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Kardashians Have ‘Unclean Hands’ In IP Row, 9th Circ. Told about Kardashian Beauty

Law360 – A cosmetics company that signed a licensing deal with Kim, Kourtney and Khloe Kardashian urged the 9th Circuit on Wednesday to undo a block on product sales while their trademark fight proceeds, saying a lower court ignored the celebrities’ “blatant and willful” violations of their agreement when issuing the preliminary injunction.
The reality television sisters launched their trademark infringement suit against Hillair Capital Management LLC over unpaid royalties in July 2016. Days later, Haven Beauty Inc., co-owned by Hillair, filed a $10 million breach of contract suit accusing the stars of not sufficiently promoting their Kardashian Beauty line while touting competitors’ beauty products.

During oral arguments before the Ninth Circuit on Wednesday, an attorney for Hillair, Gregory Fayer of Fayer Gibson LLP, asked the appellate panel to vacate the preliminary injunction, maintaining that the district court erred, “number one by refusing to apply the unclean hands analysis, refusing to so much as mention much less consider or discuss our extensive and uncontroverted evidence that we presented to the district court of the Kardashian’s rampant, blatant and willful violations of my clients rights in the very same marks pursuant for which they seek relief.”

The Kardashians purported to terminate the license agreement for nonpayment of royalties and asserted trademark infringement against Hillair. But the balance of hardships weighed in favor of the cosmetics company due to the conduct of the celebrities, and thus the sisters’ preliminary injunction motion shouldn’t have been granted, Fayer said.

Judge Paul J. Watford asked about the Kardashian’s assertion that the law in trademark licensing — including in the Third Circuit’s decision in S&R Corp. v. Jiffy Lube International Inc. — has established that a licensee cannot justify its own nonperformance based on an alleged breach by the licensor. Watford said such cases seemed to be “on point.”

“You think they’re wrongly decided and we shouldn’t basically incorporate them as part of our circuit’s law or were they just misapplied?” the judge asked.

Fayer said the district court’s interpretation of Jiffy Lube was misapplied because no royalties were due from Haven. The terms of the license agreement required the Kardashians to send invoices to his client and that term had “never been complied with.”

“Just to be clear, sales of products on which royalties were owed were made during this contract period, is that true?” Judge Watford asked.

Royalties “in theory,” would be owed, were there an invoice presented, Fayer responded.

An attorney for the Kardashians and their loan-out corporations, Jonathan Steinsapir of of Kinsella Weitzman Iser Kump & Aldisert LLP, told the court that on numerous occasions his clients sent written communications to the cosmetics company asking to be paid.

“The failure to send an invoice doesn’t mean a payment is not due,” Steinsapir said. “We’re licensing them really valuable intellectual property, and we’re saying we want to get paid for its use because we haven’t been paid for four years.”

Steinsapir added that in addition to not paying royalties, the cosmetics company launched a new product line that had not been approved by the Kardashians.

“You’re saying you’re still entitled to the injunction because they went out and sold products you disapproved,” Judge Watford said.

During rebuttal, Fayer said that the Kardashians were silent on the updated cosmetics line and didn’t expressly disapprove the products, which according to the terms of the agreement, meant they were “deemed approved.”

In their suit, the Kardashians accused Hillair and Haven of using the “Kardashian Beauty” trademark after failing to make required payments.

“Not only did defendants refuse to stop using the Kardashian image … they actually partnered with a mobile app developer to include the Kardashian Beauty mark, images of the Kardashians and the Kardashians’ names as a feature of a popular mobile app allowing people to ‘virtually’ try on ‘virtual’ makeup through ‘selfies’ on the mobile app,” the Kardashians’ suit claims.

Haven’s suit accuses Kim, Kourtney and Khloe Kardashian of ceasing to market and promote the line after Hillair allegedly acquired former distributor Boldface Licensing & Branding Inc.’s assets out of insolvency.

“In short: the Kardashians wanted a better, more lucrative deal than they had struck after the money to continue the line was already committed … with Haven and its employees bearing the brunt of the Kardashians’ window shopping,” the suit said.

Haven’s suit claims that the Kardashians have failed and refused to perform their contractual obligations since Haven acquired the rights to the license in October 2014.

Haven says that, starting in February of this year, the sisters started threatening to end the license allowing their names to be used in connection with the Kardashian Beauty line.

The legal claims are currently in arbitration, the parties told the Ninth Circuit on Wednesday.

Circuit Judges J. Clifford Wallace, Morgan Christen and Paul J. Watford sat on Wednesday’s panel for the Ninth Circuit.

Hillair Capital Management LLC, et al, is represented by Gregory A. Fayer of Fayer Gipson LLP.

The Kardashians are represented by Michael J. Kump, Jonathan P. Steinsapir and Gregory P. Korn of Kinsella Weitzman Iser Kump & Aldisert LLP.

The case is 2Die4Kourt et al. v. Hillair Capital Management LLC et al., case number 16-56217, in the United States Court of Appeals for the Ninth Circuit.

–Additional reporting by Carolina Bolado. Editing by Pamela Wilkinson.

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