A Trademark Owner That Transferred Its Trademarks to a Joint Venture Could Not Assert Those Marks After the Joint Venture Dissolved Because Its Ownership in the Marks Did Not Revert Back

Abstract

An Illinois court found that a business that transferred its trademarks to a joint venture no longer had the right to assert those trademarks and would not regain the right to the marks or the right to assert those marks when the joint venture dissolved unless the joint venture conveyed the trademark rights back to the original business.

Background

Coin-Tainer and PRP formed a joint venture (PRT) for making paper products for storing and handling coin currency. The operating agreement provided that Coin-Tainer and PRP each owned 50% of PRT and that both parties transferred to PRT all items of “Intellectual Property” they owned. The joint venture quickly devolved, leading PRP to sue Coin-Tainer and the joint venture. 

To settle the dispute, PRP agreed to pay $200,000 to Coin-Tainer in exchange for 100% of Coin-Tainer’s interest in joint venture, making PRP the sole owner of the joint venture. Upon payment, PRP purchased all the Coin-Tainer assets and liabilities of the joint venture. The settlement agreement also granted the joint venture and PRP a temporary, exclusive, royalty-free license to use the names “Coin-Tainer” and “The Coin-Tainer Company” from October 26 through December 31, 2018, and Coin-Tainer was prohibited from using those names during that period. After December 31, 2018, Coin-Tainer would then enjoy sole rights “to all variations of the [Coin-Tainer] trade names,” and PRP and the joint venture were required to cease shipping products containing these trade names.

When the settlement did not go as planned, Coin-Tainer sued the joint venture, PRP, and the sole shareholder of PRP for infringing Coin-Tainer’s trademark and other intellectual property. 

The Coin-Tainer Decision

A central issue was whether Coin-Tainer had any ownership interest in the marks asserted against PRP and the joint venture. To answer that question the court turned to the agreements between the parties forming the joint venture and settling the earlier dispute to determine the intent of the parties.

The agreements to form the joint venture were clear and detailed, and transferred all of Coin-Tainer’s intellectual property rights to the joint venture. Under the settlement agreement, PRP purchased 100% of Coin-Tainer’s interest in the joint venture in exchange for $200,000. The parties also agreed that in purchasing Coin-Tainer’s interest, PRP was also purchasing all Coin‑Tainer’s assets and liabilities in the joint venture. When read with the agreements that formed the joint venture, the settlement agreement did not re-convey to Coin‑Tainer the assets it transferred to the joint venture during its formation. Instead, the settlement agreement conveyed Coin-Tainer’s 50% interest in the joint venture to PRP in exchange for $200,000 and the joint venture agreed not to use the various Coin-Tainer trade names after December 31, 2018.

Despite the terms of these agreements, Coin-Tainer argued it owned the Coin-Tainer trademark and various intellectual property and sought summary judgment on ownership and alleged wrongful use of the mark by PRP and the joint venture.

Coin-Tainer argued that any prior use by the joint venture of Coin-Tainer’s mark was done with Coin‑Tainer’s permission under an implied license, and that after December 31, 2018 (the date PRP and the joint venture agreed to discontinue use of Coin-Tainer branded products under the Settlement Agreement), PRP and the joint venture were to convey, solely by implication, all intangible and intellectual property rights from PRT to Coin-Tainer. Coin-Tainer further argued that a reasonable juror would conclude Coin-Tainer had common law rights in its marks, including its logo, brand, trade dress, and name, among other marks.

In analyzing a contract dispute, courts initially look to the language of a contract alone because the plain and ordinary meaning of that language is considered the best indication of the parties’ intent. If the words in the contract are ambiguous, a court can consider extrinsic evidence, or evidence outside, to determine the parties’ intent.

Here, the language of the Coin-Tainer license in the settlement agreement only named “Coin-Tainer” and “The Coin-Tainer Company,” but was silent to any express transfer of any interest in any trademark or other intellectual property beyond these trade names.

The court explained that related documents must be read together, and that the settlement agreement was related to the agreements for the joint venture’s formation because it served to modify or amend some terms of the operating agreement. The parties’ history with contract making suggested that great care was taken to properly identify and define the property that was being contributed by each party for the creation and initial operation of the joint venture. The court explained that the language of the settlement agreement was clear on its face, even if it lacked specificity regarding Coin-Tainer’s rights in any property interest other than in the Coin-Tainer trade names. If the parties intended to reconvey the other properties such as the “brand” or “trademarks,” they were free to express this intention in the settlement agreement just as they had in the agreements that formed the joint venture. Because the Coin-Tainer license merely conveyed to Coin‑Tainer of “all variations of the [Coin-Tainer] trade names,” the language excluded all other conveyances of other property. The court could not find any reasonable reading of the four corners of the settlement agreement that would indicate any intent of transfer of the trademarks as well.

Coin-Tainer also pointed to the trademark registration over a decade earlier to argue that it owned the mark. In response, the court explained that registration creates a rebuttable presumption as to use of the mark and is consistent with the notion that a trademark is a form or property. Here, the trademark, as well as trade dress, good will, and other intellectual property, were transferred to the joint venture by virtue of the documents that formed the joint venture. And other than the transfer of the Coin-Tainer name back to Coin-Tainer as part of the settlement agreement, there was no evidence that any trademarks, trade dress, good will, or other intellectual property were subsequently transferred back to Coin-Tainer.

Having found that Coin-Tainer failed to demonstrate any interest in the Coin-Tainer marks (other than the trade names), the court found that Coin-Tainer did not own the marks and could not assert them.

Strategy and Conclusion

When forming a joint venture, companies may consider whether to transfer ownership or a license in intellectual property they own. They should also address what happens to each of those rights if a joint venture dissolves. Here, when the joint venture dissolved, one joint owner’s trademarks stayed with the joint venture upon dissolution, while the joint owner’s trade name was returned to the joint owner.

Further Information

The Coin-Tainer decision can be found here.