General Healthcare Ltd. v. Qashat

• Decision Date: 13 April 2004
• Docket Number: No. 03-1968.,03-1968.
• Citation: 364 F.3d 332
• Parties: GENERAL HEALTHCARE LTD., Plaintiff, Appellant, v. Isam QASHAT; Kent International Products, Inc., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 332

364 F.3d 332

GENERAL HEALTHCARE LTD., Plaintiff, Appellant, v. Isam QASHAT; Kent International Products, Inc., Defendants, Appellees.

No. 03-1968.

United States Court of Appeals, First Circuit.

Heard January 8, 2004.

Decided April 13, 2004.

Adam K. Derman with whom Peter E. Nussbaum, R. Jonas Geissler, and Wolff & Samson PC were on brief, for appellant.

Michael A. Albert with whom Laura Topper, and Wolf, Greenfield & Sacks, P.C. were on brief, for appellees.

Before HOWARD, Circuit Judge, COFFIN and CAMPBELL, Senior Circuit Judges.

COFFIN, Senior Circuit Judge.

In this dispute, both parties claim ownership of the United States trademark rights in "Kent Creme Bleach" (the Kent mark). Appellant General Healthcare International (GHL), a United Kingdom corporation, appeals the district court's grant of summary judgment in favor of Kent International Products (KIP), a United States corporation. The district court concluded that GHL never used the Kent trademark in commerce in the United States and therefore did not own the contested rights in the mark. Because GHL lacked ownership, the district court also held that GHL did not have standing to seek cancellation of KIP's allegedly infringing registration. On appeal, GHL argues that the transportation of goods bearing the Kent trademark from a manufacturer in the United States to its offices in the United Kingdom is sufficient to confer ownership rights in the mark. We disagree, and affirm the district court.

I. Factual Background

The heart of this dispute lies in Saudi Arabia, where both GHL and KIP sell Kent Creme Bleach, a personal care product that lightens body hair. The product has several components, including the actual cream itself, the tubes (bearing the Kent mark) in which the cream is placed, an instructional insert, and an applicator. Together, these elements are packaged in a box (also bearing the Kent mark) for sale to consumers. The complete product of both companies is identical in packaging and — for purposes of this appeal — substance.¹ In this case, KIP and GHL contest only trademark rights in the United States, where both companies manufacture the product.²

The undisputed first user of the Kent mark was a third company, Healthcare International (HCI), which has since been dissolved. From 1982 until approximately 1989, HCI sold Kent Creme Bleach in the Middle East. Both Adel Kseib, principal of GHL, and Isam Qashat, principal of KIP,³ were aware of the Kent product by virtue of their respective businesses involving the export of personal care products to the region. Sometime after the death of HCI principal Salvatore Rodino in 1989, Kseib and Qashat learned (through various business contacts) that supplies of Kent Creme Bleach were dwindling. Each then set about gearing up his own manufacture and export of the product. Kseib allegedly purchased the Kent trademark from Rodino's widow and received HCI's list of suppliers; Qashat, unable to reach anyone at HCI, engaged counsel to conduct a trademark search to determine the status of the Kent trademark. The search revealed that HCI's application for registration of the Kent mark was rejected and ultimately abandoned in 1986. In light of what seemed to be the permanent cessation of HCI's activity, Qashat presumed the mark to be available for appropriation. He ascertained the Kent formula based on a sample of the then-existing product and established his own manufacturing and export network in the United States.

KIP subsequently obtained United States registrations for both the word mark and the trade dress. The word mark has since become incontestable.⁴ GHL, on the other hand, never attempted to register its interest in the Kent mark, relying instead on protection afforded by common law.

The only material difference in the operation of the two companies is that KIP sells to the Middle East directly from its United States offices. GHL, on the other hand, manufactures the cream in the United States, but assembles the final product in the United Kingdom. All sales to the Middle East occur from GHL's United Kingdom offices.

Qashat and Kseib have been aware of each other's competing activity since 1990, as evidenced by a cease-and-desist letter sent from GHL to KIP in March 1991. GHL did not file suit, however, until February 1, 2000, when it brought claims under the Lanham Act for unfair competition and false advertising, and also sought to cancel KIP's United States registration. See 15 U.S.C. §§ 1064, 1119, 1125(a). KIP responded with a counterclaim against GHL for infringement. Following discovery, each party moved for summary judgment.

II. Basics of Trademark Law

Under the Lanham Act, a trademark includes "any word, name, symbol, or device or any combination thereof" used by an individual or entity "to identify and distinguish his or her goods ... from those manufactured or sold by others." 15 U.S.C. § 1127. Trademark rights may arise under either the Lanham Act or under common law, but in either circumstance, the right is conditioned upon use in commerce.⁵ United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 63 L.Ed. 141 (1918) (establishing that "the right to a particular mark grows out of its use, not its mere adoption"). A mark is deemed "in use in commerce" when it is affixed to the goods with which it is associated and those goods are then "sold or transported in commerce." 15 U.S.C. § 1127. Of particular relevance to this appeal is that sales of goods within or from the United States are not necessary to establish trademark ownership; for purposes of the Lanham Act, transportation alone qualifies. See New England Duplicating Co. v. Mendes, 190 F.2d 415, 417 (1st Cir.1951) ("The use of the disjunctive `or' between `sold' and `transported' leaves no doubt that a transportation ... is enough to constitute a `use' even without a sale.").

However, "not every transport of a good is sufficient to establish ownership rights in a mark." Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1196 (11th Cir.2001). In assessing rights stemming from transportation, courts and commentators have required an element of public awareness of the use. Mendes, 190 F.2d at 418 (requiring "first, adoption, and, second, use in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind ..."); see also Planetary Motion, Inc., 261 F.3d at 1195 (citing Mendes, 190 F.2d at 418); Brookfield Comm., Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir.1999) (citing Mendes, 190 F.2d at 418); Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260, (5th Cir.1975) ("Secret, undisclosed shipments are generally inadequate to support the denomination `use.'"); 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 19:118 (4th ed. 2003) ("It seems clear that `transportation,' as an alternative to `sale,' requires the same elements of open and public use before customers.").

GHL contended below that the shipment of Kent Creme Bleach from the United States manufacturer to its United Kingdom office, followed by subsequent sales from the United Kingdom to the Middle East, was use in commerce sufficient to sustain United States ownership rights. The crux of the district court opinion was that GHL's activities lacked the public use element necessary to assert trademark rights based on transportation. Using the two step test for abandonment set forth in 15 U.S.C. § 1127, the district court then found that any trademark rights acquired by GHL from HCI had long since been abandoned on the basis of nonuse. The court thus granted KIP's request for summary judgment, which we now review de novo. See Calero-Cerezo v. U.S. Dep't of Justice, 355 F.3d 6, 19 (1st Cir.2004).

In evaluating this claim we, like the district court, assume but do not decide that GHL legitimately acquired trademark rights from HCI in 1989. To prevail on appeal, however, GHL must demonstrate that since that acquisition, it has continued to use the mark in commerce in the United States. A trademark owner who fails to use a mark for three consecutive years may be deemed to have abandoned the mark, which would then fall into the public domain. We therefore focus our inquiry on GHL's most recent three years of use; if GHL has failed to maintain its common law rights,⁶ there will be no basis for its claim of infringement.⁷

III. GHL's Ownership Rights

GHL contends that the district court inappropriately focused on the public nature (or lack thereof) of GHL's use in commerce. The company argues that, under our decision in Purolator, Inc. v. EFRA Distrib. Inc., 687 F.2d 554 (1st Cir.1982), the fact that GHL's use included both transportation and subsequent sales to consumers eliminates the need for such an inquiry. In Purolator, we held that interstate shipment of automobile filters in unmarked boxes, followed by solely intrastate sale, was sufficient use in interstate commerce so as to bring the dispute within the jurisdiction of the Lanham Act. Id. at 559. GHL cites cases from other circuits that similarly find jurisdiction based on a combination of non-public transportation and consumer sales. See, e.g., John Walker and Sons Ltd. v. DeMert & Dougherty, Inc., 821 F.2d 399, 408 (7th Cir.1987) (interstate shipment of cans bearing allegedly infringing trademark, followed by subsequent sales overseas, brought dispute within jurisdiction of Lanham Act); Scotch Whiskey Ass'n v. Barton Distilling Co., 489 F.2d 809, 812-13 (7th Cir.1973) (determining that shipments of infringing labels from the United States to Panama gave rise to extraterritorial jurisdiction under Lanham Act). What GHL fails to recognize, however, is the distinction between a jurisdictional inquiry and an ownership dispute. The "use in commerce" test for establishing jurisdiction looks at whether shipments traveled from state to state or from the United States to a foreign jurisdiction, and...