AUSTRALIAN THERAPEUTIC v. NAKED TM, LLC

Before O’Malley, Reyna, and Wallach. Appeal from the Trademark Trial and Appeal Board

Summary: Standing to Challenge A Registered Mark at the TTAB Does Not Depend on the Challenger’s Proprietary Right to a Similar Mark

Australian Therapeutic Supplies Pty. Ltd. (“Australian”) first adopted the mark NAKED for condoms in early 2000 in Australia. In 2003, Australian began selling condoms featuring its unregistered mark to customers in the United States. Naked TM, LLC (“Naked”) owns a registration for the mark NAKED for condoms, which was filed September 22, 2003. In 2005, Australian contacted Naked and claimed rights in its unregistered mark, and Australian and Naked subsequently engaged in settlement negotiations. Naked asserted the parties reached an agreement. Australian disagreed. In 2006 Australian filed a petition to cancel Naked’s mark. In response, Naked asserted Australian lacked standing to seek cancellation. In 2018, following a trial, the Board issued a decision that concluded Australian lacked standing because, in the Board’s view, the parties entered into an informal agreement during their negotiations that Australian would not use or register its unregistered mark in the United States. As such, the Board held Australian could not establish a real interest in the cancellation or a reasonable basis to believe it would suffer harm from Naked’s registration.

The Federal Circuit reviewed the issue of standing de novo, and reversed. The Court reasoned that there was no requirement that a petitioner demonstrate a proprietary right in its own mark to demonstrate a cause of action before the Board. Thus, Australian contracting away its right to use and register an unregistered mark did not preclude it from challenging Naked’s mark at the Board. The Court noted that while an agreement could ultimately bar Australian from proving actual damage, § 1064 requires only a belief of damage. The Court next considered whether Australian had demonstrated a sufficiently reasonable belief of damage to establish standing. The Court explained that a petitioner may make such a showing by producing and selling merchandise bearing the registered mark or being refused registration in view of the registered mark. The Court observed that Australian twice filed for—and was refused over Naked’s registration—registration of its unregistered mark and further demonstrated advertising and sales of its product in the United States. Even if these sales were de minimis, the Court explained, there is no minimum threshold of commercial activity necessary to petition the Board for cancellation of a mark. As such, the Court held the Board erred by determining Australian lacked standing to petition for cancellation of Naked’s registered mark.

Judge Wallach dissented. While Judge Wallach agreed with the majority that no proprietary interest is required to have standing to challenge a mark, he disagreed that Australian demonstrated the legitimate commercial interest required to seek cancellation. In Judge Wallach’s view, even if Australian had demonstrated a commercial interest in Naked’s mark, the Board’s factual findings established Australian had contracted away, via settlement, any legitimate commercial interest and thus any reasonable belief in damages.

Editor: Paul Stewart

Written by: Jeremiah S. Helm, Ph.D. & Hans L. Mayer