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. e du/thir dc ir c uit_1997/146Filed July 3, 1997

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 96-3572

BEAUTY TIME, INC.; BEAUTY MAKERS, INC.; & R. RICHARD RISO, Appellants,

v.

VU SKIN SYSTEMS, INC.; BJV; DPM SKIN SYSTEMS, INC.; & MARION M. VUJEVICH, Appellees.

An Appeal from the United States District Court for the Western District of Pennsylvania
D.C. Civ. No. 95-1176

Argued April 17, 1997

Before: GREENBERG, ALITO and ROSENN, Circuit Judges

.

Opinion Filed July 3, 1997

Kenneth P. McKay (argued) Law Offices of K. Patrick McKay 3755 Library Road Pittsburgh, PA 15234-2266 Counsel for AppellantsDaniel P. McDyer (argued)

Anstandig, McDyer, Burdette & Yurcon, P.C. 600 Gulf Tower, 707 Grant Street Pittsburgh, PA 15219 Counsel for Appellees

OPINION OF THE COURT

Rosenn, Circuit Judge

.

This appeal primarily presents a novel question in this Circuit concerning the constructive notice provisio ns of the Lanham Act, 15 U.S.C. § 1058, the application of a statute of limitations borrowed from the state of Pennsylva nia, and the tolling principles of that state. The United St ates District Court for the Western District of Pennsylv ania dismissed the action for fraudulent re-registration of a trademark as time barred, and the remainder of the complaint for lack of standing, failure to state a claim, and pendant jurisdiction. The plaintiffs timely appeale d. We affirm in part and vacate in part.

I.

In 1981, Marion J. Vujevich filed an application fo r the registration of the trademark "DPM" with the United States Patent and Trademark Office ("PTO") for use in inte rstate
commerce of medicated and non-medicated cosmetics. In 1983, Vujevich obtained the registration of the tra demark and listing as the sole user of the trademark. Vuje vich and BJV, a limited partnership in which Vujevich partic ipated, used this trademark exclusively until 1987.

In 1987, Vujevich allegedly agreed to form a corpor ation
with R. Richard Riso to manufacture and distribute products bearing the DPM trademark. This new corporation, Beauty Time, Inc., a Delaware corporat ion, of which Riso is the sole shareholder, began distribut ing products in or about August 1987 bearing the DPM trademark. Plaintiffs allege that Vujevich had oral ly assigned the DPM mark to Beauty Time in 1987 for it s

2exclusive use and Beauty Time claims to have used t he mark exclusively from 1987 to 1991.

In February, 1989, Vujevich filed a combined §§ 8 a nd 15 declaration1 in his own name as owner and registran t with the PTO seeking renewal of the trademark in accorda nce with federal trademark registration law. Vujevich f iled an
affidavit in connection with the declaration assert ing that
he was the sole owner and user of the trademark. Vu jevich allegedly used Beauty Time packaging in support of this declaration. In July, 1989, the ownership of the tr ademark became "incontestable" and the PTO renewed Vujevich 's registration of the DPM trademark, with no mention of the alleged assignment of the mark to Beauty Time and i ts junior use of the mark.

In 1991, Vujevich allegedly began marketing and sel ling items bearing the DPM trademark without the consent of Beauty Time or Riso. According to the plaintiffs, t hese products were distributed under the names VU Skin Systems and DPM Skin Systems. Beauty Time unsuccessfully sought to compel Vujevich to cease f rom distributing these products bearing the DPM tradema rk. In August, 1994, Vujevich informed a number of purchas ers and retailers of the Beauty Time products that he, Vujevich, was the owner of the DPM trademark and that Beauty Time was infringing on the trademark. Most of these cust omers stopped purchasing Beauty Time products based upon Vujevich's assertions of ownership.

In July, 1995, Riso ascertained that Vujevich had r eregistered the trademark in 1989 listing Vujevich a s the
sole owner and user of the trademark. Soon thereaft er, the plaintiffs brought this action against the defendan ts seeking cancellation of the trademark, declaratory and injunctive relief, and monetary damages. The amende d

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1. 15 U.S.C. § 1058 (Supp. 1997) provides for the c ancellation of a prior registration of a mark "unless within one year next preceding the expiration of [six years from the date of the origi nal registration] the registrant shall file in the Patent and Trademark O ffice an affidavit" showing that mark is still in use. Upon filing of s uch affidavit, the right to use the mark under certain conditions may become incontestable to 15 U.S.C. § 1065 (Supp. 1997).

3complaint asserted eleven counts: four federal coun ts

[trademark infringement (I), false advertising (II) , false designation in interstate commerce (III), and fraud under the Lanham Act (XI)] and seven state statutory and common-law counts [violation of the state anti-dilu tion statute (IV), common law trademark infringement (V)

, fraudulent misrepresentation (VI), breach of contra ct (VII), tortious interference with contract (VIII), unjust enrichment (IX), and misappropriation (X)]. The district court dismissed the amended complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upo n which relief can be granted. The court dismissed Count XI as time-barred, Counts I through V for lack of standin g, and the remainder for lack of pendant jurisdiction. The plaintiffs appealed the order dismissing their amended complai nt.

II.

A.

Plaintiffs first challenge the district court order dismissing their claim of fraud under the Lanham Ac t as time-barred. The district court's application of th e statute of limitations and the relevant tolling principles is subject to plenary review. Sheet Metal Workers Local 19 v. 230 0 Group, Inc. , 949 F.2d 1274, 1278 (3d Cir. 1991). The Lanham Act contains no express statute of limitatio ns and the general rule is that when a federal statute pro vides no limitations for suits, the court must look to the s tate statute of limitations for analogous types of actio ns. A claim for fraud under the Lanham Act conforms to this gen eral rule. See Official Airlines Guides, Inc. v. Goss , 6 F.3d 1385, 1395 (9th Cir. 1993); Guardian Life Ins. Co. v. Ame rican
Guardian Life Assurance Co. , 943 F. Supp. 509, 517 (E.D. Pa. 1996). See also Wilson v. Garcia , 471 U.S. 261, 266-67 (1985). On this claim, it is undisputed that Pennsy lvania's two-year statute of limitations for fraud actions w ould apply. 42 Pa. Cons. Stat. § 5524(7) (Supp. 1997). Accordingly, Pennsylvania tolling principles would also be applicable in determining whether this suit is time -barred.
See Wilson , 471 U.S. at 266-67; Board of Regents of the
Univ. of the State of New York v. Tomanio , 446 U.S. 478,

4487-88 (1980); Johnson v. Railway Express Agency, I nc. ,

421 U.S. 454, 462 (1975).

Under Pennsylvania law, the statute of limitations begins to run at the time the "the right to institute and maintain the suit arises." Pocono Int'l Raceway, Inc. v. Poc ono Produce, Inc. , 468 A.2d 468, 471 (Pa. 1983). In the present matter, the allegedly fraudulent act occurred in 19 89, when Vujevich re-registered the trademark with the PTO c laiming
that he was the sole owner and user of the DPM mark

. Thus, absent any exceptions, the statute of limitat ions would have run in 1991, two years after the fraudul ent act allegedly occurred.

Because we look to state law for the appropriate st atute of limitations, we also look to Pennsylvania law on the closely related questions of tolling and applicatio n. See
Wilson , 471 U.S. at 264 n.17. It is well-established that Pennsylvania law recognizes an exception to the sta tute of limitations which "delays the running of the statut e until the plaintiff knew, or through the exercise of reas onable diligence should have known, of the injury and its cause."
Urland v. Merrell-Dow Pharmaceuticals , 822 F.2d 1268, 1271 (3d Cir. 1987). Courts employ the "same `knew or should have known' standard whether the statute is tolled because of the discovery rule or because of fraudul ent
concealment." Id . at 1273. Generally, courts have followed the old chancery rule adopted by the United States Supreme Court that when a party "has been injured b y fraud and `remains in ignorance of it without any f ault or want of diligence or care on his part, the bar to t he statute does not begin to run until the fraud is discovered , though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from t he knowledge of the other party.' " Holmberg v. Armbre cht , 327 U.S. 392, 397 (1946) (quoting Bailey v. Glover , 21 Wall. 342, 348).

Regardless of the grounds for seeking to toll the s tatute, the plaintiff is expected to exercise reasonable di ligence in attempting to ascertain the cause of any injury. Ur land , 822 F.2d at 1273-74. Reasonable diligence has been defi ned as follows: "A fair, proper and due degree of care and acting, measured with reference to the particular circumsta nces;

5such diligence, care, or attention as might be expe cted from

a man of ordinary prudence and activity." Black's L aw Dictionary

457 (6th ed. 1991). As the court observed in
Urland , there are few facts which diligence cannot discov er, but there must be some reason to awaken inquiry and suggest investigation. Urland , 822 F.2d at 1273. Plaintiffs assert that they had no reason to check the registr ation of the trademark with the PTO until they became aware that the trademark had been re-registered in 1989 listin g Vujevich as its sole owner and user. The question t hus becomes when did or when should the plaintiffs have become aware of the concerns regarding the re-regis tration
of the trademark DPM.

The dissent mistakenly believes that Pennsylvania h as carved out a separate tolling rule that "governs in fraud actions," a rule which would inexplicably make it m ore difficult to toll the statute of limitations when t he defendant has engaged in fraud. Under the dissent's view, the discovery rule has no application in cases of fraud unless the fraud thereafter has been actively concealed by the wrongdoer. This erroneous concept arises out of a misunderstanding of the origin and application of t he discovery and fraudulent concealment rules in Pennsylvania's tolling of its statute of limitation s.

Initially, Pennsylvania's Statute of Limitations (A ct of June 24, 1895, P.L. 236 § 2) provided that every su it to recover damages for personal injuries not resulting in death must be brought within two years from the time of i njury. Similarly, the statute provided for limitations for tortious actions with respect to personal and real property, and other specific misconduct. The statute made no prov ision for tolling or reference to fraud.2 Thus, under tha t statute,

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2. In 1982, the Pennsylvania legislature amended th e statute of limitations relating to torts by adding a provision specifically governing fraud actions. The new section provides for a two-y ear statute of
limitations for:

Any other action or proceeding to recover damages f or injury to person or property which is founded on negligent, i ntentional, or otherwise tortious conduct or any other action or p roceeding sounding in trespass, including deceit and fraud, e xcept an action

6even where a personal injury or other tort was unkn own to

the victim, a claim not brought within two years wa s barred. From time to time, Pennsylvania courts were confronted with cases arising out of fraudulent mis conduct
where the literal enforcement of the statute would leave the victim without remedy, even when the fraud did not become
known to the victim until the statute of limitation s had run.

Thus, in Smith v. Blachley , 198 Pa. 173, 47 A. 985 (1901), the Supreme Court of Pennsylvania wrestled with whether the general rule that the statutes of limit ations runs from the act complained of should admit an exc eption at least on account of fraud. The exception, not in the statutes, had been judicially introduced by some co urts "acting upon principles of equity." Id. at 985. Tho se courts applied the principle that the fraud, although comp lete, operates as a continuing cause of action until disc overed. In Blachley , the court concluded that it would allow an exception to toll the statute in cases of fraud onl y if the wrongdoer added to his original fraud affirmative e fforts to mislead or prevent discovery. Id. at 987. This was Pennsylvania's recognition, although modest, that i n cases of fraud an exception under certain circumstances s hould be made, not with the objective of constricting the statute of limitations but, as a matter of equity and fairn ess, to
relax it in matters of fraud.

More than a half-century later, however, Pennsylvan ia had another opportunity to modernize its tolling pr inciples and make them more consistent with the humanizing legislation that the State had enacted with the adv ent of the 20th century. Thus, in Ayers v. Morgan , 397 Pa. 282, 154 A.2d 788 (1959), the Supreme Court of Pennsylvania for the first time announced its "discovery rule."3 In Ayer s , the

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or proceeding subject to another limitation specifi ed in this subchapter.

42 Pa. Cons. Stat. Ann. § 5524(7) (Supp. 1997). Pri or to 1982, the statute of limitations for fraud claims was six yea rs. 42 Pa. Cons. Stat. Ann. § 5527 (1981).

3. Ayers relied considerably in its analysis on Lewey v. H. C. Frick Coke
Co. , 166 Pa. 536, 31 A. 261 (1895), a case decided six years before Blachley , for its enunciation of the "discovery rule." Inex plicably, Blachley makes no mention of Lewey . We discuss Lewey more fully beginning at page 8.

7court found itself confronted with a medical malpra ctice

case where the defendant surgeon allegedly left a s ponge in his patient's abdomen which was not discovered unti l almost nine years later.

The trial court entered judgment for the defendant because of the same two-year statute of limitations considered by the court in Blachley in 1901. The Supreme Court of Pennsylvania reversed. In announcing the discovery rule, the court did not confine it merely to personal injury actions. In fact, the court analogi zed that in a contract action, "the plaintiff is not prevented from filing suit after the statute of limitations has expired, if fraud has intervened," Ayers , 157 A.2d at 792, and if he has not slept on his rights. The court, therefore, held that the plaintiff was entitled to proceed with his action against the surgeon after the two-year statutory period expired because of the
nature of the concealment. Id . at 794.

The defendant in Ayers argued that there was no concealment on its part. The court summarily dismis sed this argument with the statement that no "greater concealment" was necessary than leaving a foreign substance within the folds of a patient's intestine s until its discovery nine years later. Id . There is nothing in the court's opinion that confines its rationale to pers onal injury cases. On the contrary, it referred to tolling the statute in contract actions where fraud has intervened, to cri minal actions where the defendant has fled the jurisdicti on, and to its earlier decision in Lewey v. H.C. Frick Coke Co. , 166 Pa. 536, 31 A. 261 (1895), where the defendant had committed outright fraud in extracting subterranean coal from the plaintiff's land.

In Lewey , the plaintiff did not learn of the fraudulent pilfering until seven years after the deed was done . 31 A. at 261. The trial court entered judgment for the defen dant on the basis of the six-year statute of limitations. I n reversing and ordering a new trial, the court stated that to hold that the statute begins to run at the date of the trespa ss under such circumstances -- a case clearly not involving a personal injury -- constitutes "[a] result so absur d and so unjust [as] ought not be possible." Id . at 263. The court took notice of the equity

rule in English courts: that "[i]t

8was against good conscience to permit one who had t aken

the property of another without the owner's knowled ge, and who had failed to disclose . . . what he had taken, to avail himself of the statute [of limitations] while the o wner remained in ignorance of his loss." Id

.

In Pocono Int'l Raceway, Inc. v. Pocono Produce, In c. , 468 A.2d 468 (Pa. 1983), the suit involved the negligen t operation of a truck which damaged a tunnel on plai ntiff's land. This case also concerned a suit over an injur y to real property and not a personal injury action. The tria l court entered summary judgment for the defendant on the ground that the statute of limitations had expired. Pocono
Int'l , 468 A.2d at 470. The superior court reversed and remanded for trial, holding that the discovery rule applied, tolling the statute of limitations until the damage was reasonably ascertained by the Raceway. Id . at 470-71. On appeal to the Supreme Court of Pennsylvania, the co urt reaffirmed the application of the discovery rule to property actions and its holding in Lewey . Although it reversed the superior court because it concluded that the plaint iff had the ability to ascertain the cause of action and in stitute suit within the applicable period of limitations, it hel d that the discovery rule exception "arises from the inability of the injured, despite the exercise of due diligence , to know of the injury or its cause." Id . at 471.

One of the leading cases discussing the Pennsylvani a statute of limitations and its tolling principles i s Gee v. CBS, Inc. , 471 F. Supp. 600 (E.D. Pa.), aff'd , 612 F.2d 572 (3d Cir. 1979). Applying Pennsylvania law in a cont ract dispute, then District Judge Edward Becker wrote:

As we understand the case law, there are several separate inquiries we must make under facts as alle ged here. The first is whether the underlying events being sued upon . . .sound inherently in fraud or deceit. If they do then that, without more, will toll the stat ute of
limitations until such time as the fraud has been revealed, or should have been revealed by the exerc ise of due diligence by plaintiffs. This doctrine finds expression in Justice Frankfurter's opinion in Holm berg
v. Armbrecht , 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946):

9(T)his Court long ago adopted as its own the old

chancery rule that where a plaintiff has been injur ed by fraud and remains in ignorance of it without any fault or want of diligence or care on his part, the bar to the statute does not begin to run until the frau d is discovered, though there be no special circumstance s or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party

.

Holmberg is based on the premise that fraud as a common-law cause of action is self-concealing by it s nature. . . . As long as plaintiff continues to rea sonably rely to his detriment on the knowingly misleading representation the fraud continues, and of necessit y it is concealed from plaintiff. No additional special efforts of concealment are then necessary.

Gee , 471 F. Supp. at 622-23 (footnote omitted). Judge
Becker continued:

Fraudulent concealment does not depend, as do Holmberg and Nesbitt , on the underlying cause of action . . . being inherently fraudulent. Rather, i t requires independent acts of "fraudulent concealmen t" of the events or circumstances constituting the underlying cause of action, irrespective of whether those underlying events are inherently fraudulent o r

not.

Gee , 471 F. Supp. at 623.

This court has adopted the reasoning of Gee , recognizing that "Pennsylvania's inherent fraud doctrine, as se t forth in
Gee , focuses on whether the underlying events are base d on fraud or deceit. If they are, `then that, withou t more, will
toll the statute of limitations until such time as the fraud has been revealed or should have been revealed by t he exercise of due diligence by plaintiffs." Sheet Met al Workers

, 949 F.2d at 1280 (quoting Gee , 471 F. Supp. at 622). The
court noted that the "alternative doctrine" of frau dulent concealment applied "[i]rrespective of any inherent fraud."
Id . Thus, the dissent in this case has misconstrued Pennsylvania's tolling principles and would apply t he
fraudulent concealment doctrine in an action involv ing inherent fraud. As noted above, when the underlying claim

10sounds in fraud, the statute of limitations is toll ed by the

tortious conduct, without any further action by the wrongdoer, until the fraud should have been discove red by the plaintiffs.

In the instant case, the dissent believes that the time when the plaintiffs discovered or in the exercise o f due diligence should have discovered the fraud is irrel evant because in an action for fraud in Pennsylvania the statute of limitations is not tolled, even if fraud is conc ealed, "unless such fraud has been actively concealed by t he wrongdoer," citing Turtzo v. Boyer , 370 Pa. 526, 88 A.2d 884, 885 (1952). There is no such general rule in Pennsylvania, although this rule may apply in certa in special circumstances, such as a situation where th e plaintiff claims the defendant's wrongful conduct e stops the latter from pleading the statute of limitations. We re it the general rule, a bank could not recover money secret ly peculated by a bank officer and not discovered unti l after the statute of limitations had run, unless the wron gdoer actively concealed the fraud. Thus, if there were n o active
concealment

of the peculation after the initial fraud, there could be no recovery. That makes no sense.

Turtzo is inapposite. First, the Supreme Court of Pennsylvania decided Turtzo before it announced the "discovery rule" several years later in Ayers . Actually,

Turtzo is an application of the due diligence component o f the later announced discovery rule that when the pl aintiff reasonably could have timely discovered the filing of a fraudulent nominating petition for Justice of the P eace and had in fact "visited the office of the County Board of Elections and inspected the petition within the wee k after its filing," 88 A.2d at 885, the plaintiff cannot c laim that fraud vitiates the entire proceedings. "[F]raud whe n discovered must be acted upon with dispatch." Id . However, in the instant case, there is no evidence of record to show when the plaintiffs reasonably could have discovere d the alleged fraud. Therefore, remand is required.

The cases relied upon by the dissent for the propos ition that the statute of limitations in an action ground ed in fraud is tolled only if the fraud thereafter has be en actively concealed by the wrongdoer are inapplicable to the instant

11case. Turtzo addressed a very specific provision of the state

election code establishing a statute of limitations for contesting nomination petitions and did not address the state's general statute of limitations for tort cla ims. Turtzo

, 88 A.2d at 885. In re Estate of Doerr , 565 A.2d 1207 (Pa. Super. 1989), addressed a specific provision of Pennsylvania's probate code establishing a statute of limitations for challenging wills; In re Thorne's E state , 25 A.2d 811 (Pa. 1942), addressed a statute of limitat ions under the Fiduciaries Act. Again, neither case addr esses Pennsylvania's general statute of limitations for t ort claims. Additionally, Thorne's Estate and Dalzell v. Lewis , 97 A. 407, 408-09 (Pa. 1916), both preceded Ayres and the development of the discovery rule in Pennsylvania, as did

Turtzo

.

Northampton County Area Community College v. Dow Chemical, U.S.A. , 566 A.2d 591 (Pa. Super. 1989), cited by the dissent, is also inapplicable. In that case, th e college asserted that Dow fraudulently misrepresented that a chemical used in construction would not cause defec ts in the building. Id . at 594. The trial court dismissed the claim, finding it was barred by the six year statute of li mitations then applicable to fraud actions, 42 Pa. Cons. Stat .§ 5527.
Id . The college appealed, arguing that the statute wa s tolled until the college discovered the alleged fraud. Id . at 599. The superior court cited the rule of Turtzo , noting that "[i]f the party committing fraud is also guilty of some a cts of concealment or deception which hides from the plain tiff that he has a cause of action, then the statute wil l run from the time discovery of the alleged fraud is mad e, or in the exercise of reasonable diligence should have be en made." Id . (citing Turtzo v. Boyer , 88 A.2d 884 (Pa. 1952)). The court then concluded that the college, in light of all the circumstances, could not have reasonably relied on the initial fraudulent misrepresentation, thereby deter mining that no cause of action for fraud would lie, regard less of the statute of limitations. Thus, Northampton County

, announcing a rule from Turtzo but not applying it, is simply an insufficient basis upon which to disregard the substantial body of precedent establishing that an act of fraud, by itself, will toll the statute of limitati ons until that

12fraud reasonably should have been discovered by the

plaintiffs. See Gee , 471 F. Supp. at 622.

In fact, as the Superior Court of Pennsylvania itse lf has noted, the practical difference between the discove ry rule
and fraudulent concealment in fraud cases has been "much
reduced." In Bickell v. Stein , the court said:

Appellee cites Smith v. Blachley , 198 Pa. 173, 179, 47 A. 985 (1901) and Turtzo v. Boyer , 370 Pa. 526, 528, 88 A.2d 884 (1952) for the proposition that in acti ons for fraud, the statutory limitation may only be tol led by proof of "fraudulent concealment" of the original f raud. The doctrine of fraudulent concealment appears somewhat narrower than the discovery rule, because it requires a showing that defendant himself prevented plaintiff from discovering the facts by acts of dec eption which were independent of the acts giving rise to c ause of action. However, the doctrine of fraudulent concealment has been relaxed considerably with rega rd to the deceptive intent of defendant's acts and the ir independence of the underlying, operative facts (se e Nesbitt v. Erie Coach Co. , 416 Pa. 89, 204 A.2d 473 (1952); Schwab v. Cornell , 306 Pa. 536, 106 A. 449 (1932); Gee v. CBS, Inc. , 471 F.Supp. 600, 617-634 (E.D. Pa., 1979); Hedges v. Primavera , 218 F.Supp. 797 (E.D. Pa., 1963)), so that the practical difference between the two rules is much reduced. Furthermore,
Smith and Trutzo [sic] are reconcilable with the discovery rule, because both are cases in which the court observed that the fraud was obvious or easily discoverable by a prudent individual.

435 A.2d 610, 612 n.3 (Pa. 1981).

Application of the discovery rule to fraud claims w ill not eviscerate the statute of limitations because aggri eved parties must still bring their claim within two yea rs of when they learned or should have learned, through the ex ercise of due diligence, that they have a cause of action. 4 "For

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4. We concur with the dissent that the cases interp reting Pennsylvania's tolling rules have not been entirely free from ambi guity. However, the
rule set forth in Gee and affirmed by this court is clear, and the court s of Pennsylvania have not altered this rule despite the opportunity to do
so. See , e.g. , Pocono Int'l Raceway, Inc. v. Pocono Produce, Inc

. , 468 A.2d 468 (Pa. 1983); Bickell v. Stein , 435 A.2d 610 (Pa. Super. 1981).

13statute of limitations purposes, a claimant need on ly be put

on inquiry notice by `storm warnings' of possible f raud." Ciccarelli v. Gichner Systems Group, Inc. , 862 F. Supp. 1293, 1301 (M.D. Pa. 1994). Therefore, we conclude that the discovery rule applies in Pennsylvania when the underlying cause of action sounds in fraud, and tha t the statute of limitations is tolled until the plaintif f learns or reasonably should have learned through the exercise of due diligence of the existence of the claim.

B.

The district court determined that the plaintiffs are timebarred from bringing the action based upon the constructive notice provision of the Lanham Act tha t registration of a mark "shall be constructive notic e of the registrant's claim of ownership thereof." 15 U.S.C. § 1072 (1963). The court held that the plaintiffs "were on constructive notice of any fraud committed by Vujev ich in re-registering the mark DPM as of the date that the reregistration occurred in 1989." The plaintiffs argu e, however, that state law tolling principles would no t recognize constructive notice pursuant to § 1072 as sufficient notice of the fraud to cause the running of the

statute.

The Lanham Act requires that the holder of a tradem ark submit an affidavit between the fifth and sixth yea rs after registration of the trademark to establish that the mark is currently in use in commerce. 15 U.S.C. § 1058 (Sup p. 1997). The PTO registered the trademark DPM on Apri l 19, 1983; therefore, Vujevich had to submit an affidavi t establishing the continued use of the mark by April 18, 1989 to maintain the registration. Pursuant to § 10 58, Vujevich submitted the allegedly fraudulent affidav its on February 27, 1989, thereby successfully continuing the registration of the trademark DPM listing Vujevich as the
sole owner and user of the mark. Use of this mark u nder certain conditions became incontestable pursuant to 15 U.S.C. § 1065.

It does not appear that the constructive notice pro vision of § 1072 under the Lanham Act applies to the submi ssion

14of affidavits under § 1058 to register the trademar k or under § 1065 to establish incontestability. The bri efs of the parties and our own exhaustive search reveal no cas e law establishing that the act of confirming the tradema rk's
continued use in commerce satisfies the constructiv e notice provision of § 1072. Additionally, the language of § 1072, which speaks to "[r]egistration of the trademark on the principal register" as constructive notice does not apply to the submission of affidavits five years later pursu ant to § 1058 and § 1065 of the Lanham Act. Thus, we agree with the plaintiffs that, under Pennsylvania law, thefil ing of the user affidavits by Vujevich did not constitute cons tructive notice sufficient to begin the running of the statu te of
limitations.

The plaintiffs' claim may still be time-barred, how ever, because they may have had actual notice of the alle ged fraudulent re-registration as early as 1991. The pl aintiffs' amended complaint charges that Vujevich began using the DPM trademark improperly in 1991. The complaint sta tes: "On or about March 1991, Defendants began marketing and selling in interstate commerce skin products un der the name VU Skin Systems. These skin products were sold under the label DPM Skin Systems products and/or DP M, using the mark DPM without license, or any other fo rm of approval, from Beauty Time (PA)." The language of t he complaint does not establish conclusively whether t he plaintiffs had actual knowledge of these dealings a s early as 1991; they now assert that they did not become awar e of the allegedly improper use of the trademark by Vuje vich until 1994. If the plaintiffs were aware of the use in 1991, this knowledge should have "awake[ned] inquiry and direct[ed] diligence in a channel in which it would be
successful." Urland , 882 F.2d at 1273. Thus, if the plaintiffs knew of this conduct in 1991, then the s uit should have been brought within two years of that discovery and should now properly be deemed time-ba rred. However, if the plaintiffs did not learn of this al leged fraud until 1994, then the action brought in 1995 is well -within the two-year statute of limitations for fraud estab lished by Pennsylvania law.

The district court, however, failed to determine wh en the

15plaintiffs actually learned of the alleged fraudule nt reregistration. Thus, the order dismissing the compla int must
be vacated and the matter remanded to the district court for further proceedings to determine when the plain tiffs first became aware that Vujevich was using the DPM trademark separate and independently of its use by Beauty
Time.5

C.

The plaintiffs also argue that the district court e rred in dismissing Counts IV, V, and VI of their remaining claims for lack of standing.6 A district court's decision to dismiss an action for lack of standing is subject to plenar y review. Chem Service v. Environmental Monitoring Sys. Lab.-
Cincinnati of the United States Environmental Prote ction Agency, 12 F.3d 1256, 1261 (3d Cir. 1993).

The district court held that the plaintiffs' state- law claims for trademark infringement and violation of the Pennsylvania Anti-Dilution Statute should be dismis sed because the plaintiffs failed to show an effective assignment of the trademark and failed to establish that they had first rights to the trademark, a prerequisite to ownershi p rights in the trademark. The plaintiffs assert that they m aintained common-law rights in the trademark regardless of th e alleged inadequacies of the oral assignment, and th at they therefore had standing to bring these state law cla ims as
owners of the trademark.

The plaintiffs have not alleged that the trademark was acquired in connection with the sale of a business or otherwise transferred in connection with the goodwi ll associated with the trademark. Accordingly, the att empted

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5. Once the district court ascertains the date on o r about which the plaintiffs became aware of the alleged unauthorized use of the DPM trademark, the court must determine whether that kn owledge was sufficient to begin the running of the statute of l imitations on both the claim of fraudulent re-registration as to ownership of the trademark and the claim for failing to declare the plaintiffs' ju nior use of the trademark.

6. On appeal, the plaintiffs do not challenge the d istrict court's order dismissing Counts 1 through 3 and Counts 7 through 10.

16oral assignment was an assignment in gross and was

invalid. See United Drug Co. v. Theodore Rectanus C o. , 248 U.S. 90, 97 (1918); Family Circle Inc. v. Family Ci rcle Associates, Inc. , 332 F.2d 534, 539 (3d Cir. 1964). The Anti-Dilution Statute expressly provides a remedy o nly for "a mark registered under this chapter, or a mark va lid at common law." 54 Pa. Cons. Stat. § 1124 (1996). Comm on law trademark protections only apply when the trade mark is validly acquired. The plaintiffs did not acquire any ownership rights in the trademark under Pennsylvani a law, and the mark is neither registered nor valid at com mon law. See Browning King Co. of New York v. Browning King
Co. , 176 F.2d 105, 105 (3d Cir. 1949) (under Pennsylva nia common law, trademarks cannot be transferred in gro ss). Therefore the plaintiffs have no standing to bring a claim for infringement or dilution under Pennsylvania law . Thus, we perceive no error by the district court in dismi ssing Counts IV and V of the plaintiffs' amended complain t seeking relief for common-law trademark infringemen t and
violations of the state Anti-Dilution Statute.

Count VI of the plaintiffs' state law claims, which was dismissed under the pendant jurisdiction doctrine f or lack of original jurisdiction over a state law claim, wi ll be reinstated pending resolution of the matters remand ed to the district court for further proceedings.

III.

Accordingly, the district court's order dismissing the plaintiffs' amended complaint will be vacated with respect to Count XI (fraud under the Lanham Act) and the ca se remanded to the district court for further proceedi ngs consistent with this opinion. Additionally, the ord er dismissing Count VI will be vacated and the claim reinstated for further proceedings.

Costs taxed against the appellees.

17ALITO, Circuit Judge , dissenting:

In this action, plaintiffs asserted a claim for fra ud under the Lanham Act. Since the Lanham Act does not speci fy a statute of limitations for such a claim, we look to the state statute of limitations that applies to an analogous state law cause of action. It is undisputed that the applicab le statute of limitations here is the two-year bar for fraud a ctions contained in 42 Pa. C.S. § 5524(7) and that this li mitations period begins to run at the time the fraudulent act is completed. It is also undisputed that, in evaluatin g whether § 5524(7) bars plaintiffs' fraud claim, we borrow Pennsylvania's tolling rules. Thus far I am in agre ement with the majority.

My disagreement with the majority lies in its choic e of tolling rules. The majority holds that the "discove ry rule,"
under which the statute of limitations is tolled "u ntil the plaintiff learns or reasonably should have learned through the exercise of due diligence of the existence of t he claim," applies to fraud claims. Maj. Op. at 14. As I read the Pennsylvania cases, however, the statute of limitat ions for a fraud claim is tolled only if the tortfeasor, aft er carrying out the concealment inherent in the tort, committed additional acts of concealment. Turtzo v. Boyer , 88 A.2d 884, 885 (Pa. 1952). Because plaintiffs do not even argue that defendants committed any such acts, plaintiffs cannot obtain the benefit of tolling under Pennsylvania la w, and
their Lanham Act fraud claim is time-barred.

I.

The Pennsylvania Supreme Court has squarely held th at "[i]n an action based upon a fraud" the statute of limitations is tolled only if "such fraud has been actively concealed by the wrongdoer." Turtzo , 88 A.2d at 885. As the court explained, "fraud or concealment in the origi nal
transaction" is insufficient to extend the time for filing suit; "to excuse delay of the injured party in asserting his rights there must be an independent act of fraud or concea lment which misled or prevented discovery." Id . This proposition was established as a matter of Pennsylvania law as early as 1901, Smith v. Blachley , 47 A. 985 (Pa. 1901), and has

18been repeatedly reaffirmed in recent years. Northam pton Cty. Area Commun. College v. Dow Chemical, U.S.A. , 566 A.2d 591, 599 (Pa. Super. 1989) ("If the party comm itting fraud is also guilty of some acts of concealment or deception which hide[ ] from the plaintiff that he has a cause of action, then the statute will run from the time discovery of the alleged fraud is made, or in the e xercise of reasonable diligence should have been made."), aff' d , 598 A.2d 1288 (Pa. 1991) (per curiam); In re Estate of Doerr

, 565 A.2d 1207, 1211 (Pa. Super. 1989) ("[A] cause o f action arising from fraud is complete when the transaction has ended[;] . . . the statute of limitations begins to run at once, unless discovery is prevented by active concealment .") (emendations in original) (quotation omitted). Acco rd In re
Thorne's Estate , 25 A.2d 811, 815 (Pa. 1942); Dalzell v.
Lewis , 97 A. 407, 408-09 (Pa. 1916); In re McKay , 110 B.R. 764, 767 (Bankr. W.D. Pa. 1990).

In Smith v. Blachley , the Pennsylvania Supreme Court reviewed the precedents at length and discussed two competing views of tolling in actions for fraud. Th e court explained:

It is said, in general, that in cases of fraud the statute runs only from discovery, or from when, with reasonable diligence, there ought to have been discovery. But a distinction is made in regard to t he starting point between fraud completed and ending with the act which gives rise to the cause of actio n and
fraud continued afterwards in efforts or acts tendi ng to prevent discovery. On this distinction there are tw o widely divergent views. It is held, on the one hand , that the fraud, though complete and fully actionable, operates as of itself a continuing cause of action until discovery; while, on the other hand, it is held tha t, when the cause of action is once complete, the stat ute begins to run, and suit must be brought within the prescribed term, unless discovery is prevented by s ome additional and affirmative fraud done with that int ent

.

Id . at 985 (emphasis added). The court unambiguously aligned itself with the latter view, declaring that "[w]e regard the distinction as sound, well marked, and in harmo ny with the spirit and letter of the statute." Id . at 987. The court

19observed that a tolling rule that delayed the runni ng of the

statute in all cases of fraud until discovery of th e fraud would be incompatible with the settled rule that a cause of action for fraud accrues upon consummation of the f raud.

The cases which hold that, where fraud is concealed

, or, as sometimes added, conceals itself, the statut e runs only from discovery, practically repeal[ ] the statute pro tanto. Fraud is always concealed. If it was not, no fraud would ever succeed. But, when it is accomplished and ended, the rights of the parties a re fixed. The right of action is complete.

Id

.

In other words, the Pennsylvania Supreme Court
reasoned as follows: The statute of limitations for fraud claims embodies a legislative judgment that, at lea st in typical cases, the plaintiff should begin suit with in the specified period after the fraud occurs. Since the legislature presumably realized that some concealment is inhere nt in fraud, the legislature presumably realized as well that there will typically be some lag time between the occurre nce of the fraud and its discovery by the victim. Thus, th e legislature presumably took this typical lag time i nto account in framing the statute of limitations in th efirst place and it is therefore not appropriate for the c ourts to recognize a tolling rule to account for this sort o f typical lag time. Only when there is the atypical lag time that results from subsequent acts of concealment is such a tolli ng rule appropriate.

The majority opines that it would be "inexplicabl[e ]" for Pennsylvania to apply the liberal discovery rule to other tort claims and to subject fraud claims to a different, tougher tolling rule. Maj. Op. at 6. See also Maj. Op. at 11 (it "makes no sense" to say that a victim of fraud who does not discover the fraud during the two-year limitations period cannot recover unless the defendant actively concea led the fraud subsequent to its completion). I disagree.

While I might well agree that the majority's tollin g rule represents sound public policy, it does not seem to me to be the rule that Pennsylvania has adopted, and I ce rtainly do not think that Pennsylvania's apparent choice is either

20"inexplicabl[e]" or irrational. In my view, the for egoing

discussion and excerpt from Smith v. Blachley reveal why fraud claims might be viewed as requiring different treatment. Causes of action for fraud are unique in that they always involve concealment. In contrast, only a minority of actions for other torts involve conduct that was
concealed from the victim at the time it was commit ted. An individual cause of action for personal injury, for example, is distinguished from the norm when it is alleged t hat the tortious conduct was concealed and that the plainti ff was unable to discover it until a subsequent time. Thus , in Ayers v. Morgan , 154 A.2d 788 (Pa. 1959), the court held, notwithstanding the two-year statute of limitations , that the plaintiff could maintain his suit against a surgeon who had negligently failed to remove a sponge from the plai ntiff's intestines following surgery nine years earlier. Si nce the statute of limitations was designed for the paradig matic personal injury case in which the plaintiff becomes aware of the injury at the time when the defendant performs the tortious act, it would be unfair and "illogical" to apply it to a case in which the plaintiff "does not know, and c annot know, for example, that a surgeon has negligently l eft a rubber tube in his body." Id . at 789.

The same rationale applies to other causes of actio n. In Lewey v. H.C. Frick Coke Co. , 31 A. 261 (Pa. 1895), the plaintiff sued the defendant in trespass, contendin g that it
had intruded onto his lands and stolen coal from be neath the surface. As in Ayers , the court emphasized that the plaintiff had no way of knowing that the invasion a nd theft were taking place, since "[h]e [could not] be prese nt in the
interior of the earth." Id . at 263-64. Many trespasses, like many personal injuries, are immediately apparent to a diligent plaintiff, but this particular trespass wa s not. Therefore, while in the usual trespass case the sta tute of limitations begins running upon commission of the trespass, "the statute runs against an injury commi tted in
or to a lower stratum from the time of actual disco very, or the time when discovery was reasonably possible." I d . at 264.1

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1. Contrary to the majority's implication, Lewey is poor authority for the application of the discovery rule to fraud causes o f action for the

21In contrast, since fraud always involves an element of concealment, something more is needed to distinguis h a particular fraud claim from the norm. Accordingly, while the presence of concealment in a particular persona l injury case might provide a sufficient reason to toll the statute in that case, under the reasoning of the Pennsylvania Supreme Court, something more, namely, an independe nt act of concealment, is required for tolling in a fr aud case. This reasoning might lead one to question the wisdo m of the legislature's enactment of a two-year statute o f limitations for fraud claims. But it goes without s aying that we are bound to apply the law of Pennsylvania wheth er or not we think it wise.

In my view, the foregoing clearly establishes that, at least
at the time of Turtzo , it was the law in Pennsylvania that the fraud statute of limitations was tolled only up on a showing that the defendant engaged in affirmative a cts of concealment, independent of the original fraud. The majority concludes that, at the present time, "ther e is no such general rule in Pennsylvania," and indeed hold s the precise opposite: "when the underlying claim sounds in fraud, the statute of limitations is tolled by the tortious conduct, without any further action by the wrongdoe r, until the fraud should have been discovered by the plaint iffs." Maj. Op. at 10-11. In reaching this conclusion, the majority distinguishes the cases I have cited and relies upo n some

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additional reason that the court in Lewey actually held only that "the equitable rule that the statute shall run only from discovery, or a time when discovery might have been made, should be appl ied by courts of law" confronted with claims for equitable relief. I d . at 264. I do not dispute that "[g]enerally, courts have followed the old chancery rule adopted by the United States Supreme Court that whe n a party `has been injured by fraud and remains in ignorance with out any fault or want of diligence or care on his part, the bar to t he statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party c ommitting the fraud to conceal it from the knowledge of the other party.' " Maj. Op. at 5 (quoting Holmberg v. Armbrecht , 327 U.S. 392, 397 (1946)). But that principle is explicitly a principle of equity, and it is thus ap plicable only to claims in equity. Here, it is not contended that plaintiffs' Lanham Act fraud claim sounds in equity. The majority's reliance on Holmbe rg is thus unsound.

22recent cases (mostly not decisions of the Pennsylvania Supreme Court) that create some ambiguity regarding the current state of Pennsylvania law with respect to t he requirement of fraudulent concealment independent o f the original fraud.2

I acknowledge that the cases have not been free fro m ambiguity in confirming the vitality of the rule da ting from Smith v. Blachley . But the important point is that the Smith v. Blachley

rule has never been repudiated by the Pennsylvania Supreme Court or Superior Court. Nor d o I see any clear evidence in the state appellate decis ions that the Pennsylvania Supreme Court would overrule Smith v. Blachley if given the chance. At least without far stronger evidence than we now have, I am not willing to pred ict such
a result.

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2. In fact, several of the cases cited by the major ity are at best ambiguous in their support of its conclusion. In Bi ckell v. Stein , 435 A.2d 610 (Pa. Super. 1981), the court stated that t he "doctrine of fraudulent concealment appears somewhat narrower th an the discovery rule, because it requires a showing that defendant himself prevented plaintiff from discovering the facts by acts of dec eption which were independent of the acts giving rise to [the] cause of action ." Id . at 612 n.3 (emphasis added). It is true that the court then we nt on to note its opinion that the doctrine of fraudulent concealment had been "relaxed,"
id ., but the case hardly stands clearly for the holdi ng announced by the majority. The same is true of Knuth v. Erie-Crawfor d Dairy Cooperative
Assoc. , 463 F.2d 470, 482 (3d Cir. 1972), where we in fac t held that "the governing standard" was whether there was "an affir mative, independent act of concealment." While in Sheet Metal Workers, Local 19 v. 2300 Group, Inc. , 949 F.2d 1274, 1280 (3d Cir. 1991), we did hold t he statute
of limitations tolled because of "inherent fraud" i n the "self-concealing"
false statements in the defendant's certifications that it was making the required benefit fund contributions, the fraudulent concealment (the certifications) was in fact independent of the wron g sued upon (the failure to pay the contributions). Finally, the maj ority relies on Pocono Int'l Raceway, Inc. v. Pocono Produce, Inc. , 468 A.2d 468 (Pa. 1983). The
court in Pocono , however, only discussed the discovery rule as a p relude to finding that the plaintiff's claim was time-barr ed in any event because it could have learned of its injury through the exe rcise of reasonable diligence. Id . at 471. In addition to the cases cited by the maj ority, see

Deemer v. Weaver , 187 A.215, 216 (Pa. 1936).

23II.

Accordingly, it seems to me that under Pennsylvania law, as it now stands, a different showing is required t o toll the statute of limitations for fraud claims, § 5524(7), than for other types of claims. While the statute is tolled for most tort claims if the plaintiff, "despite the exercise of due diligence, is unable to know of the existence of th e injury and its cause," Bohus v. Beloff , 950 F.2d 919, 924 (3d Cir. 1991), the statute is tolled for a fraud claim only if the defendant actively conceals the completed fraud. Si nce plaintiffs here do not even contend that defendants committed any independent acts of concealment, I wo uld hold that plaintiffs cannot avail themselves of tol ling under the Pennsylvania law governing fraud actions. Here, as in

Turtzo , "[a]ssuming, as alleged, there were fraud in the execution of the affidavit[ ] [in connection with the reregistration application], there was no independent act of fraud or concealment which misled plaintiff[s] or p revented discovery ." 88 A.2d at 886 (emphasis in original) (quotation omitted). See also Smith , 47 A. at 987 ("It is true that the defendant obtained the money, as the jury have foun d, by a scheme of the grossest fraud and deception, and u sed all possible efforts to prevent plaintiffs from finding out the truth; but all these were in the transaction itself and prior to its consummation."). Absent tolling, it is undis puted that plaintiffs' Lanham Act fraud claim is barred by§ 55 24(7)'s two-year statute of limitations. I would therefore affirm the district court's dismissal of plaintiffs' Lanham Ac t fraud
claim.3

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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3. I agree with the majority's affirmance of the di smissal of plaintiffs' state law dilution and infringement claims. Plainti ffs have not appealed
the dismissal of the remainder of their federal cla ims, so I would affirm the district court's decision not to exercise suppl emental jurisdiction over plaintiffs' other state law claims once all of thei r federal claims had been
dismissed.

24