Brown Bark II, L.P. v. Dixie Mills, LLC

Southern Specialty Brands (Southern Specialty) owned several trademarks for various food items, including cornmeal, rice, grits, and southern baking mixes, that it produced and marketed. In 1999, Adams Foods, Inc. (Adams) sold a trademark for milled foods (Adams mark), along with the mark’s associated goodwill, to Southern Specialty. In exchange, Southern Specialty gave Adams a note secured by the Adams mark. Southern Specialty defaulted on its payments to Adams in 2006, and Adams obtained a judgment against Southern Specialty in state court that gave Adams full rights to the Adams mark. Around the same time, Southern Specialty also defaulted on other loans, and Brown Bark II, L.P. (Brown) (plaintiff) bought Southern Specialty’s trademarks in a foreclosure sale in 2007. Brown later declined an offer from Dixie Mills, LLC (Dixie) (defendant) to buy the Southern Specialty marks, and Dixie began marketing milled food products using marks that were similar to the Southern Specialty marks. Adams also began selling milled food products under the Adams mark again, which were packaged and distributed by Dixie. Brown sued Adams and Dixie for trademark infringement. Brown argued, among other things, that it had acquired rights to the Adams mark with the purchase of Southern Specialty’s trademarks. However, Brown did not use the Adams mark in connection with the sale of any products. On summary judgment, Adams claimed superior rights to the Adams mark. After determining that the state-court judgment awarding the Adams mark and its accompanying goodwill to Adams was entitled to full faith and credit, the district court addressed Adams’s argument that Brown could not claim trademark infringement with respect to the Adams mark because Brown acquired the mark through an assignment in gross.