Federal Circuit says minority interests are not enough to seek trademark cancellation

The United States Court of Appeals for the Federal Circuit (CAFC) on Thursday, May 23, upheld a ruling by the Trademark Trial and Appeal Board (TTAB) that a party with only a minority stake in the owner of the allegedly infringing trademarks cannot had no standing to act. request the cancellation of the trademarks. The decision was precedent-setting and written by Justice Lourie.

Luca McDermott Catena Gift Trust has appealed a TTAB decision denying its requests to cancel the trademarks ALVAREDOS-HOBBS and HILLICK AND HOBBS. Luca McDermott and two other family trusts collectively own 21.6% of the partnership in Paul Hobbs Winery, LP, which owns the PAUL HOBBS trademark. Paul Hobbs is another partial owner of Hobbs Winery and is also the winemaker and is affiliated with the owners of the two allegedly infringing brands. McDermott filed a motion to cancel both marks citing likelihood of confusion and fraud. The fraud charge was based on the argument that Hobbs “caused his attorney, the same attorney of record for the PAUL HOBBS mark of Hobbs Winery, to assert in a declaration that the appellants’ marks would not be susceptible to cause confusion with another mark” when the lawyer “knew or should have known”, this confusion was probable.

The TTAB denied the motion, agreeing with Hobbs’ argument that the McDermott Trusts lacked standing to bring the action for cancellation because they were not the owners of the PAUL HOBBS trademarks and because the motion failed to adequately allege confusing similarity or fraud. . The Commission said that because the trusts were minority owners of the winery and did not have the right to assert the trademarks independently without approval from Hobbs Winery, they did not have the legal right to take action. The Commission also stated that the allegations of confusion and fraud failed because the trusts had no ownership rights in the marks, which was a necessary element of proving such an allegation, and that the marks were not substantially identical to demonstrate fraud. The TTAB also denied the trusts permission to amend the petition.

On appeal to the CAFC, the court explained that although the Luca McDermott Trust had standing to appeal under Article III, it did not have standing to bring the action for rescission. Implement the Supreme Court decision Lexmark framework for determining whether a right to a legal cause of action exists, the CAFC stated that 1) Luca McDermott had no independent business interest in the PAUL HOBBS trademark, thus failing the “area of ​​interests” prong of the Lexmark testing; and 2) even if it did not fail the “area of ​​interest” component, it could not satisfy the “immediate causality” component. The opinion noted that “the Supreme Court explained in Lexmark that harm will be “too remote” from the alleged illegal conduct if it “is purely derived from misfortunes caused to a third party by the actions of the defendant.” In this case, the CAFC stated:

“The alleged diminution in the value of appellant’s interest in Hobbs Winery as a result of appellants’ use of their trademarks is suffered only as a result of injury to Hobbs Winery itself… . Thus, because appellant’s alleged harm is merely derived from any harm suffered by Hobbs Winery, it is too remote to provide appellant with a cause of action under § 1064.”

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