How much weight should a District Court give to an examiner’s preliminary findings at the USPTO?

According to a recent Sixth Circuit opinion filed May 3, 2017, there is “no obligation” for a District Court to defer to the USPTO examiner’s decision rejecting an application for trademark registration.

In 2013, the world’s largest package delivery company, United Parcel Service, Inc., submitted an application to the USPTO to register the mark “UPS OrderLink.”  The USPTO examiner rejected the application based on a likelihood of confusion with Progressive Distribution Services, Inc.’s “OrderLink” mark, a registered mark since 2004 and allegedly used for at least 19 years.  Undeterred by the examiner’s decision, UPS began using the recently rejected mark in connection with launching a software program.

Despite the fact that UPS abandoned its use of the “UPS OrderLink” mark three days earlier, Progressive filed a complaint against UPS in the U.S. District Court for the Western District of Michigan alleging UPS violated the Lanham Act, among other things.  The District Court granted summary judgment in favor of UPS on the basis that there was no likelihood of confusion between the marks as a matter of law.  The Sixth Circuit affirmed.

There is a multitude of case law analyzing the Sixth Circuit’s eight-factor likelihood of confusion test.  This case was no different, and the Sixth Circuit ultimately agreed with District Judge Gordon J. Quist’s conclusion that Progressive could not meet its burden.  However, the more interesting piece of the Sixth Circuit’s analysis involved a related, but more specific question.  As posed by the Sixth Circuit, the Court was called to decide “what level of deference is to be accorded an initial USPTO decision that denied UPS’s trademark of ‘UPS OrderLink’ on the basis of its finding that there was a likelihood of confusion with Progressive’s mark.”  See Opinion, at 6 (emphasis added).  In other words, if the USPTO examiner already engaged in a likelihood of confusion analysis and found in Progressive’s favor, in what way, if at all, could the District Court consider the USPTO’s preliminary decision?

Naturally, Progressive claimed the District Court incorrectly ignored the USPTO’s decision rejecting the “UPS OrderLink” application.  The Sixth Circuit disagreed, concluding that there was “no error” in the fact that the District Court decided not to defer to the USPTO examiner’s preliminary findings.  In reaching this conclusion, the Court noted that an examiner does not consider “many of the factors that courts consider in a Lanham infringement action–including a consideration of the manner in which the marks are actually used in the marketplace.”  Opinion, at 7.  As a result, and agreeing with a similar analysis performed by the U.S. Court of Appeals for the Third and Ninth Circuits, “the examiner’s analysis was incomplete.”  See Opinion, at 8.

Takeaway

Just because an application for registration is rejected by a USPTO examiner due to likelihood of confusion, that decision likely will not carry any weight with the District Court.  While the District Court is permitted to “look to the USPTO opinion to inform its conclusions on trademark analysis,” there is “no obligation” for the District Court to defer to the examiner.  As a side note, perhaps Progressive should have reconsidered filing suit when UPS abandoned the mark in response to Progressive’s cease and desist letter?  However, had it done so, the Sixth Circuit might not have had the opportunity to give guidance on this interesting issue.

Should you ignore an arbitration proceeding? How Marlin Controls, Inc.’s risky decision to do so paid off.

On July 20, 2017, the Sixth Circuit affirmed the U.S. District Court for the Eastern District of Tennessee’s decision to vacate an arbitration award.  How the case got to the Sixth Circuit is a cautionary tale in litigation gambling that ultimately paid off.

The facts of the dispute are relatively ordinary.  Marlin Controls, Inc. and Gridsmart Technologies, Inc. entered into a distribution agreement granting Marlin the exclusive right to distribute Gridsmart’s products within a defined territory.  Gridsmart terminated the contract.  A dispute ensued over how to handle outstanding orders and returns for previously ordered equipment.

Gridsmart initiated arbitration with the American Arbitration Association.  Marlin refused to participate.  As a result, less than four months after initiating arbitration, the arbitrator granted Gridsmart’s motion for summary judgment and issued a $293,000 award in Gridmart’s favor.

Refusing to participate in the arbitration was a fairly risky decision.  As most legal practitioners know (as well as fans of the New England Patriots), there are very limited grounds to challenge an arbitration award.  As a result, an arbitrator’s award is generally upheld in the court system.  Marlin’s gamble, however, is an exception to that general rule.

When Gridsmart subsequently petitioned to enforce the award in the Knox County Chancery Court, Marlin appeared, removed the case, and filed a motion to vacate the award contending that the arbitration provision did not survive the termination of the contract.  District Judge Pamela Reeves agreed and the Sixth Circuit affirmed.

Takeaway

Marlin’s decision to ignore the arbitration was extremely risky.  Had Marlin’s bet not paid off, Gridsmart would have had a nice payday without facing much resistance on the merits of the dispute, if any at all.  A far less risky choice of action (but perhaps more expensive in the short run) would have been for Marlin to offensively institute legal action seeking to declare the arbitration agreement unenforceable with respect to the outstanding orders and the returned equipment.  While the parties may have ended up with the same result, Marlin would have had more control over the process.

 

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Free market competition is one of the most fundamental business principles in American society. Under the law, however, competition must be fair.  This blog will provide timely and meaningful analysis of the development of recent court cases discussing competitive business practices and torts, including matters involving trade secret misappropriation, non-competition covenants, misappropriation of confidential information, and tortious interference.  This blog will pay particular attention to matters in the State of Tennessee, but will also identify significant national and international matters that may have far reaching applications to the business community.