express license exists, so clarity and simplicity in the underlying license (and sensitivity to other instruments that nay be affected by it) is a must, not to mention the licensor’s actions. Whether the counterclaim will prevail remains to be seen, but the whole point is to avoid such situations in the first place. So… take care with your licenses and tailor them well — if not, you are assured of a lot of loose threads that may unravel a lot more than you think.

Tom Kulik is an Intellectual Property & Information Technology Partner at the Dallas-based law firm of Scheef & Stone, LLP. In private practice for over 20 years, Tom is a sought-after technology lawyer who uses his industry experience as a former computer systems engineer to creatively counsel and help his clients navigate the complexities of law and technology in their business. News outlets reach out to Tom for his insight, and he has been quoted by national media organizations. Get in touch with Tom on Twitter (@LegalIntangibls) or Facebook (www.facebook.com/technologylawyer), or contact him directly at tom.kulik@solidcounsel.com.

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