Monday, March 05, 2012

Precedential No. 11: Sidestepping Fraud Claim, TTAB Cancels "SHUT IT DOWN" Registration Due to Abandonment and Nonuse

The Board shut down pro se Applicant Carl Dean Lacy in this cancellation proceeding involving his registration for the mark SHUT IT DOWN in standard character form, for 113 clothing items. Petitioner alleged abandonment and fraud, asserting that at the time of filing his application Lacy had yet to use the mark on any of the goods, and that any subsequent use of the mark had been abandoned. The Board granted the petition on the ground of abandonment, sidestepped the fraud issue, and ruled that the registration was void ab initio for nonuse, a ground that was not pleaded. ShutEmDown Sports, Inc. v. Carl Dean Lacy,102 USPQ2d 1036 (TTAB 2012) [precedential].

Lacy filed his use-based application on March 15, 2006. During discovery, Lacy stated that he had offered for sale only four of the 113 items listed in his registration, and that as of August 4, 2009, no one had purchased goods from him for the previous five years.

Discovery further revealed that Lacy has no bank account, no tax returns, no sales documents, and no advertisements or promotional materials for the goods. He has no documents relating to first use of the mark. He claimed annual promotional expenditures of about $200, and annual sales of less than $1000.

Abandonment: Lacy admitted that he did not use the mark in connection with 109 of the identified goods, and that he has no intention to do so. Obviously, he failed to rebut the statutory presumption of abandonment that arises after three years of nonuse.

As to the remaining four items that Lacy claimed to have sold, the lack of sales for a five year period, coupled with the lack of documentation regarding same, established a prima facie case of abandonment. The burden shifted to Lacy to rebut the presumption of abandonment. "Respondent did not provide a shred of evidence to corroborate his alleged use of the mark in commerce" on these four items. His self-serving interrogatory response stating that he used, or intends to use, the mark on these four items was deemed insufficient to rebut the presumption of abandonment.

While it is petitioner’s burden to prove nonuse of the mark, respondent’s failure to produce any evidence corroborating his responses to petitioner’s discovery requests seeking such evidence leaves us little choice but to conclude that respondent has not used his mark in commerce on the “goods allegedly in use” for the more than three-year period from his March 2006 application filing date through his August 2009 response date and had no intention to do so. Therefore, we find that respondent has also abandoned his rights to the SHUT IT DOWN mark with respect to the four "goods allegedly in use."

Fraud/Nonuse: The Board found it unnecessary to reach Petitioner’s fraud claim because it found that Petitioner had made a prima facie case that Lacy did not use his mark on any of the goods at the time he filed his application, and Lacy failed to overcome that showing. The Board therefore ruled that Lacy’s application was void ab initio for nonuse. It acknowledged that Petitioner did not include a separate claim alleging that Lacy’s nonuse of the mark rendered the registration void, but it pointed out that, while such separate pleading is preferable, it is not required. Here there was no doubt that the issue of nonuse was clearly set out in the petition for cancellation and was tried by the parties.

And so the Board granted the petition for cancellation.

TTABlog comment: It took four years for this petitioner to knock out Lacy's phony registration. Cancellation of the registration just doesn't seem enough of a remedy, does it?

If the Board will not consider the fraud issue when an applicant has not used the mark on any of the goods in its use-based application, then that leaves for possible fraud those instances when the mark has been in use on only some of the claimed goods. But if the applicant or registrant at least has a business and shows use of the mark on some of the goods, will it not be awfully difficult to show the bad intent necessary for a fraud ruling? If the accused acted on advice of counsel (MCI v. Bunte) or was a layperson (Bristol Technologies), the Board is apparently not going to find fraud. I put it to you that the only persons who remain vulnerable to a fraud finding are trademark attorneys who file their own trademark applications.

Text Copyright John L. Welch 2012.


At 9:04 AM, Anonymous Anonymous said...

And it is a sad state of affairs that some client spent 4 years and thousands of dollars to knock out a trademark application that was totally and conpletely fraudulent from the beginning, with no financial penalty to the Applicant of course, and no stigma for clearly committing fraud.
I don't fault the Board for avoiding fraud. I do fault it for not encouraging persons in this situation to promptly file Summary Judgment motions and clearly and quickly ruling on them.
We all know that the Board and interlocutory examiners are beding over backwards for the proliferation of pro se applicants who don't know the rules, won't learn the rules, fail to play by the rules and use their pro se status to their advantage. If you want to go pro se, fine, but you ought to be treated llike any other litigant represented by counsel. Period.

At 11:51 AM, Anonymous Anonymous said...

I agree completely, but let's not forget that there are Plaintiffs who go after pro se applicants and registrants knowing those defendants do not have the resources to fight off the big bad bully.

I had a client in a similar situation with an incontestable registration who in fact did use the mark on all the goods, had receipts to prove it, and was happy to be a small business with sales of only $1000-5000 per year. Once the TTAB case started looking bad for Plaintiff (after discovery showed continuous use on all goods and a great witness) the billionaire Plaintiff just went ahead and filed in Federal Court. At that point, the costs to fight off two of the largest most aggressive law firms in the world made no sense, so my client threw in the towel in return for a small payment for his mark.

So no matter how flat the pancake, there are always two sides.

P.S. The Summary Judgment route is generally a good idea, but this is the TTAB, and more often than not they punt the ball down the road. So lots of work to file and the other side gets even more convinced they have a winning case.

At 2:47 PM, Anonymous Anonymous said...

I agree that pre se applicants should learn the rules prior to filing a trademark application. That being said, do you really think a pro se filer should be charged with fraud because they failed to use a trademark after filing a Statement of Use?

Do you know how many large corporations have "active" trademark registrations for marks that have been essentially abandoned? Should these companies be charged with fraud?

It you're looking for a witch hunt, there's plenty of targets to pick from.....and most of them are not pro se filers.

At 10:14 PM, Anonymous Anonymous said...

I have been waiting for a ruling on a couple of summary judgment motions - 5 months and counting on one and 4 months on the other one. Very very slow to rule. This seems to be outside the recently published TTAB stats on processing times. Also waiting for the Board to schedule an oral argument for over 4 months. What have been your experiences for ruling on SJs?

At 6:43 AM, Blogger John L. Welch said...

My last experience with summary judgment was about 18 months ago, and it was pending for 6 months before being denied in a brief memo. I have a motion to compel pending for six months, a final decision pending for six months, and a ten-month wait so far for scheduling of a final argument.

At 4:33 PM, Anonymous Anonymous said...

10 months for an oral argument seems extreme. Have you tried following up with the interloc. attorney?


Post a Comment

<< Home