TMT North America v. Magic Touch

Magic Touch GmbH (Magic Touch) (defendant), a German company, had developed a specially coated paper that could be used to transfer images onto fabric. Magic Touch contracted with a United States distributor, TMT North America, Inc. (distributor). While under contract with Magic Touch, the distributor filed applications to register two trademarks related to the paper product with the United States Patent and Trademark Office, although the distributor’s president and vice-president testified that they always understood Magic Touch to be the owner of the trademarks. It was unclear whether Magic Touch’s principal knew that the trademark registrations were in the distributor’s name, not Magic Touch’s. Another company with the same name as the distributor, TMT North America, Inc. (TMT) (plaintiff), purchased the distributor’s assets, and in the asset purchase agreement, the distributor represented that it owned the trademarks and was transferring them to TMT. However, in drafts of a distributorship agreement between Magic Touch and TMT that was never signed, Magic Touch represented that it owned the trademarks and would assign them to TMT. Magic Touch and TMT continued their distribution relationship without a written contract for about two years until TMT acquired another source for the raw paper product and no longer needed Magic Touch’s paper. TMT sued Magic Touch, seeking to establish its ownership of the trademarks and to prevent Magic Touch from using them. The district court entered a preliminary injunction in favor of TMT, finding that although the distributor had not acquired ownership of the trademarks by registering them, Magic Touch knew that the distributor claimed ownership and that the distributor intended to assign the trademarks to TMT. The district court reasoned that Magic Touch’s silence toward TMT regarding the ownership of the trademarks could be construed as acquiescence and estopped Magic Touch from claiming ownership of the trademarks. Magic Touch appealed.