Property, intangible

a blog about ownership of intellectual property rights and its licensing

An Invalid Assignment Isn’t Incontestable

I’m not even going to try to outline the convoluted competing ownership claims to the STOLICHNAYA trademark for vodka – you can read the decision for that.  But the disagreement about who owned the mark led to a trademark infringement suit that plaintiff Federal Treasury Enterprises Sojuzplodoimport (FTE) brought against the record owner of the mark Spirits International N.V., et al. in 2005.  The district court dismissed almost all claims on a motion to dismiss, holding that the incontestable status of the registration meant that FTE couldn’t challenge ownership. 

A registration of a trademark that is incontestable is

conclusive evidence of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the registered mark in commerce.

Lanham Act § 33, 15 U.S.C. § 1115(b).  Since a registrant includes “the assigns” of a registered mark, Lanham Act § 45, 15 U.S.C. § 1127, the district court reasoned that an owner by assignment after the mark became incontestable stepped into the shoes of the previous owner, thus making its ownership claim also incontestable.

But not quite, says the Court of Appeals. It’s only after a valid assignment that one succeeds to the rights of the assignor. Thus, one has to look at the standard for challenging the validity of the assignment.  “When the prescribed information reporting the assignment is recorded in the United States Patent and Trademark Office, the record shall be prima facie evidence of execution.”  Lanham Act § 10, 15 U.S.C. § 1060. The PTO doesn’t examine the assignments for validity, merely records them as a ministerial act.  FTE may therefore challenge the validity of the assignment:

If the mere fact that the registrant satisfied the requirements for incontestability could preclude FTE’s claim, then incontestability would transform recording–a ministerial act–into a mechanism for conclusively defeating allegations (which must be credited on a motion to dismiss) challenging the legality of the assignment. Defendants’ statutory interpretation would lead to a perverse result in cases such as this, where all parties agree that the trademarks became incontestable in 1974, but the disputed assignment comes from a series of transactions that occurred many years later.

Defendant Spirits International also failed on its argument that the validity of the assignment agreement was a state law issue, not federal, and therefore couldn’t be heard in federal court. This appears to be new ground to be trod by an appeals court, although the Second Circuit handily found that the federal court has jurisdiction based on a similar conclusion in copyright cases.  FTE had alleged Lanham Act causes of act for which ownership was a predicate, so the federal court has jurisdiction to decide the underlying ownership claim.
Federal Treasury Enter. Sojuzplodoimport v Spirits Int’l N.V., No. 06-3532 (2d Cir. Oct. 8, 2010).
Federal Treasury Enter. Sojuzplodoimport v Spirits Int’l N.V., No. 04-cv-8510 (S.D.N.Y. March 31, 2006).

Creative Commons License
The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

Share Button