What happens if a former business partner walks off with a trademark? ATLAS v. KUTRUBES

What happens if a former business partner walks off with a trademark? ATLAS v. KUTRUBES

A trademark is something that a seller of a product uses to distinguish its products from the products of competitors in the marketplace. Traditionally a trademark is thought of as a word, phrase or symbol, however many things used to signal the identity of a product producer can be granted trademark protection.  In the United States using a trademark use in commerce is the key to gaining a claim to a trademark.  A trademark can be registered with the United States Patent and Trademark Office to gain additional rights to the trademark, however registration is not a prerequisite to grant of trademark rights.  Trademark infringement is the unauthorized use of a trademark in connection with products in a manner that is likely to cause confusion, deception, or mistake about the source of the products.  A trademark owner can combat trademark infringement by filing a lawsuit that requests an injunction to stop the infringing activity and request damages for trademark infringement which has occurred.

A trademark is a valuable asset to a business.  Businesses spent considerable time and money to present their products in a positive light and trademarks are an integral part of that presentation.  Consumers frequently condition their purchases based on the trademarks displayed on a product, therefore businesses must jealously defend their trademarks from infringement.

Businesses are made up of many people and, like any relationship between people, a business relationship can sour.  When an employee leaves a business on bad terms, the employee frequently feels unappreciated and a sense of ownership over the successful aspects of the business for which the employee was responsible.  Sometimes the employee will attempt to get revenge on their former employer by bringing their knowledge to a competing company. In the absence of some agreement between the former employee and employer, such as a non-compete, working for a competitor is not against the law in the United States.  However, the employee must respect the fact that the intellectual property of the former employer remains the property of the employer.  There is no exception to trademark law that allows an employee to bring trademarks from one company to another.

ATLAS BIOLOGICALS, INC. v. KUTRUBES, 15-cv-00355 (D.CO 2019) illustrates a case where an employee tried to use the trademarks of his former employer and lost a trademark infringement lawsuit.  The plaintiff in this case produces serums that are used in the beef industry.  The plaintiff owns and uses in commerce the registered mark EquaFETAL, in addition to the following registered or common law marks: FETAL+PLUS; PROGENISERUM; FETAL CHOICE; FETAL SELECT; ATLAS; ATLAS BIOLOGICALS; and FETAL RESOURCE.

The defendant was hired by the plaintiff in 2005 and rose through the ranks within the company.  By 2013 the defendant was on the Board of Directors for the company and owned about 7% of the company stock.  In 2014 the defendant setup his own competing company, Peak Serum, transferred customer lists and began soliciting business from the plaintiff’s customers.  When the plaintiff learned of the defendant’s actions, the defendant’s employment was terminated and a suit was filed for trade secret theft, false designation of origin and trademark infringement.

The trademark infringement theory revolved around the defendant’s use of the plaintiff’s email system to solicit business and websites operated by Peak Serum which referenced the plaintiff’s trademarks.  At trial the plaintiff asserted that there was actual confusion because Peak Serum’s websites would appear when customers used a search engine to look for the plaintiff or the plaintiff’s trademark products.  The court found that a preponderance of the evidence supported a finding of trademark infringement.  Interestingly, the parties had stipulated that the plaintiff would waive damages for trademark infringement if the court imposed a permanent injunction against the defendant, which the court did.  However, the court ultimately awarded the plaintiffs $2,048,180.50 in damages based on the trade secret theft claims.

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