Failure To Record Trademark Assignment Supports Dismissal – Trademark

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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.

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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