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Trademark Cancellation Is Appropriate Sanction for Misconduct

In upholding a grocery store chain’s standing to petition for cancellation of a US trademark registration, the US Court of Appeals for the Federal Circuit affirmed the Trademark Trial and Appeal Board’s (TTAB’s) express authority to impose cancellation of a trademark by default judgment as a sanction in a TTAB proceeding. Corcamore, LLC v. SFM, LLC, Case No. 19-1526 (Fed. Cir. Oct. 27, 2020) (Reyna, J.).

SFM owns US federal trademark registrations for the mark SPROUTS for use in connection with its retail grocery store services. SFM filed a petition to cancel Corcamore’s US trademark registration for the mark SPROUT for use in connection with vending machine services, alleging a likelihood of consumer confusion with SFM’s prior trademark rights. The TTAB denied Corcamore’s motion to dismiss the cancellation petition for lack of standing. Relying on Empresa Cubana del Tabaco v. General Cigar Co., the TTAB confirmed SFM’s standing based on its “real interest” in the cancellation petition and a “reasonable belief of damage” caused by the continued registration of Corcamore’s SPROUT trademark.

Following the TTAB’s denial of its motion to dismiss, Corcamore undertook a series willful, bad-faith procedural maneuvers that resulted in two separate sanctions. When Corcamore’s further procedural misconduct violated both sanctions orders, the TTAB entered default judgment cancelling Corcamore’s SPROUT trademark registration. Corcamore appealed.

On appeal, Corcamore alleged that the TTAB (1) erred in applying Empresa Cubana rather than the Supreme Court of the United States’ Lexmark v. Static Control framework in affirming SFM’s standing, and (2) abused its discretion in granting default judgment as a sanction. On the issue of standing, the Federal Circuit rejected the TTAB’s “unduly narrow” conclusion that the Supreme Court’s Lexmark framework was inapplicable, since Lexmark related to a claim of false advertising under § 1125(a) of the Lanham Act, while Empresa Cubana addressed the right to bring a cancellation proceeding under § 1064. The Federal Circuit concluded that Lexmark applied to § 1064 and § 1125(a) because both are statutory causes of action. Nevertheless, the Court found no meaningful substantive difference between the analytical frameworks for standing expressed in Lexmark and Empresa Cubana, and found that the Lexmark “zone-of-interests” proximate cause analysis and the “real interest” and “reasonable belief of damage” requirements under Empresa Cubana similarly provided a right to bring a cause of action. As such, the Court ultimately agreed with the TTAB’s conclusion that SFM’s pleaded allegations of a likelihood of consumer confusion based on a similarity of the parties’ SPROUTS and SPROUT trademarks, and their respective goods and services, were sufficient to demonstrate a reasonable belief of damage under Empresa Cubana and thus supported the right to challenge Corcamore’s registered trademark via cancellation.

With regard to the TTAB’s grant of default judgment, Corcamore did not challenge the TTAB’s express authority to grant default judgment as a sanction under 37 CFR § 2.120(h) and Fed. R. Civ. P. 37(b)(2). Instead, Corcamore argued that the TTAB had no factual or legal basis to enter default judgment in the first [...]

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The Naked Truth About Trademark Cancellation: Only Harm, No Proprietary Interest Required

The US Court of Appeals for the Federal Circuit determined that a contracting party that contractually abandoned any proprietary interest in a mark may still bring a cancellation action if it can “demonstrate a real interest in the proceeding and a reasonable belief of damage.” Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC, Case No. 19-1567 (Fed. Cir. July 24, 2020) (Reyna, J.) (Wallach, J., dissenting).

Australian sold condoms with the marks NAKED and NAKED CONDOMS, first in Australia in early 2000, then in the United States in 2003. Two years later, Australian learned that Naked TM’s predecessor had registered a trademark NAKED for condoms in September 2003. Australian and Naked TM communicated by email regarding use of the mark for a few years. Naked TM contended that the parties reached an agreement; Australian disagreed and said no final terms were agreed upon. Australian filed a petition to cancel the NAKED trademark registration. Ultimately, and after trial, the Trademark Trial and Appeal Board (TTAB) concluded that Australian lacked standing because it had reached an informal agreement that Naked TM reasonably believed was an abandonment of any right to contest Naked TM’s registration of NAKED. Thus, the TTAB found that Australian lacked a real interest in the proceeding because it lacked a proprietary interest in the challenged mark. Australian appealed.

The Federal Circuit reversed. First, the Court clarified that the proper inquiry was a matter of proving an element of the cause of action under 15 USC § 1064 rather than standing. The Court explained that, contrary to the TTAB’s conclusion, “[n]either § 1064 nor [its] precedent requires that a petitioner have a proprietary right in its own mark in order to demonstrate a cause of action before the Board.” Assuming without deciding that the TTAB correctly determined that Australian had contracted away its rights, the Court found that fact irrelevant. Ultimately, even though an agreement might be a bar to showing actual damages, a petitioner need only show a belief that it has been harmed to bring a petition under § 1064.

The Federal Circuit found that Australian had a reasonable belief in its own damage and a real interest in the proceedings based on a history of two prior applications to register the mark, both of which the US Patent and Trademark Office rejected on the basis that they would have created confusion with Naked TM’s mark. The Court rejected Naked TM’s argument that Australian’s abandonment of those applications demonstrated there was no harm, instead concluding that Australian’s abandonment of its applications did not create an abandonment of its rights in the unregistered mark. Moreover, as a prophylactic rationale, the Court explained that Australian’s sales of products that might be found to have infringed the challenged registration also create a real interest and reasonable belief in harm.

Judge Wallach dissented. Although he agreed that the TTAB erred by imposing a proprietary-interest requirement to bring suit under § 1064, he disagreed that Australian properly demonstrated an alternative, legitimate interest—i.e., a belief [...]

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TTAB Cancellation Proceedings Not Preclusive in District Court, Even Between Same Parties

Addressing the preclusive effect of judgments by tribunals with limited jurisdiction, the US Court of Appeals for the Third Circuit held that trademark cancellation proceedings before the Trademark Trial & Appeal Board (TTAB) do not have preclusive effect against trademark infringement lawsuits in federal district courts. Beasley v. Howard, Case No. 20-1119 (3d Cir. Sept. 17, 2021) (Chagares, J.)

In 1969, Beasley started a band named The Ebonys. In the mid-1990s, Howard joined the band, and in 1997, Beasley obtained a New Jersey state service mark for “The Ebonys.” Several years later, Beasley and Howard parted ways. In 2012, Howard registered “The Ebonys” as a federal trademark with the US Patent & Trademark Office (PTO).

In 2013, Beasley filed a petition with the TTAB to cancel Howard’s mark, arguing that Howard had defrauded the PTO. The TTAB rejected Beasley’s 2013 petition. In 2017, Beasley filed a second petition with the TTAB, again arguing that Howard had defrauded the PTO and for the first time arguing that Howard’s mark could be confused with Beasley’s separate “The Ebonys” mark. The TTAB rejected Beasley’s 2017 petition, this time on claim preclusion grounds, finding that Beasley should have asserted his likelihood-of-confusion claim in his 2013 petition. Beasley did not appeal either dismissal.

In 2019, Beasley initiated a lawsuit in federal district court, requesting that the court vacate Howard’s mark, award Beasley monetary damages and permit Beasley to register his own “The Ebonys” mark with the PTO. The district court dismissed Beasley’s complaint, finding that claim preclusion applied because the complaint turned on the same factual and legal arguments litigated in the 2017 petition, even though Beasley did not seek damages in the 2017 petition. Beasley appealed.

The Third Circuit reversed the dismissal, concluding that the TTAB’ s cancellation proceedings did not preclude Beasley from bringing his § 43(a) infringement claim in the district court. The Court noted that the TTAB has limited jurisdiction to determine the right to register a trademark and does not have authority to consider questions of infringement, unfair competition, injunctions or damages. It reasoned that because the TTAB does not have jurisdiction to award any remedy beyond cancellation of the mark, a broader § 43(a) cause of action for deceptive use in commerce, as alleged by Beasley, could not have been brought in a TTAB cancellation proceeding.

The Third Circuit also rejected Howard’s argument that Beasley should have brought trademark cancellation claims in the district court in the first instance, noting that even though a federal district court has authority to order a cancellation, a TTAB petition is the primary means of securing a cancellation, and that forcing Beasley to litigate in the district court in the first instance would “encourage[] litigants to sit on their claims and undermine[] the Lanham Act’s adjudicative mechanisms.”

Practice Note: In the Third Circuit, plaintiffs are encouraged to bring their trademark cancellation claims before the TTAB in the first instance, rather than waiting to bring their trademark cancellation and trademark infringement claims together before [...]

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Injunctive Relief Available Even Where Laches Bars Trademark Infringement, Unfair Competition Damage Claims

The US Court of Appeals for the 11th Circuit affirmed a district court’s conclusion that laches barred an advertising and marketing company’s claims for monetary damages for trademark infringement and unfair competition, but remanded the case for assessment of injunctive relief to protect the public’s interest in avoiding confusion between two similarly named companies operating in the advertising sector. Pinnacle Advertising and Marketing Group, Inc. v. Pinnacle Advertising and Marketing Group, LLC, Case No. 19-15167 (11th Cir. Aug. 2, 2021) (Branch, J.)

Pinnacle Advertising and Marketing Group (Pinnacle Illinois) is an Illinois-based company and owner of two registered trademarks including the name “Pinnacle.” Pinnacle Illinois learned of a Florida-based company operating under almost the same name that was also in the advertising and marketing space—Pinnacle Advertising and Marketing Group (Pinnacle Florida) —through potential clients and a magazine’s accidental conflation of the two unrelated companies. Several years later, Pinnacle Illinois sued Pinnacle Florida for trademark infringement, unfair competition and cybersquatting. Pinnacle Florida filed a counterclaim seeking to cancel Pinnacle Illinois’s trademark registrations and also alleged that Pinnacle Illinois’s claims were barred by the doctrine of laches.

Following a jury trial, the district court granted Pinnacle Florida’s motion for judgment as a matter of law on Pinnacle Illinois’s cybersquatting claim. The jury returned a verdict in favor of Pinnacle Illinois on its claims for trademark infringement and unfair competition, awarding Pinnacle Illinois $550,000 in damages. The district court then granted Pinnacle Florida’s motion for judgment as a matter of law on its laches defense, concluding that Pinnacle Illinois’s trademark infringement and unfair competition claims were barred by laches because it waited more than four years to bring suit after it should have known that it had a potential infringement claim against Pinnacle Florida. The district court also cancelled Pinnacle Illinois’s registrations because it concluded that Pinnacle Illinois’s marks were merely descriptive and lacked secondary meaning. Pinnacle Illinois appealed.

Pinnacle Illinois argued that the district court abused its discretion in finding that Pinnacle Illinois’s claims were barred by laches, and that even if laches did bar Pinnacle Illinois’s claims for money damages, the district court should have considered whether injunctive relief was proper to protect the public’s interest in avoiding confusion between the two companies. Pinnacle Illinois also argued that the district court erred when it cancelled its registrations without regard to the jury’s findings of distinctiveness and protectability or the presumption of distinctiveness afforded to its registered marks.

The 11th Circuit found that the district court did not abuse its discretion in determining that laches barred Pinnacle Illinois from bringing its trademark infringement and unfair competition claims for monetary damages. Pinnacle Illinois sued after the Florida four-year statute of limitations had passed, and the Court found that the company was not excused for its delay because it did not communicate with Pinnacle Florida about the infringement until it filed suit. Pinnacle Florida also suffered economic prejudice because it invested significant time and money, including around $2 million, in developing its business under [...]

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Don’t Count Your Lamborghinis Before Your Trademark is in Use

The US Court of Appeals for the Ninth Circuit affirmed a grant of summary judgment, finding that a trademark registrant had alleged infringement of its trademark without having engaged in bona fide use of the trademark in commerce, as required by the Lanham Act. The Court found no material issue of fact as to whether the registrant had used the mark in commerce in a manner to properly secure registration, and the alleged infringer therefore was entitled to cancellation of the registration. Social Technologies LLC v. Apple Inc., Case No. 320-15241 (9th Cir. July 13, 2021) (Restani, J., sitting by designation)

This dispute traces back to a 2016 intent-to-use US trademark application filed by Social Technologies for the mark MEMOJI in connection with a mobile phone software application. After filing its application, Social Technologies engaged in some early-stage activities to develop a business plan and seek investors. On June 4, 2018, Apple announced its own MEMOJI software, acquired from a third party, that allowed users to transform images of themselves into emoji-style characters. At that date, Social Technologies had not yet written any code for its own app and had engaged only in promotional activities for the planned software.

Apple’s MEMOJI announcement triggered Social Technologies to rush to develop its MEMOJI app, which it launched three weeks later (although system bugs caused the app to be removed promptly from the Google Play Store). Social Technologies then used that app launch to submit a statement of use for its trademark application in order to secure registration of the MEMOJI trademark. The record also showed that over the course of those three weeks, Social Technologies’ co-founder and president sent several internal emails urging acceleration of the software development in preparation to file a trademark infringement lawsuit against Apple, writing to the company’s developers that it was “[t]ime to get paid, gentlemen,” and to “[g]et your Lamborghini picked out!”

By September 2018, Apple had initiated a petition before the Trademark Trial & Appeal Board to cancel Social Technologies’ MEMOJI registration. Social Technologies responded by filing a lawsuit for trademark infringement and seeking a declaratory judgment of non-infringement and validity of its MEMOJI registration. When both parties moved for summary judgement, the district court determined that Social Technologies had not engaged in bona fide use of the MEMOJI trademark and held that Apple was entitled to cancellation of Social Technologies’ registration. Social Technologies appealed.

Reviewing the district court’s grant of summary judgment de novo, the Ninth Circuit framed its analysis under the Lanham Act’s use in commerce requirement, which requires bona fide use of a mark in the ordinary course of trade and “not merely to reserve a right” in the mark. The issue on appeal was whether Social Technologies used the MEMOJI mark in commerce in such a manner to render its trademark registration valid.

The Ninth Circuit then explained the Lanham Act’s use in commerce requirement, which requires “use of a genuine character” determined by the totality of the circumstances (including “non-sales [...]

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“You’ve Changed!”—New Trademark and TTAB Fees Incoming

Effective January 2, 2021, the United States Patent and Trademark Office (“USPTO”) is increasing and adding certain trademark and Trademark Trial and Appeal Board (“TTAB”) fees. The changes come after a nearly three-year fee status quo.

The following TTAB fees will increase anywhere from $25 to $200:

  • Petition to cancel filed through the Electronic System for Trademark Trials and Appeals (“ESTTA”) (now $600 per class);
  • Notice of opposition filed through ESTTA (now $600 per class);
  • Initial 90-day extension request for filing a notice of opposition, filed through ESTTA (now $200 per application);
  • Second 60-day extension request for filing a notice of opposition, filed through ESTTA (now $200 per application);
  • Final 60-day extension request for filing a notice of opposition, filed through ESTTA (now $400 per application); and
  • Ex parte appeal filed through ESTTA (now $225 per class).

New TTAB fees are also taking effect. A $100 fee per application will apply for a second request for an extension of time to file an appeal brief in an ex parte appeal filed through ESTTA (and for any subsequent extension requests). A $200 per class fee will apply for appeal briefs in an ex parte appeal filed through ESTTA. A $500 per proceeding fee will apply to requests for oral hearings.

As before, there will be no fee for a first 30-day extension request for filing a notice of opposition filed through ESTTA. The USPTO will also begin issuing partial refunds for petitions to cancel in default judgments. These refunds, however, will be available only if the cancellation involves solely an abandonment or nonuse claim, if the defendant did not appear, and if there were no filings in the proceeding other than the petition to cancel.

Additionally, USPTO trademark and TTAB filings which can be and are submitted on paper will cost more than filing their electronic counterparts.

Other key USPTO trademark fee changes include the following: TEAS standard application, now $350 per class; TEAS Plus application, now $250 per class; the processing fee for failing to meet TEAS Plus requirements, now $100 per class; Section 8 or 71 declaration filed through TEAS, now $225 per class; petition to the Director filed through TEAS, now $250; and a petition to revive an abandoned application filed through TEAS, now $150. No fee will apply for an electronically filed Section 7 request to amend a registration before submitting a Section 8 or 71 declaration, as long as the filing serves only to delete goods, services, and/or classes in the request. There will, however, now be a fee assessed for deleting goods, services, and/or classes from a registration after submitting a Section 71 or 8 declaration, but before that declaration is accepted ($250 per class if filed through TEAS). Lastly, a letter of protest will now cost $50 per application.

While the changes outlined above are key, practitioners should be mindful of potential changes to all fees applicable to their specific situation and consult the USPTO’s Final Rule, available here, to ensure [...]

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No Refunds: Cancellation of Patent Claims in IPR Isn’t a Taking

The US Court of Appeals for the Federal Circuit found that cancellation of a patent in an inter partes review (IPR) proceeding is not a taking and does not grant the patentee any compensable claim against the United States. Christy, Inc. v. United States, Case No. 19-1738 (Fed. Cir. Aug. 24, 2020) (Hughes, J.).

After Christy sued two competitors for infringement of a patent directed to a vacuum, one of the competitors filed petitions for IPR. The Patent Trial and Appeal Board (PTAB) instituted the IPRs and ultimately found a majority of the patent claims unpatentable. Christy appealed to the Federal Circuit, which affirmed the PTAB’s invalidity decision.

Christy then filed a class action suit in the US Court of Federal Claims to recover from the government the issuance and maintenance fees Christy had paid for the patent, investments Christy had made in the patented technologies, attorneys’ fees from defending the IPR proceedings, the value of the patent claims, royalties and other payments for use of the patents. The government moved to dismiss all six claims for lack of subject matter jurisdiction and failure to state a claim. The court partially granted the motion to dismiss, but found that it had jurisdiction to consider Christy’s Fifth Amendment takings claim. The court found that Christy did not state a claim for relief on the merits, and reasoned that the cancellation of claims in an IPR did not amount to a compensable taking of Christy’s property interest. The court held that it did not have jurisdiction to consider Christy’s alternative illegal exaction claim, since a statute granting authority to the US Patent and Trademark Office (PTO) to refund mistakenly excessive patent-related fees displaced the court’s Tucker Act jurisdiction. In any case, the court found that on the merits, Christy’s issuance and maintenance fees were properly owed at the time they were paid, and were not paid by mistake. The government did not require Christy to pay any alleged damages on the government’s behalf, or at all, and so Christy’s theory that damages were illegally exacted was found “devoid of merit.” Christy appealed.

On appeal, Christy argued that the claims court erred in finding 1) that Christy failed to state a compensable taking claim based on the cancellation of patent claims, 2) that the claims court lacked subject matter jurisdiction over the illegal exaction claim, and 3) that Christy failed to state a plausible illegal exaction claim. The Federal Circuit disagreed, affirming the claims court and reiterating its finding in Golden v. United States that the AIA did not displace Tucker Act jurisdiction over IPR-based takings claims, and that cancellation of patent claims in an IPR cannot be a taking under the Fifth Amendment. Thus, the Court found that the claims court correctly found that it had jurisdiction over Christy’s takings claim, but that such cancellation was not a taking.

The Federal Circuit next considered Christy’s illegal exaction claim. Illegal exaction occurs when money is “improperly paid, exacted, or taken from the claimant [...]

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Supreme Court: “Booking.com” Can Be Registered as Trademark

By an 8-1 vote, the Supreme Court rejected a per se rule by the US Patent and Trademark Office (PTO) that a generic word followed by “.com” is necessarily generic and therefore ineligible for trademark protection. U.S. Patent and Trademark Office et al. v. Booking.com BV, Case No. 19-46 (Supr. Ct. June 30, 2020) (Ginsberg, Justice) (Sotomayor, Justice, concurring) (Breyer, Justice, dissenting). In so doing, the Supreme Court found that the proper test for whether “booking.com” is eligible for trademark protection for travel booking services is whether the public perceives “booking.com” as identifying a single source.

Trademarks identify and distinguish the goods and services of a single party, and the Lanham Act establishes a system of trademark registration. Among other requirements for registration, a trademark must be distinctive, as judged along a spectrum of trademark distinctiveness. Distinctive trademarks, in order of most to least strength, include fanciful or made-up words (e.g., KODAK); arbitrary marks that are existing words that have no connection to the underlying goods or services (e.g., CAMEL cigarettes); and then suggestive marks, which require some mental thought to connect them to an attribute of the products or services (e.g., TIDE laundry detergent). Descriptive words are not inherently distinctive (e.g., BEST BUY), but can still be protectable and registerable upon proof of acquired distinctiveness (i.e., secondary meaning) arising from extensive use and advertising by the trademark owner. At the low end of the spectrum of distinctiveness are generic terms, which merely refer to a category or class of goods or services (e.g., wine or art) and are therefore never protectable or registerable as trademarks.

The PTO refused registration for “Booking.com,” citing policy developed from a 132-year-old Supreme Court case which held that the addition of “Company” to a generic word does not render the resulting name (i.e., Generic Company) distinctive.  See Goodyear’s India Rubber Glove MfgCo. v. Goodyear Rubber Co., 128 U. S. 598 (1888). After the Trademark Trial and Appeal Board (TTAB) affirmed the refusal of registration, Booking.com appealed to the US District Court for the Eastern District of Virginia, which reversed the refusal of registration, finding that “‘Booking.com’—unlike ‘booking’—is not generic. The district court found that the consuming public primarily understands that BOOKING.COM does not refer to a genus, rather it is descriptive of services involving ‘booking’ available at that domain name.”  The US Court of Appeals for the Fourth Circuit affirmed the judgment of the Virginia federal court (IP Update, Vol. 22, No. 3), and the PTO sought certiorari from the Supreme Court.

The Supreme Court granted certiorari (IP Update, Vol. 22, No. 11), and Justice Ruth Bader Ginsberg delivered the opinion of the Court, with which six other justices joined. Justice Sotomayor filed a short concurring opinion, and Justice Breyer dissented. The question under review by the Court was “whether the addition by an online business of a generic top-level domain (.com) to an otherwise generic term can create a protectable trademark.

Both parties in Booking.com agreed that “booking” is generic for the kind of travel [...]

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TTAB Judicial Appointments are Determined Constitutionally Sound

Addressing for the first time whether the Supreme Court of the United States’ recent decision in United States v. Arthrex, Inc. also applied to the Trademark Trial and Appeal Board (TTAB), the US Court of Appeals for the Federal Circuit held that it did not, upholding the constitutionality of TTAB judicial appointments and affirming the TTAB’s cancellation of the SCHIEDMAYER trademark. Piano Factory Group, Inc. v Schiedmayer Celesta GMBH, Case No. 20-1196 (Fed. Cir. Sept. 1, 2021) (Bryson, J.)

Schiedmayer Celesta is the remaining corporate entity from a centuries-old line of German keyboard instrument manufacturers that uses the SCHIEDMAYER trademark in connection with the sale of its products. Sweet 16 Musical Properties and Piano Factory Group (collectively, Piano Factory) operated Hollywood Piano retail outlets where it sold “no-name” pianos purchased from China that were affixed with “Schiedmayer” labels. The owner of Piano Factory, believing the SCHIEDMAYER mark had been abandoned, applied to register the SCHIEDMAYER mark, and the registration issued in 2007.

In 2015, Schiedmayer filed a petition to cancel Piano Factory’s registration, alleging that it falsely suggested a connection with Schiedmayer and, thus, violated Section 2(a) of the Lanham Act. After the TTAB granted the petition to cancel, Piano Factory appealed.

Between the time that the parties filed their appeal briefs and the Federal Circuit issued its decision, the Supreme Court issued its decision in United States v. Arthrex, holding that the appointment of Patent Trial & Appeal Board (PTAB) administrative judges violated the Appointments Clause of Article II of the Constitution. On appeal, Piano Factory argued that the appointment of TTAB administrative judges (specifically, the administrative judges who issued the decision Piano Factory was appealing) was likewise unconstitutional. However, the Court disagreed, citing language from the Arthrex decision that “effectively confirmed that . . . the statutory scheme governing TTAB decision-making is not subject to the Appointments Clause problem the Court identified with regard to the PTAB.”

Additionally, Piano Factory cited the Trademark Modernization Act of 2020 (TMA)—which explicitly addressed this issue—for support. Piano Factory argued that since the TMA was not enacted until after the TTAB’s decision to cancel the SCHIEDMAYER registration, its enactment indicated that the TTAB was previously flawed. Again, the Federal Circuit disagreed, stating “the 2020 legislation itself makes clear that it merely confirmed, and did not alter” the framework that was in place prior to the TMA.

Piano Factory also challenged the merits of the TTAB’s decision, including its application of the four-factor test for false association, which considers:

  1. Whether the challenged mark is identical or nearly identical to a name previously used by another person;
  2. Whether the mark would be understood as a unique and unmistakable reference to that person;
  3. Whether the person referenced by the challenged mark was connected with the applicant’s activities and
  4. Whether the earlier user’s name has sufficient fame such that a connection with applicant would be presumed when the contested mark was used to identify the applicant’s goods.

Piano Factory disputed the [...]

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Third Circuit Orders Second Look at Delays and Disgorgement of Profits

In a long-running trademark dispute between two charitable organizations, the US Court of Appeals for the Third Circuit found that the appellee did not preserve its challenge to the district court’s denial of summary judgment on its trademark cancelation claims, the appellant waived any challenge to the validity of the defendant’s mark and the district court did not abuse its discretion by declining to award enhanced monetary relief or prejudgment interest. Kars 4 Kids Inc. v America Can!, Case Nos. 20-2813; -2900 (3rd Cir., August 10, 2021) (Shwartz, J.) The Court also vacated-in-part and remanded for the district court to reexamine its laches and disgorgement conclusions under applicable law.

As charitable organizations that sell donated vehicles to fund children’s programs, both America Can (as CARS FOR KIDS) and Kars 4 Kids have used similar trademarks since their respective starts in the early- to mid-1990s. In 2003 and 2013, America Can sent cease and desist letters to Kars 4 Kids after seeing its advertisements in the state of Texas. In 2014, Kars 4 Kids sued America Can for federal and state trademark infringement, unfair competition and trademark dilution claims. Less than one year later, America Can filed its own suit—alleging the same claims—plus a petition to cancel a Kars 4 Kids trademark registration and seeking a nationwide injunction and financial compensation.

Both parties appeal from a denial of their respective summary judgment motions as well as (1) the jury finding that Kars 4 Kids willfully infringed America Can’s trademark rights in Texas, (2) the rejection of America Can’s petition for cancellation of a KARS FOR KIDS trademark registration finding that the registration was not knowingly procured by fraudulent means, (3) the conclusion that laches did not apply against America Can’s claims, (4) disgorgement of Kars 4 Kids profits in Texas totaling about $10.6 million, (5) rejection of enhanced monetary relief and (6) an injunction against Kars 4 Kids with respect to use of its trademark in Texas and from using the carsforkids.com domain name. On appeal, Kars 4 Kids also renewed its motion for judgment as a matter of law, including an argument that America Can’s trademark is invalid.

The Third Circuit rejected Kars 4 Kids’ effort to overturn the jury’s liability verdict, concluding that Kars 4 Kids failed to preserve its challenge to the validity of the CARS FOR KIDS trademark when it left that issue out of its Rule 50(a) motion. Instead, evidence of America Can’s continuous use of the CARS FOR KIDS mark well prior to 2003 predated Kars 4 Kids’ first use of its trademark in Texas in 2003 and established America Can’s ownership of the CARS FOR KIDS trademark in Texas.

However, after examining the laches claim, the Third Circuit explained that it considered (1) the plaintiff’s inexcusable delay in bringing suit and (2) prejudice to the defendant as a result of the delay. With no statute of limitations under the Lanham Act, the parties agreed that their claims are properly analogized to New Jersey’s six-year [...]

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