It depends on what the meaning of “is” is: Section 15 declarations and pending challenges

It turns out that Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. De C.V., 2016 WL 3034150,  No. 11–1623 (D.D.C. May 27, 2016), is even more of a hairball than I realized.  The thorny legal and factual issues as delineated by the district court are plentiful enough, and at this point in the case there are also procedural questions about timeliness of arguments and the like which I can’t even begin to opine on.  

It turns out that there are also what appears to me to be mistaken Section 15 declarations wrongly accepted by the PTO.  Given that (1) the court found that the marks at the core of the controversy were geographically descriptive (whether the image of the Indian Girl was descriptive is a little unclear, so that too is an issue, but the decision is clear that the word marks are and its rationale would seem at least potentially applicable to the Indian Girl as well), and (2) the incontestability of one side’s marks was part of what let it prevail on priority, the PTO’s invited error might have been consequential and this case is even more of an issue-spotter than I thought.

Here’s what apparently happened: Prolacto counterclaimed in 2012 for cancellation of PLM’s older registrations on the grounds of fraud and abandonment.  (I understand that there were strategic reasons not to counterclaim for mere descriptiveness, but now that creates one of the procedural issues.) The court granted summary judgment in favor of PLM on these counterclaims in September 2014, at which point PLM filed for incontestability for its registrations of the Indian Girl alone, Nos. 2,905,172 and 2,968,652.

As with the bead dog case, TSDR clearly shows that this lawsuit is pending right before the Section 15 affidavit, but nonetheless the PTO, which doesn't conduct substantive examination of Section 15 affidavits, accepted the affidavit.  That affidavit stated that there was “no proceeding involving said rights pending and not disposed of in either the U.S. Patent and Trademark Office or the courts” (emphasis added).  That was just not true.  The law and the TMEP refer to proceedings and not to individual claims for cancellation, and rightly so: if the judgment is nonfinal, then, for example, the challenger could appeal and the court of appeals could reverse the district court on the nonfinally resolved issue—except, if the Section 15 affidavit is accepted in between the district court and court of appeals stages, then the court of appeals can’t rule on a challenge to distinctiveness or priority any more! 

There are cases indicating that if the trademark owner is a plaintiff, and no counterclaim challenging registrability was filed before the declaration was submitted, that’s not a problem. See TMEP §1605.04 (“The USPTO does not consider a proceeding involving the mark in which the owner is the plaintiff, where there is no counterclaim involving the owner’s rights in the mark, to be a ‘proceeding involving these rights’ that would preclude the filing or acknowledgment of a §15 affidavit or declaration.”).  And that too makes sense, because the mere fact that the trademark owner is fighting alleged infringers shouldn’t keep it from incontestability; at the point that no counterclaim has been raised, there is no element of the proceeding challenging the trademark owner’s ownership/right to register.  But that’s a completely different situation than a nonfinally rejected challenge to registrability. To maintain otherwise seems to me an implausibly tendentious reading of the word “is” that is inconsistent with the concept of challenges that are “pending” though not finally disposed of.

First, is it fraud on the PTO to file, claiming that there’s no pending challenge, in such a circumstance? Because the standard for fraud is so high I would say: not if there was a misunderstanding of the law (or the facts, though in this case the same firm handled the registration and the litigation), even an unreasonable misunderstanding.  (Though I think the lawyer should know better.)  Thus, the registration itself isn’t invalid. 

But, in my opinion, the Section 15 declaration still has to be revoked because the statutory requirements for incontestabilty weren’t fulfilled, even though the registration itself survives.  Because there’s no examination, this is the only way to keep the register accurate.  See Nahshin v. Product Source International LLC, 107 U.S.P.Q.2d 1257, 1258 n.1, 2013 WL 6040375 (T.T.A.B. 2013) (§ 15 affidavit filed after a petition to cancel was filed has no legal effect); cf. Duffy-Mott Co., Inc. v. Cumberland Packing Co., 424 F.2d 1095, 1100 (C.C.P.A. 1970) (noting that, because incontestability amounts to a “new right” as to the covered mark/goods, policing incontestability is of separate importance versus registration generally). I would think that the PTO, district court, or court of appeals, when informed of the problem, should revoke the acknowledgement of the declaration/order it revoked, as the PTO did with the bead dogs.

Here are the cases cited by PLM defending its position that it could take advantage of the gap between district court and appellate proceedings to file its affidavit: Sunrise Jewelry Mfg. Corp. v. Fred S.A., 175 F.3d 1322, 1327 (Fed. Cir. 1999) (no proceeding involving rights in the mark was pending because at the time section 15 affidavit was filed, no counterclaim challenging registration or validity of mark had yet been filed, though one was filed in between the filing of the affidavit and its acceptance by the PTO); Holley Perf. Prods., Inc. v. Quick Fuel Tech., Inc., 624 F. Supp. 2d 610, 616 (W.D. Ky. 2008) (section 15 affidavit of incontestability properly filed where counterclaim had not yet been filed); Levi Strauss & Co. v. Esprit US Distribution Ltd., 588 F. Supp. 2d 1076, 1083 (N.D. Cal. 2008) (no fraud where affidavit filer failed to investigate whether there was a pending challenge); J. H. Chapman Grp. v. Chapman, No. 95 C 7716, 1996 U.S. Dist. LEXIS 899, at *8-9 (N.D. Ill. Jan. 30, 1996) (same where affidavit filer didn’t disclose that a challenge had been threatened but not filed); 3 McCarthy on Trademarks & Unfair Comp. § 19:140 (4th ed.) (no challenge is pending until counterclaim has been filed); 1-4 Gilson on Trademarks § 4.03(2)(b) (Matthew Bender & Co. 2016) (reference to ability to file affidavit upon “successful termination of the litigation”; PLM's brief added the words “on the counterclaim challenging the registered mark”).

Other thoughts?  (I should disclose that PLM cites my earlier post on the case in arguing to the court that the judgment should be corrected because it doesn't make sense to cancel one of PLM's marks based on the existence of marks that infringe other, similar PLM marks.  I doubt it will want to cite this one.)