“Naked” at the Federal CircuitDecember 9, 2020

On December 4, 2020, the US Court of Appeals for the Federal Circuit (“Federal Circuit”) denied petitions by Naked TM, LLC for a panel rehearing and a rehearing en banc of the decision in Australian Therapeutics Supplies Pty. Ltd. v. Naked TM, LLC, 965 F.3D 1370 (Fed. Cir. 2020).

The Trademark Trial and Appeal Board (“the Board”) had determined that Australian Therapeutics Supplies Pty. Ltd. (“Australian”) lacks standing to petition for cancellation of a trademark registration. Naked TM, LLC (“Naked”) owns a registration for the mark NAKED for condoms. In late 2005, Australian learned that Naked had filed a trademark registration application for NAKED condoms in 2003. In 2006, Australian contacted Naked and claimed rights in its unregistered mark, and the two parties engaged in negotiations. Naked asserts that the correspondence between them demonstrates that the parties reached an agreement whereby Australian would discontinue use of its unregistered mark in the United States and consent to Naked’s use and registration of its mark in the US. Australian disagrees and asserts that no final agreement exists.

In 2006, Australian filed a petition to cancel the registration of the NAKED mark asserting Australian’s prior use of the mark and sought cancellation based on fraud, likelihood of confusion, and lack of bona fide intent to use the mark. Naked denied all allegations and asserted, among other things, that Australian lacked standing to seek cancellation and was contractually and equitably estopped from pursuing it. Following a trial in 2018, the Board concluded that Australian lacked standing to bring a petition for cancellation because Australian failed to establish proprietary rights in its unregistered mark. The Board found that, although no formal written agreement existed, the parties entered into an informal agreement wherein Australian agreed to not use or register its mark in the US and further agreed that Naked could use and register its mark in the US. This led Naked to reasonably believe that Australian had abandoned its rights in the US as to the NAKED mark in connection with condoms. Therefore, the Board concluded, Australian lacked standing to petition to cancel the NAKED mark because Australian could not establish a real interest in the cancellation or a reasonable basis to believe it would suffer damage from Naked’s registration.

The Federal circuit reversed on appeal stating that a cause of action is not contingent on whether a petitioner has proprietary rights in its own mark. Contracting away one’s rights to use a trademark does not preclude a petitioner from challenging a mark before the board. An agreement may bar Australian from proving actual damage, but only a reasonable belief of damage is required to petition for cancellation. A petitioner may demonstrate a reasonable belief of damage when the petitioner has filed a trademark application and is refused registration based on a likelihood of confusion with the mark subject to cancellation. Another way to demonstrate a reasonable belief of damage is by producing and selling merchandise bearing the registered mark. Australian filed registrations twice and was refused registrations for each based on a likelihood of confusion with Naked’s registered mark. Additionally, Australian’s advertising and sales in the US, although limited, was sufficient for a reasonable belief of damage.

Naked petitioned for rehearing, but the Federal Circuit has refused to revisit this ruling.

Julie L. Spieker is an Intellectual Property Attorney in the MVS  Biotechnology & Chemical Practice Group as well as the Mechanical  and Electrical Practice Group. To learn more, visit our MVS website , or contact Julie directly via email .

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