Explore a legal case involving trademark licensing, regional limits, and trademark infringement claims arising from remote marketing by a sublicensee. Learn about the court ruling, implications for intellectual property protection, and the Barth v. Vulimiri case.
June 12, 2020
Introduction:
In certain business sales, a seller might choose to retain specific markets while selling others. This can lead to licensing of trademarks for the region being sold. However, precautions are necessary to prevent buyers from competing in the retained markets. This article discusses a situation involving trademark licensing, regional limits, and subsequent trademark infringement claims.
The Business Transaction:
A business owner engaged in baseball training decided to sell a part of their business. As part of the deal, the seller granted the buyer an exclusive and ongoing license to use and sublicense three trademarks. This license was limited to a specific 7-state area: Maryland, Pennsylvania, Delaware, New Jersey, New York, Connecticut, and Florida. Meanwhile, the seller retained exclusive rights to use the same trademarks in areas outside of this defined region.
The Legal Dispute:
Following the transaction’s completion, the buyer sublicensed the trademarks to a competitor based in New Jersey. This competitor used the trademarks to market baseball programs remotely outside the agreed-upon 7-state region. The original seller filed a trademark infringement lawsuit in a federal district court in New Jersey against the competitor/sublicensee. The sublicensee argued for dismissal, asserting that their New Jersey location allowed them to operate within the permitted trademark region.
The Court Ruling:
The court ruled against the sublicensee’s motion to dismiss the trademark infringement claim. The court’s interpretation was that the License Agreement only permitted sublicensee marketing, advertising, and sales of baseball programs within the specified 7-state region. This encompassed online advertising and social media promotions. Any use of the trademarks from a base within the region to market or run baseball programs beyond the licensed region constituted trademark infringement.
Analysis:
Modern business practices allow for remote selling and marketing, eliminating the need for physical stores and extensive travel. However, this has introduced new challenges in areas like taxation and intellectual property protection. In acquisitions involving protected intellectual property territories, buyers and sellers must consider the implications of remote marketing on non-competition agreements and intellectual property licensing after the sale is completed.
Case Reference:
This case is referred to as Barth v. Vulimiri, Civil No. 19-20755 (RBK/JS), United States District Court, D. New Jersey, Camden Vicinage, (May 26, 2020).
By John McCauley: I help companies and their lawyers minimize legal risk associated with private business acquisitions.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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