Undisclosed transportation is not use in commerce

In General Healthcare v Qashat, the US Court of Appeals for the First Circuit has upheld a district court decision and has dismissed the plaintiff's application to cancel the mark KENT CREME BLEACH (KENT). It held that the plaintiff had not gained US rights in the trademark through the transportation of products bearing the mark because the shipments had been made in secret, which did not equate to use in commerce.

The KENT trademark was originally used by a company called Healthcare International (Healthcare) for hair bleach manufactured in the United States and sold in the Middle East. It ceased trading in 1989 and the product became unavailable.

General Healthcare (GHL) allegedly purchased the Kent brand and US common law rights in the KENT mark from Healthcare. Thereafter, GHL set up product manufacturing in the United States. It then transported the bulk product to its packaging facility in the United Kingdom and from there shipped the branded goods to customers in the Middle East.

At about the same time as GHL's alleged purchase of the Kent brand, Isam Qashat, principal of Kent International Products (KIP), engaged US counsel to conduct an availability and registrability search on the KENT mark. KIP learned that Healthcare's KENT trademark application was abandoned in 1986. Since Healthcare went out of business in 1989, Qashat reasonably believed he could appropriate the abandoned mark. KIP reverse engineered the hair bleach product's formula and established its own US manufacturing and export network. It started shipping bleaching products under the KENT mark to the Middle East.

Since early 1990 both GHL and KIP have been selling the identically branded competitive bleaching product in the Middle East. In 1991 GHL sent KIP a cease and desist letter but GHL did not follow up on its demands. In the meantime, KIP registered the KENT mark in the United States and that registration has become incontestable. In 2000 GHL sued Qashat and KIP for cancellation of the registration, false advertising and unfair competition under the Lanham Act. Both parties moved for summary judgment.

The US District Court for the District of Massachusetts granted KIP's motion based on the conclusion that GHL had abandoned its common law rights in the KENT mark by not using it "in commerce" for the three years prior to filing the suit. A mark is deemed "in use in commerce" pursuant to the Lanham Act when it is affixed to the goods with which it is associated and those goods are then "sold or transported in commerce". The crux of the district court opinion was that GHL's activities lacked the public use element necessary to assert trademark rights based on transportation. It held that undisclosed shipments, such as the transportation by GHL of the bulk product to the United Kingdom for packaging, did not equate to use in commerce. GHL appealed.

On appeal, the First Circuit affirmed the earlier ruling and rejected GHL's arguments that:

  • the district court inappropriately focused on the public element of the transportation use in commerce requirement;
  • 1988 amendments to the Lanham Act made the requirement for public use obsolete; and
  • GHL intended to resume use of the mark in commerce.

It found that GHL had no US rights in the KENT trademark and therefore it had no standing to pursue cancellation of KIP's registration.

The First Circuit also dismissed GHL's allegation that KIP's registration was fraudulently obtained because at the time Qashat filed his application, he was aware of Healthcare's prior use of the KENT mark. It affirmed the district court's finding that Qashat reasonably believed that he was simply appropriating an abandoned mark. Once abandoned, a mark reverts back to the public domain whereupon it may be appropriated by anyone who adopts the mark for his or her own use. It held that to the extent that Qashat was aware of GHL's (rather than Healthcare's) operations in the Middle East, such is not ground for fraud, especially in the absence of any visible indication of GHL's use of the KENT mark in commerce in the United States.

Brian E Banner, Banner & Witcoff Ltd, Washington DC

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