CAFC Overturns Trademark Cancellation, Clarifies ‘Use in Commerce’ Requirement

federal-circuit-cafc-1aChristian Faith Fellowship v. Adidas AG,  (Fed. Cir. Nov. 14, 2016) (Before Reyna, Hughes, and Stoll, J.) (Opinion for the court, Stoll, J.)

The Federal Circuit reversed the cancellation of two trademarks by the Trademark Trial and Appeal Board (“Board”) and remanded for further consideration.

As early as January 2005, Christian Faith Fellowship Church (“Church”) sold caps and shirts emblazoned with the phrase ADD A ZERO as part of a fundraising campaign. The Church shortly thereafter filed two clothing-based trademark applications with the Patent and Trademark Office (“Office”) for the phrase ADD A ZERO, relying on actual use of the marks in commerce, rather than an intent to use. The Office granted the applications and registered the marks.

In 2009, Adidas filed an application for a clothing trademark for the phrase ADIZERO. The Office refused the application for likelihood of confusion with the Church’s ADD A ZERO marks. Adidas then brought an action to cancel the Church’s marks, arguing, inter alia, that the Church failed to use the marks in commerce before registration.

Under the Lanham Act, “‘[t]he owner of a trademark used in commerce may request registration of its trademark.’” 15 U.S.C. § 1051(a)(1) (emphasis added by the Court). The Lanham Act explains that “‘a mark shall be deemed to be used in commerce . . . on goods when . . . the goods are sold or transported in commerce.’” Id. § 1128 (emphasis added by the Court).

Further, the Lanham Act defines “commerce” as “all commerce which may lawfully be regulated by Congress.” Id. Thus, to register a mark under § 1051(a), one must sell or transport goods bearing the mark such that the sale or transport would be subject to Congress’s power under the Commerce Clause, which includes its power to regulate interstate commerce.

To show that it used the mark in commerce, the Church, located in Illinois, offered evidence of the sale of two ADD A ZERO hats in Illinois, to a Wisconsin resident. These sales totaled $38.42 and were made before the Church applied for its marks. The Board found this sale to be “de minimis,” and not a “use in commerce” required by the Lanham Act. The Board canceled the Church’s marks without addressing Adidas’s alternate arguments.

The Federal Circuit reversed the Board’s decision. After reviewing and upholding the admissibility of the Church’s evidence of the sale at issue, the Court considered whether the sale of two hats, within the state, but to an out-of-state resident,  could be regulated by Congress, satisfying the Lanham Act § 1051(a) “use in commerce” requirement.

The Court found that “it cannot be doubted that the transaction at issue—the private sale of goods, particularly apparel, to an out-of-state resident—is quintessentially economic.” (internal citations omitted). Further: “The Board’s rationale that the sale . . . was ‘de minimis’ and thus ‘insufficient to show use that affects interstate commerce’ is squarely at odds with the progeny of Commerce Clause cases. . . . In particular, the Board’s reasoning contravenes [Gonzales v.] Raich[, 545 U.S. 1, 6–8 (2005),] which expressed that “the de minimis character of individual instances” arising under a valid statute enacted under the Commerce Clause “is of no consequence.”

The Court explained: “Even if . . . activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce and this irrespective of whether such effect is what might at some earlier time have been defined as ‘direct’ or ‘indirect.’”

The Court also considered two cases the Board relied on: In re Cook, United, Inc., 188 U.S.P.Q 284 (T.T.A.B 1975), and In re The Bagel Factory, Inc., 183 U.S.P.Q. 553 (T.T.A.B. 1974). These cases “have been the source of confusion in [the] ‘use in commerce’ doctrine.” They asserted that an intrastate  sale of goods is not a sale “in commerce” per se, unless the applicant did something more, such as knowingly direct the goods across state lines. The Court overturned these holdings to the extent that they “assert that the Lanham Act requires commercial activity . . . beyond that which is sufficient for Congress to regulate commercial activity under the Commerce Clause.” Goods are not required to be directed across state lines for Congress to regulate the activity under the Commerce Clause.

The Court remanded the case for the Board to address Adidas’s other cancellation grounds.

“Use in commerce” under the Lanham Act encompasses any activity that falls under Congress’s Commerce Clause power, including in-state sales to an out-of-state resident. Activities that are within such regulatory authority are unlikely to be disqualified as merely “de minimis,” e.g. in economic impact.

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Robert Schaffer

Robert Schaffer is an intellectual property partner at Troutman Sanders. Bob applies more than 30 years of experience to IP counseling and litigation. His work includes patent procurement, strategic planning and transactional advice, due diligence investigations, district court patent cases, and Federal Circuit appeals. He regularly handles complex and high-profile domestic and international patent portfolios, intellectual property agreements and licensing, IP evaluations for collaborations, mergers, and acquisitions. In disputed court cases Bob’s work includes representing and counseling client in ANDA litigations, complex patent infringement cases and appeals, and multidistrict and international cases. In disputed Patent Office matters his work includes representing and counseling clients in interferences, reexaminations, reissues, post-grant proceedings, and in European Oppositions. For more information and to contact Bob please visit his profile page at the Troutman Sanders website.

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Joseph Robinson has over 20 years of experience in all aspects of intellectual property law. He focuses his practice in the pharmaceutical, life sciences, biotechnology, and medical device fields. His practice encompasses litigation, including Hatch-Waxman litigation; licensing; counseling; due diligence; and patent and trademark prosecution. He has served as litigation counsel in a variety of patent and trademark disputes in many different jurisdictions, and has also served as appellate counsel before the Court of Appeals for the Federal Circuit. Joe also focuses on complex inter partes matters before the U.S Patent and Trademark Office, inventorship disputes, reexaminations and reissues. His experience includes numerous interferences, a particular advantage in new U.S. Patent and Trademark Office post-grant proceedings. He also counsels on patent–related U.S. Food and Drug Administration issues, including citizen petitions, Orange Book listing, and trademark issues. For more information and to contact Joe please visit his profile page at the Troutman Sanders website.

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