Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC

• Decision Date: 27 July 2020
• Docket Number: 2019-1567
• Citation: 965 F.3d 1370
• Parties: AUSTRALIAN THERAPEUTIC SUPPLIES PTY. LTD., Appellant v. NAKED TM, LLC, Appellee
• Court: U.S. Court of Appeals — Federal Circuit

965 F.3d 1370

AUSTRALIAN THERAPEUTIC SUPPLIES PTY. LTD., Appellant

v.NAKED TM, LLC, Appellee

2019-1567

United States Court of Appeals, Federal Circuit.

Decided: July 27, 2020

James Robert Menker, Holley & Menker, P.A., Atlantic Beach, FL, argued for appellant.

Suzanne D. Meehle, Meehle & Jay PA, Orlando, FL, argued for appellee. Also represented by Emily Behzadi, Davey T. Jay.

Before O'Malley, Reyna, and Wallach, Circuit Judges.

Dissenting opinion filed by Circuit Judge Wallach.

Reyna, Circuit Judge.

The Trademark Trial and Appeal Board determined that Australian Therapeutic Supplies Pty. Ltd. ("Australian") lacks standing to petition for cancellation of a trademark registration. The Board reasoned that Australian could not show an interest in the cancellation proceeding or a reasonable belief of damage because it had contracted away its proprietary rights in its unregistered marks. We disagree. An absence of proprietary rights does not in itself negate an interest in the proceeding or a reasonable belief of damage. We hold that a petitioner seeking to cancel a trademark registration establishes an entitlement to bring a cancellation proceeding under 15 U.S.C. § 1064 by demonstrating a real interest in the cancellation proceeding and a reasonable belief of damage regardless of whether petitioner lacks a proprietary interest in an asserted unregistered mark. Because Australian has a real interest in the cancellation proceeding and a reasonable belief of damage, Australian satisfies the statutory requirements to seek cancellation of a registered trademark pursuant to § 1064. We reverse and remand.

BACKGROUND

A

Australian first adopted the mark NAKED for condoms in early 2000 and started advertising, promoting, and selling condoms with the marks NAKED and NAKED CONDOM (collectively, the "unregistered mark") in Australia. Starting as early as April 2003, Australian, through its website, began advertising, selling, and shipping condoms featuring its unregistered mark to customers in the United States. See J.A. 10.

Naked TM, LLC, ("Naked") owns Registration No. 3,325,577 for the mark NAKED for condoms. In late 2005, Australian learned that Naked's predecessor-in-interest (herein also referred to as "Naked") had filed a trademark application for NAKED condoms on September 22, 2003. On July 26, 2006, Australian contacted Naked and claimed rights in its unregistered mark. From July 26, 2006, to early 2007, Australian and Naked engaged in settlement negotiations via email correspondence.

Naked asserts that the email communications demonstrate that the parties reached an agreement whereby Australian would discontinue use of its unregistered mark in the United States and consent to Naked's use and registration of its NAKED mark in the United States. See Appellee Br. 6 (citing J.A. 1541; J.A. 1543; J.A. 1551; J.A. 1553–56; J.A. 1587; and J.A. 1748–49). Australian disagrees and counters that no agreement exists because the parties did not agree on the final terms of a settlement. Appellant Br. 8–9 (citing J.A. 121–26, J.A. 486–508).

B

Notwithstanding the settlement discussions, in 2006, Australian filed a petition to cancel registration of the NAKED mark. The petition, as amended, asserted Australian's prior use of the mark and sought cancellation on the grounds of fraud, likelihood of confusion, false suggestion of a connection, and lack of bona fide intent to use the mark. Naked filed a response, denied the allegations in Australian's amended petition, and asserted numerous affirmative defenses, including that Australian lacked standing to seek cancellation and that Australian was contractually and equitably estopped from pursuing the cancellation.

Naked moved for summary judgment on its affirmative defenses of contractual and equitable estoppel, laches, acquiescence, and unclean hands. Australian cross-moved for summary judgment on grounds of likelihood of confusion under the Lanham Act § 2(d), 15 U.S.C. § 1052(d), and asserted that Naked's affirmative defenses are inapplicable because Naked's use of the NAKED mark would result in inevitable confusion with Australian's unregistered mark.

The Board denied summary judgment on grounds that a genuine issue of material fact existed with respect to Australian's standing and with respect to Naked's affirmative defense of contractual estoppel. The Board also opined that a finding of confusion would be likely if Australian could establish standing and priority. The Board advised the parties to focus efforts at trial on the issues of standing and priority.

On December 21, 2018, following trial, the Board concluded that Australian lacked standing to bring a petition for cancellation. Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC , CANCELLATION No. 92056381, 2018 WL 6929683, at *11 (T.T.A.B. Dec. 21, 2018) (hereinafter " Decision "). The Board reasoned that, in order to show that it had standing, Australian was required to establish proprietary rights in its unregistered mark. See id. at *2 (citing Otto Roth & Co. v. Universal Foods Corp. , 640 F.2d 1317 (C.C.P.A. 1981) ). The Board concluded that Australian failed to establish proprietary rights in its unregistered mark and thus lacked standing. See id. at *11.

The Board found that, although no formal written agreement existed, the parties entered into an informal agreement through email communications and the parties’ actions. Id. at *6–8, *9. According to the Board, Australian agreed it would not use or register its unregistered mark in the United States and that Naked could use and register its NAKED mark in the United States. Id. at *11. The Board found that Australian led Naked to "reasonably believe that [Australian] had abandoned its rights in the United States to the NAKED mark in connection with condoms." Id. at *9. Although the Board made no finding on whether Australian agreed not to challenge Naked's use and registration of the NAKED mark, the Board concluded that Australian lacked standing to petition to cancel the NAKED mark because Australian could not establish a real interest in the cancellation or a reasonable basis to believe it would suffer damage from the continued registration of the NAKED mark. Id. at *11.

Australian timely appeals the Board's decision. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(B).

DISCUSSION

We note at the outset that the Supreme Court has clarified that there are certain issues that are discussed in terms of "standing" that are more appropriately viewed as requirements for establishing a statutory cause of action. Lexmark Int'l, Inc. v. Static Control Components, Inc. , 572 U.S. 118, 128 n.4, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014). That is the case here. The Board discussed the requirements to bring a cancellation proceeding under 15 U.S.C. § 1064 in terms of "standing" instead of a statutory entitlement to a cause of action under 15 U.S.C. § 1064. Cf. , Empresa Cubana Del Tabaco v. Gen. Cigar Co. , 753 F.3d 1270, 1274 (Fed. Cir. 2014) (citing Lexmark , 572 U.S. at 125–28, 134 S.Ct. 1377 ).

We review de novo whether Australian has established entitlement to a statutory cause of action under § 1064. Empresa Cubana , 753 F.3d at 1274 (citing Lexmark , 572 U.S. at 128, 134 S.Ct. 1377 (applying "traditional principles of statutory interpretation" to determine whether party has a cause of action under the statute)). Section 1064 provides that a petitioner may seek cancellation of a registered trademark if the petitioner "believes that he is or will be damaged" by the registered trademark. § 1064. The statutory requirements to cancel registration of a mark under § 1064 are substantively equal to the statutory requirements to oppose the registration of a mark under § 1063:

both require a party to demonstrate a real interest in the proceeding and a reasonable belief of damage. See Young v. AGB Corp. , 152 F.3d 1377, 1380 (Fed. Cir. 1998) ("The linguistic and functional similarities between the opposition and cancellation provisions of the Lanham Act mandate that we construe the requirements of these provisions consistently."); see also Empresa Cubana , 753 F.3d at 1275 ("A petitioner is authorized by statute to seek cancellation of a mark where it has both a real interest in the proceedings as well as a reasonable basis for its belief of damage." (internal quotation marks and citation omitted)).

A. Proprietary Rights

The Board's conclusion that Australian lacked entitlement to bring a cancellation proceeding against a registered mark because it does not have proprietary rights in its unregistered mark is erroneous. Entitlement to a cause of action under § 1064 is not contingent on whether a petitioner has proprietary rights in its own mark.

Here, the Board required that Australian establish proprietary rights in its unregistered mark in order to demonstrate a cause of action under § 1064. This was error. Neither § 1064 nor our precedent requires that a petitioner have a proprietary right in its own mark in order to demonstrate a cause of action before the Board. See Jewelers Vigilance Comm., Inc. v. Ullenberg Corp. , 823 F.2d 490, 493 (Fed. Cir. 1987). For example, in Jewelers , we explained that a trade association may have standing to oppose a mark's registration "without [having] proprietary rights in a mark." 823 F.2d at 493 ; see also TBMP § 309.03(b) ("A plaintiff need not assert proprietary rights in a term in order to have standing."). This is true "irrespective of the grounds [of nonregistrability] upon which the opposer relies." Jewelers , 823 F.2d at 493 ; but cf. Herbko Int'l, Inc. v. Kappa Books, Inc. , 308 F.3d 1156, 1162 (Fed. Cir. 2002) (explaining that proprietary rights are necessary to show priority of use when petitioning for cancellation under section 2(d)); TBMP § 309.03(c)(2) (discussing priority of use and proprietary rights).

The Board determined that Australian had contracted away its right to use and register its unregistered mark. Decision at *11....