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It’s an Old Tune: Third-Party-Use Evidence From Long Ago Can Support Genericness

by | Jul 18, 2024 |

The US Court of Appeals for the Fifth Circuit found that the district court abused its discretion in wholesale exclusion of evidence on the issue of genericness. The evidence was offered to show prior use of a trade dress from more than five years prior to an alleged infringer’s first use of a mark. Gibson Inc. v. Armadillo Distribution Enterprises, Inc., Case No. 22-40587 (5th Cir. July 8, 2024) (Stewart, Clement, Ho, JJ.)

Gibson filed trademark infringement and counterfeiting claims against Armadillo Distribution Enterprises in 2019, alleging that Armadillo infringed four of Gibson’s trademarked guitar body shapes, one guitar headstock shape and two word marks. Just before trial, the district court made several evidentiary rulings on the parties’ motions in limine, including one in which Gibson sought to exclude all arguments and evidence related to advertisements or sales of third-party guitars before 1992, arguing they had limited probative value and were unduly prejudicial. Gibson argued that any third-party-use evidence should be restricted to a five-year period from 1992 to 1997. In its first exclusion order, the district court found that evidence of third-party use was relevant to determining whether a mark was generic or unprotectable but concluded that the probative value of the evidence from before the 1990s was low and found that the five-year cutoff date was reasonable. Armadillo objected to that ruling, leading to oral argument and a second exclusion order upholding the first order. The district court relied on Federal Rule of Evidence (FRE) 403 and the 2018 Federal Circuit ruling in Converse v. International Trade Commission to support this wholesale exclusion of evidence prior to 1992.

The parties proceeded to trial in mid-2022. A jury found that Armadillo infringed all of the trademarks other than one word mark and found that Armadillo marketed counterfeits. Armadillo appealed based on the district court’s exclusion of decades of third-party-use evidence. Armadillo asserted that this evidence was central to Armadillo’s counterclaim seeking cancellation of the marks and its main defense of genericness.

The Fifth Circuit first considered the district court’s reliance on Converse and determined that the district court abused its discretion in excluding the third-party evidence predating 1992. Armadillo argued that reliance on Converse was error because that case concerned secondary meaning and not genericness. Gibson countered that genericness and secondary meaning are closely related issues and that the five-year period predating infringement is the most logical measuring line. Alternatively, Gibson argued that 15 U.S.C. § 1064 would bar evidence predating 1992 because it provides that a petition to cancel a mark’s registration must be filed within five years from the date of registration of the mark.

The Fifth Circuit found that Converse did not rule that third-party-use evidence from more than five years prior to the alleged infringer’s first use was irrelevant to the issue of genericness and did not compel a strict five-year limitation of third-party-use evidence. The Court further reasoned that under Converse, evidence of prior use is relevant if such use was likely to have [...]

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Smart Choice: Survey Design Didn’t Render Survey Unreliable

by | Jul 18, 2024 |

Underscoring its faith in a jury’s competency to use its “common sense and experience” in evaluating evidence, the US Court of Appeals for the Ninth Circuit affirmed a district court’s judgment in favor of the defendants in a trademark infringement action following a trial, as well as its order partially denying the defendants’ motion for attorneys’ fees. BillFloat, Inc. v. Collins Cash, Inc., Case Nos. 23-15405; -15470 (9th Cir. July 1, 2024) (Thomas, McKeown, Christen, JJ.)

BillFloat and Collins Cash both provide financing to small businesses. In 2013, BillFloat began using SMARTBIZ as a trademark and registered the mark in 2014. That same year (2014), Collins Cash began using the mark SMART BUSINESS FUNDING, although it did not file an application to register the mark until 2020. Meanwhile, in 2018, BillFloat and Collins Cash entered into a partnership agreement under which Collins Cash would refer current and prospective customers to BillFloat in exchange for a referral fee. The parties’ agreement stated that “[i]f either Party employs attorneys to enforce any right arising out of or relating to this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees.”

In 2020, upon learning of Collins Cash’s use of the SMART BUSINESS FUNDING mark, BillFloat brought claims for federal and state trademark infringement, breach of contract, unfair competition and unlawful business practices. The district court granted summary judgment to Collins Cash on the breach of contract claim and proceeded to trial on the trademark infringement claim.

Collins Cash engaged an expert to conduct a likelihood of confusion survey using the so-called “Squirt” methodology, which is used for lesser-known marks. BillFloat filed a motion to exclude the expert and his survey from trial, arguing that various errors made the survey unreliable and therefore inadmissible. The district court denied the motion and admitted the expert’s testimony and his survey. The district court also admitted testimony from BillFloat’s expert that challenged the survey. Both experts were cross-examined on their qualifications and on the merits of the survey.

The jury found that BillFloat had not established trademark infringement by a preponderance of the evidence. Post-trial, BillFloat moved for judgment as a matter of law and for a new trial, and Collins Cash moved for attorneys’ fees and non-taxable costs. The district court denied BillFloat’s motion and awarded Collins Cash attorneys’ fees under the partnership agreement for the breach of contract claim but declined to award Collins Cash attorneys’ fees for the trademark infringement claim or non-taxable costs for either claim. Both parties appealed.

BillFloat argued that the district court abused its discretion in admitting Collins Cash’s expert testimony and survey evidence. It also argued that the district court erred in declining to give BillFloat’s proposed jury instruction not to draw any inferences about the fact that BillFloat did not offer its own survey evidence.

The Ninth Circuit found no abuse of discretion on these issues. The Court pointed to the distinction between the admissibility of survey evidence as opposed to the relative weight a [...]

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Robbing Peter to Pay Paul? Supreme Court to Consider Scope of Lanham Act “Defendant’s Profit” Award

by | Jul 11, 2024 | ,

The Supreme Court has agreed to consider the breadth of a damages award in a long-running trademark dispute between two real estate companies. Dewberry Group, Inc. v. Dewberry Engineers, Inc., Docket No. 23-900 (Supr. Ct. June 24, 2024).

Dewberry Group and Dewberry Engineers both offer commercial real estate services in the same geographic area. The two companies dispute the use of the name “Dewberry” for use in real estate: Dewberry Group has acquired common law rights, and Dewberry Engineers owns registered trademarks. Dewberry Engineers sued Dewberry Group, but the initial litigation ended in settlement in 2007. As part of the settlement, Dewberry Group agreed to various terms, including that it would use a specific logo and an abbreviated name in certain overlapping markets.

Ten years later, Dewberry Group rebranded and attempted to register new marks containing the word “Dewberry” and abandoned the logo and name specified by the settlement agreement. In 2020, Dewberry Engineers again sued Dewberry Group, this time for violating the terms of the confidential settlement agreement and for infringing Dewberry Engineers’ trademarks. The lower court granted Dewberry Engineers summary judgment, a permanent injunction and monetary damages. The damages award included profit disgorgement pursuant to the Lanham Act, 15 U.S.C. § 1117(a), under which the US Court of Appeals for the Fourth Circuit ordered Dewberry Group’s affiliates to disgorge almost $43 million in profits. Dewberry Group appealed, and the Fourth Circuit affirmed in a 2 – 1 decision.

Dewberry Group petitioned for certiorari on the issue of damages, arguing that the Fourth Circuit’s decision to allow Dewberry Engineers to collect damages based on Dewberry Group’s affiliates’ profits “silently invites courts to ignore corporate separateness in trademark disputes without regard to veil-piercing principles.” Dewberry Group argued that the Fourth Circuit decision was substantively incorrect and contradictory to Ninth and Eleventh Circuit decisions as well as the Lanham Act. According to Dewberry Group, the $43 million “never passed through [Dewberry Group’s] hands,” and in fact the company “had zero net profits.” Because the Lanham Act allows only for disgorgement of a defendant’s profits – not defendant’s affiliates’ profits or a penalty against the defendant – Dewberry Group contended that the damages award was improper.

The issue presented is: Whether an award of the “defendant’s profits” under the Lanham Act, 15 U.S.C. § 1117(a), can include an order for the defendant to disgorge the distinct profits of legally separate non-party corporate affiliates.



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What Makes a Trademark Case “Exceptional” in the Fifth Circuit?

by | Jul 11, 2024 |

The US Court of Appeals for the Fifth Circuit affirmed a senior party mark but found that the district court committed clear error in finding that a similar junior party mark was valid. The Fifth Circuit also found that the district court abused its discretion in awarding attorneys’ fees to the senior user. Appliance Liquidation Outlet, L.L.C. v. Axis Supply Corp., Case No. 23-50413 (5th Cir. June 21, 2024) (Smith, Haynes, Douglas, JJ.)

Appliance Liquidation Outlet (ALO), a decades-old appliance store in San Antonio, Texas, brought a trademark action under the Lanham Act and Texas law (which in all relevant aspects tracks the Lanham Act) against Axis Supply Corporation, another San Antonio appliance store that opened in 2021. Axis’s store and social media prominently featured the phrase “Appliance Liquidation”:

ALO noted that Axis’s opening happened to coincide with an influx of customers conflating ALO with Axis. ALO’s storefront had prominently displayed a banner reciting “Appliance Liquidation Outlet” for years:

Although ALO had never registered its mark, ALO had long engaged in a variety of promotional activities to raise brand recognition, including partnering with local sports teams and holding antique exhibitions and car shows.

Soon after Axis opened its store, ALO experienced a rush of customers who failed to differentiate between the stores and believed that ALO operated both. ALO requested that Axis stop using “Appliance Liquidation” and sued Axis in state court when Axis refused. Axis removed the dispute to the federal district court. After a bench trial, the district court held for ALO, enjoining Axis from using “Appliance Liquidation” and “Appliance Liquidation Outlet” and causing confusion between the two businesses. The district court also awarded attorneys’ fees under 15 U.S.C. § 1117(a) to ALO, finding that Axis’s decision to change its name only a week before trial (about 1.5 years into the dispute) amounted to litigating in an unreasonable manner. Axis appealed.

The Fifth Circuit affirmed the district court’s holding that Axis had infringed ALO’s “Appliance Liquidation Outlet” mark but assigned clear error to the district court’s finding that “Appliance Liquidation” was valid mark. The Fifth Circuit also found that the district court had abused its discretion in awarding attorneys’ fees to ALO.

With respect to the marks’ validity, the Fifth Circuit noted that both marks were unregistered and thus were not presumptively valid. The Court found that the record did not support the conclusion that “Appliance Liquidation” was a source identifier and thus found that it was not a valid mark. However, the Fifth Circuit was satisfied that “Appliance Liquidation Outlet” served as a source identifier. The Court found that although “Appliance Liquidation Outlet” was descriptive, the evidence established that San Antonian consumers perceived the mark as conveying information about ALO, not merely reflecting a class of services or businesses, and [...]

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SHOP SAFE Act: E-Commerce Trademark Enforcement Legislation Reintroduced in the House

by | Jun 27, 2024 |

On June 11, 2024, Representatives Jerry Nadler (D-NY) and Darrell Issa (R-CA) of the US House of Representatives Judiciary Subcommittee on Courts, Intellectual Property, and the Internet reintroduced the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act of 2024. The proposed legislation seeks to protect US consumers from unknowingly purchasing counterfeit goods by incentivizing e-commerce platforms to implement certain guidelines. If platforms fail to comply with the act, they could be subject to liability for the actions of third-party sellers.

The SHOP SAFE Act purports to address the growing threat of the online counterfeit marketplace. Consumers are increasingly shopping online, with estimated sales of more than $280 billion in US retail e-commerce for the first quarter of 2024. Counterfeiters have continued to target online consumers, yet under the current trademark regime, third-party counterfeit sellers are seldom held accountable for their role in the online marketplace. The legislation seeks to deter that threat by encouraging e-commerce practices that aim to better inform consumers and screen third-party sellers.

Under the SHOP SAFE Act as proposed, an e-commerce platform may be subject to a lawsuit when a third-party seller uses a counterfeit mark in commerce during a sale, offer, advertisement or distribution of a good that implicates health and safety on the platform. To reduce counterfeit offerings, the legislation purports to enlist platforms to actively monitor for trademark infringement.

The SHOP SAFE Act also would provide e-commerce platforms with a mechanism to protect themselves from contributory liability stemming from counterfeit offerings: a safe harbor if the e-commerce platform takes reasonable prophylactic measures to prevent infringing use of trademarks by a third-party seller. Best practices include imposing certain contractual limitations on third-party sellers, such as those related to:

  • Posting requirements and service of process in the United States.
  • Setting up proactive screening measures and processes to report and quickly disable and remove offerings of counterfeit goods.
  • Implementing written policies to terminate third-party accounts that repeatedly use counterfeit marks and to block those who attempt to rejoin.

Whether enactment of the SHOP SAFE Act would benefit the e-commence ecosystem is a matter of debate. Some contend that the measures are necessary to deputize platforms to better police the goods sold through their websites. Others claim that the legislation might be used to shut down, under the auspices of trademark enforcement, small businesses offering legitimate goods, especially because these businesses likely have fewer resources to challenge the platform’s determinations. As the SHOP SAFE Act has been previously introduced without movement, and given that this year is not primed for bipartisan action, it remains to be seen whether the act – which has companion US Senate legislation – moves forward toward passage.

Lauren Hong, a summer associate in the San Francisco office, also contributed to this article.



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Rum Wars: Lanham Act Doesn’t Preclude Judicial Review of PTO Renewal Decisions

by | Jun 27, 2024 |

The US Court of Appeals for the Fourth Circuit reversed and remanded a district court’s ruling, holding that the Lanham Act does not foreclose an Administrative Procedure Act (APA) action for judicial review of the US Patent & Trademark Office’s (PTO) compliance with statutes and regulations governing trademark registration renewal. Bacardi & Co. Ltd. v. USPTO, Case No. 22-1659 (4th Cir. June 13, 2024) (Rushing, Richardson, Motz, JJ.)

The Arechabala family exported rum to the United States using the registered HAVANA CLUB trademark until the Cuban government expropriated Arechabala’s assets without compensation and let the HAVANA CLUB trademark expire. Empresa Cubana Exportadora de Alimentos y Productos Varios (Cubaexport) then registered HAVANA CLUB as a trademark in the US for itself. Bacardi & Company Limited and Bacardi USA, Inc. (collectively, Bacardi) obtained an interest in the HAVANA CLUB mark from the Arechabala family, filed a US trademark application for HAVANA CLUB and petitioned the PTO to cancel Cubaexport’s registration. Upon the PTO’s denial of Bacardi’s trademark application and cancellation petition, Bacardi filed a civil action challenging these administrative rulings.

Two years later, Cubaexport was required to renew its HAVANA CLUB trademark registration under Section 8 of the Lanham Act. Because of a trade embargo, Cubaexport sought a specific license from the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) to pay the renewal fee, but OFAC denied the request. OFAC’s denial resulted in the PTO denying renewal of Cubaexport’s HAVANA CLUB registration. Cubaexport petitioned OFAC and the PTO to reverse their decisions. Ten years later, once OFAC issued a special license to Cubaexport, the PTO permitted Cubaexport to renew its HAVANA CLUB trademark registration.

Bacardi sued the PTO under the APA, claiming that the PTO Director violated Section 9 of the Lanham Act and the PTO’s own regulations by purporting to renew a trademark registration 10 years after it expired. The district court ruled that the Lanham Act precluded judicial review under the APA and thereby dismissed Bacardi’s lawsuit for lack of subject matter jurisdiction. Bacardi appealed.

The Fourth Circuit reversed, finding that “[n]othing in the Lanham Act expressly precludes judicial review of the PTO’s trademark registration renewal decisions.” In fact, Section 21 of the Lanham Act specifically authorizes, rather than forecloses, parties dissatisfied with certain decisions of the Director or the Trademark Trial & Appeal Board to appeal to the US Court of Appeals for the Federal Circuit or institute a civil action in federal district court. Section 21 of the Lanham Act also does not limit proceedings under sections or statutes such as the APA, and the Lanham Act is silent as to whether a third party may seek judicial review of the PTO’s decision to grant a renewal application.

Having found nothing in the Lanham Act that expressly precludes judicial review of PTO registration renewal decisions or fairly implies congressional intent to do so, the Fourth Circuit concluded that the APA’s mechanism for judicial review remains available.



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Sour Grapes: Winery Minority Ownership Insufficient for Statutory Standing at Trademark Board

by | May 30, 2024 |

The US Court of Appeals for the Federal Circuit affirmed the dismissal of a petition seeking to cancel the registered marks of two wineries, finding the petitioner (a trust owning an interest in a competitor winery) lacked statutory standing under 15 U.S.C. § 1064. Luca McDermott Catena Gift Trust v. Fructuoso-Hobbs SL, Case No. 23-1383 (Fed. Cir. May 23, 2024) (Lourie, Reyna, Chen, JJ.) (en banc). The Court found that while the cancellation petitioner, Luca McDermott, had Article III standing to seek judicial review of the Trademark Trial & Appeal Board’s decision, it did not have statutory standing under the Lanham Act to petition for cancellation of the registrations at issue.

Paul Hobbs is a winemaker and partial owner of California-based Paul Hobbs Winery. The Paul Hobbs Winery owns the registration for the PAUL HOBBS mark in International Class 33 for “Wines.” Luca McDermott and two other related family trusts are each limited partners of the winery, collectively owning more than 21% of the business. Paul Hobbs is also affiliated with two other wineries: Fructuoso-Hobbs, a Spanish winery and owner of the registered mark ALVAREDOS-HOBBS, and New York winery Hillick & Hobbs Estate, owner of the registered mark HILLICK AND HOBBS. Both marks are registered in International Class 33 for “Alcoholic beverages except beers; wines.”

Luca McDermott and the other two family trusts petitioned to cancel both of the registered marks on the grounds of likelihood of confusion, alleging that the use of the ALVAREDOS-HOBBS and HILLICK AND HOBBS marks in connection with wine was likely to cause confusion with the Paul Hobbs Winery’s use of the PAUL HOBBS mark for wine. The trusts also alleged that Fructuoso-Hobbs committed fraud because it caused its lawyer, the same lawyer of record who managed the registration of the Paul Hobbs Winery’s PAUL HOBBS mark, to declare that the marks would not be likely to cause confusion with another mark.

Fructuoso-Hobbs moved to dismiss the petition, arguing that the family trusts were not entitled by statute to bring the cancellation action because they were not the owners of the PAUL HOBBS mark. Fructuoso-Hobbs also argued that the trusts could not show they had the necessary “proprietary interest” to bring the likelihood of confusion claim. The Board granted the motion to dismiss. Luca McDermott, one of the three trusts in the original action, appealed.

Before it could review de novo the Board’s decision regarding the trust’s lack of standing under the Lanham Act, the Federal Circuit addressed whether the trust had Article III standing to seek judicial review of the Board’s decision. The Court had little trouble concluding that the alleged injury (i.e., the diminished value of the trust’s investment in the winery) constituted an individual injury-in-fact, even for a minority partner. Furthermore, the Court found that the causation requirement was satisfied because the constitutional standard did not require proximate causation but only that the injury be “fairly traceable” to the allegedly unlawful registration of the challenged marks. Finally, the Federal Circuit found it [...]

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Foreign Sales to Foreign Customers Are Not Actionable Under the Lanham Act

by | May 9, 2024 |

Issuing a revised opinion following the Supreme Court’s 2023 decision in Abitron Austria GmbH v. Hetronic Int’l, Inc., the US Court of Appeals for the Tenth Circuit determined that none of the defendant’s purely foreign sales to foreign customers can premise liability for the plaintiff’s Lanham Act claims and that any permanent injunction issued against the defendant cannot extend beyond qualifying domestic conduct. Hetronic International, Inc. v. Hetronic Germany GmbH; Hydronic-Steuersysteme GmbH; ABI Holding GmbH; Abitron Germany GmbH; Abitron Austria GmbH; Albert Fuchs, Case Nos. 20-6057; -6100 (10th Cir. Apr. 23, 2024) (Murphy, McHugh, Phillips, JJ.)

Hetronic is a US company that manufactures radio remote controls for heavy-duty construction equipment. Hetronic sued its foreign distributors and licensees (collectively, Abitron) in the US District Court for the Western District of Oklahoma for trademark infringement when, following termination of the Hetronic distribution and license agreements, Abitron reverse-engineered Hetronic’s products and began manufacturing and selling their own copycat products bearing Hetronic’s trade dress (a “distinctive black-and-yellow color scheme”). Abitron’s sales of the copycat products took place primarily in Europe. In the first rounds of this dispute, the district court rejected Abitron’s argument that Hetronic sought an impermissible extraterritorial application of the Lanham Act, and a jury awarded Hetronic $96 million in damages related to Abitron’s global use of Hetronic’s marks. Abitron was also permanently enjoined from using the marks anywhere in the world. Abitron appealed to the Tenth Circuit.

As a matter of first impression, the Tenth Circuit fashioned its own test to determine the extraterritoriality of the Lanham Act, upholding the district court’s ruling but narrowing the injunction to only the countries where Hetronic marketed or sold its products. Abitron appealed to the Supreme Court.

The Supreme Court granted certiorari to resolve a circuit split over the Lanham Act’s extraterritorial reach. Specifically, the Supreme Court was asked to decide whether the Lanham Act applies to “purely foreign sales that never reached the United States or confused U.S. customers” and considered its long-standing presumption against extraterritoriality, with the first step of its analysis consisting of asking whether Congress has “affirmatively and unmistakably instructed” that a particular statute “should apply to foreign conduct.” As the second step, the Supreme Court determined whether a claim seeks a permissible domestic or impermissible foreign application of a statute.

The Supreme Court held that Sections 32(1)(a) and 43(a)(1)(A) of the Lanham Act are not extraterritorial and that the infringing conduct – being “use in commerce” of a trademark – determines the dividing line between foreign and domestic application of the Lanham Act. The Supreme Court vacated the Tenth Circuit’s findings and remanded for further proceedings, instructing the Tenth Circuit to reevaluate which of Abitron’s allegedly infringing activities count as use in commerce under the Supreme Court’s exterritoriality frameworks and to determine on which side of the dividing line Abitron’s conduct falls.

With the Supreme Court having already determined step one, on remand, the Tenth Circuit started with step two of the extraterritoriality analysis and found [...]

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It May Be a Hairy Situation, but Detailed Declaration Sufficient Evidence of Prior Use

by | May 9, 2024 |

The US Court of Appeals for the Federal Circuit affirmed the Patent Trial & Appeal Board’s refusal to register a mark, finding that an unchallenged, detailed declaration by the opposing company’s director sufficed as substantial evidence of prior use. Jalmar Araujo v. Framboise Holdings, Inc., Case No. 23-1142 (Fed. Cir. Apr. 30, 2024) (Lourie, Linn, Stoll, JJ.)

On December 3, 2019, Jalmar Araujo filed an application to register #TODECACHO as a standard character mark for hair combs. Framboise Holdings filed an opposition on the grounds that Araujo’s mark would likely cause confusion with its #TODECACHO design mark (below).

Framboise Holdings alleged that it owned the mark based on its prior use of it in connection with various hair products since March 24, 2017. Framboise also filed its own application for registration of its design mark on April 14, 2020, claiming the same date of first use.

On October 18, 2021, the final day on which Framboise could submit its case in chief to the Board, it moved for a seven-day extension. Four days after filing the motion, it served Araujo with the declaration of Framboise Director Adrian Extrakt. Although it was the testimony of a single interested party, the Board found Extrakt’s declaration alone to be convincing evidence of prior use. His declaration provided a list of products and dates of first use, as well as examples of the mark displayed on products in stores. After the Board sustained the opposition, Araujo appealed.

Araujo argued that the Board abused its discretion in granting Framboise an extension of the trial period, and that the Board’s finding that Framboise established prior use of the #TODECACHO design mark was not supported by substantial evidence. The Federal Circuit disagreed.

The Federal Circuit concluded that the Board had not abused its discretion in granting Framboise an extension because it identified and applied the correct good cause standard and “reasonably found good cause to grant the extension.” The Court also found that the Board was correct in finding that Extrakt’s declaration alone was sufficient evidence to support a priority date of March 24, 2017, based on evidence of the design mark’s use in connection with various hair products. The Court noted that the declaration did not simply consist of “naked general assertions of prior use,” but contained evidence. Araujo neither deposed Extrakt nor offered any evidence to dispute his claims. Hence, Extrakt’s declaration sufficed to meet the applicable preponderance of the evidence standard.

Practice Note: Oral or written testimony, even when offered by an interested party, can establish priority of use in a trademark proceeding if it is sufficiently detailed, is supported by exhibits and is convincing.



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A Lesson in Laches: You Waited Too Long to Start Your Kar

by | May 2, 2024 |

After the district court, on remand, held that laches did not bar relief, the US Court of Appeals for the Third Circuit again determined that the district court abused its discretion by not properly applying the presumption in favor of laches and issued an order to vacate and remand with instructions to dismiss a charity’s trademark infringement claims with prejudice. Kars 4 Kids Inc. v. America Can!, Case Nos. 23-1273; -1281 (3rd Cir. Apr. 17, 2024) (Bibas, Porter, Fisher, JJ.)

Kars 4 Kids and America Can! Cars for Kids are charities that sell donated vehicles to fund children’s education programs and have been engaged in a trademark dispute since 2003. Both parties have alleged federal and state trademark infringement, unfair competition and trademark dilution over their respective KARS 4 KIDS and CARS FOR KIDS trademarks. The parties were last before the Third Circuit in 2021, when the Court held that America Can was first to use its CARS FOR KIDS trademark in Texas, and Kars 4 Kids waived any challenge to the validity of America Can’s marks. In that 2021 decision, the Third Circuit also vacated the district court judgment in part and remanded the case for the district court to reexamine its laches and disgorgement conclusions, which had been decided in favor of America Can.

The Lanham Act does not contain a statute of limitations. Instead, it subjects all claims to the principles of equity. To determine whether laches bars a claim, a court considers two elements: whether the plaintiff inexcusably delayed in bringing suit, and whether the defendant was prejudiced as a result of the delay. With respect to the burden of proof for the laches claim at issue, America Can and Kars 4 Kids agreed that their Lanham Act claims were properly analogous to New Jersey’s six-year fraud statute. Therefore, because America Can first discovered the Kars 4 Kids trademark in Texas in 2003 and did not bring counterclaims until 2015, America Can was subject to a presumption that its claims were barred by laches unless it was able to prove both that its delay in filing suit was excusable and that it did not prejudice Kars 4 Kids.

On the issue of delay, the Third Circuit found that the district court erred because it did not find that America Can met its burden of establishing that its delay in bringing suit was excusable and that a reasonable person in its shoes would have waited to file suit. Instead, the district court improperly placed the burden on Kars 4 Kids to establish whether its advertisements in Texas were viewed by a sufficient number of Texans so as to put America Can on notice. As the Third Circuit explained, this was error. The district court should have held America Can to the burden of persuasion to show that it was not sufficiently aware of Kars 4 Kids’s use of its mark in Texas and to show what it did to identify and stop any potentially [...]

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