CAFC Remands GALPERTI Case to TTAB for Application of Proper Fraud Analysis

The U.S. Court of Appeals for the Federal Circuit remanded the TTAB's decision in Galperti, Inc. v. Galperti S.r.L., Cancellation No. 92057016 (August 13, 2018) [not precedential] (Opinion by Judge Angela Lykos), in which the Board denied a petition for cancellation of a registration for the mark GALPERTI for "Ironmongery in the form of metal hardware, namely, flanges, ring-shaped fittings of metal, and forgings." The CAFC ruled that the Board had properly rejected petitioner's Section 2(d) claim due to failure to prove priority, but it concluded that the Board had not applied the proper legal analysis to petitioner's fraud claim. Galperti, Inc. v. Galperti S.R.L., 2019 USPQ2d 435065 (Fed. Cir. 2019) [not precedential].

Likelihood of Confusion: Petitioner/Appellant argued that the CAFC's decision in Converse, Inc. v. Internationial Trade Commission, 128 USPQ2d 1538, 1546 (Fed. Cir. 2018), which issued after the Board's opinion, "mandates that Appellee's priority date [in 2006] is irrelevant and the proper question is whether Appellant demonstrated use prior to April 15, 2008 - Appellee's U.S. Registration date." The court did not agree, pointing out that Converse involved an infringement action, not a priority claim. Converse concerned only whether infringement occurred before or after registration, concluding that with respect to infringements that came before registration, a mark owner must establish (without the benefit of the registration presumption) that its mark acquired secondary meaning prior to the first infringing use.

The CAFC declined to extend Converse "far beyond its facts." Such a holding would not only conflict with a significant body of law, but also with Section 7(c) of the Lanham Act ("the filing of the application to register such mark shall constitute constructive  use") and Section 66 (when a U.S. registration is based on an international registration under the Madrid Protocol, the foreign registration "shall constitute constructive use of the mark, conferring the same rights as those specified Section 7(c)"). [Appellee claimed priority based on an Italian registration].

The court also ruled that the Board did not abuse its discretion in refusing to consider appellant's trade name use because the issue was not raised in the pleadings nor tried by consent. And so the court affirmed the Board's conclusion that appellant failed to prove priority.

Fraud: The challenged registration issued under Section 2(f) based on appellee's averment in the underlying application that it had made "substantially exclusive" use of the mark GALPERTI for the five years prior to September 26, 2007. However, from 2005 to late 2006 the parties were involved in a trademark dispute in Texas relating to both parties' use of the same mark. Ms. Dina Galperti, who signed the Section 2(f) declaration, was aware of appellant and its use of the GALPERTI mark at that time.

The Board correctly concluded that she and appellant were "well aware of" Appellant, its use of the GALPERTI mark, and its "presence in the U.S. marketplace." Nevertheless, the Board concluded that appellee's claim of "substantially exclusive" use was not false. That, the CAFC found, was a misapplication of its precedent.

The Board looked to our decision in L.D. Kichler Co. v. Davoil, Inc., 192 F.3d 1349 (Fed. Cir. 1999), for guidance on the bounds of the phrase “substantially exclusive.” Board Op. at *30. As Kichler explains, an applicant’s claim is not defeated by merely any other usage of the mark. 192 F.3d at 1352. Such a strict interpretation would deprive the word “substantially” of any meaning. Id. Rather, when evaluating whether an applicant has had “substantially exclusive” use of a mark, we look to whether any use by a third party was “significant,” or whether it was merely “inconsequential or infringing.” Id.

The Board correctly stated that appellee's awareness of the presence of others in the marketplace "does not make the September 26, 2007 averment of  'substantially exclusive' use of the GALPERTI mark per se false." However, that was not the end of the matter.

The Board failed to conduct the next, necessary, step: analyzing whether Appellant’s use of the mark was “significant” enough to make Appellee’s claim false, or whether it was “inconsequential” such that Appellee’s claim of “substantially exclusive” use was not false.

Therefore the CAFC vacated the fraud portion of the Board's decision and remanded the case for further consideration consistent with the court's ruling. "On the issue of falsity, the Board should consider the significance of Appellant's use of the GALPERTI mark to determine whether Appellee's claim of  'substantially exclusive use' was false."

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TTABlog comment: Of course, even if the statement were false, appellant would still have to prove that appellee had an intent to deceive the USPTO. BTW: how does this ruling jibe with the Board's opinion in Quirk, Inc. v. Village Car Company, 120 USPQ2d 1146 (TTAB 2016) [precedential] [TTABlogged here], in which the Board held that a cancellation petitioner's fraud claim must fail when the petitioner does not establish Section 2(d) priority? The Quirk decision was cited neither by the Board nor the CAFC.

Text Copyright John L. Welch 2019.