9th Circuit treats trademark applications as registrations; cancels same

The Lanham Act is the federal law encompassing infringement of registered and unregistered trademarks. It also regulates the requirements and process of applying for trademark registrations. The interplay between the Lanham Act’s trademark litigation and registration roles resulted in an unusual holding by the 9th Circuit. BBK Tobacco & Foods LLP, dba HBI International v. Central Coast Agriculture, Inc., Appeals Nos. 22-016190 and 16281 (9th Cir. April 1, 2024). There, the plaintiff BBK, “a distributor and seller of smoking-related products with trademarked RAW branding” alleged that defendant CCA infringed its mark by selling cannabis products with the mark RAW Garden. The full panel agreed with the District Court that there was no likelihood of confusion between the marks. The controversy in this case arises because the 9th Circuit, in a divided opinion, affirmed the grant of summary judgment to plaintiff BBK on its claim to invalidate four of defendant’s trademark applications, newly extending Lanham Act Section 1119 to cover not just registrations, but applications.

The Lanham Act has long allowed the District Courts to order cancellation of registrations under 15 U.S.C. Sec. 1119 as long as there is a lawsuit pending involving the registrations. There is no independent cause of action to cancel a registration in the District Court; that is left to the U.S. Patent and Trademark Office’s Trademark Trial and Appeal Board. How does this statute arise in practice? When a plaintiff asserts a trademark registration against a defendant in an infringement lawsuit, defendant may respond with a counterclaim invoking Section 1119 to seek cancellation of the plaintiff’s registration. (A pending application gives no trademark enforcement rights). Here, plaintiff sought cancellation of four of defendant’s pending applications, alleging the applications were made on an “intent to use” (I.T.U.) basis, and defendant lacked the mandatory bona fide intent to use the marks. This is a proper basis for the U.S. Patent and Trademark Office (PTO) to refuse registration. Defendant did not challenge the factual basis for the “no intent” allegation. Instead, it defended on the basis that the PTO alone had jurisdiction to void (cancel) applications for registration. The District Court found jurisdiction. Because defendant had not contested the “no intent to use” allegation, the District Court ordered cancellation of the applications on that basis. The 9th Circuit affirmed, with the majority holding: “When an action involves a registered trademark, a district court has jurisdiction to consider challenges to the trademark applications of parties to the action, citing Section 1119, that provides: “In any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.”

The majority found that a challenge to an application necessarily affects the applicant’s right to a registration. “Permitting a district court to adjudicate trademark applications when an action already involves a registered mark advances the interest of resolving all registration disputes in a single action.” Here, however, the registration in suit belonged to the plaintiff; the applications belonged to the defendant.

A look at our unique trademark system highlights what may now be lost to some applicants. Surprising to some, the PTO does not confer trademarks. This is entirely different from the patent side of the PTO. The PTO confers a registration of an already existing trademark, assuming it qualifies for registration. Apart from narrow exceptions for foreign applicants by international treaty, a trademark registration will not issue unless and until there is a trademark to register. A trademark is created by applicant’s use of the mark in connection with goods or services lawfully sold in commerce. Think of the difference between a trademark and a U.S. trademark registration as the difference between you and your birth certificate. You came first; your birth certificate followed. Your birth certificate provides critical information about you, but it did not confer life. You can file a trademark (or service mark) application once you have acquired a trademark by using it in connection with the sales of specific goods or services in lawful commerce. There is another key basis to file an application for federal registration of a mark, and that is to file on the basis of a bona fide intent-to-use the mark in lawful commerce for the goods or services claimed in the application. This allows applications to be filed years in advance of the anticipated use of the mark. Registration will not issue unless and until lawful use of the mark for the claimed goods or services is proven to PTO on the required timetable: This is part of the application process.

Dissenting Circuit Judge Bumatay found no authority for a federal court to interfere with the application process. “Through the Lanham Act, Congress prescribed the process for applicants to attempt to register trademarks on the trademark registry,” expressly tasking the PTO with adjudicating trademark applications. 15 U.S.C. Secs. 1051, 1062. The dissent found the majority’s extension of “registration” to apply to “application” overlooked the canon of “noscitur a sociis,” meaning “a word is known by the company it keeps,” so that courts “must avoid ascribing to one word a meaning so broad that it is inconsistent with its accompanying words, thus giving unintended breadth to the Acts of Congress,” citing Yates v. United States, 574 U.S. 528, 543 (2015). “Applying for a trademark registration involves an iterative process within the PTO, sometimes requiring back-and-forth discussions and multiple internal appeals,” wrote the dissenting judge, noting further: “Premature interference would effectively take power away from the PTO to work with an applicant to modify, amend, or revise an application.” The filing date of an I.T.U. application becomes the constructive date of first use of the mark if and when the application matures to a registration, even if three years have passed since the Examining Attorney allowed the mark (assuming extensions were filed). The Opinion extinguishes the potential priority of that application with no opportunity for the applicant to modify it. Since “who was first” is a critical part of many trademark disputes, this decision may place I.T.U. applicants in peril of losing priority vis-à-vis junior users and filers.