Tuesday, Aug. 9, 2005 | 11:16 a.m.
After hearing from an international law firm that there were several problems associated with the Las Vegas Convention and Visitors Authority's transfer of the rights to, and potential profit from, the successful "What happens here, stays here" slogan to advertising agency R&R Partners, the authority board is set to make changes.
At this morning's meeting of the LVCVA board, a four-member committee of board members was formed to develop new policies on the management of the agency's intellectual property.
Las Vegas Mayor Oscar Goodman, who chairs the LVCVA board of directors, will be joined on the committee by Henderson Mayor Jim Gibson and their fellow board members Chuck Bowling and Tom Jenkin. The committee is to give its recommendations at the next LVCVA board meeting in September.
While the law firm, Morrison & Foerster, said it found nothing illicit in the slogan deal, it recommended that the LVCVA retain ownership of its own trademarks and assign a special committee to review the authority's policies to make sure they protect the public's interest.
"Because public confidence in agencies such as LVCVA is a paramount concern, it is inappropriate to place the public in a position to rely solely upon the good will of the parties involved in a transaction to protect the public's interest in a public asset," the law firm's report says, noting the LVCVA's 25-year relationship with R&R.
The report, which was released by the LVCVA board this morning, found that the agreement signed in November by LVCVA President Rossi Ralenkotter and R&R Chief Executive Billy Vassiliadis "was undertaken in good faith" and broke no state laws.
The firm noted that it couldn't go into detail in some areas because of a trademark infringement lawsuit against a California clothier. Morrison & Foerster, hired last month following a series of stories in the Sun that raised questions about the trademark transfer agreement, is also representing the authority in its trademark lawsuit.
The law firm is recommending that the LVCVA immediately renegotiate provisions of the agreement so that the LVCVA could retain exclusive licensing rights to the slogan "in order to eliminate any concerns about R&R's ability to profit from ownership of the mark."
The report also makes numerous other recommendations related to LVCVA trademark policies and the role of the board's legal counsel. Key among these recommendations is that if the LVCVA chooses to register trademarks, as it did at the state level with the "What happens here" slogan, the authority should retain ownership of those trademarks rather than allowing them to be registered with the advertising agency or another entity.
"The reasons are two-fold," the report states. "First, should LVCVA choose to award future advertising contracts to agencies other than R&R, there should be no uncertainty regarding the ownership and control of the marks.
"Second, although a mark may appear in advertisements created by the advertising agency, the agency typically does not itself use the mark to sell its advertising services. Instead, the advertising agency puts the mark into advertisements it develops for LVCVA so that the mark can create public association between LVCVA and the Las Vegas tourism LVCVA seeks to promote."
Had the LVCVA retained ownership of its trademark, "it could have acted to protect the mark without the assignment and without the attendant challenges to the integrity of the institution," the report states.
Ralenkotter after today's meeting said he found nothing wrong with the report's recommendations.
"Our policy has evolved over the years," he said. "We will clearly work with the board to move in the right direction."
"The most important part of the report was that we were doing one thing, which was to protect the mark."
Vassiliadis did not return a phone message seeking comment and was not at today's meeting.
The agreement had been signed the day the board gave Ralenkotter the written authority to transfer intellectual property but the agreement itself was signed without the board's knowledge. The agreement was written so that the LVCVA had non-exclusive rights to the slogan, giving R&R the option to also license it to others.
Ralenkotter has said the agreement was simply made to bolster a trademark infringement lawsuit R&R filed in March 2004 against Dorothy Tovar of Placerville, Calif., because of her sale of clothing bearing the slogan "What happens in Vegas stays in Vegas." The LVCVA has since been added as a plaintiff.
Morrison & Foerster found that the agreement signed by Ralenkotter and Vassiliadis did not violate any laws and that Ralenkotter acted within his authority. The law firm also stated that there was no evidence to suggest that R&R wished to profit from the slogan, which it developed for the LVCVA's use beginning in December 2002 as part of an ad campaign financed by hotel and motel room tax revenue.
But the law firm found that this "response to infringement of the mark was not the most efficient, nor one that would have necessarily been chosen had it been thoroughly vetted with the Board."
The report blamed that on the fact that the LVCVA was not properly prepared to address trademark issues, a situation exacerbated by the fact that Ralenkotter had replaced his retired predecessor, Manny Cortez, in July 2004 when the success of the "What happens here" slogan was reaching its pinnacle.
"This contributed to the uncertainty of the manner in which the authority should respond," the report stated.
The law firm recommended that the special committee be formed "to ensure that LVCVA has in place policies and procedures for the conduct of the public's business which are consistent with best practices among convention and visitors' authorities, and within both the public and the private sectors."
Among the law firm's other recommendations:
The LVCVA should adopt written asset management and public contracting policies.
The authority's legal counsel should be chosen by and report directly to the board, with written policies established to spell out the legal counsel's functions.
"There exists some uncertainty within LVCVA regarding the role of LVCVA's legal counsel," the report stated. "In particular, it is unclear under the current policies whether the legal counsel reports or should report directly to the board, or to LVCVA's president."
Trademark rights could be protected by the LVCVA through its legal counsel or through outside counsel. Because litigation can be expensive, "it would be wise to consider requiring board approval or ratification of commencement of formal court action."
"LVCVA should undertake the policing and protection of its marks, depending on the severity of the possible infringement, and the significance of the mark to the authority," the report stated. "This would not preclude LVCVA from having an advertising agency or a law firm specializing in handling intellectual property cases issue cease-and-desist letters.
"LVCVA would require, however, that the advertising agency or the law firm identify clearly that it issues those letters on behalf of LVCVA, as the owner of the marks and its client. Such tasks could also be undertaken by LVCVA's legal counsel."
Although R&R has offered to reassign the "What happens here" state trademark and service mark back to the LVCVA if the authority so desires, that reassignment should not occur until the lawsuit against Tovar is concluded.
The lawsuit filed in U.S. District Court in Reno is headed to trial after settlement talks collapsed last month. All discovery in the case must be filed by Monday and joint pretrial orders are to be filed by Oct. 17. No trial date has been set.
In the meantime, Tovar continues to sell her clothing in Las Vegas, including gift stores at Strip resorts.
R&R claims it owned the trademark rights to the "What happens here" slogan at the time the lawsuit was filed due to an oral agreement with the LVCVA. That was the agreement put in writing in November and back-dated to January 2004, two months before the lawsuit was filed.
But according to records kept by the Nevada secretary of state's office, LVCVA's state trademark and service mark for the slogan wasn't officially transferred to R&R until last month, 16 months after the lawsuit was filed. The paperwork indicates the LVCVA was paid $1 by R&R to transfer the rights to the marks.