Property, intangible

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Assigning a Trademark Claim

Plaintiff Delta Medical Systems, Inc. co-owned a trademark registration for NITREX for “medical gloves” with Delta Hospital Supply, Inc. and Delta Medical Supply Group, Inc. Delta Medical sued defendant DRE Health Corp. for trademark infringement. You may have seen this coming: DRE Health Corp. filed a motion to dismiss that the two other co-owners of the NITREX trademark were missing required parties.

Under Federal Rule of Civil Procedure 19, a case may be dismissed for failure to join a required party if, in the party’s absence,

(1) the court cannot accord complete relief among existing parties; (2) proceeding with the action may as a practical matter impair or impede the person’s ability to protect its interest in the action; or (3) proceeding with the action will subject a party to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the absent party’s interest in the action.

After the motion to dismiss was filed, the three co-owners entered into a agreement where the two non-party co-owners assigned their interest in the claim to Delta Medical, effective about a week before the complaint was filed and containing the docket number for the lawsuit. Delta Medical said it was a memorialization of a prior oral agreement.1

But assigning a claim isn’t the same as assigning a trademark. The other owners were required parties:

As an initial matter, the Court need not decide whether the oral and written assignments by the Co-Owners to Delta Medical of their rights to the claims in this action are valid. Even if the assignments are valid, the Court nonetheless finds, at the first part of Rule 19’s test, that the Co-Owners are required parties under Rule 19(a). In the Agreement, the Co-Owners assigned to Delta Medical “all of [their] right, title, and interest in and to the trademark infringement claims” asserted in this action. But, the NITREX trademark registration lists Delta Medical and the Co-Owners as owners of the mark, and the Co-Owners did not purport to assign any of their other ownership rights in the NITREX trademark to Delta Medical. As such, proceeding with this action without the Co-Owners may, “as a practical matter impair or impede [their] ability to protect” their rights in the NITREX trademark. Defendants have represented that they intend to argue that the NITREX trademark is “invalid and subject to cancellation.” The Co-Owners’ interest in and ability to enforce or use their mark could thus be impaired during the litigation; indeed, the litigation could result in the invalidation and cancellation of their mark. In addition, proceeding with this action without the Co-Owners may subject Defendants to a “substantial risk of incurring double, multiple, or otherwise inconsistent obligations.”[2] Therefore, in consideration of the “pragmatic concerns, especially the effect on the parties,” the Court determines that the Co-Owners are required parties that must be joined. Notably, several other courts have determined that trademark co-owners were required parties under Rule 19(a) for similar reasons. See, e.g., Int’l Importers, Inc. v. Int’l Spirits & Wines, LLC, 2011 WL 7807548, at *7-8 (S.D. Fla. July 26, 2011) (collecting cases).

However, Delta Medical had asked for leave to amend the complaint to add its co-owners if needed, so Delta Medical’s request to add plaintiffs was granted rather than dismissing the case.

Delta Medical Sys., Inc. v. DRE Health Corp., Civ. No. 1:21-cv-01687-WMR (D. Ga. Nov. 8, 2021)

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  1. I don’t find that difficult to believe. They probably informally discussed whether to sue DRE Health Corp. and who the plaintiffs would be. 
  2. The court doesn’t explain how this can be, if the two absent co-owners assigned to Delta Medical their right to bring an infringement claim. 
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