Federal Circuit split over ‘Naked’ condoms
An Australian contraceptive wholesaler has legal standing to challenge a trademark for the ‘Naked’ brand of condoms, the US Court of Appeals for the Federal Circuit has ruled.
In a precedential decision issued yesterday, July 27, a Federal Circuit panel ruled by 2-1 majority that the Trademark Trial and Appeal Board (TTAB) was wrong to dismiss Australian Therapeutic Supplies’ petition for cancellation of the ‘Naked’ mark.
According to the Federal Circuit, the TTAB “erroneously” held that Australian Therapeutic had no standing to bring the challenge because it could not demonstrate a proprietary interest in its own unregistered trademark.
The Federal Circuit majority also held that Australian Therapeutic had established a “real interest and reasonable belief of damage” through its advertising and sales in the US.
The dispute dates back to 2006, when Naked TM and Australian Therapeutic entered into settlement negotiations over use of the brand name in the US.
The Australian company had been using the ‘Naked’ name for condoms in its home country since early 2000, before it began selling to US customers online in 2003.
Naked TM owns a US trademark registration for the name covering condoms (US number 3,325,577). From 2006 to early 2007, the two companies engaged in settlement negotiations via email, but emerged with a different understanding of what had been agreed.
Naked TM argued that the Australian company had agreed to discontinue its use of the name in the US. But Australian Therapeutic disputed this on the grounds that the final terms of a settlement had not been agreed.
Meanwhile, Australian Therapeutic filed a petition to cancel Naked TM‘s mark at the US Patent and Trademark Office.
The TTAB ultimately ruled on the dispute in December 2018, finding that Australian Therapeutic lacked standing to bring a petition for cancellation.
According to the Federal Circuit majority, the TTAB held that, in order to establish standing, Australian Therapeutic was required to establish proprietary rights in its unregistered mark.
The Federal Circuit has now reversed that decision, ruling: “Entitlement to a cause of action is not contingent on whether a petitioner has proprietary rights in its own mark.”
The majority judgment was written by Circuit Judge Jimmie Reyna, on behalf of himself and Circuit Judge Kathleen O’Malley.
Dissenting from the majority, Circuit Judge Evan Wallach wrote: “Although I agree with the majority that a party is not required to prove a proprietary interest, I do not agree that the board required a proprietary interest from Australian or that Australian met its burden of proving a real interest and a reasonable belief in damages.”
According to Wallach, the burden was on Australian Therapeutic to demonstrate a “legitimate commercial interest” to bring the challenge—a legitimate interest which the company “contracted away” during settlement negotiations with Naked TM, Wallach said.
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