Property, intangible

a blog about ownership of intellectual property rights and its licensing

Stitch in Time

Changes of ownership of intellectual property rights are sometimes done in a series of transactions all executed at generally the same time. For example, when acquiring assets, they might first be assigned to an acquisition company, the acquisition company merged into the purchaser, the seller dissolved, and the purchasing company’s name changed to the name of the original seller. Good practice is to execute and record the documents in order.

And sometimes there are cases that remind us to keep up the good practices. Tracfone Wireless, Inc. owned a number of trademarks and copyrights. The intellectual property assets were assigned from Tracfone Wireless, Inc. (Florida) to Tracfone Wireless, Inc. (Delaware). On the same day, Tracfone Wireless, Inc. (Florida) became Tracfone Wireless, LLC. The defendants in the suit argued that the LLC was the true owner of the assets, not the plaintiff, Tracfone Wireless, Inc. (Delaware). Tracfone parried (through a declaration from a senior vice president) that the assignment was executed before the Certificate of Conversion. The court decided:

[T]he only evidence in the record is the declaration by Jill Garcia that clearly evinces the intention of the Florida corporation to assign its intellectual property rights to Plaintiff before it was converted to a new business entity. See Hinote v. Brigman, 33 So. 303, 305-06 (Fla.1902) (“if the party sought to be charged intended to close a contract prior to the formal signing of a written draft, or if he signified such an intention to the other party, he will be bound by the contract actually made, though the signing of the written draft be omitted. If, on the other hand, such party neither had nor signified such an intention to close the contract until it was fully expressed in a written instrument and attested by signatures, then he will not be bound until the signatures are affixed.”) (emphasis added). As there is no evidence that there was an intent for the conversion to take place prior to the time it was executed, I find that the evidence in the record indicates the assignment was consummated and therefore took effect prior to the conversion. Accordingly, Plaintiff is the owner of the trademarks and copyright at issue in this action and subject matter jurisdiction is proper.

At least the court was not pleased with the defendant’s ploy, but unfortunately for plaintiff not displeased enough. Plaintiff had moved for sanctions:

Plaintiff claims that Defendants’ position as to subject matter jurisdiction was frivolous and unsupported by the law. Specifically, Plaintiff represents that it explained to counsel for Defendants the circumstances surrounding the assignment of the intellectual property rights to Plaintiff and requested Defendants to withdraw their Motion. The Defendants’ position is without merit, and these circumstances present a close call as to whether imposition of sanctions would be appropriate. Defendants fail to recognize or address, either in their pleadings or at oral argument, that the crux of the question here is whether the assignment took place prior to the conversion becoming effective. The sole reliance on Fla. Stat. § 607.1114(2) is insufficient. However, because it is at least a colorable argument, I do not find it so frivolous or unsupported by law to warrant the imposition of sanctions. The Motion for Rule 11 Sanctions is accordingly denied.

Tracfone Wireless, Inc. v. Access Telecom, Inc., No. 09-20397-CIV-Gold/McAliley, 2009 WL 2207818 (S.D. Fla. July 24, 2009).

© 2009 Pamela Chestek

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