In re JAYSEE CORSET CO.

United States District Court for the Southern District of New York1911-11-09

201 F. 779

Summary · law.co

Holding. The trustee is forbidden from selling the trademark because the goodwill of the bankrupt's business was destroyed when the trustee sold only the chattels and did not preserve the business as a going concern; accordingly, neither the trustee nor the successor corporation has any valid right or title to the trademark to sell or enforce.

Joseph Cohen owned a registered trademark before forming a bankrupt corporation. He transferred his business to the corporation, which used the trademark, but never formally assigned the trademark itself to the corporation. Before the corporation's bankruptcy, Cohen transferred the trademark and purported goodwill to a third party, who then conveyed these to a new corporation in which Cohen held an interest. The trustee of the bankrupt estate sought to sell the trademark, but the new corporation objected.

The court held that a trademark cannot be transferred without the accompanying business goodwill. When the trustee sold the bankrupt corporation's assets as chattels but did not sell the business as a going concern, the goodwill was destroyed and ceased to exist. Since the goodwill no longer existed, Cohen's earlier transfer of the trademark to the third party was invalid—it conveyed nothing of legal value. Similarly, the trustee could not own or sell goodwill that no longer existed, even if it had once owned the paper trademark.

The court concluded that both the trustee and the successor corporation had no enforceable rights to the trademark. The trustee's attempt to sell something he did not own would constitute an unwarranted representation, and the court therefore enjoined the sale.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a trademark can be transferred without accompanying business goodwill
Whether goodwill survives the liquidation of a business's assets
Whether the trustee owned goodwill that ceased to exist
The validity of Cohen's trademark assignment absent any accompanying business

Procedural posture

A trustee in bankruptcy sought to sell assets of a bankrupt corporation, and a successor corporation petitioned to prevent the sale of the registered trademark.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

HOUGH, District Judge.

One Joseph Cohen was in business before the bankrupt corporation was organized. He owned a registered trade-marjc, which he placed upon goods apparently manufactured and sold by himself. He turned over his business to the bankrupt corporation, which apparently took his assets and assumed his liabilities. He became the president of the corporation, but he did not formally assign to the corporation the registered trade-mark aforesaid.

The corporation so formed became bankrupt, and a trustee was duly appointed. Such trustee did not obtain possession of the certificate of registration of trade-mark. Shortly before the bankruptcy of the corporation, Cohen transferred to a third person the trade-mark, consisting of the letters “J. C.,” and “the good will of the business in which the trade-mark is used.”- That third person in turn conveyed the trade-mark and good will to a new corporation (in which Cohen was interested), which now desires to prevent the trustee from making the sale above referred to.

The trade-mark in question, although standing in Cohen’s name, was evidently used, and used only, in the business of the bankrupt corporation. Cohen had no business of his own in which the trade-mark was used.

It may be true (as the trustee contends) that the transfer of Cohen’s business to the bankrupt corporation, and the use by that corporation of the tráde-mark (obviously with Cohen’s consent), worked by operation of law a transfer of the trade-mark itself. However this may be, it is more obviously true that Cohen’s conveyance of the trademark, unaccompanied by any business whatever, gave no title to his assignee, and therefore none in any subsequent grantee. It is to me clear (on the papers submitted) that whatever rights the present petitioner may have in the trade-mark “J. C.” do not in any way depend upon Cohen’s assignment, but only upon the continued use thereof in the petitioner’s business. Petitioner may well have established by this time a (so-called) common-law trade-mark, but that is all.

The assignment by Cohen of the paper trade-mark was made in May, 1910. In due course of time the trustee sold the goods and chattels of the bankrupt, but made no attempt to sell the good will of the bankrupt’s business, nor the trade-mark; nor did he sell the business as a going concern. The effect of these proceedings by the trustee was to kill the good will and destroy the trade-mark; for it is admitted that this.particular kind of trade-mark cannot pass, except in conjunction with the good will of a business. What has become of the bankrupt’s business ? It stopped by bankruptcy, was killed by the trustee’s sale, and the present intended action on the part of the trustee is an attempt to galvanize it into life again, something which cannot be done.

It results from the foregoing considerations that, while the present petitioner has nothing of legal value by reason of any assignment from Cohen, neither has the trustee anything to sell. Even if he ever owned the paper trade-mark, he only got it as legally appurtenant to the good will of the business of the bankrupt; but such good will could not survive the sale of the bankrupt’s chattels and the destruction of its business, for exactly the same kind of reason that made Cohen’s transfer invalid for lack of a good will to accompany it. The final situation is therefore this: The trustee wishes to sell something that he does not own, and, indeed, something that no longer exists; i. e., the good will of the bankrupt’s defunct business. And the party who seeks to prevent the sale rests his right to do so upon a worthless assignment from Cohen.

It is difficult to say that there is any equity in such a situation; but this court has a duty to perform in preventing trustees from, inadvertently making unwarranted representations. It is an error to suppose that the trustee, because he never sold the good will of the business of the bankrupt corporation, still owns it. He cannot own that which does not exist. If there beno good will to sell, then an assignment or transfer of the trade-mark, or any right or title therein or thereto, is worthless.

The trustee is therefore forbidden to make this sale.