April 19, 2021
LES Insights
By John C. Paul; D. Brian Kacedon; Anthony D. Del Monaco; Katherine T. Leonard
A New York court dismissed a trademark infringement suit where the plaintiff did not own the mark when the suit was filed. The court also held the plaintiff’s exclusive license did not confer statutory standing to sue because the license restricted certain uses of the mark by the licensee and the owner of the mark retained certain ownership and enforcement rights.
Shinho sells specialty Chinese foods, such as bean curd and soybean paste, under the design mark “CONG BAN LV.” Shinho’s founder, Teh-San Sun, registered the mark with the United States Patent and Trademark Office (USPTO) and executed an exclusive license agreement to Shinho for use of the mark with several restrictions. On June 27, 2019, Shinho recorded with the USPTO a nunc pro tunc (retroactive) assignment of the CONG BAN LV Mark to Shinho from Sun, with an effective date of July 17, 2018.
May Flower used similar marks on its own products without license from Sun or Shinho.
On July 18, 2018, one day after the retroactive effective date of the trademark assignment (but before the actual execution of that assignment), Shinho sued May Flower in the Southern District of Texas for trademark infringement under 15 U.S.C. § 1114. The case was then transferred to the Eastern District of New York.
May Flower argued that Shinho lacked standing to sue because (1) Sun, not Shinho, was the registrant of the CONG BAN LV Mark at the commencement of the lawsuit, (2) Sun’s retroactive assignment of the CONG BAN LV Mark to Shinho did not suffice to confer standing, and (3) Shinho was neither a legal representative of Sun nor an assignee of the trademark rights under the Lanham Act.
Shinho argued that (1) it did not have to be the registrant to have standing to sue under § 1114(1) because it had coextensive interests with the registrant, Sun, (2) Sun’s retroactive assignment only memorialized Shinho’s standing and (3) Shinho had standing for all its claims as an exclusive licensee.
Whether a party has standing to sue is determined at the time the complaint is filed, which in this case was July 18, 2018.
Only trademark registrants have standing to bring an infringement action under § 1114(1) of the Lanham Act, including the registrant’s legal representatives, predecessors, successors, and assigns. Accordingly, the court needed to determine whether the retroactive assignment or exclusive license sufficiently conferred standing to Shinho to sue under § 1114(1).
May Flower argued that Shinho did not have standing to sue at the commencement of the suit and that Sun’s mid-litigation assignment to Shinho cannot cure statutory standing defects. Shinho argued that while it was not the official registrant at the time the complaint was filed, it maintained statutory standing as an assignee of the registrant.
Courts have generally recognized that if the plaintiff is not the owner of the mark at the time the suit is commenced, that defect cannot be cured by a later, retroactive, assignment. An underlying concern was that allowing a subsequent assignment to cure a standing defect would expand the number of people statutorily authorized to sue. Likewise, curing lack of standing retroactively by filing a supplemental or amended complaint would circumvent the principle that nunc pro tunc retroactive assignments are not sufficient to confer retroactive standing.
Therefore, the court determined that Shinho did not have statutory standing on July 18, 2018, when it filed the suit. And the nunc pro tunc retroactive assignment of rights that Sun recorded on June 27, 2019, over a year after the commencement of the suit, was insufficient to confer statutory standing on Shinho.
For a licensee to have standing to sue under § 1114(1), the licensee must show its license amounts to an assignment, or transfer of ownership. Courts may look to the terms of the license agreement, considering the following factors: (1) whether the license agreement imposes geographical limitations on the use of the trademark; (2) whether the license requires the licensee to maintain the trademark’s quality; (3) whether the rights and duties in the license are inconsistent with an assignment; and (4) whether the license states that the licensor retains ownership of the trademark.
Here, the Court held that although the license granted Shinho “an exclusive, royalty‑free right to use and enforce” the CONG BAN LV Mark, the other factors weighed against finding that the license was an effective assignment. For example, Sun retained the ownership rights of the CONG BAN LV Mark. Sun also retained the ability to inspect Shinho’s goods, services, and promotional activities employing the logo “to ensure that such use is of proper quality.” Sun also retained the power to terminate the license should Sun determine the use of the logo was inconsistent with the license. Indeed, the license only granted Shinho the ability to carry out legal protection of the logo in the United States.
While the license did not limit Shinho’s exclusive use of the Mark, it imposed several restrictions on Shinho’s use of the Mark. These restrictions effectively made the license “more akin to a licensing agreement than an assignment.” Thus, the Court held that Shinho did not have standing to bring action under § 1114(1) as an exclusive licensee.
Companies need to have sufficient ownership or licensing interests in trademarks before bringing a suit for infringement to ensure they have statutory standing to enforce trademark rights under the Lanham Act. If they do not have a sufficient ownership or licensing interests before bringing a suit, they would need to refile the suit after obtaining sufficient ownership rights.
The Shinho Food Industries decision can be found here.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm’s clients.
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