The U.S. Court of Appeals for the Federal Circuit recently held that dismissal of an opposition by the U.S. Trademark Trial and Appeal Board (the Board) did not render an applicant’s counterclaim for cancellation moot and further upheld the Board’s holding on excusable neglect. FirstHealth of the Carolinas, Inc. v. CareFirst of Maryland, Inc., Case No. 06-1148 (Fed. Cir., Feb. 27, 2007) (Linn, J.).
CareFirst opposed FirstHealth’s applications to register "FIRSTCAROLINACARE" based upon likelihood of confusion with and dilution of the opposer’s registered "CAREFIRST" mark. FirstHealth counterclaimed for cancellation of CareFirst’s registrations on the ground of abandonment. FirstHealth moved to reopen its testimony period to introduce evidence critical to its abandonment claims. FirstHealth pleaded excusable neglect to explain its failure to introduce the evidence on time, citing the birth of its counsel’s son, the large amount of testimony it had taken, its counsel’s conflicts with unrelated matters and a docketing error by its counsel’s new paralegal. The Board found no excusable neglect and denied FirstHealth’s motion to reopen. Because FirstHealth’s primary evidence was not put on record, the Board dismissed the counterclaim for cancellation. The Board found no likelihood of confusion with or dilution of CareFirst’s marks and dismissed the opposition as well. Both parties appealed to the Federal Circuit, but CareFirst dismissed its appeal.
CareFirst argued that, because it was not appealing the Board’s dismissal of its opposition, FirstHealth’s appeal was moot. CareFirst argued that the Board’s rulings on likelihood of confusion and dilution would preclude CareFirst from asserting its marks against FirstHealth in the future, and thus there was no potential damage to FirstHealth to support a cancellation counterclaim. The Court disagreed, saying the Board only has the power to determine the right to register a mark, not the right to use it; nor can the Board determine broader issues of infringement or unfair competition. The Court said the Board’s decision did not bar CareFirst from using its mark or asserting it against FirstHealth in an infringement or unfair competition claim. Even if the Board’s decision precluded CareFirst from relitigating the issues of likelihood of confusion and dilution, CareFirst could still use its mark to cause damage by other means. The Court declined to decide whether the Board’s decision would in fact preclude future litigation on the issues of likelihood of confusion or dilution, but noted that the Second Circuit had found otherwise in at least one case.
Next, the Court reviewed the Board’s rejection of FirstHealth’s claim of excusable neglect. Applying an abuse of discretion standard, the Court stated that an agency’s interpretation of its own regulations is given controlling weight unless clearly erroneous or inconsistent. The Court noted that the Board adopted the Supreme Court’s Pioneer factors for determining whether a party’s neglect is excusable: the danger of prejudice to the other party; the length of the delay and its potential impact on the proceedings; the reason for the delay, including whether it was under the reasonable control of the movant; and whether the movant acted in good faith. The Board had held the third factor to be of "paramount importance." The Court agreed with the Board that FirstHealth’s reasons for delay were entirely within its control. Two of the reasons given for the delay had already been accommodated by a two-month stipulated extension of FirstHealth’s testimony period. FirstHealth’s claim of a docketing error was belied by a reference to the deadline in an earlier filing by FirstHealth. Regardless, the Court noted that the Board has in the past been unsympathetic to delays caused by "sloppy practice or inattention to deadlines." Finally, to the extent the delay was caused by counsel’s family matters, FirstHealth offered no reason why another attorney in the same firm could not have taken over the case. Accordingly, the Court agreed that the second and third factors weighed against excusable delay and held that the Board’s decision was not an abuse of discretion.
The Court also upheld the Board’s dismissal of FirstHealth’s counterclaim for cancellation. The Court noted that abandonment is a question of fact and said the Board’s findings should be sustained if supported by substantial evidence. The Board found that without the properly excluded evidence, FirstHealth had not proved by a preponderance of evidence that CareFirst had abandoned its marks. The Court held that the Board’s decision was supported by substantial evidence and thus affirmed.
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