AUSTRALIAN THERAPEUTIC v. NAKED TM, LLC
Oral Argument · Case 2019-1567 · 25:19
0:02
Judge Wallach
Not that it wasn't.
0:04
Judge Reyna
Our next case is Australian Therapeutic v. Naked TM LLC, case number 19-1567.
1:06
Mr. Menker, you have reserved four minutes of your time for rebuttal, correct?
1:09
Yes, sir.
1:10
Okay, we're ready when you are.
1:11
Appellant Attorney (James Robert Menker)
Okay.
1:14
May it please the court, my name is James Menker.
1:16
I'm here on behalf of Australian Therapeutic, the appellant in this case, and the petitioner at the Tremont Trial and Appeal Board.
1:22
We're here because the board made the not infrequent mistake of mistaking a grounds or merits determination with a standing determination.
1:33
Judge Wallach
On page 8 of the blue brief, in your statement of facts, you say the parties were unable to agree orally or otherwise to the terms of the settlement.
1:43
On page 20 of the blue brief, you say you vigorously disagreed with the board's conclusion that the ongoing settlement,
1:53
negotiations amounted to an enforceable binding contract, correct?
1:58
You don't otherwise develop the argument in your brief.
2:02
Appellant Attorney (James Robert Menker)
Your Honor, because it's immaterial whether there was an agreement, because...
2:06
Judge Wallach
So why shouldn't we conclude that that portion of your argument is waived?
2:11
Appellant Attorney (James Robert Menker)
We don't believe that it has any relevance to the proceedings.
2:15
So it is waived.
2:16
We contest that it's the interpretation of that contract, but for purposes of this appeal and the issue of standing,
2:24
it really has no relevance.
2:25
It has no relevance to whether my client is standing.
2:28
Judge Wallach
When you make a point in your brief and you don't have an argument to support it, you shouldn't have made the point.
2:35
Okay.
2:36
Okay.
2:38
Appellant Attorney (James Robert Menker)
A party does not need to have...
2:40
The board starts by explaining that to have a claim under Section 2D, likelihood of confusion,
2:45
you have to have a proprietary right or a property right in the mark.
2:49
And it cites the Otto Roth case for that proposition.
2:51
It then goes on to explain that because of an agreement between the parties,
2:55
that my party...
2:56
The property does not have a property right, and therefore it cannot have standing.
2:59
This court has repeatedly rejected that line of argument.
3:03
In the books on tape case, the court...
3:07
And I'll read it quickly.
3:08
The board is holding that under Otto Roth versus Universal Foods,
3:11
petitioner has no standing to bring a cancellation proceeding under Section 2D
3:15
because it does not establish proprietary rights on books on tape is wrong as a matter of law.
3:20
Petitioner is a competitor to respondant clearly has an interest in the outcome beyond the general public.
3:27
The same issue was addressed in the jeweler's case.
3:32
The court there said that you cannot conflate a standing argument with the merits,
3:39
that it doesn't matter whether the party alleging likelihood of confusion has any property rights.
3:45
In books on tape, the mark was generic.
3:47
In jeweler's case, they had not used the mark.
3:50
They had no intention of using the mark.
3:52
They were simply a trade association.
3:53
And this court said it doesn't matter what the grounds are.
3:55
Standing is an entirely separate issue.
3:58
In the Cuba tobacco case, Empresa Cubana del Tobacco,
4:04
the appellant in that case and the petitioner in that case was forbidden by Congress from selling their products.
4:11
They were ordered by the Second Circuit that they had no right to enjoin the register in that case from using their mark.
4:21
But they still could have standing because they filed an application.
4:26
The application had been refused.
4:28
And the fact that they had filed that application and been refused was on its own without anything more standing.
4:34
The party has a real interest.
4:36
The definition of real interest is whether the party is an intermeddler.
4:40
In this case, the party, my client, is clearly not an intermeddler.
4:44
They have an interest.
4:46
Judge Wallach
Does your client sell condoms in the United States under the nude trademark?
4:51
Appellant Attorney (James Robert Menker)
Yes.
4:52
Judge Wallach
How much product do they sell?
4:54
Appellant Attorney (James Robert Menker)
I'm not aware of the volume of the...
4:56
The nude trademark.
4:59
The naked trademark, they've sold an order of 40, 50 a year.
5:06
Yeah, I'm not aware of his volume of sales in nude.
5:09
Judge Wallach
Is there any record evidence that the naked trademark sells under nude?
5:14
Appellant Attorney (James Robert Menker)
It's a sub-brand under Four Seasons.
5:17
Both of them are.
5:18
They're separate sub-brands.
5:26
So as this court ruled in jewelers, standing exists irrespective of the ground.
5:33
So whether or not...
5:34
If my client has a claim under Section 2D, if it has standing, it still can bring its
5:39
claims under lack of bona fide intent and also false association, which also are irrelevant.
5:46
So the question does not start and end whether a party has a proprietary right for jurisdiction
5:52
under 15 U.S.C. 1064.
5:55
It's not an Article 3 case.
5:56
As courts make clear, that standing is much more liberally construed before board proceedings
6:01
than it is in an Article 3 case.
6:03
Judge Wallach
On pages 16 to 17...
6:04
If you cite a Third Circuit case, Official Commission of Unsecured Creditors v. Lafferty
6:11
for the proposition that an analysis standing doesn't include an analysis of equitable defenses.
6:18
Correct.
6:19
That's an Article 3 standing.
6:20
Appellant Attorney (James Robert Menker)
That was the case cited by the board in their decision for justifying having...
6:25
Complaining the arguments that they could analyze the affirmative defense essentially
6:29
as part of the standing analysis.
6:32
But if you read the case closely,
6:33
they clearly talk about standing in the first section and make it very clear that they're
6:37
not going to mix that.
6:38
Only after they find that there was standing do they get to the issue of issue preclusion
6:44
that was relevant in that case.
6:46
So as an affirmative defense, it certainly can be argued that there is a stop-o, but
6:52
only after they found standing.
6:53
They didn't analyze those two issues together.
6:55
And that's exactly what the board did here.
6:57
They said they weren't going to do that, but then they continued to...
7:01
They proceeded to do exactly that.
7:03
So we have a situation where the board said that they found an agreement that my client
7:16
would not use the mark, but he nevertheless did use the mark, and he used the mark for
7:21
several years continuously.
7:22
And they found that that had been proven in the record that my client had continued to
7:26
use it since 2003.
7:30
And in six weeks before we filed the original petition to cancel, he said, I don't know,
7:36
we received a cease and desist letter from the registrant in this case, not saying that
7:43
we were in breach of contract from continuing to sell condoms in the United States, but
7:47
that we were infringing the mark.
7:48
So my client, wanting to prevent the indecibility of the registration, wanting to remove the
7:54
registration from the register, had certainly a real interest in the outcome of a cancellation
8:02
of that registration.
8:07
Even if my client had not been using it.
8:09
Which is a good thing.
8:09
Which he has, and he never stopped using it.
8:12
He had been advertising in the United States, the defendant was aware of that advertisement.
8:17
And so he could have rights beyond property rights, like the first Niagara case where
8:21
they had use similar to trademark rights in order to establish his priority.
8:27
So he could have a real interest in the outcome, even if you accept that he had agreed that
8:34
he would not use the mark in the United States.
8:38
One further point I wanted to make.
8:40
And that is that standing does not require that...
8:51
Excuse me a second.
8:53
Judge Reyna
It seems to me that the law is very clear as to the legal interest or legal right, and
9:12
that going to the merits of the case and not standing.
9:16
Would you agree with that?
9:17
Appellant Attorney (James Robert Menker)
I would agree exactly that the issue of whether there is a contractual estopel would be an
9:23
affirmative defense that would go to the merit.
9:25
So, you know.
9:26
Obviously, in order of progress, we present our evidence, they present their affirmative defense, and then the board decides.
9:34
Now, the board in this case has already decided that the affirmative defenses are inapplicable, that my client has already proved that there's a likelihood of confusion, not just that there's a likelihood of confusion, but confusion is inevitable, and as a result, that they have no affirmative defenses that they can raise, and they've already struck them.
9:51
They've kept these alive for the purposes of the issue at standing, but they're still affirmative defenses, and that would be something that they would have to prove in order to rebut the case of a likelihood of confusion.
10:03
They did not appeal the findings of the board in summary judgment that there was a likelihood of confusion, and that confusion was inevitable, and that those estoppel, lashes, and acquiescence, and waiver had all been waived, or all inapplicable because of the doctrine of inapplicability.
10:23
And that ties back to my original point, why the agreement makes no difference, because they cannot go back and relitigate this.
10:32
If this case is remanded on the grounds that there is standing, they cannot go back and argue that there is a contract, and therefore, our claims are barred by the affirmative defense.
10:42
That's an equitable claim that the board has already said is inapplicable.
10:45
But for the purposes of standing, it doesn't make sense to argue for that evaluation.
10:51
It doesn't make sense to argue for that evaluation to be made in the context of determining whether a party has a real interest in the outcome of a petition to cancel or notice of opposition.
11:12
Judge Reyna
Counselor Mealy, is that correct?
11:14
Appellee Attorney (Suzanne D. Meehle)
Mealy, yes.
11:16
Good morning.
11:20
I would like to make a few corrections as to some of the representations that were made by Mr. Menker.
11:32
Respectfully, the board specifically did not reach the affirmative defenses in this case.
11:40
The board did cite the law regarding equitable defenses not being applicable in this case because of the inevitable confusion that it found.
11:55
What the board then said is that...
11:57
Judge Wallach
Has your client ever sold condoms in the United States under the nude trademark?
12:02
Appellee Attorney (Suzanne D. Meehle)
Under nude?
12:02
We do not believe so, no.
12:05
Our client refrained from using nude because of an agreement between the parties.
12:10
Judge Wallach
That's not a sort of I don't believe so kind of answer, yes or no.
12:15
Appellee Attorney (Suzanne D. Meehle)
It is a no.
12:18
Our client has exclusively used naked for its branding.
12:25
Equitable defenses do not include contractual defenses, contractual estoppel, waiver based on contract, abandonment based on contract.
12:36
Regardless, what the board did was look at the facts of this case and the testimony.
12:41
What the board did was look at the testimony of their chief witness, who was Graham Porter, the chief executive of Australian Therapeutic,
12:47
and determined that there was a course of conduct here that led to effectively abandonment.
12:55
That he, from an objective standard, somebody sitting outside of Mr. Porter's head, would believe that they had wound up operations in the United States.
13:06
That he stated that we have no more naked condoms in the U.S.
13:12
You're good to go.
13:13
Clear sailing was what he said.
13:15
Judge Reyna
What about the other elements, though, where they actually opposed the application at one point,
13:20
the workshops at one point, and these other findings that were made?
13:27
Appellee Attorney (Suzanne D. Meehle)
And as of April 4th, 2007, there's a fixed point in time of April 4th, 2007,
13:37
when, by Graham Porter's admission, there were no more sales in the United States.
13:44
And that our client was freed and had his consent, his blessing, to register this trademark.
13:51
If we look at a case that I found very instructive that we...
13:55
Judge Reyna
And that consent is in the contract?
13:57
Appellee Attorney (Suzanne D. Meehle)
That consent is in the contract, yes.
14:00
Judge Reyna
And the validity of that contract is being debated.
14:05
Now, aside from the estoppel issues, but the validity of the contract itself is debatable.
14:11
Is it debatable?
14:13
Appellee Attorney (Suzanne D. Meehle)
The validity of the contract.
14:14
Whether it's debatable or not wasn't necessary to reach the conclusion that the board did.
14:22
However, the board is...
14:23
Judge Reyna
But if the contract is debatable, then doesn't that give rise to standing?
14:28
Appellee Attorney (Suzanne D. Meehle)
If the contract is debatable, it could give rise to standing.
14:32
However, the board here, by substantial evidence, determined there was no real legitimate interest in the marks.
14:41
Because Australian Therapeutics had no more legitimate...
14:44
Interest in this mark in the United States.
14:46
It continued to operate solely out of Australia.
14:49
The sales and what they considered to be advertising in the U.S.
14:54
was on a .au website in Australia, marketed to and targeted at Australian customers.
15:04
Judge Reyna
It seems to me that the board may have been a little too fixated on deciding this case
15:11
on whether there's any type of error on the merits.
15:15
But that's not what we look at when we're looking at a standing issue.
15:18
Is it?
15:20
Appellee Attorney (Suzanne D. Meehle)
No.
15:20
You can't conflate standing and the merits, but the evidence involved is substantially the same,
15:28
such that they're inextricably intertwined.
15:34
That's Otto Roth.
15:36
That's actually also Jewelers.
15:39
If we look at FAMI versus Jay-Z, which is a Ninth Circuit case,
15:44
admittedly a court case and not a board case,
15:47
and even though standing is more liberal in...
15:51
In an administrative hearing, it's instructive to note
15:54
that the court analyzed the existence of the contract
15:58
and the terms of that contract in analyzing standing.
16:06
Standing must be a real interest, and there must be a reasonable belief
16:10
that one would be damaged by a registration.
16:13
There's not that reasonable belief based on Mr. Porter's own statements.
16:19
Everything that he said was subjective.
16:21
There was an agreement, but I decided I'd put it aside after I received a demand letter.
16:28
Judge Reyna
Why doesn't that agreement show a real interest under Lipton?
16:33
Appellee Attorney (Suzanne D. Meehle)
The agreement between the parties?
16:35
Judge Reyna
Yes.
16:36
Appellee Attorney (Suzanne D. Meehle)
No, it doesn't show that he had any more real interest.
16:39
Judge Reyna
What kind of impact does the existence of the agreement have on the real interest test?
16:45
Appellee Attorney (Suzanne D. Meehle)
We have the existence of an agreement and the conduct of the parties.
16:52
The conduct of the parties...
16:53
The conduct of the parties in taking the affirmative steps to perform on the agreement
16:59
included winding up operations of Australian therapeutics in the United States,
17:04
ceasing to sell condoms in the United States,
17:07
and informing our client that he could go ahead with registering this trademark in the United States
17:13
because they had no further use.
17:15
If they had no further use as of April 4th, 2017,
17:19
no further use in the United States,
17:22
then...
17:24
Any sales after that are, in fact, infringement.
17:28
Just because Mr. Porter would now like to say,
17:31
never mind the man behind the curtain,
17:32
doesn't mean you shouldn't look at Mr. Porter.
17:33
Judge Reyna
It seems to me you're addressing the merits or damages type issue.
17:38
Well, for standing under these, for the real interest test,
17:42
we don't look at the merits of the case or damages,
17:46
but whether there's a real interest.
17:48
And if there's an agreement and that agreement is debatable,
17:51
then why does that not...
17:54
Why does that not create real interest that renders standing Article 3 standing?
18:00
Appellee Attorney (Suzanne D. Meehle)
It's...
18:01
It is a...
18:03
They're bound up together in this particular case.
18:06
And what the board did,
18:08
and what the board did correctly following Impreza,
18:13
in Impreza Cigar,
18:15
a legitimate commercial interest is a real interest.
18:18
That's at 753-1270,
18:22
or F3-1270 at 1275.
18:27
And we see it all over
18:31
in Gal versus Israel Military Industries Ministry of Defense,
18:36
which admittedly is...
18:38
I mean, it's more an example here.
18:40
That was the Uzi case.
18:44
Mr. Gal had transferred the Uzi name
18:47
and therefore had no more right,
18:49
and therefore lacked standing.
18:54
Standing must be pleaded,
18:56
but it must also be affirmatively proven,
18:58
so if we're looking at the grounds for standing
19:01
that are sufficient to sustain an opposition or a cancellation,
19:06
then those are not...
19:08
They still must prove those grounds.
19:10
What they alleged was that they had continuous use
19:14
of the mark and proprietary rights,
19:17
and that was a basis for their standing.
19:21
As such, they failed to prove
19:23
that they had continuous use and proprietary rights.
19:27
What they pled,
19:28
and what they proved were different.
19:30
Just because there's no...
19:32
Just because there's a low threshold for standing
19:34
doesn't mean there's no threshold for standing.
19:36
In this case,
19:38
what was pleaded and what was proved
19:40
are what are essential here.
19:43
They pled a commercial interest,
19:45
an ongoing commercial interest
19:46
in the mark in the United States.
19:49
By Mr. Porter's own testimony,
19:51
there was no further use in the United States.
19:54
They ceased operations.
19:56
They wound up their business.
19:58
They were...
19:58
They were done.
20:00
And based on that,
20:02
the board found no further legitimate interest.
20:08
So based on substantial evidence,
20:11
the board found that what was pleaded as to standing
20:15
was not enough.
20:18
That what was pleaded was not proven.
20:23
We looked to the pleadings.
20:24
We looked to the proof.
20:26
For this case,
20:27
they pleaded likelihood of confusion based on priority
20:30
and based on...
20:32
They had a real legitimate commercial interest
20:33
in an ongoing sales in the United States.
20:37
And they failed to prove that.
20:40
Do you have any further questions?
20:44
Judge Reyna
No, we thank you.
20:45
Thank you.
20:48
You have a little over five minutes of time
20:50
to be part of that much.
20:53
Judge Wallach
Your client testified
20:56
that the two companies had a gentleman's agreement.
21:00
How is that different than a regular agreement?
21:06
Appellant Attorney (James Robert Menker)
In terms of substance,
21:09
it could be...
21:10
In my mind...
21:11
Judge Wallach
Offer, acceptance...
21:12
Appellant Attorney (James Robert Menker)
Yeah, I mean...
21:13
Judge Wallach
Mutuality...
21:14
Appellant Attorney (James Robert Menker)
Right.
21:14
I mean, you still...
21:15
There's no parameters to that gentleman's agreement.
21:19
Just more of a...
21:22
Judge Wallach
He had an offer, acceptance, mutuality,
21:25
and mutual benefits, right?
21:27
Appellant Attorney (James Robert Menker)
I would say that...
21:31
Without getting too far afield on this,
21:33
that he said that he had no more condoms
21:36
in the United States under that brand.
21:38
He never said he wasn't going to sell them.
21:40
He never said he wasn't going to file...
21:41
application.
21:42
He never said he was going to not oppose their use.
21:45
All he said was...
21:46
And then he was silent when they said,
21:48
hey, you know, you can't use it anymore.
21:50
He just ignored them.
21:51
So whether that amounts to a remand,
21:53
I can't really say.
21:55
The board obviously thought it did, and...
21:58
Judge Wallach
And you can't say it didn't.
22:00
Appellant Attorney (James Robert Menker)
I can't say it,
22:00
but the burden of proof should be on the party
22:03
alleging a equitable defense
22:04
to prove that there was a contract
22:08
and that they relied on that.
22:10
Not the plaintiffs,
22:11
to prove that they have standing
22:13
by virtue of the fact that there was a contract.
22:16
Judge Wallach
Your client said that
22:19
when he received a demand letter,
22:23
he thought that it was flippant,
22:26
if I recall,
22:27
and consequently that voided the gentleman's agreement.
22:31
Is that right?
22:31
Appellant Attorney (James Robert Menker)
It was a very short demand letter
22:34
just saying, hey, we have all these registrations.
22:37
Any use is infringing and we'll seek damages.
22:39
Judge Wallach
And it wasn't his testimony, in effect,
22:42
that that voided the gentleman's agreement.
22:44
Appellant Attorney (James Robert Menker)
That's what he felt, yes.
22:46
Judge Wallach
Where's that found in the law?
22:49
Appellant Attorney (James Robert Menker)
In his defense, he's Australian,
22:50
so maybe in Australia they have a different view
22:52
of the law, of common law contracts.
22:56
I'm not sure.
22:58
But I do want to make one point and follow up
23:00
on the point that made by the other side,
23:04
and that is that we do look to the pleadings.
23:06
We do look to the proof.
23:09
In the pleadings, we alleged we had the application.
23:11
We proved that it was filed.
23:12
They admitted that it was filed.
23:14
We showed that it was refused.
23:15
They never objected on the ground
23:18
that it wasn't really refused.
23:19
On that basis alone, the Cuba tobacco case
23:22
clearly says that nothing more is needed.
23:25
Richie B. Simpson in Lipton
23:27
and one of the other cases clearly said
23:31
nothing more is needed beyond filing an application
23:36
that's refused.
23:37
Then you have a real interest.
23:38
The goal of standing in these cases
23:40
is to separate the general public,
23:42
somebody who has...
23:43
No interest different from the rest of the world
23:46
versus somebody that does.
23:47
And here you have a competitor.
23:49
You have actual use of the mark.
23:51
You have an application that's been refused.
23:54
You have a cease and desist letter
23:55
telling them that it can't use this anymore.
23:57
And there's valuable rights that come with the registration
24:00
and with an incontestable registration
24:02
that my client was going to be damaged by
24:05
if he allowed them to stand.
24:06
And for those reasons,
24:08
there is standing in this case.
24:10
Judge O'Malley
And I'm not sure owners have any further questions.
24:13
How do you view...
24:13
How do you view the Sylvan Sons case
24:15
impacting your position?
24:20
Appellant Attorney (James Robert Menker)
I believe the Sylvan Sons was not a standing case.
24:26
It was a merits case.
24:39
In that case, they had a written settlement agreement
24:41
that was clear and unambiguous.
24:43
And then the board granted summary judgment
24:46
on the grounds that the party did not have...
24:53
On the grounds that the defendant showed
24:54
that there was equitable stop.
24:56
It wasn't a standing.
24:57
It wasn't...
24:58
It wasn't denied.
24:59
And that also predates the court's decisions
25:02
and jeweler's and subsequent decisions.
25:05
Okay.
25:07
Judge O'Malley
Anything else?
25:09
Appellant Attorney (James Robert Menker)
Thank you.
25:10
Judge Reyna
Thank you.
25:11
Thank all the parties for the arguments this morning.
25:14
This court now remains in recess.
25:16
Clerk
All rise.