Alltrade, Inc. v. Uniweld Products, Inc.

• Citation: 946 F.2d 622
• Decision Date: 05 June 1991
• Docket Number: No. 90-55605,90-55605
• Parties: ALLTRADE, INC., Plaintiff-Appellant, v. UNIWELD PRODUCTS, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 622

946 F.2d 622

20 U.S.P.Q.2d 1698

ALLTRADE, INC., Plaintiff-Appellant, v. UNIWELD PRODUCTS, INC., Defendant-Appellee.

No. 90-55605.

United States Court of Appeals Ninth Circuit.

Submitted June 5, 1991. ^*

Decided Sept. 23, 1991.

As Amended Oct. 31, 1991.

Louis S. Mastriani, Barbara A. Murphy, and Larry L. Shatzer, II, Adduci, Mastriani, Meeks & Schill, Washington, D.C., for plaintiff-appellant.

Neil F. Greenblum, Roger P. Glass, Michael J. Fink, and Jordan S. Weinstein, Sandler, Greenblum & Bernstein, Arlington, Va., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before D.W. NELSON, O'SCANNLAIN and TROTT, Circuit Judges.

D.W. NELSON, Circuit Judge:

This case focuses on an apparent conflict between two legal principles: First, the well-established "first to file rule," which allows a district court to transfer, stay, or dismiss an action when a similar complaint has already been filed in another federal court; second, the statutory right to appeal enjoyed by a party "dissatisfied" with a "decision" of the Trademark Trial and Appeal Board ("Board").

Invoking the former principle, the district court dismissed a challenge to a Board decision filed by appellant Alltrade, Inc. ("Alltrade"), on the ground that it duplicated a prior suit. Claiming that the dismissal deprived it of its statutory right to appeal, Alltrade seeks review of the district court's holding in the name of the latter. We hereby affirm the decision not to hear appellant's complaint at this time. However, we also hold that, in order better to reconcile these twin principles, the district court should have stayed, rather than dismissed, the second-filed suit.

I. Factual and Procedural Background

On December 31, 1986, appellee Uniweld Products, Inc. ("Uniweld"), filed a petition pursuant to 15 U.S.C. § 1064 seeking cancellation by the Board of three federal trademark registrations owned by appellant Alltrade. In support of its petition, Uniweld alleged prior use of the mark "ALL-TRADES" and argued that continued use by appellant would be likely to cause confusion. In addition, Uniweld claimed that Alltrade had not complied with a number of statutory registration requirements, that the inferior quality of appellant's goods damaged its reputation, and that Alltrade had committed fraud by using the registration symbol for goods not set forth in the registration.

The Board rendered its decision on December 12, 1989. In ruling for Uniweld, it held as follows:

[B]ecause the parties use these very similar marks on tools which are related products, confusion is likely. Because petitioner [Uniweld] used this mark prior to respondent's [Alltrade's] adoption and use of its mark, petitioner is entitled to judgment in its favor. Accordingly, the petition to cancel is granted.

En route to this conclusion, however, the Board rejected as bases for cancellation Uniweld's contention that "actual confusion" had occurred, that Alltrade's goods were of inferior quality, and that Alltrade had failed to comply with statutory requirements. Because appellee did not have to establish either of the above allegations in order to prevail, the essence of the Board's decision was unaffected by these findings.

Under 15 U.S.C. § 1071(b)(1), the deadline for seeking review of the Board's decision was sixty days from issuance, or February 12, 1990. See 37 C.F.R. § 2.145(d) (1990). In January and early February of that year, Alltrade conducted settlement discussions with Uniweld, interspersed with statements indicating that it intended to appeal the Board's decision in the United States District Court for the Central District of California. According to appellant, the suggestion was explicitly made on February 2, 1990.

On February 8, 1990, Uniweld filed an action in the United States District Court for the Southern District of Florida (the "Florida action") charging Alltrade with federal and state unfair competition (Counts I & III), common law trademark infringement (Count II), and violation of Florida's anti-dilution laws (Count III). Moreover, Uniweld sought review of those aspects of the Board's decision with which it disagreed (Count IV). ¹ A day later, and unaware of the Florida action, ² Alltrade filed the action at issue in this appeal in the United States District Court for the Central District of California (the "California action"), seeking review of the Board's decision (Count I) and a declaratory judgment stating that it did not infringe Uniweld's trademark (Count II). ³

Finding the issues in the California action "duplicative of issues in the Action already before the Southern District of Florida," and mindful of the presence of an additional defendant in the Florida suit, the California district court applied the first-to-file rule and dismissed Alltrade's action. Alltrade then filed this timely appeal.

II. First-To-File Rule

The first-to-file rule was developed to "serve[ ] the purpose of promoting efficiency well and should not be disregarded lightly." Church of Scientology v. United States Dep't of the Army, 611 F.2d 738, 750 (9th Cir.1979); see also EEOC v. University of Pennsylvania, 850 F.2d 969, 971 (3d Cir.), cert. granted in part, 488 U.S. 992, 109 S.Ct. 554, 102 L.Ed.2d 581 (1988), order amended, 490 U.S. 1015, 109 S.Ct. 1660, 104 L.Ed.2d 173 (1989), aff'd on other grounds, 493 U.S. 182, 110 S.Ct. 577, 107 L.Ed.2d 571 (1990). It may be invoked "when a complaint involving the same parties and issues has already been filed in another district." Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th Cir.1982). We review a court's decision to accept or decline jurisdiction based on the first-to-file rule for abuse of discretion. Id.

a.

In the present case, two prerequisites clearly have been met. The first is chronology, as Uniweld filed its suit prior to Alltrade; the second is the identity of the parties involved. Nevertheless, as appellant points out, there is some doubt regarding the similarity of the issues at stake. As the losing party in the proceeding before the Board, Alltrade contends that it alone had the right to bring an appeal. Therefore, it argues, the Florida district court lacks jurisdiction to hear that portion of Uniweld's action purporting to appeal the Board's decision. ⁴ As a result, appellant claims, a basic requirement for applying the first-to-file rule--that the issues in the two suits be identical--is not met. Indeed, even if the Florida court were to agree to hear Uniweld's appeal, Alltrade contends that to prevent it from bringing its own appeal in the forum of its choice would frustrate the purpose of section 1071. ⁵

The ambiguity begins with the language of section 1071, granting a right of appeal to parties "dissatisfied with the decision " of the Board. 15 U.S.C. § 1071(b)(1) (emphasis added). ⁶ While "dissatisfaction" hints at a broad construction of the statute--insofar as both parties might have cause for discontent--"decision" considerably narrows the scope--for a decision generally supports one party or the other. Courts that have construed this and analogous provisions typically have held that a party benefiting from a ruling, yet disagreeing with specific findings, cannot appeal.

Thus, in Maremont Corp. v. Air Lift Co., 463 F.2d 1114 (C.C.P.A.1972), the court confronted an appeal by Air Lift, the prevailing party below. Calling it "pure surplusage," and carefully adorning every reference to Air Lift's "appeal" with quotation marks, the court strongly suggested that it was improper. ⁷ Likewise, in Klemperer v Price, 271 F.2d 743 (C.C.P.A.1959), the appellant sought review of some of the Board's rulings that did not affect its favorable decision. The court dismissed the appeal, reasoning that "[i]t is evident that [appellant] is not dissatisfied with the decision of the board. ... His dissatisfaction is merely with holdings of the board on other points not necessary to that decision." Id. at 744. See also W.W. Windle Co. v. Commissioner, 550 F.2d 43, 45 (1st Cir.), cert. denied, 431 U.S. 966, 97 S.Ct. 2923, 53 L.Ed.2d 1062 (1977). ⁸

The principle has roots in the more general proposition that "[o]rdinarily, only a party aggrieved by a judgment or order of a district court may exercise the statutory right to appeal therefrom." Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 333, 100 S.Ct. 1166, 1171, 63 L.Ed.2d 427 (1980); see also Clapp v. Commissioner, 875 F.2d 1396, 1398 (9th Cir.1989).

However, there stands a somewhat contrary tradition pursuant to which even a "winning" party can appeal those aspects of a ruling with which it is dissatisfied. In Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263 (1939), respondents had sued petitioners for patent infringement. The district court, in ruling for petitioners, found that there had been no infringement. Although it could have stopped there, it went on to adjudge the patent valid--a finding that, at that point, was purely superfluous. On petitioners' appeal of that portion of the decree, the Supreme Court held as follows:

A party may not appeal from a judgment or decree in his favor, for the purpose of obtaining a review of findings he deems erroneous which are not necessary to support the decree. But here the decree itself purports to adjudge the validity of [the patent], and though the adjudication was immaterial to the disposition of the cause, it stands as an adjudication of one of the issues litigated. We think the petitioners were entitled to have this portion of the decree eliminated.

307 U.S. at 242, 59 S.Ct. at 860. Interpreting this holding some 40 years later, the Court wrote: "In a sense, the petitioner in Electrical Fittings sought review of the District Court's procedural error. The District Court ... was incorrect to adjudge the patent valid after ruling that there had been no infringement. By doing so, the...