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 invalid.
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 remain unresolved.
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