Property, intangible

a blog about ownership of intellectual property rights and its licensing

Claims Left Barely Standing

Commerce Bancorp LLC v. Hill is a meaty enough case on ownership issues alone it’s good for two blog posts.  First is a standing problem that cropped up, second an allegation of trademark abandonment.  I’ll do standing now and abandonment later.

I am always somewhat baffled by changes in ownership of intellectual property when the rights are concurrently the subject of litigation, like in the Coinco granddaddy of cases. Does the left hand not know what the right is doing?  Or is it a calculated risk, where the reasons for the transfer outweigh the possible harm to the suit on standing, injunctive relief and damages?  And if it is a calculated risk, why don’t the assignment documents specifically address the litigation to put the transaction in the best frame possible?  M&A folks, do you ask whether the assets being assigned are involved in any pending litigation on your due diligence checklist?

In this case, defendant Hill was the founder of Commerce Bank and built it up, as described by the court, to “monstrous proportions.” The Board of Directors then orchestrated Hill’s ouster and shortly thereafter, on March 31, 2008, TD Bank Financial Group acquired Commerce Bancorp.  The court’s explanation of the transaction isn’t particularly clear, but the TD Bank web page says that TD Bank Financial Group acquired all the outstanding shares of Commerce Bancorp, making Commerce Bancorp a 100% wholly-owned subsidiary.  Hill engaged in behavior that TD/Commerce didn’t like, so Commerce Bancorp filed the lawsuit against Hill on November 17, 2008 with claims of, inter alia, copyright infringement and trademark infringement.  Four months later, on March 20, 2009, Commerce Bancorp assigned the trademarks and copyrights asserted in the litigation to its parent, The Toronto-Dominion Bank.  There are three TD/Commerce plaintiffs in the case, but The Toronto-Dominion Bank isn’t one of them.  Hill moved to dismiss on the basis that the plaintiffs no longer had standing.

Federal Rule of Civil Procedure 25(c), which allows for substitution of parties, is not the answer since it is procedural, not substantive.  The court then takes a several-page frolic through a couple of patent cases where patents were assigned out, then assigned back, during the course of a litigation.  It then concluded that the fundamental question was whether the plaintiffs had assigned the right to pursue the present action to the non-party corporate parent.  If so, Commerce Bancorp was left without standing.

The answer lay in the intra-company assignments.  The operative language of the trademark assignment was an assignment of

all [Commerce’s] right, title and interest in and to the Trademarks, together with the goodwill of the business associated with the Trademarks, and the right to sue and recover for past infringements, dilution, and other violations.

Hill argued this assignment language included the present dispute since it was a “past infringement,” but the court disagreed.  It parsed the sentence above into two separate rights assigned: (1) ALL the right, title and interest in the Trademarks including the goodwill; and (2) the right to sue and recover for past infringements.  There’s no “all” in the part assigning the right to sue, so the court couldn’t say for sure that the trademark infringement claim had been assigned.  Further, since the lawsuit was already filed at the time of the assignment, the right to sue and recover on the instant action had already been exercised and therefore could not be assigned to the parent with this language.  Finally, because the agreement didn’t address the litigation, “which, given the timing and nature of the present suit, must surely have been on Plaintiffs’ collective radar screens,” the court decided that Commerce had not assigned the right to maintain the trademark action to The Toronto-Dominion Bank.

The copyright assignments were in a separate document with, of course, different language.  In that assignment, Commerce assigned

nunc pro tunc as of March 20, 2009 all right, title and interest, including copyright rights in and to the Works, including the right to sue and recover for past and future infringements, and other violations. 

Here, in contrast to the trademark assignment, there is only one category or rights being assigned, with the right to sue for past infringement as only an example. But the court falls back on the “right to sue and recover” language and decided that since Commerce had already sued at the time of the execution of the assignment (or nunc pro tunc date?), the court did not read the assignment as including the present copyright infringement action.  But it does throw a somewhat unintelligible bone to Hill:

Without being convinced that Plaintiffs no longer possess the right to maintain their claims for trademark and copyright infringement, the Court cannot conclude that Plaintiffs lack standing.[4]

Fn[4] Should further evidence come to light tending to prove that Plaintiffs no longer own the relevant trademarks and copyrights [What? Isn’t that what the assignments were all about?] the Court would, on a proper motion, reconsider the factual basis of its jurisdiction as well as consider any motion to substitute under Rule 25(c).

I think the court probably gave Toronto-Dominion and Commerce Bancorp too much credit for being thoughtful in the language of the assignment documents, particularly with respect to suggesting that they were crafted with the ongoing litigation in mind.  It all looks like boilerplate to me; I doubt that the distinction between the language in the copyright assignment and the trademark assignment was deliberate, it was just the stock language in whatever form was grabbed.  Nevertheless the court wasn’t wrong in its approach just because the language was probably thoughtless; that’s all the court has to work with and what it’s supposed to do.

So Commerce Bancorp’s claim to standing barely survives.  But since it is not the present owner of the rights, is a remedy of injunctive relief available? 

Commerce Bancorp, LLC v. Hill, Civ. No. 08-5628 (D.N.J. June 18, 2010).Creative Commons License

This work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

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