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Waiver in PTO Trademark Appeals Applies “Per Decision, Not Per Case”

by Paul Devinsky | Mar 24, 2021 | Trademarks

Addressing a “narrow question of statutory interpretation,” the US Court of Appeals for the Fourth Circuit reversed the district court’s dismissal of a trademark case for lack of subject matter jurisdiction, holding that a party that appeals a Trademark Trial & Appeal Board (TTAB) decision to the US Court of Appeals for the Federal Circuit may, after remand to and issuance of a new decision by the TTAB, seek review of the new decision in federal district court. Snyder’s-Lance, Inc. v. Frito-Lay N.A., Inc., Case No. 19-2316 (4th Cir. Mar. 17, 2021) (Wynn, J.)

Princeton Vanguard, a snack food producer, applied to register its mark “Pretzel Crisps” on the principal register. Frito-Lay opposed. The TTAB denied Princeton Vanguard’s application, concluding that the mark was generic.

Under the Lanham Act, Princeton Vanguard could appeal the TTAB’s original decision to either the Federal Circuit under 15 USC § 1071(a) or federal district court under § 1071(b). Princeton Vanguard elected a direct appeal to the Federal Circuit pursuant to § 1071(a), thus waiving its right to district court review. The Federal Circuit concluded that the TTAB applied the wrong legal standard in evaluating whether Princeton Vanguard’s mark was generic and remanded the case to the TTAB. The TTAB again concluded that Princeton Vanguard’s mark was generic. This time, Princeton Vanguard appealed to a federal district court pursuant to § 1071(b).

The district court sua sponte dismissed the case for lack of subject matter jurisdiction, concluding that Princeton Vanguard’s appeal of the original decision to the Federal Circuit pursuant to § 1071(a) precluded Princeton Vanguard from appealing the second decision to a district court pursuant to § 1071(b). Princeton Vanguard appealed.

On appeal, the Fourth Circuit concluded that the statutory text of the Lanham Act supported Princeton Vanguard’s argument in favor of jurisdiction. The Court explained that Princeton Vanguard’s waiver of its right to district court review of the original TTAB decision pursuant to § 1071(a) did not apply to any subsequent decisions in the same case, and that the waiver applied “per decision, but not per case.”

The Court rejected Frito-Lay’s argument that Princeton Vanguard was taking a second bite at the apple by seeking re-review in federal district court of issues already decided by the Federal Circuit, reasoning that Princeton Vanguard was seeking district court review of the second, separate decision that had not been reviewed by the Federal Circuit. The Court stressed, however, that the Federal Circuit’s review of the TTAB’s original decision was binding as to issues it decided.

Practice Note: If the TTAB issues multiple decisions in the same proceeding, each decision is considered a separate decision for purposes of waiver under §§ 1071(a) (b), even if the decisions implicate similar issues.

Trademark Trial & Appeal Board Gets a DuPont 101 Lesson

by Eleanor B. Atkins | Feb 22, 2024 | Trademarks

Addressing errors in the Trademark Trial & Appeal Board’s likelihood of confusion analysis in a cancellation action, the US Court of Appeals for the Federal Circuit vacated and remanded, holding that the Board erred by failing to give sufficient weight to the first DuPont factor (similarity of the marks) and failing to consider the relevant evidence for the third (similarity of established trade channels). Naterra International, Inc. v. Samah Bensalem, Case No. 22-1872 (Fed. Cir. Feb. 15, 2024) (Moore, Stoll, Cunningham, JJ.)

In 2020, Naterra International filed a petition to cancel Samah Bensalem’s registration for BABIES’ MAGIC TEA for use in connection with “medicated tea for babies that treats colic and gas and helps babies sleep better” based on a likelihood of confusion with Naterra’s multiple registrations for BABY MAGIC for use in connection with infant toiletry products such as lotion and baby shampoo. The Board denied Naterra’s petition, finding that Naterra failed to prove a likelihood of confusion. The Board found that while the first DuPont likelihood of confusion factor (similarity of the marks) weighed in favor of a likelihood of confusion, factors two (similarity of the goods) and three (similarity of established trade channels) did not, and Naterra’s BABY MAGIC mark “fell somewhere in the middle” for factor five (fame of the prior mark). The Board found that factors four (conditions of purchasing), six (number and nature of similar marks in use on similar goods), eight (length of time and conditions of concurrent use without evidence of actual confusion), 10 (market interface between applicant and owner of a prior mark) and 12 (extent of potential confusion) were neutral. Naterra appealed.

Naterra argued “that substantial evidence does not support the Board’s finding that the similarity and nature of the goods (DuPont factor two) and trade channels (DuPont factor three) disfavor a likelihood of confusion,” and that the Board did not properly weigh the first (similarity of the marks) and fifth (fame of the prior mark) DuPont factors.

DuPont Factor Two – Relatedness of the Goods

The Board rejected Naterra’s expert testimony that other so-called “umbrella” baby brands offered both infant skincare products and ingestible products, calling it “unsupported by underlying evidence.” The Federal Circuit disagreed, stating that “testimony that third-party companies sell both types of goods is pertinent to the relatedness of the goods.” Nonetheless, because the Court could not determine whether the Board rejected the expert testimony for other reasons, it remanded the case for further consideration and explanation of its analysis on this point.

DuPont Factor Three – Similarity of Trade Channels

The Board found that the third factor weighed against a likelihood of confusion, stating that it lacked the “persuasive evidence” necessary to “conclude that the trade channels are the same.” The Federal Circuit found that the Board erred by not addressing relevant evidence, namely Bensalem’s admission that the parties’ goods were sold in similar trade channels. The Court also noted that the Board “did not identify in its decision any evidence showing a lack of [...]

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A Primer on Practice at the Trademark Trial & Appeal Board

by Paul Devinsky | Jun 30, 2022 | Trademarks

In a precedential decision rendered in an opposition proceeding, the Trademark Trial & Appeal Board (Board) took the lawyers for each side to task for ignoring Board rules in presentation of their case, but ultimately decided the case on a likelihood of confusion analysis. The Board found that the parties’ marks and goods were “highly similar” and sustained the opposition. Made in Nature, LLC v. Pharmavite LLC, Opposition Nos. 91223352; 91223683; 91227387 (June 15, 2022, TTAB) (Wellington, Heasley and Hudis, ALJs) (precedential).

Pharmavite sought registration of the standard character mark NATURE MADE for various foods and beverages based on allegations of bone fide intent to use in commerce. Made in Nature (MIN) opposed on the ground that Pharmavite’s mark so resembled MIN’s registered and common law “Made In Nature” marks as to cause a likelihood of confusion when used on the goods for which registration was sought.

In its brief to the Board, Pharmavite raised, for the first time, the Morehouse (or prior registration) defense. MIN objected to the Morehouse defense as untimely. The Board agreed, noting that defense is “an equitable defense, to the effect that if the opposer cannot be further injured because there already exists an injurious registration, the opposer cannot object to an additional registration that does not add to the injury.” The party asserting a Morehouse defense must show that it “has an existing registration [or registrations] of the same mark[s] for the same goods” (emphasis in original).

Here, the Board found that this defense was not tried by the parties’ express consent and that implied consent “can be found only where the non-offering party (1) raised no objection to the introduction of evidence on the issue, and (2) was fairly apprised that the evidence was being offered in support of the issue.” In this case, Pharmavite did introduce into the record its prior NATURE MADE registrations but only for the purpose of supporting Pharmavite’s “[r]ight to exclude; use and strength of Applicant’s mark.” The Board found that this inclusion did not provide notice of reliance on the Morehouse or prior registration defense at trial.

In sustaining the opposition, the Board commented extensively on the record and how it was used, “[s]o that the parties, their counsel and perhaps other parties in future proceedings can benefit and possibly reduce their litigation costs.”

Over-Designation of the Record as Confidential

The Board criticized the parties for over-designating as confidential large portions of the record, warning that only the specific “exhibits, declaration passages or deposition transcript pages that truly disclosed confidential information should have been filed under seal under a protective order.” If a party over-designates material as confidential, “the Board will not be bound by the party’s designation.”

Duplicative Evidence

The Board criticized the parties for filing “duplicative evidence by different methods of introduction; for example, once by Notice of Reliance and again by way of an exhibit to a testimony declaration or testimony deposition.” The Board noted that such practice is viewed “with disfavor.”

Overuse of [...]

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Alleged Trademark Infringer Remains Hog-Tied after Appeal

by Paul Devinsky | Feb 3, 2022 | Trademarks
The US Court of Appeals for the Tenth Circuit dismissed an appeal of a district court order denying a stay of a federal action for lack of jurisdiction under 28 U.S.C. § 1291 and reversed in part the district court’s grant of a preliminary injunction. The Trial Lawyers College v. Gerry Spence Trial Lawyers College at Thunderhead Ranch, Case No. 20-8038 (10th Cir. Jan. 27, 2022) (Bacharach, Briscoe, Murphy, JJ.).

The dispute between the parties arose out of a program called The Trial Lawyers College at Thunderhead Ranch in Wyoming. The College’s board of directors split into two factions known as the “Spence Group” and the “Sloan Group.” After the split, the two groups sued each other. The Spence Group sued in state court for dissolution of the College and a declaratory judgment regarding control of the board of directors. The Sloan Group sued in federal court claiming trademark infringement under the Lanham Act.

Both groups sought relief in the federal case. The Spence Group filed a motion to stay the federal court proceedings in light of the state court proceedings, and the Sloan Group requested a preliminary injunction. The district court denied the Spence Group’s stay and granted the Sloan Group’s request for a preliminary injunction. The Spence Group appealed both rulings.

The Tenth Circuit found that it lacked jurisdiction to review the district court’s stay denial. First, the state court resolved the dispute concerning board control, rendering part of the requested stay moot. Second, the Court determined that it lacked jurisdiction over the remaining motion for stay because it was not a final order. The Court explained that it needed to decide the appealability of the ruling based on the category of order rather than the particular facts of the case. The Court found that there was no unsettled issue of unique urgency or importance that warranted the Court exercising jurisdiction over the denial of the stay. Specifically, the Court explained that piecemeal litigation was unlikely because the state court already decided the issue of board control, and the Spence Group did not identify an unsettled issue of unique urgency.

The Tenth Circuit did exercise jurisdiction over the district court’s grant of a preliminary injunction. The Spence Group challenged the district court’s finding of irreparable harm, the order to remove sculptures bearing the College’s name, restrictions on what the Spence Group could say and the consideration of evidence presented after the hearing ended. The Court reviewed the district court’s findings under an abuse-of-discretion standard. The Court found that the district court did not abuse its discretion by finding irreparable harm, considering evidence after the hearing and enjoining the Spence Group from using words associated with the College. The Court explained that the district court reasonably found irreparable harm based on the College’s efforts to protect its name, logo and trademarks, as well as evidence of likely confusion among customers of the College based on the Spence Group’s use of those trademarks. As for the sculptures, the Court found [...]

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Texas Hammer Nails Trademark Infringement Appeal

by Joshua Revilla | Sep 2, 2021 | Trademarks
The US Court of Appeals for the Fifth Circuit reversed a district court’s dismissal of an initial confusion trademark complaint, finding that the plaintiff alleged a plausible claim of trademark infringement under the Lanham Act. Adler v. McNeil Consultants, LLC, Case No. 20-10936 (6th Cir. Aug. 10, 2021) (Southwick, J.)

Jim Adler is a personal injury lawyer who trademarked and used several terms, including JIM ADLER, THE HAMMER and TEXAS HAMMER, to market his business, including via keyword advertisements. McNeil Consultants, a personal injury lawyer referral service, purchased keyword ads using Adler’s trademarked terms, which allowed McNeil’s advertisements to appear at the top of any Google search of Adler’s trademarked terms. McNeil’s advertisements used generic personal injury terms, did not identify any particular law firm and clicking on the ads placed a phone call to McNeil’s call center rather than directing the user to a website. The call center used a generic greeting so consumers did not realize with whom they were speaking.

Adler filed suit against McNeil, asserting Texas state law claims as well as trademark infringement under the Lanham Act. McNeil moved to dismiss, arguing that its keyword ads did not create a likelihood of confusion. The district court agreed and dismissed Adler’s complaint. Adler appealed.

To successfully plead a trademark infringement claim under Fifth Circuit law, the holder of a protectable trademark must establish that the alleged infringing use “creates a likelihood of confusion as to source, affiliation, or sponsorship.” To determine whether a likelihood of confusion exists, the Court weighs a non-exhaustive list of several confusion factors, including the similarity of the marks, the similarity of the products, the defendant’s intent and the care exercised by potential consumers.

The Fifth Circuit explained that Adler alleged initial interest confusion, which exists where the confusion creates consumer interest in the infringing party’s services even where no sale is completed because of the confusion. The Court noted that this case presented the first opportunity for the Fifth Circuit to consider initial interest confusion as it pertains to search engine keyword advertising. Relying on Ninth Circuit precedent and parallel reasoning to its own opinions on initial interest confusion in the context of metatag usage, the Court concluded that Adler’s complaint alleged a plausible claim of trademark infringement under the Lanham Act.

The Fifth Circuit noted that initial interest confusion alone is not enough to raise a Lanham Act claim. The Court explained that if a consumer searches TOYOTA and is directed to search results containing a purchased ad clearly labeled as selling VOLKSWAGEN products, a consumer who clicks on the VOLKSWAGEN ad has been distracted, not confused or misled into purchasing the wrong product. Distraction does not violate the Lanham Act. However, the Court explained that where the use of keyword ads creates confusion as to the source of the advertisement—not mere distraction—an infringement may have occurred. Because McNeil’s advertisements were admittedly generic and could have been associated with any personal injury law firm, the Court found that the keyword [...]

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David-Versus-Goliath Trademark Victory Isn’t Necessarily “Exceptional”

by Karen Gover | Jul 25, 2024 | Trademarks
The US Court of Appeals for the Third Circuit vacated an award of attorneys’ fees for reanalysis, explaining that the district court’s finding that the case was “exceptional” under the Lanham Act was based on policy considerations rather than the totality of the circumstances. Lontex Corp. v. Nike, Inc., Case Nos. 22-1417; -1418 (3rd Cir. July 10, 2024) (Hardiman, Matey, Phipps, JJ.)

Lontex Corporation is a small Pennsylvania business that manufactures and sells compression apparel to professional athletes and the public. Since 2008 it has held a registered trademark for the mark COOL COMPRESSION, which it used in conjunction with its sale of apparel. In 2015, Nike rebranded an athletic clothing line that included a category of “Cool” products designed to reduce body temperature, as well as various fits, including “Compression.” It also began using the words “Cool” and “Compression” together in the names of Nike clothing products sold online and in Nike catalogues. Nike used “Cool Compression” as a product name on tech sheets, which are internal documents used to explain Nike products to employees and third-party retailers.

The following year, upon discovering Nike’s use of the phrase “Cool Compression,” Lontex sent Nike a cease-and-desist letter. Nike’s lawyers directed the company to stop using the phrase “as soon as possible.” Nike took steps to remove the phrase from its website and catalogs but not its tech sheets. Two years later, Nike reached out to its third-party retailers and asked them to stop using “Compression” in product names.

Lontex sued Nike for trademark infringement of its COOL COMPRESSION mark, for contributory infringement based on its supply of “Cool Compression” products to retailers, and for counterfeiting. The district court dismissed the counterfeiting claim, and a jury trial was held on the infringement actions. The jury returned a verdict for Lontex, finding Nike liable for willful and contributory infringement. The jury awarded Lontex $142,000 in compensatory damages and $365,000 in punitive damages but declined to award Lontex disgorgement of Nike’s profits.

Post-trial, Nike renewed motions for judgment as a matter of law on fair use, trademark infringement, contributory infringement, willfulness and punitive damages. Lontex moved for disgorgement of profits and trebling of the damages awarded by the jury. The district court granted Lontex’s request for treble damages, increased the compensatory award to $426,000, and separately awarded Lontex almost $5 million in attorneys’ fees after finding that the case was “exceptional” under the Lanham Act. Both parties appealed.

As to the willfulness finding, Nike argued that the jury should not have been permitted to infer willfulness solely from its continued use of the mark after it received its cease-and-desist letter. The Third Circuit disagreed, pointing out that not only did Nike adopt the “Cool Compression” phrase without doing a trademark search, it also continued to use the phrase after receiving Lontex’s cease-and-desist letter and being advised by its own legal team to stop using it as soon as possible. The Court concluded that a jury could reasonably infer willful infringement. For similar reasons, [...]

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What Makes a Trademark Case “Exceptional” in the Fifth Circuit?

by Benjamin Ediger, Ph.D. | Jul 11, 2024 | Trademarks
The US Court of Appeals for the Fifth Circuit affirmed a senior party mark but found that the district court committed clear error in finding that a similar junior party mark was valid. The Fifth Circuit also found that the district court abused its discretion in awarding attorneys’ fees to the senior user. Appliance Liquidation Outlet, L.L.C. v. Axis Supply Corp., Case No. 23-50413 (5th Cir. June 21, 2024) (Smith, Haynes, Douglas, JJ.)

Appliance Liquidation Outlet (ALO), a decades-old appliance store in San Antonio, Texas, brought a trademark action under the Lanham Act and Texas law (which in all relevant aspects tracks the Lanham Act) against Axis Supply Corporation, another San Antonio appliance store that opened in 2021. Axis’s store and social media prominently featured the phrase “Appliance Liquidation”:

ALO noted that Axis’s opening happened to coincide with an influx of customers conflating ALO with Axis. ALO’s storefront had prominently displayed a banner reciting “Appliance Liquidation Outlet” for years:

Although ALO had never registered its mark, ALO had long engaged in a variety of promotional activities to raise brand recognition, including partnering with local sports teams and holding antique exhibitions and car shows.

Soon after Axis opened its store, ALO experienced a rush of customers who failed to differentiate between the stores and believed that ALO operated both. ALO requested that Axis stop using “Appliance Liquidation” and sued Axis in state court when Axis refused. Axis removed the dispute to the federal district court. After a bench trial, the district court held for ALO, enjoining Axis from using “Appliance Liquidation” and “Appliance Liquidation Outlet” and causing confusion between the two businesses. The district court also awarded attorneys’ fees under 15 U.S.C. § 1117(a) to ALO, finding that Axis’s decision to change its name only a week before trial (about 1.5 years into the dispute) amounted to litigating in an unreasonable manner. Axis appealed.

The Fifth Circuit affirmed the district court’s holding that Axis had infringed ALO’s “Appliance Liquidation Outlet” mark but assigned clear error to the district court’s finding that “Appliance Liquidation” was valid mark. The Fifth Circuit also found that the district court had abused its discretion in awarding attorneys’ fees to ALO.

With respect to the marks’ validity, the Fifth Circuit noted that both marks were unregistered and thus were not presumptively valid. The Court found that the record did not support the conclusion that “Appliance Liquidation” was a source identifier and thus found that it was not a valid mark. However, the Fifth Circuit was satisfied that “Appliance Liquidation Outlet” served as a source identifier. The Court found that although “Appliance Liquidation Outlet” was descriptive, the evidence established that San Antonian consumers perceived the mark as conveying information about ALO, not merely reflecting a class of services or businesses, and [...]

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Sour Grapes: Winery Minority Ownership Insufficient for Statutory Standing at Trademark Board

by Karen Gover | May 30, 2024 | Trademarks
The US Court of Appeals for the Federal Circuit affirmed the dismissal of a petition seeking to cancel the registered marks of two wineries, finding the petitioner (a trust owning an interest in a competitor winery) lacked statutory standing under 15 U.S.C. § 1064. Luca McDermott Catena Gift Trust v. Fructuoso-Hobbs SL, Case No. 23-1383 (Fed. Cir. May 23, 2024) (Lourie, Reyna, Chen, JJ.) (en banc). The Court found that while the cancellation petitioner, Luca McDermott, had Article III standing to seek judicial review of the Trademark Trial & Appeal Board’s decision, it did not have statutory standing under the Lanham Act to petition for cancellation of the registrations at issue.

Paul Hobbs is a winemaker and partial owner of California-based Paul Hobbs Winery. The Paul Hobbs Winery owns the registration for the PAUL HOBBS mark in International Class 33 for “Wines.” Luca McDermott and two other related family trusts are each limited partners of the winery, collectively owning more than 21% of the business. Paul Hobbs is also affiliated with two other wineries: Fructuoso-Hobbs, a Spanish winery and owner of the registered mark ALVAREDOS-HOBBS, and New York winery Hillick & Hobbs Estate, owner of the registered mark HILLICK AND HOBBS. Both marks are registered in International Class 33 for “Alcoholic beverages except beers; wines.”

Luca McDermott and the other two family trusts petitioned to cancel both of the registered marks on the grounds of likelihood of confusion, alleging that the use of the ALVAREDOS-HOBBS and HILLICK AND HOBBS marks in connection with wine was likely to cause confusion with the Paul Hobbs Winery’s use of the PAUL HOBBS mark for wine. The trusts also alleged that Fructuoso-Hobbs committed fraud because it caused its lawyer, the same lawyer of record who managed the registration of the Paul Hobbs Winery’s PAUL HOBBS mark, to declare that the marks would not be likely to cause confusion with another mark.

Fructuoso-Hobbs moved to dismiss the petition, arguing that the family trusts were not entitled by statute to bring the cancellation action because they were not the owners of the PAUL HOBBS mark. Fructuoso-Hobbs also argued that the trusts could not show they had the necessary “proprietary interest” to bring the likelihood of confusion claim. The Board granted the motion to dismiss. Luca McDermott, one of the three trusts in the original action, appealed.

Before it could review de novo the Board’s decision regarding the trust’s lack of standing under the Lanham Act, the Federal Circuit addressed whether the trust had Article III standing to seek judicial review of the Board’s decision. The Court had little trouble concluding that the alleged injury (i.e., the diminished value of the trust’s investment in the winery) constituted an individual injury-in-fact, even for a minority partner. Furthermore, the Court found that the causation requirement was satisfied because the constitutional standard did not require proximate causation but only that the injury be “fairly traceable” to the allegedly unlawful registration of the challenged marks. Finally, the Federal Circuit found it [...]

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ITU Applicants Beware: Federal Courts Have Jurisdiction Over Pending Trademark Applications

by Cecilia Choy, Ph.D. | Apr 11, 2024 | Trademarks
The US Court of Appeals for the Ninth Circuit affirmed in part a district court’s ruling in a trademark dispute, upholding its decision to invalidate trademark applications. The Ninth Circuit held that district courts have jurisdiction to alter or cancel trademark applications in an action properly brought under 15 U.S.C. § 1119, and that in the context of challenges to intent-to-use (ITU) applications, proof of a lack of bona fide intent can invalidate. BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc., Case Nos. 22-16190; -16281 (9th Cir. Apr. 1, 2024) (Hurwitz, Desai, JJ.) (Bumatay, J., dissenting).

BBK sells and distributes smoking-related products with BBK’s “RAW” branding. Central Coast Agriculture (CCA) sells cannabis products using “Raw Garden” branding. BBK filed a complaint against CCA including claims of trademark infringement and a petition to void several ITU trademark applications owned by CCA for lack of a bona fide intent to use the relevant trademarks in commerce. Instead of disputing the merits of BBK’s claims, CCA argued that the district court had no jurisdiction to adjudicate this issue. The district court granted summary judgment in favor of BBK on its claims to invalidate the trademark applications. CCA appealed.

The Ninth Circuit affirmed the summary judgment in favor of BBK on its claims to invalidate CCA’s trademark applications. The Court explained that “when an action involves a claim of infringement on a registered trademark, a district court also has jurisdiction to consider challenges to the trademark application of a party to the action.” The Lanham Act, at 15 U.S.C. § 1119, provides that “[i]n any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, . . . restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.” The Lanham Act, at § 1051, defines an application for use of trademark as a “request for registration of a trademark on the principal register.” Because a challenge to an application affects the applicant’s right to the registration, the Court reasoned that § 1119 authorizes a district court to resolve disputes over trademark applications.

The Ninth Circuit held that a “lack of bona fide intent to use a mark in commerce is a valid basis to challenge a trademark application,” aligning with decisions in sister circuits and the Trademark Trial & Appeal Board. An applicant can seek to register a mark if the mark is already being used in commerce or if the applicant has a bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce. While applicants filing under the ITU provisions may begin the registration process based on a bona fide intent to later use the mark in commerce, the Lanham Act requires such applicants to either subsequently file a verified statement of actual use of the mark or convert their application into a use application. As a result, the Ninth Circuit affirmed the district court’s ruling [...]

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Bling It On: Laches Prevents Profit Disgorgement in Diamond-Studded Trademark Battle

by Keval Amin | Feb 8, 2024 | Trademarks
In a dispute involving allegedly counterfeit luxury watches, the US Court of Appeals for the Fifth Circuit affirmed a district court’s finding of trademark infringement and its finding that a laches defense prevented disgorgement of profits. Rolex Watch USA, Incorporated v. BeckerTime, L.L.C., Case No. 22-10866 (5th Cir. Jan. 26, 2024) (Douglas, King, Willett, JJ.)

Rolex is a luxury watch seller with legally protectable interests in numerous trademarks. BeckerTime modifies Rolex-branded watches by adding diamonds, aftermarket bezels, and bands not authorized by Rolex and then sells them as “Genuine Rolex” watches. Rolex filed a lawsuit against BeckerTime, alleging trademark infringement and seeking an injunction and disgorgement of profits. After a bench trial, the district court concluded that BeckerTime infringed Rolex’s trademark but refused to order disgorgement of profits based on BeckerTime’s laches defense. This appeal followed.

On the issue of infringement, BeckerTime argued that the district court erroneously applied the traditional likelihood of confusion analysis without considering the Supreme Court’s decision in Champion Spark Plug v. Sanders (1947). In Champion, the Supreme Court held that a defendant in a trademark infringement case was not obligated to remove trademarks from repaired or reconditioned products. This ruling was grounded in the distinction that these products were distinctly marketed as “repaired or reconditioned” as opposed to brand new items. The Supreme Court clarified that a misnomer exception would only be applicable if the extent or nature of the repair or reconditioning was so profound that using the original name would be misleading, even if terms such as “used” or “repaired” were added to describe the item.

In drawing a comparison to Champion, the Fifth Circuit differentiated BeckerTime’s actions from mere repairs or reconditioning. Unlike the defendant in Champion, BeckerTime went beyond restoration, actively modifying Rolex watches by incorporating diamonds, aftermarket bezels and bracelets or straps. Consequently, the watches BeckerTime sold were materially distinct from those offered by Rolex. The Court reasoned that BeckerTime’s alterations amounted to customization rather than mere restoration, as was the case in Champion. Applying the misnomer exception from Champion, the Fifth Circuit affirmed the district court’s decision, asserting that BeckerTime’s customized watches created a likelihood of confusion among consumers and thereby infringed upon Rolex’s trademark.

On the issue of disgorgement of profits, the Fifth Circuit affirmed the district court’s application of laches to deny an award of disgorgement. Rolex argued that BeckerTime’s deliberate counterfeiting precluded laches, while BeckerTime responded that Rolex had failed to show the required unclean hands or undue prejudice to justify disgorgement. The Fifth Circuit agreed with the district court that Rolex had failed to establish unclean hands by BeckerTime, as the evidence did not show intentional infringement. The Court also agreed that the delay in filing the lawsuit caused undue prejudice to BeckerTime by enabling it to build a successful business.

While Rolex sought a complete ban on BeckerTime’s use of non-genuine bezels and dials on its modified Rolex watches, the Fifth Circuit only partially agreed. Recognizing the potential for consumer confusion, the Court ordered [...]

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