BUYER BEWARE.(Trademarks are discussed.)

The last thing a secured creditor wants to discover is that a trademark or trademark security interest it acquired is invalid. Understanding the quirks of trademark law can help avoid these pitfalls.

A trademark is "merely a symbol of goodwill" and has no independent significance. [1] Consequently, even a registered trademark cannot be legally sold or assigned to a creditor without its accompanying goodwill. Without that goodwill, the assignment, known as an "assignment in gross," is void. [2]

Trademarks, which are the subject of intent to use (ITU) documents, may be assigned to another party, but only under specific circumstances. The governing trademark statute, [sections]10 of the Lanham Act (15 U.S.C. [sections]1060), provides that an ITU trademark cannot be assigned until the trademark owner files a verified statement of use of the mark in the United States Patent and Trademark Office (PTO). The only exception is if the ITU trademark or a portion of a trademark is being passed to the successor of the applicant's business, which is ongoing. [3] Congress permitted ITU application assignments, but felt that it was necessary to ensure that the assigned ITU trademark was used with an ongoing business for fear that unscrupulous parties who traffic in trademarks would extort money from companies, particularly foreign companies, and require them to pay money to use their own trademarks. [4]

Security Interests

Along with assignments, trademarks are commonly …