Visa, U.S.A., Inc. v. Birmingham Trust Nat. Bank, 82-547

• Citation: 696 F.2d 1371,216 USPQ 649
• Decision Date: 29 December 1982
• Docket Number: No. 82-547,82-547
• Parties: VISA, U.S.A., INC., Appellant, v. BIRMINGHAM TRUST NATIONAL BANK, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 1371

696 F.2d 1371

216 U.S.P.Q. 649

VISA, U.S.A., INC., Appellant, v. BIRMINGHAM TRUST NATIONAL BANK, Appellee.

No. 82-547.

United States Court of Appeals Federal Circuit.

Dec. 29, 1982.

John P. Sutton, San Francisco, Cal., argued for appellant. With him on the brief was Limbach, Limbach & Sutton, San Francisco, Cal.

Thad G. Long, Birmingham, Ala., argued for appellee. With him on the brief were Haydn M. Trechsel and Bradley, Arant, Rose & White, Birmingham, Ala.

Before FRIEDMAN, BALDWIN and NIES, Circuit Judges.

FRIEDMAN, Circuit Judge.

This appeal challenges decisions of the Patent and Trademark Office Trademark Trial and Appeal Board (the Board), 212 U.S.P.Q. 115 (1981), in a consolidated proceeding involving applications by each party for registration of the mark "O.K." in various forms used in connection with check cashing services. As explained herein, the determinative issue in each case depends upon the validity of the assignment by which the appellant acquired the rights in the mark from its former owner. The Board held the assignment invalid on the ground that it constituted a naked assignment of the mark without the transfer of the goodwill to which the mark related. We reverse.

I.

A. On September 20, 1976, the appellant, VISA U.S.A., INC. (Visa), ¹ applied to the Patent and Trademark Office to register on the principal register the service mark "O.K." ² for "the services of providing check cashing privileges by means of a card." On September 23, 1976, appellee Birmingham Trust National Bank (Birmingham Trust) filed applications to register two similar marks ("Check-OK" and "OK" with a checkmark in the "O") for "banking services." The record established that the marks were used for Birmingham Trust's own check cashing card program. Visa and Birmingham Trust each filed an opposition to the respective applications. The Board consolidated the opposition proceedings.

Birmingham Trust had first used the mark on May 3, 1976. Alpha Beta Company ("Alpha Beta"), which later assigned the mark to Visa, had first used the mark on June 13, 1970. ³ Visa first used the mark in November 1976, on Visa "Check-O.K." cards. The assignment was made on September 10, 1976, and Visa claims that as the assignee of Alpha Beta, it could assert priority based upon Alpha Beta's earlier date of use. Under this theory, Visa's use of the mark preceded the use of Birmingham Trust by almost 6 years. Birmingham Trust's response was that the assignment of the mark from Alpha Beta to Visa was invalid because it did not also transfer Alpha Beta's goodwill associated with the mark.

B. The facts relating to the use and assignment of the mark are not in dispute. Alpha Beta, a chain of grocery stores in California and Arizona, first used the "Check-O.K." mark in 1970 to identify a program in which it provided its customers with cards that authorized Alpha Beta cashiers to accept personal checks. In order to obtain a card, a customer had to provide the store with certain credit information. Each card could be used only at the particular store where it was issued. Alpha Beta advertised the "Check-O.K." program as a way of making grocery shopping more convenient for those using checks. It used the "Check-O.K." mark continuously through September 1976. It issued cards to more than 1.5 million customers.

Birmingham Trust initiated its "Check-O.K." program in May 1976. Birmingham Trust customers received cards displaying the mark that enabled them to pay with personal checks for merchandise purchased at the stores of participating merchants (or to obtain cash with such checks). Birmingham Trust guarantied payment of any check for up to $100 accepted in reliance upon a valid guaranty card. Birmingham Trust operated the program throughout the Birmingham, Alabama, area.

Visa is a membership corporation composed of a large number of banks and financial institutions. For a number of years, it has issued a well-known credit card. In 1976, Visa decided to enter the check guaranty card business on a nationwide basis under the "Check-O.K." mark. Visa searched for other uses of the mark and found that Alpha Beta had registered it in California. At that time, Birmingham Trust was just beginning its program and had not registered the mark in Alabama or elsewhere.

On September 10, 1976, Alpha Beta and Visa executed three documents:

1. Alpha Beta and Visa entered into a contract by which Alpha Beta undertook to transfer its mark to Visa for $10,000. The agreement recited that Visa desired "to acquire the Mark and the goodwill symbolized thereby for use in connection with a national check approval program to be administered by [Visa] among its member financial institutions."

2. Alpha Beta assigned to Visa "all rights, title and interest in and to the said mark, all variations thereof, and designs thereof, together with the goodwill of the business symbolized by the mark and any variations thereof, the registration(s) thereof, and all causes of action for past infringement."

3. Visa and Alpha Beta entered into a license agreement under which Visa gave Alpha Beta "a non-exclusive, non-transferable license to use the Mark in connection with check approval services for [Alpha Beta's] customers." The agreement provided that Alpha Beta would use the mark "only in the design" set forth on Alpha Beta's card, a copy of which was an exhibit to the agreement, and that the mark would not be displayed on store windows or doors. Alpha Beta agreed that "the nature and quality of all services rendered in connection with the Mark shall conform to standards set by, and under the control of, [Visa]" and that it would comply with three specified "minimum standards." The agreement authorized Alpha Beta to grant nontransferable sublicenses to Alpha Beta's parent company and to any of the latter's "wholly owned subsidiaries engaged in retail merchandising."

Following these transactions, Visa initiated its own check guaranty program under the "Check-O.K." mark in November 1976. The program was similar to that of Birmingham Trust, but was offered nationwide by various banks affiliated with Visa. Each participating bank operates the program locally in much the same way that Birmingham Trust runs its program. Visa's affiliated banks have issued more than 3 million cards with the mark under check guaranty programs. Visa controls the quality of the services its affiliates provide under the mark.

Under the license from Visa, Alpha Beta has continued to operate its check approval program under the "Check-O.K." mark much as it did before the assignment and license-back agreement. It operates the program, however, only in its Arizona stores, which comprise only about 5 percent of its total stores. The record does not explain why Alpha Beta no longer conducts the program in its California stores.

C. The Board awarded priority of use of the mark to Birmingham Trust and refused registration to Visa. It therefore dismissed Visa's opposition and sustained Birmingham Trust's opposition.

The Board stated that

an agreement which purports to assign a mark and the goodwill of the business which it symbolizes, whether made with or without a transfer of tangible or intangible assets, is not valid unless the assignee carries on the business of the assignor by using the mark in connection with goods or services which are the same as or substantially similar to those upon which the mark was used by the assignor.

It held that the assignment in this case did not satisfy that standard because the services Alpha Beta and Visa provided under the mark

are substantially different in nature. The Visa service involves a check guarantee, so that a merchant can cash a card-holding customer's check without hesitation, whereas the Alpha Beta service does not; the Alpha Beta service is available to holders of the Alpha Beta "OK" cards only at Alpha Beta stores, whereas the Visa service is available to holders of Visa "OK" cards at a large variety of participating retail stores; the Alpha Beta program involves only Alpha Beta and its customers, whereas the Visa program involves Visa's member banks, participating merchants, and those customers of the merchant who hold Visa "OK" cards issued by Visa's member banks; and the Alpha Beta service is directed to card-holding Alpha Beta customers, whereas the Visa service is directed both to merchants and to those of their customers who hold Visa "OK" cards.

The Board stated:

Under the "license back", Alpha Beta remains free to use the "OK" design mark in connection with its service in the same form as before, and Alpha Beta continues to benefit from the goodwill of the business which was symbolized by the mark prior to the purported assignment. Indeed, it appears from the record that, except for the fact that it has given up control over the mark, the only change in Alpha Beta's position since the date of the purported assignment and the "license back" has been that its use has been limited, for reasons unknown to this record, to Alpha Beta's 15 stores in Arizona, despite the fact that the bulk of Alpha Beta's stores are located in California.

The Board concluded that "the circumstances surrounding the purported assignment lead us to conclude that there was, in fact, no real transfer of goodwill" and that the assignment "was in essence a transfer [of the mark] in gross and, hence, invalid under Section 10 of the Trademark Act [15 U.S.C. 1060 (1976) ]."

II.

A. Unlike patents or copyrights, trademarks are not separate property rights. They are integral and inseparable elements of the goodwill of the business or services to which they pertain. "Since goodwill is inseparable from the business with which it is associated" (Avon Shoe Co. v. David Crystal, Inc., 171 F.Supp. 293, 301, 121 U.S.P.Q. 397, 403 (S.D.N.Y.1959) aff'd, 279 F.2d 607, 125 U.S.P.Q. 607 (2d Cir.), cert. denied, 364 U.S. 909, 81 S.Ct. 271, 5 L.Ed.2d 224 (1960)), when one speaks...