United States: Trademark Year In Review And What Lies Ahead: The Lanham Act's New Year's Resolutions For 2017

Last Updated: January 9 2017
Article by Anthony Rufo and Meagen K. Monahan

2016 is now in the rear view mirror. At the beginning of a new year, we often take a moment to reflect on the past year, while setting goals for the present. It's a time to say, "Last year had its ups and downs, but this year I'm going to . . ." There are so many choices; what will 2017 hold? Between this article's two authors, one of us resolves to finally learn Japanese and the other resolves to run a marathon, but we'll leave it to you to guess who is who. Setting personal goals aside, as two trademark attorneys we also both wonder what we can expect from The Lanham Act in 2017.

The truth is that 2016 was a somewhat busy year for trademark law, although, upon reflection, several important trademark issues are still unresolved. Given the number of unresolved trademark issues from last year, we can probably expect some pretty big decisions to come down the pike over the next twelve months. While we don't know for certain just how the Lanham Act will resolve these open questions, we thought it would be fun to imagine what some of the Lanham Act's own 2017 resolutions might be, while highlighting some of the more notable trademark cases of 2016, and in particular, the issues they left unresolved before the ball dropped in Time Square.

The Lanham Act's List of Either/Or Resolutions for 2017:

"I resolve to let go of my need to control. If others want to be offensive, provocative, and disparaging, who am I to judge?"

– OR –

"I resolve to protect the sensibilities of others. What harm does it do if I'd rather you be agreeable, pleasing, and nice?"

2017 should be the year that reveals whether the Lanham Act can continue to prohibit disparaging marks from being registered before the U.S. Patent and Trademark Office (USPTO) or instead, resolve to (maybe sometimes) be a bit more offensive.

Over the past few years, two different cases have asked whether Section 2(a) of the Lanham Act, which bars registration of marks that may disparage or bring into contempt or disrepute people, institutions, beliefs, or national symbols, violate the First Amendment as a viewpoint-based restriction on speech. In Blackhorse v. Pro Football, Inc., the Trademark Trial and Appeal Board cancelled several trademark registrations owned by the Washington Redskins, finding that they were offensive to Native Americans. A federal district court judge later agreed, and now the Fourth Circuit Court of Appeals has taken up the case. The appeal has been fully briefed, so a decision is imminent.

In In re Tam, the Federal Circuit Court of Appeals concluded that Section 2(a) does indeed violate the First Amendment, striking down the disparagement provision. The owner of the trademark THE SLANTS had argued that his all Asian-American rock band had the right to "take back" a traditionally offensive term, and that the Lanham Act unconstitutionally barred registration. The Court of Appeals agreed. The USPTO appealed to the Supreme Court. The High Court took the case, and the Washington Redskins even tried (to no avail) to get in on the action.

In re Tam is scheduled for oral arguments on January 18th. As we eagerly await this decision, we can enjoy the Slants' latest song, "From the Heart," which the band describes as "an open letter to the trademark office."

"I resolve to build a wall around the United States. U.S. trademark law is for U.S. trademark owners only."

– OR –

"I resolve to open the borders. Why can't we all just get along?"

This past year, we saw a number of cases wrestle with the extraterritorial reach of the Lanham Act. The courts will eventually need to decide whether to close the Lanham Act's territorial borders to foreign registrants and marks.

In 2016, the Fourth Circuit Court of Appeals extended the Lanham Act's southern border in respect to unfair competition and false advertising. In Belmora v. Bayer, the court held that Bayer could sue Belmora for its deceptive use of the mark FLANAX, in connection with ibuprofen within the U.S., notwithstanding the fact that Bayer only uses the mark FLANAX for the over-the-counter pain reliever in Mexico. Meanwhile, on the northern front, in Trader Joe's, Co. v. Hallatt, the Ninth Circuit Court of Appeals permitted Trader Joe's to sue a Canadian citizen for his use of Trader Joe's marks at his Canadian grocery store, Pirate Joe's. The Ninth Circuit held that the extraterritorial reach of the Lanham Act is not a jurisdictional question but rather a merits question, and remanded the case back to the district court. We hope to learn in 2017 whether Hallatt's use of Trader Joe's U.S. trademarks in Canada is sufficient to warrant liability under the Lanham Act.

In Sojuzplodoimport v. Spirits International, et. al, the Second Circuit Court of Appeals, relying upon the doctrine of comity, deferred to Russian government authority when it assigned its trademark rights to STOLICHNAYA (a/k/a, STOLI) to a purported Russian state agency. Possibly the beginning to warmer relations with our Russian counterparts? Well, maybe not. The Second Circuit ultimately dismissed the agency's claims due to laches and res judicata. In addition to this extraterritorial matter, the Second Circuit, in a hotly contested parallel imports case, affirmed the district court's issuance of a preliminary injunction against wholesaler H&H Services in Abbott Laboratories, et al. v. H&H Wholesalers, Inc., et al. We look forward to seeing whether H&H will prevail in arguing that it cannot, as a distributor, control down-stream confusion as to foreign-market goods.

"I resolve to redistribute the wealth among trademark attorneys. I was always told that 'sharing is caring.'"

– OR –

"I resolve to let the winners pay their own way. I mean, that is the American way, right?"

In the upcoming years, we may see the Lanham Act resolve its fee-shifting issues. In 2014, the USPTO announced that sections of both patent and trademark statutes permit it to recover attorneys' fees from an applicant that appeals an administrative decision to a federal district court. The USPTO's position stems from language requiring an appealing applicant to pay "all expenses of the proceeding" in Section 145 of the Patent Act and Section 1071(b)(3) of the Lanham Act. Prior to 2014, the USPTO interpreted these sections to only include routine expenses, such as travel and printing costs. Understandably, recent trademark and patent litigants have pushed back against the USPTO's new understanding.

For example, in 2015, the Fourth Circuit Court of Appeals accepted the USPTO's interpretation as applied to the Lanham Act, and required an appealing trademark applicant to pay the USPTO's attorneys' fees. But in 2016, in NanKwest v. Lee, a patent dispute in which NanKwest challenged the USPTO's motion for attorneys' fees, a district court judge rejected the USPTO's interpretation of Section 145, finding that it violates the "American Rule," which typically prohibits fee-shifting. The USPTO has appealed the case to the Federal Circuit Court of Appeals. Going forward, if some courts adopt the NanKwest position for trademark cases over the Fourth Circuit's position to the contrary, will the forum in which trademark applicants file their district court appeal determine whether they must pay the USPTO's legal bill?

In other news, the Fifth and Ninth Circuit Courts of Appeals have joined the Third, Fourth, and Sixth Circuits in adopting the Supreme Court's Octane Fitness fee-shifting test for the Lanham Act. Now, in determining whether a prevailing party should be awarded attorneys' fees, courts must consider only two factors: (1) whether the case stands out from others with respect to the substantive strength of the litigants' positions; and (2) whether the unsuccessful party has litigated the case in an unreasonable manner. Will the remaining circuits, where fee-shifting law is more convoluted, jump on the band wagon and adopt the Octane Fitness test?

"I resolve to do the bare minimum that is required of me. I've always heard that less is more."

– OR –

"I resolve to go the extra mile. It can't hurt to require just a bit more, right?'"

How much use is enough use under the Lanham Act? To the surprise of many, the answer is not very much. In Christian Faith Fellowship Church v. Adidas AG, the Federal Circuit Court of Appeals examined the level of commercial activity necessary to be considered "use in commerce" under the Lanham Act. According to the Federal Circuit, a sale of two branded hats to an out-of-state customer is sufficient for federal registration purposes. Moreover, the court's dicta suggests all sales of branded goods, even purely in local commerce, could potentially be considered "use in commerce." We will have to wait to see the extent in which this decision impacts trademark law.

"I resolve to keep things short and simple. It seems a three-prong test is sufficient for nominative fair use."

– OR –

"I resolve to be mysterious and complex. The more factors, the more substantive I am, right?"

Finally, at least three circuit courts of appeals disagree on how to consider a defendant's claim of nominative fair use, potentially requiring future resolution. Where the Third Circuit Court of Appeals treats nominative fair use as an affirmative defense once a likelihood of confusion is shown, the Ninth Circuit Court of Appeals employs its three factor test to determine whether there is likelihood of confusion. This past year, the Second Circuit weighed in with its own unique approach in International Information Systems Security Certification Consortium, Inc. v. Security University, LLC by adding the Ninth Circuit's three factors to its standard eight-factor likelihood of confusion test. As a result, Second Circuit practitioners can look forward to briefing eleven factors in trademark disputes involving nominative fair use.

With an apparently busy year ahead for the Lanham Act, we will continue to keep you posted on any resolutions in 2017. In the meantime, if you are in the Boston area and interested in hearing a more thorough analysis of the cases discussed herein, please join Julia Huston on January 26, 2017 when she will be presenting The "Metes and Bounds" of the Lanham Act: A Trademark Year in Review at the Boston Bar Association's 17th Annual Intellectual Property Year in Review. For more information about the event, please visit the BBA's webpage.

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