Court Concludes No Likelihood of Confusion between AutoZone and OilZone/WashZone and AutoZone’s Claims Barred by Laches

I previously blogged (link here) about the trademark infringement lawsuit brought by automotive parts retailer AutoZone against Illinois businessman, Michael Strick, doing business under the service marks Oil Zone and Wash Zone. The Seventh Circuit reversed a district court’s decision finding no likelihood of confusion as a matter of law between the AUTOZONE mark and Strick’s use of OILZONE and WASHZONE. See AutoZone, Inc. et al v. Strick et al., Appeal No. 07-2136 (7th Cir. September 11, 2008). The decision sent the case back the lower court for trial.

After a bench trial was held on November 2 and 3, 2009, U.S. District Court Judge John Darrah on March 8, 2010, issued findings of fact and conclusions of law which rule in favor of Strick and against AutoZone. The court concluded that Strick's use of the OIL ZONE and WASH ZONE names and marks was not likely to cause consumer confusion with AutoZone’s mark, and, in the alternative, AutoZone’s lawsuit was barred the doctrine of laches. See AutoZone, Inc. et al v. Strick, 2010 U.S. Dist. LEXIS 21928, Case No. 03-cv-8152 (N.D. Ill. March 8, 2010).

Because there was no issue regarding the protectibiliyt of AutoZone’s marks, the decision came down to likelihood of confusion. The court went through an analysis of the seven likelihood of confusion factors set forth in CAE, Inc. v. Clean Air Engineering, Inc., 267 F.3d 660, 677-78 (7th Cir. 2001).

Regarding the similarity of the mark, while they all three contained the word “zone” (preceded by a short one or two syllable word), the court found that the marks have significant differences, including color, letter capitalization, the appearance of the individual letters altogether and even the graphical elements conveying movement or speed, that made the marks only somewhat similar. The court also took into account the retail context in which the marks appeared to find that confusion was even less likely:

Furthermore, confusion between the marks is even less likely when the marks are considered in the physical retail context in which they are displayed by the parties and perceived by the consumer. Specifically, the exterior appearance of the Oil Zone facilities significantly diminishes the probability of consumer confusion by associating either location with AutoZone. The Wheaton Oil Zone location is a simple concrete building with a green Oil Zone sign. The Naperville Oil Zone/Wash Zone location is a white building with a blue roof. Neither has an appearance even slightly resembling a typical AutoZone store, which has the standardized, uniform look consistent with a retail store operated as part of a nationwide chain. In contrast, the Oil Zone locations present the appearance of two small, independent businesses, not associated with any national commercial entity.

Regarding similarity of the products and/or services offered, while the businesses may generally relate to care and maintenance of automobiles, the court found that Oil Zone and Wash Zone primarily provide automotive services while AutoZone primarily sells automotive products. The court rejected as unsupported by any evidence AutoZone’s claims that consumers would believe these are service-only centers of AutoZone.

Regarding the “area and manner of concurrent use” factor, the court found differences in the customer bases of the two businesses (65% of Strick's customers are women while 20% of AutoZone customers are women; AutoZone has a very high percentage of DIY customers while Strick’s facilities provide basic automobile maintenance services to automobile owners). The court also noted that AutoZone customers generally seek to purchase products for use by the customer in performing maintenance and repair on an automobile whereas Oil Zone/Wash Zone customers are seeking to purchase both the part and the installation and repair or maintenance service. The court also found that the physical appearance of the interior of Strick's facilities make it unlikely that a consumer would believe that the business sold auto parts. Similarly, the typical AutoZone store is a retail facility with large glass windows but no car bays with an interior that contains aisles of shelves stocked with automobile parts and accessories. The court also noted that there is no significant concurrent use of the marks in advertising because AutoZone’s ads are mostly nationwide through television, radio, newspapers, and sponsorship of professional teams, while Strick’s primary means of advertising is through direct mail -- a method not used extensively by AutoZone.This factor favored no likelihood of confusion.

As for the degree of care likely to be exercised by consumers, the court rejected AutoZone’s arguments that customers are likely to exercise a low degree of care because most of the products and services sold by Autozone and Strick are inexpensive in light of the “distinct difference in essentially the sale of services offered by Strick and the sale of products offered by AutoZone.”

Sidenote: The court could not resist pointing out that AutoZone, in its own proposed findings of fact and conclusions of law, stated that “Strick's customer base consists largely of individuals who live or work within a three-mile radius of one of its two locations, which suggests that those customers are drawn to Strick's business because they are convenient to customers' homes and offices, and that these customers would continue to frequent Strick's business regardless of the names used to identify those operations,” which the court took as an admission by AutoZone that Strick's customers are drawn from a limited surrounding area, familiar with his business and not dependent on Strick's use of any particular mark. [ed.--Oops!]

There was no dispute that AutoZone’s marks were strong, and thus the “strength of the mark” factor favored AutoZone. AutoZone admitted that it had no evidence of actual confusion. While the court acknowledged that evidence of actual confusion is not required to show likelihood of confusion, lack of such evidence over an extended period of time may indicate lack of actual confusion. In this case, Strick had been using the OIL ZONE mark for over 13 years and AutoZone had no evidence of any incident of confusion between the marks during this time period – even though AutoZone had two facilities located within a mile of Strick’s locations. “Therefore, the absence of actual confusion, particularly when considered in the context of these facts, fails to support AutoZone's claim.”

The final factor was Strick’s intent. The court found credible and persuasive Strick’s testimony that he had not heard of AutoZone at the time he created the OIL ZONE name and mark in 1996. The court also rejected AutoZone's evidence that its Chicago-area advertising somehow put Strick on notice when he opened his business: “AutoZone did not provide specific evidence as to what advertising was done in Chicago prior to 1996. Considering the evidence presented, it is reasonable to conclude that Strick created OIL ZONE before AutoZone had fully developed its Chicago advertising campaign.” In addition, the two AutoZone stores nearest to Strick at the time he opened his first location were forty miles away, which the court found could not have reasonably provided notice of the AUTOZONE mark. The court found no persuasive evidence that Strick intended to "palm off" his business as AutoZone

Weighing all of the factors above, the court found that AutoZone had failed to establish by a preponderance of the evidence that Strick's use of the OIL ZONE and WASH ZONE marks were likely to cause confusion among consumers (finding that only the strength of the mark weighed in favor of AutoZone, which was significantly outweighed by the dissimilarity of the marks and the products and services offered by the parties).

The court also addressed Strick’s alternative argument that the doctrine of laches bars AutoZone's claims. AutoZone became aware of Strick's use of OIL ZONE and WASH ZONE in December 1998, but did nto contact Strick until a cease and desist letter was sent in February 2003. This four year delay was outside the three-year statute of limitations found in the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/10a(e), and therefore, there was a presumption of unreasonable delay applied.

AutoZone attempted to argue that its delay was not unreasonable and was excusable due to AutoZone's other ongoing enforcement actions between 1998 and 2003 (even having in-house counsel testify regarding AutoZone’s procedures for monitoring and prioritizing trademark enforcement actions). But the court shot down AutoZone quite directly stating “It is clear that the actual reason AutoZone did not pursue this case in a reasonably timely manner was not that it was too busy with other enforcement actions but, rather, that for whatever reason, it gave the case file no attention for nearly four years. This does not excuse AutoZone's delay. Therefore, AutoZone has not overcome the presumption that its four-year delay was unreasonable.” (footnote omitted).

After determining unreasonable delay, the court turned to the question of whether Strick has shown prejudice due to AutoZone's inaction. While AutoZone tried to argue that Strick had presented no concrete evidence that he has built up good will or customer loyalty over the last four years, the court rejected the need for such evidence in showing prejudice: “It is undisputed that Strick spent four years and a substantial sum promoting the Oil Zone name. Forcing him to change that name now would obviously cause a loss in terms of both time and money. Thus, Strick has shown that he has been prejudiced by AutoZone's delay.” While AutoZone argued that that Strick had not shown that he relied on AutoZone's delay and that AutoZone's action induced Strick to adversely change his position, the court rejected the argument that such a showing was required (citing recent Seven Circuit case law) and held that Strick did not need to make any further showing with respect to prejudice.

Accordingly, the court held that AutoZone unreasonably delayed in bringing this suit, and Strick would be prejudiced by allowing AutoZone to now assert its rights and applied the doctrine of laches to bar AutoZone’s lawsuit.

Nevada District Court Clarifies Nevada Limitations Period for Laches Presumption

A Nevada District Court has clarified that, for purposes of determining whether the presumption of laches applies in a trademark infringement lawsuit filed in Nevada, the applicable statute of limitations period is four years. See Aristocrat Technologies, Inc. et al v. High Impact Design & Entertainment, et al, Case No. 07-cv-01033 (D. Nev. June 23, 2009).

Aristocrat Technologies, Inc. (“ATI”) produces and sells gaming machines under the word and design trademarks ARISTOCRAT (here and here), which ATI has registered both in the U.S. and internationally. High Impact Design & Entertainment (“HIDE Nevada”) had an agreement with ATI to purchase ATI’s gaming machines – an agreement that clearly indicated that ATI retained all rights, title and interest in its trademarks, and HIDE Nevada had no such rights. In June 2003, HIDE Nevada (without ATI's knowledge) applied to register the ARISTOCRAT design mark in Venezuela. ATI discovered HIDE Nevada’s Venezuelan application in December 2003 and demanded that HIDE Nevada withdraw the application; however, HIDE Nevada convinced ATI to wait until the mark had registered and then assign it to ATI later in order to avoid spending more time and money in registering the mark. ATI took no action at the time, and waited until it registered to HIDE Nevada’s Venezuelan affiliate company. But when the mark registered, HIDE Nevada refused to assign the mark over to ATI.

ATI initially sued HIDE Venezuela in August 2007. In August 2008, ATI filed an amended complaint adding HIDE Nevada and some individual defendants to the action. The defendants’ initial motion to dismiss for lack of subject matter jurisdiction was dismissed. Shortly thereafter, three of the Defendants (the “Moving Defendants”) filed Motions to Dismiss Case not Commenced within Three Years

The Moving Defendants argued that ATI's Lanham Act trademark infringement claims were not timely commenced and therefore the doctrine of laches should apply to bar the complaint based on the nearly four year delay from the time ATI learned of HIDE Nevada’s application for trademark registration in Venezuela and the date that ATI filed suit.

The court described the significance of the statute of limitations with respect to the defense of laches as follows:

While laches and the statute of limitations are distinct defenses, if the plaintiff filed a Lanham Act claim within the analogous limitations period under state law, courts strongly presume that laches is inapplicable. Reno Air Racing Ass'n, Inc. v. McCord, 452 F.3d 1126, 1138-39 (9th Cir. 2006). If the plaintiff filed suit outside the analogous period, courts have often presumed that laches is applicable. Id. at 1139. Because the Lanham Act contains no explicit statute of limitation, courts "borrow" the analogous state time period. Id. In determining the presumption for laches, the limitations period runs from the time the plaintiff knew or should have known about his cause of action. Id.

In this case, the Moving Defendants’ position was that the analogous statute of limitations under Nevada law is three years, and because ATI waited more than four years to file suit, ATI's suit should be barred as untimely. The Moving Defendants relied upon the Reno Air case which cited to NRS §11.190(3), which provides for a three-year statute of limitations for actions involving fraud, as the applicable statute of limitations.

However, the court noted that the issue of the applicable statute of limitations was not really at issue in the Reno Air case:

The [Reno Air] Defendant asserted that the doctrine of laches should apply to bar the Plaintiff's claim, and the court specifically noted that the parties in that case had agreed that the three-year limitation period in NRS §11.190(3) should apply to determine the presumption for laches. Id. at 1139. Notably, as Plaintiffs in this case point out, the court in Reno Air did not specifically hold that the applicable statute of limitations for a Lanham Act claim is three years under NRS §11.190(3). Id. Rather, the Reno Air court accepted the parties' understanding without discussion, and undertook its analysis of the laches issue based on the fact that the parties agreed that the three-year period should apply. Id.

(bold italics emphasis added).

The court then went on to address which of Nevada’s statute of limitations should apply – agreeing with ATI’s arguments that it should be four years based on Nevada’s four year statute of limitations period for actions under Nevada’s deceptive trade practices laws:

By contrast, Plaintiffs in this case argue that the Court should look to the four-year statute of limitations in NRS §11.190(2) for actions involving deceptive trade practices in violation of NRS §598.0903 to 598.0999. (Pl.'s Opp'n (# 48) 4). They argue that both the Lanham Act and Nevada's deceptive trade practices statute are "designed to prevent consumer confusion and deception in the marketplace with respect to the source, sponsorship, approval, affiliation, connection, or association of goods and services" and therefore Nevada's four-year statute of limitations for deceptive trade practices is the most closely analogous. Id. at 5. This Court agrees. A review of the Lanham Act provisions regarding trademark infringement and Nevada's deceptive trade practices statute reveals that the two are indeed analogous and appear to address similar wrongs including the false or deceptive use of another's mark or product.

(bold italics emphasis added).

Accordingly, the court applied the four-year limitations period to determine whether laches is applicable in this case. In this case, accepting the Moving Defendants' assertion that Plaintiffs discovered the offending use in December 2003, the suit, filed on August 3, 2007, was within the four-year statute of limitations period, and therefore, the court presumed that laches was inapplicable.

The court added that, even though ATI’s suit was presumed to have been timely filed, laches could still apply if the Moving Defendants could show that they suffered prejudiced as a result of the ATI’s unreasonable delay in filing suit. The court noted that, given HIDE Nevada’s assurances that it would assign the Venezuelan trademark upon registration, it was not unreasonable for ATI to delay in filing its action upon initially discovering the application in December 2003. Moreover, the Moving Defendants apparently had not shown any evidence of prejudice as a result of the alleged delay. Thus, the court denied the Moving Defendants’ Motion to Dismiss.

Eighth Circuit Overturns Lower Court’s Laches Decision in CRISTAL Trademark Infringement Lawsuit

The relatively new-on-the-block Minnesota Law, Technology & Intellectual Property Blog reports on the decision by the Eighth Circuit Court of Appeals overturning a lower court’s decision dismissing a trademark infringement lawsuit on the basis of laches. See Champagne Louis Roederer v. J. Garcia Carrion, S.A., et al., No. 08-2907 (8th Cir. June 24, 2009).

Cristal Champagne

Champagne Louis Roederer, maker of CRISTAL CHAMPAGNE, sued J. Garcia Carrion, S.A., maker of a sparkling wine sold under the mark CRISTALINO, for trademark infringement. The lower court dismissed the lawsuit on the basis that Roederer had constructive notice of Carrion’s use of the CRISTALINO mark as early as 1995 and the action was therefore barred by the doctrine of laches.

Cristalino Cava

The Court of Appeals found that the district court had not done a meaningful analysis of the issue of progressive encroachment to determine if 1995 was really the date when Carrion’s use became actionable infringement for purposes of applying the doctrine of laches.

The Court further noted that Carrion was certainly on notice regarding Roederer’s objection to Carrion’s use of the CRISTALINO mark. Roederer had opposed several trademark registration applications filed by Carrion in Spain, the U.S. and Columbia in the early and late 1990s -- long before Carrion has made a significant investment in improving a particular production plant in 2003.

Finally, the Court found that the district court had erred in finding that Carrion would be prejudiced by this delay if Roederer’s lawsuit proceeded. Carrion’s investment in improving its production plant did not appear to be so related to the CRISTALINO brand (only 9% of the plant’s output) that Carrion would not have otherwise made it without the CRISTALINO brand. Thus, Carrion had failed to show that it suffered undue prejudice as a result of Roederer's delay in bringing suit. The Court found that this alone was sufficient to bar Carrion’s use of the laches defense.

Ninth Circuit “Eviscerates” Laches Defense Against Trademark Infringement

The Ninth Circuit has denied a defendant the defense of laches against a plaintiff despite the fact that the plaintiff waited seven years to assert its trademark rights – all because the defendant had (in the majority’s view) not spent that enough money developing the alleged infringing mark as its own (and thus was not prejudiced by the delay). See Internet Specialties West, Inc. v. Milon-Digiorgio Enterprises, Inc., Nos. 07-55199, 07-55087 (9th Cir. March 17, 2009).

Internet Specialties West, Inc. (“ISW”) and Milon-Digiorgio Enterprises, Inc. (“MDE”) are both internet service providers. ISW registered the domain name ISWest.com in May 1996. In July 1998, MDE registered the domain name ISPWest.com. ISW discovered MDE’s website in late 1998, but took no action at the time supposedly because while ISW offered dial-up, DSL and T-1 internet access nationwide, MDE only offered dial-up access in Southern California.

MDE expanded it business nationwide in 2002 and began offering DSL in 2004. In 2005, ISW sent a cease and desist letter to MDE and later brought a trademark infringement lawsuit against MDE’s use of the name ISPWest. See Internet Specialties West, Inc. v. Milon-Digiorgio Enterprises, Inc., Case No. 05-cv-03296, 05-cv-03296 (C.D. Cal.). A jury found that while MDE had infringed ISW’s mark, there was no damages from the infringement. Nonetheless, with such finding, the district court imposed an injunction against any further use of the mark by MDE. Moreover, the district court also determined that ISW’s claims were not barred by laches.

MDE appealed the district court’s decision to the Ninth Circuit Court of Appeal. A divided Ninth Circuit panel affirmed the jury’s verdict on infringement and also upheld the district court’s decisions on laches and the injunction imposed on MDE.

The defense of laches is often categorized as embodying the principle that a plaintiff cannot sit on the knowledge that another company is using its trademark, and then later come forward and seek to enforce its rights. See Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1102-03 (9th Cir. 2004). The two part test for the defense of laches is 1) was the plaintiff’s delay in bringing suit was unreasonable and 2) was the defendant prejudiced by the delay. See Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002); Tillamook Country Smoker, Inc. v. Tillamook County Creamery Association, 465 F.3d 1102, 1108 (9th Cir. 2006). The six factors analyzed by courts in deciding whether laches precludes a claim are: “1) the strength and value of trademark rights asserted; 2) plaintiff’s diligence in enforcing mark; 3) harm to senior user if relief denied; 4) good faith ignorance by junior users; 5) competition between senior and junior users; and 6) extent of harm suffered by junior user because of senior user’s delay.” E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983).

The Ninth Circuit found that the district court had wrongfully decided the first issue and that indeed ISW’s delay in bringing suit was unreasonable. The district court found that the relevant period of time started running in 2004; however, the court found that the earlier 1998 date was when ISW knew or should have known about its cause of action based on ISW’s actual notice of MDE’s use of the mark in connection with internet services. Based on this earlier date of 1998, ISW’s filing of an action outside of the applicable four-year statute-of-limitations period created a presumption that laches applied.

However, in analyzing the second factor (prejudice resulting from the unreasonable delay in bringing suit), the Court found that MDE was not prejudiced by the 7 year delay by ISW in enforcing its trademark rights. It is this particular point where the Ninth Circuit panel split. The dissent found obvious prejudice from MDE’s expansion of its business from 2,000 customers to 13,000 customers along with the accompanying sales and expenses.

The majority opinion, however, felt differently stating:

While we are sympathetic to MDE’s position, the meaning of prejudice in this context is not so simple. “If this prejudice could consist merely of expenditures in promoting the infringed name, then relief would have to be denied in practically every case of delay.” Tisch Hotels, Inc. v. Americana Inn, Inc., 350 F.2d 609, 615 (7th Cir. 1965). Laches is meant to protect an infringer whose efforts have been aimed at “build[ing] a valuable business around its trademark” and “an important reliance on the publicity of [its] mark.” 6 McCarthy on Trademarks and Unfair Competition § 31:12 (citations omitted) (emphases added). Therefore, we feel compelled to analyze whether MDE’s claim of prejudice is based on “mere[ ] expenditures in promoting the infringed name,” Tisch Hotels, 350 F.2d at 615, or whether it is based on an investment in the mark ISPWest as the identity of the business in the minds of the public. See Jarrow, 304 F.3d at 835-36 (finding prejudice where had the plaintiff “filed suit sooner, [the infringer] could have invested resources in an alternative identity . . . in the minds of the public.”)

The majority noted that the district court had found that MDE did not demonstrate prejudice from ISW’s delay in bringing suit because MDE had not expend any time or resources during the interim developing brand recognition of its mark. The district court focused on the fact that most of MDE’s advertising was in the form of “pay-per-click” advertisements (which typically did not include the ISPWest mark) – efforts that the court stated “creates little to no brand awareness.” “It is a simple premise that MDE cannot create 'public association' between ISPWest and the company if it does not even use the ISPWest mark in its most prevalent form of advertising.” The district court also found that MDE would not have to undertake significant advertising expenditures to change its name at this juncture. Finally, the majority did not feel that its view of what constitutes prejudice was in defiance of the court’s prior decision in Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002) and Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1102-03 (9th Cir. 2004).

As such, the majority found no error or abuse of discretion in the district court’s finding that MDE was not prejudiced, and thus laches would not bar ISW’s lawsuit. The majority also found the scope of the district court’s injunction requiring MDE to cease all use of the ISPWest.com mark reasonable in order to prevent consumer confusion.

Judge Andew Kleinfeld’s dissenting opinion agrees with every part of the majority opinion’s decision on laches – except for the decision regarding prejudice, which Kleinfeld describes as an enunciating “a new and unfair standard for prejudice in trademark law. . . . The practical effect of this new rule is to eviscerate the defense of laches in trademark law.”

Kleinfeld noted that the key to the majority’s rationale was its holding that “[i]f this prejudice could consist merely of expenditures in promoting the infringed name, then relief would have to be denied in practically every case of delay.” The dissent further notes that this language came from a Seventh Circuit decision where the delay was less than under a year and the infringement was deliberate as opposed to the instant case where the delay was far in excess of the applicable statute of limitations and the infringement was arguably not deliberate.

Kleinfeld's dissent focuses on the fact that when ISW first discovered ISPWest, the company only had about 2000 customers; and yet by the time ISW brought action, ISPWest had grown to 13,000 customers with over $1.5 million in marketing expenses. In Kleinfeld's view, this showed that MDE continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights – which is sufficient for establishing prejudice. “All this expansion happened while Internet Specialties knew about the infringement and did nothing to stop it. Until today, ISPWest’s five or sixfold expansion of its business would have been more than enough to establish prejudice.”

One of the key (and most eloquent) statements made by Kleinfeld is the following:

As the majority concedes, Jarrow Formulas, Inc. v. Nutrition Now, Inc., establishes that laches is presumed to bar a claim made outside of the analogous limitations period, 4 years here. 304 F.3d 829, 835-36 (9th Cir. 2002).The district court did not apply this presumption because, as the majority holds, it failed to determine the proper period for laches. Majority Op. at 3410-11. In fact, the district court applied a presumption against laches. Accordingly, the district court necessarily committed an abuse of discretion on this issue, and we cannot properly defer to its discretion. The majority’s deferential review is erroneous.

Kleinfeld argued that the majority’s decision cannot be reconciled with the Ninth Circuit’s decision in Grupo Gigante in which the Ninth Circuit did not mention a need for “brand awareness” or “public association” before finding laches in the Grupo Gigante case – what mattered was that the party asserting laches “has continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights.” The same decision also reinforced the importance of a trademark holding conducting “an effective policing effort” in order to obtain judicial enforcement of its trademarks. Moreover, in Grupo Gigante, the Ninth Circuit held that the plaintiff “cannot simply wait without explanation to see how successful the defendant’s business will be and then ask for an injunction to take away the good will developed by defendant in the interim.”

Kleinfeld further notes that the Ninth Circuit based its decision to apply laches in E-Systems v. Monitek, Inc., where the defendant “incurred substantial advertising expenditures and rapidly expanded its business” despite the fact that the plaintiff sued the same year that it discovered the infringement but barred because of a 6-year delay from the time when it should have known about the infringement.

Kleinfeld argues that where the presumption of prejudice applies (and there is no question that it does in this case), the prejudice exists where an infringer is “forced to abandon its long-term investment in its presentation of [its product] to the public.” (citing Jarrow Formulas, 304 F.3d at 840).

Kleinfeld also added his own thoughts about the injunction being an abuse of discretion because it failed to take into account the “public interest” of the burden on MDE’s customers who will have to change their e-mail addresses because MDE can no longer use the ispwest.com domain name. “Thousands of individuals ought not be required to alert family, friends, business contacts, banks, listservs, and their online subscription providers of a change in e-mail address, all because of Internet Specialties’ delay. An injunction without even weighing these burdens on the innocent is an abuse of discretion.”

But nothing says it better than Kleinfeld’s closing paragraph:

The majority’s evisceration of laches means that a big company can lurk in the tall grass while its little prey gradually fattens itself by dint of great effort and expense. Then, when the small competitor has succeeded, the big company can shake it down for a cut of its hard-won success, or destroy the name under which it innocently did business for years. That is trademark law as protection racket, rather than trademark law as prevention of consumer confusion.

[Comment: What about trademark troll?]

Vegas™Esq. Comments:
If it’s not apparent from the tone of the above write-up, I find the majority’s decision quite troubling – for all of the reasons articulated by Judge Kleinfeld's eloquent dissent. This decision is screaming for en banc review and I certainly expect MDE to petition for such review.

Hualapai Tribe opens a new front in its long running trademark battle over GRAND CANYON WEST

The "Skywalk"at the Hualpai Tribe's Grand Canyon West

(AP Photo from Flickr)

I previously wrote (link here) about the Trademark Trial and Appeal Board decision in the opposition filed by Grand Canyon West Ranch, LLC (“Ranch”) against the Hualapai Tribe over the Indian tribe’s attempt to register the mark GRAND CANYON WEST. See Grand Canyon West Ranch, LLC v. Hualapai Tribe, Opposition No. 91162008 (June 30, 2008).

By way of background, Ranch, which had its own pending applications for GRAND CANYON WEST RANCH (filed about a year after Hualapai Tribe’s application), opposed registration of the mark on the basis that it was geographically descriptive (and had not acquired distinctiveness) and because of fraud of the PTO. While the TTAB decision determined that the Hualapai Tribe had proven that the mark GRAND CANYON WEST had acquired distinctiveness, the Board nonetheless sustained the opposition based on fraud. Hualapai Tribe has filed an appeal to the Federal Circuit of the TTAB’s decision (Appeal No. 2009-1012). A copy of the Amicus Curiae brief filed by the AIPLA in support of the Hualapai Tribe is available here. Apparently, Ranch did not appeal the Board’s determination regarding acquired distinctiveness.

So while that appeal is pending, on February 12, 2009, Grand Canyon Resort Corporation (“GCR”), the Hualapai Tribe’s federally chartered corporation, filed a lawsuit in the U.S. District Court for the District of Arizona against Ranch. See Grand Canyon Resort Corporation v. Grand Canyon West Ranch, LLC, Case No. 09-cv-00289 (D. Ariz.). A copy of the complaint can be downloaded here. Not surprisingly, GCR is now attempting to stop Ranch from using the mark GRAND CANYON WEST RANCH in connection with its tourism business.

GCR claims that it has used the mark GRAND CANYON WEST in connection tourism related to the Hualapai Tribe’s land on the west rim of the Grand Canyon commonly referred to as “Grand Canyon West” since October 1998. [Note: In the TTAB decision, the Hualapai Tribe claimed use of “Grand Canyon West” back to 1986, but in that case, the party fighting the opposition was the Hualapai Tribe, whereas the plaintiff in this case did not exist until October 1998.] According to the complaint, GCR’s tourism revenue from GRAND CANYON WEST was $2.8 million. [Query– Is that from 1998 to 2000, for the year 2000 alone, or from the time they began operating “Grand Canyon West” including the time when it was operated by the Hualapai Tribe? The amount seems low regardless.]

For a period of time before 2000, GCR (or possibly its predecessor-in-interest) had an agreement with a company name Heli-USA, Inc. to provide helicopter tours at Grand Canyon West. The agreement was apparently terminated in 2000 after a dispute arose between GCR and a principal of Heli-USA, Nigel Turner.

According to the complaint, Turner, through Ranch (another company that he owned or managed) purchased some property that was located on the same road which leads to GCR’s “Grand Canyon West” sometime in 2000 or 2001. At that time, Ranch named the property “Grand Canyon West Ranch” and began operating it a tourist destination – presumably in competition with the tourism services offered by GCR.

GCR seeks a declaratory judgment that is consistent with the TTAB’s decision that GCR’s GRAND CANYON WEST mark has acquired distinctiveness. GCR’s other causes of action are for federal trademark infringement, federal trademark dilution, and common law trademark infringement.

Vegas™Esq. Comments:
The TTAB Opposition was filed back in September 8, 2004, so it’s fair to say that GCR knew about Ranch’s use of “Grand Canyon West Ranch” at least as far back as September 2004 (and more likely knew about it going all the way back to 2001). But instead of taking action back in 2004 to stop Ranch’s use of the mark GRAND CANYON WEST RANCH, GCR waited 4 years and 4 months to take such action. Laches, anyone?

New York District Court Denies MGM Mirage's Motion to Dismiss MONTE CARLO Lawsuit

I previously wrote (link here) about the long-running and contentious dispute between Société des Bains de Mer et du Cercle des Etrangers à Monaco (“SBM”), the owner of Le Casino de Monte-Carlo (pictured above), and MGM Mirage, Inc. (“MGM Mirage”) and its subsidiary, Victoria Partners, L.P. (“Victoria Partners”), the owner of the Monte Carlo Resort and Casino in Las Vegas (pictured below).

On March 28, 2008, SBM filed a lawsuit against MGM Mirage and Victoria Partners (the “Defendants”) in the U.S. District Court for the Southern District of New York over the Defendants' use of the MONTE CARLO name. See Societe Anonyme Des Bains De Mer ET Du Cercle Des Etrangers A Monaco Cercle Des Etrangers A Monaco v. MGM Mirage, Inc. et al, Case No. 08-cv-03157 (S.D.N.Y.).

MGM Mirage and Victoria Partners filed a motion to dismiss the case for lack of personal jurisdiction and for failure to state a claim or alternatively to transfer the case to Nevada District Court. On November 24, 2008, United States District Judge Harold Baer, Jr. denied the motion.

The court found that the Defendants were subject to personal jurisdiction in New York under New York’s long-arm statute (N.Y. CPLR §302(a)(1)), on the basis that the Defendants transacted business in New York through its highly interactive http://www.montecarlo.com/ website which allowed a New York resident to book a flight (the website had a drop-down menu with a finite list of potential departure cities which included LaGuardia and Kennedy), book a room at the Monte Carlo, and to sign up for a Monte Carlo players club account. Moreover, SBM’s claims arise from Defendants’ transaction of business in New York through the use of the MONTE CARLO mark on the website which SBM contends suggests a connection between Defendant’s Las Vegas casino and SBM’s Casino de Monte-Carlo. Finally, the court found that the Defendants, by transacting business in New York, purposefully availed themselves of the privileges of this forum, and thus it does not offend “traditional notions of fair play and substantial justice” to force Defendants to defend against SBM's claims in New York.

MGM Mirage attempted to dismiss the complaint against it on the basis that SBM failed to allege direct unilateral action by MGM Mirage in the infringement of SBM’s trademark rights. However, the court read the complaint “generously” and noted that it did cite MGM Mirage as being a direct actor by maintaining the Monte Carlo website. On the basis, the court denied MGM Mirage’s motion.

The defendants next argued that SBM’s lawsuit was barred by laches. The court noted that while laches is normally an affirmative defense (and not appropriate for a motion to dismiss), a “court may consider the defense of laches on a motion to dismiss ‘[w]hen the defense of laches is clear on the face of the complaint, and where it is clear that the plaintiff can prove no set of facts to avoid the insuperable bar.’” (quoting Lennon v. Seaman, 63 F. Supp. 2d 428, 439 (S.D.N.Y. 1999)). The Second Circuit applies New York’s six-year fraud statute of limitations to Lanham Act claims to determine which party bears the burden of proof with respect to the laches defense.

The Defendants argued that SBM had knowledge of Defendants’ use of the MONTE CARLO trademark when the hotel/casino opened in June 1996, but waited until 2008 to file an action – long after the six year statute of limitations had expired.

However, the court sidestepped the laches issue at this stage of the case by noting that SBM had alleged intentional infringement which, if true, would bar consideration of the laches defense:

I find that dismissal based on laches at this stage of the litigation would not be proper because even if the instant action was filed after the applicable limitations period, Plaintiff’s Amended Complaint alleges intentional infringement, a set of facts that, if true, would avoid application of the laches defense altogether. Hermes Int’l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000).

SBM’s allegations of Defendants’ willful infringement included Defendants’ representations to the United States Patent and Trademark Office that the name Monte Carlo was selected in order to invoke the image, in the minds of its consumers, of the real Casino de Monte Carlo. Based on SBM’s allegations that Defendants’ trademark infringement and dilution was willful and intentional (which if true would bar the defense of laches), the court declined to invoke the equitable doctrine of laches at this stage of the case and denied the motion to dismiss for failure to state a claim.

Finally, the court chose not to transfer the case to Nevada – finding the convenience factors either neutral (not favoring either party) or not weighing heavily in favor of transfer.

While Defendants argued convenience of the witnesses on the basis that they intended to call a number of non-party witnesses who live in the Las Vegas area, Defendants did not specify which witnesses would be their key witnesses and the nature of their testimony. The court also noted that unavailability of witnesses does not compel transfer when videotape and deposition testimony is available. Defendants also argued that they would want the jury to visit the Monte Carlo Resort & Casino, but the court determined that such a trip would be extremely prejudicial and therefore barred by Rule 403 of the Federal Rules of Evidence (while noting that pictures and video are suitable alternatives). The court also noted that while many of the operative facts of the case would pertain to events that took place in Las Vegas, there is no dominant center of gravity for likelihood of confusion claim. And while Nevada would be more convenient for the Defendants, SBM’s U.S. operations are based in New York and “this forum is much closer to Monaco than is Las Vegas.”

As such, the court denied the Defendants' alternative motion to transfer the case to the District of Nevada.

Seventh Circuit reignites AutoZone's trademark infringement claims against OilZone and WashZone

The Seventh Circuit reversed a district court’s decision finding no likelihood of confusion as a matter of law between the large automotive parts retailer AutoZone and an Illinois businessman, Michael Strick, doing business under the service marks Oil Zone and Wash Zone. See AutoZone, Inc. et al v. Strick et al., Appeal No. 07-2136 (7th Cir. September 11, 2008).



AutoZone, in business since 1987, became aware of Strick's two businesses in December 1998, but did not take any legal action against Strick until November 14, 2003 (a cease and desist letter was sent to Strick in February 2003). On cross-motions for summary judgment, the district court found that AutoZone's claims of trademark infringement and unfair competition failed as a matter of law because AutoZone had failed to produce sufficient evidence to show a likelihood of confusion between AutoZone's marks and Strick’s Oil Zone and Wash Zone marks – the district court found that the AutoZone mark and the Oil Zone and Wash Zone marks were "not similar enough for a reasonable finder of fact to find that there is a likelihood of confusion."

The Court of Appeals, reviewing de novo the district court's decision to grant summary judgment, found that the evidence was not so one-sided that it was proper for the district court to determine the issue of likelihood of confusion at the summary judgment stage, and thus reversed the district court’s decision. The Court reached this conclusion by doing its own analysis of each of the seven likelihood of confusion factors adopted by the Seventh Circuit. See Packman v. Chicago Tribune Co., 267 F.3d 628, 642 (7th Cir. 2001).

Regarding similarity of the marks, because the marks are all comprised of two words in the same font, slanted in the same direction, with “Zone” as the second word and the first letter of both words larger than the other letters in the marks, and feature bar designs that suggest movement or speed, the Court found that the marks in this case were similar enough that a reasonable finder of fact could find that a consumer would believe that the marks are connected to the same source. While the Court acknowledged some dissimilarities, “viewing the facts in the light most favorable to AutoZone, as we are required to do at this stage of the litigation, the prominent similarities between the marks may very well lead a consumer cruising down the street to believe, after driving past both parties' businesses, that Oil Zone and Wash Zone represented AutoZone's entry into the oil-change and car wash-services market.”

Regarding similarity of the products, the court stated that:

in light of the similarity of the marks, a reasonable consumer may very well be led to believe that Oil Zone and Wash Zone are AutoZone spinoffs. A retailer or manufacturer with a strong mark venturing into a related service industry would not be that surprising. And the automotive services provided by Strick's businesses are related to the automotive products sold at AutoZone stores. Indeed, there is even some direct overlap between AutoZone's products and the services provided by Strick's businesses: Strick provides car washes and oil changes while AutoZone sells car-wash and oil-change products. A reasonable consumer, taking into account the similarity of the marks, could therefore conclude from the relatedness of the goods and services provided by AutoZone, Oil Zone, and Wash Zone that the marks are all attributable to a single source. Thus, AutoZone has shown that a genuine dispute exists here as well.

Regarding the relationship in use promotion, distribution, or sales between the services of the parties, the court found that the evidence of record showed that both parties sell and promote their automotive goods and services in the Chicago area. Strick tried to argue that the nationwide scale of AutoZone’s services was different than his very localized offering of services, but the court noted that “trademark law makes no exception for the localized infringer.” As for differences in customers, the court held that “the record before us does not rule out the reasonable inference that a substantial congruence exists between the potential customer base in Naperville and Wheaton for AutoZone and Strick's businesses. AutoZone has therefore created a genuine factual dispute for this factor as well.”

Regarding customer degree of care, the district court had found this factor to support AutoZone’s argument for confusion and the Court agreed. AutoZone presented evidence that many of its automotive products are inexpensive and Strick did not present any evidence that his customers are particularly sophisticated. As such, a reasonable trier of fact could conclude that this factor favors AutoZone.

Regarding the strength of AutoZone’s mark, the Court found the evidence of record more than sufficient to support AutoZone’s argument that its AutoZone marks was strong. “The AutoZone mark is displayed prominently on more than 3,000 stores nationwide, and it has been the subject of hundreds of millions of dollars' worth of advertising since 1987.” Strick attempted to argue that the AutoZone mark is weak based on evidence that the word "Zone" is commonly found in other marks. However, Strick did not actually produce any evidence to show how extensively any of the third party marks that use the word "zone" have been promoted or become recognized by consumers in the marketplace, and thus evidence of such marks does not raise any question about the strength of AutoZone's mark. In addition, Strick’s argument fails to note that a mark must be viewed as a whole, and while the word “zone” by itself may be common, the same is not necessarily true for a composite mark like AutoZone, and a trier of fact could reasonably conclude that AutoZone's mark is strong and thus the factor of confusion would favor AutoZone.

Regarding the factor of Strick’s intent to palm off his services as those of AutoZone, while Strick testified that he was not aware of the AutoZone mark when he created the Oil Zone mark, the Court noted that in some circumstances, an intent to confuse may be reasonably inferred from the similarity of the marks where the senior mark had already attained great notoriety. In this case, “a reasonable trier of fact could conclude from Strick's experience in the industry, AutoZone's extensive marketing of its mark in the area where Strick did business, and the close similarity in design between the marks that Strick designed the Oil Zone mark with the intent to mislead consumers into believing that Oil Zone was somehow affiliated with AutoZone.” Whether Strick was honest in not being aware of the AutoZone mark was a decision for the trier of fact to decide.

The Court concluded that based on its own analysis of the likelihood of confusion factors, “a reasonable finder of fact could have found that consumers might be led to believe that AutoZone and Strick's Oil Zone and Wash Zone are affiliated with each other. AutoZone has therefore presented sufficient evidence to create a triable issue of fact on the issue of likelihood of confusion.” As such, it was improper for the district court to grant summary judgment with the existence of so many unresolved genuine issues of material fact, and the Court remanded the case back to the district court for trial.

Finally, Strick had argued at the district court and again a the Court of Appeals, that AutoZone’s claims were barred by the doctrine of laches – based on the delay between the time when AutoZone first became aware of Strick’s businesses in 1998 and when AutoZone finally took action in 2003. However, because a district court's decision to apply the doctrine of laches is discretionary and the district court declined to rule on the issue in its decision, the Court opted to let the district court determine on remand how it will exercise its discretion in this case.

Hobbit Travel Successfully Asserts Laches Defense Against Tolkien Enterprises’s Trademark Infringement Lawsuit

Saul Zaentz Company d/b/a Tolkien Enterprises (“Tolkien”), which owns the rights to use and license others to use marks and other intellectual property related to novelist J.R.R. Tolkien's books, including The Hobbit, was defeated in its attempt to stop a Minnesota-based travel agency, Wozniak Travel, Inc. (“Wozniak Travel”), from operating under the name “Hobbit Travel.” See The Saul Zaentz Company d/b/a Tolkien Enterprises v. Wozniak Travel, Inc., 2008 U.S. Dist. LEXIS 57285, Case No. 06-5421 (N.D. Cal. July 2008).

The decision, written by U.S. District Court Judge Marilyn Hall Patel, granted Wozniak Travel’s motion for summary judgment on whether the affirmative defense of laches bars Tolkien’s trademark infringement related claims.

The court first provided some background on the origin of the term “Hobbit” – the race of fictional three-foot tall, human-like creatures who inhabit the mythical world of Middle Earth in which the late J.R.R. Tolkien’s novels The Hobbit and The Lord of the Rings trilogy are set – as well as a detailed history on the commercialization efforts by the owners of the rights to J.R.R. Tolkien's works during the 70s, 80s, and 90s up to and including the recent The Lord of the Rings movies released by New Line Cinema. The court notes that Tolkien or its licensees have even marketed travel-related goods and services, including an agreement with Air New Zealand in 2002 to market the carrier as “Airline to Middle-earth” and to allow Hobbit characters to be painted on the jets. Tolkien owns over one hundred trademark registrations for various marks associated with Tolkien’s books, including five current HOBBIT marks (although none are for use in connection with travel goods and services).

George Wozniak, the owner/founder of Wozniak Travel, opened Hobbit Travel in 1976 under the name Wozniak’s Hobbit Travel in partnership with a Chicago-based travel agency, Hobbit International, which also did business under the name Hobbit Travel. He later dropped the surname because of customer difficult in spelling and pronunciation. Hobbit Travel does not use any other signs, ads, or logos which invoke Tolkien’s novels or their characters although Hobbit Travel has adopted some recognizable Tokien terms in his business (e.g., a 401(k) name "Tolkien Trust" and the company packages its wholesale packages under the name “Trilogy Tours.”). Wozniak Travel has steadily grown into one of the largest travel agencies in Minnesota, and since 1996, has offered its services online at http://www.hobbittravel.com/.

Tolkien first claimed to have learned about Wozniak Travel in November 2003 because of the company’s growing internet presence. In 2004, New Line Cinema sent a cease-and-desist letter, but Wozniak Travel continued to operate as Hobbit Travel. In 2005, Wozniak Travel filed an application with the United States Patent and Trademark Office to register the mark HOBBIT TRAVEL for travel agency services (although the application was later voluntarily withdrawn before a decision was rendered in this litigation, which had put on hold the pending TTAB opposition that Tolkien had filed against registration of the mark). Tolkien filed suit against Wozniak Travel in 2006 alleging five causes of action: trademark infringement (15 U.S.C. § 1114), unfair competition and false designation of origin (15 U.S.C. § 1125(a)), trademark dilution under 15 U.S.C. § 1125(c), trademark dilution under California law (Cal. Bus. & Prof. Code § 14330), and unfair competition under California law (Cal. Bus. & Prof. Code § 17200 et seq.). Wozniak Travel moved for summary judgment on the grounds that Tolkien’s claims are barred by laches.

In order to assert the defense of laches, Wozniak Travel had to show that Tolkien’s delay in filing suit was unreasonable and that Wozniak Travel would suffer prejudice caused by the delay if the lawsuit were to continue. The factors used by Ninth Circuit in deciding whether a plaintiff's delay was unreasonable are: “(1) strength and value of the trademark rights asserted; (2) plaintiff's diligence in enforcing mark; (3) harm to senior user if relief is denied; (4) good faith ignorance by junior user; (5) competition between senior and junior users; and (6) extent of harm suffered by the junior user because of senior user's delay.” See E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983); Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n, 465 F.3d 1102, 1108 (9th Cir. 2006).

Unreasonable Delay
The two step process for determining whether a party exercised unreasonable delay in filing a lawsuit is first, the court must assess the length of delay, measured from the time the plaintiff knew (had actual notice) or should have known (had constructive notice) about its potential cause of action, and second, the court then must determine whether such a delay was unreasonable. See Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002).

In this case, the evidence showed that Tolkien had been made aware of Wozniak Travel’s “Hobbit Travel” name since at least 1988 (18 years before Tolkien filed suit) when the name appeared one of Tolkien’s trademark search reports. A subsequent report provided to Tolkien in 1992 (fourteen years before filing suit) by AT&T (as part of a litigation) again disclosed Hobbit Travel. Finally, Tolkien’s counsel in 2000 (six year before filing suit) ordered a search report that again disclosed Hobbit Travel.

Despite having these reports disclosing Wozniak Travel’s open, continuous, and not insignificant use of the Hobbit Travel name, Tolkien did not take any action. In addition, the court noted that Hobbit Travel since its inception had been receiving a growing amount of publicity (spending more than $10 million in advertising and receiving media coverage on Oprah), and thus Hobbit Travel would have been easily discovered had Tolkien acted as a reasonably prudent person and conducted further research upon seeing the name in the search reports. The court determined that Tolkien had constructive notice of Hobbit Travel as least as early as 1988.

Reasonableness of Delay
In determining whether a plaintiff’s delay may be excused as reasonable, the court considers the relevant statute of limitations for the causes of action at issue as well as any legitimate excuse by a plaintiff for the delay.

Because the Lanham Act does not contain an explicit statute of limitations, the Ninth Circuit presumes that Congress intended to “borrow” the statute of limitations for the analogous state causes of action. Under California law, the statute of limitations for the analogous state causes of action is either three or four years (depending on the state law action relied upon) – the court did not bother determining which since Tolkien’s delay of 18 years is far beyond either limitations period. Furthermore, the court rejected Tolkien’s excuse for delay (“defendant's subjective ignorance and lack of curiosity prior to 2003 are not valid excuses since plaintiff is charged with constructive knowledge as of 1988.”).

Tolkien tried to argue that the doctrine of progressive encroachment justified its delay. Under this doctrine, a trademark owner is not obligate to file suit over de minimis infringement but instead is obligated only when the junior user redirects or expands its business into different regions or markets bringing it into direct competition with the trademark owner. The court noted, however, that a junior user’s growth of its existing business and the concomitant increase in its use of the mark do not constitute progressive encroachment.

In this case, Wozniak Travel’s use of Hobbit Travel was certainly not de minimis (the company generated over $1 billion in travel sales over its 30 year history). As the court stated, “Had plaintiff chosen to examine Hobbit Travel, Hobbit Travel would not have been difficult to find.”

While Tolkien attempted to argue that Wozniak Travel’s expansion into internet sales brought the company into a new market and squarely into competition with Tolkien, the court rejected such argument on the basis that expansion into internet sales represented natural business growth for a company with an already growing national customer base (i.e., going online is a natural expansion of such a company’s existing business). The court also noted that Wozniak Travel was not really in direct competition with Tolkien, thus further making progressive encroachment an improper grounds for delay (“Tolkien's trademarks cover consumer goods and merchandise such as games, clothing, jewelry and collectibles, and Wozniak's business involves only travel services. . . . Wozniak has always sold travel services and travel services only, and at no point in time has it sought to expand the type of services it sells, or use its mark in a significantly different way.”)

The court further noted that while senior users of a strong mark can prevent others from using a similar mark in an area of business that represents a “natural zone of expansion” of the senior user’s business, in this case, the natural expansion of Tolkien's Hobbit mark did not extend to travel services at the time Wozniak opened Hobbit Travel and Tolkien’s involvement in travel-related services was minimal throughout the 1970s, 1980s and 1990s when defendant's travel agency was growing increasingly large in size.

Not until 2002 did Tolkien begin to enter into licensing agreements for licensees to use its marks in connection with travel related services. As the court stated,

This late and sporadic foray into the travel services market does not aid Tolkien in countering laches. As Judge Hand explained, “The owner's rights in . . . appendant markets are easily lost; they must be asserted early lest they be made the means of reaping a harvest which others have sown.” Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n (“Country Smoker”), 311 F. Supp. 2d 1023, 1033 (D. Or. 2004) (quoting Dwinell-Wright Co. v. White House Milk Co., 132 F.2d 822, 825 (2d Cir. 1943)); see also E-Systems, Inc., 720 F.2d at 607

Finally, the court rejected as “specious” Tolkien’s argument that its claim for trademark dilution, based on a likelihood of dilution, could not be brought until Congress passed the Trademark Dilution Revision Act of 2006, which amended the federal trademark dilution statute to make likelihood of dilution the necessary showing. [Ed. – Is Tolkien acknowledging that there is no likelihood of confusion . . . why else the need to rely on likelihood of dilution?] Tolkien stated that it brought its dilution claim at the earliest possible time shortly after Congress passed the TDRA, but the court rejected Tolkien’s argument. First, Tokien’s dilution claims pled “actual dilution.” Second, trademark dilution has existed at the federal level since 1995 and state level (in California) since 1967. And most importantly, before the Supreme Court's decision in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003) requiring a showing of actual dilution, the Ninth Circuit applied a “likelihood of dilution” standard to claims brought under the prior law. [Ed. – Oops!]

The court concluded that Tolkien’s delay of at least eighteen years was unreasonable, and since such delay far exceeds the statute of limitations period a presumption of laches applies and none of Tolkien’s excuses for its delay overcomes this presumption:

Plaintiff brought this action in 2006 to enjoin defendant's use of the mark Hobbit Travel, thirty years after defendant had adopted that mark, and eighteen years after plaintiff received the first of multiple trademark search reports informing it of defendant's potentially unlawful use. Despite having constructive notice of defendant's use, plaintiff did nothing about it--no communications were made, no letters were written, and no lawsuits were filed against defendant or any of the other entities operating travel agencies under the Hobbit mark.

Prejudice to Defendant
However, such unreasonable delay is not by itself sufficient to invoke laches – the court must also consider whether the defendant has suffered prejudice by plaintiff’s undue delay in bringing suit.

The two types of prejudice are 1) “expectations-based prejudice or “economic prejudice” (prejudice derived from taking actions, such as investing time, labor, and capital to build up a business based on presumed rights, or suffering consequences, such as the loss of such investment, that the defendant would not have suffered had the plaintiff filed suit promptly) and 2) evidentiary-based prejudice (prejudice suffered by a defendant when relevant records or witnesses are unavailable due to the natural passage of time since the time the cause of action accrued).

In this case, the court found the economic prejudice to Wozniak Travel’s business to be severe if it lost the right to use the name Hobbit Travel. The court found that the tens of millions of dollars on advertising and the substantial time on promotional efforts spent by Wozniak Travel during its thirty years in business in an effort to build up name recognition and goodwill demonstrated that Wozniak Travel would now suffer economic prejudice if it were enjoined from operating under the name Hobbit Travel.

While the court gave a passing mention to the evidentiary prejudice to Wozniak Travel (i.e., the likely loss of relevant records or death of witnesses due to the passage of time), when considered along with the “overwhelming economic prejudice,” the court found that the overall prejudice to Wozniak Travel to be substantial.

Naked License Counter-defense to the Defense of Laches
Tolkien then attempted to argue make the “creative argument” that prejudice cannot be established by Wozniak Travel for laches purposes because Wozniak Travel abandoned its mark through naked licensing (which is more often cited as an affirmative defense to infringement). The concept of naked licensing is as follows:

Abandonment through naked licensing occurs when a trademark owner fails to take the reasonable steps necessary to monitor the quality of goods produced by a licensee. First Interstate Bancorp v. Stenquist, 1990 U.S. Dist. LEXIS 19426, 1990 WL 300321, at *3 (N.D. Cal. July 13, 1990) (Patel, J.). This failure to ensure quality control “may result in the trademark ceasing to function as a symbol of quality and controlled source.” 3 McCarthy § 18:48. As a result, “a court may find that the trademark owner has abandoned the trademark, in which case the owner would be estopped from asserting rights to the trademark.” Barcamerica Int'l USA Trust v. Tyfield Importers, Inc., 289 F.3d 589, 596 (9th Cir. 2002) (citing Moore Bus. Forms, Inc. v. Ryu, 960 F.2d 486, 489 (5th Cir. 1992)).

In this case, the “naked license” at issue was to a Wisconsin-based travel agency name Friedman's Hobbit Travel and later to a joint advertising campaign which listed its former partner, Hobbit International, as Hobbit Travel Tolkien argues that Wozniak Travel, by allowing Friedman's Hobbit Travel and Hobbit International to use the name Hobbit Travel without any kind of quality control restrictions on its use, granted a naked license. Thus, Tolkien argues, Wozniak Travel abandoned its right to use the name Hobbit Travel on account of these naked licenses, and therefore cannot suffer the prejudice required to invoke laches. [Ed. – So, in other words, because other people were using the mark as well without restriction, that makes Tolkien’s delay in suing Wozniak Travel suddenly non-prejudicial?]

In this sense, Tolkien is relying upon abandonment (through naked licensing) not as a defense to infringement, but instead to negate the prejudice element of Wozniak Travel’s laches defense. The court found no cases applying naked licensing to bar a party from defending an infringement claim on the basis of laches.

Tolkien’s supporting case law cites, which focused on language in those cases regarding how naked licensing is inherently deceptive and constitutes abandonment of any rights to the trademark, overlooked the context of those cases which, upon closer analysis, stood more for the proposition that a claimant may not advance an infringement claim after granting a naked license to his mark. If anything, Wozniak Travel’s naked licensing could mean that the company may face an abandonment defense should it attempt to exclude others from using the name Hobbit Travel at a later date – but as Wozniak Travel has not asserted an infringement counterclaim against Tolkien, the right to exclude is not at issue. The court stated, “Abandonment through naked licensing has never been applied in a case like this where a defendant asserts only the right to continue its use of a mark, and not its right to exclude use by another. The court declines to adopt such a rule today.” [Ed. – I smell a Ninth Circuit appeal already].

The court added that “To preclude laches based on the alleged naked licensing would depart too widely from precedent and work unfairness in what should be an equitable doctrine designed to achieve a just outcome. As a result, the court concludes that defendant has suffered both economic and evidentiary prejudice as a result of plaintiff's delay, and that defendant's conduct and relationships with respect to Friedman's Hobbit Travel and Hobbit International, allegedly a “naked license,” do not defeat defendant's showing of prejudice.”

With that, the court granted Wozniak Travel’s motion for summary judgment on the basis of laches.

The One Ring

Terraserver sues Microsoft for trademark infringement over Terraserver-USA.com

I’m a little surprised this lawsuit has not received much press yet.

On May 2, 2008, Terraserver.com Inc. (“Terraserver”) filed a trademark infringement lawsuit in the U.S. District Court for the Eastern District of North Carolina against Microsoft Corporation (“Microsoft”). See Terraserver.com, Inc. v. Microsoft Corporation et al, Case No. 08-cv-00067 (E.D. N.C.). A copy of the complaint can be downloaded here (courtesy of Justia.com).

Terraserver.com Screenshot

Terraserver operates the satellite imagery database website terraserver.com. Terraserver claims that Microsoft is infringing on Terraserver’s trademarks with Microsoft’s competing satellite imagery database website named terraserver-usa.com.

Microsoft's Terraserver-USA.com

According to the complaint, Aerial Images, Inc. (“AEI”), Terraserver’s predecessor in interest, worked with Microsoft and Compaq back in the mid 1990s to develop a website database of worldwide satellite imagery – with AEI providing the satellite imagery and Microsoft and Compaq providing the hardware and software. Terraserver maintains that its agreement with Microsoft and Compaq at the time was that AEI would keep the name “Terraserver” because “Microsoft and Compaq were simply using Aerial Images, Inc.’s name (Terraserver) and imagery to test their hardware and software systems.” As evidence of such tacit approval, Terraserver points to the fact that on March 9, 1998, AEI applied to register the mark TERRA SERVER for “computer services, namely providing a database featuring photographic images and geographic information.” The mark registered on March 21, 2000 – without any objection from Microsoft or Compaq . The registration, however, was cancelled on December 23, 2006, when Terraserver failed to file a Section 8 Declaration of Continued Use – apparently because Terraserver was no longer using the mark “Terra Server” (with a space), but instead was using the mark Terraserver (no space).

The satellite imagery website and database was launched in 1997 using the domain name address “Terraserver.com.” Terraserver further maintains that when its “arrangement” with Microsoft and Compaq ended in 2000, the parties again agreed that AEI would continue to own and use the domain name “Terraserver.com,” which AEI, and later Terraserver, continued to do.

Terraserver argues that through extensive marketing of its website worldwide, the domain name terrserver.com has acquired a secondary meaning and is recognized as a source identifier for Terraserver’s web-based satellite imagery database.

Terraserver also holds two registrations for the marks TERRASERVER and TERRASERVER-USA. The TERRASERVER mark was applied for as a use-in-commerce application on July 21, 2003 (March 1, 1998 was claimed as the first date of use in commerce) for “a computer database available through an internet website that provides photographic images and geographic imagery obtained from satellites.” The mark registered December 21, 2004. The TERRASERVER-USA mark was applied for as an intent-to-use application on December 16, 2003 for “displaying the satellite and aerial images of others on a computer server.” The mark registered on June 13, 2006.

According to Terraserver, Microsoft began operating its “Terraserver-usa.com” website in the summer of 2003 (Note: the Internet Archive suggests a date of around June 7, 2003 – about a month and a half before Terraserver submitted its TERRASERVER application). Terraserver asserts that Microsoft has continued to operate its website despite Terraserver’s demands “on numerous occasions” that Microsoft stop using its registered trademarks.

Terraserver cites two examples of “actual confusion” to support its case. The first is the Wikipedia entry for Terraserver which describes user confusion between the two. [Comment: We all know how reliable Wikipedia evidence is, especially for demonstrating likelihood of confusion.] The second example is a USPTO office action which initially refused to register TERRASERVER-USA on the basis of likelihood of confusion with the TERRA SERVER mark (with the space) [Comment: How exactly does that show actual confusion between Microsoft’s site and Terraserver’s site?].

Terraserver’s causes of action are for registered trademark infringement under Section 32 of the Lanham Act (15 U.S.C. §1114), false designation of origin/unfair competition under Section 43(a) of the Lanham Act (15 U.S.C. §1125(a)), trademark dilution under Section 43(c) of the Lanham Act (15 U.S.C. §1125(c)), and unfair and deceptive trade practices under Chapter 75 of the North Carolina General Statutes. Terraserver seeks injunctive relief, actual damages, treble damages, costs and attorneys’ fees

Vegas™Esq Comments:
One interesting nuance with respect to Terraserver’s TERRASERVER-USA application is that the filing date of this “intent-to-use” application was several months after Terraserver acknowledges Microsoft already had its own website up and running at the domain name http://www.terraserver-usa.com./ While the dates of first use for this mark are claimed as May 1, 2003 (which coincidentally is several days before the terraserver-usa.com domain name was registered by Microsoft), this date of first use is based on a Statement of Use filed by Terraserver on March 23, 2006. What is even more interesting is that when you plug the web page included in one of the Specimens of Use (http://www.terraserver.com/providers/Terraserver-USA.asp) into the Internet Archive, the web page seems to have made its first appearance around February 8, 2006 – just before the page was submitted as a specimen of use and several months after Terraserver’s initial specimens of use (submitted September 20, 2005) had been rejected as inadequate (Terraserver submitted a picture of a hat displaying the TERRASERVER-USA mark and an address label). Furthermore, if Terraserver had really been using the TERRASERVER-USA mark since May 1, 2003, wouldn’t one think that the company, already a high profile internet site, would have been saavy enough to acquire the same domain name address? Unless, of course, Terraserver was not actually using the make at the time. Ever heard of Occum’s Razor?

Terraserver may have an uphill battle to fight to the extent it is relying upon its TERRASERVER-USA registration. Given the suspiciousness surrounding its claimed use of the mark, Terraserver had better be prepared to show more concrete evidence that it was legitimately using in commerce the TERRASERVER-USA as declared in its Statement of Use.

Indeed, by including TERRASERVER-USA as a basis for infringement, Terraserver may have muddied up what otherwise would have been a much cleaner case of infringement against TERRASERVER-USA based on the TERRASERVER mark alone and opened itself up to an “unclean hands” defense by Microsoft.

Another interesting nuance with respect to Terraserver’s TERRASERVER application is that the specimen of use provided by Terraserver was a copy of the website showing “terraserver®.com.” The PTO apparently had no objection to the presence of the ® symbol on the specimen, and presumably, the ® was based on the “Terra Server” registration in existence at that time. Nonetheless, such use (or misuse) of the ® symbol also makes the TERRASERVER registration vulnerable to claims of “unclean hands” (see prior blog post here) although not to the same degree as TERRASERVER-USA given the reasonable explanation for using the ® symbol under the circumstances.

Finally, the big question is why Terraserver waited so long to pursue this action when it appears as if it could have been brought back in 2003 . . .unless there is something else going on here that is not apparent from the complaint (something in the “agreement” between Terraserver, Microsoft, and Compaq). By waiting so long, Terraserver may be vulnerable to a laches defense by Microsoft – the length of delay appears to be almost five years, there does not appear to be any excuse for such delay, and Terraserver had the opportunity to act sooner. Because North Carolina has a three year statute of limitations for tort actions (see N.C.Gen.Stat. Sec. 1-52), the burden will be on Terraserver to prove that application of the defense would be inequitable (as opposed to Microsoft having the burden of showing that laches should apply).

Eleventh Circuit affirms lower court decision in favor of Georgia group on use of ANGEL FLIGHT mark

The Eleventh Circuit Court of Appeals last week reaffirmed a lower court’s decision upholding a Georgia organization’s senior rights to use the mark “Angel Flight” in Georgia, Alabama, South Carolina, Mississippi, North Carolina, and Tennessee. The court also upheld the lower court’s decision to cancel a trademark registration for the mark “Angel Flight” on the basis that it was acquired through fraud. See Angel Flight of Georgia, Inc. v. Angel Flight Southeast, Inc. et al, Case No. 07-11460 (11th Cir. April 4, 2008).

The case involves the group of organizations that operate under the name “Angel Flight” A man named Jack Welsh formed an organization called the American Medical Flight Support Team (“AMSFT”) in 1982 made up of volunteer pilots willing to provide free transportation for donated organs and medical patients. AMSFT chapters soon after began forming in other regions of the country.

In 1983, the Las Vegas chapter of AMSFT began using a mark with the words "The Angel Flight" with a winged caduceus. With permission from the Las Vegas chapter, the Los Angeles chapter of AMSFT (later known as Angel Flight West) also began using the same mark. After the Las Vegas chapter went defunct, Angel Flight West continued to use the mark, which it later modified slightly by altering the design of the wings and adding a stylized type to the words “Angel Flight” (picture above).

In 1983, an AMFST chapter was formed in Georgia (later known as Angel Flight of Georgia (“AFGA”)) and became the first organization to use the Angel Flight name in Georgia, Alabama, South Carolina, Mississippi, North Carolina, and Tennessee. In 1986, an AMFST chapter was formed in Florida (later known as Angel Flight Southeast (“AFSE”)) and operated primarily in Florida.

In 1987, Angel Flight West applied for registration of its modified “Angel Flight” mark (see ANGEL FLIGHT (and design) for transportation of human patients, tissue and organs, principally by air) after confirming that the Las Vegas organization was no longer in existence. The date of first use in commerce was claimed as November 21, 1983 (three years prior to the date Angel Flight West had created its modified “Angel Flight” mark). Angel Flight West, through its President at the time, signed the typical declaration (i.e., that Angel Flight West was the owner of the mark and, to the best of his knowledge and belief, no other person, firm, corporation, or association had the right to use the mark in commerce, either in an identical form or a near resemblance such as would be likely to cause confusion or mistake or deceive) – even though Angel Flight West certainly knew that other organizations were using the name Angel Flight in connection with similar air transportation services for medical patients and organs. The mark went on to be registered on June 7, 1988.

In 2000, many, but not all, of the regional Angel Flight organizations came together to form a national association known as Angel Flight America (“AFA”) which then divided the country into territorial zones and authorizing its members to operate in its designated geographical regions. Both AFSE and Angel Flight West joined AFA, but AFGA did not.

In May 2001, Angel Flight West agreed to assign its registered mark to AFA, which in turn licensed the mark to its affiliated member organizations.

Before joining AFA, AFSE originally served Florida patients and medical facilities, transporting patients and organs into and out of Florida; however, after joining AFA, AFSE began operating in Florida, Georgia, Mississippi, Alabama, and South Carolina. More significantly, AFSE began recruiting donors and promoting its services at trade shows and to medical facilities within those states. Sometime in 2001, AFGA became aware of AFSE's plans to open an office in Augusta, Georgia.

After becoming aware that donors and news media were confusing the two, AFGA on May 8, 2003, wrote to AFSE demanding that it cease and desist from promoting its services under the Angel Flight mark in Georgia, Alabama, South Carolina, Mississippi, North Carolina, and Tennessee. When AFSE refused, AFGA, on November 23, 2003, filed a lawsuit in the U.S. District Court for the Northern District of Georgia against AFSE alleging false designation of origin, false advertising, common law trademark infringement, common law unfair competition, and deceptive trade practices and other related state law claims. AFA later intervened in the lawsuit, and the AFA and AFSE filed similar counterclaims against AFGA

In July 2006, the district court ruled in favor of AFGA’s claims and against AFA/AFSE’s counterclaims. The district court issued a permanent injunction enjoining AFA and any of its members from using the Angel Flight mark in Georgia, Alabama, Mississippi, Tennessee, North Carolina, or South Carolina for the purpose of soliciting donations, advertising, promoting their services, or recruiting volunteers. In addition, the court ordered that AFA’s trademark registration be cancelled on the grounds that Angel Flight West had committed fraud in obtaining the registration by falsifying information in the application, specifically the incorrect date of first use as well as the failure to disclose the rights of others to use the mark.

On appeal to the Eleventh Circuit Court of Appeals, AFA and AFSE tried to argue that the district court erred by relying on hearsay testimony to support a finding of actual confusion, refusing to apply the doctrine of laches or acquiescence against AFGA, crafting an overly broad injunction, and canceling AFA’s registered trademark.

Hearsay Evidence of Actual Confusion
The district court found that AFGA was the senior user of the Angel Flight mark in the geographic region at issue. Much of the court’s conclusion of infringement was based on the similar manner in which AFSE was using the mark and AFGA’s evidence of actual confusion.

The evidence of actual confusion consisted of two AFGA employees who testified regarding conversations they had with donors and medical personnel. The district court allowed the evidence under Fed. R. Evid. 803(3), the hearsay exception permitting receipt of out of court statements for the purpose of showing the declarant's "confused" state of mind; however, in its order, the district court recounted such stories as fact (i.e. used the out-of-court statements for the truth of the matters asserted, which is hearsay).

The court noted, however, that evidence of actual confusion was just one part of the court’s overall determination that a likelihood of confusion existed. Even if such evidence were excluded, the court found sufficient evidence to support the district court's finding that confusion was likely (identical mark, identical services, targeting the same consumers, identical advertising methods, and AFSE intent to exploit AFGA’s goodwill with its opening of an office in Georgia and contacting established AFGA donors). Thus, the court found no error in the district court’s determination of a likelihood of confusion with respect to AFGA’s common law trademark rights..

Laches and Acquiescence
With respect to AFA’s argument that the district court erred in finding that AFA and AFSE had not proven the affirmative defenses of laches and acquiescence, the court found no abuse of discretion by the district court, which ruled that AFGA did not unreasonably delay before bringing its lawsuit. Specifically, before 2001, AFSE’s use of the mark in AFGA’s territory was limited to flying patients and organs in and out of the area before; however, after 2001, AFSE opened a branch office in the territory and began soliciting donations and promoting its services.

The court stated:

Under the doctrine of progressive encroachment, "delay is to be measured from the time at which the plaintiff knows or should know she has a provable claim for infringement." Kason Indus., Inc. v. Component Hardware Group, Inc., 120 F.3d 1199, 1206 (11th Cir. 1997); see also 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31.19 (4th ed. 1997) ("The senior user has no obligation to sue until the likelihood of confusion looms large. . . ."). The district court found AFSE's change of tack in 2001 justified the timing of AFGA's lawsuit. That finding was supported by the evidence and was not an abuse of discretion.

Slip op. at 14.

The court noted further than even if AFA and AFSE had proven their affirmative defenses, it would not have precluded the court from issuing a permanent injunction in order to prevent a likelihood of confusion. See 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31.10 (4th ed. 1997); see also SunAmerica Corp. v. Sun Life Assur. Co. of Canada, 77 F.3d 1325, 1337 (11th Cir. 1996); Coach House Rest., Inc. v. Coach & Six Rests., Inc., 934 F.2d 1551, 1564 (11th Cir. 1991). As such, the district court did not err in rejecting AFA/AFSE affirmative defenses of laches and acquiescence as grounds for barring AFGA’s injunctive relief

Permanent Injunction
AFA/AFSE, in trying to argue that the district court erred in granting a permanent injunction, argued that the district court was wrong in deciding that an injunction would serve the public interest. AFA/AFSE argued that the public interest at stake was the “interest in accessing free medical transportation,” which could be harmed by the court’s injunction.

In response to the argument that avoiding confusion is a legitimate public interest for granting an injunction, AFA/AFSE tried to argue that confusion “cannot be the only public interest considered by the court when deciding whether to issue an injunction . . . because no litigant can win a trademark infringement lawsuit without proving it likely that the public will be confused by similarities between the original and infringing marks, the ‘public interest’ in an injunction must be more than a mere interest in avoiding confusion. Were that not the case, an injunction would issue in every trademark action where infringement has been shown.” Id. at *19-20. The court, however, notes that indeed in most trademark infringement actions, complete injunctions are imposed against the infringing party for the simple reason that “the public deserves not to be led astray by the use of inevitably confusing marks-even in cases in which more than one entity has a legal right to use the mark.” Id. at *20.

Because the district court found a likelihood of confusion, the court found that the district court did not err in issuing an injunction to stop AFA/AFSE from using the Angel Flight mark in a way that would cause confusion in violation of AFGA’s senior rights. To that end, the court noted that the district court carefully crafted the injunction to allow AFA/AFSE to continue to use the mark in a way that it had before opening the Atlanta office. The district court’s injunction only prohibited AFA and its members (including AFSE) from using the Angel Flight mark in Georgia, Alabama, Mississippi, Tennessee, North Carolina, and South Carolina for the purpose of soliciting donations, advertising or promoting their services, or recruiting volunteers – the injunction does not prevent AFA and its members from using the mark to identify its planes flying into and out of these states and does not prevent them from promoting their services or recruiting volunteers in other states. The court found no error on the district court’s part with respect to issuing the injunction or its scope.

Cancellation of Trademark Registration on basis of Fraud
Finally, the court upheld the district court’s cancellation of AFA’s trademark registration.

The court noted:

In any action involving a registered mark, a court may order the cancellation of the registration, in whole or in part, when such action is warranted. See 15 U.S.C. § 1119. One ground on which a party may petition to cancel a registered service mark is that the registration was obtained fraudulently. 15 U.S.C. § 064(3) [sic]. Fraud occurs when an applicant knowingly makes false, material representations of fact in connection with an application for a registered mark. Metro Traffic Control, Inc. v. Shadow Network Inc., 104 F.3d 336, 340 Fed. Cir. 1997).

Slip op. at 19.

The district court found that Angel Flight West, the original applicant, committed two acts of fraud in obtaining its registration: intentionally providing an incorrect first date of use for the registered mark and intentionally failing to disclose known use of the mark by others

Regarding the first act of fraud, the court noted that “A misstatement of the date of first use in the application is not fatal to the securing of a valid registration as long as there has been valid use of the mark prior to the filing date.” Id. at 20 (quoting Car Subx Serv. Sys., Inc. v. Exxon Corp., 215 U.S.P.Q. 345, 351 (P.T.O. T.T.A.B. 1982) and citing Pony Exp. Courier Corp. of America v. Pony Exp. Delivery Serv., 872 F.2d 317, 319 (9th Cir. 1989)). In this case, because Angel Flight West did not modify the earlier version of the mark created by the Las Vegas AMFST chapter until 1986, it could not have used such mark in 1983; nonetheless, the court found that Angel Flight West was using the modified mark before it filed for federal registration, and therefore, “the improper first use date contained in the application cannot be a basis for invalidating the registration.” Id. at 21.

However, with respect to the Angel Flight West’s failure to disclose in its application the fact that other organizations were using the term “Angel Flight” despite knowledge of other organizations rightfully using the name, the court noted that “[p]urposely failing to disclose other users' rights to use the same or similar marks may qualify as a material omission justifying cancellation of a trademark. See L.D. Kichler Co. v. Davoil, Inc., 192 F.3d 1349, 1352 (Fed. Cir. 1999) (suggesting proof of noninfringing, consequential use by others may invalidate applicant's claim when combined with proof of intent to deceive).” Id.

Given the evidence that Angel Flight West was aware of other organizations using the “Angel Flight” name for similar transportation services at the time the application was filed and yet failed to disclose such material information to the PTO, the district court’s ruling that Angel Flight West had committed fraud was not clearly erroneous, and thus the district court did not err in canceling the registration on the basis of fraud.

Afterthought
AFA also has a second registration for the word mark ANGEL FLIGHT for “Transportation of human patients, tissue and organs by air.” The first date of use in commerce is cited as November 21, 1983 (the same date as the registration cancelled above). In addition, the registration suffers the same flaw as the above application – it was filed in January 28, 2003, and yet includes the same kind of declaration by AFA that no other person, firm, corporation, or association has the right to use said mark in commerce, either in the identical form thereof or in such near resemblance thereto as may be likely, when used on or in connection with the goods/services of such other person, to cause confusion, or cause mistake, or to deceive. AFGA filed extensions of time to file an opposition back when the mark was published for opposition, but did not follow through. AFGA would appear to have the necessary ammunition should it desire to cancel this registered mark as well.