Precedential No. 37: Dismissing "NAKED" Condoms Cancellation, TTAB Finds Lack of Standing Due To Contractual Estoppel

The Board dismissed this petition for cancellation of a registration for the (oxymoronic) mark NAKED for "condoms," finding that Petitioner Australian Therapeutic lacked standing because it had agreed not to use or register the mark NAKED for condoms in the United States, and further had agreed that Respondent Naked TM could use and register the mark. Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC, 129 USP2d 1027 (TTAB 2018) [precedential] (Opinion by Judge Marc A. Bergsman).

The Board had already ruled, on cross-motions for summary judgment, that confusion is both likely and inevitable between registrant's mark and petitioner's asserted marks NAKED and NAKED CONDOM for condoms. It advised the parties "to focus their efforts at trial on the issues of standing (i.e., whether or not Petitioner is contractually estopped from asserting a 'real interest' as a basis for damage or maintaining this cancellation action) and priority." The Board noted that the defense of contractual estoppel - unlike respondent's defenses of laches, acquiescence, and equitable estoppel - is not "negated by inevitable confusion."

The issue of contractual estoppel is effectively a threshold inquiry into whether or not the parties entered into an enforceable agreement such that Petitioner now lacks a “real interest” in seeking cancellation of Respondent’s registration or has “contracted away” its right to seek cancellation.

Respondent Naked TM contended that Petitioner Australian had contracted away its standing -  i.e.,  its “real interest” in the proceeding - when the parties agreed that Australian would use and register NUDE for condoms while Naked TM would use and register NAKED for condoms.

The TTAB observed that, although it is empowered to determine only the right to register a mark, it "may consider the terms of a contract if, and to the extent that, construction of the contract is necessary to a decision on matters within the Board’s jurisdiction." Moreover, "[u]nder certain circumstances a consent to register a mark may be implied from a consent to use the mark."

Here, there was no formal written agreement, but the Board recognizes oral and informal agreements. It reviewed "the relevant actions and communications between the parties to determine whether the parties had reached an agreement regarding their respective use and registration of the NAKED trademark." The communications were by email. The Board found that:

Petitioner’s actions and communications led Respondent to believe that the parties agreed that Petitioner would not use or register the mark NAKED in connection with condoms in the United States and that Respondent could use and register the mark NAKED in the United States

• In the April 4, 2007 email exchange Petitioner wrote: "[N]o need to put anything on paper. Just makes lawyers a lot of money. We no longer have any Naked condoms in the USA, so it should be clear sailing for you. Good luck with the launch." Thus, Petitioner expressly stated that it no longer had any NAKED condoms in the United States. But more telling, Petitioner did not inform Respondent that it had any plans to continue selling NAKED condoms in the United States via the Internet from Australia;

• In the March 2011 email exchange regarding the confusion caused by Petitioner’s use of the NAKED trademark on its TWITTER account, when Respondent thanked Petitioner “for discontinuing your sub brand naked,” Petitioner did not correct Respondent and explain that Petitioner believed it retained the right to sell NAKED brand condoms in the United States via the Internet. In fact, Petitioner said that because it “helped out the last time” presumably meaning that because Petitioner stopped using NAKED in the United States, Respondent should take down its TWITTER site;

• As of September 3, 2011, Petitioner abandoned application Serial No. 78528237 for the mark NAKED CONDOMS; and

• Throughout all of the communications between Petitioner and Respondent, Petitioner never stated or reminded Respondent that Petitioner was retaining the right to sell NAKED condoms in the United States via Internet sales from Australia.

The Board concluded that the parties had reached an agreement.

The mutuality of intent to contract is satisfied because the parties recognized their trademark issue and they communicated and exchanged offers to resolve it. The consideration for the contract is Petitioner’s agreement not to use or register the NAKED trademark for condoms in the United States and Respondent’s agreement not to use or register the NUDE trademark for condoms. Finally, the lack of ambiguity in offer and acceptance is evidenced by the facts that Petitioner stopped using the NAKED mark in the United States, Petitioner did not interfere with Respondent’s use and registration of the NAKED mark in the USPTO, Petitioner registered the NUDE trademark in the United States, and Respondent did not interfere with Petitioner’s use and registration of the NUDE trademark in the USPTO.

***

Petitioner’s actions and communications stating that it no longer had any NAKED brand condoms in the United States so that it should be “clear sailing” for Respondent to launch its NAKED brand condoms caused Respondent to reasonably believe that any rights Petitioner had in the NAKED trademark for condoms had been abandoned. Therefore, we find that Petitioner agreed that it would not use or register the mark NAKED for condoms in the United States and that Respondent could use and register the mark NAKED for condoms in the United States. In view thereof, Petitioner failed to prove that it has standing to cancel the registration

The Board therefore found that Petitioner Australian failed to prove that it has standing to cancel the subject registration because it lacks a real interest in the proceeding or a reasonable basis for its belief of damage, "having contracted away its right to use and register NAKED and by extension NAKED CONDOMS."

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TTABlog comment: It seems as though, by calling this a "standing" issue, the Board was able to avoid the "inevitable confusion" response to Respondent's affirmative defense. But haven't we just seen how low the hurdle is for standing? As a competitor of Respondent, doesn't Petitioner meet that minimum standard?

Text Copyright John L. Welch 2019.