Columnist Jeff German: R & R is sure to get bang for its buck

By Jeff German

Friday, June 24, 2005 | 5:34 a.m.

Jeff German's column appears Tuesdays, Wednesdays, Fridays and Sundays in the Sun. Reach him at [email protected] or (702) 259-4067.

WEEKEND EDITION

June 25-26, 2005

The Las Vegas Convention and Visitors Authority has sold its trademark rights -- for $ 1 -- to the popular slogan "what happens here, stays here" to its high-powered advertising agency, R & R Partners.

Trademark experts say the catchy phrase -- which has spawned copycats in Las Vegas and other cities and become part of the nation's vernacular -- potentially could have been worth millions of dollars to the LVCVA in merchandising opportunities.

The slogan was created by R & R Partners for the LVCVA, which pays the advertising agency $66.5 million a year to promote Las Vegas.

On March 9, the LVCVA, an agency funded by a state hotel room tax, recorded the $1 assignment of the "mark" to R & R with the Nevada Secretary of State's Office.

In that paperwork the LVCVA says it gave R & R "all right, title and interest, together with the goodwill of the business in which the mark is used."

The paperwork formalized a more comprehensive "trademark assignment and license-back agreement" that was signed by LVCVA President Rossi Ralenkotter and R & R CEO Billy Vassiliadis on Nov. 9. The transfer, according to the agreement, was effective back to Jan. 1, 2004.

The eight-page agreement, which Ralenkotter acknowledges was not presented to the LVCVA's 13-member board, has a "license-back grant" clause that allows the LVCVA to continue to use "what happens here, stays here" without having to pay royalties to R & R.

This appears to be clear evidence that the LVCVA knew it was giving up the rights to the slogan. Royalties to R & R would not need to be waived if the LVCVA owned the rights.

The agreement, as did the papers on file with the secretary of state, gives R & R "all right title and interest held by the LVCVA" in the mark, as well as "the goodwill of the business connected with the use" of the slogan.

R & R Partners also receives, "all rights to damages or profits ... arising out of past, present or future infringement of said (mark), or injury to said goodwill, together with the right to sue or recover the same in R & R's name."

Both Ralenkotter and Vassiliadis insist the deal was struck merely to give R & R the ability to go to court to stop any business that tries to rip off the prized slogan.

"This became a phenomenon beyond our expectations and dreams, and we have had to step up the formality of our game," Vassiliadis says. "This is a simple agreement for us to enforce the trademark so it's not being used inappropriately."

Vassiliadis adds, "We can't profit off LVCVA property without board approval."

Within the past year, R & R has indeed moved to enforce the trademark.

In June 2004, before the agreement was signed, R & R's lawyers sent more than a half-dozen cease-and-desist letters to businesses here and elsewhere in the country that have sought federal trademarks for slogans similar to "what happens here, stays here."

On March 22, two weeks after the LVCVA formally assigned R & R the mark through the secretary of state's office, the advertising agency filed a federal lawsuit in Reno against a Sacramento entrepreneur who is marketing a line of risque clothing under the brand, "what happens in Vegas, stays in Vegas."

Ralenkotter, meanwhile, contends that the LVCVA still owns "what happens here, stays here" under terms of its overall marketing contract with R & R.

"The general contract says we own everything they produce," Ralenkotter explains. "They can't use any of their work product for their own benefit. If there is a profit, it comes back to us."

But Ralenkotter's position is contradicted by R & R lawyers in their legal efforts to protect the mark.

In the cease-and-desist letters, the lawyers say the mark is "extremely valuable to R & R," not the LVCVA. There is no mention in the letters that the advertising agency is acting on behalf of the LVCVA.

And in the trademark infringement complaint, R & R says it is the owner of the award-winning slogan.

"LVCVA registered the mark in the state of Nevada on or about July 11, 2003 with a first date of use of December 2003," the complaint says. "LVCVA then transferred all right, title and interest in and to the mark to R & R."

In other court papers in the case R & R lawyers refer to the LVCVA as the "previous owner" of the mark.

Even Ralenkotter acknowledges in a May 10 sworn affidavit in the case that R & R has the authority to grant a license to anyone to manufacture merchandise bearing the slogan.

"Does R & R Partners have the ability to license the mark 'what happens here, stays here,' to any party other than the LVCVA?" Ralenkotter is asked.

"Yes," Ralenkotter responds.

Vassiliadis, however, says his company has not done that and is not interested in profiting from the trademark other than through its work with the LVCVA.

But Sacramento trademark attorney Daniel Ballard, who is defending clothier Dorothy Tovar in the R & R infringement suit, says the opportunity is legally there for R & R to profit.

"They're talking out of both sides of their mouths," Ballard says of Ralenkotter and Vassiliadis. "They're trying to get out from under the fact that they gave away a very valuable public asset.

"Instead of selling the mark for its fair market value, the LVCVA has sold it to R & R Partners as part of a backroom deal."

Ballard says the deal, the result of a longstanding cozy relationship between the LVCVA and R & R, was put together in a very sloppy way and isn't likely to hold up in court. R & R has had the LVCVA's marketing contract for 25 years.

"They consider themselves joined at the hip," Ballard says. "They've failed to distinguish the separateness of the two entities, and that's vital when you have a public agency in partnership with a private company."

Ralenkotter says he didn't bring the agreement before the LVCVA board, which is made up of elected officials and private business people, because he felt that he had authority to sign it himself.

In his affidavit in the court case, he says he also never tried to determine the value of the "what happens here, stays here" trademark before it was assigned to R & R.

"Have you ever had occasion to -- has the LVCVA ever had the occasion to monetarily quantify the dollar value of the goodwill of the business associated with LVCVA's use of 'what happens here, stays here?"' Ralenkotter is asked.

"Not to my knowledge," he responds.

Gordon Smith, one of the country's most recognized trademark experts, says it's difficult to put a value on the slogan.

"It's validity is how it's used and perceived by the public," he says.

But Smith, who runs a consulting business in a Philadelphia suburb, adds: "It does potentially have great value. It could be a money-maker for whoever owns it."

That value, he says, could be worth millions of dollars.

Whether the LVCVA is giving it all away is something its board should want to determine.