United States: Oops! Assignment Of Intent-To-Use Trademark Applications: Easy But Not Simple

Last Updated: August 28 2013
Article by Susan Neuberger Weller

 The language in the Trademark Act is very clear on the issue of assignment of intent-to-use applications.  In a recently issued precedential opinion, the Trademark Trial and Appeal Board has held, once again, that Section 10(a)(1) of the Act really means what it simply states, namely, that prior to filing proof of use at the Trademark Office, an intent-to-use application cannot be assigned "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 an existing." So why are registrations still being canceled for violating these terms?

Unlike many other jurisdictions, US trademark jurisprudence is founded on the principle of use. Accordingly, a federal trademark registration will not issue until after proof of use has been filed by a US applicant. The US Trademark Office began permitting the filing of intent to use applications in 1989, requiring that proof of use be filed before a registration based upon such an application would issue. The underlying legislative history for this "new" procedure made clear that there would be no tolerance for warehousing of and trafficking in trademarks. Thus, the law requires an applicant filing an intent-to-use application to sign a declaration under penalty of criminal perjury attesting to the fact that it has a "bona fide" intent to use the applied-for mark in commerce on or in connection with the goods and/or services listed in the application as filed. In addition, the Trademark Act, with limited exceptions, requires that a mark be in use before an application for registration can be assigned to a third-party. Seems simple right?

Well, simple can get complicated under the right circumstances. In the recent TTAB case,Cent. Garden & Pet Co. v. Doskocil Mfg. Co., No. 91188816 (TTAB August 16, 2013), a registration used as a basis for filing an opposition proceeding was canceled on a counterclaim for violating the anti-assignment provisions above. In that case, the application which eventually matured into the canceled registration was filed by a company called All-Glass Aquarium Co., a wholly-owned subsidiary of Pennington Seed. Pennington Seed was a wholly-owned subsidiary of the Opposer in this case Central Garden & Pet Company. While the All-Glass application was pending and before proof of use was filed, All-Glass assigned the application to Central Garden. As anyone who practices before the USPTO knows that documents such as assignments which are filed for recordation at the USPTO are not reviewed for accuracy or validity. Rather, if they are filed in the proper format with the proper filing fee, whatever documents are filed will be recorded without review. Thus, with the recordation of this assignment document, the intent-to-use application was assigned to Central and the Registration eventually issued in its name.

The undisputed facts in the case demonstrated that the assignment was not part of any larger transaction between the companies, that Central was not a successor to All-Glass or any part of it, and that All-Glass continued in business in the exact same manner as it had before the transfer continuing to produce and sell products under the assigned mark. Thus, the only thing which was exchanged in the transaction between these two companies was the mark and the goodwill associated with the mark. Neither all or a portion of the Applicant All-Glass was transferred to Central.

In defending against the counterclaim to cancel the registration for an invalid assignment, Central argued that because All-Glass and Central were "closely related companies" and because the assignment did not cause any "confusion or discontinuity" in the use of the mark, that there was no violation of the statute. The Board disagreed completely. It stated that because "Central owned all of the stock in Pennington Seed, and... Pennington Seed owned all of the stock in All-Glass, which in turn owned the...application [at issue], [that] [i]n one sense, it could be said that Central owned the application all along." However, the Board made clear that since Central chose to structure its business using multiple and separate corporate subsidiaries, each of which counts as a "person" under Section 45 of the Trademark Act, it must live with the fallout from that decision. Although such a business structure may offer certain advantages, it does have some strictures and "the existence of a corporation cannot be turned on or off at will to suit the occasion."  Moreover, even though Central was not trafficking in intent-to-use applications and did not engage in any other type of bad faith conduct, the Board was adamant that, regardless, "it does not follow that either entity should be free from the restrictions of the statute." In other words, the language in the statute is clear, its intent is unquestionable, and it means what it says.

There are several takeaways here. First, related companies are not free to assign intent-to-use applications between them unless they meet the strict language of the statute for doing so. Common ownership and/or control alone are not sufficient to meet the standards for a valid assignment. Second, be very careful when filing an intent-to-use application to ensure that the named applicant should be the applicant until such time as proof of use can be filed. For example, sometimes an individual will file an application in his or her name personally prior to forming a corporate or other entity in order to get the earliest possible filing date. In such a situation, he or she may not be able to assign the application to the later-formed entity until after proof of use has been filed. A potential solution to that situation is to have the individual applicant license the rights to the applied-for mark to the newly formed entity so that the eventual use of the mark by the licensee entity can form the basis for filing proof of use, paving the way for assignment of the application to the company. A written license is highly recommended for this purpose. Of course, if an individual applicant does operate an "ongoing an existing business" to which the mark pertains, and that entire business is transferred to a subsequently created entity, then the pending intent-to-use application may be assigned as well. Finally, be sure title to your issued registration is valid before asserting it against a third party and risking cancellation.

Even seemingly easy and simple can be tricky if you're not paying attention.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Susan Neuberger Weller
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