Property, intangible

a blog about ownership of intellectual property rights and its licensing

Third Circuit Adopts the Standard Test

The Court of Appeals for the Third Circuit, took an opportunity to clarify the doctrine to be used when deciding, as between a manufacturer and distributor, who owns the trademark. The decision is a wee bit puzzling only because it makes much of what didn’t look like much at the trial court level. The court expressly adopted what it called the “McCarthy test” for deciding ownership, versus the “First Use test.” The “McCarthy test” is quite standard (the court listing all the circuits that have adopted it):

As Professor McCarthy explains, where initial ownership between a manufacturer and its exclusive distributor is at issue and no contract exists, the manufacturer is the presumptive trademark owner unless the distributor rebuts that presumption using a multi-factor balancing test designed to examine the distribution agreement in effect between the parties. The six factors that should be considered are: (1) “[w]hich party invented or created the mark”; (2) “[w]hich party first affixed the mark to goods sold”; (3) “[w]hich party’s name appeared on packaging and promotional materials in conjunction with the mark”; (4) “[w]hich party exercised control over the nature and quality of goods on which the mark appeared”; (5) “[t]o which party did customers look as standing behind the goods, e.g., which party received complaints for defects and made appropriate replacement or refund”; and (6) “[w]hich party paid for advertising and promotion of the trademarked product.”

I suspect the opinion was designed simply to distinguish one of the court’s earlier decisions, Doeblers’ Pa. Hybrids, Inc. v. Doebler, 442 F3d 812 (3d Cir. 2006), although the two cases aren’t inconsistent. In Doebler, there were different companies formed at different times but all within the control of the same family. The trial court held that one of the companies was successor to the DOEBLER trademark, even though there was no assignment and the original company that first adopted the “Doebler” name still existed, although in different legal form. The Court of Appeals rejected the concept, an outcome occasionally possible under the “McCarthy test,” that a different company might become the owner of the mark without any transfer. As explained:

To presume that in every case where ownership is not decided in advance, a distributor who makes the initial public sale thereby assumes the mark and the manufacturer cedes any claim to initial ownership would defy logic and common sense. Thus, it cannot be that, in the absence of a contractual arrangement, the first use test automatically fills that gap. Instead, a different test accounting for the realities of the manufacturer-distributor relationship must control.

For that reason, when we first considered the manufacturer-distributor domain in Doebler, we cited approvingly the ownership test expounded by Professor J. Thomas McCarthy in his seminal treatise on trademark law. Doebler, 442 F.3d at 826 (quoting 2 McCarthy on Trademarks § 16:48). But we had no need in Doebler to expressly adopt that test because, in that case, initial ownership as between the manufacturer and distributor was clearly established. Id. at 826-27. Today, the issue is squarely presented to us, and we find the McCarthy test has much to recommend it.

So the Third Circuit expressly joins everyone else.

*Covertech Fabricating, Inc. v. TVM Bldg. Prods., No. 15-3893 (3rd Cir. April 18, 2017)
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