Precedential No. 35: TTAB Grants Motion to Sever Permissive Counterclaim from Cancellation Proceeding

By this interlocutory order, the Board unsurprisingly severed Respondent Gibson's permissive counterclaim that had a minimal relationship to the petitioners' cancellation claim. The Board concluded that judicial economy would be served by severance, and further found that Petitioner Estate would be prejudiced by the delay caused by discovery on the counterclaim, since it was not a party thereto. Paul Reed Smith Guitars and The Estate of Theodore M. McCarty v. Gibson Brands, Inc., 2024 USPQ2d 11 (TTAB 2023) [precedential] (Order by Ellizabeth J. Winter, Interlocutory Attorney).

Petitioners seek cancellation of Gibson's registration for the mark THEODORE for "stringed musical instruments," claiming likelihood of confusion with the mark MCCARTY for guitars under Section 2(d), and false suggestion of a connection under Section 2(a). Gibson admitted that its THEODORE guitar was named after Ted McCarty, former president of Gibson, who designed the guitar.

Gibson's permissive counterclaim sought cancellation of Petitioner Paul Reed Smith's registration for the unpleaded mark SILVER SKY NEBULA for guitars, on the ground of likely confusion with Gibson's common law mark SILVERBURST for musical instruments. [The Board noted that a counterclaim to cancel a registration owned, but not pleaded, by an adverse party is a permissive counterclaim.]

The petitioners moved to sever the counterclaim from this proceeding, the Board construing the motion as falling under Fed. R. Civ. P. 21. In applying that Rule, the courts consider "whether the claims share questions of law or fact common to all defendants and arise out of the same transaction or occurrence." They also take into account "whether the settlement of the claims or judicial economy would be facilitated, whether prejudice would be avoided if severance were granted, and whether different witnesses and documentary proof are required for the separate claims."

In view of the foregoing, the following circumstances may be relevant in Board proceedings to determine whether a permissive counterclaim should be severed under Fed. R. Civ. P. 21:

    • whether the claims and/or permissive counterclaims at issue arise out of the same transaction, occurrence, or series of transactions or occurrences;

    • whether the claims present some common questions of law or fact;

    • whether judicial economy and efficiency would be facilitated or harmed by severance;         or

    • whether prejudice would occur if severance were granted or denied.

Here, the marks involved in the counterclaim are "completely dissimilar" from those involved in the petitioners' claims. Gibson pointed out that the parties are the same, that both claims involve musical instruments, and that discovery, evidence, and witnesses in the two proceedings will overlap.

The Board, however, agreed with the petitioners that "their claims and the permissive counterclaim do not arise out of the same transaction, occurrence, or series of transactions or occurrences or share questions of law or fact."

Simply put, the fact that the claims in the cancellation and the permissive counterclaim share superficial similarity . . . does not obviate other realities: the claim of false suggestion of a connection under Trademark Act Section 2(a) in the cancellation involves another party, i.e., Petitioner Estate; different factual issues are raised by Petitioner Estate’s Section 2(a) claim, such as whether Respondent’s registered mark creates a false suggestion of a connection with Theodore McCarty . . . ; factual issues exist pertaining to Petitioner PRS’ Section 2(d) claim regarding the alleged licensing agreement between Petitioners; and the marks involved are entirely different.

Different discovery and evidence will be required for the claims. For example, priority is an issue in the counterclaim, since Gibson is relying on alleged common law rights. The petition for cancellation will involve Petitioner Estate's rights and its licensing agreement with PRS. 

The Board concluded that granting the motion to sever would "enhance judicial economy and efficiency." The parties will be able to "focus their discovery requests, minimize discovery disputes, and avoid an unnecessarily complex single proceeding." In addition, "if the cancellation claims and the permissive counterclaim are not severed, issuance of a final decision may be delayed because the Board will be required to expend additional time distinguishing between unrelated claims, facts, and evidence."

Finally, the Board found that Petitioner Estate would be prejudiced by inclusion of the permissive counterclaim because Estate is not involved in the counterclaim, and resolution of Estate's cancellation claim would be delayed by discovery regarding Gibson's alleged common law use of the SILVERBURST mark. 

And so, the Board granted the motion to sever and ordered that a new cancellation proceeding be instituted for Gibson's counterclaim.

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TTABlogger comment: Is this a WYHCC? (Would you have counterclaimed?).

Text Copyright John L. Welch 2024.