For me, Ralston v. Salba Corp. was one of those “whoops, keep an eye out for that next time” kind of cases. Note to self – in the future, check for a reversionary right in the property being licensed.
Plaintiffs William and Richard Ralston and Great Western Tortilla Co., a company that had been owned by the Ralstons, were the original owners of the marks SALBA SMART and SALBABALANCE. SALBA is a trademark for a particular varietal of a chia seed, purportedly with health benefits. The Ralstons assigned the marks to Salba Corp., N.A., which granted an exclusive worldwide license back to the Ralstons and Great Western Tortilla for certain snack food products. The Ralstons in turn sublicensed the mark to Salba Smart Natural Products, LLC, a co-plaintiff with the Ralstons in the suit. This is the court’s description of the terms of the assignment and license agreement between the plaintiffs and defendant:
|• Defendant Salba Corp. N.A. shall not adopt, grant any rights, and or use SALBA SMART, SALBABALANCE, or any term in combination with SALBA in North America on certain products identified in a supply agreement;
• Defendant Salba Corp. N.A. shall not use, assign, sell or otherwise transfer the Marks without the Ralstons’ and Great Western Tortilla’s prior written consent;
• The Assignment and Agreement would terminate in the event that either Defendant Salba Corp. N.A. assigned, transferred, sold or licensed the Marks without the Ralstons’ and Great Western Tortilla’s prior written consent or Defendant failed to comply with any other provision of the Agreement;
• In the event of termination by the above-described means, Defendant Salba Corp. N.A. would forfeit ownership of all right, title and interest to the Marks, and title to the Marks and accompanying good will would automatically revert back to the Ralstons. The forfeiture of and reversion of rights would be set forth in a confirmatory assignment, which Defendant would execute.
Defendant Salba Corp. then licensed at least SALBA SMART to Core Naturals, LLC. This was a fatal decision: the arbitrator found that Salba Corp. had breached the assignment agreement by licensing to Core Naturals. (If you’re interested, read the arbitration award. There’s bad blood all over; the decision here tells only a small part of it.) Therefore, the ownership of the marks reverted to the Ralstons and the arbitrator enjoined Salba Corp. from performing under its license agreement with Core Naturals. The decision went further; although Salba Corp. retained ownership of a U.S. registration for SALBA for the seeds themselves, it is prohibited from licensing this registration in North America.
Core Naturals and another licensee, Source Salba Inc., tried to intervene, since now their licenses for the use of SALBA are at least questionable. Too late, said the court, denying motions for either intervention of right or permissive intervention, albeit served with an invitation:
|The instant action concerns the parties’ specific rights and the obligations of the Ralstons and Salba Corp. N.A. under the 2007 Trademark Assignment and Agreement, as well as Defendant Salba Corp. N.A.’s breaches of those obligations. The Proposed Intervenors’ claims concern their rights under separate agreements they entered into with Defendant Salba Corp. N.A. and Defendant’s obligations pursuant to those agreements. Nothing prevents the Proposed Intervenors from filing a separate action against Defendant. The Proposed Intervenors’ participation in the instant suit would not change the fact that Defendant breached the 2007 Trademark Assignment and Agreement, in part, by granting unauthorized trademark licenses to them. However, their participation would interject new and distinct issues. In light of the new and distinct issues, denial of the third parties’ Motions for Leave to Intervene does not bind them by res judicata or collateral estoppel from obtaining relief/damages from Defendant for the improper licensing of said trademarks.|
Some comfort for practitioners – the arbitration award says that Core Naturals knew of the Ralstons’ exclusive license, because Salba Corp. asked the Ralstons to license Core Naturals and there had been some due diligence but the Ralstons ultimately declined. So Core Naturals wasn’t without notice; indeed it looks like the Ralstons’ refusal to license to Core Naturals may have precipitated the situation.
The ownership of the SALBA trademark per se looks like it may be the root of the case, but there are few clues given in the documents. Core Naturals’ Motion to Intervene says it has been using the SALBA mark since 2005, and Source Salba says it was licensed in 2006, both before the assignment of the SALBA SMART and SALBABALANCE marks. The arbitrator also awarded the Ralstons only the SALBA SMART and SALBABALANCE marks worldwide, but defendant Salba Corp. still has more U.S. applications and registrations containing the mark SALBA (as noted above, Reg. No. 3071655 for SALBA, and App. Nos. 77487209 and 77142369 for SALBA LIFE and SALBA OLE) that were not assigned to the Ralstons. The first use date in the Ralston applications is after the first use date for SALBA for seeds. There are also a few unrelated applications for SALBA formatives (three abandoned and one live – use this query in TESS: salba*.bi. not “salba corp”.on.
An ugly, ugly situation that looks like it’s only half-told and far from over.
Ralston v Salba Corp., No. 09-cv-02142-CMA-MJW, 2010 WL 1644627 (D. Colo. Apr. 21, 2010).
This work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.*.bi.>