## Facts

- Magic Touch GmbH, a German company, developed specially coated paper used to transfer photocopied images onto fabric using heat and pressure.
- In 1990, Magic Touch granted TMT North America, Inc. (TMT‑1) exclusive North American distribution rights and required TMT‑1 to use trademarks supplied by Magic Touch on packaging and promotional materials.
- During the distribution relationship, TMT‑1 distributed the product under “The Magic Touch” and “The Magic Touch … my one and only” and filed U.S. trademark applications for the marks in its own name.
- TMT‑1’s president and vice president later testified that they understood Magic Touch to be the owner of the trademarks.
- TMT North America, Inc. (TMT‑2) later purchased TMT‑1’s assets under an agreement in which TMT‑1 represented that it owned and was transferring the marks.
- A draft distributorship agreement between Magic Touch and TMT‑2 (never executed) stated that Magic Touch owned the marks and would assign them to TMT‑2.
- The parties continued doing business without a written contract for about two years; after TMT‑2 obtained another source for raw paper, it sought to establish exclusive rights to the marks and block Magic Touch from using them.

## Issues

1. Whether Magic Touch’s alleged acquiescence or inequitable conduct during TMT‑2’s asset purchase could result in complete forfeiture of Magic Touch’s trademark rights in favor of TMT‑2.
2. Whether TMT‑2 showed a likelihood of success on the merits sufficient to support a preliminary injunction barring Magic Touch from using or asserting ownership of the marks.

## Decision

- The Seventh Circuit vacated the preliminary injunction that barred Magic Touch from using the marks or asserting ownership.
- The court accepted that the record did not show a transfer of trademark ownership from Magic Touch to TMT‑1, notwithstanding TMT‑1’s registrations.
- Even assuming Magic Touch acquiesced in some way, the court held such conduct could not extinguish Magic Touch’s rights and make TMT‑2 the exclusive owner.
- At most, any acquiescence could place TMT‑2 on equal standing with Magic Touch regarding use of the marks, not authorize an injunction excluding Magic Touch.

## Legal Principles

- Trademark registrations by a distributor do not establish ownership where the underlying relationship shows the manufacturer supplied and controlled the marks and did not transfer them.
- Equitable acquiescence or estoppel in trademark disputes can limit a party’s ability to challenge another’s use, but does not ordinarily cause complete forfeiture of the true owner’s rights absent a valid transfer, abandonment, or comparable proof.
- A preliminary injunction requires a showing of likelihood of success on the merits; an injunction that effectively awards exclusive ownership without legal basis exceeds permissible relief at the preliminary stage.

## Conclusion

The Seventh Circuit held that the record did not support treating Magic Touch as having forfeited all trademark rights through acquiescence, and vacated an injunction that improperly barred Magic Touch from using or asserting rights in the marks.


TMT N. Am., Inc. v. Magic Touch GmbH, 124 F.3d 876 (7th Cir. 1997)