In a recent Trademark Reporter Commentary, I went on a tirade about a two district court cases that, in my view, misinterpreted Section 10 of the Lanham Act. Section 10 generally prohibits assignment of intent-to-use applications “except for an assignment to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.” The two courts held that there had to be a trademark in use before it could be assigned, a legal conclusion I argue is contrary to both the statutory language and the policy decisions underlying the exception. But your can read the article for the full argument.
One of the cases I criticized was Sebastian Brown Prods. v. Muzooka, Inc. The Sebastian Brown Products court said that “an ‘ongoing and existing’ business to which a mark pertains requires at least some use of the mark in commerce. This is simply another way of stating that the mark must have accrued goodwill before the mark may be validly assigned.” The plaintiff hadn’t provided any evidence of use, so the court dismissed the complaint with prejudice. The plaintiff moved for reconsideration asking for another opportunity to fix the problem, which the court granted.
Alas, not because the court realized it had erred on interpreting Section 10. No,
In the instant motion, Plaintiff relies on the text of § 1060(a)(1) and associated legislative history to argue that the Court should alter its interpretation of § 1060(a)(1). Not only were these arguments available to Plaintiff at the time of the Court’s order, the Court considered these issues in detail in the order dismissing the FAC.1 See Muzooka II, 2016 U.S. Dist. LEXIS 33483, 2016 WL 949004, at *8-11. Accordingly, reconsideration on this basis is not warranted.
But the plaintiff was successful with an argument that, had it known what view of Section 10 the court was going to take, it would have presented evidence in support of that view, evidence it had:
The Court agrees that Plaintiff has shown a material difference in fact from that presented on the motion to dismiss. In support of the instant motion, Plaintiff offers significant evidence that Miller engaged in a variety of activities not presented during the briefing on the motion to dismiss, including signing a written agreement with a recording studio while using the Muzook Mark; contacting “numerous” and “many” people in the recording industry using the Muzook Mark; and discussing the Muzook Mark at the San Francisco MusicTech Summit IX. This evidence is relevant to whether the Muzook Mark accrued goodwill prior to Miller’s assignment of the Muzook Mark to Plaintiff. While Plaintiff could have presented this evidence during the motion to dismiss, Plaintiff is correct that, at the time of the motion to dismiss, neither the Ninth Circuit nor any district court within the Ninth Circuit had interpreted the legal requirements of § 1060(a)(1). In addition, the Trademark Trial and Appeal Board had issued conflicting authority on the meaning of § 1060(a)(1). Thus, the scope of § 1060(a)(1)—and the type of allegations needed to satisfy § 1060(a)(1)—was unclear. In light of the newly presented evidence, the Court is persuaded that granting Plaintiff leave to amend Plaintiff’s Lanham Act claim is not necessarily futile. For this reason, the Court agrees with Plaintiff that Plaintiff’s Lanham Act claim should be dismissed with leave to amend to allege newly presented facts, rather than with prejudice.
You take the win anyway you can get it.
Sebastian Brown Prods., LLC v. Muzooka, Inc., No. 15-CV-01720-LHK (N.D. Cal. July 5, 2016).
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