The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
Appellees HMX, LLC and HMX Poland SP.Z.O.O (collectively, "Appellees" or "HMX"), acquired the "Pusser's of the West Indies" trademark for use in connection with t-shirts and sweaters, registry number 1,449,837 (the "'837 Trademark"), from the estate of XMH Corp. 1 (f/k/a Hartmarx Corp.) pursuant to a sale ordered by Judge Bruce W. Black of the Bankruptcy Court for the Northern District of Illinois. Following this sale, Pusser's (2001) Ltd. ("Appellant" or "Pusser's"), which had sold the '837 Trademark to Hartmarx Corp. in 1998, filed a cancellation petition (the "Cancellation Petition") with the Trademark Trial and Appeal Board ("TTAB"). The Petitioner sought to remove the '837 Trademark from the U.S. Patent and Trademark Office ("USPTO") Registry on the basis of abandonment, fraudulent renewal, and transfer in gross on the part of the debtors prior to the sale. In response, HMX returned to the bankruptcy court, where it filed a Motion to Compel Compliance with Sale Order, arguing that the Cancellation Petition was in violation of the court's § 363 sale order (the "Sale Order"). The bankruptcy court granted HMX's motions and entered an order (the "Compliance Order"), requiring Pusser's to dismiss the Cancellation Petition. HMX also has a motion for summary judgment pending with the TTAB, which that board has stayed pending the outcome of this appeal.
Pusser's appeals the bankruptcy court's decision. Pusser's asserts that the bankruptcy court erred in concluding that the Cancellation Petition was barred by the Sale Order because the petition only affected HMX's "use" of the '837 Trademark; that the court erred in concluding that the doctrine of res judicata barred the Cancellation Petition and consequently violated Pusser's' due process rights; and that the court exceeded its jurisdiction by reviving a dead trademark in violation of federal trademark law and public policy. In response, HMX argues that the bankruptcy court correctly directed Pusser's to dismiss its Cancellation Petition before the TTAB because the petition violates a final order enjoining pre-sale claims, which Pusser's cannot now challenge on either substantive or jurisdictional grounds.
The court reads the parties' briefs to present these questions on appeal: (1) whether the bankruptcy court had subject matter jurisdiction to enter the Compliance Order and the Sale Order, and whether the court would have had jurisdiction to entertain a trademark cancellation petition prior to entry of the Sale Order; and (2) whether a party may petition for cancellation of a trademark sold in bankruptcy when all of the bases for cancellation existed prior to the entry of a bankruptcy sale order, which terminated all pre-sale encumbrances. For the reasons more fully explained below, the court concludes that the bankruptcy court had the authority to rule as it did on HMX's motion and that Pusser's trademark cancellation petition is barred by the Sale Order.
FACTUAL AND PROCEDURAL BACKGROUND*fn1
Appellant Pusser's is a proprietor of rum and rum products founded in 1979 and based in the British Virgin Islands.*fn2 The '837 Trademark originated on November 18, 1986, when Pusser's Inc., Appellant's predecessor in interest, filed the trademark application for use in connection with t-shirts and sweaters, in international class 25. ('837 Trademark, Ex. A to Dkt. 1756.) Twelve years later, on November 3, 1998, Pusser's Inc. sold the '837 Trademark, along with other clothing related trademarks, to Hartmarx Corp. and its affiliate Tag Apparel, Inc. (along with other affiliates, the "Debtors") pursuant to a trademark purchase agreement. (Trademark Purchase Agreement, Ex. D to Dkt. 1756.) Later, on July 16, 2007, HMX Sportwear, Inc. (one of the Debtors, not to be confused with HMX, the Appellees) filed a renewal application with the U.S. Patent and Trademark Office ("USPTO") for the '837 Trademark. (Ex. 1, Part 2 to Dkt. 1849, at 13-15.) The Debtors filed for Chapter 11 bankruptcy protection on January 23, 2009. (Voluntary Pet., Dkt. 1.)
As part of the bankruptcy proceedings, the Debtors filed a Sale Motion with the court in order to begin an auction sale of assets to various purchasers under an asset purchase agreement ("APA"). (Sale Motion, Dkt. 463.) The Sale Motion had two phases. (Brief of Appellees HMX, LLC and HMX Poland SP.Z.O.O., Luxembourg Branch (hereinafter "Appellees' Brief"), at 6.) In the first phase, after notice and hearing, the court approved the bidding procedures, bid protections, and the form and manner of notice of the sales. (Id.) The second phase, following the actual bidding and auction process, was a hearing at which the Bankruptcy Court reviewed and approved the sales. (Id.) The '837 Trademark was among the assets sold in the auction.
On June 2, 2009, the Debtors served Pusser's with notice of the sale, along with copies of the Sale Motion, the approved bidding process, the APA, and the proposed form of order approving the Sale. (Aff. of Service, Dkt. 503, at 1-3, 284.)*fn3 It is not clear from the record why Pusser's received notice, but in addition to creditors, Debtors' Sale Motion proposed to give notice to, among others, "all entities known to have expressed an interest in a transaction with respect to any of the Acquired Assets during the past year." (Sale Motion ¶ 27.) Among other things, the notice of sale explained that objections to the sale were due on June 19, 2009. (Notice of Sale of Certain Assets at Auction, Ex. F to Dkt. 1756.) Despite this notice, Pusser's did not appear before the bankruptcy court, nor did it respond to the Sale Motion. On June 25, 2009, the bankruptcy court entered a Sale Order authorizing the Debtors to sell their assets to the purchasers who won at auction. (Sale Order, Dkt. 646.)
Substantially all of the Debtors' assets, including the '837 Trademark, transferred to the purchasers through the Sale Order and APA. (Id. at 2.) The Sale Order conveyed the Debtors' assets "free and clear of all liens, claims, encumbrances and interests" (id. ¶ N, at 8), and provided that upon the closing date, "all Encumbrances of any kind or nature whatsoever existing as to the Debtors or the Acquired Assets prior to the Closing Date have been unconditionally released, discharged and terminated." (Id. ¶ 28, at 19.) The Sale Order further provided for injunctive relief against actions to enforce such encumbrances:
[A]ll persons holding Encumbrances against or in the Debtors or the Acquired Assets of any kind or nature whatsoever shall be, and hereby are, forever barred, estopped, and permanently enjoined from asserting, prosecuting, or otherwise pursuing such Encumbrances . . . against the Purchasers, their property, their successors and assigns, or the Acquired Assets . . . . Following the Closing Date, no holder of an Encumbrance in or against the Debtors shall interfere with Purchasers' title to or use and enjoyment of the Acquired Assets based on or related to such Encumbrances, or any actions that the Debtors may take in their Chapter 11 Cases. (Id. ¶ 33, at 21-22.) Finally, the Sale Order provided for the bankruptcy court's ongoing jurisdiction to enforce and implement the terms and provisions of the [APA] . . . including, but not limited to, retaining jurisdiction to . . . (d) interpret, implement, and enforce the provisions of this Order, and (e) protect the Purchasers against . . . (ii) any Encumbrances against or in the Debtors or the Acquired Assets, of any kind or nature whatsoever, whether attaching to the proceeds of the Sale subject to the terms of this Order or otherwise. (Id. ¶ 35, at 22.)
Nevertheless, one day after the bankruptcy court entered the Sale Order, Pusser's filed a trademark application for the mark "Pusser's" (the "'095 Trademark") to be used in the same international class as the '837 Trademark. (Pusser's' Trademark Application, Ex. J to Dkt. 1756.) In addition to t-shirts and sweatshirts, the Pusser's Trademark identifies use on shirts, sweatpants, shorts, trousers, jackets, windbreakers, hats, caps, shoes, and sandals. (Id.) The USPTO issued the registration on March 9, 2010. ('095 Trademark, Ex. 1, Part 1 to Dkt. 1849, at 19.)
Next, on November 22, 2010, Pusser's filed a petition with the TTAB
seeking to cancel the '837 Trademark's registration. (Pet. for
Cancellation, Ex. 1, Part 1 to Dkt. 1849, at 1-14.) The petition
asserted five grounds for cancellation: (1) "on information and
belief," Debtors abandoned the trademark for a period of at least
three years prior to renewing the registration in 2007;*fn4
Debtors fraudulently renewed the trademark by filing a specimen
showing use of the trademark on a silk shirt, not a t-shirt or sweater
as specified by the '837 Trademark; (3) the renewal application listed
the incorrect owner of the trademark (HMX Sportswear, Inc. rather than
Tag Apparel, Inc.) and contained false information concerning Debtors'
use of the trademark; (4) the trademark was abandoned for a period of
at least three years after the renewal application in 2007;*fn5
and (5) Debtors Tag Apparel, Inc. transferred the '837
Trademark in gross, without goodwill, to HMX Sportswear, Inc. (again,
one of the Debtors, to be distinguished from HMX, the Appellees) prior
to entry of the Sale Order and, consequently, the transfer between HMX
Sportswear, Inc. and the Appellees was also in gross. (Id. at 8-12.)
Appellees moved for summary judgment in their favor, arguing that the
Sale Order bars the Cancellation Petition. That motion is suspended
pending the outcome of this appeal. (TTAB Order, Ex. 1 to Brief of
Appellant Pusser's (2001) Ltd. (hereinafter
"Appellant's Brief").) Also, in response to the '095 Trademark
registration, HMX filed a cancellation petition with the TTAB on
December 1, 2010, claiming that the existence of the Pusser's
Trademark harms HMX's use of the '837 Trademark. (Ex. 7 to Dkt.
Finally, on March 15, 2011, HMX filed a motion with the bankruptcy court seeking an order directing the TTAB to dismiss the Cancellation Petition and to revoke the '095 Trademark registration as barred by the court's Sales Order. (Motion to Compel Compliance with Sale Order, Dkt. 1756, at 22.) Following a schedule of briefing and oral argument, the bankruptcy court granted that motion in part. The court's Compliance Order required Pusser's to dismiss its Cancellation Petition before the TTAB. (Order Partially Granting HMX's Motion to Compel, Dkt. 1890.) In so ruling, the Bankruptcy Court rejected Pusser's' arguments that the court lacked jurisdiction over the matter and held that the doctrine of res judicata barred Pusser's-which received notice and an opportunity to be heard prior to the entry of the Sales Order-from challenging the Sale Order. (May 25, 2011 Hr'g Tr., Ex. 3 to Appellees' Brief, at 5.) The court determined that Pusser's Cancellation Petition violated the Sale Order, which "conclusively found that the trademark was debtor's to transfer and stripped off any and all impediments to the purchaser's use of the trademark that existed prior to the sale." (Id. at 3-4.)
The bankruptcy court concluded that an order directing the TTAB to dismiss the Cancellation Petition would be improper, and instead ordered Pusser's to cause the petition to be dismissed. (Id. at 3, 6.) This appeal arises from that order. The bankruptcy court declined to order the TTAB to revoke the registration of the '095 Trademark, concluding that the issue was one of trademark infringement, and therefore beyond the court's jurisdiction (id. at 5-6)-a decision that HMX does not challenge.
Pusser's contends that the bankruptcy court committed a series of errors that warrant a reversal of the Compliance Order. First, Pusser's argues that the bankruptcy court erred in concluding that the Cancellation Petition would jeopardize HMX's use of the '837 Trademark. Pusser's asserts that it does not challenge HMX's right to use the trademark, but rather HMX's right to maintain the '837 Trademark on the USPTO's registry. Concerning registration, Pusser's contends that because the '837 Trademark was sold "as is," HMX purchased a defective trademark that can be challenged in the TTAB. Pusser's further asserts that determining whether the trademark was abandoned is a noncore proceeding outside the bankruptcy court's jurisdiction. Second, Pusser's argues that the bankruptcy court improperly applied the doctrine of res judicata and that the court violated Pusser's' due process rights by ordering it to withdraw its Cancellation Petition. Third, and finally, Pusser's argues that allowing the Sale Order to bar future challenges to the '837 Trademark's validity effectively revives an abandoned trademark and that such an action is outside the bankruptcy court's jurisdiction.
In response, HMX contends that the Cancellation Petition was an encumbrance appropriately barred by the Sale Order and there was no denial of due process because Pusser's was given notice of the bankruptcy proceedings. The Sale Order does not revive a dead trademark, HMX urges, but rather cuts off any claim that Pusser's could have asserted before the bankruptcy court entered the Sale Order. HMX further contends that the bankruptcy court had subject matter jurisdiction to enter the ...