Standing Naked before the TTAB

Australian Therapeutic Supplies Pty. v. Naked TM (Fed. Cir. 2020) (en banc)

NAKED TM holds the registration for the mark NAKED that it uses to sell its luxury condoms.  However, by the time NAKED TM started its business, Australian Therapy was already selling its NAKED condoms to US customers over the internet.  In the early 2000s, the companies reached some form of a tacit agreement — although without an express contract.  Since 2003, Australian has continued to sell NAKED condoms in the US, but the TTAB found that it was never more than 48 consumers per year.

The appeal here stems from Australian Therapy’s cancellation proceeding that ended when the TTAB found the petitioner lacked standing under 15 U.S.C. § 1064 (petition to cancel may be filed by “any person who believes that he is or will be damaged … by the registration of a mark …”).  The TTAB particularly found a binding contract between the parties where Australian Therapy gave-up its rights to use the mark in the US: 

The evidence shows that the parties reached an agreement. The mutuality of intent to contract is satisfied because the parties recognized their trademark issue and they communicated and exchanged offers to resolve it. The consideration for the contract is Petitioner’s agreement not to use or register the NAKED trademark for condoms in the United States and Respondent’s agreement not to use or register the NUDE trademark for condoms.

The Board explained also that Australian must show a “proprietary rights in its unregistered mark” in order to have standing under the statute.

On appeal, the Federal Circuit reversed — holding a cancellation petition may be filed by any party who demonstrates “a real interest in the cancellation proceeding and a reasonable belief of damage regardless.” It does not require evidence of a “proprietary interest in an asserted unregistered mark.”  Here, the court found a real-interest based on the fact that Australian had filed to register its marks, and had demonstrated a belief of damage because the USPTO refused registration of both the ’237 and ’589 applications based on a likelihood of confusion with Naked’s registered mark, U.S. Registration No. 3,325,577.”

At that point, NAKED TM petitioned for en banc rehearing on two questions:

I. Whether a petitioner who has forfeited its rights in a mark pursuant to a valid settlement agreement has a real interest in the proceedings and a reasonable belief of harm for the registration of said mark so as to support a finding of statutory standing under 15 U.S.C. § 1064 to challenge the registration of the mark; and

II. Whether a petitioner in the TTAB is required to establish the pleaded basis for its standing at the commencement of an action, or whether this Court may rely on an argument that has been waived by a party in finding a basis for standing in the TTAB.

The Federal Circuit has now denied the rehearing, although the case includes an interesting dissent from Judge Wallach. Wallach argues that the decision in Australian Therapy:

1. Conflicts with our case law requiring a “legitimate commercial interest” to have a valid cause of action under 15 U.S.C. § 1064, see Empresa Cubana Del Tabaco v. Gen. Cigar Co., 753 F.3d 1270, 1274 (Fed. Cir. 2014) (following Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014)., noting that a petitioner must have a “legitimate commercial interest sufficient to confer standing”);
2. Undermines our case law favoring the enforcement of settlement agreements, see Wells Cargo, Inc. v. Wells Cargo, Inc., 606 F.2d 961, 965 (C.C.P.A. 1979) (“If there [is] a policy favoring challenges to trademark validity, it too has been viewed as outweighed by the policy favoring settlements.”); and
3. Raises questions as to the impact of Supreme Court precedent on our statutory standing jurisprudence, see Lexmark, 572 U.S. at 128 n.4 (noting that statutory standing does not implicate Article III subject matter jurisdiction), 134 (providing “a direct application of the zone-of-interests test and the proximate-cause requirement [to] suppl[y] the relevant limits on who may sue”).

AusTherapy v. Naked.