• The Opposition, Cancellation and District Court Trifecta

    by  • May 9, 2022 • trademark • 0 Comments

    Here we have multiple businesses originally operated by a husband and wife, now divorced and now adverse to each other, and the same rights to the same trademark litigated in three different venues.

    There are a couple of lessons here. One, put forward your best case at the TTAB. If you lose at the TTAB there may be, as happened in this case, issue preclusion in district court. (Oddly, the cancellation was not precluded by the opposition, but the case was dismissed on failure to state a claim without reaching claim preclusion.)

    Second, don’t give away federal trademark registrations as wedding presents.

    So diving in, here are the relevant players:

    • Dale Barnes – Ex-husband. Invented the BIOWORLD product. Had two former entities in his name, one named BioWorld, but that didn’t play a role in the decisions.
    • Diane Barnes – Ex-wife. Registered “Bio-World” logo in California in 1992 in her own name.
    • Phillip Barnes – Dale and Diane’s son.
    • Don Damschen – an employee who ultimately sided with Diane.
    • BioWorld Products – no formal formation, operated in California. Started in 1990 and both Dale and Diane participated in its operation.
    • BioWorld Products, LLC – formalizing the entity BioWorld Products (above) as a California limited liablity company on January 23, 1998 in Diane’s name only. In 2007, a transmutation agreement transmuted 100% of the personal property interests as community property of the marriage into Diane’s separate property. In 2010, was converted from an LLC to a corporation and became BioWorld Products, Inc. Also in 2010, filed a trademark application for BIOWORLD PRODUCTS, which registered on April 19, 2011.
    • BioWorld USA Inc. – a California corporation formed on September 14, 2015 by Don Damschen who became CEO; Diane became the administrative manager. This is the opposer in the opposition proceeding, petitioner in the cancellation, and defendant and counter-plaintiff in the district court lawsuit.
    • Advanced BioTech, LLC – a California limited liability company Dale formed on January 5, 2000. Worked cooperatively with BioWorld Products, LLC/Inc. for many years. This is the applicant and respondent in the opposition and cancellation filed by BioWorld USA, Inc. (above) and the plaintiff and counter-defendant in the district court lawsuit.

    Some relevant events:

    • Sometime in 2013, Dale and Diane separated but their companies continued to work together.
    • On October 12, 2013, Diane/BioWorld Products gifted its trademark registration for BIOWORLD to Phillip Barnes without Dale’s knowledge. The registration then lapsed in 2018 while subject to a cancellation action by Advanced BioTech.1
    • About April 7, 2014, Dale dissolved the partnership arrangement between their two companies.
    • On September 1, 2016, BioWorld Products Inc. sold all its assets, including unidentified trademarks, to BioWorld USA; BioWorld Products then filed for bankruptcy.
    • Diane and Dale divorced in 2018, after the opposition was filed.

    Ok, with that as background, the dispute started when Advanced BioTech, LLC (Dale’s company) filed trademark applications for BIOWORLD and BIOWORLD PRODUCTS in 2017 and 2018 respectively. BioWorld USA Inc. (Diane’s company) opposed the registrations, claiming to be the owner of the trademark.

    It’s not clear from the opinion, but Dale apparently also claimed that he (or one of his companies) had always been the owner of the BIOWORLD mark. (The trademark applications claim a first use date of 1989.) The Board, however held that BioWorld Products was the owner during any relevant time period:

    [Dale] never explains why Diane was listed as the owner on the California fictitious business statement prior to the company’s formation; why Diane was listed as the President of the LLC that was formed; or why he signed the transmutation agreement in 2007, converting 100% of the ownership of the company to the sole property of Diane.

    Notwithstanding the couple’s subjective intentions at the time (which remain obscure) and Dale’s testimony in this case, it is clear from their actions at the time and the documentary evidence of record that Dale and Diane wanted the BioWorld Products company and all rights to it to be in Diane’s name, at least publicly. Dale’s contention that he never intended to relinquish his rights in the mark BIOWORLD is belied by the objective evidence in this case. Therefore, we find that Diane, not Dale, owned the company and mark during the early years of the company – that is, until she assigned it away.

    On its part, BioWorld USA had malleable theories for priority. In its Notice of Opposition, it claimed to use the BIOWORLD trademark “with permission of” (i.e., had a license from) Phillip Barnes. At trial, as supposed by the Board “likely as a result of the cancellation of Phillip Barnes’ trademark registration,” BioWorld USA claimed to have acquired the trademark rights when it purchased the assets of BioWorld Products. However, Advanced BioTech pointed out that BioWorld USA couldn’t have acquired the trademark rights from BioWorld Products because BioWorld Products had assigned the trademark to Phillip before that. BioWorld USA then shifted its argument, claiming that the assignment was of the federal registration and not also the common law rights, which were acquired from BioWorld Products. The Board didn’t buy it:

    Opposer’s argument that the assignment was limited to just the registration is unpersuasive, since the document states in no uncertain terms that “BioWorld Products Inc. has gifted the full rights to the trademark ‘BioWorld Products’ to Phillip Barnes” (emphasis added). “Give him this,” mentioned in the document, clearly refers to mark itself and not simply the registration listed below. It is simply inconsistent with, and contrary to trademark law that one can assign full rights in a mark, including its federal registration, while at the same time retaining separate common law rights.

    (Emphasis by the Board.)

    BioWorld USA also argued that the assignment to Phillip was invalid because it lacked an assignment of the goodwill. The absence of the word “goodwill” in the assignment also wasn’t the cure-all BioWorld USA hoped for:

    As to Opposer’s argument that the assignment was invalid because it does not mention the magic word “goodwill,” Opposer has presented no case precedent, nor are we aware of any such precedent, holding that the transfer of “full rights in a mark” does not encompass its goodwill. It is true that “[u]nlike patents or copyrights, trademarks are not separate property rights. They are integral and inseparable elements of the goodwill of the business or services to which they pertain.” A naked transfer of the mark alone – known as a transfer in gross – is invalid. However, in this case, Opposer has presented no evidence to show that the transfer was invalid. To the contrary, Opposer’s witnesses Diane and Don, treat the assignment in their testimony as if it was valid and that their use was based on permission, essentially a license back from Phillip to use the mark. Accordingly, we also treat the assignment as valid and find that following the assignment, Diane and BioWorld Products, Inc. no longer owned the mark. It follows, then, that BioWorld Products, Inc. had no ownership rights in the mark BIOWORLD PRODUCTS to transfer to Opposer through the Asset Purchase Agreement of September 1, 2016.

    (Internal citations omitted.)

    BioWorld USA therefore couldn’t rely on priority that accrued from any predecessor. It could rely on any common law rights it acquired after its incorporation on September 14, 2015 and before Advanced BioTech’s application filing dates, but its evidence was inadequate. The opposition therefore failed.

    Not content, BioWorld USA then filed a petition to cancel the same registrations. The petition was denied, but, surprisingly, not based on claim preclusion. The Board granted two motions to dismiss the petition, with leave to amend both times. The first time the petition was not sufficiently clear in alleging ownership and likelihood of confusion. The second time BioWorld USA alleged priority based on a newly acquired exclusive license from Phillip, but:

    A licensee cannot plead or claim priority based on the licensor’s use of the licensed mark. Moreno v. Pro Boxing Supplies, Inc., 124 USPQ2d 1028, 1036 (TTAB 2017) (holding that while a licensor can rely on its licensee’s use to establish priority, “a mere licensee, cannot rely on [its] licensor’s use to prove priority.”).[2] Accordingly, Petitioner has not pleaded priority and has therefore failed to state a cognizable claim of likelihood of confusion.

    Although BioWorld USA was given leave to amend, it did not do so and the petition to cancel was denied.

    And finally we get to district court. In this case, BioWorld USA wasn’t the instigator; Advanced BioTech was, on a misappropriation of trade secret claim. But BioWorld USA didn’t miss the opportunity to fight the trademark battle again.

    First, the district court wouldn’t consider what, now, had become an assignment of the trademark from Phillip to BioWorld USA because it was entered into after the lawsuit was filed. BioWorld USA then lost, this time, on issue preclusion by both TTAB decisions. As to the opposition decision:

    BW USA’s claims opposing the registration of BIOWORLD PRODUCTS relate to its infringement counterclaim. To maintain a cause of action for trademark infringement, BW USA must show it has priority to the asserted marks and BioTech’s use of those marks creates a likelihood of confusion. Likewise, to maintain an opposition to federal registration, BW USA asserted likelihood of confusion with a mark to which it allegedly has superior rights. Therefore, BW USA’s infringement claim closely relates to its prior challenge to the registration of the BIOWORLD PRODUCTS mark. These factors illustrate how the TTAB November 2020 already addressed the issue as to whether BW USA own use constitutes sufficient market use to preempt BioTech’s federal rights, an issue identical to one raised by the counterclaim.

    {Internal citations omitted.)

    For the cancellation decision,

    The TTAB August 2021 decision further precludes BW USA from asserting common law rights to the BIOWORLD marks based on its status as a licensee. In both its petition for cancellation of the mark before the TTAB and in its current counterclaim, BW USA argues its written license executed in November 2020 allows it to “step into the shoes” of Phillip Barnes, as the owner of the marks. Specifically, BW USA argued to the TTAB that it was “asserting Phillip Barnes’ rights” because it obtained an “exclusive license” to use the mark in November 2020. BW USA likewise provided the Court with the November 2020 license to support its argument that it holds superior rights to the BIOWORLD marks over BioTech. However, the TTAB held that BW USA, as a licensee of Phillip Barnes, could not claim priority based on Phillip’s use of the BIOWORLD marks. Given the overlap in arguments, evidence, and application of law, BW USA raised an identical issue before the TTAB. … Therefore, the TTAB August 2021 decision meets step one of the issue preclusion analysis.

    Three strikes and out? Still the court of appeals to go, though.

    BioWorld USA, Inc. v. Advanced BioTech, LLC, Opp. No. 91236811 (TTAB Nov. 2, 2020)
    BioWorld USA, Inc. v. Advanced BioTech, LLC, Can. No. 92071532 (TTAB Aug. 17, 2021)
    Advanced BioTech, LLC v. BioWorld USA, Inc., No. 1:19-cv-01215 JLT SKO (E.D. Cal. Apr. 26, 2022)

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    1. This is mystifying. There doesn’t appear to be any income stream associated with the assignment. But there is a lot missing from this case, as the Board said, “We begin our analysis by remarking on the unsatisfactory state of the record before us, which has a number of holes not filled in by the parties, leading us to question the credibility of both parties and their witnesses to some degree. As with any dispute, the Board is charged with determining the relevant facts reflected in the record, which becomes more challenging when the parties have not been completely forthright.” 
    2. I think the Moreno decision is contrary to Federal Circuit law, but the TTAB denied a request for reconsideration. It doesn’t make any sense to me why, if a licensee has standing, they can’t also rely on the full scope of their licensor’s rights for their claim. 
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