You understand the importance of protecting your new product or service with a trademark, and thanks to our Part One article on the subject, you also learned several keys to filing an application with the U.S. Patent and Trademark Office (USPTO) that outlines your intent-to-use the mark. It’s equally important to ensure that you’ve listed the right “Applicant” on that intent-to-use trademark application, and we’ll discuss that below. In Part Three of this series, we’ll address what errors an Applicant might make in their application that are correctable after filing.

What is a trademark “assignment”?

Every trademark application and registration has an Applicant and an Owner. Sometimes, the original Owner will transfer ownership of a trademark to another entity, which is called an assignment. However, if you are the Owner of an intent-to-use application pending before the USPTO, it isn’t always easy to transfer ownership.

Section 10(a)(1) of the Lanham Act, commonly referred to as the anti-assignment or anti-trafficking provision, provides that no intent-to-use trademark application can be assigned prior to filing an amendment to allege use or a statement of use, except to a successor of the ongoing and existing business, or portion thereof, connected with the mark. An amendment to allege use (AAU) or statement of use (SOU) is a submission to the USPTO in which the applicant provides a specimen or example showing how the trademark is being used in connection with selling the goods or services listed in the trademark application, along with a statement that the specimen was in actual use in commerce by a specified date.

If an AAU or SOU has not been filed, “the effect of assigning an intent to use application prior to filing a verified allegation of use is that both the assignment and the application is void.” (See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, §18:13, at 18-36 (5th ed. 2017) citing The Clorox Co. v. Chemical Bank, 40 U.S.P.Q.2d 1098, 1996 WL 579826 (TTAB 1996).

When is the exception applicable?

Over the years there have been several cases in which the USPTO’s Trademark Trial and Appeal Board (TTAB) and the courts have provided guidance as to when an assignment violates the anti-trafficking provision of the Trademark Act.

For example, in one case the TTAB found that an assignment of an intent-to-use application as collateral for a loan prior to filing a verified allegation of use (an AAU or SOU) violated the anti-assignment provision. In this case (The Clorox Co. v. Chemical Bank, 40 USPQ2d 1098 (TTAB 1996)), the assignment of the application as collateral provided that the application would be transferred back to the applicant upon repayment of the loan. In another case, the TTAB also made clear that even an assignment of an intent-to-use application to a parent company prior to filing an AAU or SOU violated Section 10(a)(1) because the parent company was not a successor to the Applicant’s business connected to the trademark. (See Central Garden & Pet Company v. Doskocil Manufacturing Company, Inc., 108 USPQ2d 1134, TTAB 2013). In fact, in this case the child company had already produced and sold products under the relevant mark before assigning the intent-to-use application to its parent company and continued in the exact same business after the transfer, which confirmed that the parent company was not the successor to this aspect of the business.

With respect to transfers to a successor of an existing and ongoing business, the TTAB has provided some guidance on what constitutes an “ongoing and existing” business connected with the mark. Since intent-to-use trademark applications are generally filed prior to establishing use in commerce, it is important to know what level of use is sufficient. In 2008, the TTAB decided two cases in which this issue was discussed. In Railrunner N.A., Inc. v. New Mexico Department of Transportation, 2008 WL 8973295 (TTAB 2008), the TTAB stated that a business is “ongoing and existing” only if the Applicant is already providing the goods or services recited in the application. This seemed to suggest that an intent-to-use application may only be assigned if the Applicant is providing each and every good and service listed in the application. However, in a subsequent case, the TTAB noted that the anti-assignment provision cannot be read to require that there be an ongoing and existing business for each of the goods in an intent-to-use application before it may be assigned. Exel Oyj v, D’Ascoli, 2008 WL 4354180 (TTAB 2008). In some cases, clever Applicants have drafted assignments that include specific language in an unsuccessful attempt to avoid violation of the anti-assignment provision, for example, assignments specifically stating that the transfer includes all of the ongoing and existing business to which the mark pertains have been found invalid. As another example, an agreement to convey and assign a mark upon registration was found to be tantamount to an invalid assignment where the Applicant agreed to use the mark by a specific date and adhere to quality control requirements.

What Can an Applicant Do?

In one case, an assignment from one joint Applicant to another joint Applicant prior to filing the AAU or SOU was found by the TTAB to be acceptable. This particular transfer was considered to be a relinquishment of rights by one joint Applicant rather than a true assignment to a third party that violates the anti-assignment provision. See, Amazon Technologies, Inc. v. Jeffrey S. Wax, 95 USPQ2d 1865 (TTAB 2010).

In another case, the Applicant licensed the intent-to-use application to a third party entity such that the benefit of the third party’s use of the mark was applied to the Applicant. See, J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, §18:46, at 18-124 (5th ed. 2017). According to Philip Restifo v. Power Beverages, LLC substituted for Paul Kidd (aka Ishmael Hassan), Opposition No. 91181671 (TTAB 2011), “an applicant may enter into a licensing agreement concerning future use for an applied-for trademark not previously used in commerce. Indeed, entering into a licensing agreement is contemplated as a vehicle for applicant to initially put the mark to use in commerce.”

If you are considering licensing or assigning your rights in an intent-to-use application, you should be aware of these important considerations and seek guidance. An assignment violating the anti-trafficking provision of the Trademark Act is void, and voids the intent-to-use application. Uncontrolled or naked licenses may also result in abandonment of your mark.