‘What happens here’ has been used elsewhere

By Steve Kanigher

Friday, July 22, 2005 | 5:11 a.m.

WEEKEND EDITION

July 23-24, 2005

By the time "What happens here, stays here" was unveiled in late 2002 as a novel way to promote Las Vegas as a tourist destination, the slogan had long been used in obscure locales.

A sign bearing that slogan hung in the Cambridge, Mass., tavern Eddy's Place in October 1991, according to a Boston Globe report of an attempted murder in that bar.

And in Woonsocket, R.I., the dressing room of the Mount St. Charles Academy high school hockey team once had a sign that warned: "What happens here, stays here. What's said here, stays here," according to an April 1998 story in the Providence Sunday Journal.

But no use of "What happens here" caught the nation's attention as did the national advertising campaign devised by R&R Partners Inc. of Las Vegas on behalf of the Las Vegas Convention and Visitors Authority.

The LVCVA, which paid for the 20-month, $58 million ad campaign mostly through hotel and motel room tax revenue, could have chosen to capitalize financially on the popular slogan.

Instead, a series of events unfolded resembling a Keystone Kops caper and calling into question:

The LVCVA's trademark and intellectual property policy.

The authority's willingness to retain work product that was purchased through tax dollars.

The wisdom of allowing R&R to file a trademark infringement lawsuit to defend a slogan the LVCVA owned on paper at the time the lawsuit was filed, according to Nevada secretary of state records.

A secret trademark transfer agreement, inked without the LVCVA board's knowledge, that assigned the "What happens here" slogan and its potential profits back to R&R.

A settlement conference has been scheduled for Wednesday in Reno before U.S. Magistrate Robert McQuaid Jr. in the lawsuit, which R&R filed last year against a California clothier. Las Vegas Mayor Oscar Goodman, chairman of the LVCVA board, said he plans to attend.

Morrison & Foerster, an international law firm that was hired two weeks ago by the LVCVA, is preparing an investigative report on the authority's trademark and intellectual property policy.

LVCVA board and executives, on the advice of the law firm, are declining comment on all trademark issues until the report is released. LVCVA President Rossi Ralenkotter reiterated that position by phone last week.

But Craig Walton, professor emeritus of ethics and policy studies at UNLV, expressed hope that the entire affair will promote openness at the authority.

"There is a communitywide desire for more openness," Walton said. "We can't be supportive of our agencies if we don't know what they're deciding on and why. When you're dealing with public property, you're dealing with something that was generated through public money, and that's the public's business."

Any transfer of property, including trademark rights, should be done in the open, Walton said.

"If the public becomes bored to tears, these items could be moved to the consent agenda, but they're still on the agenda," he said.

The trademark issue isn't expected to die anytime soon, though. That's because several individuals and companies, including two Las Vegas resorts and a company headed by Venetian owner Sheldon Adelson, have filed federal trademark applications to use versions of the "What happens here" slogan.

Legal quagmire

That has created a potential legal quagmire for the LVCVA and R&R as the floodgates have been opened for numerous competing applicants.

The Las Vegas Hilton applied on July 19, 2004, for a service mark for "What happens in Vegas, stays in Vegas," to be used for slot machine services.

"No one that we're aware of has filed opposition to it," resort spokesman Ira David Sternberg said. "We just filed an intent to use it."

The Palms on Oct. 18 filed for federal trademarks and service marks for "What happens at the Palms never happened." Palms owner and President George Maloof came up with the slogan and his resort has already used it on apparel. Palms spokeswoman Vanessa Thill said Maloof has not received any complaints about the slogan.

Adelson's Interface Group-Nevada Inc. on April 13 applied for the service mark, "What happens in Vegas, grows in Vegas at the Sands," on behalf of the Sands Expo & Convention Center.

"We have no reason to believe that there are any issues with regard to our filing," Venetian spokesman Ron Reese said. "We believe our filing is sufficiently different from other registered trademarks."

Other federal applications include: "What happens at Grandma's, stays at Grandma's," "What happens in Iraq, stays in Iraq," "What happens at spring break, stays at spring break," "What happens in Mexico, stays in Mexico," and "What happens in the dorm, stays in the dorm."

The "What happens here" TV spots were among the best R&R ever produced for the LVCVA and garnered national advertising awards. One of the most popular spots showed a scantily clad woman flirting inside a limousine with the driver. After revealing how much she loved the smell of new cars and leather, she raised the privacy wall and reappeared as a professionally dressed woman.

The ad campaign began catching fire in January 2003, thanks largely to the National Football League. The NFL wanted no part of the ads for its Super Bowl that year because of its disdain for legalized betting on professional football, even though the ads had nothing to do with gambling.

The league raised such a stink that Las Vegas wound up with tons of free national publicity. And from there the slogan became a part of the nation's vernacular.

In terms of trademarks, the LVCVA was beaten to the punch by a Placerville, Calif., woman who was a high school dropout. Dorothy Tovar, co-owner of the clothier Adrenaline Sports Inc., coined "What happens in Vegas, stays in Vegas," filing for a federal trademark on Feb. 28, 2003, and a Nevada trademark on April 22, 2003, for use on clothing. The federal trademark was approved on March 8.

Tovar, in a telephone interview, said she believed the slogan was already widely used.

"I'd been going to Las Vegas trade shows since 1997 and I hooked up with a lot of friends," Tovar said. "They would say, 'What happens in Vegas, stays in Vegas.' I thought it would make a great line of clothes. But I didn't come up with the saying. It was already common vernacular."

The LVCVA waited until July 11, 2003, to file for a state service mark -- to protect the "What happens here, stays here" slogan for promotional purposes. It wasn't until Feb. 19, 2004, that the authority filed for a state trademark to use the slogan on "clothing such as hats, shirts, underwear to promote Las Vegas as a destination for consumers."

The authority didn't apply for a federal trademark or service mark for that slogan, leaving that task to R&R. The distinction is that a federal trademark is used for interstate commerce, and the state mark is only honored within Nevada.

The ad agency applied for a federal service mark for "What happens here" on March 22, 2004, for advertising and public relations purposes and applied for a federal trademark on Nov. 10 for souvenirs and clothing.

Applications pending

Both applications are pending, but a Scottsdale, Ariz., company and an individual have also applied to protect the same slogan.

R&R Chief Executive Billy Vassiliadis has said his company does not intend to profit from the trademark, though he left open the possibility that merchandising work could be subcontracted by his firm.

The agency was given a $67.4 million budget from the LVCVA for the fiscal year that ended June 30. An estimated $54.3 million was spent by R&R to place television, radio, print media and other ads. The agency, according to associate public relations director Dain Percifield, makes a maximum pre-tax profit on this account of 4 percent annually, which would have translated to $2.7 million last fiscal year.

Percifield said the agency can charge the LVCVA 16 percent in commissions based on the amount of money the media charge R&R for the ads. He said he did not know the amount of these commissions, all of which were part of the $67.4 million budget. But from an R&R pie chart that assigned percentages of the budget to various forms of advertising, it can be estimated that the total commissions amounted to roughly $8.7 million.

While R&R is not in the merchandising business, Mary LaFrance, a professor at UNLV's Boyd Law School and an authority on trademark issues, said a federal trademark application will not be approved "until the applicant proves that it is actually using the mark on the goods and services specified in the application."

Tovar began selling her slogan on T-shirts in Nevada as early as April 2003. Later, she applied the slogan to camisoles, tube tops, shorts, sweat pants, hats and shot glasses.

"Obviously, I'm doing very well with it," Tovar said while declining to specify the amount of money she has made.

By early 2004 Tovar's wares had become known to LVCVA and R&R executives, in part because some of her clothing was being sold at five locations within McCarran International Airport. They also learned of her trademarks.

The Las Vegas Review-Journal in February 2004 quoted LVCVA legal counsel Luke Puschnig as saying the authority was unlikely to issue cease and desist letters against the strip club Cheetah's for using "What happens in Vegas, stays in Vegas" billboards because that slogan was not the authority's to protect.

But R&R launched its own lawsuit against Tovar a month later in U.S. District Court in Reno. The lawsuit accused Tovar of trademark infringement of the "What happens here, stays here" slogan. Vassiliadis declined comment on the lawsuit or anything related to the slogan. Calls to R&R attorneys Kirstin Jahn and John Desmond, both of Reno, were not returned.

Central to R&R's case is that the LVCVA first used that slogan in December 2002, four months before Tovar began using her slogan.

Tovar attorney Daniel Ballard of Sacramento said his client doesn't dispute the LVCVA's earlier use, but contends that R&R cannot prove that her slogan confuses customers into believing that they're buying items sponsored by the ad agency or the LVCVA.

'Truth on my side'

"I did everything right," Tovar said. "I applied for trademarks and I have truth on my side."

Over the prior 20 years, R&R sent dozens of cease and desist letters to individuals and companies on behalf of the LVCVA, alleging that the letter recipients were misusing slogans prepared for the authority. Vassiliadis has said R&R performed this service because its staff was better able than the LVCVA to monitor potential trademark abuses.

But the Tovar case represented the first time R&R sued someone for allegedly misusing an LVCVA slogan.

After the lawsuit was filed, Tovar continued to sell her clothing, even in Strip resorts that have executives on the LVCVA board. In a deposition taken in the lawsuit, Tovar was asked by an R&R attorney to name her clients.

"I don't know if I can give you all of them off the top of my head because there's quite a few," Tovar said. "I have the Mandalay Bay Group. Do you want everyone in that group? Circus Circus, Excalibur, Mandalay Bay, Monte Carlo.

"I have Stratosphere, MGM, Mirage, New York-New York, Fat Tuesday (Forum Shops at Caesars), Love Boutique. And I know there's a few more that I can't think of off hand."

Her clothes were also for sale at the Palms and Palace Station. And they remain on sale at all those properties except for the Palms, which has begun marketing its own clothing with the slogan, "What happens at the Palms never happened."

Tovar also said she first saw the "What happens here" slogan in an LVCVA TV commercial around April 2003, but didn't see that ad as a conflict with her own slogan.

"I didn't see that they were similar," Tovar said. "They were advertising. I'm dealing in goods. They're services, I'm goods, and I didn't make any connection."

It also came out in the deposition that Park Place Entertainment used "What happens in Vegas, stays in Vegas" on T-shirts at the Paris Las Vegas as early as Oct. 6, 2002, two months before the LVCVA "What happens here" ad campaign was launched.

The motive for the R&R lawsuit against Tovar could be summed up in a paragraph on its second page:

"Since at least December of 2002, a great amount of time, effort and money was expended in connection with the promotion and advertisement on behalf of the LVCVA such that the Mark and its goodwill have become an asset of substantial value."

The most curious part of the lawsuit, two paragraphs down, read:

"LVCVA registered the Mark in the state of Nevada on or about July 11, 2003, with a date of first use of December 2003 (later corrected to 2002). LVCVA then transferred all right, title and interest in and to the Mark to R&R."

The problem was that the LVCVA still owned the state service mark and trademark as of the date of the lawsuit, according to Nevada secretary of state's records.

At some point after the lawsuit was filed a solution was devised by R&R and LVCVA executives: Have the LVCVA transfer the trademark in a written agreement and then back-date the agreement to Jan. 1, 2004, two months before the lawsuit was filed.

On Nov. 9 Ralenkotter asked the LVCVA board to approve a list of responsibilities he would be authorized to undertake, including the ability to "register, protect and assign all intellectual property."

The board approved that item, unaware that on the same day, Ralenkotter signed over the rights and potential profits to the "What happens here" slogan to R&R. The agreement, co-signed by Vassiliadis, was back-dated to Jan. 1, 2004.

After the Sun revealed the secret agreement last month, Ralenkotter said the way the deal was done represented years of past practices. As he disclosed in a May 10 deposition for the lawsuit, many of those policies had never been put in writing.

In the deposition, Ralenkotter stated that the LVCVA president always had the authority to assign trademarks, but that such authority did not exist as a written policy until the board approved the list of presidential responsibilities on Nov. 9.

Ralenkotter had just become president four months earlier, having replaced Manny Cortez, who retired.

"As I stated before, the past practice has been we verbally talk," Ralenkotter said in the deposition.

"We went through a process of analyzing all of the board policies and responsibilities of the president and on directives and so forth that have been established over the almost 50 years of the LVCVA. Prior to my presidency, no one had ever codified any of that or analyzed any of those agreements to see if they were still in effect or whatever."

Clarification

In a May 27 motion to add the LVCVA as a plaintiff in the lawsuit -- a motion that has not yet been approved -- R&R clarified its original statement about the transfer of the trademark rights from the LVCVA to R&R.

In the clarification R&R stated that the LVCVA made an oral agreement in late 2003 -- before the lawsuit was filed -- to assign the trademark to R&R and that the agreement was then put in writing on Nov. 9.

But the clarification did not state who made the oral agreement with R&R. The board never voted on such an agreement. If Cortez did, it was without written authorization from the board. Cortez, who is on vacation, did not return calls seeking comment.

And then there is this: Puschnig signed an "assignment of mark" document, notarized on March 9, that was intended to transfer the "What happens here" state marks from the LVCVA to R&R for $1.

The Sun faxed the document to Scott Anderson, deputy for commercial recordings in the secretary of state's office, for comment.

The problem, Anderson said, was that the document was never stamped and filed with his office as required by law. The document should have had a secretary of state stamp with the filing date in the upper right-hand corner where it states "Office Use Only," but that part of the document was blank.

"As far as our records show the LVCVA is still the holder of those marks," Anderson said Tuesday.

On Wednesday, secretary of state spokesman Steve George said the paperwork was properly filed that day, with R&R gaining assignment of both the state trademark and service mark from the LVCVA for $1.

That meant R&R didn't officially become the owner of both marks, at least in the eyes of the secretary of state's office, until July 20, 16 months after the ad agency sued Tovar for trademark infringement.