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Getting Real About Real Estate: Why Should Real New York Real Property Owners Really Care About the Rule Against Perpetuities?

By All, Featured, Real Estate, Real Estate Bulletins

Believe it or not, New York real property owners should be aware of the “rule against perpetuities” when structuring transactions – the rule arises in many more cases than you think.   New York’s rule against perpetuities is taught in the first year property courses of law schools, included in bar review courses, and usually promptly forgotten.

But that’s dangerous.  I’ll explain why.

Here’s the Rule Against Perpetuities in NY: “No estate in property shall be valid unless it must vest, if at all, not later than twenty-one years after one or more lives in being at the creation of the estate and any period of gestation involved. In no case shall lives measuring the permissible period of vesting be so designated or so numerous as to make proof of their end unreasonably difficult.” EPTL 9-1.1(b).

Got it?

I thought not. The short version is that no interest in real property is any good unless is vests, that is, comes into being, no later than twenty-one years after a life in being as stated in the instrument creating the interest, such as a deed, will, or contract.  And if there is no “measuring life” mentioned then you count twenty-one years from the date of the instrument.

Here’s why you should care.

For one thing, you should care because you are going to die and you want to plan for what happens to your property when you do. But if your plan is not careful, it might violate the Rule Against Perpetuities and your property goes nowhere but to court where your survivors fight over it.

For example, you could will your house to your sister for life and then to the oldest of her surviving children when they turn 30. This violates the Rule Against Perpetuities because it’s possible that no one alive today will receive the interest. For example, if your sister’s children die, and then she has another child and dies, the interest might not vest in anyone alive.

Or for another example suppose you will a building you own to your sister, so long as it is never used as a bar or restaurant, in which case it goes to your brother. That violates the Rule Against Perpetuities because it is possible for the interest to vest — someone opens a bar in the building and it goes to your brother’s heirs — more than 21 years after the death of everyone involved when you willed the building to your sister. Thus, the conveyance is not valid.

But what about while you’re still living, should you care about the Rule Against Perpetuities then? Yes.

But why, you ask? I’ll tell you.

Let’s suppose you own a nice little building in Brooklyn with a small grocery you run on the ground floor and two nice apartments upstairs, one of which you live in and one you rent out. And suppose further that knowing that you are going to die someday you decide you don’t want to spend the rest of your life selling groceries. So you decide to sell your building, take the money, and live out your days on the beach.

But you care about your neighbors and what could happen to them after you leave. In particular, you don’t want their children to be exposed to drugs. And now that pot is legal, you don’t want anyone to turn your bodega into a cannabis shop.

So you tell your lawyer you want your deed to prohibit anyone who buys your building from operating a cannabis shop there or else the property will go to your son and his heirs. Sorry, no you can’t, says your lawyer. That would violate the Rule Against Perpetuities because there is no time limit on when someone could open a cannabis shop and lose the building to your son or his heirs.

Finally, let’s suppose your next-door neighbor comes to you asking to buy your building to turn it into a single-family home for him and his family. And you say thanks, no thanks, you’re not ready to move to the beach — and anyway, the little old lady who lives in the other apartment with her grandkids is protected by rent control and it would be too nasty and expensive to get her out.

Then the neighbor says that’s ok, he can wait. He just doesn’t want you to sell the building to some stranger when you’re ready to go. So he asks you to sell him the grocery now and the apartments later whenever they are vacant.

So you ask him how you can do that. And he says, you sell him a one-third interest in the building and agree on a price to buy the other two-thirds whenever the apartments are vacant. In the meantime, you and he own the building together as tenants in common with an agreement that he collects the rent from the store and pays one-third of the building’s operating costs.

You say yes. You and he sign a contract to sell the one-third now and the two-thirds at a given price later whenever the apartments are vacant. You deed him his one-third interest in the property — and then you wait, and wait, and wait. And the little old lady dies and her grandkids stay in the apartment as rent-controlled tenants. And you wait some more.

Years later after you and the grandkids have moved and the apartments are finally vacant, your co-owner says he’s ready to pay the option price to buy your two-thirds interest in the building. But now the fair market value of the property is much more than the option price and you don’t want to sell your interest at a discount.

Instead, you say that the option agreement is no good because it violates the Rule Against Perpetuities because the option agreement sets no deadline for when it can be exercised. So you refuse to give up your ownership interest in the building at the now-low price you agreed to all those years before. Then your co-owner sues you to see if a judge will order you to sell your interest in the building at the option price.

And that is another example of how the Rule Against Perpetuities works and why you should care about it.

These are real problems that real people have with their real property in New York.

If you have real problems with your real property in New York, call Dunnington to find a solution.

by Andrew Weltchek

New Partner Announcement: Padmaja Chinta

By Uncategorized

Padmaja Chinta chairs Dunnington’s patent group and is a member of Dunnington’s  intellectual property, advertising, art and fashion law  and litigation, arbitration and mediation practice groups.  She is an experienced intellectual property attorney and trial lawyer. She has counseled clients on all aspects of intellectual property with an emphasis on litigation.

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Careers at Dunnington – Junior to Mid Level Trust and Estates Associate

By Careers at Dunnington

DESCRIPTION:
Dunnington, Bartholow & Miller is a midsize Park Avenue law firm seeking a Trust and Estates Associate with at least 3-5 years of trust and estates law experience to join its practice. The ideal candidate must be a self-starter with exceptional organizational skills and the ability to lead and follow. Candidate should have experience with estate planning and administration, including drafting, asset protection, and wealth transfer techniques.  Knowledge and preparation of estate tax returns and gift tax returns, as well as probate administration experience, are essential. Collegial attitude and desire to provide superior client service are imperative; the associate will be given significant responsibility for matters, including client contact.

JOB TYPE: Full-time

JOB LOCATION: New York, NY

EDUCATION: Juris Doctorate from an ABA-accredited law school; LLM in Estate Planning or Tax would be a plus

EXPERIENCE:
• NY bar admission or the ability to waive into the NY bar
• Trusts and Estates experience, Tax Experience a plus, minimum 3-5 years

SALARY: $90,000 to $100,000

TO APPLY: If you meet the criteria, please click the following link:
https://dunnington1921.wufoo.com/forms/trust-and-estates-associate-application

NOTABLE BENEFITS:
• Monthly professional individual coaching.
• 12 vacation days plus 10 personal days, which increases to 20 vacation days and 10 personal days after 1 year of employment.
• 401K, Health, Dental, Vision, and Life insurance.

WHO WE ARE:
Founded in 1921, Dunnington, Bartholow & Miller LLP is a growing New York City-based international firm that maintains its core values of reliability, trustworthiness, and commitment to excellence. Dunnington provides a full array of legal services, including counsel in Corporate, Litigation, Employment, Trust & Estates, Intellectual Property (with Fashion and Art law), Real Estate, Immigration, and Not-for-Profit practice areas. The Firm is organized into practice teams focused on Italy, France, Latin America, the United Kingdom/Commonwealth and is a member of the Cicero League of International Lawyers.

As the Firm celebrated its centennial in 2021, we are dedicated to providing clients with a personalized approach for an efficient, cost-effective way to tackle the problems at hand. Dunnington, Bartholow & Miller LLP is a signatory to the New York City Bar Association’s Statement of Diversity Principles and believes that through increased diversity, the legal profession can more effectively address societal and individual needs by bringing to bear more varied perspectives, experiences, and knowledge to the practice of law.

EEO STATEMENT:
Dunnington, Bartholow & Miller is an equal opportunity employer and does not discriminate on the basis of race, religion, color, national origin, age, sex, gender, sexual orientation, disability, or any other characteristic protected by law.

Trademark Talk – Do I Need to Register my Trademark?

By Intellectual Property, Advertising, Art and Fashion Law, Trademark Bulletins

Yes, you should.  Trademarks are like a muscle, the more you use it, the stronger you become. Using this muscle analogy, you know that exercise does not magically create a muscle, it rather develops it and makes you stronger overall.  Registration at the USPTO works in a similar fashion.  Registration does not grant you trademark rights, it rather enhances them, and makes your brand stronger overall.  Without a federal registration, you are limited in your development and will face difficulties in warding off infringers.  In other words, your muscles are weak, and you lack the strength needed to defend yourself.

Trademark rights in the United States are based on the “first-to-use” rule, not the “first-to-file” rule.  This means that trademark rights are given to marks that have been used in commerce the longest.  It is actual use that matters, rather than registration.  So the moment you start using a trademark in commerce (i.e. selling goods or services using the mark), it is your baseline from which you can determine whether someone is infringing upon your mark.  This is called “common law” use of a trademark.  These are rights based solely on use of the trademark in commerce within a particular geographic area.  In other words, your rights in that “common law” trademark are limited to the specific geographic area where the trademark is used.

Registering your trademark with the USPTO, however, creates rights throughout the entire United States and its territories.  Once you submit an application, your application is immediately visible in a publicly accessible database of registered trademarks and pending applications.  This application gives you priority over subsequently submitted applications for confusingly similar marks. This visibility is important, as it provides public notice to anyone searching for similar trademarks.

There are other significant benefits.  A registration can provide you a basis for filing for trademark protection in foreign countries.  It also gives you a legal presumption that you own the trademark and have the right to use it (i.e. you do not need to spend loads of attorneys’ fees trying to prove the mark is yours).  You can also register your trademark with the United States Customs and Border Protection, which can stop the importation of goods with an infringing trademark.  It also grants you the right to bring a lawsuit concerning the trademark in federal court, which can be a significant strategic advantage.  You can also use the federal trademark registration symbol ® to show that you are registered with the USPTO, which can have a deterrent effect on potential infringers.

Does that mean that if you have “common law” rights, you have no rights against a subsequent filer at the USPTO?  No, as long as you are the senior user.  You may be able to challenge the legitimacy of a registration at the USPTO if you are the “first-to-use” a similar trademark.  However, the path to do so can be expensive, time consuming, and could have been avoided simply by registering in the first place.   There are contested proceedings (i.e. a lawsuit) before the Trademark Trial and Appeals Board that require you to hire an attorney to prove you are the senior user.  These can cost anywhere between $5,000 and $100,000 or more in legal fees.  In other words, registration saves you money in the long term.

We wrote here about prior searches (https://dunnington.com/trademark-talk-should-i-conduct-a-prior-trademark-search/).  Many would-be filers at the USPTO merely conduct a search on the USPTO database to determine whether someone else is using a similar mark.  If you are a “common law” user, your mark will not appear in these searches, and thus your mark will not prevent someone from registering their mark at the USPTO.  This means that the only way for you to prevent this subsequent use is to file a contested proceeding at the TTAB, or a federal lawsuit.  Both are very expensive options.

So save yourself the aggravation, and register at the USPTO.  You may find these other articles useful in navigating that process:

Trademark Talk – Do I Need an Attorney to Register my Trademark?

By Intellectual Property, Advertising, Art and Fashion Law, Trademark Bulletins

Do I need an attorney to register my trademark

This is a simple question that requires a nuanced answer.  As a law firm, we always recommend use of counsel in the filing of a trademark.  An attorney provides you guidance on the selection of a mark https://dunnington.com/trademark-talk-what-makes-a-trademark-strong/, and prior searches https://dunnington.com/trademark-talk-should-i-conduct-a-prior-trademark-search/.

But as a practical matter, no, you are not legally required to have counsel file a trademark application if you are domiciled in the United States.  If you are a foreign domiciled trademark applicant or registrant, however, you must have a US-licensed attorney represent you.

The trademark registration process can take years, and may entail multiple substantive correspondences with an examining attorney from the USPTO.  In the long run, hiring an attorney can save you money, as experienced counsel can help you navigate the clearance and registration process, and address post registration issues such as potential infringements and the maintenance of your mark.

 

Trademark Talk – Should I Conduct a Prior Trademark Search?

By Intellectual Property, Advertising, Art and Fashion Law, Trademark Bulletins

Trademark Talk Part 3

The short answer is yes, you should. Conducting a prior search can help you identify whether the mark you have chosen is already in use. This is a necessary first step before choosing labels, marketing materials, a domain name and creating a website. A branding change after all of these have been selected would be very disruptive.

The United States Patent and Trademark Office (www.uspto.gov) provides an online search system which is both intuitive and easy to use (https://tmsearch.uspto.gov/search/search-information). This includes helpful videos on how to search for trademarks. If you believe you came up with a unique mark, doing a search may help you confirm whether the mark may already being used by someone else. These “knockout” searches are a good starting point but it is usually best to rely upon a full search and the professional opinion of legal counsel.

A full search includes business registrations, domain names, state trademark registrations, social media and other databases. An experienced trademark attorney needs to review the search results and provide advice. For example, a trademark application for WILD ROSE NO. 8 for women’s perfume might be rejected if there is already a registration for WILD ROSE NO. 8 for vitamin supplements. This is because businesses that produce women’s beauty products sometimes also produce vitamin supplements. Another concern is that English terms need to be translated into their foreign equivalents. For example, a prior registration for WILD ROSE NO. 8 in French for women’s perfume would be a bar to registration.

A full prior search of a potential trademark is also important because it may prevent or reduce your potential damages if you are faced with a trademark infringement lawsuit. The failure to conduct a full search can be a factor that indicates “willful” trademark infringement. This could result in a court forcing you to turn over all of your profits to the plaintiff in the lawsuit. For these reasons, the cost of an initial search is far less than the potential legal bills arising from defending yourself in court.

So yes, conduct an initial search early on in the process and be creative in choosing a strong mark (https://dunnington.com/trademark-talk-what-makes-a-trademark-strong).

 

Trademark Talk – What Makes a Trademark “Strong”?

By Intellectual Property, Advertising, Art and Fashion Law, Trademark Bulletins

What makes a Trademark "strong"?

Bob Marley once said “you never know how strong you are, until being strong is your only choice.”  He was not talking about trademarks, but he certainly could have been.  Trademarks are only as strong as their ability to sustain challenges.  While you cannot anticipate all challenges ahead, you can certainly lay the groundwork to have a strong trademark.  It starts by picking the right components to your mark (https://dunnington.com/trademarktalk-whatisatrademark/).

A strong trademark is an “inherently distinctive” mark.  An inherently distinctive mark is a mark that clearly identifies the sources of your goods and services as coming from you. The mark is strong because it is uniquely associated to you.

The strength of a trademark will be judged on a sliding scale from weak to strong.  Weak marks are descriptive or generic.  For example, a generic mark would be “MILK” for milk products or “BICYCLE” for bicycles.  These types of marks do not function as trademarks because they are merely the common name for the products. They do not indicate the source of the products. Examples of descriptive marks would be “CREAMY” for yogurt or “STYLISH” for a clothing line.  These types of marks only describe the products without, again, indicating the source of the products.

Descriptive marks can only be registered if they have been used for an extensive period of time and therefore have become “distinctive”.  This requires years of use, and the ability to prove that consumers recognize the mark as the source of the products.   This can be a time consuming and expensive process.  For example, BOOKING.COM went all the way to the Supreme Court of the United States to prove that it had a valid trademark for online “booking” services.  It took years and, presumably, extensive legal fees to do so.

A stronger mark will be a “suggestive” mark.  Suggestive marks are words that suggest some quality of the product, but do not explicitly state it.  For example, “TINT TONE” for hair coloring, “SNO-RAKE” for a snow removal tool, or “NOBURST” for liquid antifreeze.  These marks are suggestive because it requires some imagination or thought to reach a conclusion as to the nature of those goods. Suggestive marks are stronger marks and are considered acceptable as trademarks.

The strongest trademarks are fanciful and arbitrary marks.  Arbitrary marks are words that have no association with the underlying goods or services.  For example, the use of “APPLE” for a family of  computers when clearly fruit has no relation to electronic equipment.  Fanciful marks are invented words and only have meaning with respect to the product with which they are associated. For example, “PEPSI” for a soft drink or “EXXON” for petroleum products.

The stronger marks that are suggestive, arbitrary or fanciful will offer the best trademark protection. Of course, for every mark that you are considering you should conduct a prior search to see whether anyone is already using that mark.  Find out more about trademark searches in next week’s post.

Trademark Talk – What is a Trademark?

By Intellectual Property, Advertising, Art and Fashion Law, Trademark Bulletins

A trademark can be a word, phrase, symbol, design, sound, smell, or audio visual movement.  When you hear the term “trademark,” it is often used to describe not only trademarks but service marks as well.  A service mark is a mark used for services; a trademark is a mark used on goods.

The purpose of a trademark is to identify your goods and to protect your brand from counterfeit products and fraud.  Trademarks are registered with the federal government and trademark law focuses on preventing confusion among consumers. For this reason, the central question in determining whether a trademark infringes on the rights of another trademark is whether the infringing mark is confusingly similar to the registered mark.

For example, imagine a long row of cereal boxes arranged next to each other in a grocery store.  If all the cereal boxes used the same colors, sizes, and shapes, then it would be difficult to distinguish between them. A consumer could become confused and pick the cereal they do not want. Trademark registration and federal law protects the consumer by giving each trademark limited property rights to brand owners.  Therefore, when the consumer browses that cereal aisle, the consumer can easily identify the brand of cereal it wants and not be confused by another product that it never intended to purchase.

However, trademark protection is not unlimited.  While a cereal company might use a pink leprechaun logo as a trademark on a strawberry-flavored cereal, it would not prevent someone else from using a similar design for computer repair services. This is primarily because the likelihood of creating confusion among consumers is very low.

Trademark law will not protect marks that are descriptive of the goods or services.  Businesses should use “strong” trademarks that are unique to their business. Unfortunately, descriptive words are often preferred by new businesses because descriptive words describing the business might attract new consumers.  In the long term, however, it is always better to rely on unique, as opposed to descriptive, trademarks and let a good marketing campaign attract consumers to you.

Questions about trademarks?  Contact our Trademark Practice Group Chair, Olivera Medenica, at [email protected].