06-5316-cv Topps Co. v. Cadbury Stani S.A.I.C.
1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 4 _______________ 5 6 August Term, 2007 7 8 (Argued: December 12, 2007 Decided: May 15, 2008) 9 10 Docket No. 06-5316-cv 11 12 _______________ 13 14 The Topps Company, Inc., 15 16 Plaintiff-Appellant, 17 18 v. 19 20 Cadbury Stani S.A.I.C., f/k/a Productos Stani 21 Sociedad Anonima Industrial y Comercial, 22 23 Defendant-Appellee. 24 25 _______________ 26 Before: 27 CARDAMONE, and POOLER, Circuit Judges, 28 and KEENAN,* District Judge. 29 30 _______________ 31 32 Plaintiff appeals from the judgment of the United States 33 District Court for the Southern District of New York (Haight, 34 J.), entered November 8, 2006, dismissing claims for breach of 35 contract and misappropriation of trade secrets. 36 37 Reversed and remanded. 38 39 _______________ 40 41 42 43 44 45 _______________ 46 47 * Honorable John F. Keenan, United States District Judge for 48 the Southern District of New York, sitting by designation. 1 _______________ 2 3 DAVID G. EBERT, New York, New York (Patricia Hewitt, Mioko 4 Tajika, Caitlin L. Bronner, Ingram Yuzek Gainen Carroll & 5 Bertolotti, LLP, New York, New York, of counsel), for 6 Plaintiff-Appellant. 7 8 DENNIS P. ORR, New York, New York (Stefan W. Engelhardt, John 9 W.R. Murray, Morrison & Foerster LLP, New York, New York, of 10 counsel), for Defendant-Appellee. 11 12 _______________ 1 CARDAMONE, Circuit Judge:
2 Plaintiff appeals from a grant of summary judgment in favor
3 of defendant in litigation between two multinational
4 corporations. This litigation concerns chewing gum, principally
5 "Bazooka" bubble gum, known in this country by its small -- less
6 than an inch -- paper-wrapped package and accompanying comic
7 strip. Chewing gum is a pastime engaged in since ancient times
8 when the substance chewed was a resin taken directly from certain
9 trees. Nowadays people generally chew the industrially-produced
10 version. They do so for a variety of reasons, including: to
11 cleanse teeth and freshen breath; to focus the mind during
12 athletic competitions; to calm the stomach; and to take the place
13 of smoking. One's inability to chew gum while simultaneously
14 carrying out other routine activities, such as walking, is
15 sometimes used as an epithet. And, of course, because gum is
16 today a sugary confection it is sweet and chewing gum is
17 enjoyable and fun.
18 Such a widely enjoyed product is a big seller in the
19 marketplace and a dispute over the manufacture and distribution
20 of "Bazooka" bubble gum and another brand in parts of South
21 America is what precipitated the instant litigation. On this
22 appeal we review a grant of summary judgment to defendant, which
23 had been licensed for many years by plaintiff to make and sell
24 these products. In reaching its decision the United States
25 District Court for the Southern District of New York (Haight, J.)
26 relied heavily on an analysis of trademark rights and the sale of
2 1 goodwill that led it into a complex and evolving area of the law.
2 We believe it erred here as well as in other aspects of its
3 reasoning. Yet, it is not our purpose in this opinion to plant
4 new guideposts into the trademark terrain. We write, rather,
5 simply to explain why this case was not ripe for summary
6 judgment.
7 BACKGROUND
8 The Topps Company, Inc. (Topps or plaintiff) is a New York
9 corporation that makes and sells chewing gum under a number of
10 brand names, including the "Bazooka" brand. Cadbury Stani
11 S.A.I.C., f/k/a Productos Stani Sociedad Anonima Industrial y
12 Comercial (Stani or defendant) is an Argentinian corporation to
13 which, beginning in 1957, Topps granted, through a series of
14 licensing agreements, the exclusive right to manufacture, sell
15 and distribute "Bazooka" and other Topps chewing gum brands in
16 five South American countries: Argentina, Bolivia, Chile,
17 Paraguay and Uruguay. See Topps Co. v. Cadbury Stani S.A.I.C.,
18 454 F. Supp. 2d 89, 91 (S.D.N.Y. 2006).
19 A. The Licensing Agreements
20 The original 1957 licensing agreement provided for Topps to
21 share with Stani "the know-how, formulae, processes and
22 techniques used by Topps" in return for royalties on Stani's
23 sales. The 1957 agreement was set to expire after 20 years. But
24 in 1976, one year short of the contract's termination, the
25 parties executed a new agreement, providing for the continued
26 sharing of "manufacturing technology, marketing concepts and
3 1 techniques, administrative and consultive assistance and
2 trademark use" in return for Stani paying a yearly license fee.
3 The 1976 agreement had a term of ten years, with an option for
4 Stani to extend it for another ten years.
5 Four years later, in 1980, the parties simultaneously
6 executed two additional agreements that are the subject of the
7 present dispute. One was an Amended and Restated License
8 Agreement. It contained terms similar to those set out in the
9 1976 license agreement, but extended the license until April 30,
10 1996. Paragraph 2 of the 1980 license agreement stated that
11 Topps granted to Stani
12 the exclusive non-assignable right and 13 license to manufacture in Argentina, Bolivia, 14 Chile, Paraguay and Uruguay and sell within 15 the Territory, during the continuance of this 16 Agreement, Licensed Products employed by 17 TOPPS in [enumerated locations] and in any 18 subsequent established affiliated plants of 19 TOPPS. 20 21 This language was nearly identical to that of paragraph 2 of the
22 1976 license agreement, except that the 1976 agreement referred
23 to "Licensed Products utilizing TOPPS Technology" (emphasis
24 added) while the 1980 agreement referred simply to "Licenced
25 Products."
26 Paragraph 3 of the 1980 license agreement stated
27 [t]he TOPPS Trademarks and the TOPPS 28 Technology shall at all times remain the 29 exclusive property of TOPPS or its assigns 30 and the rights hereby granted to STANI shall 31 be by way of license or, if required by 32 trademark regulations within the Territory, 33 by way of registered user rights. 34
4 1 Again, this language was nearly identical to that used in the
2 1976 licensing agreement. In addition, both agreements defined
3 Topps Trademarks as "all Chewing Gum and Other Topps Products
4 trademarks, owned, used or originated by TOPPS," and they defined
5 Topps Technology as "the specialized knowledge and experience of
6 TOPPS applicable to the manufacture and/or sale of Licensed
7 Products," including "formulae, recipes, processes, equipment
8 utilization, labour and equipment standards, ingredient
9 specifications, factory management and production planning
10 techniques, factory facility design and layout and quality
11 control procedures, including gum base technology."
12 The 1980 and 1976 license agreements provided for early
13 termination by either party on certain grounds, and both
14 specified that upon termination Stani, among other things, would
15 have no further right "to use any of the TOPPS Trademarks or the
16 TOPPS Technology except for use in connection with selling and
17 disposing of Licensed Products on hand" under specified
18 conditions.
19 Further, Paragraph 30 of the 1980 license agreement (like
20 Paragraph 32 of the 1976 agreement) contained the following
21 language
22 All the terms of the Agreement between the 23 parties are herein set forth and no 24 modification, amendment alteration or 25 variation of the terms of this Agreement 26 shall be valid unless in writing signed by 27 TOPPS and STANI. No agreement, letter or 28 other communication between the parties shall 29 be deemed to be a modification or amendment 30 of this Agreement or any terms hereof, unless
5 1 such agreement, letter or other communication 2 expressly provides that it is intended to be 3 a modification or amendment of this 4 Agreement. 5 6 B. The Escrow Agreement
7 On the same day the 1980 license agreement was executed, the
8 parties also signed what they termed an Escrow Agreement. This
9 escrow agreement set out the terms by which the minute book,
10 stock book, and stock certificates of one Verco Holding
11 Corporation would be held in escrow and delivered to Stani's
12 owner on May 31, 1996 unless Stani defaulted under the 1980
13 license agreement or other enumerated events occurred. The
14 preamble to the escrow agreement stated, "Topps has transferred
15 legal title to the registration in Argentina of the trademarks
16 'Bazooka', 'Topps' and related trademarks to the Verco Holding
17 Corp., a New York corporation, all of the capital stock of which
18 is issued in the name of [Stani's owner]." In exchange for the
19 transfer, Stani paid Topps $100,000. Topps, 454 F. Supp. 2d at
20 98.
21 C. The Dispute
22 The 1980 license agreement expired by its own terms on April
23 30, 1996, and it appears the escrow agent, as provided in the
24 escrow agreement, transferred the stock and corporate papers to
25 Stani's owner on May 31, 1996. Topps, 454 F. Supp. 2d at 98.
26 Three years later, in 1999, Topps brought the present suit
27 against Stani, contending that Stani continued to use Topps
28 chewing gum formulas (considered Topps Technology under the
6 1 license agreements) after April 30, 1996, and that it transferred
2 these formulas and other Topps Technology to its parent company,
3 Cadbury, all in breach of the 1980 license agreement. Topps
4 maintained Stani's conduct constituted wrongful misappropriation
5 of trade secrets under New York tort law. Stani responded by (1)
6 denying it continued to use Topps chewing gum formulas, and (2)
7 arguing that even if it had, such conduct was neither a breach of
8 the agreement nor a wrongful misappropriation because the
9 agreement granted it the right to use plaintiff's formulas.
10 Topps, 454 F. Supp. 2d at 99.
11 On Stani's motion, the district court granted it summary
12 judgment on all but one of Topps' claims. Id. at 108. The court
13 separated these claims from the one remaining claim in order to
14 render a final, appealable judgment. Topps Co. v. Cadbury Stani,
15 S.A.I.C., 2006 WL 3247360, at *4 (S.D.N.Y. 2006). The trial
16 court concluded that the 1980 licensing agreement, read in
17 conjunction with both the contemporaneously signed escrow
18 agreement and the prior (1976) licensing agreement, unambiguously
19 gives Stani the right to continue using Topps chewing gum
20 formulas even after the 1996 expiration date. Topps, 454 F.
21 Supp. 2d at 101-07. Reasoning from this conclusion, it went on
22 to hold there was neither a breach of contract, nor a wrongful
23 misappropriation of trade secrets. Id. at 107-08. From the
24 ensuing dismissal of its claims, Topps now appeals.
7 1 DISCUSSION
2 I Standard of Review
3 We review a grant of summary judgment de novo applying the
4 same tests used by the district court. See, e.g., Compagnie
5 Financiere de CIC et de L'Union Europeenne v. Merrill Lynch,
6 Pierce, Fenner & Smith Inc., 232 F.3d 153, 157 (2d Cir. 2000).
7 Imposing this procedural remedy is appropriate only when there is
8 no genuine issue with regard to any material fact and the moving
9 party is entitled to judgment as a matter of law. Fed. R. Civ.
10 P. 56(c). When deciding a summary judgment motion, a court must
11 construe all the evidence in the light most favorable to the
12 nonmoving party, in this case Topps, and draw all inferences and
13 resolve all ambiguities in that party's favor. LaSalle Bank
14 Nat'l Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 205 (2d
15 Cir. 2005).
16 This generally means that a motion for summary judgment may
17 be granted in a contract dispute only when the contractual
18 language on which the moving party's case rests is found to be
19 wholly unambiguous and to convey a definite meaning. See
20 Compagnie Financiere, 232 F.3d at 157-58. Ambiguity here is
21 defined in terms of whether a reasonably intelligent person
22 viewing the contract objectively could interpret the language in
23 more than one way. Sayers v. Rochester Tel. Corp. Supplemental
24 Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir. 1993). To the
25 extent the moving party's case hinges on ambiguous contract
26 language, summary judgment may be granted only if the ambiguities
8 1 may be resolved through extrinsic evidence that is itself capable
2 of only one interpretation, or where there is no extrinsic
3 evidence that would support a resolution of these ambiguities in
4 favor of the nonmoving party's case. See Compagnie Financiere,
5 232 F.3d at 158. We turn next to resolve those issues.
6 II The 1980 License Agreement
7 A. Its Ambiguity
8 On its face, the 1980 license agreement contains no terms
9 expressly granting or denying Stani the right to Topps chewing
10 gum formulas after April 1996, and its provisions bearing on the
11 issue point in different directions. On the one hand, the
12 agreement states, "[t]he TOPPS Trademarks and the TOPPS
13 Technology" -- the latter defined to include Topps chewing gum
14 formulas -- "shall at all times remain the exclusive property of
15 TOPPS or its assigns." And further, where Paragraph 2 grants
16 Stani the right to use Topps formulas, it grants this right only
17 "during the continuance" of the agreement. These provisions
18 strongly suggest Stani had no right to continue using Topps
19 formulas after the agreement's April 1996 expiration date. On
20 the other hand, there is no language in the 1980 agreement
21 expressly stating that Stani's right to the formulas would end
22 with the April 1996 expiration date. By way of contrast, this
23 agreement expressly addresses the loss of Stani's right to these
24 formulas in the event of early termination. Hence, the absence
25 of such express language in the agreement with respect to the
9 1 regular expiration date could be read to mean Stani's rights to
2 the formulas would continue.
3 As a consequence, the 1980 license agreement is amenable to
4 two different interpretations. Because we believe a reasonably
5 intelligent person viewing this agreement objectively could
6 choose either interpretation, we hold the agreement is ambiguous.
7 See Compagnie Financiere, 232 F.3d at 158; Sayers, 7 F.3d at
8 1095.
9 B. The Role of Extrinsic Evidence
10 Given our conclusion that the 1980 license agreement is
11 ambiguous, we look next to the record to determine whether any
12 relevant extrinsic evidence is so one-sided in defendant's favor
13 as to allow Stani's interpretation to prevail on summary
14 judgment. As a preliminary matter, we address Topps' contention
15 that the 1980 escrow agreement and 1976 license agreement are
16 inadmissible for this purpose under the parol evidence rule.
17 It is conceded that New York law governs the interpretation
18 of the 1980 license agreement. New York's parol evidence rule
19 generally bars admission of extrinsic evidence to vary or
20 contradict the terms of a fully integrated writing. See Primex
21 Int'l Corp. v. Wal-Mart Stores, Inc., 89 NY2d 594, 599-600 (N.Y.
22 1997). Contrary to the district court's analysis, Topps, 454 F.
23 Supp. 2d at 101 n.11, this rule of inadmissibility of extrinsic
24 evidence applies to both oral and written evidence alike. See
25 Primex, 89 NY2d at 599-600; Farm Stores, Inc. v. Sch. Feeding
26 Corp., 79 AD2d 504, 504-05 (1st Dep't 1980), aff'd 53 NY2d 910
10 1 (N.Y. 1981). Moreover, Article 30 of the 1980 license agreement
2 appears to express the parties' intent to form an integrated
3 agreement. See Primex, 89 NY2d at 596-97, 599-600.
4 Nonetheless, extrinsic evidence may be used as a guide to
5 Stani's rights after April 1996 because the 1980 license
6 agreement is facially ambiguous as to these rights. "Even though
7 a document may be fully integrated with respect to the ultimate
8 terms of the agreement, the meaning of those terms may remain
9 unclear." U.S. Fire Ins. Co. v. Gen. Reinsurance Corp., 949 F.2d
10 569, 571 (2d Cir. 1991) (applying New York law). In such cases,
11 it is proper to consider extrinsic evidence in interpreting the
12 ambiguous terms, irrespective of the parol evidence rule. Id.
13 The extrinsic evidence in this case, however, does not
14 resolve the ambiguities over Stani's rights for purposes of its
15 summary judgment motion. The 1980 escrow agreement and the 1976
16 license agreement shed little light on the parties' intent with
17 regard to Stani's rights to Topps formulas after April 1996. In
18 fact, the strongest pieces of extrinsic evidence identified by
19 the parties are Stani's own pleadings and the statement of one of
20 its experts that it had no need for these formulas after that
21 date -- and possibly even much earlier. Far from proving Stani's
22 case, these pieces of evidence lend support to Topps' position.
23 III District Court's Analysis
24 The district court viewed the evidence in a different light.
25 It did so in the context of interpreting what it erroneously
26 believed to be unambiguous contract language. Nonetheless, we
11 1 address its reasoning at this juncture. Were this reasoning
2 sound, it would apply equally to our evaluation of the evidence
3 for purposes of resolving the ambiguities in the 1980 license
4 agreement.
5 A. Of Trademark Law
6 The trial court relied heavily on the 1980 escrow agreement,
7 which it read in the context of what it understood to be
8 applicable principles of trademark law. It reasoned that if
9 Stani had not been given the right to continue using Topps
10 formulas after April 1996, the 1980 escrow agreement would amount
11 to nothing more than a transfer of the Topps trademarks "in
12 gross," and in that way would "violate the laws of trademark."
13 Topps, 454 F. Supp. 2d at 102. The court concluded the parties
14 must not have intended to contract with each other in such a
15 manner. Id.
16 We think this reasoning flawed in several respects. First,
17 the district court assumed the "laws of trademark" applicable to
18 this transfer prohibited assignments "in gross." In so doing it
19 looked to U.S. trademark law for the principle that a trademark
20 is simply a symbol of goodwill and cannot be sold or assigned
21 apart from the goodwill it symbolizes. Id. at 102 (citing
22 Marshak v. Green, 746 F.2d 927, 929 (2d Cir. 1984) (citing Lanham
23 Act § 10, 15 U.S.C. § 1060)). An assignment "in gross" is a
24 purported transfer of a trademark divorced from its goodwill, and
25 it is generally deemed invalid under U.S. law. See Marshak, 746
12 1 F.2d at 929. But in the case at hand the 1980 escrow agreement
2 dealt with trademarks in Argentina, not in the United States.
3 Although the escrow agreement includes a choice-of-law
4 clause pointing to New York law, the question is not whether or
5 how to enforce this agreement, but rather what was the actual
6 effect, in Argentina, of the purported transfer that the
7 agreement memorialized. The principle of territoriality is
8 fundamental to trademark law. A trademark has a separate legal
9 existence under each country's laws, and trademark rights exist
10 in each country solely according to that nation's laws. See,
11 e.g., ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 155 (2d Cir.
12 2007); Person's Co. v. Christman, 900 F.2d 1565, 1568-69 (Fed.
13 Cir. 1990). As a consequence, whether or not the transfer
14 memorialized in the escrow agreement ultimately left Stani with
15 the right to trademarks in Argentina depends on Argentinian law.
16 This is a significant matter in this litigation because
17 there has been no briefing on the relevant Argentinian law, much
18 less any notification, under Federal Rule of Civil Procedure
19 44.1, that foreign law would be at issue. Although we decline to
20 rule definitively on this issue under these circumstances, we
21 note that Argentinian trademark law (like that of many countries)
22 appears to permit assignments in gross. See 1 Trademarks
23 Throughout the World § 9:21 (5th ed. 2007); Susan Barbieri
24 Montgomery & Richard J. Taylor, Key Issues in Worldwide Trademark
25 Transfers: Law & Practice 1, 5-6 (2005); Ernesto O'Farrell &
26 Iris V. Quadrio, Argentina in id. at AR-1, AR-11; Mark A.
13 1 Greenfield, Goodwill As a Factor in Trademark Assignments: A
2 Comparative Study, 60 Trademark Rep. 173, 181-81 (1970).
3 Second, even were the court's ruling correct that the
4 applicable law prohibited assignments in gross, it is not evident
5 the transfer at issue required a concomitant transfer of Topps
6 chewing gum formulas to avoid qualifying as such an assignment.
7 The goodwill requirement in U.S. law does not mean the assignee's
8 products must be identical to those of the assignor. Instead,
9 they need only be "substantially similar" such that "consumers
10 would not be deceived or harmed." Marshak, 746 F.2d at 930.
11 Stani's own pleadings and the statements of one of its experts
12 strongly suggest a substantially similar product could be
13 produced without using the Topps formulas. At the very least,
14 this question of fact could not be resolved in Stani's favor on
15 Stani's motion for summary judgment.
16 Third, even if applicable law prohibited assignments in
17 gross and even if the transfer here would have qualified as such
18 without a concomitant transfer of Topps formulas, there still is
19 insufficient proof, for summary judgment purposes, that the
20 parties intended to give Stani the right to these formulas. It
21 could well have been that the parties were attempting an
22 assignment in gross despite the law. In fact it appears
23 businesses take this risk frequently. See Irene Calboli,
24 Trademark Assignment "With Goodwill": A Concept Whose Time Has
25 Gone, 57 Fla. L. Rev. 771, 774 (2005); Nathan Isaacs, Traffic in
26 Trade-Symbols, 44 Harv. L. Rev. 1210, 1210-21 (1931). And, to
14 1 the extent the parties were looking to U.S. law when they
2 negotiated the escrow agreement, they may well have relied on the
3 then-recent trend toward a more flexible definition of the
4 goodwill necessary to avoid the prohibition against assignments
5 in gross. See Calboli, supra, at 791 ("[B]y the beginning of the
6 1970s, most courts . . . started to declare assignments valid as
7 long as sufficient continuity or substantial similarity, rather
8 than identity, existed between the marked goods."); Stephen L.
9 Carter, The Trouble With Trademark, 99 Yale L.J. 759, 785-87
10 (1990) (criticizing this trend). As with the other issues
11 involved in the district court's trademark analysis, this
12 question of the parties' intent was a subject not suitably
13 resolved on summary judgment.
14 B. Of Contract Law
15 The district court also relied on principles of contract law
16 in reading the 1980 escrow agreement and the 1976 license
17 agreement in conjunction with the 1980 license agreement. It
18 looked to the 1980 license agreement's broad definition of "Topps
19 Technology" to include not just the chewing gum formulas at issue
20 but also "all other elements of TOPPS' knowledge and experience."
21 Topps, 454 F. Supp. 2d at 104. The court reasoned that for the
22 agreement to be read as prohibiting Stani's continued use of
23 Topps chewing gum formulas, it would also need to be read as
24 prohibiting Stani's use of everything else defined as Topps
25 Technology, since the agreement does not differentiate between
26 these groups. Id.
15 1 This reading, the court found, would have "put Stani out of
2 business" or at least forced it to "start over entirely in the
3 gum business, with new plants, new methods, new processes, and
4 all the technical components involved in the making of chewing
5 gum." Id. Such an outcome seemed in the trial court's view
6 inconsistent with the existence of the escrow agreement, which
7 suggested the parties' assumption that Stani would continue to
8 manufacture and sell chewing gum using the "'specialized
9 knowledge and experience' it had acquired from Topps over the
10 course of a 39-year relationship." Id.
11 The district court also focused on the contrast, noted in
12 Part II A. above, between the 1980 license agreement's express
13 language cutting off Stani's right to use Topps Technology in the
14 event of early termination, and the absence of such a cut-off
15 provision in the contract language establishing the April 1996
16 expiration date. Id. at 105. Further, it looked to (1) the
17 absence of the words "utilizing Topps technology" in paragraph 2
18 of the 1980 licensing agreement as compared to paragraph 2 of the
19 1976 licensing agreement, (2) the fact that the 1980 licensing
20 agreement was set to expire on a date certain whereas the 1976
21 agreement had the option of renewal, and (3) the fact that Stani
22 had limited rights to terminate the 1980 licensing agreement as
23 compared to its rights to terminate the 1976 licensing agreement.
24 Id. at 105-07. The court took all of these things as signs of
25 the parties' intent for Stani to continue using Topps Technology,
26 including chewing gum formulas, after April 1996. Id. at 107.
16 1 There is no question that with respect to Stani's rights
2 after April 1996 the 1980 license agreement could have been more
3 clearly written. However, the extrinsic evidence in the record
4 does not weigh so overwhelmingly in Stani's favor as to permit
5 resolution of the agreement's ambiguities on a motion for summary
6 judgment. Quite the contrary, as already noted, Stani's own
7 pleadings and the statements of one of its experts strongly
8 undercut the district court's finding that the company could not
9 remain in business without using Topps Technology. While the
10 differences in the language of the 1976 and 1980 license
11 agreements do support Stani's position to some extent, they do
12 not plainly resolve the question for purposes of summary
13 judgment.
14 CONCLUSION
15 For all of these reasons, we must reverse the district
16 court's grant of summary judgment in favor of defendant. We do
17 so with respect to the breach of contract claim (including Topps'
18 claim with regard to the alleged disclosure of Topps Technology
19 to Cadbury, which was not addressed in the district court's
20 opinion), and also with respect to the misappropriation claim,
21 since the judgment we reverse hinged as to both claims on an
22 erroneous interpretation of the 1980 license agreement.
23 Accordingly, the case is remanded to the district court for
24 further proceedings not inconsistent with this opinion.