If you have ever worked for an employer, you probably signed an employment contract with an intellectual property clause that obligates you to assign any and all intellectual property created by you (the employee) in the course of your employment, or in relation to a certain field. This may not seem like a big deal to you as an employee (and it might not matter or ever apply to you), and sometimes it is necessary to agree to all of the terms to an employment contract in order to get the job. But if you are an employer, it is important to prepare proper assignment agreements and maintain a good record of executed assignments.
Most big companies - particularly tech companies or other companies that have a lot of proprietary information are generally good about keeping track of assignments. But if you are a small company or if you are a sole member, you might be less diligent and this could cost you time and money down the road. Here is an example scenario based on a real case I handled- all names have been changed.
Frank files a trademark application and names himself as the trademark owner. Subsequently, Frank obtains a trademark registration and he remains as the owner of the trademark. Frank is the owner of ABC LLC. ABC LLC is a sole member LLC and the LLC (not Frank as an individual) is now using his trademark in commerce. Frank never assigns the trademark to ABC LLC. ABC LLC did business as DEF LLC and GHI LLC. A year goes by and Frank decides to sell ABC LLC's assets to Mark and the trademark is sold as part of the sale. Under the sale contract, the parties are named GHI LLC and XYZ LLC. Mark owns and operates XYZ LLC and all assets of ABC LLC are acquired by XYZ LLC. Mark fails to do due diligence and does not notice that the trademark has never been assigned from Frank to ABC LLC. Mark also fails to update the ownership information for the trademark registration. Few months later, ABC LLC is dissolved. Later, Seth, on behalf of his LLC, JKL LLC, wants to apply for the same trademark and contacts Mark. Seth finds out that XYZ LLC is no longer using the trademark and is willing to cancel the trademark registration. JKL LLC and XYZ LLC enter into a contract to acquire the trademark. Mark submits the sales contract between GHI LLC and XYZ LCC to the USPTO to show transfer of ownership of the trademark registration and concurrently files a petition to cancel the trademark registration. The USPTO accepts the transfer of ownership of the trademark registration, but rejects the petition to cancel the trademark registration.
There are a ton of problems with the above fact pattern. Let's identify a few relating to assignments and discuss.
1. Frank failed to assign the trademark registration from himself to his LLC, ABC LLC. This is where the problem started. Because the LLC was using the mark in commerce, and not Frank personally, the LLC was the true owner of the trademark. Frank never assigned the trademark to the LLC because he thought it was just a matter of formality and doing paperwork, but paperwork is important.
2. The sales contract between Frank and Mark named incorrect parties. Frank used different names for his LLC. He should have identified all of his LLC names in the sales contract to ensure that the assignee of the trademark was correctly identified. If parties are not correctly identified, that could be grounds for void contract. Also, remember that if you assign your registration to your company and the company's information (e.g., name, address, etc.) subsequently changes, you have to execute a new assignment agreement showing the updated information.
3. Mark failed to do due diligence. Mark should have checked to make sure that the trademark registration was valid and enforceable. Does the trademark registration have a valid ownership? Were maintenance fees paid? Is there a pending TTAB proceeding for cancellation? Is there a pending trademark infringement litigation? It is pretty easy to look up trademark registrations on the USPTO website.
4. Mark never updated the trademark ownership information on the USPTO database. If the trademark registration was valid and enforceable, Mark should have updated the trademark ownership information. Usually this is just a matter of filing a form on the USPTO website and submitting evidence like assignment agreements. If ownership information is properly updated, the registration should show previous and current owner information.
5. The petition to cancel the trademark registration was not filed by the "correct party." Only the trademark owner can petition to cancel a trademark registration. Even though the USPTO recognized Mark's LLC as the new owner, because Frank never transferred the registration from himself to his LLC, there was a break in the chain of ownership and Mark could not ultimately cancel the mark before fixing the break in the chain of ownership.
Here, you could see that one small mistake of not assigning a trademark registration snowballed into a much bigger, more complicated issue. Assignment agreements are not that difficult to prepare and execute. The moral of the story, then, is to save yourself a headache and maintain a good record of assignment agreements. You will thank yourself later.