Monday, December 11, 2017

Precedential No. 34: TTAB Orders Cancellation of TAO VODKA Registration for Nonuse and Likelihood of Confusion With TAO Restaurants

The Board granted a petition for cancellation of a registration for the mark TAO VODKA for “alcoholic beverages except beer" [VODKA disclaimed] on two grounds: nonuse and likelihood of confusion with petitioner's registered and famous mark TAO for restaurant and nightclub services. Respondent's "eyebrow-raising activities" in choosing its mark after petitioner refused to purchase its vodka, including adoption of a font very similar to the font used by petitioner, factored into the Board's Section 2(d) ruling. Tao Licensing, LLC v. Bender Consulting Ltd. d/b/a Asian Pacific Beverages, 125 USPQ2d 1043 (TTAB 2017) [precedential] (Opinion by Judge Cynthia C. Lynch).

Nonuse: Under Section 45 of the Trademark Act, a trademark is in "use" when the goods bearing the mark "are sold or transported in commerce." Here, the Board considered whether the importation or distribution of samples of the goods met the use in commerce requirement. Respondent conceded that, prior to filing its Statement of Use on April 24, 2012, it had not sold any goods under the mark TAO VODKA, but it contended that the distribution of samples sufficed. It appeared to concede that mere importation of the goods from the Vietnamese manufacturer did not constitute use in commerce. See Avakoff v. Southern Pacific Co., 765 F.2d 1097, 226 USPQ 435, 436 (Fed. Cir. 1985) (shipment of goods from the manufacturer to the trademark owner did not satisfy the use or transportation in commerce requirement, as "it was a shipment of the goods in preparation for offering the goods for sale. It did not make the goods available to the purchasing public").

Turning to the issue of distribution of samples, the Board first observed that alcohol is distributed in a three-tiered system: a manufacturer may sell only to a distributor, who may sell only to a retailer, who may sell only to the public. The Board also noted that the testimony of Respondent's witness showed a lack of knowledge of the underlying facts and the lack of corroborating documentation. Cf. Research in Motion Ltd. v. NBOR Corp., 92 USPQ2d 1926 (TTAB 2009) (lack of documentation contributes to finding lack of bona fide intent to use a mark)

Respondent testified that it distributed samples to three entities. The first, J.M. Stevens, was not a distributor of alcohol but rather was a shareholder of Kai Vokda, an entity related to respondent. There was no evidence as to the disposition of those samples.

The second was a restaurant called Tango Cafe, but Tango was not a distributor. The testimony indicated that this activity was "preliminary and exploratory, and Respondent was not yet ready to introduce the product in the ordinary course of trade."

The third was a distributor named Northern Wine & Spirits who, according to respondent, "were going to review [the product] and see if they had interested parties in their market." There was no written follow-up and so sales were ever made to or by Northern.

None of the three entities purchased or sold any TAO VODKA. In fact the first sale did not occur until two and one-half years later. The Board found that "the record as a whole reflects that Respondent was not yet using or even ready to use the mark in the ordinary course of trade, but was merely exploring such use at some point in the future." The "sharing of these samples ... was more in the nature of a preliminary advisory consultation than bona fide use of the TAO VODKA mark in the ordinary course of trade."

Therefore the Board concluded that respondent did not use the mark TAO VODKA in commerce prior to the Statement of Use deadline (September 20, 2012).

Likelihood of Confusion: Petitioner's evidence of customer volume and revenue, advertising expenditures, unsolicited media coverage, and industry awards convinced the Board that TAO is a famous mark for restaurant services. The Board noted, however, that even if the mark were of "average strength," its conclusion under Section 2(d) would be the same. [Note that the Board cited the CAFC's Phelps decision for the proposition that the 5th du Pont factor "involves assessing the mark "'along a spectrum from very strong to very weak.'" In other words, fame for Section 2(d) purposes is not an all-or-nothing determination. - ed.].

Respondent argued that, based on third-party registration and use, TAO is weak and diluted. The Board, however, discounted the third-party use evidence [two dozen or so restaurants] because it was somewhat outdated, because it lacked specifics regarding the extent of use [So much for Juice Generation and Jack Wolfskin - ed.], because respondent's witness did not collect the information, and because petitioner successfully challenged some of the restaurants. The third-party registrations submitted by respondent were mostly for unrelated goods or services. Only one related to alcoholic beverages.

The third-party evidence did show, however, that "tao" suggests that the restaurant has an Asian theme or serves Asian food. Nonetheless, in light of the "compelling evidence" of the fame of petitioner's mark, the third-party evidence did not convince the Board that TAO is weak of entitled to a limited scope of protection. "The commercial strength of Petitioner's TAO mark outweighs any conceptual weakness." [I thought the Board just said that the fame of the TAO mark didn't matter? - ed.].

Not surprisingly, the Board found the marks to be similar in look, sound, meaning, and commercial impressions. As to the involved goods and services, the Board recognized that it is not enough to show that restaurants serve food and beverages: "something more" is required to establish that alcoholic beverages and restaurant and nightclub services are related.

The evidence showed that petitioner uses its TAO mark to promote alcoholic beverages, that its restaurants offer drinks, including at least one vodka drink, that bear TAO-formation names (e.g., Tao-love potion #9), that it sometimes engages in joint promotional efforts with vodka manufacturers, and that it advertises "Vodka Open Bars" at events in its venues. The evidence also showed that "private-label" bottling is an industry trend, and the Board concluded that "consumers on a widespread basis must be aware of it." [If private label bottling is widely recognized - which is news to me - then are all bottled alcoholic beverages related to restaurant services? - ed.].

Moreover, respondent's own actions "show that it believed that consumers would view Respondent's vodka and Petitioner's services as related." The record showed that respondent rebranded an existing vodka product, Kai Vodka, as TAO VODKA after its unsuccessful attempt to sell its Kai Vodka to TAO venues. Respondent also initially displayed the mark in a stylized font very similar to petitioner's font. It then sought an agreement to sell its registration to petitioner at a "high price" and to supply petitioner with large volumes of vodka. From this evidence, the Board found that "Respondent anticipated a benefit from implying a connection to Petitioner, a benefit that could only exist if Respondent believed that consumers would actually see Respondent's products as related to Petitioner's restaurant services."

The Board therefore concluded that consumers would likely infer that respondent's goods "emanate from the same source as Petitioner's services, or are sponsored by Petitioner."

Because respondent's goods may be sold to individual consumers in restaurants and nightclubs, the channels of trade and classes of consumers overlap. As to the lack of actual confusion evidence, the Board agreed with petitioner that because of respondent's limited use of its mark, there was little opportunity for actual confusion to occur.

Finally, under the catch-all 13th du Pont factor, petitioner maintained that respondent's bad faith weighed in favor of a finding of likely confusion. The Board agreed that respondent's "more eyebrow-raising activities," discussed above, were further evidence that confusion is likely.

And so the Board found confusion likely and it ruled that Section 2(d) is a second, independent ground for granting the petition for cancellation.

Read comments and post your comment here.

TTABlog comment: Suppose someone independently came up with the mark TAO VODKA and got a registration. Same result?

NB: Petitioner also argued that the distribution of samples to Tango and Northern was merely intrastate (in Hawaii) and therefore could not be use in commerce. The Board, however, pointed out that the CAFC in Christian Faith Fellowship v. Adidas AG, "noted that the appropriate inquiry should focus on whether the general category of such transactions would cause a substantial effect on interstate commerce." Congress may regulate activity under the Commerce Clause even if the goods do not cross state lines, and "there is likewise no such per se condition for satisfying the Lanham Act's 'use in commerce' requirement.'" Id. 120 USPQ2d a6 1647.

Text Copyright John L. Welch 2017.


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