Tuesday, August 15, 2006
Court of Appeal Reinstates ‘Pelican’ Trademark Infringement Suit
By a MetNews Staff Writer
Legitimate commercial sales of trademarked goods, even for a failing business depleting inventory, are sufficient to defeat a claim of abandonment of the trademark, the Ninth U.S. Circuit Court of Appeals ruled yesterday.
The court overruled summary judgment ordering cancellation of a trademark by U.S. District Court Judge Nora M. Manella of the Central District of California, who has since been appointed to the state Court of Appeal, and her determination that the use of the mark while depleting inventory was neither bona fide nor in the ordinary course of business, and that the owner had therefore abandoned the mark.
Ronald Mallett owned a federal trademark consisting of the word “pelican” below an outline of a flying pelican in a circle, covering wallets, backpacks, totebags, and luggage. Mallet purchased backpacks from his friend, Tom Robbins, who lived in Thailand and had access to manufacturing facilities. Mallet sold the backpacks with the pelican mark from 1995 through 2002.
In 1966 Mallett placed a very large order with Robbins, but sales plummeted and the 1996 inventory order was not depleted until 2002. Disappointed with the sales, Robbins parted ways with Mallett in 1998.
Mallett fired his sales representatives and quit using invoices or a letterhead with the pelican mark. He began making “on the spot” sales for cash, only some of which he documented. By late 1998, Mallett was selling backpacks at a steep discount.
Mallett testified that he continued to sell backpacks out of his car and travel bi-annually to the Florida trade show until he assigned the pelican mark, along with all the goodwill of the business, to Electro Source, LLC on August 5, 2002.
In return for the assignment, Electro Source paid Mallett $15,000 and a grant-back license to use the Pelican Mark on certain goods. At the time of the assignment, Mallett had at least 10 boxes of inventory left. He continued to sell goods until he sold his remaining inventory to Electro Source December 2002.
Pelican Products, Inc. and Brandess-Kalt-Aetna Group, Inc. manufacture, market, and sell a variety of goods under the trademarks “Pelican Products,” “Pelican,” and “Peli Products.” PPI also registered the mark “www.pelican.com.”
Electro Source filed suit against PPI in 2002, alleging a claim for trademark infringement of its pelican mark. PPI counterclaimed and alleged as a defense that Mallett had abandoned the pelican mark before he assigned it to Electro Source.
When PPI moved for summary judgment, Manella agreed with PPI that Mallets sales were mere attempts to “rid oneself of inventory” and not bona fide uses of the mark in the ordinary course of trade. Manilla found that the pelican mark had been abandoned, thus rendering the subsequent assignment to Electro Source ineffective. She ordered cancellation of the pelican mark.
But Judge M. Margaret McKeown, writing for the Ninth Circuit, said:
“[T]he district court did not hew to the strict statutory standard for abandonment, which requires complete discontinuance of use, even for a business on its way out. If there is continued use, a prospective intent to abandon the mark or business does not decide the issue of abandonment.”
Noting that “[t]he Lanham Act defines abandonment as (1) discontinuance of trademark use and (2) intent not to resume such use,” McKeown explained:
“Abandonment under [the Lanham Act] requires an intent not to resume trademark use, as opposed to a prospective intent to abandon the mark in the future. This distinction is not merely semantic. An intent not to resume use presupposes that the use has already ceased—the first prong of the abandonment statute. In contrast, a prospective intent to abandon says nothing about whether use of the mark has been discontinued.”
Larry C. Russ, Russ of August & Kabat in Los Angeles represented Electro Source, LLC. Gregory B. Wood of Fulbright & Jaworski, LLP, in Los Angeles represented Pelican Products, Inc. and Brandess-Kalt-Aetna Group, Inc.
The case is Electro Source LLC v. Pelican Products, Inc., 04-56648.
Copyright 2006, Metropolitan News Company