Failure to Record Trademark Assignment Supports Dismissal
In Muertos Roasters LLC v Luke Schneider the US District Court for the Eastern District of California has dismissed a complaint of infringement, based on USPTO records that failed to reflect an assignment from a parent company. The case is a cautionary tale that demonstrates the importance of recording transfers of ownership.
For many business owners, attempting to keep up with trademark registration records can easily lead to oversights. Some may reasonably believe that a trademark assignment is effective by virtue of a written agreement between parties laying out the intention to transfer a mark. This, however, is not always the case. While a written agreement is certainly necessary, the prima facie evidence of execution afforded by recordation with the USPTO not only makes the assignment binding with subsequent purchasers, but also generally prevents loopholes in enforcement measures. Muertos Roasters illustrates just this.
Muertos Roaster, a California coffee company, brought a trademark infringement lawsuit against an Illinois coffee shop, Fire Department Coffee Inc., and its owners, alleging that Fire Department Coffee infringed its distinct trade dress to market and sell its coffee. The defendants moved to dismiss the lawsuit under the Federal Rules of Civil Procedure 12(b)(6) and 12(b)(2) arguing that the plaintiff did not own the disputed marks and that the court lacked personal jurisdiction over them.
In granting Fire Department Coffee’s motion to dismiss for failure to state a claim upon which relief may be granted, the court noted that Muertos Roasters’ lawsuit was based on ownership of the trademarks in dispute. However, according to the USPTO records that the defendants provided, the trademark registration and application were actually owned by Muertos Roasters’ parent company, Cup Half Full Holdings Inc. As USPTO records are public and their accuracy “could not reasonably be questioned” the US District Court for the Eastern District of California took judicial notice of the information and accepted it as true. This is despite Muertos Roasters submitting a declaration explaining its relationship to its parent company and providing a written trademark assignment agreement as evidence of the parties intent.
The court reasoned that the unrecorded assignment agreement was not subject to judicial notice as it was not attached to Muertos Roasters’ complaint, and it did not mention in the complaint that it owned the marks by way of assignment. Because the court is not required to accept allegations that contradict matters subject to judicial notice as true, it dismissed Muertos Roasters’ complaint for infringement with leave to amend. The company will now need to revise its complaint to address the discrepancy in ownership.
Like all maintenance requirements, taking the additional step to record a trademark assignment can seem time consuming. This is especially so for businesses with more complex ownership structures and a large portfolio of transferred marks. However, like most tedious tasks, it is very important. In the context of transactions, a clean record chain of title can increase the speed of a deal and the parties’ comfort. And, especially in the context of enforcement, as in Muertos Roasters, properly recorded assignments create certainty around ownership, allowing the parties to focus on the merits of the ultimate infringement claim. To avoid larger issues down the road, practitioners and business owners should be diligent and proactive about updating their trademark records with the USPTO.
This article originally appeared in World Trademark Review Weekly on Sept. 22, 2022, and is reprinted with permission.
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