Foreign manufacturer succeeds in cancelling registration owned by domestic distributor

United States of America
In Nahshin v Product Source International LLC (Cancellation No 92,051,140, June 21 2013), the US Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) has cancelled US Registration No 3,350,041 for the mark NIC OUT, finding that petitioner Leonid Nahshin, not registrant Product Source International LLC, owned the mark in the United States. 

Petitioner Nahshin is an Israeli citizen who owns a company in Israel that manufactures cigarette filters under the NIC OUT mark. In 2002 Nahshin selected Nikolai Maslov, who was not a party to the cancellation action, to distribute the Nic Out filters in the United States. From 2003 to 2007 Maslov distributed the Nic Out filters to Product Source, which marketed and sold them in the United States. In 2006 Product Source filed an application to register the NIC OUT mark, which was registered in 2007. Beginning in 2007, Product Source purchased the Nic Out filters directly from Nahshin. 

Nahshin filed a petition to cancel Product Source‘s NIC OUT registration. The TTAB focused its inquiry on whether Nahshin or Product Source was the proper owner of the trademark. The TTAB found that Nahshin developed trademark rights in the United States through its distribution of the product beginning in 2002, and therefore became the owner of the mark in the United States. Further, neither Maslov nor Product Source developed ownership rights in the NIC OUT mark, because the mere distribution of a foreign manufacturer’s branded product does not give a US distributor an ownership interest in the subject mark (see TMEP § 1201.06(a)). The TTAB went on to deny Product Source’s defences. 

Before reaching the merits of the case, the TTAB made notable procedural and evidentiary rulings. 

First, Product Source argued that its lack of ownership of the NIC OUT mark was a “new claim” not pled by Nahshin in its petition and, accordingly, requested that the TTAB not consider it as a ground for cancellation. However, Rule 15(b) of the Federal Rules of Civil Procedure provides that pleadings can be amended if:

  1. doing so will aid in presenting the merits and the objecting party fails to demonstrate that the evidence would prejudice that party's action or defence on the merits; or
  2. the issue not raised is tried by the parties’ with their express or implied consent. 

In this case, the ownership claim was tried and argued by both parties in their trial briefs. The TTAB concluded that Product Source had fair notice of the lack of ownership issue and actively defended against this claim on the merits. Based on the circumstances, the TTAB treated the pleadings as amended to include the lack of ownership claim. 

Second, the TTAB addressed objections to evidence, including evidence submitted through two testimonial depositions on written questions. One form of submitting trial evidence in a TTAB proceeding is a testimonial deposition of one’s own witness. In the case of a foreign deponent, testimonial depositions are typically taken upon written questions (see 37 CFR § 2.124).   

The party taking the written deposition serves written questions on the adverse party, the adverse party then serves cross-questions, the taking party then serves redirect questions, and finally, the adverse party can serve re-cross questions. Objections to written questions may be served on any party propounding questions. In order to cure the issues raised in the objections, a party may serve substitute questions. At the end of this procedure, the deposing party mails all questions to the officer designated to take the testimony of the witness, who then conducts the deposition and records the witness’ answer to each written question.

In the present case, Nahshin bypassed this procedure by not waiting for cross questions or objections, but instead he simply had his questions read to the deponents. After review, the TTAB ordered that Product Source had 25 days to serve cross-questions. Product Source was then in the unusual position of having the deponents’ answers to review, as well as the Nahshin’s questions, before preparing its cross-questions and objections. This gave Product Source the opportunity to object to not only the questions, but also the testimony and documents. However, Product Source failed to do so.

Product Source later raised a series of evidentiary objections, including lack of authentication of documents, non-responsive answers, and lack of foundation, to the deponents’ testimony and Nahshin’s exhibits. The TTAB noted that in the typical deposition on written questions, it would not be possible to raise objections with the taking of testimony or when an exhibit is “introduced”. However, the procedure employed in this case was akin to an oral deposition, and thus Product Source had an opportunity to provide such objections but did not. As a general rule, objections that are curable must be seasonably raised, or they will be deemed waived (see TBMP Section 707.03(a)). 

The TTAB concluded that the issues raised in the objections could have been cured by Nahshin if Product Source had timely raised them when it first had the opportunity. Accordingly, the TTAB overruled Product Source’s evidentiary objections that could have been raised during its time for responding to the written deposition testimony.  

Andrew J Avsec, Brinks Hofer Gilson & Lione, Chicago

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