TRADEMARK LAW

Territoriality

QUESTIONS:

Consider again the outcome in thePerson'scase that you read. Do you think the outcome was fair? What problems could an absolute principle of territoriality create? On the other hand, what problems could be created by a rule that said that use anywhere in the world would be sufficient for rights in the United States? How might courts and Congress strike a balance between those two extremes?

Person's Co. v. Christman United States Court of Appeals for the Federal Circuit 900 F.2d 1565 (Fed. Cir. 1990)

FACTS OF THE CASE: Person's Co. appeals from the decision of the Patent and Trademark Office Trademark Trial and Appeal Board whichgranted summary judgmentin favor ofLarry Christman andordered the cancellationof appellant's registration for the mark "PERSON'S" for various apparel items. Appellant Person's Co. seeks cancellation ofChristman's registration forthe mark "PERSON'S" forwearing apparel. Weaffirm the Board's decision. Background The factspertinent to thisappeal are asfollows: In 1977,Takaya Iwasaki firstapplied a stylizedlogo bearing thename "PERSON'S" toclothing in his nativeJapan. Two yearslater Iwasaki formedPerson's Co., Ltd.,a Japanese corporation,to market anddistribute the clothingitems in retailstores located in Japan. In 1981, Larry Christman, a U.S. citizen and employee of a sportswear wholesaler, visited a Person's Co. retail storewhile on abusiness trip toJapan. Christman purchasedseveral clothing itemsbearing the "PERSON'S" logoand returned withthem to theUnited States. Afterconsulting with legalcounsel and being advisedthat no onehad yet establisheda claim tothe logo inthe United States,Christman developed designsfor his own"PERSON'S" brand sportswearline based onappellant's products he had purchased inJapan. In February1982, Christman contractedwith a clothingmanufacturer to produce clothing articles with the "PERSON'S" logo attached. These clothing items were sold, beginning in April 1982, to sportswear retailers in the northwestern United States. Christman formed Team Concepts, Ltd., a Washington corporation, in May 1983 to continue merchandising his sportswear line, which had expanded to include additional articles such as shoulder bags. All the sportswear marketed by Team Concepts bore either themark "PERSON'S" or a copyof appellant's globelogo; many ofthe clothing styleswere apparently copied directly from appellant's designs. In April1983, Christman filedan application forU.S. trademark registrationin an effortto protect the "PERSON'S" mark. Christman believed himself to be the exclusive owner of the right to use and register the mark in the United States and apparently had no knowledge that appellant soon intended to introduce its similar sportswear line under the identical mark in the U.S. market. Christman's registration issued in September 1984 for use on wearing apparel. In theinterim between Christman'sfirst sale andthe issuance ofhis registration, Person'sCo. became a well knownand highly respectedforce in theJapanese fashion industry.The company, whichhad previously sold garments under the "PERSON'S" mark only in Japan, began implementing its plan to sell goods under this mark in the United States. According to Mr. Iwasaki, purchases by buyers for resale in the UnitedStates occurred asearly as November1982. This wassome seven monthssubsequent to Christman's first sales in the United States. Person's Co. filed an application for U.S. trademark registration in the following year, and, in 1985, engaged an export trading company to introduce its goods

Person's Co. v. Christman into theU.S. market. Theregistration for themark "PERSON'S" issuedin August 1985for use on luggage, clothing and accessories. After recording U.S. sales near 4 million dollars in 1985, Person's Co. granted Californiadistributor Zip ZoneInternational a license tomanufacture and sellgoods under the "PERSON'S" mark in the United States. In early1986, appellant's advertisingin the U.S.became known toChristman and bothparties became aware of confusion in the marketplace. Person's Co. initiated an action to cancel Christman's registration. Christman counterclaimed and asserted grounds for cancellation of the Person's Co. registration. After some discovery, Christman filed a motion with the Board for summary judgment on all counts. In a well reasoneddecision, the Boardheld for Christmanon the groundsthat Person's useof the markin Japan couldnot be usedto establish priorityagainst a "goodfaith" senior userin U.S. commerce.The Board also found that Christman had not abandoned the mark, although sales of articles bearing the mark were oftenintermittent. The Boardgranted summary judgmentto Christman andordered appellant's registration cancelled. The Boardheld in itsopinion on reconsideration thatChristman had notadopted the markin bad faith despite his appropriation of a mark in use by appellant in a foreign country. The Board adopted the view that copying a mark in use in a foreign country is not in bad faith unless the foreign mark is famous in the United Statesor the copyingis undertaken forthe purpose ofinterfering with theprior user's planned expansion into the United States. Person's Co. appeals and requests that this court direct the Board to enter summary judgment in its favor. Issues 1. Does knowledge of a mark's use outside U.S. commerce preclude good faith adoption and useof the identical mark in the United States prior to the entry of the foreign user into the domestic market? 2. Did the Board properly grant summary judgment in favor of Christman on the issue of abandonment? Cancellation The Boardmay properly cancela trademark registrationwithin five yearsof issue when(1) there isa valid groundwhy the trademarkshould not continueto be registeredand (2) theparty petitioning for cancellation hasstanding. Such cancellationof the marks'registrations may bebased upon anyground which could have prevented registration initially. The legal issue in a cancellation proceeding is the right to registera mark, whichmay be basedon either (1)ownership of aforeign registration ofthe mark in question or (2) use of the mark in United States commerce. Priority The firstground asserted forcancellation in thepresent action is 2(d) ofthe Lanham Act;each party claims prior use of registered marks which unquestionably are confusingly similar and affixed to similar goods. Section 1of the LanhamAct states that"the owner of a trademarkused in commercemay register his trademark." Theterm "commerce" isdefined in Section45 of theAct as "allcommerce which maybe lawfully regulatedby Congress." Nospecific Constitutional languagegives Congress powerto regulate trademarks, sothe power of the federalgovernment to providefor trademark registrationcomes only

Person's Co. v. Christman under itscommerce power. Theterm "used incommerce" in theLanham Act refersto a saleor transportation of goods bearing the mark in or having an effect on: (1) United States interstate commerce; (2) United States commerce with foreign nations; or (3) United States commerce with the Indian Tribes. In the present case, appellant Person's Co. relies on its use of the mark in Japan in an attempt to support its claim for priority in the United States. Such foreign use has no effect on U.S. commerce and cannot form the basis for a holding that appellant has priority here. Theconcept of territoriality is basic to trademark law; trademark rights exist in each country solely according to that country's statutory scheme. Christman was thefirst to usethe mark inUnited States commerceand the firstto obtain afederal registration thereon. Appellant has no basis upon which to claim priority and is the junior user under these facts.16 Bad Faith Appellant vigorously asserts thatChristman's adoption and useof the markin the United States subsequent toPerson's Co.'s adoptionin Japan istainted with "badfaith" and thatthe priority inthe United Statesobtained thereby isinsufficient to establishrights superior tothose arising fromPerson's Co.'s prior adoption in a foreign country. Relying on Woman's World Shops, Inc. v. Lane Bryant, Inc.,17 Person's Co. argues that a "remote junior user" of a mark obtains no right superior to the "senior user" if the "junioruser" has adoptedthe mark withknowledge of the"senior user's" prioruse.18 In Woman's World, the senior user utilized the mark within a limited geographical area. A junior user from a different geographical area of the United States sought unrestricted federal registration for a nearly identical mark, with the exception to its virtually exclusive rights being those of the known senior user. The Board held that such an appropriation with knowledge failed to satisfy the good faith requirements of the Lanham Act and denied the concurrent use rights sought by the junior user. Person's Co. cites Woman's World for the proposition thata junior user'sadoption and useof a markwith knowledge ofanother's prior use constitutes badfaith. It isurged that thisprinciple is equitablein nature andshould not belimited to knowledge of use within the territory of the United States. While the facts of the present case are analogous to those in Woman's World, the case is distinguishable in one significantrespect. In Woman'sWorld, the firstuse of themark by boththe junior andsenior users was in United States commerce.In the case at bar, appellant Person's Co., while first to adopt the mark, was not the first user in the United States. Christman is the senior user, and we are aware of no case where a senior user has been charged with bad faith. The concept of bad faith adoption applies to remote junior users seekingconcurrent use registrations; insuch cases, thelikelihood of customerconfusion in the remote areamay be presumedfrom proof ofthe junior user'sknowledge. In thepresent case, when Christman initiateduse of themark, Person's Co.had not yetentered U.S. commerce.The Person's Co. 16 Section 44 of the LanhamAct permits qualified foreignapplicants who own aregistered mark intheir country of origin toobtain a U.S. trademark registrationwithout alleging actualuse in U.S.commerce. If aU.S. application isfiled within sixmonths of thefiling of the foreign application,such U.S. registrationwill be accordedthe same forceand effect asif filed inthe United Stateson the samedate on which the application was first filed in the foreign country. The statutory scheme set forth in 44 is in place to lower barriers to entry and assist foreignapplicants in establishingbusiness goodwill inthe United States.Person's Co. doesnot assert rightsunder 44,which if properly applied, might have been used to secure priority over Christman. 17 5 U.S.P.Q. 2d (BNA) 1985 (TTAB 1985). 18 Appellant repeatedly makes reference to a "world economy" and considers Christman to be the remote junior user of the mark. Although Person's did adopt the mark in Japan prior to Christman's use in United States commerce, the use in Japan cannot be relied upon to acquire U.S. trademark rights. Christman is the senior user as that term is defined under U.S. trademark law.

Person's Co. v. Christman had nogoodwill in theUnited States andthe "PERSON'S" markhad no reputationhere. Appellant's argument ignores the territorial nature of trademark rights. As the Board noted below, Christman's prior use in U.S. commerce cannot be discounted solely because he was aware of appellant's use of the mark in Japan. Knowledge of a foreign use does not preclude good faith adoption and use in the United States. While there is some case law supporting a finding of bad faith where (1) the foreign mark is famous here23 or (2) the use is a nominal one made solely to block the prior foreign user'splanned expansion intothe United States,as the Boardcorrectly found, neitherof these circumstances is present in this case. We agree with the Board's conclusion that Christman's adoption and use of the mark were in good faith. Christman adoptedthe trademark beingused by appellantin Japan, butappellant has notidentified any aspect of U.S. trademark law violated by such action. Trademark rights under the Lanham Act arise solely out ofuse of the mark inU.S. commerce orfrom ownership ofa foreign registrationthereon; "the law pertaining to registration of trademarks does not regulate all aspects of business morality." When the law has beencrafted with theclarity of crystal,it also hasthe qualities ofa glass slipper:it cannot beshoe- horned onto facts it does not fit, no matter how appealing they might appear. Abandonment Appellant nextseeks to cancelChristman's registration ofthe "PERSON'S" markon the groundof abandonment, citing(1) the intermittentsales registered byChristman's corporation duringthe years 1983-87; (2)the paucity oforders for replenishmentof corporate inventoryduring the sameperiod; and (3) the lack of significant sales to commercial outlets. Section 45 of the Lanham Act provides in pertinent part that a mark shall be deemed abandoned "when its use hasbeen discontinued withintent not toresume. Intent notto resume maybe inferred from circumstances." Person'sCo. carries theburden of establishingthe case forcancellation on groundsof abandonment by a preponderance of the evidence. Appellant correctlyasserts that thecritical issue hereis whether Christman'sactions demonstrate a cessation ofcommercial use and an intentnot to resumesuch use. Althoughsales by Christmanand his corporation were often intermittent and the inventory of the corporation remained small, such circumstances donot necessarily implyabandonment. There isalso no ruleof law thatthe owner ofa trademark must reach a particular level of success, measured either by the size of the market or by its own level of sales, to avoid abandoning a mark. After consideration of the record as a whole, the Board found nothing tosupport appellant's argumentthat Christman abandonedthe mark. Weagree with theBoard's conclusion that, as a matter of law, the evidence submitted by appellant was insufficient to raise an issue of fact of abandonment of the "PERSON'S" mark. Conclusion In United Drug Co. v. Rectanus Co., the Supreme Court of the United States determined that "there is no such thing as property in a trademark except as a right appurtenant to an established business or trade in connection with which the mark is employed. Its function is simply to designate the goods as the product of a particular trader and to protect his goodwill against the sale of another's product as his; and it is not 23See, e.g., Vaudable v. Montmartre, Inc., 193 N.Y.S.2d 332 (N.Y. Sup. Ct. 1959).

Person's Co. v. Christman the subjectof property exceptin connection withan existing business." Inthe present case,appellant failed to secure protection for its mark through use in U.S. commerce; therefore, no established business or productline was inplace from whichtrademark rights couldarise. Christman wasthe first to usethe mark in U.S. commerce. This first use was not tainted with bad faith by Christman's mere knowledge of appellant's prior foreign use, so the Board's conclusion on the issue of priority was correct. Appellant also raises no factual dispute which is material to the resolution of the issue of abandonment. Accordingly, the grant of summary judgment was entirely in order, and the Board's decision is affirmed. AFFIRMED.

COURSE HERO 1

The outcome of Person's Co. v. Christman was fair based on the facts and the law that was applied in the case. In the case, the US

Patent and Trademark Office's Trademark Trial and Appeal Board granted summary judgment in favor of Larry Christman and ordered the cancellation of Person's Co.'s registration for the mark "PERSON'S" for various apparel items.

An absolute principle of territoriality could create problems because it would mean that the right to use a trademark would be determined by the country of origin. This could lead to a situation where two companies operating in different countries could use the same trademark, leading to confusion and dilution of the trademark.

On the other hand, if a rule stated that use anywhere in the world would be sufficient for rights in the US, it could create problems as well. This could lead to trademark squatting, where companies would register trademarks in the US even if they had no intention of using them there, just to prevent others from using them.

Courts and Congress could strike a balance between these two extremes by considering the likelihood of confusion in a given case and the extent to which the use of the trademark in the US is legitimate. In other words, courts and Congress could balance the interests of trademark owners and consumers in determining trademark rights.

Explanation:

The outcome in the case of Person's Co. v. Christman was fair because the court made its decision based on the evidence presented and the law applicable to the case. In this case, the court found that Larry Christman had used the mark "PERSON'S" first in the

United States for clothing items and that Person's Co. could not establish rights to the mark in the US, as it had only used the mark in Japan prior to Christman's use.

An absolute principle of territoriality in trademark law could create problems because it would mean that a trademark used and protected in one country would not necessarily be protected in another country. This could lead to confusion and competition between different parties using the same mark in different countries.

On the other hand, a rule that said that use anywhere in the world would be sufficient for rights in the United States could create problems because it would allow companies to register trademarks in the US even if they have never actually used the trademark in the US. This could lead to an overburdened trademark registry and could dilute the value of trademarks.

To strike a balance between these two extremes, courts and Congress could consider factors such as the time and extent of use, the good faith of the parties involved, and the likelihood of confusion between the two uses of the mark. They could also take into account the international treaties and conventions relating to trademarks, which aim to harmonize trademark protection across different countries.