CAFC Reverses TTAB: In-State Sale of Two Hats to Out-of-State Resident Constitutes Use of Mark in Commerce
The CAFC reversed the TTAB's decision in adidas AG v. Christian Faith Fellowship Church, Cancellation No. 92053314 (September 14, 2014) [not precedential], ruling that the sale of two hats at the Church's bookstore to an out-of-state resident constituted use in commerce of applicant's mark ADD A ZERO. The Board had granted the petition of adidas AG for cancellation of two registrations owned by the Christian Faith Fellowship Church for the mark ADD A ZERO, in standard character and design form, for "clothing, namely shirts and caps," finding that these sales were de minimis and insufficient to show use that affects interstate commerce. Christian Faith Fellowship Church v. adidas AG, 120 USPQ2d 1640 (Fed. Cir. 2016) [precedential].
Section 1(a) of the Lanham Act provides that "[t]he owner of a trademark used in commerce may request registration of its trademark." "Commerce" is defined as "all commerce which may lawfully be regulated by Congress." To register a mark based on use in commerce, "one must sell or transport goods bearing the mark such that the sale or transport would be subject to Congress’s power under the Commerce Clause, which includes its power to regulate interstate commerce."
In this case, the question was whether the Church made a sale of goods bearing the mark, in commerce regulable by Congress, before it applied to register its marks. The TTAB's interpretation of the Lanham Act and the "legal tests it applies in measuring registrability" are subject to de novo review by the CAFC.
Congress has broad power under the Commerce Clause. The Supreme Court's has ruled that Congress may regulate activities that have a "substantial effect" on interstate commerce.
In considering whether an activity has a substantial effect on commerce, one must consider the nature of the statutory scheme involved, regardless of whether the particular activity at issue is local or de minimis in nature. Wickard v. Filburn, 317 U.S. 111 (1942).
“That [the farmer’s] own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial.” Id. at127–28.
"[W[hen a general regulatory statute bears a substantial relation to commerce, the de minimis character of individual instances arising under that statute is of no consequence," and Congress has the power to regulate it under the Commerce Clause. Gonzalez v. Raich, 545 U.S. 1, 17 (2005), quoting United States v. Lopez, 514 U.S. 549, 558 (1995).
The CAFC observed that its prior rulings in "use in commerce" cases reflect the broad scope of Congress’s Commerce Clause powers. For example, in Larry Harmon, the court argued that the Lanham Act’s requirement could be satisfied by a single-location restaurant and it refused to adopt a de minimus test for the "use in commerce" requirement. 929 F.2d at 663. In Silenus Wines, the CAFC held that the intrastate sale of imported French wine constituted "use in commerce." 557 F.2d at 809.
In the case at hand, the Court found it clear in light of those precedents that the Church's sale of two "ADD A ZERO"-marked hats to an out-of-state resident is regulable by Congress under the Commerce Clause and, therefore, constitutes “use in commerce” under the Lanham Act.
We reach this conclusion without defining the outer contours of Congress’s Commerce Clause powers because the transaction at issue falls comfortably within the bounds of those powers already sketched for us by the Supreme Court. The Lanham Act is a comprehensive scheme for regulating economic activity—namely the marking of commercial goods—and the "use in commerce" pre-registration requirement is an "essential part" of the Act.
The CAFC pointed out that the Church was not required to present evidence of "an actual and specific effect that its sale of hats to an out-of-state resident had on interstate commerce. Nor did it need to make a particularized showing that the hats themselves were destined to travel out of state."
Adidas’s argument that the Church must present actual proof that its sale to Ms. Howard directly affected commerce also contradicts precedent. "[P]roof that the defendant’s conduct in and of itself affected or threatened commerce is not needed. All that is needed is proof that the defendant’s conduct fell within a category of conduct that, in the aggregate, had the requisite effect." quoting Taylor v. United States, 136 S.Ct. 2074, 2080 (2016)
The appellate court pointed out that the definition of "commerce" in the Lanham Act means "all commerce that may be lawfully regulated by Congress." It concluded that because "one need not direct goods across state lines for Congress to regulate the activity under the Commerce Clause, there is likewise no such per se condition for satisfying the Lanham Act’s 'use in commerce' requirement."
And so the CAFC reversed the TTAB's decision and remanded the case to the Board for consideration of adidas’s other grounds for cancellation (abandonment-and failure-to-function).
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TTABlog comment: Following the court's reasoning, is there any "use" of a trademark or service mark that does not satisfy the "use in commerce" requirement? Is the old "interstate/intrastate" dichotomy dead, as far as "use" goes?
In other words, for application purposes are "first use" and "first use in commerce" now the same thing?
Text Copyright John L. Welch 2016.