Grocery service provider SFM wins appeal against vending machine service provider Corcamore over TM infringement
Date Published: Jun 21, 2021
The present case is an appeal in the United States Court of Appeals for the Federal Circuit from the order of the United States Patent and Trademark Office, Trademark Trial and Appeal Board. SFM LLC (“SFM”) owns the registered trademark “SPROUTS” for retail in grocery and store services. The mark has been in use since April 15, 2002. Corcamore LLC (“Corcamore”) owns the registered mark SPROUT for use in connection with vending machine services. They claim that this mark has been used by them since May 1, 2008. SFM filed a petition with the United States Patent and Trademark Office’s Trademark Trial and Appeal Board (“TTAB”) to cancel Corcamore’s registration for SPROUT. SFM alleged that the registration has to be cancelled on the ground that they were prior users of the mark, that is, since 2002; and that Corcamore’s mark is deceptively similar and identical, in fact, the exact word, excluding the letter “S” and hence, was causing confusion amongst the consumers regarding the identity of the product’s source. Corcamore moved to dismiss SFM’s petition for lack of standing under Rule 12(b)(6) of the Federal Rules of Civil Procedure and relying on the case of Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). The Board was of the opinion that this particular case is not applicable, and thus denied Corcamore’s motion to dismiss the case for lack of standing and motion for reconsideration. The board entered default judgment against Corcamoreand ordered that Corcamore’s registration be cancelled. Corcamore filed an appeal, i.e. the present case (Corcamore, LLC v. SFM, LLC, 978 F.3d 1298 (Fed. Cir. 2020)). Corcamore contended that the Board erred in granting a default judgment, particularly because SFM LLC lacked standing to bring a petition for cancellation of the trademark registration.The appellant court concluded affirming TTAB’s decision that SFM was entitled to bring and maintain a petition under 15 U.S.C.§ 1064, the statutory cause of action for cancellation of trademark registrations, and that the Board did not otherwise abuse its discretion in imposing default judgment as a sanction.
When the case was under consideration of the TTAB, and Corcamore moved to dismiss SFM’s petition for lack of standing under Rule 12(b)(6) of the Federal Rules of Civil Procedure by relying on Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), the board was of the opinion that Lexmark case was not applicable in the given case scenario. The Board instead relied on the analysis adopted by this court in Empresa Cubana del Tabaco v. General Cigar Co., 753 F.3d 1270 (Fed. Cir. 2014), SFM had locus standi to the file the case as it sufficiently alleged a real interest in the cancellation proceeding and a reasonable belief of damage, as required under 15 U.S.C. § 1064. With this rationale, the Board found that SFM had standing to bring a petition to cancel Corcamore’s trademark registration.
Due to various activities, there were 2 sanctions that were imposed on Corcamore. The Board entered default judgment against Corcamoreand ordered for Corcamore’s registration to “be cancelled because Corcamore had on numerous occasions already violated the First and Second Sanctions”. The Board also pointed out and observed that
“Corcamore engaged in wilful, bad-faith tactics, consistent with its “procedural maneuvers” letter, frustrated SFM’s ability to advance its case, and taxed Board resources”
When the case went up to the appellant court, Corcamore majorly put forth 2 arguments:
- That SFM lacks standing to bring a petition for cancellation of a registered trademark. On this point, Corcamore also alleged that the Board had erred in not applying Lexmark case, and instead applying Empresa Cubana.
- That the Board abused its discretion in granting default judgment as a sanction.
The court addressed to each issue, one at a time.
The appellant court stated that whether a party is entitled to bring or maintain a statutory cause of action is a legal question which shall be considered de novo. The court was of the opinion that the Lexmark analytical framework was the applicable standard for determining whether a person is eligible under § 1064 to bring a petition for the cancellation of a trademark registration. However, it also observed that there was no major difference in the framework set by Lexmark case and Empresa Cubana. Hence, even if the board applied the latter case, the finding and the conclusion of the Board was not wrong. The court at length discussed the two cases and came to the conclusion that
“We therefore hold that the Board correctly determinedthat SFM falls within the class of parties whom Congresshas authorized to sue under the statutory cause of actionof § 1064. Cf. Lexmark, 572 U.S. at 137–40. We are notpersuaded that we should disturb the result reached by theBoard. In other words, SFM is entitled under § 1064 topetition for cancellation of the trademark registration toSPROUT.”
Thereafter, the court dealt with the Board’s grant of default judgmentas a discovery sanction. According to Benedict v. Super Bakery, Inc., 665 F.3d 1263, 1268 (Fed.Cir. 2011)an abuse of discretion of power occurs when,
- The decision is clearly unreasonable, arbitrary, or fanciful or
- Is based on an erroneous conclusion of law; or
- Rests on clearlyerroneous fact findings; or
- Involves a record that contains no evidence on which the Board could rationally baseits decision.
It is pertinent to note that Corcamore did not challenge the Board’s express authority to grant default judgment as a sanction, but instead argued that the Court has no factual and legal basis to enter default judgment in the first place. The appellant court stated that there has been no abuse of discretion by the Board. Accordingly, the appellant court affirmed the Board’s entry of default judgment as a sanction was not an abuse of discretion.