Exclusion of Trademark Licenses in Bankruptcy Asset Sales and the Limits of the First‐Sale Doctrine in the Context of Consumer Confusion

Introduction

In Nutradose Labs, LLC v. Bio Dose Pharma, LLC, the United States Court of Appeals for the Eleventh Circuit addressed two pivotal trademark issues under the Lanham Act: (1) whether a prebankruptcy trademark license survived an asset sale and thus continued to authorize the licensee’s use of the mark, and (2) whether the first‐sale doctrine shields a reseller from trademark liability when its marketing creates consumer confusion about the source of genuine goods. The plaintiff, Nutradose Labs, LLC, acquired the GlutaDose mark through a postbankruptcy asset chain; the defendants, Bio Dose Pharma, LLC and its principal Raimundo Santamarta, continued using the mark without permission. The district court held that the license was extinguished by the bankruptcy sale and that the first‐sale doctrine did not apply because of consumer confusion. On appeal, Santamarta challenged the rejection of both defenses. The Eleventh Circuit affirmed.

Summary of the Judgment

The court’s decision turned on two main holdings:

License Extinguishment in Bankruptcy Asset Sale: The Trademark License Agreement between Unipharma and Bio Dose was categorized as an “Excluded Liability” under the Asset Purchase Agreement. It was not assumed by the buyer (New Vision) and thus was automatically extinguished at closing, meaning Nutradose received the mark free of that license.
First‐Sale Doctrine Does Not Apply When Misrepresentations Cause Consumer Confusion: Although Bio Dose sold genuine GlutaDose products, its website and marketing suggested that Bio Dose, rather than Nutradose, was the source or sponsor of those goods. Such false indications of sponsorship fell outside the first‐sale doctrine’s protection, which assumes no confusion about origin.

Analysis

Precedents Cited

HGI Assocs., Inc. v. Wetmore Printing Co. (11th Cir. 2005): Standard of review for bench trials—de novo review of legal conclusions, clear‐error review of facts.
Bill Blass, Ltd. v. SAZ Corp. (3d Cir. 1984): Held that an ex‐licensee (manufacturer) may not sell off its inventory after the licensor revokes the license. The Eleventh Circuit found its reasoning applicable to distributor ex‐licensees as well.
Burger King Corp. v. Mason (11th Cir. 1983): Trademark infringement may arise when a reseller falsely suggests affiliation or sponsorship, causing consumer confusion.
Davidoff & CIE, S.A. v. PLD Int’l Corp. (11th Cir. 2001): Affirmed the first‐sale doctrine for genuine goods unless consumer confusion about origin exists. Bio Dose’s misrepresentations distinguished the present case.

Legal Reasoning

The Eleventh Circuit began by interpreting the Asset Purchase Agreement’s definitions of “Assumed Liabilities” and “Excluded Liabilities.” Because the Trademark License Agreement was not listed among the assumed obligations, it fell within the excluded category and thus terminated automatically. Santamarta’s arguments—(1) that the license imposed no obligation on Unipharma, and (2) that carve‐out provisions created ambiguity—were carefully dissected and rejected:

Provision 4.9(d) recognized Bio Dose’s use of the mark was immaterial to the sale but did not preserve any license right.
Provision 6.12 (preclosing covenant to terminate or renegotiate agreements) and Provision 2.4 (postclosing extinguishment of excluded liabilities) served different stages and scopes and did not conflict.

On the first‐sale doctrine, the court reaffirmed that resale of genuine goods generally does not infringe, because origin remains unchanged. But it distinguished Davidoff on the ground that Bio Dose’s website omitted any indication that it was merely a reseller of Nutradose products, thereby misleading consumers into believing that Bio Dose was the source or sponsor. Under Burger King, that false suggestion breached the Lanham Act’s prohibition against uses “likely to cause confusion as to source or sponsorship.”

Impact

This decision reinforces two important principles:

Bankruptcy Asset Sales and Trademark Licenses: Trademark licenses not expressly assumed in an asset purchase agreement will be treated as excluded liabilities and extinguished at closing, unless the parties clearly provide otherwise.
Limits of the First‐Sale Doctrine: Even when goods are genuine, resellers must take care in marketing and labeling to avoid implying ownership, sponsorship or origin, or they risk trademark infringement despite the first‐sale doctrine.

Future litigants and drafters in bankruptcy and trademark contexts should carefully negotiate asset purchase and license agreements, and resellers should clearly communicate their relationship to the trademark owner.

Complex Concepts Simplified

Excluded vs. Assumed Liabilities: In an asset sale, the buyer agrees only to take on certain debts or obligations (“assumed”). Anything not on that list (“excluded”) stays with the seller or is wiped out.
First‐Sale Doctrine: If you buy a genuine trademarked product, you can normally resell it without infringing. But if your sale makes buyers think you’re the trademark owner or sponsor, you’re infringing.
Consumer Confusion: Occurs when marketing leads a reasonable buyer to believe goods come from—or are approved by—a different trademark owner.

Conclusion

Nutradose Labs, LLC v. Bio Dose Pharma, LLC establishes that prebankruptcy trademark licenses not expressly assumed in an asset purchase are extinguished upon sale, and it clarifies that the first‐sale doctrine cannot shield resellers whose marketing falsely implies source or sponsorship. This case underscores the need for precision in drafting asset purchase and licensing provisions, and for clear labeling and communication by resellers to avoid consumer confusion and trademark liability.