11th Circuit: nothin' from nothin' leaves nothin'

In Axiom Worldwide Inc v Excite Medical Corp (Case No 13-13900, November 17 2014), the US Court of Appeals for the 11th Circuit has affirmed a district court’s $1.32 million judgment in favour of a medical device maker, ruling that Axiom Worldwide LLC never owned the trademarks in question and therefore could not have passed the rights in the trademarks to a successor.   

Axiom Worldwide Inc developed, manufactured and sold medical products and owned various trademarks for use in connection with its products. In 2007 Axiom Worldwide Inc transferred all of its assets, including its “goodwill”, to non-party Axiom Worldwide LLC via a warranty bill of sale. The bill of sale was made retroactive to January 3 2006. Axiom Worldwide LLC later transferred the acquired assets to Progress Bank and, in July 2010, HTRD purchased all of the assets from Progress Bank.

HTRD, set up by a former employee of Axiom Worldwide Inc, produced generic medical devices sold as authorised Axiom products. The former employee had forged Axiom Worldwide Inc CEO’s signature on a document claiming that HTRD had been given the rights to Axiom Worldwide Inc’s intellectual property in China. HTRD also believed that the assets purchased from Progress Bank included Axiom Worldwide Inc’s IP rights. However, it had been determined in an earlier ruling by another court that the IP rights were not part of the transfer of assets to Axiom Worldwide LLC and, therefore, the trademarks in question still belonged to Axiom Worldwide Inc.

In 2011 Axiom Worldwide Inc filed a lawsuit for trademark infringement, copyright infringement and misappropriation of trade secrets against HTRD and its affiliated companies and several former Axiom Worldwide Inc employees (collectively, the defendants), arguing that the defendants made counterfeit devices and tried to steal its trademarks. Axiom Worldwide Inc also claimed that HTRD had submitted false and misleading information to the US Patent and Trademark Office in an attempt to steal Axiom Worldwide Inc’s trademarks.

The district court found that the rights in the trademarks had not been transferred from Axiom Worldwide Inc in connection with the warranty bill of sale and that the defendants infringed Axiom Worldwide Inc’s trademarks. The district court further found that the former employee Saleem Musallam was individually liable for $85,000 in statutory damages and that HTRD’s US-affiliated Excite Medical Corp was liable for $1.32 million. The defendants appealed, claiming they had rights in the trademarks and contesting the amount of damages set by the district court.

The 11th Circuit affirmed the district court, noting:

“[b]ecause we agree with the district court (and Billy Preston and Bruce Fisher, for that matter) that ‘nothin’ from nothin’ leaves nothin’’, and because we find no error in any of the district court’s other challenged rulings, we affirm.”

Ulrika E Mattsson, McDermott Will & Emery LLP, Chicago