B&B Hardware, Inc. v. Hargis Industries, Inc., No.
06CV01654, 2016 WL 3615833 (E.D. Ark. May 16, 2016)
So, despite all the commotion surrounding this case, B&B
forgot to renew its registration,
which was duly cancelled. A cautionary
story for clients! Also,
incontestability is a really big deal, which deserves to be much, much better
policed.
As you may recall, B&B sells self-sealing fasteners for
the aerospace industry under the mark “Sealtight.” Hargis sells fasteners for
the construction trade under the mark “Sealtite.” As the Supreme Court said,
the full story of the litigation “could fill a long, unhappy book.” And here we go again, denying Hargis’ motion
for judgment on the pleadings.
B&B registered Sealtight in 1993. It opposed Hargis’s 1996 application; Hargis
sought to cancel B&B’s mark, and then B&B sued for infringement. A jury found in favor of Hargis, holding that
B&B’s mark was “merely descriptive” and had not acquired a “secondary
meaning.” Hargis’s petition to cancel B&B’s trademark was dismissed in June
2003. In 2006, B&B filed a
declaration of incontestability, “negat[ing] the first jury’s findings on
descriptiveness and secondary meaning.”
B&B then sued again. Before
the second case went to the 2010 jury, the TTAB found a likelihood of
confusion; the jury again found for Hargis on all claims. But the Supreme Court held that TTAB
decisions have preclusive effect! Thus,
the 2010 judgment was remanded for further proceedings, “including what
remedies may be awarded for infringement.” The Eighth Circuit instructed the
trial court to “give preclusive effect to the decision of the TTAB on
likelihood of confusion.”
But then! After the
remand, “Hargis discovered that B&B failed to renew its registration,
resulting in its cancellation some time after the 2010 trial.” The PTO’s official record of the cancellation
says the mark was cancelled on February 29, 2016, but Hargis argued that the
cancellation occurred some time prior, which I suspect is true given ordinary
PTO practice but have not specifically investigated. The cancellation record is a ministerial act; the
registration lapsed when the Section 8 deadline passed. See Land O' Lakes, Inc.
v. Hugunin, 88 U.S.P.Q.2d 1957, 2008 T.T.A.B. Lexis 47, at *4–5 (T.T.A.B.2008)
(precedential) (“[T]he date of expiration of application's registration is not
dependent on the date the Office undertook the ministerial function of entering
the cancellation into the USPTO database.”).
B&B since reapplied for registration, which is pending,
but obviously can’t provide B&B with priority over Hargis even if it’s
ultimately granted. (If it is, because
confusion with Hargis’s use is unlikely and, though preclusion applies in court
to TTAB holdings, the PTO isn’t bound by prior rulings on different marks, then
Hargis will have a good argument for its saga replacing Bleak House as the definititive account of ridiculous litigation; I
haven’t even mentioned some of the details of what went on before.)
The district court confronted the question: now what?
First, B&B didn’t waive review of the non-infringement
claims such as unfair competition, nor was it estopped from relitigating them
or barred by the law of the case. “Considering
how intertwined ‘likelihood of confusion’ is with the other claims, it cannot
be ruled that B&B waived or is estopped from re-litigating the other claims
when it explicitly argued that such an important element was improperly
decided.” Nor did the law of the case
govern, because B&B “was
certainly a significant development that changed the game for both parties.” And the trial court’s earlier error about
preclusion “also affected the admissibility of evidence. B&B was limited by
pretrial rulings on how the decision could be used during trial.” (Query: why would the TTAB ruling be
admissible now? Of course the arguments for why it’s not relevant
now have a different basis.)
Then, the court ruled, “the Lanham Act does not require a
registrant to maintain [its] registration through to trial.” Sections 32 and 43(a) have the same basic
elements, except that incontestability is conclusive evidence of validity
(subject to various defenses). Hargis
argued that B&B could no longer rely on its registration, because it doesn’t
have one. “B&B argues that its mark
was registered during the period of infringement and its subsequent
cancellation only changes the theory on which it can rely for the time after
cancellation.”
Hargis argued that the words “registrant,” “registered
mark,” and “registered on the principal register” in the Lanham Act all require
B&B to maintain its registration for the duration of the suit, rather than
simply possess it when Hargis allegedly infringed. The court considered this an issue of first
impression. (I’m dubious of the court’s reasoning
here. Consider the situation where the
registration is directly and successfully attacked. The court properly orders the registration
cancelled. It’s beyond peradventure that
the presumptions accorded the registration, although they applied at the outset
of the case, can’t still be accorded the former registration. The registration did exist when the litigation
started, but now it doesn’t. Even if the
mark is cancelled for reasons that are not absolute bars, this should be true. Consider, for example, fraud on the PTO: the
mark is in theory registrable, but the registrant deliberately lied to register
it with the intent to deceive the PTO, then sues someone else. The fraud is proven and the registration is
cancelled. The plaintiff claims that it
still has common-law rights (say, secondary meaning for a descriptive term). The defendant shouldn’t still confront the presumption of ownership/validity that existed
at the outset of the case.)
The court reasoned that, when an unregistered mark becomes
registered during the pendency of the litigation, that doesn’t change the fact
that it was unregistered at the outset and thus no burden-shifting from the
trademark claimant is appropriate. But
that seems completely different to me, because the initial basis of the
claimant’s rights—its unregistered common-law rights—is still present in the case,
and those rights simply continue. It
would be completely unfair to, say, a §33(b) remote good faith user to say that
the registration relates back to the initiation of the case, when a key point
of registration is to fix the date on which rights became nationwide as a
matter of law.
But, for the very same reason, the result should be
different here: registration provides statutory
rights that are explicitly provided over and above the common law, and it was
those things—nationwide priority, the very broad description of the goods in
the specification, and, for incontestability, distinctiveness as a matter of
law—that allowed B&B priority and victory in its likely confusion claim. Those are now gone from B&B’s arsenal. B&B should be able to claim whatever
common-law priority it has, including rights concurrent with its federal registration,
but the cancelled registration ought to be treated as if it had never existed.
However, relying on the analogy to unregistered marks that
become registered, the court held that “registration only impacts the theory of
recovery during periods of infringement.”
The court also considered that its rationale was in line with
constructive notice: even a nonrenewed registration provided constructive notice
during the period of registration. Action Temp. Serv., Inc. v. Labor Force,
Inc., 870 F.2d 1563, 1566 (Fed. Cir. 1989).
But constructive notice and existence of rights are pretty
different. Indeed, the Action Temp court continued that the
TTAB’s conclusion that an initially unlawful adoption of a mark stayed unlawful
was “flawed.” Though use during the
pendency of another’s now-cancelled registration wasn’t “lawful” in the sense
necessary to support a concurrent use registration, that was only one part of
the question the TTAB had to resolve on remand, given that mere knowledge of a
prior user isn’t itself bad faith precluding registration. See
also Action Temp, 870 F.2d at 1566 n.9 (citing Anderson, Clayton
& Co. v. Krier, 478 F.2d 1246, 1248 (C.C.P.A. 1973), for the proposition that
“whatever benefits a federal registration confers are lost when that
registration is canceled”).
Unfortunately, the B&B
court’s research failed to disclose the cases—few of them, to be sure—reaching
the opposite conclusion. Spin Master,
Ltd. v. Zobmondo Entertainment, LLC, 2012 WL 8134013 (C.D. Cal. Jun. 18, 2012),
for example, has some striking similarities with this case. The Ninth Circuit held that plaintiffs’
registration, which was granted without a requirement of showing secondary meaning,
entitled it to a presumption of inherent distinctiveness and therefore reversed
a grant of summary judgment to defendants. While the case was back before the
district court, however, the time for filing the section 8 affidavit
expired. Plaintiffs argued that the
presumption of validity/inherent distinctiveness still applied to the time the
registration was in effect. The court
disagreed, concluding that “[t]he statutory evidentiary presumptions attendant
to a registration disappear when the registration lapses, including a lapse
caused by the failure to file a timely Section 8 affidavit.”
Along with a few other cases, the Zobmondo court pointed to TTAB practice of rejecting expired
registrations as evidence of anything, including protectability, validity, use,
likely confusion, or anything other than that the registration issued. “When a registration lapses, the ‘applicant
is now in much the same position it would have been had the prior registration
never issued ....’” See, e.g., In re Compania Tabacalera Santiaguense, S.A., 1999 WL
546830, at *3 (T.T.A.B. July 21, 1999) (“Once a registration has been cancelled
under the provisions of Section 8 of the Trademark Act, however, it cannot
serve as evidence of any existing rights in the mark.… By failing to timely
file a Section 8 affidavit, applicant has opened up its mark to reexamination
under present standards.”); In re Compania Tabacalera Santiaguense, S.A ., 1999
WL 546830, at *3 (T.T.A.B. July 21, 1999) (non-precedential) (“Once a
registration has been cancelled under the provisions of Section 8 of the
Trademark Act ... it cannot serve as evidence of any existing rights in the
mark.”); cf. Kellogg Company v.
Western Family Foods, Inc., 209 U.S.P.Q. 440 (T.T.A.B. 1980) (explaining that
TTAB makes an exception to its practice and takes judicial notice of
cancellations of relevant registrations that occur during the pendency of an opposition
proceeding, because of the potential material effect of cancellation on parties’
rights).
In sum, the Zobmondo
court held, the expired registration “is treated as never having been issued,”
which is “a bright-line rule that does not turn on the factual and procedural
nuances of a particular case. Thus, when the ‘830 registration lapsed, the
statutory presumption of validity evaporated.”
As a result, the plaintiffs would now have to proceed without any rights
conferred by registration, despite their victory at the court of appeals based
on their registration when suit began. See also Advance Magazine Publ’rs, Inc.
v. Norris, 627 F.Supp.2d 103, 114 n. 2 (S.D.N.Y. 2008) (finding that the
presumption of validity evaporated upon expiration of registration two years
after suit was filed and “affording neither presumptions nor evidentiary
advantages to any party”).
The reasoning in ZipSleeve, LLC v. West Marine, Inc., 2015
WL 2380990 (D. Or. May 19, 2015), relies on Lexmark
but reaches the same conclusion:
ZipSleeve was indeed the
“registrant” of the registered trademark “ZIPSLEEVE” when West Marine allegedly
began its infringing activity in 2011. ZipSleeve accordingly argues that its
right to sue under § 1114 accrued at that time—and that the cancellation of the
mark [for failure to renew during the pendency of the case] did not extinguish
that right….
A statutory cause of action
“extends only to plaintiffs whose interests fall within the zone of interests
protected by the law invoked.” Lexmark, 134 S.Ct. at 1388. The constructive
notice to competitors and evidentiary presumptions afforded the registrant are
among the most important rights a trademark registrant has under the Lanham Act.
By contrast, the right to exclude others from use of the mark comes not from
registration, but merely from priority of use of a protectable mark. And that
right may be protected, in the absence of a registered trademark, using §
1125(a). The weight of authority thus clearly indicates that Congress sought to
protect only the interests of plaintiffs with registered trademarks under §
1114. Plaintiffs with unregistered trademarks are protected by § 1125(a), but
do not fall within the zone of interests protected by § 1114. Therefore, the
owner of a mark that was valid when issued but which has since lapsed has no
cause of action under § 1114—not even for infringement that occurred during the
lifetime of the mark.
The B&B district
court’s conclusion was, by contrast, that:
“registrant” and “registered mark”
do not refer to a claimant’s present condition, but only the situation at the
time of infringement. Hargis’s argument inserts words into the statute, as the
Lanham Act does not say that a mark must be “presently registered” or
“currently registered.” B&B’s registration was not cancelled because it was
obtained improperly, but merely expired when it failed to renew.
I don’t understand that distinction, which does not explain
why someone with a mark cancelled for a substantive reason wouldn’t also have
been the “registrant” at the time the lawsuit began. The statute also doesn't say "legitimate/ly" or "valid/ly" before registrant/registered.
Anyway, the court went on to hold that B&B’s requested
remedies, an injunction and money damages, were both still available. An
injunction was still available to prevent injury given that B&B filed a new
registration application seeking expedited review. “Should Hargis be found liable at trial, the
parties may argue whether an injunction is appropriate.” As for damages, willful infringement wasn’t a
prerequisite; the court found that the statute was straightforward because of
the more recently added language requiring willfulness for damages caused by
dilution. And anyway, there was a
question of material fact:
Viewed in the light most favorable
to B&B, Hargis knew of B&B’s concern for the confusing marks since the
mid-1990s, and even after Hargis won at trial in 2000, Hargis knew that the PTO
deemed B&B’s mark worthy of registration. Hargis had knowledge of B&B’s
registration, and thus B&B’s right of exclusive ownership, and Hargis
admits that it was aware of the PTO’s later determination of incontestability.
Based on this limited record, this is sufficient to create a jury question on
whether Hargis willfully infringed on B&B’s mark.
(Is that really sufficient for willfulness as to infringement? Ah well.) Questions about equitable defenses also would
have to be resolved after liability, if it were found.
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