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July 13 — Trademarks related to a landmark New Orleans restaurant were transferred in a “clear and unambiguous” agreement, the U.S. District Court for the Eastern District of Louisiana ruled July 10.
Despite arguments that the contract's language limited the transfer to tangible personal property—which normally would not include trademarks—the court ruled that the agreement's specific trademark provision made the sale of the Camellia Grill's trademarks valid.
The Shwartz family owned and operated the Camellia Grill in New Orleans. The restaurant closed when Hurricane Katrina hit the city in 2005, and remained closed when owner Michael Shwartz moved to Mississippi after the storm.
In 2006, Shwartz sold the restaurant to Hicham Khodr. The sale was executed through three contracts. One of these contracts, called a “Bill of Sale,” claimed to transfer “interest in and to the following tangible personal property located within or upon” the Camellia Grill—which specifically included “trademarks”—from Shwartz's Camellia Grill Inc. to Khodr's Uptown Grill LLC.
Two weeks later, the parties executed a licensing agreement in which the parties said that Shwartz's trademark holding company—Camellia Grill Holdings Inc.—owned the Camellia Grill's marks, and granted Khodr's holding company—Grill Holdings LLC—an exclusive license to use the marks for $1 million plus royalties. The licensing agreement was eventually cancelled by a Louisiana state court.
While the cancellation was on appeal, Shwartz' holding company sued Khodr's holding company alleging Lanham Act trademark infringement. The court denied Shwartz's holding company's motion for a preliminary injunction and Shwartz moved to dismiss the case.
While the dismissal was pending, Khodr filed for a declaratory judgment in the Eastern District of Louisiana that his company owned the marks. Shwartz then sued for trademark infringement in state court, and Khodr removed that litigation to the district court.
Khodr then filed a motion for summary judgment, which the district court granted.
“At its core, this Motion turns on whether the language of the Bill of Sale was clear and unambiguous and, if so, what was transferred to whom,” Judge Jane Triche Milazzo said.
Under Louisiana law, “when the words of a contract are clear and explicit and lead to no absurd consequences, no further investigation may be made in search of the parties' intent,” and “when a clause in a contract is clear and unambiguous, the letter of that clause should not be disregarded under the pretext of pursuing its spirit.”
Khodr said that the contract “clearly and explicitly conveys ownership of all ‘trademarks' to it.” Shwartz argued that the contract was specifically limited to “tangible personal property”—which does not include intellectual property—or was rendered ambiguous by the “tangible personal property” language, that the transfer was not permitted by law and that the court should consider parol evidence.
The court said that Shwartz's “tangible personal property” argument was “without merit.” The court said that while trademarks are not tangible personal property, Shwartz's argument ignored a fundamental rule of contract interpretation: that when interpreting contracts, “the specific controls the general.”
Therefore, the court said, the specific conveyance of trademarks should be enforced over the general restriction to tangible personal property.
The court also dismissed Shwartz's argument that the trademark transfer was not legal because it did not explicitly transfer the good will associated with the marks, and denied Shwartz's request to consider parol evidence.
The court also rejected Shwartz's argument that the licensing agreement provided conclusive evidence that it retained ownership of the marks. The court said that it could not consider the agreement because the bill of sale was clear, unambiguous and without absurd consequences.
The court also said that Uptown Grill did not agree to alter the bill of sale through the licensing agreement between Shwartz and Grill Holdings because Uptown Grill and Grill Holdings were not a single business enterprise.
Khodr was represented by E. John Litchfield of Berrigan Litchfield Schonekas Mann & Traina LLC, New Orleans. Shwartz was represented by Irl R. Silverstein of Gretna, La.
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