State university entitled to sovereign immunity on Lanham Act claims

United States of America
In Board of Regents of the University of Wisconsin System v Phoenix International Software Inc (Case 08-4164, December 28 2010), the US Court of Appeals for the Seventh Circuit has reversed the district court’s decision with respect to its grant of summary judgment on the issue of likelihood of confusion.

In 1997 Phoenix International Software Inc registered the mark CONDOR for a software product. In 2001 the University of Wisconsin registered the mark CONDOR for an arguably different software product. Phoenix petitioned to cancel the university’s registration. The US Trademark Trial and Appeal Board (TTAB) found a likelihood of confusion and cancelled the registration. The university appealed by filing an action in a Wisconsin district court challenging the TTAB’s decision. 

Phoenix filed a counterclaim for trademark infringement and unfair competition under the Lanham Act. The district court dismissed Phoenix’s counterclaims on summary judgment, holding that the university, as a state agency, was immune to Phoenix’s counterclaims under the doctrine of sovereign immunity. The district court also reversed the TTAB’s determination, finding no likelihood of confusion. Phoenix appealed to the Seventh Circuit. The appellate court agreed with the district court on sovereign immunity, but reversed on likelihood of confusion.

The sovereign immunity decision was grounded in a Supreme Court case relating to patents. Congress had attempted to abrogate the states’ rights to sovereign immunity from patent suits by the Patent and Plant Variety Protection Remedy Clarification Act. However, in Florida Prepaid Postsecondary Educ Expense Bd v College Savings Bank (Case 98-531), the US Supreme Court had determined that Congress may not abrogate state immunity from patent suits. Congress similarly attempted to abrogate the states’ rights to sovereign immunity from trademark suits by means of the Trademark Remedy Clarification Act. The Seventh Circuit majority followed the teaching of Florida Prepaid Postsecondary Educ Expense Bd, finding that the Trademark Remedy Clarification Act was “not materially different” from the Patent Remedy Act and was, therefore, also unconstitutional.

Phoenix claimed that the university had waived any right to sovereign immunity by choosing to participate in the trademark registration process, or by invoking the jurisdiction of the district court. As to the registration process, the court held that the university’s “choice to register its mark was… [a] lawful activity, and… the receipt of trademark registration [was not] specifically conditioned on a waiver of immunity”. As to the university’s appeal to the district court, the Seventh Circuit majority determined that the university was essentially in the position of a defendant that had been forced into litigation with Phoenix involuntarily. Thus, the majority found no waiver. 

The dissent argued that the university’s appeal to the district court (rather than directly to the Federal Circuit) was a voluntarily act and waived any right to sovereign immunity. The majority ruled, however, that the university’s mere exercise of its option to challenge the TTAB’s adverse decision in district court did not result in a waiver. Interestingly, all agreed that an appeal to the Federal Circuit, which was another appeal route open to the university, would not have constituted a waiver. 

Finally, the district court had essentially dismissed the TTAB’s findings on likelihood of confusion. The Seventh Circuit reinstated those findings and determined that Phoenix had offered sufficient evidence to survive summary judgment on this issue. Accordingly, the Seventh Circuit reversed and remanded for a new trial on likelihood of confusion. However, in the view of the university’s successful sovereign immunity defence, it remains to be seen just what remedy will be afforded to Phoenix.

Stephen M Schaetzel, King & Spalding LLP, Atlanta

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