United States: States´ Liability For Trademark Infringement Limited As "Trademark Remedy Clarification Act" Found Unconstitutional

Previously published August 25, 2008

The U.S. District Court for the Western District of Wisconsin (the "Court") recently ruled in a case of first impression that the federal Trademark Remedy Clarification Act,¹ which purported to abrogate states' immunity from trademark infringement suits, violates the Eleventh Amendment of the Constitution, and therefore a defendant could not advance a counterclaim for trademark infringement against the University of Wisconsin.²

The case began when the University of Wisconsin ("the University") filed an action with the Court seeking reversal of the cancellation of the "CONDOR" trademark registration by the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office. Phoenix Software, the plaintiff in the Trademark Trial and Appeal Board cancellation proceeding, filed a counterclaim against the University for trademark infringement based upon the University's use of the disputed "CONDOR" mark. The University filed a motion to dismiss the counterclaim on the grounds that the University is an arm of the state of Wisconsin and is entitled to sovereign immunity under the Eleventh Amendment. Phoenix Software alleged that the state had waived its immunity by participating in the federal trademark system and by filing its complaint with the Court. The Court ruled that the Trademark Remedy Clarification Act violates the U.S. Constitution and the University did not voluntarily waive its sovereign immunity by participating in the federal trademark system or by appealing the ruling of the Trademark Trial and Appeal Board to the Court.

The Court's discussion of the Trademark Remedy Clarification Act centered on interpretation of the U.S. Supreme Court's Eleventh Amendment precedent. Based on that precedent, the Court determined that state sovereign immunity can be limited only (1) when Congress abrogates the state's immunity pursuant to a valid exercise of power; or (2) when the state makes an express and voluntary waiver of the immunity.³ In deciding the first element of this bifurcated test, the Court ruled that although Congress intended to abrogate state sovereign immunity from trademark infringement suits by enacting the Trademark Remedy Clarification Act, it did so without appropriate justification. The Court determined that Congress invalidly exercised its powers by using the Commerce Clause as justification for the Act because the Supreme Court had previously held that the justification for an abrogation of sovereign immunity must be found in the Fourteenth Amendment of the Constitution and not the Commerce Clause.⁴

The Court relied on the Supreme Court's prior ruling in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank related to patent claims against states, and determined that it would be unlikely the Supreme Court would reach a different decision in relation to trademark infringement claims. In making this determination, the Court noted that there was a lack of congressional testimony setting forth expansive injuries sufficient to justify Congress's attempt to abrogate state immunity from trademark claims. Thus, the Court held that the Trademark Remedy Clarification Act is an unconstitutional expansion of Congress's power over the states and the University had immunity from trademark infringement claims.

The Court then addressed whether the University had voluntarily waived its sovereign immunity. The Court determined that a state may waive its immunity by either making a clear declaration that it intends to submit itself to federal jurisdiction or by voluntarily invoking federal jurisdiction. The Court found that the University's participation in the federal trademark application and registration system did not constitute a waiver of immunity. In so deciding, the Court emphasized that the Trademark Remedy Clarification Act does not condition the receipt of a federal trademark registration on a waiver of sovereign immunity. Therefore, the Court reasoned that any attempt to equate participation in the trademark system with a waiver of immunity is "nothing more than abrogation under another name."

The Court also determined that appealing the Trademark Trial and Appeal Board's cancellation of the University's trademark registration did not constitute a voluntary waiver of sovereign immunity. The Court found that the University's district court action was not "voluntary" if the action merely sought review of the Trademark Trial and Appeal Board's administrative decision canceling the CONDOR trademark registration. Because the University's action was limited to appealing the adverse decision from the Trademark Trial and Appeal Board, the Court held that the University did not voluntarily waive its sovereign immunity.

If the Court's ruling is upheld on appeal, and/or if other courts reach a similar conclusion regarding the Trademark Remedy Clarification Act, the ruling could have wide-ranging implications for trademark owners.

Footnotes

^{1 15 U.S.C. § 1122(b).}

^{2 University of Wisconsin v. Phoenix Software, No. 07-cv-665-bbc, 2008 WL 2780905 (W.D. Wis. 2008).}

^{3 Id. at *1 (citing Tennessee v. Lane, 541 U.S. 509 (2004); Clark v. Bernard, 108 U.S. 436 (1883)).}

^{4 Id. (citing College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666 (1999) and Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999), which were companion cases holding that states could assert sovereign immunity in suits brought for patent infringement or for false and misleading advertising).}

© 2008 Sutherland Asbill & Brennan LLP. All Rights Reserved.

This article is for informational purposes and is not intended to constitute legal advice.