Fees for amended petition to cancel need not be paid before petition granted

United States of America

The US Court of Appeals for the Federal Circuit has, in effect, chastised the Trademark Trial and Appeal Board (TTAB) in Fred Beverages Inc v Fred’s Capital Management Company (Case 2010-1007, May 12 2010). The Federal Circuit, in a unanimous decision, reversed the TTAB’s denial of a motion for leave to amend a petition to cancel solely because the fee for the amended classes had not been submitted to the TTAB along with the motion.

This Federal Circuit decision arose from a cancellation proceeding that Fred Beverages Inc initially filed against Fred’s Capital Management Company based on the fact that a trademark registration owned by Fred’s Capital covered some 12 classes of goods under the Nice Classification and, therefore, blocked registration of Fred Beverages' mark. In order to garner a trademark registration for its mark, Fred Beverages initially sought to cancel the registration in only one class - Class 32 - based on an allegation of abandonment. Fred Beverages’ initial petition to cancel was properly filed and accompanied by the requisite fee of $300 per class sought to be cancelled.

After the cancellation proceeding commenced, Fred Beverages determined that it wanted to amend its pleadings to include the additional ground of fraud for cancellation of Class 32, and to seek to include four additional classes as part of the cancellation petition. As part of its motion for leave to amend a petition to cancel, Fred Beverages provided the TTAB with a copy of its proposed amended pleading. What Fred Beverages did not do is include any additional monies to cover the fees that would be required for a petition to cancel the additional classes. Ultimately, the TTAB rejected the motion solely because Fred Beverages had not paid the fees for cancellation of the additional classes along with the filing of its motion.

Fred Beverages appealed, arguing that the statutory fee is not required until the motion to amend is granted. In other words, the amended petition is not effective until the TTAB allows it to be filed, at which time the statutory fees can be paid.

Although having submitted a voluntary surrender of its registration in Class 32, Fred’s Capital continued to defend the TTAB’s ruling, arguing to the Federal Circuit that the failure to include the filing fees for the additional classes was jurisdictional. Fred’s Capital argued that without the payment of the fees, the motion was improper. Accordingly, the TTAB had properly denied the motion in its entirely.

The Federal Circuit relied on the language of Rule 15(a) of the Federal Rules of Civil Procedure for its primary guidance. It has long been held that amendments to pleadings, such as petitions or complaints, should be liberally granted. If the amendment does not prejudice the other party, then the amendment should be allowed to proceed. In this regard, the court noted that the TTAB did not cite any equitable justification or prejudice to Fred’s Capital flowing from the granting of the amendment.

Further, the court noted that the TTAB does not have a rule requiring the payment of fees with a motion. In this regard, the court reviewed past TTAB precedents. The court cited several decisions where the TTAB had granted a motion to amend on condition that any fees be paid within 30 days of the TTAB’s order. In all events, the Federal Circuit relied on these precedents as demonstrating that the TTAB did not have an established practice that required the fees to be paid along with the motion to permit amendments to pleadings to proceed.

The court also specifically noted that the TTAB’s own opinion in this matter did not reference any TTAB opinion, rule or precedent for denying a motion for leave to amend based solely on the failure to pay along with the motion any fees that would be required if the motion was in fact granted. The court found that this alone sufficed to demonstrate that the TTAB’s ruling was “arbitrary and capricious”. Ultimately, the court’s decision looked at the practical difficulties in requiring payment in advance. The TTAB, the court noted, does not have any rule specifically providing that any filing fees would be refunded if paid but the motion was not granted.

In effect, the Federal Circuit’s decision makes for a more efficient and effective system for petitioners and registrants alike.

Rochelle D Alpert, Morgan Lewis & Bockius, LLP, San Francisco

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