Evidence of abandonment clarified by Ninth Circuit

In Electro Source LLC v Brandess-Kalt-Aetna Group Inc, the US Court of Appeals for the Ninth Circuit has held that legitimate, commercial sales of trademarked goods - even for a failing business that clearly is trying to deplete its inventory - are sufficient to defeat a claim of abandonment. In doing so, the court clarified the requirements necessary to prove abandonment of a trademark; or, more accurately, the type of evidence which may assist in overcoming such a claim.

In 1995 Ronald Mallett began selling backpacks and luggage bearing a mark consisting of a pelican device with the word PELICAN immediately underneath. Soon thereafter, Mallett obtained a federal registration for the mark. Over time, sales of PELICAN goods began to decline and, by 1999, Mallett was selling his PELICAN products primarily out of the trunk of his car. Finally, in 2002, Mallett assigned the PELICAN mark to Electro Source LLC. At the time of the assignment, Mallett still had inventory bearing the PELICAN mark - inventory which he continued to sell until December 2002, when he sold the remaining inventory to Electro Source.

Pelican Products Inc and Brandess-Kalt-Aetna Group Inc (collectively 'the defendants'), manufacture and sell a line of products under the marks PELICAN PRODUCTS; PELICAN and PELI PRODUCTS. In 2002 Electro Source commenced suit against the defendants for, among other things, trademark infringement. In its summary judgment motion, the defendants argued that Mallett had abandoned his PELICAN mark prior to the assignment to Electro Source, thus rendering the assignment ineffective. The district court ruled in favour of the defendants, determining that the PELICAN mark had been abandoned and ordering that the registration for the PELICAN mark be cancelled.

On appeal the Ninth Circuit analyzed the concept of abandonment of a trademark and reversed the district court's ruling. It held that the record did not support summary judgment in favour of the defendants and vacated the order to cancel the PELICAN mark. In its analysis, the court examined the plain language of Section 1127 of the Lanham Act, which requires that abandonment be proved by the discontinuance of use of a mark and the intent not to resume such use. Accordingly, the court considered what constituted "use" for the purposes of Section 1127, including an analysis of the meanings of "bona fide use" and use in the "ordinary course of trade".

The defendants had argued at first instance that the good faith sales of the PELICAN mark products were not "bona fide" because they were not made in connection with any business. The district court had agreed. In reversing the district court ruling, the Ninth Circuit explained that (i) the district court drew inferences against Mallett as to his intent, notwithstanding the fact that all reasonable inferences in the summary judgment ruling should have been made in favour of Mallett as the non-moving party; and (ii) the district court disregarded Mallett's use of his PELICAN mark. In doing so, the district court ignored the statutory standard for abandonment, which requires complete discontinuance of use with an intent not to resume - whether or not Mallett intended to cease use of the PELICAN mark was irrelevant.

The court also explained that it is appropriate in any such analysis to look at the totality of the circumstances to determine whether there has been trademark use "in the ordinary course of trade" under Section 1127. Facts to be considered include:

• the genuineness and commercial character of the activity;
  
  
• whether the mark was sufficiently public;
  
  
• the scope of the trademark activity; and
  
  
• the amount of business transacted.

In this case, Mallett publicly displayed and transported his PELICAN mark goods in an earnest effort to sell them, and made actual sales - all of which indicated that Mallett did not abandon his trademark.

Jessica L Rothstein, Goodwin Procter LLP, New York