11/08/17

TTAB TRUMPS ANTI-TRUMP TRADEMARK PETITIONER

Timothy J. Lockhart

The U.S. Trademark Trial and Appeal Board (TTAB) rejected arguments that, as a board within the executive branch of the U.S. government, the TTAB should disqualify itself from ruling on a petition to cancel seven registrations for TRUMP marks in which the head of the executive branch, President Donald J. Trump, has an interest. Prospector Capital Partners, Inc. v. DTTM Operations LLC, 123 USPQ2d 1832 (TTAB 2017) [precedential].

On April 11, 2016, Prospector Capital Partners, Inc. (Prospector) filed a petition to cancel the TRUMP registrations on the ground of abandonment. Prospector claimed that it owns the mark TRUMP YOUR COMPETITION as used with “advertising and marketing consultancy,” in International Class 35. When it filed its petition, Prospector owned a pending application for TRUMP YOUR COMPETITION that shortly thereafter, on May 3, 2016, matured into Registration No. 4948838.  That the U.S. Patent and Trademark Office did not cite any of the TRUMP registrations, two of which cover services in Class 35, against Prospector’s application, begs the question of why Prospector went to the trouble and expense of filing its arguably unnecessary petition.

Instead of filing an answer to the petition, DTTM Operations LLC (DTTM) filed a motion to dismiss for failure to state a claim upon which relief can be granted. The TTAB granted the motion, allowing Prospector 20 days to file and serve an amended petition to cancel that properly pleaded both standing and a valid claim for relief.  But Prospector then filed a motion to disqualify the TTAB, to “transfer” venue of the proceeding to the U.S. District Court for the Central District of California, to vacate the TTAB’s order granting DTTM’s motion, and to suspend proceedings.

Prospector’s motion asserted that the TTAB should be disqualified because President Trump holds an interest in the TRUMP registrations and therefore the TTAB was incapable of fairly adjudicating the issues before it. Prospector argued that, because administrative trademark judges are appointed by the “Secretary of Commerce, who serves under the President, [and] has the authority to hire or fire” those judges, the TTAB’s decision-making process would be influenced by the fact of such appointment.  In support of its arguments Prospector quoted from an online blog posting of the “watchdog group” Project On Government Oversight and invoked Title 28 of the U.S. Code, which deals with the operations of the judicial branch.

In its ruling, written by Chief Judge Gerard F. Rogers, the TTAB rejected all of Prospector’s arguments. First, the TTAB said that it “is not a ‘court’ as defined by 28 U.S.C. § 451;” and TTAB judges are not judges of any such court. “Therefore, the judicial disqualification provision in 28 U.S.C. § 455 [was] inapplicable to these proceedings” (citations omitted).

Second, the TTAB noted that a presumption of regularity attaches to the procedures of government agencies and any order issued by an agency. See, e.g., U.S. Postal Serv. v. Gregory, 534 U.S. 1, 10 (2001); Busboom Grain Co. v. I.C.C., 830 F.2d 74, 75 (7th Cir. 1987). Cf. United States v. Chem. Found., Inc., 272 U.S. 1, 14 (1926) (“In the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties.”).

The TTAB pointedly observed that Prospector had provided “no facts whatsoever to support its asserted suspicions that the President or the Secretary of Commerce has, or will in the future, assert improper influence on the [TTAB’s] statutory responsibility to decide this cancellation proceeding based on the evidence and facts of record and the applicable law.” Accordingly, the TTAB said, “this motion to disqualify is utterly devoid of merit” (citation omitted).

The TTAB said that its authority to rule on trademark cancellation proceedings “extends to all registrations, irrespective of the identity of the owner of a registration. The [TTAB] is not relieved of its statutory duty to determine rights to registration because a party is directly or indirectly connected with the United States government.” Cf. Thompson v. Commissioner, 148 T.C. No. 3, 2017 WL 448978 (Feb. 2, 2017) (denying motion to disqualify judge on ground that judge would be biased because the president of the United States has the power to remove judges of the Tax Court for cause), appeal filed, No. 17-71027 (9th Cir. Apr. 10, 2017); Cheney v. U.S. Dist. Court for D.C., 541 U.S. 913 (2004) (denying motion to recuse Justice Scalia based on a personal relationship with former Vice President Cheney).

Adopting Prospector’s argument, said the TTAB, would mean that “there would exist entire categories of applications and registrations (those owned by, or connected to, the United States government or any of its officers or agencies) for which the [TTAB] would, per se, be unable to fulfill its statutory obligations.” Cf., e.g., U.S. Navy v. U.S. Mf’g Co., 2 USPQ2d 1254 (TTAB 1987) (determining likelihood of confusion with respect to mark owned by the United States Navy); Dep’t of Justice, FBI v. Calspan Corp., 196 USPQ 326 (TTAB 1977) (determining likelihood of confusion with respect to mark owned by the United States Department of Justice) (other citations omitted).

Finally, the TTAB noted that if Prospector were dissatisfied with whatever final decision the TTAB made in the cancellation proceeding, Prospector could appeal the decision to the U.S. Court of Appeals for the Federal Circuit or file a civil action in a federal district court. 15 U.S.C. § 1071.  In either of those scenarios Prospector would be making its arguments to entities within the judicial, not the executive, branch of the federal government.

For all of those reasons the TTAB denied Prospector’s motion that the TTAB disqualify itself. The TTAB also denied as premature Prospector’s motion for review by a federal court of the TTAB’s earlier order, denied as being beyond the TTAB’s power Prospector’s motion to have the pending proceeding “transferred” to a district court, and, in view of its ruling on the transfer request, denied as moot Prospector’s motion to have the proceeding suspended.  Under the circumstances the TTAB did, however, grant Prospector another 20 days to file an amended petition to cancel.  Prospector subsequently filed a motion for reconsideration of the TTAB’s order denying its motion, DTTM opposed the motion, and the TTAB will now rule on the motion for reconsideration.

 

IS THE GOLDEN GOOSE ON THE CHOPPING BLOCK?

Dawn L. Merkle

Patent owners are often seen as aggressive—sometimes accurately so—in protecting their patent rights. But when the alleged infringer is likely the only user for the patented invention, the patent owner may want to consider a kinder, gentler approach.

If you have been through airport security since 9/11, you probably have experienced a logjam at Transportation Security Administration (TSA) checkpoints, particularly as people empty their carry-on belongings into bins and then retrieve them on the other side of the x-ray machine. Sensing a need for a better way to get people through the checkpoints, the founder of SecurityPoint Media, LLC formulated a process for efficiently recycling those bins and carts at a checkpoint.  The process for moving the bins and carts efficiently was patented in 2004 (U.S. Patent No. 6,888,460) and included claims for using identification tags with the bins and placing advertising displays on the bottom of the bins.

Earlier, in 2002, SecurityPoint began soliciting the TSA to try its method. In 2006, the TSA finally decided to test the system, first at the Los Angeles airport for three months, then in 14 other airports for a year.  Until then, TSA had not been able to solve the problem of checkpoint congestion and the injuries suffered by its employees dealing with bins.  And SecurityPoint’s offer to provide test equipment for free was enticing.

At least one other advertising broker, The Adason Group, LLC, was interested in being part of the pilot and offered carts and bins similar to that of SecurityPoint to airports. SecurityPoint quickly sued Adason for patent infringement.  SecurityPoint also contacted airports and told them that its patent prevented airports from acquiring bins and carts from any other entity.  Adason and SecurityPoint settled the lawsuit and Adason filed for bankruptcy.  SecurityPoint was left as the sole broker in the pilot program.

The pilot was a success—efficiency increased and TSA employees suffered fewer injuries. In 2008, TSA rolled out a voluntary Bin Advertising Program (Program) under which airports could sign a memorandum of understanding (MOU) with TSA and then request proposals from advertising brokers.  Each advertising broker would make money by selling ads, and in some cases so would the airports through revenue sharing.  Alternatively, an airport operator could provide the bins and carts itself.

Not only did the TSA institute its Program, its 2009 Checkpoint Design Guide recommended placement of the bins with carts similar to SecurityPoint’s method, and most of the 450 U.S. airports agreed to adopt this process. But the TSA had not asked for, and SecurityPoint had not given, SecurityPoint’s permission to take those steps.

So SecurityPoint, aggressively protecting its patent, sued the TSA for patent infringement, seeking $380 million in damages. In response, the TSA challenged the validity of the patent.  At the time of the lawsuit, about 40 of the 450 airports had begun participation in the TSA’s program.

Shortly after SecurityPoint sued, the TSA changed the MOU and required the airport (or the advertising broker) to indemnify the TSA for any infringement claims. Seeing this as a threat to its business and as retaliation for the patent-infringement suit, SecurityPoint sought removal of this new provision.  The company claimed that airport operators would not sign MOUs with the indemnity language and that the TSA would incur increased costs for replacement bins and employee injuries.  When the TSA declined to remove the indemnification provision, SecurityPoint petitioned the U.S. Court of Appeals for the D.C. Circuit for review, accusing the TSA of “killing the goose that laid the golden eggs.”

The D.C. Circuit found that the TSA had not provided a “reasoned decision” for denying SecurityPoint’s request and remanded the matter to the TSA. In response, the TSA made a few tweaks to the indemnification clause (but did not remove it) and prepared a “reasoned decision” for its inclusion.  SecurityPoint sued again, noting that no new airport had contracted for SecurityPoint’s services since the MOU was revised.

Meanwhile, SecurityPoint scored a victory when the U.S. Court of Federal Claims upheld the validity of SecurityPoint’s patent. It seemed SecurityPoint’s aggressive protection of its patent was paying off—first against Adason and then against the TSA.  SecurityPoint was even awarded $86,000 in attorneys’ fees for the first challenge to the revised MOU.

But SecurityPoint’s luck ran out in the D.C. Circuit. In August 2017 that court ruled in favor of the TSA and allowed the indemnification clause to remain.  The court noted that the cost to the TSA of replacing bins and carts at airports not participating in the TSA’s Program would be less than the TSA’s potential liability for patent infringement.  Noting that the indemnification clause was actually beneficial to SecurityPoint because either airports would contract with SecurityPoint or other brokers would get a license from the company, the court found SecurityPoint’s concerns “puzzling.”

The usefulness of SecurityPoint’s patent appears to be limited to TSA screening points. SecurityPoint spent four years enticing the TSA to try its method and many more years in court enforcing its patent.  But rights to intellectual property have little value if the owner has no market for them.  The TSA has noted that only four airports signed the new MOU between 2012 and 2017.  Today only a small percentage of airports utilize the Program.  It will be interesting to see if the TSA truly has “killed the golden goose,” or if the D.C. Circuit was right and SecurityPoint actually benefits from the indemnification clause, or if, as a third possibility, SecurityPoint finds another way to exploit its patent.

 

The Willcox & Savage, P.C. website is for informational purposes only and should not be treated as legal advice. Neither reviewing the website nor corresponding with us through the website will create an attorney-client relationship between you and the firm. An attorney-client relationship and a corresponding duty to maintain confidentiality do not arise until Willcox & Savage, P.C. has determined that no conflicts of interest exist and has informed you that it is willing and able to represent you. Do not send confidential information or substantive details about your case or transaction to us until you speak with one or our attorneys and receive authorization. Information we receive will not be treated as confidential until we establish an attorney-client relationship with you and authorize you to send us confidential information.

By hitting "Agree" below, you agree that you have read and accept these terms.