Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-05153/USCOURTS-caed-1_04-cv-05153-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1051 Trademark Infringement

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

E. & J. GALLO WINERY,

Plaintiff,

v.

CANTINE RALLO, S.p.A.,

Defendant.

1:04-cv-5153 OWW DLB

ORDER RE: REQUEST FOR

RECONSIDERATION 

OF MAGISTRATE JUDGE’S RULING,

PURSUANT TO LOCAL RULE 72-303(c)

and 28 U.S.C. § 636(b)(1)(A)

I. INTRODUCTION

E. & J. Gallo Winery (“Plaintiff” or “E&J Gallo”) filed a

complaint for trademark infringement in this court on January 22,

2004. Doc. 1. After the summons and complaint were allegedly

served upon Cantine Rallo (“Defendant”) by service on January 28,

2004, on a designated representative under 15 U.S.C. § 1051(e),

default was entered on March 19, 2004. See Doc. 6. The district

court granted Plaintiff’s proposed judgment of permanent

injunction on March 24, 2004. Doc. 7. On July 12, 2004,

Defendant moved to vacate the default judgment. See Docs. 8-11. 

Magistrate Judge Dennis L. Beck issued Findings and

Recommendations (“F&R”), recommending that the motion to vacate

be granted on the grounds that the judgment was void because

service was improper. Magistrate Judge Beck rejected Defendant’s

alternative argument that default should be set aside for

excusable neglect under Federal Rule of Civil Procedure 60(b)(1). 

See Doc. 36, filed Sept 22. 2004. 

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1 The copy of the transcript of this deposition submitted

to the court bears two page numbering systems. The citations

contained in this memorandum opinion refer to the page numbers of

the deposition 

2

Plaintiff timely objected to the F&R and seeks review in the

district court. Doc. 36, filed Sept. 22, 2004. Defendant

opposes Plaintiff’s objections, Doc. 39, filed Oct. 13, 2004, and

moves for “conditional reconsideration” of the part of the F&R

concerning Rule 60(b)(1), Doc. 34, filed Sept. 22, 2004.

II. FACTUAL BACKGROUND

Cantine Rallo has been producing Marsala wine since 1860 and

has been selling wine in the United States for more than fifty

years. Doc. 11, Declaration of Francesco Vesco, at ¶1-2. In

1962, Rallo obtained a trademark for the mark Rallo and

associated design. Doc. 39 at 1. 

Rallo allowed its trademark to lapse, however, and again

applied to register the mark in 2001. Id. Rallo engaged an

Italian patent and trademark agent, Luciana Perrotta, to pursue

the renewal of their trademark. Doc. 31, Ex. A, Deposition of

John Egbert, at 8.1 Perrotta, in turn, maintained a business

relationship with John Egbert, a Houston attorney specializing in

patent and trademark litigation. Perrotta retained Egbert to

help with the registration of the Rallo trademark. Id. at 17.

Egbert, acting upon Perrotta’s instructions, filed an

application with the Patent and Trademark Office (PTO) to

register the Rallo trademark. See Id. at 34-35. As part of the

application process, in accordance with PTO regulations and

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2 Egbert does possess many transmittal letters notifying

Perrotta that certain documents were received by his Houston

3

Egbert’s regular practice, Egbert designated himself the

“domestic representative” for service of process pursuant to 15

U.S.C. § 1051(e). Id. at 23-24. Egbert assumed the status of

domestic representative in March 2001. Id. at 37. The PTO

approved Rallo’s application on December 30, 2002. See Doc. 39

at 1.

On October 29, 2003, E&J Gallo initiated a proceeding before

the PTO to oppose Rallo’s trademark application. Egbert Depo.,

at 39-40. E&J Gallo served the administrative opposition on

Egbert. Id. Egbert, in turn, provided a copy of the relevant

documents to Perrotta. Id. 40. Egbert asserts that, along with

copies of the documents, it was his normal practice to send a

communication to his client (in this case, Perrotta) indicating

that an answer would be due in the near future. Id. at 40. With

respect to these documents, and every other filing received by

Egbert concerning the Rallo trademark, Egbert simply sent copies

of documents and communications directly to Perrotta. Egbert had

no way of knowing when, whether, or in what form those documents

were passed along to Rallo. Id. 40. Perrotta then instructed

Egbert to respond to E&J Gallo’s administrative opposition. 

Egbert complied with this request. Id. at 43. 

On January 23, 2004, Egbert received a letter from E&J Gallo

warning Rallo of the strength of the E&J Gallo mark and demanding

that Rallo cease and desist using the Rallo mark. Id. at 44. 

Again, Egbert asserts that his normal practice would have been to

forward this letter directly to Perrotta.2

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office, but these transmittal letters were not disclosed in

discovery because Egbert considered them to be privileged

attorney-client communications. Egbert established a privilege

log for these letters, but the log has not been made part of the

record. Egbert Depo., at 47-48.

3 The summons served with the complaint bears the

caption: “Central District of California.” However, the summons

was signed by the clerk of court for the Eastern District of

California. The parties do not explicitly address the

consequences of this technical error.

4

While the administrative opposition proceeding was pending,

E&J Gallo filed this action (“the district court complaint”). In

the district court complaint, E&J Gallo alleges, among other

things, that Rallo’s use of its trademark infringes upon

trademarks belonging to E&J Gallo, in violation of federal

statute and state law. Doc. 1. Egbert was served a copy of the

district court complaint on January 28, 2004. Egbert Depo., at

56.3 Although Egbert did not believe he was the proper person to

be served with the district court complaint, he nevertheless

forwarded it on to Perrotta. Id. at 59. Neither Perrotta nor

Rallo ever advised Egbert to take any action with respect to the

district court complaint. On March 11, 2004, Egbert sent

Perrotta an opinion letter concerning the possibility default

judgment could be entered in the district court case. Id. at 69. 

Egbert then received from E&J Gallo a petition to suspend

proceedings in the trademark application proceeding because of

the pending district court case. Id. at 69-70. This was also

forwarded to Perrotta. Id. at 71. 

On March 1, 2004, E&J Gallo served a second cease and desist

letter addressed to Rallo upon Egbert. This letter warned of E&G

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5

Gallo’s intent to seek entry of default in the district court

case. Doc. 18, Declaration of Matthew A. Berliner, Ex. D. 

Egbert again sent this document to Perrotta. However, Egbert

acknowledges that, at this time, his communications with Perrotta

were “very sketchy and distant and far between and

uninformative.” Egbert Depo., at 81. Egbert speculates that

Rallo might have “severed their relationship with Perrotta during

this time.” Id. This was only supposition, however, as Rallo

never gave Egbert any direct notification that Perrotta was no

longer representing Rallo. Again, Rallo never sent Egbert any

instructions to take action with respect to the district court

case or the March 1 cease and desist letter. 

On March 16, 2004, E&J requested entry of default and

default judgment. Doc. 5. The relevant documents were served

on Egbert, who transmitted them to Perrotta. Egbert Depo., at

63. Egbert never received a response from Perrotta, nor did he

ever have a conversation with Perrotta about the subject.

Default was entered on March 19, 2004, and default judgment

granted on March 24. Docs. 6 & 7. Egbert forwarded documents

reflecting these actions to Perrotta. Egbert Depo., at 101-102. 

Rallo acknowledges receipt of a copy of the Summons and

Complaint but claims that Egbert never informed it that this was

a separate proceeding that required a separate response. Vesco

Decl., at ¶4-5. Rallo claims to have first become aware of the

default judgment when one of its United States distributors,

Distillerie Stock, contacted Rallo and informed it of the

permanent injunction. Id. 

In early April 2004, Egbert received a copy of E&J Gallo’s

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6

motion for summary judgment in the administrative proceeding

before the PTO. Egbert Depo. at 93-94. Presumably, this motion

was based on the entry of default judgment and permanent

injunction in the district court case. Egbert again sent these

documents to Perrotta, but received no response or instructions

regarding the administrative proceeding. Id. at 95. 

On April 19 2004, Sergio Ardito, who represented himself as

a translator for Rallo, contacted Egbert to inquire about finding

counsel to represent Rallo in the Eastern District of California. 

Id. at 63. Egbert sent a letter in response the same day,

suggesting two law firms in the Fresno area. Egbert Depo., Ex.

B. 

Rallo retained Jonathan Moskin of White & Case in New York

to represent it in the district court matter. On July 1, 2004,

Moskin sent a letter to E&J Gallo acknowledging the entry of

judgment by default and seeking an informal resolution to the

matter (presumably in the form of a stipulation to set aside

default) “without the need for protracted proceedings.” Doc.

10., Declaration of Jonathan Moskin, Ex. E. This request was,

obviously, not successful, and Rallo filed its motion to set

aside the default judgment on July 12, 2004. Doc. 8. 

Apparently, Rallo also failed to timely file a response to 

E&J Gallo’s motion for summary judgment in the administrative

proceeding, and the motion was granted without opposition. On

July 16, 2004, Rallo moved the Trademark Trial and Appeal Board

(“TTAB”) for relief from this ruling. Rallo submitted a copy of

the Magistrate Judges’ F&R setting aside the default in the

district court case and urged the administrative tribunal to do

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7

the same. See Doc. 46. E&J Gallo objected that the F&R was not

a final order and that the matter was still pending. On December

27, 2004, the TTAB issued an order permitting Rallo to clarify

the status of the pending civil case. Rallo failed to respond to

this order. On March 17, 2005, the TTAB denied Rallo’s motion

for relief from judgment. E&J Gallo filed a copy of the TTAB’s

decision with the district court on April 14, 2005, Doc. 45, and

served a copy of such on Rallo’s counsel, Doc. 46. This was,

apparently, the first Rallo’s counsel had heard of the TTAB’s

December 27, 2004 order or of the denial of its motion for relief

from judgment. See Doc. 52, filed Apr. 22, 2005. Rallo promptly

moved to have its motion for relief from judgment reinstated on

the grounds that its failure to timely respond to the December

27, 2004 order was excusable neglect. Id. The record does not

reflect any further developments in the administrative case. 

III. THE MAGISTRATE’S FINDINGS AND RECOMMENDATIONS

The F&R has two components. Magistrate Judge Beck first

examined the effect of 15 U.S.C. § 1051(e), which provided at the

time of the attempted service in this case that any applicant for

a trademark “shall designate, by a document filed in the United

States Patent and Trademark Office, the name and address of a

person resident in the United States on whom may be served

notices or process in proceedings affecting the mark.” The F&R

concluded that § 1051(e) only applies to proceedings before the

Patent and Trademark Office and does not authorize service on a

designated domestic representative in proceedings in U.S.

district courts. Id. at 8:3-5. As a result, “[s]ervice of

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4 As the first finding is sufficient to vacate the

default judgment entered against Defendant, Defendant only

objects to the second finding if the Plaintiff’s motion for

reconsideration of the first finding is granted. Id. 

8

process upon Mr. Egbert [allegedly designated as Defendant’s

domestic representative under §1051(e)] was not proper under the

circumstances of this case, nor was Mr. Egbert properly

designated as Defendant’s domestic representative.” Id. at 9:23-

24. The F&R concluded that default was not properly entered

(i.e., that it was void) and should be vacated. 

The F&R next addressed the alternative argument that default

should be vacated based on Defendant’s excusable neglect and

concluded that Defendant had not met its burden of proving

excusable neglect. Id. at 12:8-9.

In moving for reconsideration of the Magistrate Judge’s

findings and recommendations, E&J Gallo moves only for a

reconsideration of the first of these findings concerning section

1051(e) and reasserts its entitlement to recover attorneys fees

and costs. See Doc. 36 at 1:6-12. Rallo opposes reconsideration

of this finding. See Doc. 39. Rallo also filed a “conditional”4

objection to the second of the Magistrate Judge’s findings and

recommendations: that excusable neglect did not exist for

Defendant under Fed. R. Civ. P. 60(b)(1). See Doc. 34. E&J

Gallo opposes Rallo’s conditional objections. Doc. 38

//

//

//

//

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5 The statute has since been amended to make the

designation of a domestic representative optional, rather than

mandatory. The current statutory text provides:

If the applicant is not domiciled in the United States

the applicant may designate, by a document filed in the

United States Patent and Trademark Office, the name and

address of a person resident in the United States on

whom may be served notices or process in proceedings

affecting the mark. Such notices or process may be

served upon the person so designated by leaving with

that person or mailing to that person a copy thereof at

9

 IV. STANDARD OF REVIEW

When a party objects to the findings and recommendations of

a magistrate judge, the district court shall review de novo the

findings of fact and conclusions of law to which objection is

made. 28 U.S.C. § 636(b)(1)(C); Unites States v. Reyna-Tapia,

328 F.3d 1114, 1121 (9th Cir. 2003) (en banc). The court need

not review de novo any finding or recommendation that the parties

accept as correct. Id. at 1121. The district court may accept,

reject, or modify, in whole or in part, the magistrate judge’s

findings or recommendations. See 28 U.S.C. § 636(b)(1).

V. LEGAL ANALYSIS

A. Effectiveness of Service upon Mr. Egbert.

Plaintiff moves for reconsideration of that portion of the

F&R interpreting 15 U.S.C. 1051(e). Doc. 36 at 1:6-12. In 2001,

when Egbert filed Rallo’s trademark application, section 1051(e)

provided in pertinent part that a foreign trademark applicant:

shall designate, by a document filed in the United

States Patent and Trademark Office, the name and

address of a person resident in the United States on

whom may be served notices or process in proceedings

affecting the mark.5

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the address specified in the last designation so filed.

If the person so designated cannot be found at the

address given in the last designation, or if the

registrant does not designate by a document filed in

the United States Patent and Trademark Office the name

and address of a person resident in the United States

on whom may be served notices or process in proceedings

affecting the mark, such notices or process may be

served on the Director.

15 U.S.C. § 1051(e), as amended by the Technical Corrections in

Trademark Law, Pub. L. No. 107-273 § 13207 (2002) (emphasis

added).

6 The Magistrate Judge correctly noted that “[f]ew courts

have examined whether section 1051(e) provides for service on a

domestic representative in civil actions brought against foreign

corporations, and []the courts that have analyzed the issue []

are inconsistent. No court in the Ninth Circuit has tackled the

issue.” F&R at 5:24-27.

10

Plaintiff attempted to serve its civil complaint against

Defendant for alleged “trademark infringement and dilution” on

Mr. Egbert, the Texas lawyer. Two issues are presented: 

(1) whether a person appointed by a foreign corporation under 

§ 1051(e) may accept service of process for any civil proceeding

or only for proceedings before the PTO; and (2) whether Mr.

Egbert was a properly designated representative under § 1051(e). 

1. Does 1051(e) permit service of process upon a

“domestic representative” in a federal civil

action?

Whether section 1051(e) allows service on a domestic

representative of a foreign corporation in a civil action is a

question of first impression in this Circuit.6 Of the district

courts that have considered the subject, two have found that

section 1051(e) provides for service in all civil actions, see

V&S Vin and Sprit Aktiebolag v. Cracovia Brands, Inc., 212 F.

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7 A number of other courts have examined the related

question of whether the Lanham Act addresses a federal court’s

ability to assert personal jurisdiction over a Lanham Act

defendant. Under the “national contacts” doctrine, where a

federal statute authorizes nationwide service of process, the due

process requirements of the Fifth Amendment are satisfied for the

purposes of personal jurisdiction where defendant has sufficient

contacts with the nation as a whole, rather than sufficient

contacts with the particular state in which the federal court

sits. Many courts have held that the Lanham Act contains no such

provision. See Wells Fargo & Co. v. Wells Fargo Exp. Co., 556

F.2d 406, 418 (9th Cir. 1977)(“[N]ot all federal statutes which

grant a federal right to recovery and provide for suit in federal

court contain an additional provision granting [nationwide]

service of process powers. The Lanham Act, presently before us,

apparently does not.”); see also Sports Auth. Mich., Inc. v.

Justballs, Inc., 97 F. Supp. 2d 806, 809 (E. D. Mich. 2000) (“The

Lanham Act does not...provide for nationwide service of process

on a defendant or otherwise address this Court's personal

jurisdiction over Lanham Act defendants.”); Search Force, Inc. v.

Dataforce Intern., Inc., 112 F. Supp. 2d 771, 775 (S.D. Ind.

2000)(holding that Lanham act does not provide for nationwide

service of process); Johnson Worldwide Assoc., Inc. v. Brunton

Co., 12 F. Supp. 2d 901, 906 (E.D. Wis. 1998)(same). But see

Havana Club Holding, S.A. v. Galleon S.A., 974 F. Supp. 302

(S.D.N.Y. 1997)(holding that section 1051(e)’s requirement for

designation of an agent for service of process renders foreign

registrants “subject to the jurisdiction of the United States”

11

Supp. 2d 852 (N.D. Ill. 2002); Haemoscope Corp. v. Pentapharm AG,

2002 WL 31749195 (N.D. Ill. Dec. 9, 2002); see also Havana Club

Holding, S.A. v. Galleon S.A., 974 F. Supp. 302, 311-12 (S.D.N.Y.

1997) (finding in dicta that, where there has been an appointment

of a domestic representative, section 1051(e) affords service in

civil court proceedings affecting the trademark), while two

district courts have found that the statute does not apply to

service in a civil suit, see Outboard Marine Corp. v. Chantiers

Beneteau, 687 F. Supp. 366 (N.D. Ill. 1988); Sunshine

Distribution, Inc. v. Sports Authority Michigan, Inc., 157 F.

Supp. 2d 779, 787 (E.D. Mich. 2001).7

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for purposes of a jurisdictional pre-requisite contained within

the Cuban Assets Control Regulations, 31 C.F.R. § 515.201(b)(1)).

In any case, the effect of the Lanham Act’s terms on the

exercise of personal jurisdiction is not germane to the question

at issue in this case –- whether 1051(e) authorizes service upon

the designated agent in a case brought in federal court. 

12

a. The Plain Language of the Statute.

At the center of this dispute is the statutory language. In

2001, when Mr. Egbert applied to renew Rallo’s trademark and

designated himself as Rallo’s domestic representative, the

statute provided:

If the applicant is not domiciled in the United States

he shall designate by a written document filed in the

Patent and Trademark Office the name and address of

some person resident in the United States on whom may

be served notices or process in proceedings affecting

the mark. Such notices or process may be served upon

the person so designated by leaving with him or

mailing to him a copy thereof at the address specified

in the last designation so filed. If the person so

designated cannot be found at the address given in the

last designation, such notice or process may be served

upon the Director.

15 U.S.C. § 1051(e) (emphasis added). The critical language is

the phrase “proceedings affecting the mark.” The parties in this

case, and other district courts, disagree as to the scope and

meaning of this phrase. Defendant maintains that this language

refers only to matters before the Patent and Trademark Office

“affecting the mark.” Plaintiff contends it extends to any claim

“affecting the mark,” including claims brought in federal

district court.

This is a question of statutory construction: 

The purpose of statutory construction is to discern the

intent of Congress in enacting a particular statute.

The first step in ascertaining congressional intent is

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13

to look to the plain language of the statute. To

determine the plain meaning of a particular statutory

provision, and thus congressional intent, the court

looks to the entire statutory scheme. If the statute

uses a term which it does not define, the court gives

that term its ordinary meaning.

The plain meaning of the statute controls, and courts

will look no further, unless its application leads to

unreasonable or impracticable results. If the statute

is ambiguous--and only then--courts may look to its

legislative history for evidence of congressional

intent.

United States v. Daas, 198 F.3d 1167, 1174 (9th Cir. 1999). 

A statute is ambiguous if it “gives rise to more than one

reasonable interpretation.” DeGeorge v. United States Dist.

Court for the Cent. Dist. of Cal., 219 F.3d 930, 941 (9th Cir.

2000); see also U.S. v. Ventre, 338 F.3d 1047, 1052 (9th Cir.

2003)(“[W]here a statute yields to more than one reasonable

interpretation, we turn to the statute's legislative history for

evidence of congressional intent.”).

Here, Plaintiff first asserts that the term “proceeding” is

unambiguous, pointing to the Black’s Law Dictionary definition of

the term “proceeding”: 

In the general sense, [a proceeding is] the form and

manner of conducting juridical business before a court

or judicial officer...[the term] also refers to

administrative proceedings before agencies, tribunals,

bureaus, or the like. 

Black’s Law Dictionary, p. 836 (6th ed. 1991). But in the

statute, the term “proceedings” is modified by the phrase

“affecting the mark.” Plaintiff’s reliance on the dictionary

definition of the term “proceeding” does not settle whether the

phrase “proceedings affecting the mark” is susceptible to more

than one reasonable interpretation.

Plaintiff also points out that § 1051(e) refers to “notice

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or service in proceedings affecting the mark.” Plaintiff 

asserts that the term service is an unambiguous reference to

service of process in a civil case. First, Plaintiff insists

that the term “service of process” has a well-established

technical meaning: “a formal delivery of documents that is

legally sufficient to charge the defendant with notice of the

pending action.” Volkswagenwerk A.G. v. Schlunk, 486 U.S. 694,

700 (1988). Plaintiff also notes that an administrative

opposition filed in a PTO proceeding is called a “notice of

opposition,” implying that the term “service” could not refer to

documents in a PTO proceeding and therefore must refer only to

documents in a civil proceeding. This is a plausible reading,

but is not the only reasonable interpretation.

Defendant submits that the statutory language is equally

susceptible to an interpretation that would preclude service in a

civil action upon a domestic representative. Rallo relies

heavily on the location of the disputed language in the overall

statutory scheme. Section 1051(e) is part of Section 1 of the

Lanham Act, which generally sets forth the process by which a

trademark application must be filed with the PTO and makes no

mention of causes of action in the federal courts. Other

subsections explain how to file and amend use-based and intentto-use applications, §§ 1051(a)-(c), and how to verify “use,” 

§ 1051(d). The district court in V&S Vin found location to be an

indicator of ambiguity:

[T]he fact that the provision for designating a

resident for service of process appears in the

section of the trademark law regarding

registrations suggests that Congress may have

intended the appointment to cover only those

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8 V&S Vin is internally inconsistent on the question of

ambiguity. The opinion later states: “This Court does not agree

that the term ‘proceeding,’ standing alone, is sufficiently

ambiguous to require an analysis of its legislative history. 212

F. Supp. 2d at 855.

15

proceedings concerning the registration of the

mark. This, in turn, gives rise to an ambiguity

in the meaning of the statute, so we look to the

legislative history for guidance. 

V&S Vin, 212 F. Supp. 2d at 854.8 This reasoning is persuasive. 

The statutory language is reasonably susceptible to either of the

interpretations advanced by the parties. Accordingly, it is

appropriate to look beyond the plain meaning of the statute to

other indicators of Congressional intent, including legislative

history. 

b. A Review of the Caselaw.

Of the four cases that have examined the specific issue

presented in this case, two engaged in some analysis of the

legislative history of the statute, but reached different

conclusions. At the heart of the conflict are two paragraphs of

testimony given in 1925 by Arthur W. Barber, a U.S. Trademark

Association official, before the Congressional Joint Committees

on Patents. Mr. Barber stated in his testimony:

Section 8 provides that the foreign applicant for a

trade-mark shall name a representative in this country

upon whom may be served process...in any action or

proceeding affecting his trademark brought under the

provisions of this act, or under the provisions of any

other laws of the United States. 

It seems to me, Mr. Chairman, that the process that it

is permitted to serve upon a representative so named

should be limited to the process in a proceeding

affecting the registration it should not be extended so

as to enable a party to get jurisdiction of a foreign

registrant in an action not confined – or a proceeding

not confined to his registration. It seems to me that

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in a common law action for an injunction under this

provision of the bill, process should be served upon

the representative named in the registration, and it

strikes me that this is altogether too broad a

provision. 

Hearings on S. 2679 Before the Joint Comm. on Patents, 68th

Cong., 2d Sess 133 (1925)(emphasis added). 

The district court in Outboard Marine concluded that

Congress had adopted Barber’s recommendation that broad language

inviting service upon the designated representative was limited

to “proceedings affecting the trademark brought...under the

provisions of any other law of the United States” was “altogether

too broad a provision.” Outboard Marine emphasized the omission

of the term “action” from the current statutory text: 

[The precursor to Section 1051(e)], as enacted, makes

no mention of the term “action.” It is therefore

reasonable to infer that this term was elided from the

section in order to limit the service provision to

proceedings in the PTO.

687 F. Supp. at 368.

By contrast, the district court in V&S Vin gave little

weight to the Barber testimony. He was not a legislator. Less

weight is afforded individual hearsay statements about

legislation than to legislative committee notes or code

commissioner’s notes. V&S Vin, 212 F. Supp. 2d at 855 (citing 

Kelly v. Robinson, 479 U.S. 36, 51 n.13 (1986)). The V&S Vin

court reasoned that Outboard Marine had relied on an erroneous

analysis of legislative history:

...Congress did not actually make a decision to

omit the word “action” from the service of

process provision; in fact, that word never

appeared in any version of the bill. Moreover,

the legislative history indicates that Congress

did not intend for the § 1051(e) agent to receive

service of process only in proceedings affecting

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the registration of the mark notwithstanding the

provision’s placement in the part of the

trademark statute that concerns registration. 

Early versions of the bill contained that exact

language, but as enacted, the provision covers

all “proceedings affecting the mark.” See S.

2679; H.R. 6248; H.R. 13486; H.R. 6683....

212 F. Supp. 2d at 855-56.

As explained below, a comprehensive review of the

legislative history does precious little to un-muddy the waters

(or the wine).

c. Legislative History: A Review of

Congressional Action Leading up to the

Passage of the Lanham Act.

The first draft of the bill that would eventually become the

Lanham Act was submitted for consideration by the Senate on

February 29, 1924. Section 8 of this bill provided:

Every applicant for registration of a trade-mark, or

for renewal of registration of a trade-mark, who is not

resident within the United States,

shall...designate...some person residing within the

united states on whom process or notice of proceedings

affecting the trade-mark of which such applicant may

claim to be the owner, brought under the provisions of

this Act or under other laws of the united States, may

be served with the same force and effect as if served

upon the applicant or registrant in person...

S. 2679, 68th Cong. § 8 at 10 (1st Sess. 1924).

Shortly after the submission of this draft bill, the Joint

Committee on Patents held a hearing on S. 2679, during which Mr.

Barber made the statements cited in Outboard Marine and V&S Vin. 

His complete statement reads as follows:

Mr. Barber: Section 8 provides that the foreign

applicant for a trade-mark shall name a representative

in this country upon whom may be served process in any

action or proceeding - that is lines 12 and 13 of page

10- in any action or proceeding affecting his trademark

brought under the provisions of this act, or under the

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provisions of any other laws of the United States. 

It seems to me, Mr. Chairman, that the process that it

is permitted to serve upon a representative so named

should be limited to the process in a proceeding

affecting the registration it should not be extended so

as to enable a party to get jurisdiction of a foreign

registrant in an action not confined – or a proceeding

not confined to his registration. It seems to me that

in a common law action for an injunction under this

provision of the bill, process should be served upon

the representative named in the registration, and it

strikes me that this is altogether too broad a

provision. 

Hearings on S. 2679 Before the Joint Comms. on Patents, 68th

Cong. at 133 (2d Sess. 1925).

Mr. Barber’s comments arguably influenced an edit made to

the text of the next draft bill submitted to the House: 

Every applicant for registration of a trade-mark or for

renewal of registration of a trade-mark, who is not

resident within the united States,

shall...designate...some person residing within the

United States on whom process or notice of proceedings

affecting the registration of the trade-mark of which

such applicant may claim to be the owner, brought under

the provision of this Act or under other laws of the

United States, may be served, with the same force and

effect as if served upon the applicant or registrant in

person....

H.R. 6248, 69th Cong. § 8 at 11-12 (1st Sess. 1925)(emphasis

indicating changed language). The use of the phrase “proceedings

affecting registration” is more narrowly drawn than the phrase

“proceedings affecting the mark.” However, the text still

included the language “brought under the provision of this Act or

under other laws of the United States,” which is arguably broad

enough to encompass civil complaints filed in federal district

court for injunctive relief.

This language remained unchanged in two draft bills

submitted to the House in 1926 and 1927, respectively. H.R.

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13486, 69th Cong. § 8 at 11-12 (2d Sess. 1926); H.R. 6683, 70th

Cong. § 8 at 16 (1st Sess. 1927). In March 1928, language was

inserted requiring that the designation be “continuously

maintained”: 

Every applicant for registration of a trade-mark or for

renewal of registration of a trade-mark, who is not

resident within the united States, shall...designate...

some person residing within the United States on whom

process or notice of proceedings affecting the

registration of the trade-mark of which such applicant

may claim to be the owner, brought under the provision

of this Act or under other laws of the United states,

may be served, with the same force and effect as if

served upon the applicant or registrant in person. 

Such designation shall be continuously maintained. 

H.R. 11988, 70th Cong. § 8 at 17-18 (1st Sess. 1928)(emphasis

indicating changed language). This text remained unchanged

throughout 1928 and 1929. H.R. 13109, 70th Cong. § 8 at 15-16

(1st Sess. 1928); H.R. 2828, 71st Cong § 8 at 14-15 (1st Sess.

1929). 

After the 1929 draft, the bill was tabled for almost ten

years. In January 1938, Congress again turned its attention to

trademark legislation. A draft that more closely resembles the

modern statutory language was then introduced to the House: 

Title I - The Principal Register

Sec. 2. Trade-marks used in commerce shall be

registered in the following manner:

(a) By filing in the Patent Office – 

(1) a written application, verified by the

applicant, in such form as may be prescribed

by the Commissioner; 

(2) a drawing of the trade-mark; and 

(3) number of specimens or facsimiles of the

trade-mark as actually used as may be

required by the Commissioner. 

(b) By paying into the Patent Office the sum of $15. 

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9 Later amendments to this statute moved the disputed

provision to § 1051(e). 

20

(c) By complying with such rules or regulations, not

inconsistent with law, as may be prescribed by the

Commissioner. 

(d) If the applicant is not domiciled in the United

States he shall designate by a written document

filed in the Patent Office some person resident in

the United States on whom may be served notices or

process in proceedings affecting the trade-mark.

H.R. 9041, 75th Cong. § 2(d) at 2 (3d Sess. 1938))(emphasis

indicating changed language). Noticeably absent is the broad

language “brought under the provision of this Act or under other

laws of the United states” found in all of the drafts considered

during the 1920s. However, the text shifted back to “proceedings

affecting the trade-mark” rather than the narrower “proceedings

affecting the registration.” 

This language evolved over the next few years toward the

current statutory text. In March of 1938, the House considered a

bill which specified that service could be made by leaving a copy

of relevant documents at the designee’s last known address:

If the applicant is not domiciled in the United States

he shall designate by a written document filed in the

Patent Office some person resident in the United States

on whom may be served notices or process in proceedings

affecting the trade-mark. Such notices or process may

be served upon the person so designated by leaving a

copy thereof at the last address so filed.

H.R. 4744, 76th Cong § 2(d) at 2 (1st Sess. 1938)(emphasis

indicating new language).9 

In 1939, the Trademarks Subcommittee of the House Committee

on Patents held hearings on H.R. 4744. The service/designation

provision was discussed at some length during the testimony of

Karl Fenning, a PTO official. 

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10 In support of this second point, Stolte quotes Havana

Club Holding, S.A. v. Galleon, S.A., 974 F. Supp. 302, 311

(S.D.N.Y. 1997), which held that designation of an agent by a

foreign corporation pursuant to section 1051(e) satisfied the

requirement in an unrelated statute that the corporation be

“subject to the jurisdiction of the United States.” The Havana

Club court also stated in dicta that a foreign company was

“subject to service of process by service of its United States

representative” designated pursuant to 1051(e). Id. Critically,

the scope and meaning of 1051(e) was not in dispute in the Havana

Club case, nor did the Havana Club court engage in any detailed

analysis of the provision. 

21

Mr. Fenning: This provides, theoretically, for the

appointment of an agent in the United States, on whom

service may be made. It frequently happens that the

agent thus appointed dies or disappears during the 20-

year period of registration. In some instances that

may not be of very great moment, but in other instances

it may be of very great moment. It seems to me there

should be a provision made in here for a continuous

appointee’s name and address appearing on the record,

possibility with a further provision that on the

failure to locate the agent, service may be made on the

Commissioner of Patents, and jurisdiction may be

obtained in the courts of the District of Columbia. 

You see, without any agent present, if the agent dies

or disappears, the court has no jurisdiction of

proceedings to cancel the mark. I think some provision

of that sort should be made to cover those

eventualities.

[Congressman] Lanham: Personally, I see no objection to

that, because, in order that process may be made or

served there must be someone on whom it can be served.

 

Hearings on H.R. 4744 Before the Subcommittee on Trademarks of

the House Committee on Patents, 76th Cong. at 14-15 (1st Sess.

1939).10

One commentator asserts that the above-quoted testimony

makes it “clear that the drafters of the Lanham Act expressly

intended section 1(e) to pertain to service of process in a civil

court proceeding.” See Keith M. Stolte, Avoiding Hague

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Convention Headaches--An analysis of Lanham Act Section 1(e)

Service of Process on Foreign Nationals, 92 Trademark Rep. 1417,

1424-25 (2002). Stolte further asserts that the mention of

obtaining jurisdiction in the courts of the District of Columbia

“implies that [section 1051(e)] may also provide a valid basis to

confer personal jurisdiction as well as to permit service of

process on a foreign national in civil litigation.” Id. at n.35. 

But the statement by Mr. Fenning is hardly “clear” evidence of a

legislative intent to make section 1051(e) apply to service of

process in district court cases. No language establishing

jurisdiction in the district court of the District of Columbia

over 1051(e) proceedings was ever inserted into any subsequent

version of the Lanham Act. 

Later during that same hearing on H.R. 4744, Mr. Fenning and

Congressman Lanham discussed over the manner by which documents

may be served upon designated agent. Mr. Fenning argued: 

It says notice or process may be served, in effect, by

leaving a copy at the address specified in the last

designation. I do not think that is adequate service

on anything or anybody. I would suggest that that be

amended to say that notice or process may be served in

the manner provided by the Rules of Civil Procedure. 

This bill [as currently drafted] merely means you can

go along and slip something in the window or put it in

the ash-can in the back yard. 

Hearings on H.R. 4744, at 89 (1939). Specific methods of service

were discussed, but the language remained essentially unchanged:

[Congressman] Lanham: [Reading proposed language] Such

notices or process may be served upon the person so

designated by leaving him a copy thereof at the address

specified in the last designation so filed. 

Mr. Fenning: The rules of procedure have worked out

every detail; that is why I think we ought to refer to

them.

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[Congressman] Lanham: [The language as proposed] does

not obviate them.

Mr. Fenning: Those rules have no effect here unless we

put it in the statute that they do.

Id. at 92. If Fenning believed that 1051(e) covered service in

all district court cases, his comment would make no sense at all,

as the Federal Rules of Civil Procedure already governed service

throughout the federal court system. Rather, Mr. Fenning states

his view that the intent of 1051(e) was to set up a parallel

system of service for administrative proceedings. 

A provision for alternative service upon the Commissioner

was proposed in June of 1939 and considered by both the House and

Senate. 

If the applicant is not domiciled in the United States

he shall designate by a written document filed in the

Patent Office some person resident in the United States

on whom may be served notices or process in proceedings

affecting the trade-mark. Such notices or process may

be served upon the person so designated by leaving a

copy thereof at the last address so filed. If the

person so designated cannot be found at the address

given in the designation, such notice or process may be

served upon the Commissioner.

S. 895, H.R. 6618, 76th Cong. § 2(d) at 2 (1st Sess.

1939)(emphasis indicating changed language). 

This language remained unchanged in drafts submitted to the

House in 1941, 1943, and 1945. H.R. 5461, 77th Cong. § 2(d) at 3

(1st Sess. 1941); H.R. 82, 78th Cong. § 2(d) at 3 (1st Sess.

1943); H.R. 1654, 79th Cong. § 2(d) at 3 (1st Sess. 1945). 

No further changes were made to this provision prior to the

enactment of the Lanham Act in 1946. 60 Stat. 427 (July 5,

1946). 

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In 2002, the designation of a domestic agent for service was

made voluntary and provision was made for situations in which no

designation is made:

If the applicant is not domiciled in the United States

the applicant may designate, by a document filed in the

United States Patent and Trademark Office, the name and

address of a person resident in the United States on

whom may be served notices or process in proceedings

affecting the mark. Such notices or process may be

served upon the person so designated by leaving with

that person or mailing to that person a copy thereof at

the address specified in the last designation so filed.

If the person so designated cannot be found at the

address given in the last designation, or if the

registrant does not designate by a document filed in

the United States Patent and Trademark Office the name

and address of a person resident in the United States

on whom may be served notices or process in proceedings

affecting the mark, such notices or process may be

served on the Director. 

Technical Corrections in Trademark Law, Pub. L. No. 107-273 §

13207 (2002). (This bill caused language of § 1051(e) to conform

to the voluntary provision in the Patent Act, which will be

discussed in greater detail below.) 

Discerning Congressional intent from this legislative

history is extremely difficult. Ordinarily, the hearsay comments

from individuals, even if they are legislators, are not

authoritative as compared with committee reports. Hertzberg v.

Dignity Partners, Inc., 191 F.3d 1076, 1082 (9th Cir. 1999); see

also Garcia v. United States, 469 U.S. 70, 76 (1984). Mr.

Barber’s comments, on which the Outboard Marine court relies,

suggest only that one administrative official, who was not a

legislator, believed the originally proposed service provision

was too broad. The drafts immediately succeeding his comments

did change the language from “proceedings affecting the mark” to

“proceedings affecting the registration” but this change is

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11 The Supreme Court cautions against drawing inferences

from failed legislative proposals, deeming them “a particularly

dangerous ground on which to rest an interpretation of a prior

statute.” Central Bank of Denver, N.A. v. First Interstate Bank

of Denver, N.A., 511 U.S. 164, 187 (1994)(“Congressional inaction

lacks persuasive significance because several equally tenable

inferences may be drawn from such inaction, including the

inference that the existing legislation already incorporated the

25

nowhere explained in the Congressional Record. The provision

continued to include the language: “brought under the provision

of this Act or under other laws of the United States.” Given the

continued inclusion of this broad language, it is difficult to

conclude that Congressional intent was shaped in any way by

Barber’s comments. It is also hard to distinguish “proceedings

affecting the mark” which more readily admits of judicial actions

over the mark, from “proceedings affecting the registration”

which more narrowly addresses the administrative process to

perfect the mark before the PTO and potential judicial litigation

concerning the registration. 

After a lengthy break in legislative activity on the subject

lasting throughout most of the 1930s, a new draft trademark law

was submitted in 1939 which reverted to the phrase “proceedings

affecting the mark.” It is impossible to tell whether this

reversion was an overt rejection of the “proceedings affecting

the registration” language; an attempt to acknowledge the

previous language “brought under the provision of this Act or

under other laws of the United states”; an inadvertent reference

to the language used in the earliest drafts by a drafter

unfamiliar with the many edits made to the text during the 1920s;

or the result of some other motivations or circumstances.11

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offered change.”); see also Solid Waste Agency of Northern Cook

County v. United States Army Corps of Eng’rs., 531 U.S. 159, 160

(2001). Even if it were possible to glean Congressional intent

from the pre-1938 drafts, these were essentially abandoned and

could be considered “failed legislative proposals.”

26

The testimony provided by Karl Fenning to the House

Trademarks Subcommittee adds another facet to the analysis. 

Fenning suggested a provision for alternative service upon the

Commissioner be included. Language to that effect was added in

June of that year. On the one hand, Fenning made reference in

his comments to ensuring default “jurisdiction in the courts of

the District of Columbia.” This reference could imply that that

Fenning believed that the term “proceedings affecting the mark”

language was already broad enough to cover service in district

court cases, and that it was preferable to provide a default

venue in which jurisdiction would be assured, should the predesignated domestic representative (within the jurisdiction of a

particular district court) die or disappear. However, no such

language referencing the federal courts was ever included in §

1051. Moreover, Fenning’s simultaneous comment that the Federal

Rules of Civil Procedure would “have no effect here unless we put

it in the statute that they do” suggests that 1051(e) was not

meant to cover proceedings in the district courts, as service of

process in such proceedings was governed by the Federal Rules. 

At best, the legislative history suggests a narrow

interpretation. But, given the scepticism with which courts are

instructed to view opinions of individual witnesses and

legislators that are not reflected in the statutory language or

in committee reports, serious ambiguity remains. 

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d. Other Indications of Legislative Intent.

 (1) PTO Policy as set forth in TMEP § 604. 

E&J Gallo argues that Rallo’s interpretation of 

§ 1051 conflicts with established policy of the PTO. E&J Gallo

points to section 1008 of the “Trademark Manual of Examining

Procedure” (“TMEP”), which provides: 

The designation [of a representative] is not the same

as a power of attorney. The designation serves a

different purpose, namely, to bring foreign applicants,

registrants and parties under the jurisdiction of the

United States legal system. The designation of a

domestic representative does not authorize the person

designated to prosecute the application or to represent

a party in a proceeding before the USPTO. 37 C.F.R. §

2.24. Similarly, a power of attorney does not serve as

a designation of a domestic representative unless the

power of attorney specifically states that the attorney

is also the domestic representative on whom may be

served notices or process in proceedings affecting the

mark.

TMEP § 604, at “http://www.uspto.gov/web/offices/tac/tmep” (last

visited Aug. 16, 2005) (emphasis added). This passage, E&J Gallo

asserts, suggests that the PTO takes a broad view of the scope of

a designation under 1051(e).

An agency’s interpretation is entitled to deference under

certain circumstances, such as when an agency is charged with the

duty of interpreting and enforcing a regulation. Here, however,

the target of the interpretation is a service-of-process

provision, which is traditionally the province of the courts and

not within the agency’s special expertise. See Ardestani v. INS,

502 U.S. 129, 112, S.Ct. 515, 526 (1991)(“[R]reviewing courts do

not owe deference to an agency's interpretation of statutes

outside its particular expertise and special charge to

administer.”). In addition, the above-quoted passage is from a

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manual of trademark examining procedure, not a published rule

subject to notice and comment. As such, it is entitled to even

less deference. Christensen v. Harris County, 529 U.S. 576, 587,

(2000)(“[I]nterpretations contained in policy statements, agency

manuals, and enforcement guidelines, all of which lack the force

of law--do not warrant Chevron-style deference....[but instead]

are entitled to respect....but only to the extent that those

interpretations have the power to persuade....”).

(2) Meaning Ascribed to Similar Language in

the Patent Act. 

Finally, the choice of Congress to subject foreign

applicants, registrants, and parties to personal jurisdiction,

which is a waivable due process right, is distinguishable from

service of process to affect fair notice of the right to be heard

and defend, which is an unwaivable, if not consented to, due

process right. Similar language contained within a section of

the U.S. Patent Act is of limited guidance. 35 U.S.C. § 293

provides:

Every patentee not residing in the United States may

file in the Patent and Trademark Office a written

designation stating the name and address of a person

residing within the United States on whom may be served

process or notice of proceedings affecting the patent

or rights thereunder. If the person designated cannot

be found at the address given in the last designation,

or if no person has been designated, the United States

District Court for the District of Columbia shall have

jurisdiction and summons shall be served by publication

or otherwise as the court directs. The court shall have

the same jurisdiction to take any action respecting the

patent or rights thereunder that it would have if the

patentee were personally within the jurisdiction of the

court.

(emphasis added). This section uses the phrase “process or

notice of proceedings affecting the patent or rights thereunder”

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alongside express language granting default personal jurisdiction

over the foreign patentee to the federal courts of the District

of Columbia if the designee cannot be found or no designee has

been appointed. 

 The direct reference to the courts of the District of

Columbia suggests that the Patent Act ascribes a meaning to the

phrase “proceedings affecting the patent or rights thereunder”

that includes claims brought in federal court. On the one hand,

the similar phrase “proceedings affecting the trademark” in the

Lanham act could be assigned a similar meaning -- one that

encompasses district court cases. See U.S. Industries, Inc. v.

Maclaren, et al., 1976 WL 21010, 191 U.S.P.Q. 498 (D.D.C.)

(finding that foreign patent owners become amenable to service in

the United states by designating an agent for service of process

under § 293). The absence of any reference to the federal courts

in § 1051(e) just as easily supports the opposite conclusion. 

(3) Related language in other laws.

Congress has clearly specified the scope of a designation to

include service of process in district court cases. Section 293

of the Patent Act is one example, which makes direct reference to

federal court jurisdiction and grants personal jurisdiction over

a foreign patentee. There are many other federal provisions

requiring the designation of an agent for service of process that

expressly extend the scope of that designation beyond

administrative proceedings. See e.g., 21 U.S.C. § 360mm (“It

shall be the duty of every manufacturer offering an electronic

product for importation into the United States to designate in

writing an agent upon whom service of all administrative and

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judicial processes, notices, orders, decisions, and requirements

may be made for and on behalf of such manufacturer...”); 49

U.S.C. § 30164 (“A manufacturer offering a motor vehicle or motor

vehicle equipment for import shall designate an agent on whom

service of notices and process in administrative and judicial

proceedings may be made.”). Other federal statutes employ broad

language implying that the designation applies to service of

process in a wide range of proceedings. See e.g., 12 U.S.C. 

§ 1819 (“The Board of Directors [of the Federal Deposit Insurance

Corporation] shall designate agents upon whom service of process

may be made in any State, territory, or jurisdiction in which any

insured depository institution is located.”); 12 U.S.C. 

§ 2277a-7 (“The Board of Directors [of the Farm System Insurance

Corporation] shall designate an agent on whom service of process

may be made in any State or jurisdiction in which any insured

System bank is located.”) Still other statutes set forth

separate provisions, one requiring designation of an agent for

service in administrative proceedings, another requiring a

similar designation for service in district court proceedings.

See, e.g., 49 U.S.C. § 723 (“A carrier providing transportation

subject to the jurisdiction of the [Surface Transportation] Board

under subtitle IV shall designate an agent in the District of

Columbia, on whom service of notices in a proceeding before, and

of actions of, the [Surface Transportation] Board may be made.”

); 49 U.S.C. § 724(a) (“A carrier providing transportation

subject to the jurisdiction of the [Surface Transportation] Board

under subtitle IV shall designate an agent in the District of

Columbia on whom service of process in an action before a

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12 This issue was far from clear or settled at the time

E&J Gallo served the relevant documents upon Mr. Egbert. 

Plaintiff could easily have effectuated service on Rallo in the

manner provided by the Federal Rules of Civil Procedure. 

31

district court may be made.”).

e. Conclusion Re: the Scope of Section 1051(e).

Whether section 1051(e) is intended to be limit service of

process to administrative actions before the Patent and Trademark

Office or extends to service of process in the federal courts as

well is not answered by the ambiguous text of the statute. The

legislative history fails to clarify the meaning of the phrase

“proceedings affecting the mark.”12 In the final analysis, an

examination of similar provisions in other federal laws provides

meaningful guidance. Congress knows how to provide for service

of process in cases before the federal courts when it so intends. 

It has not done so here. The Magistrate Judge correctly

concluded that service upon an agent designated to accept service

under section 1051(e) does not constitute valid service of

process for purposes of this litigation in federal district

court. Service is therefore defective (void). Defendant’s

motion to vacate the default judgment must be GRANTED. 

2. The Effect of Mr. Egbert’s Self-Designation

The Magistrate Judge concluded that Mr. Egbert was not

properly designated as a domestic representative of Rallo. F&R

at 8:3-25. The F&R relied upon language found in the Trademark

Manual of Examining Procedure (“TMEP”), which provides:

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Designation of Domestic Representatives by Parties Not

Domiciled in the United States. 

***

A person who is properly authorized to sign a

designation of domestic representative is: 

(1) A person with legal authority to bind the

applicant or party; or 

(2) A person with firsthand knowledge of the

facts and actual or implied authority to act

on behalf of the applicant or party; or 

(3) An attorney as defined in 37 C.F.R. § 10.1(c)

who has an actual written or verbal power of

attorney or an implied power of attorney from

the applicant or party.

TMEP § 604. The F&R concluded that Mr. Egbert did not satisfy

any of the three categories of authorized persons who may execute

and file a domestic representative form. The Magistrate Judge

reasoned:

When [Egbert] receives instructions to file an

application, he routinely designates himself as the

domestic representative pursuant to 15 U.S.C. § 1051(e)

without necessarily having the consent or instructions

to do so from either the applicant or the agent. He

states that he “assumed” domestic representation status

in March 2001. Indeed Defendant’s trademark

application, signed only by Mr. Egbert, appoints Mr.

Egbert as its attorney to prosecute the application and

as domestic representative.

According to Mr. Egbert’s deposition and the trademark

application, it appears that Defendant never actually

contemplated Mr. Egbert’s appointment as domestic

representative. Instead, Mr. Egbert’s appointed

himself by signing the trademark application following

his usual method of conducting business. This

circumstance when viewed in light of § 1051(e)’s

optional nature (i.e., that an applicant not domiciled

in the United States “may” appoint a domestic

representative), leads to the conclusion that Defendant

did not knowingly choose Mr. Egbert to represent them

in any capacity other than filing an application for

registration. As such, Mr. Egbert does not meet any of

the three categories of persons who may sign a domestic

representative form. 

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F&R at 10 (internal citations omitted)(emphasis added). 

The Magistrate Judge appears to have operated under the

understanding that designation was optional. In 2001, when

Rallo’s application was filed by Mr. Egbert, designation of a

domestic representative was mandatory, not optional. See supra

note 3. According to PTO policy in 2001, Mr. Egbert had to file

a domestic representative designation along with Rallo’s

trademark application. Ms. Perrotta should have known of this

requirement (or at least, Mr. Egbert should have notified Ms.

Perrotta of Egbert’s self-designation). The extent to which Mr.

Egbert obtained express permission to file the designation from

Perrotta and/or Rallo is not relevant. At the very least, Mr.

Egbert had implied authority to file the designation. See Sheet

Metal Workers Local Union No. 54, AFL-CIO v. E.F. Etie Sheet

Metal Co., 1 F.3d 1464, 1471 (5th Cir. 1993) (“Under Texas agency

law a grant of authority to an agent includes the implied

authority to do all things proper, usual, and necessary to

exercise that authority.”). Applying this principle to the

standard set forth in TMEP § 604, Mr. Egbert was “[a]n

attorney...who has an...implied power of attorney from the

applicant or party.” E&J Gallo had the right to rely upon

Egbert’s designation to the extent of the trademark law. 

The scope of Mr. Egbert’s designation is disputed. Rallo

impliedly argues that the scope of the designation is somehow

tied to Mr. Egbert’s understanding of the scope of § 1051(e). 

Rallo points out that Mr. Egbert never considered himself a

proper agent for service of process in the district court case. 

Mr. Egbert “did not contemplate binding himself as agent for

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service in any but the narrowest of circumstances.” According to

Rallo’s argument, even if Mr. Egbert properly designated himself

as Rallo’s domestic agent, this designation did not permit him to

accept service in the district court case. 

The scope of Mr. Egbert’s designation is not a subjective

inquiry. Rather, it is tied directly to the actual scope of the

statutory provision. That Mr. Egbert had a different

understanding of the scope and effect of § 1051(e) is not

determinative. 

B. Motion to Set Aside Default Under Rule 60(b)(1).

Although the default judgment must be vacated for improper

service, given the unsettled nature of the law interpreting

section 1051(e), the alternative excusable neglect issue is

appropriately analyzed. 

Under Fed. R. Civ. P. 60(b)(1), a court may grant relief

from default judgment in cases of “mistake, inadvertence,

surprise, or excusable neglect....” Default judgments are

disfavored, and cases should be decided on their merits whenever

reasonably possible. Pena v. Seguros La Comercial, S.A., 770

F.2d 811, 814 (9th Cir. 1985). The interest in finality of

judgment “should give way fairly readily, to further the

competing interest in reaching the merits of a dispute.” TCI

Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir.

2001)

The Ninth Circuit’s standard for excusable neglect has

evolved over time, not always consistently, and is applied in a

three-part test explicated by Falk v. Allen, 739 F.2d 461, 463

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(9th Cir. 1994):

(1) whether Defendant engaged in culpable conduct that led

to the default; 

(2) whether Defendant had a meritorious defense; or 

(3) whether reopening the default judgment would prejudice

Plaintiff.

(the “Falk” factors). A party’s conduct is considered culpable

“if he has received actual or constructive notice of the filing

of the action and intentionally failed to answer.” Alan Neuman

Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988).

But, in 1993, in Pioneer Investment Services, Co. v.

Brunswick Associates, Ltd., 507 U.S. 380, 395 (1993), the Supreme

Court held that excusable neglect could encompass some

intentional failures to act, and explained that a court should

determine whether such intentional failures are excusable by

examining a number of equitable factors. The Ninth Circuit, in

TCI, 244 F.3d at 697, examined whether the Falk factors and the

holding from Alan Neuman were still valid after Pioneer. TCI

concluded these holdings were still good law, after providing

some clarification of the pre-existing Ninth Circuit standards. 

See TCI, 244 F.3d at 697-699.

TCI reaffirmed that a party’s conduct could be considered

culpable if that party “received actual or constructive notice of

the filing of the action and intentionally failed to answer.” 

Id. at 697 (emphasis in original). However, in light of Pioneer,

the “intentional failure to answer” element must be interpreted

narrowly. Specifically, 

Neglectful failure to answer as to which the defendant

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offers a credible, good faith explanation negating any

intention to take advantage of the opposing party,

interfere with judicial decisionmaking, or otherwise

manipulate the legal process is not "intentional" under

our default cases, and is therefore not necessarily --

although it certainly may be, once the equitable

factors are considered –- culpable or inexcusable.

TCI, 244 F.3d at 698-99. The first part of TCI’s analysis

permits excuse from default as non-culpable if the defaulted

party offers a “credible, good faith explanation [that] negate[s]

any intention to take advantage of the opposing party, interfere

with judicial decisionmaking or otherwise manipulate the legal

process.” Id.

The meaning of the second part of TCI’s holding is a matter

of considerable dispute among the parties. Rallo contends that

the phrase “once the equitable factors are considered” demands an

equitable balancing of all three Falk factors in every case. E&J

Gallo, pointing to Franchise Holding II, LLC, v. Huntington

Restaurants Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004) and

American Association of Naturopathic Physicians v. Hayhurst, 227

F.3d 1104, 1108 (9th Cir. 2000), rejoins that the three Falk

factors are disjunctive (i.e., that a district court may deny a

motion to vacate if the defendant fails to satisfy any of the

three factors). 

Franchise Holding II, on which E&J Gallo relies, is an

anomalous case that does not follow precedent and was not

followed by a subsequent en banc panel of the Ninth Circuit. A

recent district court opinion from the Central District of

California summarized Franchise Holding II’s failures:

//

//

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...[T]he Ninth Circuit has reached a [decision]

seemingly inconsistent [to TCI] in Franchise Holding II

[]. The [Franchise Holding II] court stated that where

a "defendant has received actual or constructive notice

of the filing of the action and failed to answer, its

conduct is culpable" in the context of entry of

default. Although this position appears to be directly

contrary to the court's position in TCI, the court

engages in little analysis and fails to even mention,

let alone explicitly overrule, TCI. 

In addition, subsequent to Franchise Holding II, the

Ninth Circuit once again broadly defined excusable

neglect. In Pincay v. Andrews, an en banc panel of the

Ninth Circuit upheld the district court's finding of

"excusable neglect" where an attorney had delegated to

a paralegal the task of calendaring the date for the

notice of appeal and the paralegal misinterpreted an

unambiguous rule concerning the filing deadline causing

the firm to miss the deadline. Although the court

recognized that a mistake of law in reading a rule of

procedure "is one of the least compelling excuses that

can be offered," it held that "the nature of the

contextual analysis and the balancing of the factors

adopted [by the Supreme Court] counsel against 

the creation of any rigid rule" that certain conduct is

inexcusable. The court went on to find that a district

court is in the best position to make excusable neglect

determinations. As TCI gives a thorough reasoned basis

for its decision, Franchise Holding II provides no

analysis and fails to even mention TCI, and the Ninth

Circuit again broadly defined excusable neglect after

Franchise Holding II, the Court finds Franchise Holding

II anomalous and unpersuasive.

Quach v. Cross, 2004 WL 2862285, *6 (C.D. Cal.)(internal

citations omitted). The en banc decision in Pincay emphasizes

the importance of balancing the Pioneer factors and avoiding per

se rules. Pincay v. Andrews, 389 F.3d 853, 860 (9th Cir.

2004)(en banc). 

Reliance upon Naturopathic Physicians, 227 F.3d at 1108, is

also misplaced. First, the case does not address Pioneer, which

the Supreme Court decided seven years earlier. In light of

Pincay’s reaffirmance of the importance of Pioneer’s equitable

approach, the continued viability of Naturopathic Physicians’

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holding that the Falk factors are disjunctive is dubious.

Rallo, in advocating a balancing of the three Falk factors,

implicitly suggests that a default might be excused even if, for

example, the defaulting party presented no meritorious defense

or, alternatively, even if the non-moving party would be

prejudiced. TCI did not so hold. Rather, TCI suggests that

where “defendant presents no meritorious defense, then nothing

but pointless delay can result from reopening the judgment” but

where “reopening the judgment would prejudice the

plaintiff...then the interest in finality should prevail.” 244

F.3d at 697. The language relied upon by Rallo simply means that

the first Falk factor (culpability) was not dispositive and that

the other “equitable” factors must also be considered. 

In this Circuit, a court asked to set aside a default must

determine:

(1) Whether the defaulted party received actual or

constructive notice of the suit?

(2) Did the defaulted party “intentionally” failed to

respond? To answer this second question, a court must

determine whether the defaulted party offered a credible

good faith explanation that negates any intention to take

advantage of the opposing party, interfere with judicial

decisionmaking, or otherwise manipulate the legal process. 

The party in default bears the burden of showing that the Falk

factors counsel in favor of setting aside default. TCI, 244 F.

3d at 696. 

//

//

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1. The First Falk Factor: Excusable Neglect/ Culpable

Conduct

The Magistrate Judge found Defendant had “not met its burden

of proving excusable neglect”: 

Standing alone, Mr. Vesco’s declaration may state

grounds for excusable neglect...[h]owever, when viewed

in light of Mr. Egbert’s deposition and the numerous

letters sent to Defendant’s agent regarding this

action, Mr. Vesco’s assertion stand contradicted.

 

F&R at 12. After review of the law and the entire record, a

different conclusion is warranted

a. Notice.

Although Rallo contends that it did not recognize that the

district court case was distinct from the administrative

proceeding and demanded a separate response, Rallo nevertheless

admits that it received a copy of the complaint from Mr. Egbert. 

Doc. 11, Vesco Decl., at ¶4. Rallo had actual notice of the

district court complaint. 

b. Intentional Failure to Respond.

The defaulted party must offer a credible good faith

explanation that negates any intention to take advantage of the

opposing party, interfere with judicial decisionmaking, or

otherwise manipulate the legal process. Courts have given weight

to various considerations in this analysis, including the nature

of the explanation, the defaulted parties’ familiarity with legal

process, and communication problems between the defaulted party

and its advisers.

Here, Rallo relies primarily on the Declaration of Mr.

Francisco Vesco to support its claim of excusable neglect. Vesco

declares:

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It was not until after I had been contacted by

Cantine Rallo’s United States distributor,

Distillerie Stock, which had apparently received

a “judgment of Permanent Injunction,” that I came

to appreciate that this second proceeding had

been commenced and that Canine Rallo had some

further obligation to defend itself. Although

Mr. Egbert had sent us a copy of a Summons and

Complaint, he did not advise us this was in fact

a second, separate proceeding, and did not inform

us we had any need to respond to the pleading.

Doc. 11 at 17-23. 

It is not disputed that Mr. Egbert forwarded a number of

documents to Ms. Perrotta that should have put any Englishspeaking reader on notice of the risk of failing to respond to

the district court complaint. See F&R at 12-14. The Magistrate

Judge concluded from this evidence that Rallo “certainly should

have been aware of its duty to respond, regardless of the

sufficiency of the communication between Defendant and Ms.

Perrotta.” Id. The relevant question is not whether Rallo

should have been aware of its obligations. Even if a defaulted

party “know[s] what the likely consequence [of failing to

respond] will be,” that failure is not necessarily “intentional.” 

TCI, 244 F.3d at 697. Rather, a court must determine whether

Rallo has offered a “credible, good faith explanation [that]

negate[s] any intention to take advantage of the opposing party,

interfere with judicial decisionmaking or otherwise manipulate

the legal process.” Id. For example, in TCI, the Ninth Circuit

reasoned that even where an attorney “knew that [a response]

would be due while he was away, yet did nothing about obtaining

an extension, [this] did not preclude a finding of excusable

neglect.” Id. at 698. 

The Ninth Circuit has adopted a forgiving approach to

excusable neglect, accepting even “weak” reasons if they reveal

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mere “negligence and carelessness, not...deviousness or

willfulness.” Bateman v. United States Postal Serv., 231 F.3d

1220, 1225 (9th Cir. 2000). In Bateman, an attorney was excused

from his failure to timely file a pleading because he had to

leave the country on fairly short notice and, upon his return,

suffered from jet lag and took some time to sort through his

mail. Although this was a “weak” reason, it was enough to

warrant relief under Rule 60(b)(1). Similarly, in Pincay v.

Andrews, 389 F.3d 853, 859 (9th Cir. 2004), the Ninth Circuit

examined whether a lawyer’s failure to read an applicable rule

could constitute excusable neglect:

We recognize that a lawyer's failure to read an

applicable rule is one of the least compelling excuses

that can be offered; yet the nature of the contextual

analysis and the balancing of the factors adopted in

Pioneer counsel against the creation of any rigid rule.

Rather, the decision whether to grant or deny an

extension of time to file a notice of appeal should be

entrusted to the discretion of the district

court....Pioneer itself instructs courts to determine

the issue of excusable neglect within the context of

the particular case, a context with which the trial

court is most familiar. Any rationale suggesting that

misinterpretation of an unambiguous rule can never be

excusable neglect is, in our view, contrary to that

instruction. [T]he right way, under Pioneer, to decide

cases involving ignorance of federal rules is with an

elastic concept equitable in nature, not with a per se

rule.

Id. See also Quach, 2004 WL 2862285 at *7 (finding excusable

neglect where defaulted party failed to respond because they felt

they were improperly served). This more lenient approach has

evolved from the stricter standard that held parties liable for

their own negligence or lack of diligence and specified that the

remedy was against the attorney or representative. See Ringgold

Corp. v. Worrall, 880 F.2d 1138, 1141-42 (9th Cir. 1989); see

also Cmty. Dental Serv. v. Tani, 282 F.3d 1164 (9th Cir. 2003)(en

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banc)(holding that a default caused by an attorney’s gross

negligence could be set aside under the “catch all” clause

contained in Rule 60(b)(6)).

Here, Rallo asserts that it was confused by the parallel

proceedings and failed to understand its responsibility to file a

separate response in the district court case. Although Rallo has

not offered any evidence directly addressing the extent or

sufficiency of communications it received from Perrotta, a

communication breakdown is reasonably inferrable from the record.

For example, Francisco Vesco asserts that Mr. Egbert “did not

advise us [that the district court complaint] was in fact a

second, separate proceeding, and did not inform us we had any

need to respond to the pleading.” Vesco Dec., at ¶4. This

directly contradicts Mr. Egbert’s assertions that he sent

correspondence to Perrotta explaining Rallo’s obligation to

timely respond to the district court complaint. 

Communication problems are relevant to the excusable neglect

inquiry. For example, in Briones v. Riviera Hotel & Casino, 116

F.3d 379, 382 (9th Cir. 1997), the Ninth Circuit excused a

litigant’s failure to respond to a motion to dismiss in part

because there “may have been a communication problem within his

group of assistants.” See also Cheney v. Anchor Glass Container

Corp., 71 F.3d 848, 850 (11th Cir. 1996)(finding excusable

neglect where a delayed filing was caused by a “failure in

communication between the associate attorney and the lead counsel

[and where] [t]he circumstances of the error were obviously

within counsel's control, but their noncommunication and

resulting inaction amounts only to an omission[] caused by

carelessness.”). Here, although additional evidence on the

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communication problem would have been prudent and helpful, its

absence is not fatal. 

E&J Gallo points out that Rallo did actually communicate

with Mr. Egbert directly at one point. Under certain

circumstances, this might indicate culpability. Where a

defaulting party is “generally familiar with legal processes or

consultation with lawyers....[a]bsent some explanation...it is

fair to expect that individuals who have previously been involved

in litigation or have consulted with a lawyer appreciate the

consequences of failing to answer and do so only if they see some

advantage to themselves.” TCI, 244 F.3d at 699 n.6 (9th Cir.

2001) (emphasis added). E&J Gallo cites two additional cases in

support of this proposition, Meadows v. Dominican Republic, 817

F. 2d 517 (9th Cir. 1987) and Richmark Corp. v. Timber Falling

Consultants, Inc., 937 F.2d 1444 (9th Cir. 1991), both prePioneer cases that were approvingly cited in TCI. Both cases are

distinguishable on their facts. In Meadows “the district court

found that [foreign] defendants were fully informed of the legal

consequences of failing to respond by the United States

Department of State...[and were] sufficiently sophisticatd and

experienced in the requirements of American law to protect its

interests, based on its involvement in other actions in the

United States courts.” 817 F.2d at 522. Here, nothing in the

record indicates that Rallo, an Italian Company with limited

business in the United States was familiar with legal processes

in the United States or, apart from this case, that Rallo was or

ever has been involved in litigation in the federal courts. 

Richmark involved a Chinese company that contended it had

failed to respond to a complaint because the Chinese government

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13 Moreover, after mailing its application to register its

mark and pursuing, even if incompetently, administrative

proceedings in the PTO, there is no conceivable explanation why

Rallo should be found to have abandoned its pursuit of the mark

on this record. 

44

refused its application for an exit visa. 937 F.2d at 1444. 

But, the defendant in Richmark was “during [that] same

period...able to secure local counsel in the United States to

address other matters.” Id. Despite not being able to secure an

exit visa, the Richmark court concluded that the Chinese company

could have “communicated with the court through other channels.” 

Id. Here, in contrast, Rallo claims not to even have been aware

that it needed to communicate with the district court. Richmark

is inapposite. 

E&J Gallo’s assertion that Rallo engaged in a “knowing

strategy to deliberately ignore legal proceedings” is

unpersuasive. See Doc. 24, E&J Gallo’s Opposition to Rallo’s

Motion to Vacate default, at 16. Even assuming, arguendo, that

Rallo understood the consequences of not responding to the

district court complaint, purposefully failing to respond to a

motion for permanent injunction makes no legal or business

sense.13

In further support of its argument, E&J Gallo emphasizes

that Rallo also failed to timely respond to the motion for

summary judgment in the administrative proceeding. The exact

chronology of the administrative docket is difficult to discern

from the record, but it appears that E&J Gallo filed a motion for

summary judgment in the administrative proceeding in early April

2004, basing its motion on the fact that a preliminary injunction

had been entered against defendant based on the default in the

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14 Outside the context of default, a court must analyze

the length of the delay separately. See Pioneer, 507 U.S. at

395. However, under TCI, because the “Falk factors are...quite

sufficient after Pioneer [] to guide district courts’ exercise of

discretion [] in the context of default judgments,” a separate

discussion of the length of the delay is not technically

necessary. Nevertheless, even in the context of default, the

length of the delay can be relevant circumstantial evidence of

culpability. TCI, 244 F.3d at 698. Here, the length of the

delay does not suggest culpability. It is not clear from the

record when Rallo (as opposed to Egbert and Perrotta) actually

received notice of the default judgment and permanent injunction. 

Although Francisco Vesco’s declaration admits receipt of the

district court complaint, it implies that some time passed before

Rallo became aware of the existence of the injunction. But,

assuming, arguendo, that Rallo became aware of the judgment soon

after it was entered, in late March 2004, between two and three

months passed before Rallo began to defend in the district court. 

Rallo took steps to secure counsel in mid-April 2004, and Rallo’s

45

district court case. Egbert Depo., at 93-94. Rallo offers no

explanation who it failed to respond to the dispositive motion in

the administrative proceeding. Rallo acknowledges that it was

required to defend the trademark proceeding. Despite Rallo’s

apparent lack of effective response in the administrative

proceeding, on July 16, 2004, Rallo moved for relief from the

administrative judgment, about the same time that Rallo moved for

relief from default judgment in district Court. See Doc. 8,

filed July 12, 2004. This is contrary to E&J Gallo’s assertion

that Rallo engaged in a “knowing strategy to deliberately ignore

legal proceedings.” During the pendency of the administrative

summary judgment motion, Rallo appears to have been working to

retain a lawyer to handle the district court matter. See April

19, 2004 letter from Mr. Egbert to Sergio Ardito. Egbert Depo.,

Ex. B. When White & Case was finally engaged, Rallo then took

action to protect itself both before the district court and the

TTAB.14 This suggests negligence and inattention, not a knowing

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new lawyer began working to set aside the default judgment on

July 1, 2004, sending a letter to E&J Gallo expressing its

interest in obtaining relief from default and seeking an informal

resolution to the matter. Doc. 10, Ex. E. Rallo followed this

with a motion to vacate on July 12, 2004. Doc. 8. This is not

an unreasonable delay under the circumstances, particularly given

that Rallo was operating out of a foreign country. See

Bateman, 231 F.3d at 1225 (finding a delay of “a little more than

one month” was “minimal” and “not long enough to justify denying

relief”).

15 Mr. Egbert declined to disclose whether he articulated

this position to anyone else, citing attorney-client privilege. 

Egbert Depo., at 86.

46

strategy to ignore legal proceedings.

Pioneer established the general principle that excusable

neglect demands an equitable inquiry “taking account of all

relevant circumstances...” 507 U.S. at 395. Accordingly, some

weight may also be given to the unsettled status of the law

regarding the scope of 15 U.S.C. § 1051(e). Mr. Egbert believed

that service was improper, although nothing in the record proves

that he communicated this belief to Perrotta or Rallo. Egbert

Depo., at 85-86.15

Crediting the overarching principle that default judgments

are disfavored and the law strongly prefers trial on the merits,

Rallo’s failure to timely respond to the complaint constitutes

excusable neglect. The delay was not unreasonably long,

Plaintiff will suffer no prejudice, and the proffered “excusable”

neglect, marginal as it is, negates any wrongful purpose. 

Although Defendant has demonstrated its apparent lackadaisical

attitude toward United States legal proceedings, this does not

amount to bad faith. Communication problems with Mr. Egbert, who

is subject to criticism for his apparent ineptitude, Rallo’s lack

of familiarity with the American legal system, and ambiguity in

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the statutory service provision all played some part in the

delay. There is absolutely no evidence that Rallo’s delay was in

any way designed to interfere with or manipulate the legal

system. 

2. The Second Falk Factor: Prejudice to Plaintiff.

In this case, Plaintiff has offered no evidence of prejudice

beyond the effect of proceeding on the merits if relief from

default is granted. Having to try a case on the merits is not,

without more, sufficient prejudice. See TCI, 244 F.3d 701 (“To

be prejudicial, the setting aside of a judgment must result in

greater harm than simply delaying resolution of the case.”). 

Rather, "the standard is whether [plaintiff's] ability to pursue

his claim will be hindered.” Id. Plaintiff offers no suggestion

that it will not be fully able to prosecute its claims. 

3. The Third Falk Factor: A Meritorious defense.

“A defendant seeking to vacate a default judgment must

present specific facts that would constitute a defense. But the 

burden...is not extraordinarily heavy.” TCI, 244 F.3d at 700. 

The moving party need only assert a factual or legal basis that

is sufficient to raise a particular defense; the question of

whether a particular factual allegation is true is resolved at a

later stage. See id. 

In this case, E&J Gallo claims that Defendant’s use of the

mark “Rallo” infringes upon its own “extraordinarily strong and

distinctive mark.” Rallo asserts in defense that it will be able

to prove that E&J Gallo’s infringement claim is (a) barred by the

doctrine of laches and (b) will fail on the merits because there

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is no likelihood of confusion. The law does not require that

defendant show it will prevail on its defense.

a. Laches Defense

“Laches is an equitable time limitation on a party's right

to bring suit, resting on the maxim that one who seeks the help

of a court of equity must not sleep on his rights.” Jarrow

Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th

Cir. 2002). It is well-settled that Laches may be raised as a

defense to Lanham Act claims. Id. 

To assert a laches defense, a party must “show that it

suffered prejudice as a result of the plaintiff's unreasonable

delay in filing suit.” Id. A court determines whether laches

bars a claim by examining: (1) “the length of delay, which is

measured from the time the plaintiff knew or should have known

about its potential cause of action;” and (2) “whether the

plaintiff's delay was reasonable.” Id. The reasonableness of

the delay is “considered in light of the time allotted by the

analogous limitations period,” and “whether the plaintiff has

proffered a legitimate excuse for its delay.” Id. The analogous

limitations period applicable to Lanham Act claims brought in

California is the three-year statute of limitations for fraud

claims, meaning that a presumption of latches arises if a Lanham

Act claim is brought more than three years after the plaintiff

knew or should have known of the alleged infringement. Id. 

Here, Rallo submits that it has been selling its wines in

the United States for more than fifty (50) years. Rallo argues

that “fifty years is simply too long to wait, and it is unfair

now to destroy a half-century of goodwill in a brand....” Doc.

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16 On June 30, 2005, Rallo also submitted a letter to the

court, attaching a copy of a transcript from the deposition of

Jeff Bland, Vice President/General Manager of E&J Gallo’s

International Business Division, which allegedly reveals that

Bland became aware of the existence of Rallo’s wines when he

purchased one of Rallo’s product in Italy. E&J Gallo objects to

the district court’s consideration of this supplemental evidence,

on the grounds that it has not properly been made a part of the

record of this case and that it mischaracterizes the record and

is inherently misleading. Doc. 54, filed July 6, 2005. Even if

the district court were to consider this evidence at this time,

it is not particularly helpful to Rallo’s laches defense. 

Assuming, arguendo, that E&J Gallo did become aware of Rallo’s

operations in Italy more than three years ago, such an awareness

is not germane to the analysis required under Jarrow. 

49

34 at 10.16 Rallo impliedly asserts that E&J Gallo should have

been aware of Rallo’s fifty-plus years of operations in the

United States. Rallo’s owner and General Manager declares that

Rallo’s “sales in the United states have never been

extraordinarily high.” Vesco Decl., at ¶2. On the record before

the court, the latches defense is viable and cannot be eliminated

as a matter of law. 

 

b. Defense on the Merits: No Likelihood of

Confusion

To prevail on the merits of its trademark infringement

claim, E&J Gallo must show that it (1) “holds a protectable

mark,” and that Rallo’s mark is similar enough to “cause

confusion, or to cause mistake, or to deceive.” Surfvivor Media,

Inc. v. Survivor Productions, 406 F.3d 625, 630 (9th Cir. 2005)

(citing KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc.,

125 S.Ct. 542, 547(2004)). The critical inquiry is whether a

“reasonably prudent consumer in the marketplace is likely to be

confused as to the origin of the good or service bearing one of

the marks.” Id. 

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To analyze likelihood of confusion, a court must consider

the following eight factors: 

(1) strength of the mark(s); 

(2) relatedness of the goods; 

(3) similarity of the marks; 

(4) evidence of actual confusion; 

(5) marketing channels; 

(6) degree of consumer care; 

(7) the defendants' intent; 

(8) likelihood of expansion. 

Id. (citing AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49)

(9th Cir. 1979). (These factors are often referred to as the

"Sleekcraft" factors). “The test is a fluid one and the

plaintiff need not satisfy every factor, provided that strong

showings are made with respect to some of them.” Id.

(1) Strength of the Mark

“The purpose of examining the strength of the plaintiff's

mark is to determine the scope of trademark protection to which

the mark is entitled. The more unique the mark, the greater the

degree of protection.” Surfvivor Media, 406 F.3d at 631. E&J

Gallo places great emphasis on the strength of its mark, citing

E. & J. Gallo Winery v. Pasatiempos Gallo S.A., 905 F. Supp.

1403, 1407 (E.D. Cal. 1994), which found that “[b]y virtue of

widespread sales and promotion for over half a century, the []

GALLO mark has become extraordinarily strong and distinctive.” 

Rallo does not here challenge the strength of E&J Gallo’s mark. 

The holding of the district court in Pasatiempos is not

dispositive of the outcome on the merits. 

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(2) Marketing Channels. 

Rallo offers some evidence, in the form of information

obtained from of the internet, that Marsala wines are used mostly

as desert wines or for cooking. See Moskin Decl. Ex. D. 

Although Rallo suggests, quite logically, that these wines would

likely be “sold in somewhat different manner from E&J Gallo

wines.” Rallo offers no specific evidence that its wines are

sold through different marketing channels from any E&J Gallo

wines. 

(3) Degree of consumer care

Rallo similarly argues that consumers of Marsala wines would

be sophisticated enough to distinguish between the allegedly

conflicting marks. Rallo offers no evidence of consumer

sophistication. 

(4) Evidence of actual confusion

Rallo argues that the absence of actual consumer confusion

is powerful evidence that there is no likelihood of confusion. 

At this stage, Rallo has offered no evidence, survey-based or

otherwise on the confusion issue. E&J Gallo suggests that the

only appropriate evidence of the absence of confusion is survey

evidence, which has not been presented. It has been suggested

that “there are at least three types of proof of likelihood of

confusion: (1) survey evidence; (2) evidence of actual confusion;

and (3) an argument based on an inference arising from a judicial

comparison of the conflicting marks themselves and the context of

their use in the marketplace.” Dr. Seuss Enters., L.P. v.

Penguin Books USA, Inc., 109 F.3d 1394, 1404 n.14 (9th Cir.

1997). Although Rallo has not yet presented survey evidence (or

any other evidence) of an absence of actual confusion, it does

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17 Rallo concedes that E&J Gallo has registered the mark

“Gallo” alone for wines, including one that predates Rallo’s 1962

registration of the mark “Rallo.” Doc. 34, at 12-13. But, Rallo

argues that these marks have been abandoned and presents evidence

in support of this assertion. See Moskin Decl. Ex. C.

52

present an argument based on an “inference arising from a

judicial comparison of the conflicting marks themselves and the

context of their use in the marketplace.”

(5) Similarity of the marks

Rallo suggests a number of bases for finding that the two

allegedly conflicting marks, as they are used in the marketplace,

are not similar. In determining similarity, a court may draw

guidance from the following three axioms: 

First, the marks must be considered in their entirety

and as they appear in the marketplace. 

[S]econd, similarity is adjudged in terms of

appearance, sound, and meaning, and 

[T]hird, similarities are weighed more heavily than

differences, 

GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1206 (9th Cir. 

2000).

Rallo offers evidence that E&J Gallo “tends not to use the

name ‘Gallo’ alone on its products,” instead preferring to use

terms like “Ernest & Julio Gallo,” “E&J Gallo,” and “Gallo

Sonoma.” See Moskin Decl., Ex. C; Doc. 34 at 12.17 This tendency

is not disputed by E&J Gallo. Rather, E&J Gallo argues that the

word “Gallo” dominates the labels on Gallo wines, again citing 

Pasatiempos, 905 F. Supp. at 1407, which so held. Again,

although the holding in Pasatiempos is potentially persuasive

authority, it is not dispositive of the factual questions

presented in this case. 

Rallo also points out that the words “Gallo” and “Rallo”

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18 Rallo offers the alternative argument that the Rallo

mark is “most naturally” pronounced with a soft “a” sound

(rhyming with “hollow”). E&J Gallo responds that “it is well

established that notwithstanding the rules of phonetics, there is

no such thing as the correct pronunciation of a trademark.” 

JouJou Designs, Inc. v. JOJO Ligne Internationale, Inc., 821

F.Supp. 1347, 1354 (N.D. Cal. 1992).

53

only differ by a single letter and are no more likely to be

confused than are the words “giver” and “river.”18 

Finally, Rallo notes that it makes Marsala wines, which have

special legal status connecting them to a specific region of

Italy, 27 C.F.R. § 4.24(b)(2), along with other distinctive

Sicilian wines. E&J Gallo produces no similar varietals. Rallo

suggests that the distinct nature of its wines further separates

its mark from those possessed by E&J Gallo. 

On balance, Rallo has presented enough evidence concerning

the dissimilarity of the allegedly conflicting marks to prevent

the issue of a valid defense being decided as a matter of law at

this stage. Rallo has satisfied the third Falk factor and is

entitled to have the default judgment against it SET ASIDE.

C. Plaintiff’s Request for Attorney’s Fees and Costs

E&J Gallo requests that the issuance of an order vacating

the default judgment be conditioned on Rallo’s reimbursing E&J

Gallo for the costs and attorney’s fees E&J Gallo incurred in

seeking and enforcing the default judgment. Rallo responds that

conditioning the order on the payment of fees and costs is not

warranted in this case. 

It is appropriate for a district court to condition its

order setting aside default on the payment of fees and costs. 

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19 Rallo suggests that, where a court has found a default

judgment void for lack of proper service, sanctions may not be

imposed upon the defaulting party. However, Rallo does not cite

any authority for this proposition, nor does it acknowledge Ninth

Circuit precedent approving the practice of conditioning orders

to set aside default upon payment of reasonable attorney’s fees.

54

Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana

Hydrolec, 854 F.2d 1538, 1546-47 (9th Cir. 1988)(“By conditioning

the setting aside of a default, any prejudice suffered by the

non-defaulting party as a result of the default and the

subsequent reopening of the litigation can be rectified....The

use of imposing conditions can serve to promote the positive

purposes of the default procedures without subjecting either

litigant to their drastic consequences.”).19

In this case, Rallo received actual notice of the instant

lawsuit but, whether caused by a communication failure or some

other act of negligence, inadvertence, or inattention, failed to

recognize the need to respond to the district court complaint. 

Whatever the cause, E&J Gallo incurred attorney’s fees and costs

as a result. Some shifting of costs is appropriate to apprise

Rallo of its responsibility to pay attention to legal proceedings

in a jurisdiction in which it chooses to do business.

However, Rallo should not be responsible for fees and costs

incurred after July 1, 2004. Upon discovery of its failure to

timely respond to the district court complaint, Rallo took action

to protect its interests and to inform E&J Gallo of its intention

to defend. The letter sent by White & Case to E&J Gallo on July

1, 2004 suggested an amicable resolution. Therafter, the fees

incurred by E&J Gallo to defend the default judgment were by its

own choice. 

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E&J Gallo has neglected, however, to provide any information

to the court concerning the amount of the fees and costs incurred

in connection with the default proceedings in the district court. 

Only those fees reasonably incurred prior to July 1, 2004 by E&J

Gallo in pursuing default will be recoverable as a condition of

setting aside the default. E&J Gallo shall submit a short

supplemental brief detailing any such fees and costs incurred

within ten days following electronic service. An appropriate

order conditioning the vacation of the default judgment on the

payment of such fees will then be entered. 

V. CONCLUSION

For the reasons set forth above, 

(1) Service upon Mr. Egbert was improper and the default

judgment is VOID;

(2) Alternatively, even if service was proper, Defendant has

established excusable neglect and the default judgment will be

SET ASIDE on that ground;

(3) Plaintiff’s request for attorney’s fees and costs is

GRANTED to the extent discussed above; Plaintiff shall submit a

supplemental brief concerning fees within ten days following

electronic service of this order. 

SO ORDERED.

Dated: August 17, 2005 /s/ OLIVER W. WANGER

______________________________

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

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