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Trademark Assignments: Keeping it Valid

After a trademark achieves federal registration, ownership of the mark may change hands for a variety of reasons. When a trademark owner transfers their ownership in a particular mark to someone else, it is called an assignment. Generally, for an assignment of a trademark to be valid, the assignment must also include the ‘goodwill’ associated with the mark (goodwill is an intangible asset that refers to the reputation and recognition of the mark among consumers). If the assignment of a trademark includes the mark’s goodwill and is otherwise legal, the assignee gains whatever rights the assignor had in the mark. Importantly, this includes the mark’s priority date, which has implications for protecting the mark from potential infringers going forward.

In contrast, if an assignment of a trademark is made without the mark’s accompanying goodwill, then it is considered an assignment “in gross” — and the assignment is invalid under U.S. law. Courts have analyzed whether an assignment was made in gross in a few different ways, but, as is the case with much of trademark law, protecting customers from deception and confusion is the primary motivation behind any analysis for determining the validity of an assignment.

One way courts determine if an assignment was made in gross is through the substantial similarity test. This test essentially examines whether the assignee is making a product or providing a service that is “substantially similar” to that of the assignor, such that consumers would not be deceived by the assignee’s use of the mark. This analysis includes an assessment of the quality and nature of the goods and services provided under the mark post-assignment.  Thus, even if an assignee is using the mark on the same type of goods, but the goods are of lower quality than the goods previously offered by the assignor under the mark, the assignment could be invalid. However, slight or inconsequential changes to goods and services after an assignment are not likely to invalidate the assignment, as such changes are to be expected and would not thwart consumer expectations.

Decisions on the question of substantial similarity are only marginally instructive, as the  test calls for a fact specific inquiry into what the consuming public has come to expect from the goods or services offered under a given mark. For example, courts have noted that despite similarities in services and goods, “even minor differences can be enough to threaten customer deception.”[1] Instances of products or services that were deemed not substantially similar (and thus resulted in invalid assignments) include: an assignee offering phosphate baking powder instead of alum baking powder;[2] an assignee using the mark on a pepper type beverage instead of a cola type beverage;[3] an assignee producing men’s boots as opposed to women’s boots;[4] an assignee using the mark on beer instead of whiskey;[5] and an assignee selling hi-fidelity consoles instead of audio reproduction equipment.[6]

Conversely, case law has also shown that substantial similarity can be found even when products or services do differ in some aspects, if consumers aren’t likely to be confused. For example, the following product changes did not result in a finding of an invalid assignment: an assignee offering dry cleaning detergent made with a different formula;[7] an assignee using thinner cigarette paper;[8] and an assignee selling a different breed of baby chicks.[9]

Whether goods or services are substantially similar may seem like an easy test to apply, but, as case law demonstrates, this fact-intensive analysis can yield results that look strange in the abstract. Disputes involving the validity of a trademark assignment are decided on a case-by-case basis, using the specific facts at hand to determine if consumer expectations are being met under the new use. Thus, while trademarks acquired through assignment can have significant value (and grant the assignee important rights formerly held by the assignor), assignees should be wary of changes to goods or services under an acquired mark that could be seen as deceiving the public.


[1]Clark & Freeman Corp. v. Heartland Co. Ltd., 811 F. Supp. 137 (S.D.N.Y. 1993).

[2] Independent Baking Powder Co. v. Boorman, 175 F. 448 (C.C.D.N.J.1910).

[3] Pepsico, Inc. v. Grapette Company, 416 F.2d 285 (8th Cir. 1969).

[4] Clark & Freeman Corp. v. Heartland Co. Ltd., 811 F. Supp. 137 (S.D.N.Y. 1993).

[5]Atlas Beverage Co. v. Minneapolis Brewing Co., 113 F.2d 672 (8 Cir. 1940).

[6]H. H. Scott, Inc. v. Annapolis Electroacoustic Corp., 195 F.Supp. 208 (D.Md.1961).

[7]Glamorene Products Corp. v. Procter & Gamble Co., 538 F.2d 894 (C.C.P.A. 1976).

[8] Bambu Sales, Inc. v. Sultana Crackers, Inc., 683 F. Supp. 899 (1988).

[9]Hy-Cross Hatchery, Inc v. Osborne 303 F.2d 947, 950 (C.C.P.A. 1962)

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About this Author

Rachel A. Nicholas, Intellectual Property Attorney, Lewis Roca Law Firm
Associate

Ms. Nicholas is an associate in the firm’s Intellectual Property practice group. She focuses her practice on copyright and trademark law. 

Ms. Nicholas’ experience includes assisting with contractual matters, drafting memoranda, and working on licensing agreements. 

Before joining the firm, Ms. Nicholas worked as a legal intern for Phoenix Children’s Hospital. 

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