Thursday, December 17, 2015

Defendant can't take advantage of TM abandonment it created

Axiom Worldwide, Inc. v. HTRD Group Hong Kong Ltd., 2015 WL 8113965, No. 8:11–cv–1468–T–33 (M.D. Fla. Oct. 30, 2015)
Axiom sued seeking to confirm its ownership of certain IP, including trademarks, related to medical devices, and for infringement resulting from its unauthorized use.  It won summary judgment against numerous defendants, and prevailed again after a non-jury trial, receiving damages and a permanent injunction, which was affirmed.
Defendants sought modification of the permanent injunction, which enjoined them from using Axiom’s trademarks, including “DRX 9000” and “Axiom Worldwide” for any commercial purpose.  Defendants alleged that Axiom had abandoned the marks for medical devices; that the federal registrations for Axiom Worldwide and DRX 9000 had been cancelled; that Axiom has had no substantive operations in the United States since 2010; and that at least since 2011, no new devices in the “DRX” line could be offered for sale in the U.S. because the FDA 510(k) pre-market clearances for those devices were de-listed. Thus, the legal basis for the injunction allegedly no longer existed.
Axiom responded that it hadn’t abandoned the marks but rather licensed them to other companies, who were using them on the internet at, in fax blasts to doctors, and at trade shows both domestically and internationally. Also, Axiom argued that defendants had flagrantly violated the injunction, and that any nonuse was their fault.  The court heard testimony from James Gibson, president of Axiom.
An injunction may be modified when its original purposes are not being fulfilled in any material respects, or perhaps when the party seeking modification shows that a significant change in circumstances warrants revision.  Either way, defendants failed to show entitlement to a change.  Defendants argued that the abandonment of the marks, and their consequent availability to the public, constituted a change in circumstances.
Gibson conceded that Axiom had no substantive business operations in the United States, apart from litigation, since 2010, although he testified to Axiom’s efforts post-judgment and post-appeal to regain a footing in the DRX medical device service and sales market.  Nonuse for three years is prima facie evidence of abandonment, creating a rebuttable presumption of intent not to resume use.  Moreover, intent to resume use “cannot be far-flung or indefinite; rather there must be an intent to resume use within the reasonably foreseeable future.”  However, here, much of the period of nonuse was caused by defendants and others like them, and was excusable; further, Axiom took efforts to resume meaningful use of the marks in a timely manner.
For some background: Axiom created an LLC and transferred certain assets to the LLC; the LLC ran into financial trouble and its assets were bought by HTRD, which filed paperwork with the PTO to assign Axiom’s trademarks to itself.  HTRD used Excite Medical to make and sell DRX devices using Axiom’s trademarks, designs, and other intellectual property.  It was this that led to the lawsuit which established that Axiom owned the relevant IP. The court ordered the cancellation of HTRD’s registrations of the trademarks and directed the PTO to amend its records to show Axiom as the owner.
The first notice of cancellation for failure to file a section 8 declaration for “Axiom Worldwide” came while HTRD claimed to own the marks and before the district court’s ruling that Axiom owned the marks. A later notice of cancellation, for the “DRX 9000” word mark, came after the entry of judgment, when the marks had been reassigned to Axiom.  HTRD filed the first required Section 8 Declarations for both marks between the fifth and sixth anniversaries of the registration, but the PTO rejected the declaration for “Axiom Worldwide” because HTRD didn’t have proper chain of title. For the “DRX 9000” mark, the PTO accepted the declaration from HTRD, but cancelled the registration for failure to file the declaration at the ten-year mark.  In any event, the owner didn’t properly file section 8 declarations, and that couldn’t be blamed on the PTO or someone else.
In April 2011, purportedly to protect the marketplace from counterfeit goods, Axiom de-listed its DRX 9000 series of products with the FDA, which prevented it from making DRX devices in the U.S. After the litigation, Axiom conveyed the trademarks to other entities, as a result of substantial judgments against it.  One of those other entities is currently authorized by the FDA to manufacture DRX 9000 devices, because it re-listed the 510(k) clearance with the FDA this year.  Although these entities haven’t made new devices, Gibson testified that they could do so if they received a customer order, and that they’d been advertising new machines for sale since attending a trade show in January 2015 in Dubai. They also attended trade shows in Nevada and the West Coast and intended to go to others ithis fall. The DRX 9000 mark and the Axiom Worldwide trademark and logo have been used at these trade shows. Axiom also showed “fax blasts” from between February and June 2014, promoting the sale of service parts and used devices for the DRX machines (the latter for international customers, which would seem to create a use in the US issue). Gibson further testified that he attempted to regenerate Axiom’s business activity but was unable to obtain investors who were fearful of the injunction and of defendants’ continued violations.
Axiom showed that defense counsel, on behalf of defendant Excite Medical, filed an application with the PTO to register “DRX 9000” for medical devices in May 2015.  Its declaration that “the applicant is the owner of the trademark or service mark” or alternatively, that “the applicant is entitled to use the mark in commerce” and that “the signatory believes .... no other person has the right to use the mark in commerce ....” was, according to Axiom, clearly false, and a blatant violation of the injunction. Defendants responded that it was merely an ITU application, and that  Excite Medical intended to use the mark for “back braces,” not for the spinal decompression device at issue in this litigation.
The court concluded that, “despite some missteps and apparent difficulty getting business restarted, the whole of this litigation demonstrates Axiom’s efforts to reclaim the marks for use of the marks in commerce.”  Its actions of suing after learning that HTRD claimed ownership of the intellectual property and had reassigned the Axiom trademarks to itself and begun manufacturing and selling DRX 9000 devices weighed against any finding of inexcusable nonuse. “While Axiom ceased further operations pending a determination that it owned the marks, its conduct in seeking to regain control of its marks and intellectual property simply does not lend support to Defendants’ claims of abandonment nor their request for modification.”  The court wasn’t willing to allow defendants to benefit from a problem they’d helped cause.  Their attempts to do so included the ITU, since the injunction explicitly prevented defendants from “[m]aking representations that they own or are authorized to use any of the trademarks or intellectual property rights and proprietary information this Court has found belong to Axiom.” Defendants’ and their counsel’s belief in the marks’ abandonment didn’t displace the injunction, and their insistence on testing its boundaries weighed against a finding that the injunction had served its intended purpose.
Although Axiom’s financial circumstances made it doubtful that Axiom itself could reenter the DRX sales or service business, it had post-litigation licensing agreements that allowed it and its transferee to do so, and those entities were actively marketing the DRX products and using the marks for their sales and service efforts. (The court again didn’t address the international v. use in the US aspects of this marketing.)  “[T]hese intentional and concrete efforts to reestablish business in the DRX line of machines are not far flung or indefinite.”

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