Tuesday, December 02, 2014

Precedential No. 42: Board Grants 12(b)(6) Motion to Dismiss Fraud, Nonuse, and Abandonment Counterclaims

The Board granted opposer's Dragon Bleu's Rule 12(b)(6) motion to dismiss three counterclaims for cancellation of opposer's three pleaded registrations, ruling that applicant VENM had failed to state claims (for fraud, nonuse, and abandonment) upon which relief can be granted. Dragon Bleu (SARL) v. VENM, LLC, 112 USPQ2d 1925 (TTAB 2014) [precedential].

Fraud: Applicant's fraud claim was directed at only one of the three pleaded registrations. The Board found that the false statements allegedly made by opposer were not false. Opposer stated during prosecution of its application that its mark VENUM "is specifically and narrowly directed to clothing used in connection with the sport of martial arts" and that its goods are "limited to clothing used in connection with a particular sport, namely martial arts." Those statements, the Board observed, are not representations regarding opposer's actual use of its mark or the enforcement thereof. They were simple statements regarding the limitations that opposer agreed to in order to overcome a Section 2(d) refusal.

The Board also observed that, in any event, applicant's allegations regarding the materiality of those statements made no sense. In approving the application for publication, the examining attorney relied only on the limitations to opposer's identification of goods; any planned use of the mark (if the statements were so construed) would be irrelevant to the examining attorney's decision. And to top things off, applicant failed to properly plead an intent to deceive the USPTO.

Nonuse:  Applicant asserted that two of the pleaded registrations were invalid because of "lack of bona fide use" of the subject marks. However, since the two registrations were based on Section 66(a) requests for extension of protection, use is not required for registration and therefore a claim of cancellation due to nonuse is legally insufficient. However, nonuse is relevant to the abandonment counterclaim, as discussed below.

Abandonment: Applicant alleged that two of the three registrations were invalid because the subject marks had not been used since the filing date of the underlying applications (November 24, 2008). Under Section 45 of the Trademark Act, nonuse for three consecutive years constitutes prima facie evidence of abandonment. To adequately plead an abandonment claim, "a plaintiff must recite facts which, if proven, would establish at least three consecutive years of nonuse, or alternatively, a period of nonuse less than three years coupled with proof of intent not to resume use."

When an applicant relies on use in commerce as a basis for registration under Section 1 of the Act, "it is appropriate to include in the period of nonuse any pre-registration nonuse subsequent to applicant's declaration of use." A Section 66(a) applicant is not required to use its mark at any time prior to registration, but once the registration issues it is treated "much the same as any other registration on the Principal Register," and the registrant must use the mark in commerce in order to avoid abandonment. See Saddlesprings, Inc. v. Mad Croc Brands, Inc. [TTABlogged here].

The question at issue here was one of first impression: "What is the earliest point in time from with the period of nonuse may be measured for an abandonment claim with respect to a Section 66(a) registration?"

The Board looked to the way a Section 44(e) registration is treated vis-a-vis abandonment, since a Section 44(e) registration may also be obtained without use prior to registration. The CAFC in Imperial Tobacco ruled that the period of nonuse that constitutes prima facie evidence of abandonment does not begin until the registration issues.

And so the Board held that "in order to sufficiently plead a claim for cancellation of a Section 66(a) registration on the grounds [sic] of abandonment for nonuse, the plaintiff must allege, as of the date the claim is filed, either:

(a) three or more consecutive years of nonuse commencing no earlier than the date on which the registration was issued; or.

(b) if the period of non-use commencing no earlier than the date of registration and extending to the filing of the claim is less than three years, fact supporting nonuse after the date of registration, coupled with an intent not to resume use.

The Board then found that applicant did not plead a prima facie case of abandonment. Applicant filed its (amended) counterclaims on December 13, 2013, less than three years after the issuance of the two registrations (on December 28, 2010 and March 8, 2011). And because applicant did not plead facts that would allow the Board to conclude that opposer did not intent to commence use of its marks, the counterclaim failed to state a claim upon which relief can be granted.

Although the Board dismissed all three claims, it allowed applicant thirty days within which to submit "a sufficient amended abandonment claim."

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TTABlog note: Wow, those were some half-bake counterclaims, weren't they?

Text Copyright John L. Welch 2014.


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