Wednesday, July 03, 2013

Precedential No. 24: Foreign Manufacturer, Not U.S. Distributor, Owns the Mark, Says TTAB

In this petition for cancellation of a registration for the mark NIC OUT for "mechanical cigarette filters for removing nicotine," the Board ruled that Petitioner Leonid Nahshin, as the manufacturer of the goods and first user, owned the mark, and not the U.S. distributor. Before reaching its decision, the Board overruled several objections made by Respondent Product Source to Petitioner's testimony, taken by way of a deposition on written questions. Leonid Nahshin v. Product Source International, LLC, 107 USPQ2d 1257 (TTAB 2013) [precedential].

Although Petitioner's claim was grounded on likelihood of confusion under Section 2(d), the actual issue was ownership of the subject mark. It was clear from the record that Respondent had fair notice of that issue and actively defended on the merits. Therefore the Board ruled that the issue of ownership was tried by consent, and it deemed the pleadings to be amended under FRCP 15(b) to include lack of ownership as a ground for relief.

Objections to Testimony: Rule 2.124(d)(1) establishes the procedure for taking testimony by way of written questions. The parties are supposed to prepare direct, cross, re-direct, and re-cross questions before the questions are propounded to the witness. Here, however, Petitioner did not follow the rule. He served and filed notices of taking testimony, but he did not wait for Respondent to serve cross-questions or objections. Instead, he had his questions read to the witnesses and, after receiving responses, moved to resume the proceeding. Respondent opposed the motion on the ground that it was not given copies of the question prior to the deposition, and so did not have a chance to serve cross-questions or to object. The Board granted Respondent 25 days to serve cross-questions.

Thus, respondent had the unique opportunity to review the deponents’ answers before drafting its cross-questions. It also had an opportunity to object to the responses and the documents, but failed to do so. It is clear that at least some of respondent's objections, such as lack of authentication of documents, could have been cured by petitioner if respondent had raised them at that point.

Although in the usual case of a deposition on written questions, it is not possible to raise a contemporaneous objection to testimony or introduction of a document, here the situation was like an oral deposition. Respondent could and should have objected at a time when the defect could have been cured. The Board deemed Respondent's later objections on the ground of lack of authentication to be untimely, as was its objection to particular testimony as "not responsive."

Ownership: The issue of who owned the mark was relatively straightforward. [See Pamela Chestek's comments here at her Property, Intangible blog]. Petitioner Nahshin, an Israeli citizen, adopted the mark NIC-OUT in 2002 when he contracted for the manufacture of NIC-OUT cigarette filters. He entered into an agreement with one Maslov to market and sell the products in the United States, and Maslov did so from 2002 through 2008.

There was no evidence that Nahshin ever agreed that Maslov would own the mark in the U.S., or ever assigned his rights to Maslov. Nahshin became the owner of the mark in the United States through the distribution of the product.

From 2003 to 2007, Respondent purchased Petitioner's NIC-OUT product from Maslov and distributed the product for him. Respondent's president testified that he did not know where Maslov acquired the product. There was no evidence that Maslov had any rights in the mark, and nothing in his three agreements with Respondent mention the trademark.

In 2007, Respondent began purchasing the product from Petitioner, but there was no evidence of any transfer of rights. Generally, the Board observed, the mere fact that a distributor in this country distributes a foreign manufacturer's branded product does not give the U.S. distributor ownership of the mark.

Therefore, the Board concluded that Petitioner Nahshin owned the mark.

Read comments and post your comment here:

TTABlog note: Whether the mark was spelled NIC OUT or NIC-OUT (with a hyphen) was of no consequence in the Board's decision.

Text Copyright John L. Welch 2013.


At 12:29 PM, Anonymous Michael R. Graham said...

Interesting decision -- which I will now have to read, since it appears to reverse the long-standing doctrine that a trademark registration and rights can be owned in the U.S. by an exclusive distributor of a product.

At 12:59 PM, Anonymous Anonymous said...

See TMEP Section 1201.06(a)
(April 2013 online version)


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