December 3, 2020

Volume X, Number 338

Advertisement

December 02, 2020

Subscribe to Latest Legal News and Analysis

December 01, 2020

Subscribe to Latest Legal News and Analysis

November 30, 2020

Subscribe to Latest Legal News and Analysis

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 of damage with a reasonable basis in fact. Judge Wallach would have given dispositive weight to the agreement between Australian and Naked TM in which Australian supposedly gave up any right to contest Naked TM’s rights in the mark NAKED.

Practice Note: Ultimately, although the majority and dissent disagreed about how to apply the law to the facts, Australian Therapeutic Supplies stands as a firm reminder that something less than a proprietary interest is required in order to challenge a trademark registration. How much less is a fact-specific inquiry.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 218
Advertisement

TRENDING LEGAL ANALYSIS

Advertisement
Advertisement

About this Author

Paul Devinsky, Intellectual Property Attorney
Partner

Paul Devinsky is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  He focuses his practice on patent, trademark and copyright litigation and counseling, as well as on trade secret litigation and counseling, and on licensing and transactional matters and post-issuance PTO proceedings such as reissues, reexaminations and interferences.

202-756-8369
Amol Parikh, McDermott Will Emery, Chicago, patent lawyer, Intellectual Property Litigation Attorney
Associate

Amol Parikh is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office.  He focuses his practice on IP litigation, counseling and prosecution. Amol has been recognized as a 2011 Illinois Rising Star in Intellectual Property by Law & Politics.  Rising Stars are lawyers under the age of 40 that have been in practice for 10 years or less.  No more than 2.5 percent of the lawyers in Illinois are named as Rising Stars.

Amol has...

312-984-6477
Advertisement
Advertisement