Federal Circuit Affirms TTAB Holding Regarding Standing and Sanctions

By Rebecca Tapscott
October 29, 2020

“Although the TTAB applied the standard of Empresa Cubana rather than Lexmark, the CAFC explained that there was ‘no meaningful, substantive difference between the analytical frameworks expressed in Lexmark and Empresa Cubana.’

On October 27, the United States Court of Appeals for the Federal Circuit (CAFC) affirmed a decision of the United States Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) in Corcamore, LLC v. SFM, LLC. In an opinion authored by Circuit Judge Reyna, the CAFC affirmed the TTAB’s decision that SFM was entitled to bring and maintain a petition under 15 U.S.C. § 1064 because it met the requirements to bring a cancellation action against Corcamore’s registered mark, and that the TTAB did not abuse its discretion in imposing default judgment as a sanction.

SPROUTS and SPROUT

federal circuitSFM owned the federal registration for the mark SPROUTS for use in connection with retail grocery store services and Corcamore owned the federal trademark registration for SPROUT for use in connection with vending machine services. SFM filed a petition with the TTAB to cancel Corcamore’s registration for SPROUT, asserting that its rights to the SPROUTS mark were superior to Corcamore’s rights and that “it would be damaged by [Corcamore’s] continued registration of the SPROUT mark because use of the mark was ‘likely to cause confusion or mistake, or to deceive the purchasing public’ with respect to the source of the goods it sold under its SPROUTS mark.” Corcamore moved to dismiss the petition for lack of standing under Rule 12(b)(6) of the Federal Rules of Civil Procedure, “citing the analytical framework established by the Supreme Court in Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), for determining whether the requirements for maintaining a statutory cause of action have been satisfied.” The TTAB denied Corcamore’s motion to dismiss for lack of standing and reasoned that  Lexmark was not applicable because it was limited to civil actions involving false designation of origin under  15 U.S.C. § 1125(a) and did not extend to cancellation of registered marks under 15 U.S.C. § 1064. Relying instead on the analysis set forth by the CAFC in Empresa Cubana del Tabaco v. General Cigar Co., 753 F.3d 1270 (Fed. Cir. 2014), the CAFC concluded that SFM had standing because it “sufficiently alleged a real interest in the cancellation proceeding and a reasonable belief of damage, as required under 15 U.S.C. § 1064.”

Following the TTAB’s denial of the motion to dismiss, “Corcamore sent a letter to SFM’s counsel indicating that it would bring “procedural maneuvers” against SFM and delay discovery.”

As a result of Corcamore’s behavior, the TTAB imposed two sanctions and entered default judgment in favor of SFM. At the close of discovery, SFM moved for default judgment as a sanction for Corcamore’s litigation misconduct and the TTAB granted the motion due to Corcamore’s “willful, bad-faith tactics, consistent with its ‘procedural maneuvers’ letter, [which] frustrated SFM’s ability to advance its case, and taxed Board resources.” Corcamore appealed to the CAFC, arguing that 1.) SFM lacks standing to bring a petition for cancellation of a registered trademark, and 2.) the Board abused its discretion in granting default judgment as a sanction.

CAFC’s Review of Standing

The CAFC initially noted that “certain issues often discussed in terms of “standing” are more appropriately viewed as requirements for establishing a statutory cause of action” and the case at hand focused on the requirements that a party must satisfy to bring or maintain a statutory cause of action, such as a petition to cancel a registered trademark under 15 U.S.C. § 1064, rather than Article III standing.

The CAFC also noted that the TTAB’s interpretation of Lexmark was unduly narrow, and “Lexmark analytical framework is the applicable standard for determining whether a person is eligible under § 1064 to bring a petition for the cancellation of a trademark registration.”  The CAFC explained that the Supreme Court in Lexmark established a party is entitled to bring a statutory cause of action if it demonstrates “(i) an interest falling within the zone of interests protected by the statute and (ii) proximate causation.”  The CAFC further explained that the “zone-of-interests requirement applies to all statutory causes of action, and that proximate causation generally applies to all statutory causes of action.” The CAFC noted that the TTAB improperly interpreted Lexmark as being limited to false advertising provided in 15 U.S.C. § 1125(a). Thus, the CAFC concluded that the Lexmark analytical framework applied to § 1064 and § 1125(a) because both are statutory causes of action. Although the TTAB applied the standard of Empresa Cubana rather than Lexmark, the CAFC explained that there was “no meaningful, substantive difference between the analytical frameworks expressed in Lexmark and Empresa Cubana”; therefore, the TTAB still reached the correct result, i.e. SFM pleaded allegations sufficient to demonstrate a right to challenge Corcamore’s registered mark under § 1064.

CAFC Review of Sanctions

Corcamore asserted that the TTAB had no factual or legal basis to enter default judgment. The CAFC rejected each of Corcamore’s arguments that the TTAB abused its discretion, noting that Corcamore’s arguments were immaterial or not supported by the record. Thus, the CAFC concluded that the TTAB’s entry of default judgment as a sanction was not an abuse of discretion.

 

The Author

Rebecca Tapscott

Rebecca Tapscott is an intellectual property attorney who has joined IPWatchdog as our Staff Writer. She received her Bachelor of Science degree in chemistry from the University of Central Florida and received her Juris Doctorate in 2002 from the George Mason School of Law in Arlington, VA.

Prior to joining IPWatchdog, Rebecca has worked as a senior associate attorney for the Bilicki Law Firm and Diederiks & Whitelaw, PLC. Her practice has involved intellectual property litigation, the preparation and prosecution of patent applications in the chemical, mechanical arts, and electrical arts, strategic alliance and development agreements, and trademark prosecution and opposition matters. In addition, she is admitted to the Virginia State Bar and is a registered patent attorney with the United States Patent and Trademark Office. She is also a member of the American Bar Association and the American Intellectual Property Law Association.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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  1. Pro Say October 29, 2020 5:38 pm

    Well . . . regardless of the procedural / sanction wrangling, you’ve got to ask yourself whether it was wise to in the first place obtain a singular version of an exact-match plural TM’d word; especially in the case of such a well-known company like Sprouts.

    Even allowing for the different TM classifications each mark are in.

    Indeed, who wouldn’t readily assume that a “Sprout” ATM card / service / banking platform wasn’t owned / run by / controlled by Sprouts?

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