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Transfer of Trademark Ownership Was Not Undone by a Subsequent Agreement

Thursday, May 30, 2019   (0 Comments)
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Transfer of Trademark Ownership Was Not Undone by a Subsequent Agreement Concerning Patents and Know-How

By John Paul, Brian Kacedon, Clara Jiménez, and Nicholas Camillo

Edited by John Paul, Brian Kacedon, Cecilia Sanabria, and Clara Jiménez

Abstract:  The Third Circuit found language of a first agreement was unambiguous in transferring ownership of a trademark, and that a subsequent agreement relating to patents and know-how provided no basis for revoking or affecting the transfer of ownership when the first agreement terminated. As a result, the company that acquired the trademark rights was not liable to the original trademark owner for trademark infringement, false advertising, unfair competition, breach of contract, and unjust enrichment.

Thomas Sköld, an inventor and entrepreneur, created a drug-delivery system named Restoraderm for use in skin-care products.

In 2002, Sköld and CollaGenex (a skin care company later acquired by Galderma) signed a Co-Operation, Development and Licensing Agreement that granted CollaGenex certain rights in the Restoraderm mark. After executing the 2002 agreement, CollaGenex applied to register the Restoraderm trademark with the United States Patent and Trademark Office.

In 2004, Sköld and CollaGenex signed an Asset Purchase and Product Development agreement  that superseded the 2002 Agreement. The 2004 Agreement transferred from Sköld to CollaGenex "Restoraderm Intellectual Property" (which was defined to include patent rights and associated know-how.)

In 2008, Galderma Laboratories L.P. ("Galderma") purchased CollaGenex, and by early 2009, Galderma used the Restoraderm trademark on products that did not use Sköld's drug-delivery system.

Galderma ultimately terminated the 2004 agreement and proclaimed that it was the owner of the Restoraderm mark. In response, Sköld sued Galderma in for trademark infringement, false advertising, unfair competition, breach of contract, and unjust enrichment based on Galderma's use of the trademark Restoraderm.  After a trial, the jury found that Sköld was the owner of the Restoraderm mark and that he adequately proved unjust enrichment. However, the jury also found that Sköld had failed to prove infringement, unfair competition, false advertising, and breach of contract. Both parties then appealed to the Third Circuit.

The Galderma Decision
The Third Circuit court of appeals focused on who owned the Restoraderm mark and interpreted the 2002 and 2004 Agreements to conclude that Galderma owned the trademark.

The 2002 Agreement
A portion of the 2002 Agreement stated that "[a]ll trade marks applied for or registered (including 'Restoraderm') shall be in the sole name of CollaGenex and be the exclusive property of CollaGenex during the Term [of the agreement] and thereafter" (emphasis added). The court interpreted thatregoing provision as not only granting CollaGenex ownership of the Restoraderm mark during the term of the agreement, but also after termination of the agreement. This was confirmed by another provision that stated that "[a]ny termination [of the 2002 Agreement] . . . shall not affect in any manner vested of either party arising out of this Agreement prior to termination" (emphasis added).

Sköld argued that the 2002 transfer of the Restoraderm mark was negated by the 2004 Agreement. However, the court was not persuaded given (1) the clear intent demonstrated by the straightforward language of the 2002 Agreement, (2) the clear intent demonstrated by a 2001 letter of intent between the parties that stated "[a]ll trade marks associated with [Restoraderm intellectual property and products] . . . shall be applied for and registered in the name of CollaGenex and be the exclusive property of CollaGenex[,]" and (3) the additional reasons discussed below with respect to the 2004 Agreement.

The 2004 Agreement
Although the subject matter of the 2004 Agreement referred to "Restoraderm Intellectual Property" the term was limited to patent rights and know-how and was silent on ownership rights in the Restoraderm mark. The 2004 Agreement, however, included an integration clause that "cancel[ed] and supersede[d] any and all prior negotiations, correspondence, understandings and agreements (including the [2002 Agreement]) whether oral or written, between the Parties respecting the subject matter hereof and thereof; provided that nothing in this Agreement shall replace, supercede [sic], cancel or modify any prior agreements or assignments between the Parties that have been filed with the United States Patent and Trademark Office."

It was apparent to the court that the parties did not void CollaGenex's ownership of the Restoraderm mark, but rather contracted and confirmed that ownership, which was later succeeded by Galderma. Further, the court reasoned, the phrase "hereof and thereof" in the integration clause did not transfer ownership of the Restoraderm mark because the 2002 Agreement encompassed trademarks, while the 2004 Agreement did not. Therefore, the prior transfer of Restoraderm "[was] not contained in 'the subject matter hereof and thereof' in the 2004 Agreement's integration clause."

Sköld further argued that the 2004 Agreement provisionally returned the mark to himself, and subsequently to CollaGenex, under the "goodwill" provision of the agreement. The 2004 Agreement stated that "Sk[ö]ld shall sell, transfer and deliver to CollaGenex … all goodwill, if any, relating to the [Restoraderm Intellectual Property]." Additionally, the 2004 Agreement further provided that CollaGenex would return certain assets (including related goodwill) to Sköld in the event of termination by either party. Notwithstanding those provisions, the court was not persuaded "[b]ecause CollaGenex's ownership of the mark survived termination of the 2002 Agreement, [and] Sköld had no rights to Restoraderm when he executed the 2004 Agreement. Therefore, he could not have transferred the mark under the 'goodwill' provision or any other."

Overall, the court found the language of the 2002 Agreement to be unambiguous with respect to transferring the ownership of the trademark to CollaGenex, and the 2004 Agreement to provide no basis for revoking that transfer of ownership. Accordingly, the court held that "Galderma, as successor-in-interest to CollaGenex, became the rightful owner of the Restoraderm mark and remained so after the termination of [the 2002] [A]greement." As a result, the original trademark owner did not retain or recover any rights after termination of the subsequent agreement to assert claims for trademark infringement, false advertising, unfair competition, breach of contract, and unjust enrichment.

Strategy and Conclusion
This case demonstrates how disputes can occur in interpreting agreements defining the scope of the rights transferred, proper usage of those rights, and what rights survive after an agreement is terminated. Where a trademark is assigned without limiting its use to a particular product or service, the acquiring party may have latitude to use the mark in other ways, absent clear language limiting its use.

Further Information
The Sköld decision can be found here.

Editors and Authors
The editors and authors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.

John Paul              
Brian Kacedon     
Cecilia Sanabria   
Clara Jimenez       
Nicholas Camillo 


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