On April 1, 2024, the Ninth Circuit Court of Appeals issued a landmark decision ruling that district courts have jurisdiction to cancel trademark applications and that a lack of bona fide intent is a proper basis to challenge an application. This case serves as a reminder of the importance of maintaining evidence of a genuine intent to use a trademark in commerce.
ORIGINAL ACTION
The saga began when BBK Tobacco (“BBK”) brought an action in Arizona District Court against Central Coast Agriculture (“CCA”). BBK, which owns the registered trademark “RAW” for smoking-related products, alleged that CCA’s use of the brand name “RAW GARDEN” for its cannabis products infringed upon BBK’s “RAW” trademark. BBK’s complaint also included a petition to cancel four of CCA’s pending trademark applications for lack of a bona fide intent to use the marks in commerce. The district court granted summary judgment in favor of CCA on BBK’s trademark claims. However, the district court also granted summary judgment in favor of BBK on the counterclaim to invalidate CCA’s trademark applications. Both parties appealed to the Ninth Circuit[1].
NINTH CIRCUIT’S DECISION
In its precedential decision, the Ninth Circuit Court of Appeals found: (1) district courts have the jurisdiction to alter or cancel trademark applications in an action properly brought under 15 U.S.C. § 1119; and (2) lack of bona fide intent is a proper basis on which a party in such an action can challenge a trademark application. BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc.
District courts have jurisdiction over the trademark applications of parties to the action
The Ninth Circuit found that when an action involves a registered trademark, a district court has jurisdiction to consider challenges to the trademark applications of parties to the action.
The court’s finding relied in large part on Section 1119 which 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.
15 U.S.C. § 1119. The court clarified that while a cancellation claim is not available as an independent cause of action, if there is an underlying registration, Section 1119 permits the district court to “determine the right to registration” and “rectify the register with respect to the registrations of any party to the action.” 15 U.S.C. § 1119. Noting the Lanham Act refers to an “[a]pplication for use of trademark” as a “request [for] registration of [a] trademark on the principal register.” 15 U.S.C. § 1051(a)(1), (b)(1). Thus, finding a challenge to an application necessarily affects the applicant’s right to a registration.
The court further reasoned that permitting a district court to adjudicate trademark applications when an action already involves a registered mark is a matter of efficiency. Ultimately finding that in an action involving a registered trademark, district courts have jurisdiction to consider challenges to a party’s trademark applications.
Lack of bona fide intent is a valid basis to seek cancellation of a trademark application
When an applicant files a trademark application it can do so under two alternative bases: (1) if a mark is already being “used in commerce;” and (2) if the applicant has “a bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce.” 15 U.S.C. § 1051(a)(1), (b)(1).
Though intent-to-use applicants can begin the registration process having only a sincere intent to later use the mark in commerce, the applicant is required to eventually either (i) file a verified statement of actual use of the mark, or (ii) convert the application into a use application.
The court noted that three other circuit courts and the Trademark Trial and Appeal Board, have all held that lack of a bona fide intent to use a mark is proper grounds on which to challenge a trademark application. The court further cited language from the Federal Circuit in making explicit that lack of bona fide intent to use a mark in commerce is a ground on which a party may oppose a trademark application.
PRACTICAL APPLICATION
The decision is of particular importance to those filing intent-to-use applications, particularly in the cannabis industry which cannot presently show lawful use in interstate commerce, despite planning to do so when legal. Moving forward, applicants may want to take note that mere intent without evidence of plans to use the mark in commerce may not withstand a challenge.
[1] In a concurrently filed memorandum disposition, the panel reversed the district court’s summary judgment on BBK’s trademark claims and affirmed the summary judgment on CCA’s counterclaim to cancel BBK’s trademark for unlawful use.