Friday, September 22, 2017

Precedential No. 27: TTAB Suspends LATEA Opposition In View of Arbitration Clause

The Board suspended this opposition proceeding in view of an LLC operating agreement that called for arbitration of any dispute between the members of the LLC arising out of or relating to the agreement. The particular dispute centered on the issue of ownership of the mark LATEA and whether Applicant TJ Food Service transferred its ownership of the mark to the LLC when it became a member thereof. Yufan Hu v. TJ Food Service, LLC, 123 USPQ2d 1777 (TTAB 2017) [precedential].

The Arbitration Clause: Opposer Hu filed a motion for summary judgment on the ground that the Board lacked jurisdiction in view of the arbitration clause. That clause stated that "Any dispute, claim, or controversy among the Members of the Company [the LLC] or between a Member and the Company arising out of or related to this agreement shall be settled by arbitration in Tippecanoe County, Indiana."

Section 2 of the Federal Arbitration Act (the "FAA") provides that an agreement to arbitrate "shall be valid, irrevocable, and enforceable ...." The Supreme Court has recognized that this statute "requires that we rigorously enforce agreements to arbitrate." "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration."

The Board found that the arbitration clause here is broad. At issue was whether Applicant TJ contributed the LATEA mark to the LLC in exchange for an equity position in the company, or whether it contributed a mere nonexclusive license.

The Board concluded that, since applicant's contribution was made pursuant to the operating agreement - which authorized a member's contribution of any cash, property, labor, or services to obtain an equity position in the LLC - the nature of applicant's contribution "arguably falls within the purview of the arbitration clause." The agreement does not expressly exclude Lanham Act claims or any statutory claims. The Board therefore was not persuaded that the parties' trademark ownership dispute is excepted from the arbitration clause.

Arbitrability of Trademark Ownership: The next question for the Board was whether trademark ownership can be arbitrated. Administrative proceedings are not necessarily exempt from the FAA even when there is a federal statute enabling a federal agency to resolve the dispute. The focus is on the intent of Congress, in this case as expressed in the Lanham Act.

The Board noted that the Act provides the Board with authority to determine the right to register marks, and does not contain language expressly exempting such determinations from being decided by arbitration. See Trademark Act Sections 13, 14, 17, and 18.

The question presented in this case is whether Applicant transferred any ownership rights in the subject mark to WNH when it relied on the value of the mark as part of its capital contribution. Because one cannot register a mark that it does not own, the ownership issue is central to deciding the registrability of the mark in dispute. [citations omitted]. Accordingly, the issue of whether the WNH Operating Agreement is determinative of ownership rights in the mark is arbitrable.

Conclusion: The Board deemed it appropriate to honor the arbitration clause with regard to the dispute over trademark ownership (a question turning on the parties' intent). It therefore suspended the opposition proceeding for 60 days, with the proceeding to be resumed unless an arbitration has been commenced on the ownership issues. If arbitration occurs, the parties were required to report to the Board the decision of the arbitrator on the arbitrability and ownership issues so that the Board may decide how to proceed.

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TTABlog comment: On August 23, 2017, applicant notified the TTAB that it had commenced a civil action in Tippecanoe Superior Court No. 2 in Tippecanoe County, Indiana in July 2017 against opposer and two other defendants, seeking an order requiring the parties to arbitrate all claims, including the claim of ownership. Accordingly, on September 14, 2017, the Board suspended the opposition proceeding.

Text Copyright John L. Welch 2017.


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