{"id":2767,"date":"2019-05-16T18:55:07","date_gmt":"2019-05-16T18:55:07","guid":{"rendered":"https:\/\/www.dekuzu.com\/en\/?p=2767"},"modified":"2020-02-18T16:45:26","modified_gmt":"2020-02-18T16:45:26","slug":"a-trademark-cannot-be-separated-from-the-goodwill-of-a-business","status":"publish","type":"post","link":"https:\/\/www.dekuzu.com\/en\/2019\/05\/a-trademark-cannot-be-separated-from-the-goodwill-of-a-business.html","title":{"rendered":"A trademark cannot be separated from the goodwill of a business"},"content":{"rendered":"\n

An attempt to simultaneously sell a restaurant and license associated intellectual property has led to ten years of litigation in state and federal court. Michael Shwartz and his family owned and operated the Camellia Grill restaurant on Carrollton Avenue (the \u201cCarrollton restaurant\u201d) for decades. He operated the business \u2013 the single restaurant \u2013 through a wholly owned corporation, Camellia Grill, Inc. In 1999, Shwartz formed CGH for the sole purpose of owning federally registered Camellia Grill trademarks.<\/span><\/p>\n

<\/span><\/p>\n

In 2006, Shwartz agreed to sell the Carrollton restaurant to Hicham Khodr. On August 11, in the \u201cBill of Sale,\u201d Shwartz sold to Uptown Grill, L.L.C. all his \u201cright, title and interest in and to the\u2026 tangible property located within or upon\u201d the Carrollton restaurant, including \u201call furniture, fixtures and equipment, cooking equipment, kitchen equipment, counters, stools, tables, benches, appliances, recipes, trademarks, names, logos, likenesses, etc., and all other personal and\/or movable property\u2026 located within or upon the property.\u201d<\/span><\/p>\n

On August 27, in the \u201cLicense Agreement,\u201d CGH licensed to The Grill Holdings, L.L.C. (\u201cTGH\u201d) the right to use certain defined \u201cMarks.\u201d These \u201cMarks\u201d included \u201call \u2018Camellia Grill\u2019 marks on file with the USPTO\u201d and \u201call \u2018trade dress\u2019 associated with the \u2018Camellia Grill\u2019 Restaurant,\u201d as well as blueprints, menus, and recipes. Section 5 of the License Agreement provides that the \u201cLicensee acknowledges and agrees that all of the Licensor\u2019s right, title and interest in and to the Marks shall remain the property of the Licensor.\u201d The License Agreement also bound TGH\u2019s affiliates and related companies.<\/span><\/p>\n

In 2009, Khodr opened a Camellia Grill location in Destin, Florida, which eventually failed. In 2010, Khodr opened a location on Chartres Street in New Orleans (the \u201cChartres restaurant\u201d).<\/span><\/p>\n

Following state court litigation that ended in the termination of the License Agreement, Khodr filed a declaratory action to determine the parties\u2019 respective rights in the Camellia Grill trademarks within or upon the Carrollton restaurant. Shwartz filed a separate action asserting trademark and trade dress infringement claims and breach of contract claims based on the continued use of Camellia Grill-related intellectual property following the termination of the License Agreement. The cases were consolidated.<\/span><\/p>\n

Khodr moved for, and the district court granted, summary judgment on the question of ownership of trademarks within or upon the Carrollton restaurant. The district court held that the Bill of Sale transferred \u201cownership of the trademarks associated with the operation of the Camellia Grill restaurant on Carrollton Avenue to Uptown Grill.\u201d The court also held sua sponte that the Bill of Sale transferred all Shwartz\u2019s rights in the Camellia Grill trademarks to Uptown Grill and entered judgment for Khodr on all claims.<\/span><\/p>\n

Shwartz appealed, and this court affirmed the district court\u2019s first holding but reversed and remanded on its second. The court held that the Bill of Sale \u201cclearly and unambiguously transfers to Uptown Grill the trademarks within or upon the Carrollton Avenue location.\u201d However, because Khodr had not asked the district court to make its second holding, this court reversed and remanded for further proceedings.<\/span><\/p>\n

The district court ultimately ruled that the Bill of Sale assigned all Camellia Grill trademark rights to Khodr, as well as trade dress rights associated with the Carrollton restaurant. The court then found that Shwartz was unable to sustain his trade dress infringement claim on the merits. Alternatively, the court held that even if Shwartz could sustain his trademark and trade dress infringement claims, he was not entitled to monetary damages.<\/span><\/p>\n

With respect to the Shwartz\u2019s breach of contract claims, the court found that the parties were still bound by the License Agreement. The court stated in a footnote that because \u201cthe parties have consistently treated the License Agreement as valid and binding,\u201d it would \u201cgive effect to their agreement to the extent permissible under the law.\u201d The court held that the use of the trademarks at the Chartres restaurant following the termination of the License Agreement was a breach of that contract. However, the court found that Shwartz could not prove breach of the agreement as to any putative trade dress.<\/span><\/p>\n

Finally, after a bench trial, the court found that the operation of the Chartres restaurant during two discrete time periods constituted a breach of the License Agreement. The court then found that Shwartz had not proved any compensable damages, so denied any such award. The court enjoined TGH, Uptown Grill, and the company that owned the Chartres restaurant (Chartres Grill, LLC) from employing the Camellia Grill trademarks identified in the License Agreement \u201cat any location other than the Carrollton Location.\u201d Shwartz timely appealed the district court\u2019s various adverse rulings.<\/span><\/p>\n

The district court denied Shwartz\u2019s motion for summary judgment on its ownership of the Camellia Grill trademarks other than at the Carrollton restaurant. The court held that the Bill of Sale assigned all Camellia Grill trademark rights to Khodr because (1) prior to the Bill of Sale, the trademarks had been used only at the Carrollton restaurant, (2) Shwartz made no effort to operate another Camellia Grill-branded restaurant before or since the Bill of Sale, and (3) the Bill of Sale assigned all goodwill and marks associated with the Carrollton restaurant to Khodr.<\/span><\/p>\n

Shwartz contends that the court erred for several reasons. First, Khodr repeatedly represented that he would not dispute ownership of the trademarks outside the Carrollton restaurant. Second, federal registration of the marks affords Shwartz a presumption of ownership and nationwide protection. Third, the district court\u2019s ruling does not take into account the License Agreement.<\/span><\/p>\n

Khodr\u2019s position is hard to pin down. In his briefing, he acknowledges the agreement not to use the trademarks at any location other than the Carrollton restaurant (i.e., the injunction), and argues that whether Shwartz\u2019s purported use of the trademarks supports ownership is \u201cof no consequence.\u201d However, at oral argument Khodr contended that the Bill of Sale was \u201call-encompassing\u201d and did in fact assign all Camellia Grill trademark rights to him.<\/span><\/p>\n

The Bill of Sale conveyed all Shwartz\u2019s \u201cright, title and interest\u201d to the \u201ctrademarks, names, logos, likenesses, etc. . . . located within or upon\u201d the Carrollton restaurant. This court previously held that the Bill of Sale clearly \u201ctransfers to Uptown Grill the trademarks within or upon the Carrollton Avenue location.\u201d Shwartz, 817 F.3d at 258. The question now is whether Shwartz retained any interest in the trademarks. He did not<\/a>.<\/span><\/p>\n

A trademark is a designation that identifies the source of goods and services and that has no independent significance separate from the goodwill of the business it symbolizes. As a technical matter, a trademark cannot be separated from the goodwill of a business. So, when an entire business is sold, as here, the goodwill and associated trademarks are necessarily transferred absent certain conditions not present here. Thus, the Bill of Sale unambiguously sold all rights to the Camellia Grill trademarks, and we cannot look to parol evidence to find otherwise.<\/span><\/p>\n

A trademark \u201conly gives the right to prohibit the use of it so far as to protect the owner\u2019s good will\u201d and so \u201ccannot be sold or assigned apart from the goodwill it symbolizes.\u201d Thus, trademark ownership and the related goodwill \u201cimpliedly pass with ownership of a business, without express language to the contrary.\u201d Moreover, to retain ownership after the sale of the business associated with the trademark, \u201cthe owner\u2019s intent to resume producing substantially the same product or service must be manifest, some portion of the goodwill of the previous business must remain with the owner, and resumption of operations must occur within a reasonable time.\u201d<\/span><\/p>\n

When selling an entire business, the rights to associated trademarks are necessarily sold unless at least two conditions are met: (1) the contract expressly reserves some right and interest in the trademark, and (2) the seller retains some of the business\u2019s goodwill. The latter condition is the most important, as no rights to trademarks can exist without the related goodwill.<\/span><\/p>\n

Having already sold to Khodr the Carrollton restaurant\u2019s real property, Shwartz sold \u201call of his right, title and interest in and to\u201d all \u201cfurniture, fixtures and equipment, cooking equipment, kitchen equipment, counters, stools, tables, benches, appliances, recipes, trademarks, names, logos, likenesses, etc., and all other personal and\/or movable property owned by Shwartz located within or upon the real property.\u201d The only Camellia Grill business was the Carrollton restaurant.<\/span><\/p>\n

So, all goodwill associated with Camellia Grill was connected to the business sold to Khodr as a going concern. No goodwill was expressly retained or remained to which otherwise free-floating trademark rights could attach, and Shwartz has never argued that he retained some part of the business\u2019s goodwill. Without looking outside the four corners of the Bill of Sale, and given the technical understanding of the term \u201ctrademark,\u201d the contract unambiguously transfers \u201call of Shwartz\u2019s right, title, and interest\u201d in the Camellia Grill trademarks.<\/span><\/p>\n

Finding that Shwartz retained some rights in the Camellia Grill trademarks would be contrary to a fundamental purpose of trademarks: identifying a single source of a product or service. If Shwartz sold all trademark rights to Khodr in the Bill of Sale, then Shwartz could not turn around and license these rights in the License Agreement. Shwartz cannot sustain his claims of trademark ownership on the basis of the License Agreement.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

A trademark \u201conly gives the right to prohibit the use of it so far as to protect the owner\u2019s good will\u201d and so \u201ccannot be sold or assigned apart from the goodwill it symbolizes.\u201d<\/p>\n

Continue readingA trademark cannot be separated from the goodwill of a business<\/span><\/a><\/div>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,39,17,15],"tags":[],"class_list":["post-2767","post","type-post","status-publish","format-standard","hentry","category-intellectual-property","category-interpretation","category-litigation","category-trademark","entry"],"_links":{"self":[{"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/posts\/2767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/comments?post=2767"}],"version-history":[{"count":1,"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/posts\/2767\/revisions"}],"predecessor-version":[{"id":2768,"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/posts\/2767\/revisions\/2768"}],"wp:attachment":[{"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/media?parent=2767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/categories?post=2767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dekuzu.com\/en\/wp-json\/wp\/v2\/tags?post=2767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}