Wednesday, April 10, 2024

Divided 9th Circuit Says District Court Has Power to Adjudicate TM Applications

Section 1119 of the Trademark Act gives a federal district court the power to "determine the right to registration, order cancelation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action." Does it give a court power to invalidate pending trademark applications? A divided panel of the U.S. Court of Appeals said yes in BBK Tobacco & Foods LLC d/b/a HGI v. Central Coast Agriculture, Inc., Appeals Nos. 22-16190 and 16281 (9th Cir. April 2, 2024).

BBK, a seller of smoking-related products under the mark RAW, alleged that Central Coast infringed the RAW trademark by selling cannabis products under the mark RAW GARDEN. The district court granted BBK's summary judgment motion on its infringement claim, as well as on its counterclaim to invalidate four of Central Coast's pending trademark applications (on the ground of lack of bona fide intent).

The Ninth Circuit panel affirmed the invalidation of the four Central Coast pending applications, ruling that when an action involves infringement of a registered trademark, a district court also has jurisdiction to consider challenges to the trademark applications of a party to the action. The dissenting judge opined that federal courts lack authority to cancel pending applications.

The panel majority concluded that the district court's power to "determine the right to registration" and to "rectify the register" includes the power to decide disputes over trademark applications. The Trademark Act describes an application as a request for registration, and therefore a challenge to an application "necessarily affects the applicant's right to a registration."

The plain language of Section 1119 thus grants a district court jurisdiction to consider challenges to the trademark applications of a party to the action if the action involves a registered trademark.

Permitting the district court to adjudicate trademark applications when a registration is involved "advances the interest in resolving all registration disputes in a single action." Section 1119 does not require a district court to address such claims when "the interest in efficiency or other considerations counsel against adjudicating a right to registration."

The dissenting judge contended that the Trademark Act's text, structure, and context confirm that district courts are not allowed "to interfere with the PTO's approval process and to prematurely cancel pending trademark registration applications. (emphasis in original).

The judge pointed out that "[a]s a historical matter, courts have seemingly always deferred to patent and trademark tribunals to review trademark applications in the first instance." Congress has created specific procedure and protections within the USPTO to adjudicate trademark applications. That system should not be interfered with lightly.

The phrase "determine the right to registration" in Section 1119 does not authorize cancelling applications. It refers to the court's authority to determine "the ownership, scope, priority, and use of trademarks, which may entitle a party to registration of the mark." Section 1119 gives a court the power to decide "who has rights to a mark."

The term "otherwise" in the phrase "otherwise rectify the register," is a "big deal." The canon noscitur a sociis (a word is known by the company it keeps) instructs that all terms in Section 1119 be read similarly. Each of the other powers in Section 1119 refer to control over completed registrations. So should "right to registration" be read.

And so, the dissenting judge would not reach the issue of cancellation of Central Coast's four pending applications.

Read comments and post your comment here.

TTABlogger comment: The majority does not cite any court precedent for its position. There does not seem to be any other court of appeals decision on point. What do you think? Some lower courts have suggested that a district court has authority over applications for marks that are sufficiently related to the marks at issue in the infringement lawsuit.

Text Copyright John L. Welch 2024.


At 8:54 AM, Blogger ea said...

This is a bit unsettling to concern lies with the potential for a slippery slope with a final destination of substantive trademark application review. I'd rather deal with the TTAB, thank you very much!

At 9:24 AM, Anonymous Jack A. Wheat said...

This holding does not bother me. Sect 1119 is a pretty broad grant of judicial authority, and factoring in the judicial economy of allowing a court currently litigating the mark to go ahead and address whether registration should be granted seems appropriate.

At 12:50 PM, Anonymous Warren Dranit said...

This feels like it conflates two issues. One is the district court assessing a party's rights to a trademark and second is the USPTO's process for registering those rights. It makes sense that a district court can conclude that that a party who does not have trademark rights should not be pursuing an application to register that trademark. But that does not mean that the district court has the authority to direct the USPTO to diverge from its statutory process as defined by the Lanham Act.

This issue seems to have been managed by the TTAB in Piano Wellness, LLC v. Williams, 126 USPQ2d 1739, 2018 WL 2455403 (TTAB 2018): "The District Court's direction to the Commissioner of Trademarks to “transfer the application” to plaintiff exceeds the court's statutory authority to rectify the register under Section 37 of the Trademark Act, which is limited to registrations, not pending applications." The Board's order provided time for the opposer to "inform the Board that it will seek additional relief from the District Court in the nature of an order directing Applicant to assign the subject application to Opposer."

Isn't that the correct approach here? The district court can find that a party is not entitled to pursue a trademark application and can order the applicant to withdraw its trademark applications. But the district court does not have authority to the direct the Commissioner of Trademarks.

At 2:00 PM, Anonymous Anonymous said...

I have to disagree. The statute is clear on its face. Section 1119 involves registered marks, not pending applications. The authority to decide registrbility is clearly vested with the USPTO. If there is a finding of "infringement" by the Article III courts, the TTAB should have descretion on whether to lend deference thereto. The likelihood of confusion analysis at the TTAB is different from the circuit courts' analysis. The 9th Circuit is overstepping here!! Isn't this similar to the B&B Hardware case? Not on the facts, but the principal -- if the elements of the whatever the issue is met, then the decision could have preclusive effect. However, the analysis and determination still needs to be made by the body that has the authority to decide it.

At 7:19 PM, Blogger John L. Welch said...

I agree with Mr. Dranit's approach. The court has jurisdiction over the defendant and can order it to withdraw or amend its applications. I would limit this order, however, to the marks and goods/services found to be infringing.

At 9:11 AM, Anonymous Anonymous said...

Interesting that the majority didn't discuss the Piano Wellness decision, which provides a competing and reasonable interpretation of this arguably ambiguous statutory provision and thus could/should(?) have been given Chevron deference (as long as Chevron is still breathing).


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