Mark abandonment defence takes a tumble in TUMBLEBUS Case
In Tumblebus Inc v Cranmer, the US Court of Appeals for the Sixth Circuit has dismissed the defendant's appeal, which was based on a trademark abandonment defence. The court held that even though TUMBLEBUS, the mark at issue, may have lost its significance as an indication of origin outside the plaintiff's area of operation, evidence showed that it had not lost its significance within that area.
Brenda Scharlow owns Tumblebus Inc, a company that provides gymnastics and physical education services for children by way of buses refitted as mobile gyms. It operates in greater Louisville, Kentucky under the common law trademark and trade name TUMBLEBUS MOBILE GYM ON WHEELS. Tumblebus also sells its refitted buses to other operators and allows them to use the TUMBLEBUS mark to advertise their gym services. However, Tumblebus does not sell buses to anyone who intends to use them in Tumblebus's established territory. Some bus sales contracts contain written geographical restrictions, but most do not. Tumblebus did not structure its business as a franchise since on-site service monitoring would be too difficult.
Meredith Cranmer purchased a TUMBLEBUS bus from Tara Pate, who had bought it directly from Tumblebus. Cranmer allegedly represented to Scharlow that she would only use the bus in Bloomington, Indiana. Instead, Cranmer began to operate in the Louisville area under the trade name Tumblebus of Louisville. She also advertised her business in the Louisville telephone directory next to Tumblebus. Scharlow insisted that Cranmer remove the word Tumblebus from her trade name. When Cranmer failed to comply, Tumblebus filed a trademark infringement suit.
After an evidentiary hearing, the district court issued a preliminary injunction against Cranmer, who appealed. She claimed that the district court erred when it issued the preliminary injunction by discounting the affirmative defence of trademark abandonment.
Title 15 USC § 1127 of the Lanham Act provides that:
"[a] mark shall be deemed "abandoned" ... [w]hen any course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark."
A mark may be abandoned and become unenforceable through naked licensing. This occurs when a trademark owner (or licensor) fails to exercise reasonable control over the licensed use of a mark by a licensee. The mark then no longer identifies goods or services that are under the control of the licensor and it no longer provides a meaningful assurance of quality. However, abandonment of trademark rights in one geographical area does not result in extinguishment of rights in all other geographical areas. The burden of proof to show abandonment through a naked licence is stringent.
In affirming the district court's preliminary injunction, the US Court of Appeals for the Sixth Circuit held that it was unclear from the record whether the relationship between Tumblebus and bus purchasers with respect to the TUMBLEBUS mark is most aptly categorized as:
- a licence (requiring quality control);
- a 'consent to use' agreement (not requiring quality control); or
Further, it noted that Cranmer failed to carry its burden of proof on the abandonment issue. While the TUMBLEBUS mark may have lost its significance as an indication of source, origin or sponsorship outside the greater Louisville area, the record showed it had not lost its significance within the greater Louisville area.
Brian E Banner, Banner & Witcoff Ltd, Washington DC
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