Tuesday, May 28, 2024

CAFC Affirms TTAB Dismissal of Consolidated Cancellations Due to Lack of Entitlement to a Statutory Cause of Action

The CAFC affirmed the Board's dismissal of two petitions for cancellation on the ground of lack of entitlement to a statutory cause of action under Section 1064 of the Trademark Act. The appellant, a limited partner of the Paul Hobbs Winery, challenged registrations for the marks ALVAREDOS-HOBBS and HILLICK AND HOBBS on two grounds (likelihood of confusion and fraud) but it failed to satisfy the Lexmark test because appellant lacked a direct commercial interest in the PAUL HOBBS mark being asserted, and because any injury appellant might suffer was too remote. Luca McDermott Catena Trust v. Fructuoso-Hobbs SL, 2024 USPQ2d 941 (Fed. Cir. 2024) [Precedential].

The CAFC first looked to whether the appellant had Article III standing ("constitutional standing"), and then turned to the question of appellant's entitlement to a statutory cause of action.

Article III Standing
To establish constitutional standing, Appellant “must show (i) that [it] suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by [Appellees]; and (iii) that the injury would likely be redressed by judicial relief.” TransUnion LLC v. Ramirez, 594 U.S. 413, 423 (2021) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)).

The court had "little doubt" that the appellant's alleged injury - the diminishment of the value of its investment in Hobbs Winery - satisfied the "injury-in-fact" requirement. "Such a monetary injury is undoubtedly 'concrete.' Indeed, the Supreme Court has long recognized that 'traditional tangible harms,' such as monetary harms, 'readily qualify as concrete injuries under Article III.'" TransUnion LLC, 594 U.S. at 425; see Spokeo, Inc. v. Robins, 578 U.S. 330, 340 (2016). Furthermore, the appellant's injury is "particularized" because it affects the appellant personally and individually, and the injury is "actual or imminent," not just "conjectural or hypothetical."

The causation requirement was satisfied because "[t]he allegedly unlawful registrations of Appellees’ marks cause a diminishment of value in Appellant’s Hobbs Winery ownership interest." And "there can be no doubt that Appellant’s injury would be redressed by a favorable decision."

The CAFC was therefore satisfied that the appellant met its burden as to Article III standing.

Entitlement to a Statutory Cause of Action

The question, then, was "whether Appellant falls within the class of plaintiffs who Congress has authorized to seek cancellation of Appellees' trademark registrations under 15 U.S.C. § 1064." The Board concluded that it did not. The CAFC agreed.

[W]e apply the analytical framework set forth by the Supreme Court in Lexmark, which provides two requirements to establish an entitlement to a statutory cause of action. 572 U.S. at 129; see Corcamore, 978 F.3d at 1305 (holding that Lexmark controls the statutory cause of action analysis under § 1064). First, Appellant must show that its interests fall within the “zone of interests” that Congress intended to protect in enacting the relevant statute. Lexmark, 572 U.S. at 129. Second, Appellant must show that its injuries are proximately caused by Appellees’ alleged violation of that statute. Id. at 132. In other words, Appellant must establish that its harm is not “too remote” from Appellees’ alleged unlawful conduct. Id. at 133.

The Lexmark analysis has "no meaningful, substantial difference" from the test traditionally applied by the CAFC: whether a trademark challenger has demonstrated "a real interest in cancelling the [registered trademarks at issue] and a reasonable belief that the [registered trademarks] are causing it damage." Each of the tests is meant to exclude only the claims of "mere intermeddlers."

A petition can satisfy the "zone of interests" requirement by showing that it has a "legitimate commercial interest" vis-a-vis the challenged mark. The court concluded that, because the only basis for the appellant's challenge is its minority interest in the owner of the mark, and not its own commercial activity, "it is not within the zone of interests entitled to seek cancellation of those marks under Section 1064."

That conclusion is supported by the Supreme Court’s guidance that Congress’s intent in enacting the Lanham Act was to provide a cause of action to persons engaged in commerce, not consumers, as well as our case law proscribing "mere intermeddlers" from seeking cancellation of challenged marks. * * * [N.B.: registrations are cancelled, not marks - ed.]. While Appellant, who, after all, owns up to 21.6% of Hobbs Winery, is not properly called an “intermeddler,” it indeed lacks the direct commercial interest in the registration at issue that the trademark laws contemplate as providing a basis for a cause of action

Finally, the CAFC observed that, even if the appellant's claims fell within the zone of interests of Section 1064, it could not satisfy the proximate causation requirement. The applicant's injury is derivative: absent injury to Hobbs Winery's mark, there can be no injury to appellant. In sum, the appellant's injury, like that of the landlord or the electric company mentioned in Lexmark, is too remote to provide the appellant with a cause of action under Section 1064.

Read comments and post your comment here.

TTABlogger comment: This decision does not bode well for Professor Curtin's appeal of the Board's RAPUNZEL decision. (TTABlogged here). BTW: Why didn't the winery appear as the petitioner here?

Text Copyright John L. Welch 2024.


At 2:43 PM, Anonymous Anonymous said...

"Why didn't the winery appear as the petitioner here?"

This is answered in the decision's opening paragraphs. The registrant is another partnership controlled by Paul Hobbs. One might suggest that by forming multiple companies under his own umbrella, each with different investors but using similar brands, he maximizes his own returns while minimizing his investors'. Whether this is an ethical business practice is an exercise for the reader.

At 2:48 PM, Anonymous Alex B. said...

Why didn't the winery appear as the petitioner here?
I haven't read the decision, but is the reason why the minority owners petitioned because the majority owners were behind the application since the nature of this dispute is really an internal ownership dispute?

At 3:30 PM, Anonymous Anonymous said...

The TTAB decision sheds light. The petitioners here are minority members of an LP that owns the mark PAUL HOBBS. The PAUL HOBBS mark seems to act as a house mark or selector’s mark for the marks that are the subject of these two cancellations. The minority owners of the registrant objects to the registration of these HOBBS-variant marks to other entities. They alleged that two thirds of the owners of the registrant have to approve such co-existence with HOBBS marks, which didn’t occur. So they’re petitioning here except they can’t for the reasons stated by the CAFC. The TTAB said, basically, we don’t do derivative actions at the TTAB.

At 12:17 AM, Anonymous Anonymous said...

So let me see if I have this right. The petitioner, who does not use or own the mark, but has a minority interest in the Hobbs Winery, which does own the mark, has an injury in fact because of the diminished value of its investment in the winery, which injury is a concrete monetary injury which affects petitioner personally and individually, with the injury being actual or imminent. So there is 'little doubt" petitioner has standing. BUT, sorry, petitioner, because you have no direct commercial activity, the harm to you is just too remote or derivative so you don't fall within the "zone of interests" to do anything about it. Hmmm. One might ask how can the injury be so concrete, personal and actual or imminent but just too remote or derivative? I love these cases where the plaintiff has sufficient interest to have standing but not enough to do anything about it (except waste a lot of money on legal fees). (Sorry to be so cynical about this case.)

At 7:25 AM, Blogger John L. Welch said...

As the opinion indicates, one can have "standing" under Article III because there is an injury, but not be entitled to bring suit under a specific statute because that statute doesn't cover that kind of injury. You seem to want to "conflate" the two. [I hate the word "conflate."]


Post a Comment

<< Home