Tuesday, August 20, 2013

Precedential No. 33: TTAB Cancels ZILLA Registration, Section 10 Violated by Assignment of ITU Application to Parent

In this complicated, consolidated proceeding, Central Garden opposed Doskocil's applications to register the marks PETZILLA and DOGZILLA & Design, and petitioned to cancel Doskocil's registration for DOGZILLA in standard character form, for pet toys, claiming priority and likelihood of confusion with its twice-registered mark ZILLA for pet food and pet treats. Doskocil counterclaimed for cancellation of Central's registrations, one due to an allegedly improper assignment of Central's underlying intent-to-use application, and the other due to a likelihood of confusion with Doskocil's previously-used DOGZILLA mark. In an instructive decision, the Board granted Doskocil's first counterclaim for cancellation (improper assignment), dismissed its second counterclaim (lack of interest), and dismissed Central's oppositions and petition for cancellation (lack of priority). Central Garden & Pet Company v. Doskocil Manufacturing Company, Inc., 108 USPQ2d 1134 (TTAB 2013) [precedential].

Priority: Because counterclaims were asserted against Central's pleaded registrations, and Doskocil's registration is subject to a petition for cancellation, each party must prove priority with regard to its likelihood of confusion claim(s). Each party may rely on the filing date of a particular (valid) application as a constructive first use date.

Central asserted priority based on the filing date (December 7, 2005) of the intent-to-use application that ultimately issued as its '521 registration for ZILLA, and that date would have sufficed, since the earliest date that Doskocil could rely on was April 4, 2006, the application filing date for its registered DOGZILLA mark. But Doskocil counterclaimed to cancel the '521 registration due to an allegedly improper assignment of Central's application in violation of Section 10 of the Trademark Act. So the Board first put aside the constructive first use date of that registration and instead looked to see whether Central could otherwise establish priority - even if its registration were cancelled.

In attempting to prove actual use of ZILLA prior to Doskocil's constructive first use date, Central relied on a "teaser ad" and a "name validation study" under a theory of use analogous to trademark use." The Board observed that "even before proper trademark use commences, advertising or similar pre-sale activities may establish priority if they create the necessary association in the mind of the consumer."

Simply put, to claim priority based on analogous use, a party must show that its putative mark essentially functioned as a trademark - identifying the source of the goods in the mind of the consumer - notwithstanding that technical trademark use, such as use on or in connection with the goods, had not commenced.

The Board found Central's evidence insufficient. The use of ZILLA as a proposed mark with three other marks in a survey was not the type of use that would form the required source connection in the mind of the public. Moreover, given the small number of respondents (83) and the vaguely-described goods ("reptile-related products"), Central's survey fell short.

The "teaser ad" featured a "mysterious reptilian eye, ominously peering out of a large dinosaurian egg that is breaking open." The ZILLA logo appeared prominently in a corner of the ad, and the phrases "The Reign Begins in September" and "www.zilla-rules.com" in another corner. The Board found two problems with this advertisement: the date of publication was unclear, and no mention was made of any goods. At most, it suggested that ZILLA was to be used as a mark for something to do with reptiles. Such an indefinite association of a mark with a general field of commerce is insufficent to establish analogous use.

The Board therefore found that Central was not entitled to priority based on analogous use, and it concluded that, if Doskocil's counterclaim to cancel the '521 registration were successful, Doskocil has priority of use. If not, Central had priority.

Assignment: Doskocil maintained that Central's '521 registration should be cancelled because the underlying intent-to-use application was improperly assigned before an allegation of use was filed, in violation of Section 10 of the Act. Under Section 10, the Board noted, an intent-to-use application may not be transferred to another unless the assignee also acquires at least that part of applicant's business to which the mark pertains. An improper transfer results in a void application, and any resulting registration must be cancelled. Clorox Co. v. Chem. Bank, 40 USPQ2d 1098, 1106 n.8 (TTAB 1996).

The application at issue was filed by All-Glass Aquarium Co., a wholly-owned subsidiary of Pennington Seed, which was in turn a wholly-owned subsidiary of Central. While that application was pending, and prior to the filing of an allegation of use, All-Glass assigned the application to Central. The recorded assignment of the mark constituted the entire agreement between All-Glass and Central regarding transfer of the application; the assignment was not part of a larger transaction. Central was not the successor to All-Glass; All-Glass continued in the same business after the transfer as before, including the production and sale of products under the ZILLA mark. The Board had no doubt that this transaction violated Section 10.

[T]he only thing which was exchanged in the transaction was the mark and the 'goodwill of the business appurtenant to and connected with the Mark,' in return for which All-Glass recited receipt of nominal consideration. In particular, neither All-Glass itself, nor the 'portion thereof, to which the mark pertains, Trademark Act Section 10(a)(1), was transferred from All-Glass to Central along with the ZILLA mark.

Although Central feebly contended that the Board's reading of Section 10 was "hypertechnical," the meaning of the statute was "plain and clear" to the Board.

The Board distinguished this case from Amazon v. Wax, in which Wax and Freeland had jointly filed an intent-to-use application, but Freeland assigned his interest to Wax prior to the filing of an allegation of use. That was not an impermissible transaction, the Board found, because there was no transfer to "another," since Wax was an original applicant and became the sole applicant. The transaction was more a change of entity type than an assignment of a mark from one unrelated party to another.

Here, All-Glass and Central were distinct legal entities. The Board recognized that Central owned Pennington, and Pennington owned All-Glass. But each of the companies counts as a "person" under the Trademark Act.

Central contended that Congress did not intend such a result, but Central did not argue that the language of Section 10 is unclear. When the statutory language is clear on its face, "it is usually inappropriate to delve into the legislative history in search of another meaning." If the intent of Congress was to prohibit "trafficking" in intent-to-use trademark applications, perhaps Congress could have drafted narrower language, but the Board has "no authority to tell Congress how to accomplish its goals."

The Board concluded that the assignment violated Section 10, and therefore Central's '521 registration must be cancelled.

Likelihood of Confusion: With the '521 registration cancelled, Central's three likelihood of confusion claims failed. There remained Doskocil's Section 2(d) counterclaim against Central's '833 registration. This was a perfunctory, hypothetical claim in case the Board found that Doskocil had priority, but Doskocil argued at length that confusion was not likely. The Board concluded that, "if the senior party does not believe there to be a likelihood of confusion, we need not and should not opine on this purely hypothetical question.

And so, as to likelihood of confusion, the Board chose to "leave the parties as we found them, without reaching the merits of either party's claim."

Read comments and post your comment here.

Text Copyright John L. Welch 2013.


At 9:52 AM, Anonymous Anonymous said...

I've never agreed with the rule that you can't transfer an ITU application prior to filing the s/u (apart from the sale of a business). It may not be a trademark until it's put into use, but it's still property of some value. Why shouldn't you be able to transfer it for what it is (something less than a trademark but something more than nothing). Frankly, the exception that allows transfer along with the sale of the business doesn't make sense either. If an ITU is not sufficiently mature to be transferred on its own - how does its character change if it's part of the sale of a business? Bad mojo all around.

At 1:58 PM, Anonymous Orrin A. Falby said...

Anonymous - The statutory basis for the "assignment-in-gross doctrine" is Section 10 of the Lanham Act, 15 U.S.C. Sec. 1060. Courts have held that the policy basis for invalidating illegal trademark assignments is the need to protect the public from being misled or confused about the source and nature of the goods and services in the public domain. When a buyer obtains a trademark that is separated from the goodwill of the assignor, the buyer has taken the symbol of a known quantity, but not the substance that the public expects to find when encountering the mark. The mark no longer symbolizes the identity and quality that it once did, and the established meaning of the mark is shattered. Trademarks assigned in gross are invalidated when challenged because the promotion of an alien product or service under cover of existing, familiar goodwill is regarded by courts as a fraud on the purchasing public.

Section 10 also prevents others from engaging in trademark-squatting.

At 7:13 PM, Anonymous Anonymous said...

To continue the policy discussion led by Anonymous and Falby....

For a long time Trademark Act did not permit ITU applications (Sec. 1(b) added in 1988). Perhaps the primary policy behind the change was to allow owners that put bona fide effort and investment into developing a mark to "hold a place in line" as compensation. This reduces the waste of such development resources should a mark be rejected or pre-empted at an earlier stage.

However, allowing sale of 1(b) placeholder applications creates perverse incentives for parties with no bona fide intent or investment in a mark to post the modest filing fee to file and squat/ransom.

At 10:22 AM, Anonymous Anonymous said...

Still makes no sense to me. An ITU application, without evidence of use, has no goodwill and so there is no trademark right yet. Only, a place holder. However, while its not a trademark, it's still property of some value. I don't see why a person shouldn't be able to assign it like they can any other property. I don't think you are going to create a squatters market for ITU applications because of the bona fide intent to use requirement. If I was going to buy an ITU application I'd insist on seeing the evidence of a bona fide intent to use. In other words, a squatters ITU application would be of no more value if you lifted the rule on transfer than it is now with the rule in place.

I understand that when ITUs where created it was done with some understandable caution, but at this point they are established and its clear they have become a legitimate tool. I think the law should recognize that and remove constraints like the restriction on assignment that no longer have (or maybe never had) a function.

If you look at the rules on inventions - you can assign them in any state, whether a patent application has been filed or not. If someone wants it you can sell it. Why should trademarks be any different?

Good discussion

At 3:49 PM, Anonymous Anonymous said...

The result here was among the more bizarre coming out of the TTAB in quite some time.

If there was no transfer to "another" in the Amazon Techs case (where there was a transfer from one entity - the two person applicant) to a distinctly different entity (one of those two persons) then there could hardly have been a transfer to "another" here (transfer from a 100% owned "grandchild" company to its "grandparent" company).

The rule against transfers to "another" was apparently added to the statute to avoid trademark trafficking. But where is the possibility for trafficking here where the ultimate owner has not changed?

If the Federal Circuit gets a crack at the case, I can't imagine that they too will also rule for form over substance.


Post a Comment

<< Home