the court first i'd like to thank the court for allowing the parties to appear before you today and to argue about some of these very important issues that affect trademark law particularly in connection with the rules relating to abandon them in the mark the central issue to be decided today in this appeal is whether there is a bright line test nt to a bona fide use the mark and that of course would involve deciding whether mark is being used for warehousing some other bad faith purpose or simply in the ordinary course of the business left and therefore everything thereafter was not considered a bona fide with all due respect to judge me now who happens to be an extremely diligent and gifted judge just records me not make negative inferences on the record of fact what is the ordinary course of this particular business what is appropriate use what is the size of the business is this an appropriate use for this type of business here we have a very small businessman operating out of his home  his warehouse was in his the ranch both before and after his bout with cancer he was a sales rep for more than one line including his own line of goods it is true that before his bout with cancer hi sales were more robust but he continued to sell his products with the trademark on the goods he continued to believe that his backpacks were the best in the business he continued to sell his goes to the same types of vendors he continued to transport his goods in interstate commerce and the question is absent any bad faith motive for doing that is that a bona fide use and even if it were not do we means made in good faith without fraud or deceit sincere genuine was manufactured by a party where they were going to share the profits and they brought in enough bags to to last them for quite some time obviously mr mehlis cancer inhibited sales mallet didn't have any cost in the good the manufacturer had cost in the goods but the record indicates that at some point in the relationship mr mallet turned over about sixteen thousand dollars worth of goods to the manufacturer and basically everything else he had left was his goods to do what he deemed appropriate and he had no cost in them so everything that he sold was pure profit so it was asking about that and let me ask you about that issue your contention is that he was not selling below cost because of this somewhat unusual arrangement the district court took the position that he was selling below  cost my question is why does it matter it doesn't matter i think it's a legal issue it doesn't matter i think the district court used that issue of selling below c a factor in her consideration as to whether mr mallett had a business or was selling for profit now if you're selling i mean in any business if you're selling to recover your money there is a legitimate business reason behind that whether i mean it is typical in the apparel industry and lots of other industries at the end of the season to reduce your inventory by selling the goods below cost if you have to replenish your your funds and you prepare for a new fact that there's this here i wouldn't i would agree that of all the factual disputes in the record it shouldn't make a difference whether the goods are sold below cost or not because of the start abandonment as to whether a a party sold goods below cost there are lots of different influences that can be drawn from selling goods below cost and it's not the kind of inference that you want to well there were two different questions let let's assume it was a pure liquidation as opposed to liquidating his business he had a trademark for the sale of backpacks and wallet even assuming that he had sold all of is good but he had an inventory would not necessarily mean that he abandoned his mark for example the very next day after he sold his goods he could have received an order for more backpacks in a while that's or a different style of backpacks and wallets and the same art and problem well it's a slightly different problem but if you're in a pure liquidation situation and all you have left is the mark and you have no operating business do you think that you arguments are viable well let's look at what what was the operating of the business both before and after the mr mallock suffered from cancer i mean he always operated his his business from his backpacks and containing the do so the question that he was asked was was he continues to sell his inventory or and the word was put in his mouth we look within your inventory and of course the answer is yes i was looking getting my inventory that's what i was doing i i don't think you would make a difference in this record and here's why every time mr mallock took his backpacks and wallets to let's say the florida trade show at any time somebody and this happens by the way in  these in these trade shows some company could have seen this product and said i like these backpacks and wallets let me order some and at that point when he's got an order he will order some more backpacks and while it's you know if you go to these these surf where trade shows there are all kinds of small vendors this is the nature of this industry and they sell watches backpacks while it's all kinds of other stuff related items in small quantities and sometimes they have you know they can go for years selling small quantities until some company says i like this label and i li position as i understand it your position seems to be that that that it has to be at least possible that he might stay in this or that simply the liquidating of of the e u this sale of goods in the liquidation of a business if that's what we know abandonment even while the sales are still going on is is that that's correct and if we were to have a standard that in connection with discontinuing a product line or any other sell off of inventory that that is indicative of abandonment we're going to have a big problem because businesses do this as a regular basis without any intention of abandoning their market the question is  it is not imagine a situation in which a company announces that it is intending to discontinue i did vision but it sells branded items and there are lots of branded items in inventory and they're going to think they're going to engage in a sale over the next two years and imagine the chaos that is going to be can come into the marketplace if other vendors start selling goods with the same trademark and contend that it's perfectly  confuse consumers during that two year period because this company has announced that it's going to discontinue this line of goods or this division and therefore it's consumers are no longer associating the product with the original manufacturer it would cause chaos  cessation of use and then there's a prime if they show case after three years but and there's a reason for that you've got to have nine use for significant period of time before you get to the issue abandonment and in the cases in most a bona fide use in the polonius case a company acquired the trademark sold heaters in the marketplace and went out of its way in an advertising campaign to destroy the goodwill of that mark because it introduced two new br for the same business and that's that was the situation in the zero play case and that is the situation in many of the warehousing cases through which a company is attending to keep others at bay from using the market it has no intention of using and that's what what is considered where has it but here you have a small business person that has been using the mark from the beginning of time in the same way selling it to the same vendors with the goods that are marked and there's nothing in this re i'm having a hard time understanding why it matters and the only reason it matters in this appeal your honor i wouldn't have made this argument but the way that the district court got around the absence of the cessation of use of the mark and  mr mallock ostensibly he closed his business in one thousand nine hundred eighty and i would agree that is not a proper analysis it is not a proper issue it's not a proper determination and the only reason i'm addressing it is because we don't think on this district court can ignore the evidence of continued sales and act and good faith activity by just claiming that or deciding as a matter of law that the business was closed in one thousand nine hundred for everything thereafter is not a bona fide  hat a title is it seems to me that the intent and the reason that intent is relevant is because it's in the statute correct but the intent in the statute is intended not to resume it's not the could come to the end of your inventory and you could hope somebody would buy your business and maybe after six months they will and i still mean that in that case you would argue they mark had not been aband correct if there isn't a completes the station of use of the mark for sufficient period of time then the issue of a bin shouldn't come up it's only if there's a long period of complet know if there were three if there were three year gap for example between selling out your product and then there are let's make it three and a half years just to make it a little easier if there were three a half year gap that there would be at least so they put the labels and promotional items and t shirts and things that had nothing to do with the source they weren't promoting the line in any way they were just using the labels and the court determined that that use of a mark was not bona fide because they weren't promoting the goods that they were selling and associate them with the source they were just getting the whole purpose was just to get rid of this hundred thousand labels that they had nothing to do with so i don't believe that that case is you good afternoon i'd like to address just the last issue that was raised regarding the label song t shirts are on the shirts and the fact that the labels were with just stop right there because that really is the heart of the cracks how can you say stuff conducting its business when he was selling the trademarked goods well because the trademark selling goods is not the  touchstone of the conducting of the business here again i think that what you have to do well i think you have to sell our goods with the trademark and use that mark as  is it your position that because they would be liquidating their inventory that that would not be a bonafide trademark use and that they would be abandoning it once they are and an announcement that they're going to liquidate coke zero no i don't think that they would be a it because they would still be operating and presenting themselves and presenting the product as originating from coca cola what happened in one nine hundred ninety eight i was less and less that's changed the hypothetical i'd say that cult instead of a that they're going out of business a year but in the meanwhile they're going to sell pulp zero with a trademark coke zero and they're going to reap the benefits of the path back to people like help zero so why he wasn't better well it's no different than someone that goes out and tries to sell an edsel that he has and merely because he has a product and it has a seems to me to be at a minimum at a factual issue the difficulty is it seems to me that we're mixing and matching business questions with statutory trademark questions the statute basically says it's abandoned if you use this think it's discontinued with intent not to resume and they're talking there about trademark use so i'm having some trouble understanding why someone who is the trademark holder selling trademark goods is not selling goods that me trademark use under the statute well i think where i get stuff i try to look at the statue i think you have to look at the nature of the activity that he was engaged in and frankly there's no dispute about this if you look at the receipts the receipts were for generic goods they were not for pelican branded goods when you look at the transactions they were made of five of those thirteen miners transactions were made to a consignment outfit not he was trying to sell a product based upon the trademark of furthermore one sense that that is that you know all these big retailers a lot of them consigning goods that certainly can't have benchmarks of whether but still selling trademarked goods because of the actions that mr mallock truck were as much as an announcement that he was going out of business that he was no longer conducting business when he discontinued all stopped using pelican in connection with those sales in fact what he said was in his deposition his only intent and he said this several times you committed his only intent was just to get rid of inventory that's all and i think the fact that he didn't associate the market with sales transactions after nine hundred ninety eight combined with his admission that he had no intent of ever ordering again and he had no one temp of doing anything other than getting rid of inventory i demonstrate on that on that point on that point i guess i would wonder if you look at the history of trademark law and the purpose of the trademark which is a source of benefit cation which i think both counsel have alluded to that really relates to the consumer and up to now we've talked only mallock did with his business was there anything in terms of consumer purchase of these that somehow disassociated the products from the mark in any way well i think that there are i think that there was if you look at those thirteen transactions and you look at who those transactions were we're you will find that twelve o thirteen prince actions were made to rip into teas that were not our customers of the pelican business while it was being conducted and  that you know goes into t v s would have had no connection at all between mr mallock and the pelican mark it was probably incidental that the products incidentally had because that's the little man the consumer is somebody who buys the backpack and says i hate those backpacks those pelican backpacks never last or i like teleconverter packs i'm glad i found one because i haven't seen very many out here so was there anything in terms of the trademark use that was undermined by its sales in terms of the consumer yes i think there was let's look at it from the standpoint of a consumer who purchased a product a book for nine hundred ninety eight would have looked to the into t the fictitious name it and being the into t that was actually generating the good will the into t to whom mr mallock or excuse me to whom the consumer would look for replacing that product in some way that removed it from the trademark and that almost sounds like an argument that oh he's not the trademark owner so maybe if you could clarify that  conducted that it's a separate independent business under the name a mallet but the fact is legally mr mallock then pelikan were the same entity we haven't focused on that point because of that fact but when you ask the question what's the consumer see what did the consumer look at the consumer doesn't know the pelican is the d p eight the consumer sees public and it's a separate business they have no way of making a branded marks he says that he enjoyed the same reputation that he did before nine hundred ninety eight in among consumers i assume he's talking about he says he made the best backpacks in the business and his reputation remain after  that now he says that but here we are on summary judgment and we have to draw all the inference from this figure much of your argument seems to me is based on inferential reasoning well it does but the facts of what we're talking about on summary judgment is whether there's a dispute material fact and the facts i think are undisputed if you look at judgment i was decision and you evaluate those facts those facts are undisputed and i think it's legitimate on summary judgment for don't know how we can resolve that part appeal and summary judgment situation we'll accept his opinion is not is not evidence that i think can be a basis of overcoming the district court i think  case now and going back to judge the cubans example about coke zero how is that any different well except under code zero who was continuing to present itself as coca cola as the business mr mollett ceased doing g that can is coming out of that secret vault in atlanta in terms of the coke now modify coke zero formula the consumer is everyone wants to know if it has a problem and they can blows up or to go to just like if you were a consumer of a backpack and there was some problem with flammability you would want to know where to go to well wouldn't you go to the person who is sourced identifying use and when mr mallock sells leftover inventory that he's just trying to get rid of that is not a source identifying use of  claim otherwise well i mean let's take let's say let's take martha stewart let's say she says i'm going to jail i'm shutting this down so kmart says you know what we're going to liquidate all of martha stewart and everything else because there's no doubt she can go to jail she's not going to continue her business under your theory it would seem to me that it would be open season for anybody to then come the end and used to martha stewart trademark on sheets or whatever because essentially she said i'm not going to continue my business kmart you know it's going to take six months to sell out the inventory why wouldn't that be the same thing well it would be the same thing because martha stewart has residual goodwill that was and been developed over the significant period of time there is no such research will good will in this case this was a very very let me let me stop ok let me stop there because i think i'm just trying to narrow the issues if so let's take away what we'll call the famous mark and instead we have just an average trademark that's not doesn't have the kind of notoriety or what's known as the famous mark  that accurate i think that that i guess i haven't thought of it that respect but i think that that's probably probably accurate and let me just point out again that of the of the purchasers of these before and i think that's significant because you talk about the goodwill that exist if these customers are in fact distributors and they distribute to  the customers we know the customers now got a we know how do we make the inferential leap that there's no goodwill at all left in this product well i think that we have shown the facts th not bonafide sales where he was trying to acquire goodwill in the in the market to himself and the fact that he sold to people under his own name without even mentioning pelicans and sold those goods i think is indicative of the fact that they were not bona fide sales of the market in commerce your time is expired but i want to make sure i think i'm going to need two minutes just two quick comments first off of the twelve of the thirteen sales they all went to surf shop similar types of customers that buy backpacks in authorize such an analysis i don't think so and what we're going to do is open up a pandora's box for every large company to come in and take a look at the small companies use of the markets they would like that mark let's take a look investigate and see how how much this mark has been put to a need we can kind of grab this mark from the small company because we can show on summary judgment that they're used just as in a bona fide years not because they had any real intent to abandon the mark but because they just plodding along and they're not doing a very good job of it and i don't think that's what congress intended that's not what the law was about and the district court decision shouldn't get help for that reason because it's going to create a lot of problems thank you very much for giving us the time you counsel on a thank all of you for