Neutron Depot, L.L.C loses appeal against Bankrate, Inc. in a case involving Trademark Infringement

Date Published: Jun 21, 2021

The present case is an appeal in the United States Court of Appeals for the Fifth Circuit (“Appellant Court”) from the United States District Court for the Western District of Texas (“District Court”). The case is between NEUTRON DEPOT, L.L.C. (“Neutron”) and BANKRATE, INCORPORATED (“Bankrate”). Neutron had been granted a license to use the trademarked term “insurance depot” by the mark registrant CSi Agency Services in the year 2013. CSi’s president and owner was also Neutron Depot’s manager. Between 2010-2014, Bankrate drove traffic to its website using “insurance depot” to collect users’ contact information and sell it to insurers. In May 2014, Neutron sued Bankrate under various sections of the Lanham Act for infringing the mark. Bankrate took a stand that, the licensing agreement in 2013 which was endorsed upon Neutron, i.e. the license to use the mark “insurance depot” did not give statutory right to bring a claim of infringement on the mark. During litigation, in December 2016, CSi assigned the mark to Neutron Depot. The 2016 assignment transferred “ownership” of the mark without qualification and was effective from December 28, 2016. The claims were ultimately dismissed, and Neutron Depot appealed. The United States Court of Appeals for the Fifth Circuit (Neutron Depot, L.L.C. v. Bankrate, Incorporated, No. 18-51021 (5th Cir. 2020)), affirmed the dismissal with prejudice of Neutron Depot’s Lanham Act Section 32(1) and 43(c) claims for trademark infringement and dilution, finding that Neutron Depot lacked statutory standing to sue, because it was not the owner or assignee at the time that it a suit, and the later assignment did not assign past claims. The Fifth Circuit also affirmed the district court’s grant of summary judgment that Neutron Depot was not entitled to any damages under the remaining Lanham Act Section 43(a) claim for unfair competition, finding that there was no evidence creating a jury question as to whether Bankrate had wilfully infringed the mark.

The Appellant court in-depth dealt with reviewing summary judgement, dismissals for lack of statutory standing, and lastly the district court’s decision to dismiss with or without prejudice for abuse of discretion. Neutron argued that the district court erroneously applied a jurisdictional “time-of-filing” rule and dismissed its claim under Sections 32(1) and 43(c) of Lanham Act. On the other hand, Bankrate pointed out that at the time of filing the suit, Neutron had no statutory standing in filing infringement suit for the mark that was licensed to them and that it did not have the ownership of the same. Considering the same, they argued that,  

“a Lanham Act claimant cannot cure a standing defect after litigation begins. Itcites two Federal Circuit cases that hold patent assignees cannot curestatutory-standing defects through mid-litigation patent assignments. SeeAlps S., LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 1384–85 (Fed. Cir. 2015);Gaia Techs., Inc. v. Reconversion Techs., Inc., 93 F.3d 774, 779–80 (Fed. Cir.1996).”

The Appellant court observed that to bring a claim under section 32(1) and 43(c), a claimant must own the mark outright to have statutory standing. In the present case since, Neutron is not the owner of the marks, but merely an exclusive licensee, it has no standing to sue. Only an original owner or a true assignee—one who has acquired not only the right to use the mark but real title to the mark has a statutory right to file the suit. The court further said that it is not even required to discuss if time-of-filing rule was rightly applied or not. This is because, the assignment that was made in 2016 upon Neutron was not retroactive but was effective from December, 2016. Hence, Neutron did not own the mark when it filed the suit. Hence, the appellant court affirmed the dismissal of Neutron Depot’s claims under§§ 32(1) and 43(c).

Neutron next argued that the district court erred in finding it un-entitled to profit disgorgement for its false-designation claim under Section 43(a)(1)(A). Neutron argued that Bankrate used the infringing mark intentionally and wilfully and the same was testified by Bankrate’s corporate representative, Matthew Rihtar. The Appellant court to calculate the availability of profit disgorgement took into consideration the Pebble Beach factors. (Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 555 (5th Cir. 1998)). 

“An infringement is “willful[]” if done “voluntarily andintentionally and with the specific intent to cause the likelihood of consumerconfusion.” Id. at 349 n.9. We regularly reverse juries’ profit-disgorgementawards for lack of evidence of willfulness. See, e.g., Streamline Prod. Sys., Inc.v. Streamline Mfg., Inc., 851 F.3d 440, 461–63 (5th Cir. 2017); Tex. Pig Stands,Inc. v. Hard Rock Cafe Int’l, Inc. [TPS], 951 F.2d 684, 694–96 (5th Cir. 1992).”

The appellant court observed that the district court was right in finding no evidence of Bankrate wilfully infringing the mark. Bankrate had no knowledge about CSi or Neutron. The testimony does not reflect upon the intention to cause confusion or deceive the general public. Hence, the appellant court affirmed dismissing Neutron Depot’s Section 43(a)(1)(A) claim.

The third and the last argument that the appellant court dealt with was that the district court had abused its discretion in dismissing its claims with prejudice. Outrightly, the appellant court disagreed with the same. While affirming the district court decision, the appellant court observed that district court was in a better position to determine the case and simultaneously, the Neutron had sufficient opportunity to present its best submissions. Even though the defect of locus standi of Neutron Depot was brought to the court over 3 years ago, the district court gave Neutron 3 opportunities to file amended complaints. Hence, there has been no abuse of discretion at any point in the district court proceedings and the appellant court affirmed the district court’s decision of dismiss with prejudice. 

Neutron Depot LLC v. Bankrate Inc. Case number: No. 18-51021