Wine Not Wine & Trademarks: Grapevine Guardians: Understanding Trademark Assignments and Ownership Changes for Wineries
Introduction
As the owner of a winery, you might choose to sell your winery in the future. Alternatively, you might need to reorganize your corporate structure. As an aspiring winery owner, you might choose to buy an existing winery. Each of these scenarios involves changes in ownership. As a result, understanding trademark assignments is important. This blog post addresses key points for wineries to understand trademark assignments.
Trademark Assignment
A trademark assignment is a legal document wherein the owner of a trademark transfers their rights to another person or entity. In the wine industry, this often occurs when a winery changes ownership, merges with another company, or reorganizes its corporate structure. Here are several important terms to include in a trademark assignment.
Key Terms in a Trademark Assignment:
Identify the Parties: An assignment should clearly state the names and details of the assigning party (the current trademark owner) and the assignee (the new owner).
Description of Trademark: Provide a detailed description of the trademark being transferred, including any associated logos or designs. If the trademark is the subject of a pending application and/or registration, serial and registration numbers should be provided. The trademarks are usually identified in the body of the assignment, or an exhibit/appendix attached to the assignment. It is often easier to identify a plurality of trademarks in an exhibit/appendix than in line in the body of the assignment. Trademark assignments often identify the relevant goods/services, as well.
Transfer of Rights: The trademark assignment should identify the specific rights being transferred, such as the right to use the trademark for certain products or services. Assignors often assign their entire interest in the trademark(s), but that is not always the case.
Consideration: Specify the financial terms of the assignment, including any compensation or royalties if applicable. Because this term is often large and confidential: wineries do not necessarily want the public to know how much they paid/received in connection with a transaction. Because trademark assignments are often filed publicly with the government (e.g., USPTO), a trademark assignment might consist of a confidential version and a version for public filing. Alternatively, the assignment might be one document in a larger set of transaction documents, drafted with public disclosure in mind.
Goodwill: In financial terms, goodwill represents the difference in market value and book value. Stated differently, it is the value a company gets from its brand, customer base, and reputation associated with its intellectual property. Transferring goodwill is probably the most important aspect of a trademark assignment. A valid trademark assignment requires the transfer of goodwill. It should be stated in writing, and it must occur.
Goodwill and Assignments in Gross
As mentioned above, a valid trademark assignment must include the transfer of goodwill. Failure to transfer goodwill constitutes an assignment in gross. Assignments in gross refer to the transfer of trademark rights without a corresponding transfer of the associated business or assets. In other words, when a trademark is assigned in gross, it is detached from any specific business or individual, making it a standalone asset. One clear requirement that arises from this principle is that a mark cannot be assigned for use by a business with fundamentally dissimilar goods and services. Burgess v. Gilman illustrates this point. 475 F. Supp. 2d 1051 (D. Nev. 2007) (citing Mister Donut of America, Inc. v. Mr. Donut, Inc., 418 F.2d 838, 842 (9th Cir. 1969)).
Burgess v. Gilman illustrates the issue of assignments in gross. That case concerned the disputed ownership of the Mustang Ranch's service marks after the government seized that brothel in conjunction with criminal proceedings against the former owner. The government seized the brothel and sold the ranch buildings and the Mustang Ranch service mark (through eBay), but not the land. Burgess opened a new brothel using the Mustang Ranch marks. Gilman purchased the assets from the eBay auction and reopened the brothel under the Mustang Ranch marks. Burgess sued for trademark infringement and asserted that the trademark assignment pursuant to the eBay auction was an assignment in gross and, therefore, invalid. The Court made the following observation:
“Prostitution services” remain the essence of the business, and as we have already noted in denying summary judgment, there is strong evidence of fame in the Mustang Ranch mark (e.g., the inflated value of the auctioned assets such as the hot tub health certificate), which would appear to translate into business goodwill. The buildings would also appear to represent a core aspect of the business. Mr. Brandt and Mr. Gilman both testified that the octagon, the parlor, the bar, and the tubs constitute an important part of the atmosphere or aura of Mustang Ranch business. Mr. Brandt testified that the trademark was tied to the buildings and the guard tower. Mr. Gilman also testified that the pink buildings' spoke design and signage were all associated with the goodwill of the business, and moving these things to a new location was all that was necessary. The buildings, of course, were sold with the trademark at the eBay auction.
. . . . The acquisition of the unique Mustang Ranch buildings appears to substantially meet these sorts of tests.
Id. at 1059.
Although this case does not involve wine or wineries, it is amusing and illustrates the issue. For a winery, the transfer of goodwill is probably most easily demonstrated by a buyer who takes over the seller’s operations. However, that is not always the case: Buyers do not always buy the shares of the seller’s business or all of its assets. Often, buyers acquire some, but not all, of the seller’s assets.
What asset transfers are sufficient to avoid an assignment in gross is fact specific. A winery buyer might take over the mailing list of the seller, or it might acquire the inventory or tasting room of the seller, etc.
Change in Ownership: Protecting the Wine Legacy
When a winery undergoes a change in ownership, whether through a sale, merger, or acquisition, it is important to address several considerations to preserve the brand's integrity.
Key Aspects of Handling a Change in Ownership:
Due Diligence: Before finalizing the transaction, the buyer should carefully review the existing trademarks to ensure there are no hidden conflicts or infringements. The buyer should investigate records of the USPTO, the seller’s records, and common law uses, among other things.
Trademark Transfer: As discussed above, if the trademarks are transferred along with the winery, the buyer should obtain a written trademark assignment and consider filing the assignment with the USPTO (or other governmental agency, as applicable). Filing the assignment is not mandatory. However, it puts third-parties on notice of your rights in the trademark(s).
Consistency in Branding: If allowed under the transaction agreements—and it makes sense for your winery—maintain consistency in branding and labeling to reassure loyal customers that the wine they love remains unchanged.
Legal Counsel: Engage experienced trademark attorneys to guide you through the process and ensure compliance with legal requirements.
Conclusion
Protecting a winery's brand is essential. A change in ownership alone is no reason for the legacy of a winery to suffer. With a deep appreciation for the significance of trademarks and the guidance of experienced trademark counsel, wineries can navigate these transitions smoothly, ensuring that the essence of their craft and the spirit of their wines endure for generations to come.
Trademark assignments and changes in ownership are not just legal procedures; they are the guardians of a winery's story, protecting the heritage that flows from each bottle and safeguarding the trust of devoted oenophiles around the world.
If you would like to discuss change in owners trademark assignment, or other trademark issues for your winery with an experienced trademark attorney, please schedule a consultation here.
