The U.S. Court of Appeals for the Second Circuit overturned
a summary judgment in favor of accused trade-secret infringer
Cadbury Stani (Stani) after determining that the license in
suit was ambiguous and inapposite for determination on summary
judgment. The Court also discussed the legal effect of
transferring a trademark "in gross," that is, without
also transferring the goodwill that the trademark symbolizes.
The Topps Co. v. Cadbury Stani S.A.I.C., Case. No.
06-5316, (2nd Cir., May 15, 2008) (Cardamone, J.).
Topps licensed its trademarks and trade secrets respecting
certain bubblegum brands to Stani in South America. The license
was amended to terminate in 1996 and a second agreement was
executed providing for transfer of the trademarks to Stani upon
termination for $100,000. In 1996 the license expired by its
terms, the trademarks were transferred and Stani continued to
make and sell the trademarked gums. In 1999 Tops sued for
misappropriation of the trade-secret gum ingredient formulas.
Stani contended both that it had not used Topps'
formulas to make its gum after 1996 and that Topps had
transferred the trade secrets along with the trademarks. The
district court found that the contracts made no express
provision for transfer of trade secrets. Nonetheless the court
found for Stani on summary judgment because it decided that the
parties must have intended to transfer the trade-secret gum
formulas to effectively assign the trademarks since an
assignment of the trademarks in gross would have been
The Second Circuit agreed that an assignment of a trademark
in gross is invalid under U.S. law but observed that this is
"a complex and evolving area of the law." The Court
noted a judicial trend towards finding a valid assignment where
the marked goods are "substantially similar,"
although not identical, to the assignor's goods
"such that consumers would not be deceived or
harmed." The Court found that the factual issue of whether
Stani's post-1996 gum was substantially similar to the
gum made before 1996 using Topps' formulas could not be
determined on summary judgment. The court further observed that
Argentine, not U.S., trademark law, would be legally
controlling, but that the issue had never been briefed. The
case was remanded with instructions to construe the contract
language by considering whether the parties had intended to
transfer the trademarks in gross notwithstanding the unclear
legal effect of that intent.
Practice Note: When assigning trademarks,
counsel should carefully consider and contractually provide for
the goods to which the assigned marks will be applied. Here, 12
years after purported assignment of the trademarks and nine
years after suit was initiated, the rights of the parties
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general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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Trademarks and design rights are a woeful but combustible combination. Another day and another trademark infringement suit is commenced to circumvent the lack of effective design protection rights in the United States.