Property, intangible

a blog about ownership of intellectual property rights and its licensing

Sixth Circuit Saves the Day

A while back I started a post this way:

What a mess. Add up ugly facts and a court that bought a frivolous and completely wrong argument (made without citation – because there aren’t any) and you end up with a fiasco. Here’s to appeals.

And the appeal is here.  Muuuchhh better!

Defendant Steven Brandeberry acquired the trademark AMTEL for a phone book business in 1994, signing the agreement on behalf of his corporation and himself personally. He then had financial problems and assigned the mark to non-party White, but the agreement was on behalf of his corporation only, not himself personally. White then sold the business to plaintiff Yellowbook Inc. After White’s state registration for AMTEL expired, Brandeberry resumed using the AMTEL mark and was sued by Yellowbook.

The district court held that since Brandeberry hadn’t assigned away his personal interest in the mark when assigning the mark to White, all that Yellowbook acquired was a non-exclusive right to use the mark. Yellowbook argued that, even so, Brandeberry abandoned the mark through six years of non-use, but the court found that abandonment was only a defense that did not strip Brandeberry of his right to use the AMTEL mark. Therefore, both parties could use the mark.

Luckily, we have an appeals court that understands what a trademark is. First the court looked at the 1994 agreement. It didn’t buy that the trademark was assigned to be jointly owned by Brandeberry and his company, but rather found the trademark was assigned only to the company:

The most basic problem with the district court’s reading is that no part of the contract makes any mention of joint ownership. Brandeberry and his corporation are always collectively referred to as a singular “licensee.” The contract gives no guidance as to whether the trademark rights would be owned jointly or as tenants in common, exclusively or non-exclusively, or be unilaterally assignable, transferrable, or licensable. We could speculate about how the parties intended to structure the joint ownership, but here the language permits a more straightforward interpretation. The natural reading is that the contract transferred a single right—undivided ownership—to Brandeberry’s wholly owned corporation. As 100% owner of American Telephone, Brandeberry had no reason to retain any individual stake. Burkhalter made sure Brandeberry signed the contract in his individual capacity to hold him personally liable for the $50,000 purchase price of the trademark, not to bifurcate the property rights between Brandeberry and his corporation.If the district court were correct that the contract created a joint right, this reasoning would apply with equal force to the 1994 Corporate Asset Purchase Agreement, which transferred various intangibles from Burkhalter to both Brandeberry and American Telephone, referred to jointly as “Purchaser.” No party has argued that Brandeberry is also the joint owner of the AMTEL customer lists, books and records, and goodwill. All of these assets—as intended at the time—were held exclusively on the balance sheet of American Telephone, and we do not read the contract as creating a bifurcated ownership scheme where none was clearly intended or acted upon.Joint ownership is disfavored in the trademark context. See 2 McCarthy on Trademarks & Unfair Competition § 16:40 (4th ed.). By their nature, trademarks derive their value from exclusively identifying a particular business. If customers are confused about which business the mark refers to, one of the users may unfairly benefit from the goodwill of the other, or the goodwill of the mark may be dissipated entirely. Beneficial joint ownership or licensing schemes may be devised, but courts are not well placed to fill in these details, and parties (and customers) are typically best served by exclusive ownership. It is not clear what benefits there would have been to splitting ownership between Brandeberry and American Telephone. Nor in practice did Brandeberry make any such attempts to bifurcate ownership. He never used the AMTEL mark in his individual capacity or for other businesses, but simply through American Telephone and in his role as its President and employee. Further, for any joint-ownership scheme to have been valid, Brandeberry would have to have received some of the AMTEL goodwill: otherwise his trademark rights would be “in gross” and invalid. 15 U.S.C. § 1060. But the 1994 Corporate Asset Purchase Agreement appears to have transferred all of the goodwill and non-trademark assets to American Telephone, leaving it as the party presumptively holding the AMTEL mark. Whether considered invalidated, abandoned, or not transferred in the first place, Brandeberry retained no rights in the AMTEL mark independent of his ownership of American Telephone.

From here, the court readily found that Brandeberry had subsequently conveyed all his interest in the trademark to White, retaining none for himself. “This was not a sale to carve out a particular business or spin-off certain assets; it was a wholesale transfer from Brandeberry to White of control over American Telephon’s entire business. We will not presume the creation of jointly owned or non-exclusively licensed trademark rights, especially where dissipation of goodwill, and increased customer confusion, is inevitable.”

Yellowbook also won on the abandonment argument. Noting that while it’s true abandonment is often used defensively in infringement cases, “Brandeberry’s abandonment-as-a-defense-only position would permit trademark users who abandoned their rights impunity from charges of infringement ….”  Brandeberry’s six year period of non-use created a presumption of abandonment that Brandeberry rebutted with only “speculative” evidence, so Brandeberry had abandoned the trademark.

But who on earth still publishes yellow pages?

Yellowbook Inc. v. Brandeberry, No. 11-4267 (6th Cir. Feb. 27, 2013).

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

Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *