United States: Supreme Court Docket Report - June 23, 2014

Keywords: Supreme Court, trademark tracking, Passenger Rail Investment and Improvement Act

Today, the Supreme Court granted certiorari in two cases of interest to the business community:

  • Trademark Tacking—Question of Fact or Question of Law
  • Nondelegation Doctrine—Passenger Rail Investment and Improvement Act

Trademark Tacking—Question of Fact or Question of Law

To have a protected interest in a trademark, a party must be the first to use it. The party that first uses the mark is said to have "priority," and the date of the mark's first use is its "priority date." Because the first use of a trademark is critical to determining ownership, courts have recognized a doctrine called trademark "tacking" to permit the owner of a trademark to make minor changes to the mark without losing priority. The test for trademark tacking, which courts routinely characterize as a narrow doctrine, is whether the old mark and the new mark are "legal equivalents." If tacking is permitted, the priority date of the later mark becomes the party's first use of the earlier mark.

Today, the Supreme Court granted certiorari in Hana Financial, Inc. v. Hana Bank, No. 13-1211, to decide whether trademark tacking is a question of law for a court or a question of fact for the jury. Mayer Brown represents the petitioner in this matter.

Petitioner Hana Financial, Inc., the owner of the federally registered trademark "Hana Financial," sued respondents Hana Bank and Hana Financial Group for trademark infringement based on their use of "Hana Bank." Respondents argued that they had priority based on the trademark tacking doctrine. Specifically, they claimed that the mark "Hana Overseas Korean Club" could be tacked to the later mark "Hana World Center," and that "Hana World Center" could be tacked to "Hana Bank." Relying on Ninth Circuit precedent holding that trademark tacking is a question of fact, the district court had the jury determine whether these marks are "legal equivalents." The jury returned a verdict in favor of respondents.

The Ninth Circuit affirmed. The court explained that "[i]n our circuit, tacking presents a question of fact that must ultimately be decided by the jury unless the evidence is so strong that it permits only one conclusion." Hana Financial Inc. v. Hana Bank, 735 F.3d 1158, 1168 (9th Cir. 2013). The court of appeals went on to conclude that "[Hana Financial, Inc.] has not shown that the jury's decision was unreasonable." Id.

The Ninth Circuit acknowledged, however, that other circuits understand trademark tacking to be a question of law. Id. at 1164 n.5; see Data Concepts, Inc. v. Digital Consulting, Inc.,150 F.3d 620, 623 (6th Cir. 1998); Van Dyne-Crotty, Inc. v. Wear-Guard Corp.,926 F.2d 1156. 1159(Fed. Cir. 1991). The court further recognized that, because respondent's marks "seem aurally and visually distinguishable," these other courts "might reach a different conclusion on these facts." Hana Financial, 735 F.3d at 1166, 1168.

This case is of interest to all trademark owners and is of considerable practical significance, as the question whether the trademark tacking doctrine sounds in law or fact arises (explicitly or implicitly) in every trademark tacking case.

Absent extensions, which are likely, amicus briefs in support of the petitioner will be due on August 14, 2014, and amicus briefs in support of the respondent will be due on September 15.

Nondelegation Doctrine—Passenger Rail Investment and Improvement Act

Section 207 of the Passenger Rail Investment and Improvement Act of 2008 directed the Federal Railroad Administration and Amtrak to work jointly to "develop new or improve existing metrics and minimum standards" for measuring the performance of Amtrak's intercity passenger rail services. It further provided that, if the parties did not complete work on the standards within 180 days, either of them could petition the Surface Transportation Board to appoint an arbitrator to resolve their disputes through binding arbitration. The Supreme Court granted certiorari today in Department of Transportation v. Association of American Railroads, No. 13-1080, to determine whether Section 207 was an unconstitutional delegation of legislative power to a private entity.

Congress specified that the standards developed pursuant to Section 207 would be used to evaluate Amtrak's performance and be incorporated into Amtrak's operating agreements with "host railroads" whose tracks it uses. In addition, Congress gave the Surface Transportation Board the authority to investigate any sustained failure of Amtrak trains to meet the newly developed standards and to award damages against a host railroad if the STB finds that that host railroad has caused Amtrak's substandard performance by failing to prefer Amtrak trains over freight traffic as federal law requires. An association representing a number of host railroads challenged Section 207 on the ground that it unconstitutionally delegated legislative authority to a private entity (Amtrak).

In the decision below (721 F.3d 666), the D.C. Circuit invalidated the statute. The court held that Amtrak should be considered a private entity for purposes of the nondelegation doctrine because Congress had expressly designated it as a private corporation and a for-profit entity. The court accordingly concluded that Section 207—which, in its view, gave Amtrak and the Federal Railroad Administration equal power to approve or disapprove standards—delegated an impermissible degree of regulatory authority to Amtrak. The court was also troubled by the statutory provision authorizing the use of an arbitrator to resolve disputes over the standards; the panel pointed out that, if a private arbitrator were chosen, it would be possible for metrics and standards to go into effect that had not been approved by any governmental entity.

This case has special relevance to freight railroads whose tracks Amtrak uses and who could thus be targets of future STB investigations under Section 207. But the case also has important implications for any industry in which Congress's legislative scheme gives private stakeholders a role in developing regulations. The decision below marks the first time since the 1930s that a court has struck down such a scheme based on the nondelegation doctrine. The Supreme Court's resolution of this case will thus provide rare guidance regarding how much power Congress can give to private parties in the rulemaking process and whether, and to what extent, arbitrators may be involved in resolving rulemaking disputes between those private entities and government agencies.

Absent extensions, which are likely, amicus briefs in support of the petitioners will be due on August 14, 2014, and amicus briefs in support of the respondent will be due on September 15, 2014.

Please visit us at www.appellate.net

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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