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‘Maybe’ Is Not Enough: Foreign Business Fails to Obtain Declaratory Judgment for Potential Use of Trademark

A foreign business recently failed to prevail in a trademark lawsuit because it could not demonstrate it had immediate plans to commence use of the trademark in the United States.

Plaintiff-appellant Abdul Rehman Karim Saleh co-owns an online apparel business that sells to customers in India and Thailand. The apparel has the marks “SULKA” and “PHULKA.” Saleh looked to expand into the U.S. market, but ran into a problem: a luxury menswear brand already owns U.S. trademark registrations relating to the SULKA mark. Sulka Trading (i.e., A. Sulka and Company Limited and Sulka Trading Limited), once a “men’s haberdashery that . . . counted the Duke of Windsor, Winston Churchill, Henry Ford and Clark Gable among its customers,” closed its last U.S. shop on New York City’s Madison Avenue in 2002. Yet, when Saleh asked Sulka Trading to voluntarily withdraw the trademark registrations, as the SULKA mark appeared to have been “abandoned” due to its lack of use in U.S. commerce for many years, Sulka Trading refused. Sulka Trading explained the value of the SULKA mark to the company and how the brand was being used in connection with the sale of ties in the U.S. market and the company’s “imminent” plans to launch a new clothing line.

Saleh escalated the matter by filing a lawsuit in the Southern District of New York, seeking a declaratory judgment that Sulka Trading had lost any trademark rights in the SULKA mark. But, before reaching the question of validity of the trademark registrations, the district court dismissed the case for lack of subject matter jurisdiction.

The Declaratory Judgment Act (28 U.S.C. § 2201(a)) confers a district court the power to “declare the rights and other legal relations of any interested party seeking such declaration” in “a case of actual controversy.” Where a plaintiff seeks a declaratory judgment with respect to a trademark, a plaintiff in the Second Circuit must allege that it “has engaged in a course of conduct evidencing a definite intent and apparent ability to commence use of the marks on the product.” Saleh v. Sulka Trading Ltd., at *3 (quoting Starter Corp. v. Converse, Inc.).

The district court concluded there was no genuine controversy capable of supporting the exercise of subject matter jurisdiction because Saleh’s plans to conduct business in the United States were too vague and were largely formulated after Saleh had filed the original complaint, thereby making them irrelevant to the question of jurisdiction.

Focusing on the former ground, the Second Circuit affirmed the district court’s dismissal, finding Saleh had failed to “point to specific conduct” evidencing his “intent and ability” to sell apparel bearing the SULKA mark to customers in the United States. The Second Circuit took issue with Saleh’s allegations that he “might” do certain actions (e.g., use a certain shipper or not, use a certain processor or not, contract with on-line portals or not). The court concluded that “[t]hese hypothetical possibilities, without tangible steps to effectuate those plans, are not enough to create a ‘definite and concrete’ dispute between the parties.” Saleh, 2020 WL 2078980, at *5. Saleh’s application to register the SULKA mark in the United States was the only alleged conduct related to the U.S. market. This alone, however, was insufficient to show Saleh’s readiness to do business in the United States.

While providing examples of conduct deemed sufficient to demonstrate a case or controversy, the court observed there is no “one-size-fits-all” approach to deciding whether a party has taken the necessary steps to satisfy the jurisdictional requirements for a declaratory judgment proceeding; instead, each situation must be assessed on case-by-case basis. A business’ foreign activity can be relevant to determining whether a business is “ready and able” to expand into the United States, but to move past the pleading stage, a plaintiff must allege it has taken concrete action showing both the “definite intent and apparent ability” to commence use of the marks in the United States.

© 2020 Proskauer Rose LLP.

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About this Author

Yena Hong IP Lawyer Proskauer Rose
Associate

Yena Hong received her J.D. from Fordham University School of Law. While at Fordham, she was an articles and notes editor on the Fordham Law Review, a member of the Brendan Moore Trial Advocacy Program and president of the Asian Pacific American Law Students Association.

Yena holds a B.A. from the University of Pennsylvania.

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