[00:00:00] Speaker 01:
The next case, as you've heard, is Authentic Apparel Group versus the United States, 2020-14-12.

[00:00:08] Speaker 01:
Mr. Bainton.

[00:00:09] Speaker 02:
Thank you, Your Honor, and may it please the Court.

[00:00:11] Speaker 02:
It's been my privilege to represent both appellants since the commencement of this breach of trademark license case exactly six years ago today on January 6, 2015.

[00:00:21] Speaker 02:
If the Court will permit me, I would like to address the following topics in the following order.

[00:00:26] Speaker 02:
First, the granting of the Army's motion for summary judgment dismissing all of Authentic's claims.

[00:00:34] Speaker 02:
Second, the denial of Authentic's motion for partial summary judgment as to liability on certain claims.

[00:00:41] Speaker 02:
And finally, the dismissal at the pleading stage in 2015 of Mr. Rubin's claims.

[00:00:47] Speaker 02:
With respect to the first topic.

[00:00:49] Speaker 01:
Council, didn't the Army do exactly what it had a right to do to reject

[00:00:56] Speaker 01:
items that it didn't want to approve?

[00:01:02] Speaker 02:
No, it did not, Your Honor.

[00:01:03] Speaker 02:
And with respect to that, I would like to direct the Court's attention to its decision on December 23 of 2020 in a case called BGT Holdings versus the United States.

[00:01:15] Speaker 02:
Mr. Kushner represented the appellee in that case, and Judge Stoll sat on the panel.

[00:01:20] Speaker 02:
In that case, the appellant

[00:01:25] Speaker 02:
BGT Holdings had entered into a contract to provide a gas turbine to the United States Navy.

[00:01:31] Speaker 01:
The contract... But, Counsel, aside from who sat on that case, who represented the other party, isn't what counts what is in this agreement?

[00:01:44] Speaker 02:
Yes, Your Honor, what counts is in this agreement.

[00:01:47] Speaker 02:
But this agreement must be used in a reasonable fashion, right?

[00:01:52] Speaker 02:
In the case to which I just referred,

[00:01:55] Speaker 02:
At page 11 of the slip opinion, which is available on the course website, it says, excuse me, page 12, it says the correct interpretation of quote shall consider in this contract does not give the government absolute discretion, but instead holds the government to a duty of good faith and reasonableness.

[00:02:17] Speaker 02:
At page, beginning at the bottom of page 27 of our principal brief carrying over,

[00:02:21] Speaker 02:
We point out that for the first two years, a little better than two years of the contract, while we were obliged to pay guaranteed minimum royalties, the Army would not approve any designs that were merchantable, thus leaving us in the position of having the obligation to pay guaranteed minimum royalties and no revenue with which to pay them.

[00:02:44] Speaker 02:
It is our contention with respect to the Army's motion for summary judgment

[00:02:49] Speaker 02:
Is that, uh, that the... Wait.

[00:02:54] Speaker 03:
This new case that you just mentioned is not the subject of a 28J letter, correct?

[00:03:00] Speaker 02:
I just found it last night, Your Honor.

[00:03:02] Speaker 03:
Okay.

[00:03:02] Speaker 03:
Did you tell opposing counsel that you were going to rely on it this morning?

[00:03:07] Speaker 02:
No, Your Honor.

[00:03:07] Speaker 02:
I found it last night around four, four or five o'clock in the afternoon, and I observed that he represented the government in the case.

[00:03:14] Speaker 02:
So I don't think... I think he knows more about this case than I do.

[00:03:17] Speaker 03:
You are still obligated under our rules to advise opposing counsel of new cases that you plan to rely on in oral argument.

[00:03:29] Speaker 02:
All right.

[00:03:31] Speaker 02:
I will not refer to it anymore.

[00:03:34] Speaker 02:
The answer to the question, however, remains the same.

[00:03:38] Speaker 02:
It is not reasonable for the Army to have insisted that we pay guaranteed minimum royalties

[00:03:46] Speaker 02:
while refusing to approve any merchantable product from which to generate revenues, from which to pay those.

[00:03:53] Speaker 02:
More importantly, this is a trademark license agreement.

[00:04:00] Speaker 02:
The quid pro quo, we paid guaranteed minimum royalties, an initial payment, and then running royalties in consideration of the use of the trademark for trademark purposes.

[00:04:12] Speaker 02:
A trademark

[00:04:14] Speaker 02:
by statutory definition, is an indication of source.

[00:04:18] Speaker 02:
The trial court found, in so many words, and correctly, that the Army categorically refused to permit its licensee to use the trademarks for trademark purposes, but instead insisted that they be used merely for decoration.

[00:04:34] Speaker 02:
Indeed, at his deposition, Mr. Sullivan admitted as much in so many words.

[00:04:39] Speaker 02:
So while the Army has

[00:04:43] Speaker 02:
discretion like every trademark owner to approve and disapprove the use of its mark in a way that is consistent with the best interest of the trademark holder, it cannot categorically refuse a licensee to permit use of the licensed trademark for trademark purposes to with identifying the source of the licensed goods as those of the licensor.

[00:05:09] Speaker 02:
I believe that's the answer to your question.

[00:05:12] Speaker 01:
Mr. Benton, do I have accurate information that between 2011 and 2014, Authentic submitted 491 requests, 41 of which were disapproved.

[00:05:28] Speaker 01:
In other words, 90% were approved.

[00:05:31] Speaker 02:
That's not accurate, Your Honor.

[00:05:33] Speaker 02:
Before the requests were first initially by email,

[00:05:40] Speaker 02:
And then, as Mr. Rubin's testimony makes clear, there were ongoing discussions about the Army's continued rejection, initially, of merchandise that was garishly over-marked and was unmerchantable.

[00:05:55] Speaker 02:
And to suggest that the entire conversation about the use of the mark is limited to the submissions to which Your Honor refers is inaccurate.

[00:06:10] Speaker 02:
Army said, listen, more trademarks, more trademarks, there was no sense for a Senate to continue to submit proposals, requests for approval that it knew would be denied.

[00:06:25] Speaker 02:
There was an ongoing discussion between 2010 and essentially the end of 2012 with respect to the appearance of the goods.

[00:06:36] Speaker 02:
Then, Your Honor,

[00:06:38] Speaker 02:
There is the issue of merchandising.

[00:06:41] Speaker 02:
A trademark has value only with respect to the interrelationship between the trademark and the consuming public.

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And you don't get to that point until you have something to merchandise.

[00:06:56] Speaker 02:
The license started in 2010.

[00:06:57] Speaker 02:
It wasn't until the very end of 2012 or the beginning of 2013 that Authentic had a mere roughly 200 styles of garments to take to market.

[00:07:07] Speaker 02:
Then and only then did the trademark in a trademark sense become valuable to authentic as the contracting party.

[00:07:16] Speaker 02:
And it is, while the trial court's opinion does not discuss it in more than a single sentence, it is undisputed that they would not permit, that they, the Army, would not permit the use of the trademark for trademark purposes, namely to identify the licensor as the source of the licensed goods

[00:07:36] Speaker 02:
or the endorser of the licensed goods.

[00:07:39] Speaker 02:
That's an express finding by the trial court.

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It is well founded in the record.

[00:07:44] Speaker 02:
It was admitted by Mr. Sullivan, a 30B6 witness, at his deposition.

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It is simply an undisputed fact in this case.

[00:07:52] Speaker 02:
And the legal issue presented is whether a trademark licensee has a right to use the license mark for trademark purposes.

[00:08:02] Speaker 02:
That is the principal issue in this case.

[00:08:05] Speaker 02:
It's been the principal issue since the first conference in 2015, and remains for this court to decide.

[00:08:14] Speaker 02:
The issue is not do they have a right to exercise control, because as we point out in our briefs, if a trademark owner does not exercise control, becomes a naked license, and the trademark is subject to forfeit.

[00:08:30] Speaker 01:
Now.

[00:08:32] Speaker 01:
Of course, the validity of the trademark isn't an issue here.

[00:08:35] Speaker 02:
Absolutely not.

[00:08:40] Speaker 02:
The validity indeed, under the licensee estoppel rule, authentic could never challenge the trademark, right?

[00:08:48] Speaker 02:
Assuming it's challengeable.

[00:08:50] Speaker 02:
But that's got nothing to do, I suggest, with the contractual obligations of the Army as a trademark licensure.

[00:08:57] Speaker 02:
It agreed, it didn't have to enter into this license,

[00:09:00] Speaker 02:
The Secretary of Defense did not have to exercise his discretion to permit the licensing of marks within his control.

[00:09:08] Speaker 02:
But once he did, he had a contractual obligation to permit a trademark licensee to use the trademark for trademark purposes.

[00:09:16] Speaker 02:
And we well know, based upon the statute, that the purpose of a trademark is identification of a source.

[00:09:23] Speaker 02:
If there's any doubt about that, the enabling statute incorporates the Lanomatics definition

[00:09:30] Speaker 02:
within its four corners.

[00:09:32] Speaker 02:
So when the Secretary of Defense and his delegates, the Army and others, decided to license their trademarks, they were obliged to permit licensees to use them for trademark purposes.

[00:09:46] Speaker 01:
For what other reason... Mr. Branson, you questioned the numbers that I mentioned to you.

[00:09:52] Speaker 01:
Well, do you have other numbers?

[00:09:55] Speaker 01:
What percent of requests were granted?

[00:09:59] Speaker 02:
Your Honor, you are correct with respect to the submissions, right?

[00:10:04] Speaker 02:
That is a correct number.

[00:10:07] Speaker 02:
But the approval of garments is not the issue.

[00:10:12] Speaker 02:
All of the submissions to which you refer, Your Honor, refer to the appearance of garments which use ultimately the licensed trademarks as decorations.

[00:10:22] Speaker 02:
The issue in this case is merchandising, not garment design.

[00:10:29] Speaker 02:
And the record is clear that when we finally, by the beginning of 2013, had a 200-style line to take to market and began developing merchandising materials, the Army would not permit us to advertise approved, licensed goods as being

[00:10:55] Speaker 02:
from the army as its source or the minimum as its endorser.

[00:11:00] Speaker 02:
And that's what this case is about.

[00:11:02] Speaker 02:
Not about the approval of garments.

[00:11:04] Speaker 02:
Well, it is in part about the approval of garments because it's our contention that it took way, way, way too long for the army to approve merchandise for Authentic to Sell.

[00:11:17] Speaker 02:
As Mr. Rubin testified, and part of the trial court opinion

[00:11:22] Speaker 02:
that troubles me is it completely ignores the breach of the first license, the negotiation of a compromise, the 40% reduction in the royalty rate.

[00:11:34] Speaker 02:
So, we'll even testify.

[00:11:37] Speaker 02:
I'm sorry, Your Honor.

[00:11:39] Speaker 02:
Pardon me?

[00:11:43] Speaker 02:
The 40%... I'm sorry, Your Honor.

[00:11:46] Speaker 02:
I didn't hear you.

[00:11:46] Speaker 02:
You broke up.

[00:11:47] Speaker 02:
Could you please repeat your question?

[00:11:49] Speaker 01:
The 40% reduction of the royalty rate is for your benefit, isn't it?

[00:11:54] Speaker 02:
It's for our benefit if, but only if, they permit us to use the trademark for trademark purposes.

[00:12:00] Speaker 02:
A trademark license that permits the licensee not to use the trademarks for anything other than decoration, which renders the license itself naked, benefits us not a whit.

[00:12:12] Speaker 02:
We signed the license agreement for the purpose of trading on the goodwill of the United States Army.

[00:12:19] Speaker 02:
with respect to license goods.

[00:12:20] Speaker 02:
That was the principal object of the trademark license, as it is the principal object of any trademark license.

[00:12:27] Speaker 03:
In how many instances did the government take more than 10 days to approve or disapprove your design?

[00:12:35] Speaker 02:
Your Honor, I can't give you a precise amount, but I can tell you that with respect to the merchandising material for the critical Christmas

[00:12:45] Speaker 02:
holiday season, we submitted requests in October, and it took them until March.

[00:12:51] Speaker 02:
And the precise citations to that are in our briefs.

[00:12:57] Speaker 02:
And again, the issue is merchandising.

[00:12:59] Speaker 02:
The issue is selling this goods, not getting it approved so we can manufacture it.

[00:13:04] Speaker 02:
The issue for any trademark licensee is trading on the goodwill that it in quote purchases via the trademark license to sell goods

[00:13:15] Speaker 02:
because it's a licensee, as was the case here, is a complete unknown.

[00:13:22] Speaker 01:
Shall we save the remainder of your rebuttal time, Mr. Baker?

[00:13:25] Speaker 02:
I would like to say one other thing, as we point out in our brief, with respect to Mr. Rubin's claim as an intended third-party beneficiary.

[00:13:34] Speaker 02:
The question is, is it plausible?

[00:13:36] Speaker 02:
If the 40% reduction wasn't to help him, who is it there to help?

[00:13:40] Speaker 02:
And now I will stop, sir.

[00:13:43] Speaker 01:
Thank you.

[00:13:43] Speaker 01:
We will save four minutes for you, Mr. Payton.

[00:13:47] Speaker 01:
Mr. Kushner.

[00:13:50] Speaker 00:
Thank you.

[00:13:52] Speaker 00:
Good morning and may it please the court.

[00:13:54] Speaker 00:
I'd like to start with authentic apparel's primary argument, which is that it was somehow not allowed to use the trademark or trademark.

[00:14:05] Speaker 03:
The agreement... Before you begin, Judge Dyke, let me ask you a question.

[00:14:09] Speaker 03:
As I understand it,

[00:14:10] Speaker 03:
The licensee here was required to pay substantial minimum regardless of items they sold, correct?

[00:14:22] Speaker 03:
That is correct.

[00:14:24] Speaker 03:
Okay.

[00:14:24] Speaker 03:
As I read your position, the government had no obligation under this agreement to approve any proposed design.

[00:14:34] Speaker 03:
Is that your position?

[00:14:37] Speaker 00:
That is correct, but with a caveat.

[00:14:41] Speaker 00:
The way this agreement is set up, the Army has a contractual obligation to substantively analyze and consider the licensee submissions.

[00:14:51] Speaker 00:
So if the Army fails to do that, if the Army simply takes in submissions and says, you know what, licensee, we don't like you.

[00:14:59] Speaker 00:
We don't care what your submissions look like.

[00:15:03] Speaker 00:
We are just going to disapprove of them outright.

[00:15:05] Speaker 00:
If the Army had done that, then that could possibly be

[00:15:10] Speaker 00:
cause for a breach of contract claim, because that is outside the realm of the exculpatory provision.

[00:15:17] Speaker 03:
Suppose they're arbitrary rejection.

[00:15:19] Speaker 03:
There's no remedy for an arbitrary rejection?

[00:15:25] Speaker 00:
If the Army had substantively reviewed the submissions and rejected them arbitrarily, if I understand the hypothetical, then yes, the exculpatory clause would kick in

[00:15:38] Speaker 00:
and it would not allow a damages claim against the government.

[00:15:43] Speaker 00:
The reason is your honor, because there has to be some added value from the exculpatory clause.

[00:15:50] Speaker 00:
If the court had the authority to review every single submission under the under the APA style rational basis review,

[00:16:01] Speaker 00:
then the only provision that would go into play is the provision that gives the Army discretion.

[00:16:09] Speaker 00:
Because, as we explained in our brief, discretionary decisions are reviewed under that deferential standard.

[00:16:16] Speaker 00:
But this contract not only has a provision that gives the Army discretion, it also has a provision that clearly and unequivocally exculpates the government from liability based on how the government exercises that discretion.

[00:16:31] Speaker 03:
Suppose the government acted in bad faith, no liability?

[00:16:39] Speaker 00:
Again, as long as the government substantively reviewed and considered the licensee submissions, then yes, it would still be no liability.

[00:16:49] Speaker 00:
And Your Honor, I would refer you back to the Wells Brothers case that we cite.

[00:16:55] Speaker 00:
That was a delayed claim in a construction case

[00:16:58] Speaker 00:
But the court didn't ask there what the reason for the delay was.

[00:17:03] Speaker 00:
It didn't matter whether the government gave a good reason for the delay or a made up reason for the delay.

[00:17:08] Speaker 00:
The exculpatory clause applied because the government had that discretion over delay.

[00:17:15] Speaker 00:
The government could not be sued for damages that were occasioned by the delay.

[00:17:20] Speaker 03:
That is that case only involved one feature, the delay feature.

[00:17:24] Speaker 03:
of the government's obligations, whereas here you're saying the government has no obligations other than to consider this.

[00:17:32] Speaker 03:
I mean, it seems like an unlikely interpretation of the contract, given the covenant of good faith and fair dealing.

[00:17:42] Speaker 03:
To say that the government can act in bad faith and escape liability, that seems extremely odd.

[00:17:49] Speaker 03:
But in any event, I understand

[00:17:51] Speaker 03:
your position is that the government nonetheless acted reasonably here?

[00:17:57] Speaker 00:
Certainly, but going back to the duty of good faith and fair dealing, that duty certainly still applies to this contract, but as this court has held time and again, the implied duty of good faith and fair dealing cannot displace express contractual provisions.

[00:18:12] Speaker 00:
It cannot change the bargain that the party expressly agreed to

[00:18:17] Speaker 00:
And if the court applied the duty of good faith and fair dealing to the exculpatory clause, we think that that's exactly what this duty would do.

[00:18:25] Speaker 00:
It would displace the exculpatory clause, which was bilaterally negotiated by the party.

[00:18:30] Speaker 00:
Authentic Apparel agreed to exculpate the government from any liability based on how the Army exercised its discretion over approval.

[00:18:39] Speaker 00:
That provision

[00:18:41] Speaker 00:
must have meaning, as the Supreme Court said in Wells Brothers, it cannot be treated as meaningless and futile and read out of the contract.

[00:18:50] Speaker 00:
And we ask that the Court do that here as well, but Your Honor is correct.

[00:18:54] Speaker 00:
We also point out that there is certainly no that face, there's no violation of the duty of good faith and fair dealing here, because all the discretionary disapprovals by the Army had very much a rational face.

[00:19:11] Speaker 00:
Now, going back to Santic Apparel's primary argument, this idea that it was not allowed to use the trademarks for a trademark purpose, and that seems to go back to this idea that any use of a trademark has to be an indication of the trademark's primary source.

[00:19:32] Speaker 00:
So there's two problems with that argument.

[00:19:34] Speaker 00:
The first one is that in section 2.4 of the agreement, which the court can find

[00:19:40] Speaker 00:
on page 79, 46 of the joint appendix.

[00:19:44] Speaker 00:
Authentic apparel expressly agreed, and I quote here, licensee may not state or imply either directly or indirectly that it is supported, endorsed or sponsored by owner.

[00:19:56] Speaker 00:
So it agreed that it cannot represent to the general public that the army either supports or endorses or sponsors its products in any way.

[00:20:07] Speaker 00:
Now, as a,

[00:20:08] Speaker 00:
broader point about trademark licensure, the view that authentic apparel has presented to this court through its brief and again today is the old view of trademark licensing that has not applied in this country for many decades.

[00:20:24] Speaker 00:
Under the modern view, trademark licensing is permissible even when trademarks are used as decorations.

[00:20:31] Speaker 00:
And even when those trademarks are not used to identify the primary source of the goods,

[00:20:37] Speaker 00:
as long as a licensed store imposes some quality controls over the items that bear its marks.

[00:20:45] Speaker 00:
And this can be seen in merchandising agreements that are very much prevalent in today's economy.

[00:20:53] Speaker 00:
If you consider, for instance, an organization like the New York Yankees that has a trademark over its logo, the Yankees license their trademark to companies that make all kinds of items from coffee mugs

[00:21:06] Speaker 00:
key chains to earrings all bearing the New York Yankees logo.

[00:21:12] Speaker 00:
And those are all decorative uses of the mark that do not indicate the primary source of the item.

[00:21:19] Speaker 00:
No one thinks that the New York Yankees are manufacturing earrings, but they are all permissible uses of the trademark.

[00:21:26] Speaker 00:
So long as the Yankees impose some quality controls over the use of the mark.

[00:21:32] Speaker 00:
And that is exactly what the Army did here.

[00:21:35] Speaker 00:
There is no indication by authentic apparel that the Army did not properly impose quality control.

[00:21:41] Speaker 00:
In fact, if anything, the opposite is true, because authentic apparel has alleged that the Army too strictly tried to preclude certain uses of its marks, which is the very type of quality control that a licensor is supposed to impose.

[00:21:58] Speaker 00:
If the Court is interested in this

[00:22:01] Speaker 01:
Yes.

[00:22:02] Speaker 01:
Of course, is there any precedent interpreting trademark license from, say, the Army or the Yankees or a similar group as not necessarily relating to and certifying origin, but relating more to decorations?

[00:22:29] Speaker 00:
Your Honour, there's lots of precedent on this.

[00:22:31] Speaker 00:
This idea is known as secondary source identification, and it's the idea that trademark usage, when a trademark is licensed, can properly signify only the secondary source, which is the licensed source authority to use the mark.

[00:22:49] Speaker 00:
There is a lengthy discussion of this in the preeminent treatise on trademarks at the treatise that the Supreme Court has

[00:22:57] Speaker 00:
cited many times.

[00:22:59] Speaker 00:
It's called McCarthy and Trademarks and Unfair Competition.

[00:23:02] Speaker 00:
And in sections 18 colon 39 to 18 colon 41, there's a long discussion of the old view that authentic apparel has articulated today and how that view has developed over the years.

[00:23:15] Speaker 01:
And then in section 18 colon... That doesn't amount to a naked license.

[00:23:21] Speaker 00:
It does not, Your Honor.

[00:23:22] Speaker 00:
To be a naked trademark license

[00:23:25] Speaker 00:
A licensure would have to license its trademark without quality controls.

[00:23:31] Speaker 00:
That is what makes a license a naked license.

[00:23:35] Speaker 00:
That is different for assignments.

[00:23:37] Speaker 01:
It's not a license in gross.

[00:23:43] Speaker 00:
Those two terms have been used that are changeable sometimes.

[00:23:47] Speaker 00:
But there's a distinction between what makes a trademark license a naked license.

[00:23:53] Speaker 00:
and a trademark assignment, a naked assignment.

[00:23:56] Speaker 00:
It is true that when a licensor, or I'm sorry, a trademark owner assigns its license, that assignment has to be made with the goodwill that is associated with the trademark and courts look to whether it's assigned to a company that essentially manufactures or makes the same type of items that the goodwill can move to the assignee from the assignor.

[00:24:21] Speaker 00:
That is not the appropriate analysis for trademark licensing.

[00:24:26] Speaker 00:
When it comes to licensing, as long as the licensor imposes quality control, it is a permissible trademark license, even if the trademark is used in a decorative way.

[00:24:40] Speaker 00:
And your honor, you asked for, you asked for cases.

[00:24:44] Speaker 00:
The case we cited in our brief is the General Motors Corporation, the Gibson Chemical and Oil Corporation.

[00:24:50] Speaker 00:
second-circuit case from 1986.

[00:24:53] Speaker 00:
And in that case, there was a transmission fluid that GM licensed the name of that fluid to various companies.

[00:25:02] Speaker 00:
And the company that was making counterfeit products, Gibson, it argued that this licensing program that GM had essentially deprived the trademark of Lanham Act protection because it did not indicate

[00:25:19] Speaker 00:
the source of the mark because you know at different companies could say that they are the manufacturer of this dextron 2 transmission fluid instead of gm and the court said that does not deprive the trademark of lana mac protection because a trademark can properly be used without displaying the licensors name can simply display the trademark

[00:25:43] Speaker 00:
and the name of the licensee.

[00:25:45] Speaker 01:
And McCarthy and trademark... You meant that quality control is being an essential aspect of the license.

[00:25:52] Speaker 01:
And I assume to you that the right to approve the product is evidence of the quality control being in the agreement.

[00:26:07] Speaker 00:
That's correct.

[00:26:07] Speaker 00:
That's correct, Your Honor.

[00:26:09] Speaker 00:
Section 5.1, which discusses the approval process under the license agreement, imposes not only discretion on the Army in its ability to approve or disapprove marks, but it also has a lengthy discussion of the various stages of the approval process, the fact that authentic apparel had to seek approval of its designs in the concept stage and the prototype stage, and then it had to submit actual samples of clothing

[00:26:39] Speaker 00:
in the final stage, and it also discusses the fact that the Army had discretion to disapprove those items at every single stage of that process.

[00:26:48] Speaker 00:
So what Section 5.1 establishes is precisely the type of quality controls that are required for a valid trademark license.

[00:27:03] Speaker 01:
Anything further?

[00:27:06] Speaker 00:
Um, unless there are further questions from the court, I, I, I did want to mention one last thing.

[00:27:13] Speaker 00:
Um, there was a discussion of the BGT Holdings case and Judge Dyke correctly, uh, pointed out that authentic apparel did not, uh, advise of its intent, uh, to reference that case today.

[00:27:26] Speaker 00:
Uh, but I am familiar with that case.

[00:27:28] Speaker 00:
I was the attorney on that case.

[00:27:30] Speaker 00:
Uh, it's a very different situation than the one here.

[00:27:33] Speaker 00:
Uh, the BGT Holdings case.

[00:27:35] Speaker 00:
arises out of the cd a contract uh... in which uh... the contract said that the uh... contracting officer quote shall consider and quote an equitable adjustment but the court found uh... just recently that the shell consider language did not give the army discretion and the reason is the cd a contracted issue there did not have a provision that expressly said

[00:28:03] Speaker 00:
the contracting officer has discretion of whether to give an equitable adjustment to the contractor.

[00:28:10] Speaker 00:
That is in direct conflict with the agreement we have here, which in section 5.1 and again in section 14.3 expressly says that the Army has sole and absolute discretion over approvals.

[00:28:27] Speaker 00:
So in this case, we have a provision that expressly provides

[00:28:32] Speaker 00:
discretion to the government.

[00:28:34] Speaker 00:
And when that is the case, even if authentic apparel is able to overcome the exculpatory clause, the court really should review that discretionary decision under the highly deferential APA standard of review.

[00:28:51] Speaker 00:
With that, if there are no further questions, I want to thank the panel and again ask the court to affirm the trial court's decision.

[00:28:59] Speaker 03:
I have one more question.

[00:29:00] Speaker 03:
You just said

[00:29:01] Speaker 03:
we should review it under the APA standard.

[00:29:04] Speaker 03:
And yet earlier in your argument, you said there's no review at all.

[00:29:08] Speaker 03:
How's that consistent?

[00:29:10] Speaker 00:
That's correct, your honor.

[00:29:11] Speaker 00:
It's essentially an argument in the alternative.

[00:29:13] Speaker 00:
So there is no review under the culpatory clauses, but in the event authentic apparel is somehow able to overcome the exculpatory clauses, which again, as we explained, it should not, but in the event that it is the appropriate standard of review,

[00:29:30] Speaker 00:
is the rational basis standard of review, according to which if the army articulated a rational basis for its discretionary decision, then the court must affirm that discretionary decision without second guessing the army's considerations.

[00:29:46] Speaker 00:
So in the event authentic apparel can somehow overcome the exculpatory clause, that would be the appropriate standard of review to apply.

[00:29:56] Speaker 01:
Thank you, Mr. Kushner.

[00:29:58] Speaker 01:
Mr. Bacon has four minutes for the bottle.

[00:30:01] Speaker 02:
Thank you, your honor.

[00:30:02] Speaker 02:
First, Mr. Kushner, having mentioned the BGT Holdings case, I would like to point out at page 12 of the slip opinion, the court wrote the following quote, the correct interpretation of quote, shell consider unquote in this contract setting does not give the government absolute discretion, but instead holds the government to a duty of good faith and reasonableness unquote.

[00:30:24] Speaker 02:
That is what the BGT case holds, and we believe that the government had to exercise a degree of reasonableness with respect to not only product approval, but again, more importantly, merchandising.

[00:30:37] Speaker 02:
Second, with respect to much of what Mr. Crister just said, I would direct the court's attention to the record beginning at appendix page 3376.

[00:30:45] Speaker 02:
In our briefs, we talk much about what are called two army, quote, the U.S.

[00:30:51] Speaker 02:
official army licensing asset guide.

[00:30:54] Speaker 02:
One was applicable to the first license.

[00:30:56] Speaker 02:
One was applicable to the second license.

[00:30:58] Speaker 02:
The third iteration prepared after this lawsuit is now called, quote, U.S.

[00:31:04] Speaker 02:
Army brand guidelines for licensed products.

[00:31:08] Speaker 02:
I ask that you consider it in reaching your decision, because you will see that the brand guideline with respect to packaging does not particularly address merchandising, gives licensees exactly what we claim we were entitled to, namely to merchandise

[00:31:24] Speaker 02:
our product as part of the U.S.

[00:31:28] Speaker 02:
Army brand, part of the U.S.

[00:31:30] Speaker 02:
Army brand, and that's exactly what that document shows.

[00:31:34] Speaker 02:
Next, with respect to the Wells decision and the companion decision, both of those cases involve contracts to construct something in which the possibility of delay was known to the contracting parties, the allocation of the risk of loss,

[00:31:53] Speaker 02:
was assigned to the contractor, and the contract was enforced according to its terms.

[00:31:58] Speaker 02:
In this case, the object of the contract is not the construction of something, but rather the licensing of trademarks.

[00:32:07] Speaker 02:
And if we're not permitted to use the trademark, trademarks, for trademark purposes, namely to identify the Army as the source or to minimum the endorser of the licensed products, the principal object of the contract was frustrated

[00:32:23] Speaker 02:
And the trial court should not have interpreted the contract in a way that frustrated its very object.

[00:32:32] Speaker 02:
That is all I have by way of rebuttal.

[00:32:40] Speaker 01:
I hear no further questions, so I thank you.

[00:32:43] Speaker 01:
I thank both counsel and the case is submitted.

[00:32:52] Speaker 00:
The honorable court is adjourned until tomorrow morning at 10 a.m.