Monday, January 26, 2015

Distributor's TM registration blocks manufacturer's claim

Mighty Enterprises, Inc. v. She Hong Indus. Co. Ltd., 2015 WL 276771, No. 2:14–cv–06516 (C.D. Cal. Jan. 22, 2015)
Mighty distributes and services heavy machinery. She Hong makes heavy machinery under the name “Hartford.” Mighty sued She Hong for breach of contract and related claims, based on alleged breach of an oral contract granting Mighty exclusive rights to distribute and service Hartford machinery in the US. She Hong counterclaimed for false advertising and violation of California’s UCL.
She Hong alleged first sales of Hartford machinery in the US in 1982.  But in 2014, Mighty applied to register the Hartford mark in the US, attaching pictures of She Hong’s machinery to its application.  The registration was approved, and She Hong alleged that Mighty wrongfully applied for it.  Mighty allegedly used the Hartford marks in its advertising to attract She Hong’s consumers, falsely suggesting association with She Hong or that Mighty was the manufacturer of Hartford products.
The court rejected She Hong’s legal theory as alleged, because She Hong doesn’t “presently own” the rights to the Hartford mark.  Mighty’s registration was prima facie evidence of the validity of its mark.  Given that “admitted” ownership, the theory that use of the mark was false advertising couldn’t work.  It “put the cart before the horse—there can be no claim for false advertising against a company that advertises with a registered trademark it owns.”
She Hong’s position was “understandable,” but its legal theory depended on owning the rights to a mark it didn’t own.  Since the counterclaim was permissible, the court wouldn’t let She Hong amend without an “exceedingly persuasive” argument.  Comment: wouldn’t an “exceedingly persuasive” argument be: this registration is invalid because She Hong is the true owner; the registration should be cancelled/She Hong’s allegations if true would overcome the presumption of validity; after that the infringement/false advertising claims are cognizable?  I wonder why the court didn’t point to this alternative theory.

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