Property, intangible

Legal doctrine has developed a manufacturer-distributor paradigm, but that is too simplistic in today’s commercial world. What we have in ACRO Biosystems v. Acrobiosystems USA LLC, an opposition, is manufacturer versus branch office.

The opposer is a Chinese manufacturer of biochemical reagents sold in the US under the mark ACROBIOSYSTEMS. The applicants are a US company and the individual who was the company’s incorporator. The opposer claims the US company is a division or branch, while the US company claims that it is the headquarters—actually, the applicants’ theory isn’t well-explained, probably because the evidence was so monumentally against them that it didn’t really support any relationship except the one the opposer claimed.

The opposer, referred to in the opinion as Acro Beijing, was the first company to do business in the United States. After its first sales contract, the CEO, Mike Chen, contacted Kaifan Dai to establish a US division. According to Chen, the US entity, Acro USA, was to receive payments from the US customers and forward the payment to Acro Beijing, taking out about 10% as its operating costs. Chen’s desire was to be incorporator of the US entity, but Dai told Chen that the US company had to be under the name of a US citizen, permanent resident, or someone with a US work permit. Dai’s wife, Xuelian Zhao, had a work permit so she formed the US company. She also filed an application to register the ACROBIOSYSTEMS trademark in her name and the name of Acro USA, so we have a dispute over who owns the trademark.

Putting the testimonial evidence aside, this is some of the documentary evidence about the relationship of the two companies:

• A shareholder cooperation agreement signed by Zhao stating that Zhao had responsibility “for operation of the U.S. branch office (ACROBIOSTEMS [sic] USA LLC)” and she agreed to “complete all the legal formalities to ensure the full ownership by the Company [Acro Beijing] of the U.S. branch office”
• An email from Dai saying “the U.S. branch will be the wholly owned subsidiary of the headquarter office [and] … [t]he ‘Acrobiosystems’ trademark registered by the U.S. Branch office is the company’s strategic assets”
• An email from Dai saying “[a]ll of the U.S. branch company’s assets belong to the Beijing company”
• An email from Dai entitled “US Branch Company report for discussion in the shareholder meeting” containing information regarding ” the US Branch Company” and the revenue it was transferring to Acro Beijing
• An email from Dai saying that the “U.S. Branch Company’s accounting … including the costs, has always been consolidated with and under the unified controlled [sic] of the Beijing Company”

It’s easy lifting from here:

The foregoing evidence demonstrates that Applicant Acro USA was created by Kaifan Dai and Xuelian Zhao to act as a mere representative on behalf of Opposer Acro Biosystems, that Zhao’s function was to operate the U.S. entity on behalf of Opposer, and that Acro USA and Xuelian Zhao were Opposer’s representatives. The evidence further shows that all involved persons (i.e., Chen, Dai, and Zhao) treated Acro USA as a mere representative for Opposer, rather than treating Applicants as the owners of the mark in the United States. In view thereof, Opposer has demonstrated that there is no genuine dispute that it is the owner of the trademark ACROBIOSYSTEMS mark in the United States, and that Applicants acted as Opposer’s distributor. Cf. Global Maschinen GmbH v. Global Banking Systems, Inc., 227 USPQ 862, 866 (TTAB 1985) (“It is settled law that between a foreign manufacturer and its exclusive United States distributor, the foreign manufacturer is presumed to be the owner of the mark unless an agreement between them provides otherwise.”) (internal citations omitted).

The applicants had some lame arguments that the Board rejected:

Specifically, none of the documents provided by Applicants contradicts Opposer’s evidence which clearly shows that all individuals involved considered Acro USA to be Opposer’s representative. Applicants’ own statements in various emails corroborate Chen’s testimony and clearly demonstrate (i) that Dai and Zhao acted on behalf of Opposer in creating Acro USA and carrying out the business, and (ii) that the ACROBIOSYSTEMS mark belongs to Opposer. Applicants’ attempt to retract the previous statements of Dai and Zhao by stating that they were “opinion” does not raise a genuine dispute as to whether Applicants acted on behalf of Opposer.

So, easily done. But I think it’s time to jettison the manufacturer-distributor paradigm. The doctrine creates a presumption in favor of the manufacturer,  Sengoku Works v. RMC Int’l, 96 F.3d 1217, 1220 (9th Cir. Cal. 1996) (“in the absence of an agreement between the parties, the manufacturer is presumed to own the trademark”); nevertheless, “a long-standing line of precedent holds that an exclusive distributor may acquire trademark rights superior to those of the manufacturer.” Id.  Trying to shoehorn these relationships with different contours into a “manufacturer-distributor” framework, which adds a presumption where perhaps none is justified (takes as an example the OEM manufacturing situation), simply muddies the waters. We should just look instead at the full scope of the relationship of the disputing parties and decide who the rightful owner is.

HT to John Welch, author of my second favorite blog, for the case.

ACRO Biosystems v. Acrobiosystems USA LLC, Opp. No. 91212675 (TTAB March 20, 2015)

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