It is a basic principle of trademark law that a mark can only be assigned with the goodwill of the business to which the mark relates, for the good reason that the mark is in fact inseparable from the business. But what kind of “business” is necessary to support ownership of a mark? A recent decision by the Federal Court in the Southern District of New York in Creative Arts by Calloway, LLC v. Brooks, a dispute among members of the family of the late musician Cab Calloway, sheds light on this issue.
The plaintiff, a company owned by the widow of Cab Calloway and some other Calloway family members, claimed ownership of the mark CAB CALLOWAY and had filed a PTO service mark application for use in connection with various retail, music and entertainment services. The defendant, a grandson of Cab Calloway, had used the mark THE CAB CALLOWAY ORCHESTRA for musical performances. The plaintiff and defendant had been engaged in litigation related to Cab Calloway’s musical legacy for many years, but the issue in this case related to the plaintiff’s service mark application, which was filed in 1999. The defendant had opposed the application based on his prior use of the mark THE CAB CALLOWAY ORCHESTRA, and the TTAB upheld the opposition. The plaintiff challenged that decision in the Federal Court.
The plaintiff’s application to register CAB CALLOWAY had originally been filed by Cab Calloway’s widow on an intent-to-use basis. The application had been assigned to the plaintiff in 2001, before any Amendment to Allege Use or Statement of Use had been filed. Under 15 U.S.C. §1060, an intent-to-use application may only be assigned “to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing”. The purpose of this Lanham Act provision is to prevent trafficking in intent-to-use applications. In this case, the defendant moved for summary judgment on the basis that Mrs. Calloway was not operating an ongoing and existing business related to the mark at the time the assignment was made.
The evidence in the case was that Mrs. Calloway had taken no steps to market, merchandise, advertise, promote or sell products bearing Cab Calloway’s name, likeness, voice or caricature before the assignment was made in 2001. In fact, one member of the plaintiff had conceded in her deposition that the plaintiff was still “attempting” to start its business in 2001, after the assignment had taken place. Mrs. Calloway had, however, used Cab Calloway’s name in connection with receipt of royalties from his works and in connection with approving use of his image or name. This was insufficient for the court, which held that:
Approving the use of Cab Calloway’s name or likeness in exchange for payment – particularly without taking any steps to “market, merchandise, advertise, promote, or sell products bearing Cab Calloway’s name, likeness, voice or caricature” or develop a public expectation regarding the Cab Calloway brand – does not rise to the level of operating a business to which the mark “CAB CALLOWAY” pertains.
Although Mrs. Calloway had re-licensed the use of the Cab Calloway name to the Cab Calloway School of the Arts, that re-licensing was held by the court not to rise to the level of operating an ongoing and existing business. The court stated that the licensing activity, to the School of the Arts and to a number of other licensees, had amounted only to “personal stewardship or management of assets”.
The difference between such “stewardship” and a licensing program that could constitute an ongoing business was not completely clear from the judgment. Certainly, ownership rights in a mark can be sustained through use by a controlled licensee (see TMEP §1201.03(f)), and so licensing could, in theory, constitute operation of an ongoing business. However, the court seems to have made a distinction between a properly documented licensing program with control of use of the mark by the licensor (which the plaintiff had not been able to establish) and the series of somewhat haphazard permissions that the plaintiff was able to show.
Similarly, Mrs. Calloway’s retention of professional advisors in connection with administration of her rights, and discussions relating to a possible Broadway musical, were held not to constitute operation of an ongoing business.
Accordingly, the court found that the intent-to-use application was not validly transferred to the plaintiff and summary judgment was granted in favor of the defendant.
This case is a reminder that if you wish to assign an intent-to-use trademark application and you are unsure whether a business pertaining to the mark has been established, it is best to wait until you are sure. If the business relates to licensing the mark rather than using it, the licensing program must be properly documented. When the assignment is made, you should consider assigning other assets as well (such as customer lists and business plans) in order to support an argument that an ongoing business is being transferred. Lastly, remember that an improperly assigned application is void ab initio and cannot be cured, so the applicant will lose the priority date of the ITU and will have to file a new application.