United States: Intra-Corporate Trademark Transfers: Beware Of The Intent-To-Use Trap

In the course of a corporate restructuring or in the management and reorganization of a company's IP assets, intra-corporate trademark assignments are not uncommon.  Perhaps a special entity is created to hold all of the company's IP assets, or a corporate organization with multiple affiliates and subsidiaries may elect to consolidate its trademarks in the ultimate parent company or other entity.  There are any number  of possibilities in which one or more trademarks may be transferred from one corporate entity to another.  No big deal, right?  Well, not so fast.

A recent, precedential decision from the Trademark Trial and Appeal Board provides a clear reminder that such ownership transfers are not always straightforward and that companies need to think through the process before executing these assignments.  In particular, there are special rules for assigning rights in a U.S. federal trademark application that has been filed on the basis of an intent to use the mark.  The failure to follow these rules can result in a later cancellation of your federal registration, as happened to Central Garden & Pet Company in Central Garden & Pet Company v. Doskocil Manufacturing Company, Inc., Opposition No. 91188816 (TTAB August 16, 2013).

Under U.S. law, a person is allowed to file a trademark application in the U.S. Patent and Trademark Office merely on the basis of a bona fide intent to use the subject trademark in commerce.   In other words, you have legitimate plans to start using the mark but just aren't using it yet.  The intent-to-use application is a great benefit because it allows you to claim priority against others from the date you file the application.  That way you can protect yourself against others who may, whether in good faith or not, begin using the same or confusingly similar trademark before you are ready to begin using your mark.  Even though they may beat you to market, if your application date pre-dates their priority date, you can make them stop using their confusingly similar mark.  It's a great tool for trademark owners.

But there's a bit of catch, unlike existing trademark registrations and applications filed on the basis that the mark is already in use, the original applicant of an intent-to-use trademark application can assign its rights in that application in only 2 contexts:  (1) if it has already filed a statement of use of the mark (or an amendment to the application to allege use), or (2) if no statement of use has been filed,  it is selling its entire business, or at least that part of the business to which the subject mark pertains.  This can be a challenge in the context of an intra-corporate IP transfer because typically the transfer just involves the IP assets and not the entire business assets.  

In the Central Garden case, an indirect subsidiary of Central Garden filed an intent-to-use application for the mark ZILLA to be used on aquariums, terrariums and related equipment.  Before filing any statement of use or amendment to allege use of the ZILLA mark, the subsidiary assigned the trademark application up the chain to its ultimate parent Central Garden.  Thereafter, the USPTO issued a registration to Central Garden for the ZILLA mark.

About 4 months after the ZILLA application was filed, Doskocil filed an application to register the mark DOGZILLA for dog toys and ultimately was granted a registration.   Central Garden filed a petition to cancel that registration.  Based on the application dates, under normal circumstances, the ZILLA mark would have priority and, if the marks were likely to cause confusion, Central Garden would prevail.  However, Doskocil filed a counterclaim seeking to cancel Central Garden's registration for ZILLA on the grounds that the assignment from its subsidiary was improper and the resulting registration invalid.  The Trademark Trial and Appeal Board agreed with Doskocil and ordered that Central Garden's registration be cancelled and, accordingly, denied Central Garden's petition to cancel the DOGZILLA mark.   For other reasons stated in the opinion, the Board did not reach the question of whether the two marks would be likely to cause confusion.

From a business person's point of view, it may sometimes be tempting to view an entire corporate organizational structure as being one entity for the purpose of IP ownership, and whether the assets are held in one corporate affiliate as opposed to another may not seem to make a difference.  But it does.  The corporate form must be respected.  Before executing any intra-corporate trademark transfers, it is important to understand exactly what assets are being transferred and to be sure you are following all the rules governing those transfers.  Otherwise, you could find yourself inadvertently losing your valuable trademark assets.

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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