1997 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-3-1997

Beauty Time Inc v. VU Skin Sys Inc

Precedential or Non-Precedential:

Docket 96-3572

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Recommended Citation

"Beauty Time Inc v. VU Skin Sys Inc" (1997). 1997 Decisions. Paper 146.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/146
Filed 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 Appellants 
Daniel 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 provisions of the 

Lanham Act, 15 U.S.C. § 1058, the application of a statute 

of limitations borrowed from the state of Pennsylvania, and 

the tolling principles of that state. The United States 

District Court for the Western District of Pennsylvania 

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 appealed. We 

affirm in part and vacate in part. 

I. 

In 1981, Marion J. Vujevich filed an application for the 

registration of the trademark "DPM" with the United States 

Patent and Trademark Office ("PTO") for use in interstate 

commerce of medicated and non-medicated cosmetics. In 

1983, Vujevich obtained the registration of the trademark 

and listing as the sole user of the trademark. Vujevich and 

BJV, a limited partnership in which Vujevich participated, 

used this trademark exclusively until 1987. 

In 1987, Vujevich allegedly agreed to form a corporation 

with R. Richard Riso to manufacture and distribute 

products bearing the DPM trademark. This new 

corporation, Beauty Time, Inc., a Delaware corporation, of 

which Riso is the sole shareholder, began distributing 

products in or about August 1987 bearing the DPM 

trademark. Plaintiffs allege that Vujevich had orally 

assigned the DPM mark to Beauty Time in 1987 for its 

 2 
exclusive use and Beauty Time claims to have used the 

mark exclusively from 1987 to 1991. 

In February, 1989, Vujevich filed a combined §§ 8 and 15 

declaration1 in his own name as owner and registrant with 

the PTO seeking renewal of the trademark in accordance 

with federal trademark registration law. Vujevich filed an 

affidavit in connection with the declaration asserting that 

he was the sole owner and user of the trademark. Vujevich 

allegedly used Beauty Time packaging in support of this 

declaration. In July, 1989, the ownership of the trademark 

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 its 

junior use of the mark. 

In 1991, Vujevich allegedly began marketing and selling 

items bearing the DPM trademark without the consent of 

Beauty Time or Riso. According to the plaintiffs, these 

products were distributed under the names VU Skin 

Systems and DPM Skin Systems. Beauty Time 

unsuccessfully sought to compel Vujevich to cease from 

distributing these products bearing the DPM trademark. In 

August, 1994, Vujevich informed a number of purchasers 

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 customers 

stopped purchasing Beauty Time products based upon 

Vujevich's assertions of ownership. 

In July, 1995, Riso ascertained that Vujevich had reregistered the trademark in 1989 listing Vujevich as the 

sole owner and user of the trademark. Soon thereafter, the 

plaintiffs brought this action against the defendants 

seeking cancellation of the trademark, declaratory and 

injunctive relief, and monetary damages. The amended 

_________________________________________________________________ 

1. 15 U.S.C. § 1058 (Supp. 1997) provides for the cancellation of a prior 

registration of a mark "unless within one year next preceding the 

expiration of [six years from the date of the original registration] the 

registrant shall file in the Patent and Trademark Office an affidavit" 

showing that mark is still in use. Upon filing of such affidavit, the right 

to use the mark under certain conditions may become incontestable to 

15 U.S.C. § 1065 (Supp. 1997). 

 3 
complaint asserted eleven counts: four federal counts 

[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-dilution 

statute (IV), common law trademark infringement (V), 

fraudulent misrepresentation (VI), breach of contract (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 upon which 

relief can be granted. The court dismissed Count XI as 

time-barred, Counts I through V for lack of standing, and 

the remainder for lack of pendant jurisdiction. The plaintiffs 

appealed the order dismissing their amended complaint. 

II. 

A. 

Plaintiffs first challenge the district court order

dismissing their claim of fraud under the Lanham Act as 

time-barred. The district court's application of the statute of 

limitations and the relevant tolling principles is subject to 

plenary review. Sheet Metal Workers Local 19 v. 2300

Group, Inc., 949 F.2d 1274, 1278 (3d Cir. 1991). The 

Lanham Act contains no express statute of limitations and 

the general rule is that when a federal statute provides no 

limitations for suits, the court must look to the state 

statute of limitations for analogous types of actions. A claim 

for fraud under the Lanham Act conforms to this general 

rule. See Official Airlines Guides, Inc. v. Goss, 6 F.3d 1385, 

1395 (9th Cir. 1993); Guardian Life Ins. Co. v. American

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 Pennsylvania's 

two-year statute of limitations for fraud actions would 

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, 

 4 
487-88 (1980); Johnson v. Railway Express Agency, Inc., 

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. Pocono

Produce, Inc., 468 A.2d 468, 471 (Pa. 1983). In the present 

matter, the allegedly fraudulent act occurred in 1989, when 

Vujevich re-registered the trademark with the PTO claiming 

that he was the sole owner and user of the DPM mark. 

Thus, absent any exceptions, the statute of limitations 

would have run in 1991, two years after the fraudulent act 

allegedly occurred. 

Because we look to state law for the appropriate statute 

of limitations, we also look to Pennsylvania law on the 

closely related questions of tolling and application. See

Wilson, 471 U.S. at 264 n.17. It is well-established that

Pennsylvania law recognizes an exception to the statute of 

limitations which "delays the running of the statute until 

the plaintiff knew, or through the exercise of reasonable 

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 fraudulent 

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 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 fraud is discovered, though 

there be no special circumstances or efforts on the part of 

the party committing the fraud to conceal it from the 

knowledge of the other party.' " Holmberg v. Armbrecht, 327 

U.S. 392, 397 (1946) (quoting Bailey v. Glover, 21 Wall. 

342, 348). 

Regardless of the grounds for seeking to toll the statute, 

the plaintiff is expected to exercise reasonable diligence in 

attempting to ascertain the cause of any injury. Urland, 822 

F.2d at 1273-74. Reasonable diligence has been defined as 

follows: "A fair, proper and due degree of care and acting, 

measured with reference to the particular circumstances; 

 5 
such diligence, care, or attention as might be expected from 

a man of ordinary prudence and activity." Black's Law

Dictionary 457 (6th ed. 1991). As the court observed in 

Urland, there are few facts which diligence cannot discover, 

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 registration of 

the trademark with the PTO until they became aware that 

the trademark had been re-registered in 1989 listing 

Vujevich as its sole owner and user. The question thus 

becomes when did or when should the plaintiffs have

become aware of the concerns regarding the re-registration 

of the trademark DPM. 

The dissent mistakenly believes that Pennsylvania has 

carved out a separate tolling rule that "governs in fraud 

actions," a rule which would inexplicably make it more 

difficult to toll the statute of limitations when the 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 the 

discovery and fraudulent concealment rules in 

Pennsylvania's tolling of its statute of limitations. 

Initially, Pennsylvania's Statute of Limitations (Act of 

June 24, 1895, P.L. 236 § 2) provided that every suit to 

recover damages for personal injuries not resulting in death 

must be brought within two years from the time of injury. 

Similarly, the statute provided for limitations for tortious 

actions with respect to personal and real property, and 

other specific misconduct. The statute made no provision 

for tolling or reference to fraud.2 Thus, under that statute, 

_________________________________________________________________ 

2. In 1982, the Pennsylvania legislature amended the statute of 

limitations relating to torts by adding a provision specifically governing 

fraud actions. The new section provides for a two-year statute of 

limitations for: 

Any other action or proceeding to recover damages for injury to 

person or property which is founded on negligent, intentional, or 

otherwise tortious conduct or any other action or proceeding 

sounding in trespass, including deceit and fraud, except an action 

 6 
even where a personal injury or other tort was unknown to 

the victim, a claim not brought within two years was 

barred. From time to time, Pennsylvania courts were

confronted with cases arising out of fraudulent misconduct 

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 limitations 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 limitations 

runs from the act complained of should admit an exception 

at least on account of fraud. The exception, not in the 

statutes, had been judicially introduced by some courts 

"acting upon principles of equity." Id. at 985. Those courts 

applied the principle that the fraud, although complete, 

operates as a continuing cause of action until discovered. 

In Blachley, the court concluded that it would allow an 

exception to toll the statute in cases of fraud only if the 

wrongdoer added to his original fraud affirmative efforts to 

mislead or prevent discovery. Id. at 987. This was 

Pennsylvania's recognition, although modest, that in cases 

of fraud an exception under certain circumstances should 

be made, not with the objective of constricting the statute 

of limitations but, as a matter of equity and fairness, to 

relax it in matters of fraud. 

More than a half-century later, however, Pennsylvania 

had another opportunity to modernize its tolling principles 

and make them more consistent with the humanizing 

legislation that the State had enacted with the advent 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 Ayers, the 

_________________________________________________________________ 

or proceeding subject to another limitation specified in this 

subchapter. 

42 Pa. Cons. Stat. Ann. § 5524(7) (Supp. 1997). Prior to 1982, the 

statute of limitations for fraud claims was six years. 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." Inexplicably, 

Blachley makes no mention of Lewey. We discuss Lewey more fully 

beginning at page 8. 

 7 
court found itself confronted with a medical malpractice 

case where the defendant surgeon allegedly left a sponge in 

his patient's abdomen which was not discovered until 

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 analogized 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 dismissed 

this argument with the statement that no "greater 

concealment" was necessary than leaving a foreign 

substance within the folds of a patient's intestines until its 

discovery nine years later. Id. There is nothing in the 

court's opinion that confines its rationale to personal injury 

cases. On the contrary, it referred to tolling the statute in 

contract actions where fraud has intervened, to criminal 

actions where the defendant has fled the jurisdiction, 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 defendant on 

the basis of the six-year statute of limitations. In reversing 

and ordering a new trial, the court stated that to hold that 

the statute begins to run at the date of the trespass under 

such circumstances -- a case clearly not involving a 

personal injury -- constitutes "[a] result so absurd 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 

 8 
was against good conscience to permit one who had taken 

the property of another without the owner's knowledge, and 

who had failed to disclose . . . what he had taken, to avail 

himself of the statute [of limitations] while the owner 

remained in ignorance of his loss." Id. 

In Pocono Int'l Raceway, Inc. v. Pocono Produce, Inc., 468 

A.2d 468 (Pa. 1983), the suit involved the negligent 

operation of a truck which damaged a tunnel on plaintiff's 

land. This case also concerned a suit over an injury to real 

property and not a personal injury action. The trial 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 court 

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 plaintiff had 

the ability to ascertain the cause of action and institute suit 

within the applicable period of limitations, it held 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 Pennsylvania 

statute of limitations and its tolling principles is 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 contract 

dispute, then District Judge Edward Becker wrote: 

As we understand the case law, there are several 

separate inquiries we must make under facts as alleged 

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 statute of 

limitations until such time as the fraud has been 

revealed, or should have been revealed by the exercise 

of due diligence by plaintiffs. This doctrine finds

expression in Justice Frankfurter's opinion in Holmberg

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 injured 

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 fraud is 

discovered, though there be no special circumstances 

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 its 

nature. . . . As long as plaintiff continues to reasonably 

rely to his detriment on the knowingly misleading 

representation the fraud continues, and of necessity 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, it 

requires independent acts of "fraudulent concealment" 

of the events or circumstances constituting the 

underlying cause of action, irrespective of whether

those underlying events are inherently fraudulent or 

not. 

Gee, 471 F. Supp. at 623. 

This court has adopted the reasoning of Gee, recognizing 

that "Pennsylvania's inherent fraud doctrine, as set forth in 

Gee, focuses on whether the underlying events are based 

on fraud or deceit. If they are, `then that, without more, will 

toll the statute of limitations until such time as the fraud 

has been revealed or should have been revealed by the 

exercise of due diligence by plaintiffs." Sheet Metal Workers, 

949 F.2d at 1280 (quoting Gee, 471 F. Supp. at 622). The 

court noted that the "alternative doctrine" of fraudulent 

concealment applied "[i]rrespective of any inherent fraud." 

Id. Thus, the dissent in this case has misconstrued 

Pennsylvania's tolling principles and would apply the 

fraudulent concealment doctrine in an action involving 

inherent fraud. As noted above, when the underlying claim 

 10 
sounds in fraud, the statute of limitations is tolled by the 

tortious conduct, without any further action by the

wrongdoer, until the fraud should have been discovered by 

the plaintiffs. 

In the instant case, the dissent believes that the time 

when the plaintiffs discovered or in the exercise of due 

diligence should have discovered the fraud is irrelevant 

because in an action for fraud in Pennsylvania the statute 

of limitations is not tolled, even if fraud is concealed, 

"unless such fraud has been actively concealed by the 

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 certain 

special circumstances, such as a situation where the 

plaintiff claims the defendant's wrongful conduct estops the 

latter from pleading the statute of limitations. Were it the 

general rule, a bank could not recover money secretly 

peculated by a bank officer and not discovered until after 

the statute of limitations had run, unless the wrongdoer 

actively concealed the fraud. Thus, if there were no 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 of 

the later announced discovery rule that when the plaintiff 

reasonably could have timely discovered the filing of a 

fraudulent nominating petition for Justice of the Peace and 

had in fact "visited the office of the County Board of 

Elections and inspected the petition within the week after 

its filing," 88 A.2d at 885, the plaintiff cannot claim that 

fraud vitiates the entire proceedings. "[F]raud when 

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 discovered the 

alleged fraud. Therefore, remand is required. 

The cases relied upon by the dissent for the proposition 

that the statute of limitations in an action grounded in 

fraud is tolled only if the fraud thereafter has been actively 

concealed by the wrongdoer are inapplicable to the instant 

 11 
case. 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 claims. 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 Estate, 25 

A.2d 811 (Pa. 1942), addressed a statute of limitations 

under the Fiduciaries Act. Again, neither case addresses 

Pennsylvania's general statute of limitations for tort 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, the college 

asserted that Dow fraudulently misrepresented that a 

chemical used in construction would not cause defects in 

the building. Id. at 594. The trial court dismissed the claim, 

finding it was barred by the six year statute of limitations 

then applicable to fraud actions, 42 Pa. Cons. Stat.§ 5527. 

Id. The college appealed, arguing that the statute was 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 acts of 

concealment or deception which hides 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 exercise of reasonable diligence should have been 

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 determining 

that no cause of action for fraud would lie, regardless 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 limitations until that 

 12 
fraud reasonably should have been discovered by the

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

In fact, as the Superior Court of Pennsylvania itself has 

noted, the practical difference between the discovery 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 actions 

for fraud, the statutory limitation may only be tolled by 

proof of "fraudulent concealment" of the original fraud. 

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 deception 

which were independent of the acts giving rise to cause 

of action. However, the doctrine of fraudulent 

concealment has been relaxed considerably with regard 

to the deceptive intent of defendant's acts and their 

independence of the underlying, operative facts (see 

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 will not 

eviscerate the statute of limitations because aggrieved 

parties must still bring their claim within two years of when 

they learned or should have learned, through the exercise 

of due diligence, that they have a cause of action.4 "For 

_________________________________________________________________ 

4. We concur with the dissent that the cases interpreting Pennsylvania's 

tolling rules have not been entirely free from ambiguity. However, the 

rule set forth in Gee and affirmed by this court is clear, and the courts 

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). 

 13 
statute of limitations purposes, a claimant need only be put 

on inquiry notice by `storm warnings' of possible fraud." 

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 that the 

statute of limitations is tolled until the plaintiff 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 that 

registration of a mark "shall be constructive notice 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 Vujevich in 

re-registering the mark DPM as of the date that the reregistration occurred in 1989." The plaintiffs argue, 

however, that state law tolling principles would not 

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 trademark 

submit an affidavit between the fifth and sixth years after 

registration of the trademark to establish that the mark is 

currently in use in commerce. 15 U.S.C. § 1058 (Supp. 

1997). The PTO registered the trademark DPM on April 19, 

1983; therefore, Vujevich had to submit an affidavit 

establishing the continued use of the mark by April 18, 

1989 to maintain the registration. Pursuant to § 1058, 

Vujevich submitted the allegedly fraudulent affidavits 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 under 

certain conditions became incontestable pursuant to 15 

U.S.C. § 1065. 

It does not appear that the constructive notice provision 

of § 1072 under the Lanham Act applies to the submission 

 14 
of affidavits under § 1058 to register the trademark or 

under § 1065 to establish incontestability. The briefs of the 

parties and our own exhaustive search reveal no case law 

establishing that the act of confirming the trademark's 

continued use in commerce satisfies the constructive 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 pursuant to 

§ 1058 and § 1065 of the Lanham Act. Thus, we agree with 

the plaintiffs that, under Pennsylvania law, thefiling of the 

user affidavits by Vujevich did not constitute constructive 

notice sufficient to begin the running of the statute of 

limitations. 

The plaintiffs' claim may still be time-barred, however, 

because they may have had actual notice of the alleged 

fraudulent re-registration as early as 1991. The plaintiffs' 

amended complaint charges that Vujevich began using the 

DPM trademark improperly in 1991. The complaint states: 

"On or about March 1991, Defendants began marketing

and selling in interstate commerce skin products under the 

name VU Skin Systems. These skin products were sold

under the label DPM Skin Systems products and/or DPM, 

using the mark DPM without license, or any other form of 

approval, from Beauty Time (PA)." The language of the 

complaint does not establish conclusively whether the 

plaintiffs had actual knowledge of these dealings as early as 

1991; they now assert that they did not become aware of 

the allegedly improper use of the trademark by Vujevich 

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 suit 

should have been brought within two years of that 

discovery and should now properly be deemed time-barred. 

However, if the plaintiffs did not learn of this alleged fraud 

until 1994, then the action brought in 1995 is well-within 

the two-year statute of limitations for fraud established by 

Pennsylvania law. 

The district court, however, failed to determine when the 

 15 
plaintiffs actually learned of the alleged fraudulent reregistration. Thus, the order dismissing the complaint must 

be vacated and the matter remanded to the district court 

for further proceedings to determine when the plaintiffs 

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 erred 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 plenary review. 

Chem Service v. Environmental Monitoring Sys. Lab.-

Cincinnati of the United States Environmental Protection

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 dismissed 

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 ownership rights 

in the trademark. The plaintiffs assert that they maintained 

common-law rights in the trademark regardless of the 

alleged inadequacies of the oral assignment, and that they 

therefore had standing to bring these state law claims 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 goodwill 

associated with the trademark. Accordingly, the attempted 

_________________________________________________________________ 

5. Once the district court ascertains the date on or about which the 

plaintiffs became aware of the alleged unauthorized use of the DPM 

trademark, the court must determine whether that knowledge was 

sufficient to begin the running of the statute of limitations on both the 

claim of fraudulent re-registration as to ownership of the trademark and 

the claim for failing to declare the plaintiffs' junior use of the trademark. 

6. On appeal, the plaintiffs do not challenge the district court's order 

dismissing Counts 1 through 3 and Counts 7 through 10. 

 16 
oral assignment was an assignment in gross and was 

invalid. See United Drug Co. v. Theodore Rectanus Co., 248 

U.S. 90, 97 (1918); Family Circle Inc. v. Family Circle

Associates, Inc., 332 F.2d 534, 539 (3d Cir. 1964). The 

Anti-Dilution Statute expressly provides a remedy only for 

"a mark registered under this chapter, or a mark valid at 

common law." 54 Pa. Cons. Stat. § 1124 (1996). Common 

law trademark protections only apply when the trademark 

is validly acquired. The plaintiffs did not acquire any 

ownership rights in the trademark under Pennsylvania law, 

and the mark is neither registered nor valid at common 

law. See Browning King Co. of New York v. Browning King

Co., 176 F.2d 105, 105 (3d Cir. 1949) (under Pennsylvania 

common law, trademarks cannot be transferred in gross). 

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 dismissing 

Counts IV and V of the plaintiffs' amended complaint 

seeking relief for common-law trademark infringement and 

violations of the state Anti-Dilution Statute. 

Count VI of the plaintiffs' state law claims, which was 

dismissed under the pendant jurisdiction doctrine for lack 

of original jurisdiction over a state law claim, will be 

reinstated pending resolution of the matters remanded 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 case 

remanded to the district court for further proceedings 

consistent with this opinion. Additionally, the order 

dismissing Count VI will be vacated and the claim 

reinstated for further proceedings. 

Costs taxed against the appellees. 

 17 
ALITO, Circuit Judge, dissenting: 

In this action, plaintiffs asserted a claim for fraud under 

the Lanham Act. Since the Lanham Act does not specify 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 applicable statute 

of limitations here is the two-year bar for fraud actions 

contained in 42 Pa. C.S. § 5524(7) and that this limitations 

period begins to run at the time the fraudulent act is 

completed. It is also undisputed that, in evaluating whether 

§ 5524(7) bars plaintiffs' fraud claim, we borrow 

Pennsylvania's tolling rules. Thus far I am in agreement 

with the majority. 

My disagreement with the majority lies in its choice of 

tolling rules. The majority holds that the "discovery rule," 

under which the statute of limitations is tolled "until the 

plaintiff learns or reasonably should have learned through 

the exercise of due diligence of the existence of the claim," 

applies to fraud claims. Maj. Op. at 14. As I read the 

Pennsylvania cases, however, the statute of limitations for 

a fraud claim is tolled only if the tortfeasor, after 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 law, and 

their Lanham Act fraud claim is time-barred. 

I. 

The Pennsylvania Supreme Court has squarely held that 

"[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 original 

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 concealment 

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 

 18 
been repeatedly reaffirmed in recent years. Northampton

Cty. Area Commun. College v. Dow Chemical, U.S.A., 566 

A.2d 591, 599 (Pa. Super. 1989) ("If the party committing 

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 exercise 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 of 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). Accord 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. The 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 the 

starting point between fraud completed and ending 

with the act which gives rise to the cause of action and 

fraud continued afterwards in efforts or acts tending to 

prevent discovery. On this distinction there are two 

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 that, 

when the cause of action is once complete, the statute 

begins to run, and suit must be brought within the 

prescribed term, unless discovery is prevented by some

additional and affirmative fraud done with that intent. 

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 harmony with 

the spirit and letter of the statute." Id. at 987. The court 

 19 
observed that a tolling rule that delayed the running of the 

statute in all cases of fraud until discovery of the fraud 

would be incompatible with the settled rule that a cause of 

action for fraud accrues upon consummation of the fraud. 

The cases which hold that, where fraud is concealed, 

or, as sometimes added, conceals itself, the statute 

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 are 

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 least in 

typical cases, the plaintiff should begin suit within the 

specified period after the fraud occurs. Since the legislature 

presumably realized that some concealment is inherent in 

fraud, the legislature presumably realized as well that there 

will typically be some lag time between the occurrence of 

the fraud and its discovery by the victim. Thus, the 

legislature presumably took this typical lag time into 

account in framing the statute of limitations in thefirst 

place and it is therefore not appropriate for the courts to 

recognize a tolling rule to account for this sort of typical lag 

time. Only when there is the atypical lag time that results 

from subsequent acts of concealment is such a tolling 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 concealed the 

fraud subsequent to its completion). I disagree. 

While I might well agree that the majority's tolling rule 

represents sound public policy, it does not seem to me to 

be the rule that Pennsylvania has adopted, and I certainly 

do not think that Pennsylvania's apparent choice is either 

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

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 committed. An 

individual cause of action for personal injury, for example, 

is distinguished from the norm when it is alleged that the 

tortious conduct was concealed and that the plaintiff 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 plaintiff's 

intestines following surgery nine years earlier. Since the 

statute of limitations was designed for the paradigmatic 

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 cannot 

know, for example, that a surgeon has negligently left a 

rubber tube in his body." Id. at 789. 

The same rationale applies to other causes of action. In 

Lewey v. H.C. Frick Coke Co., 31 A. 261 (Pa. 1895), the 

plaintiff sued the defendant in trespass, contending that it 

had intruded onto his lands and stolen coal from beneath 

the surface. As in Ayers, the court emphasized that the 

plaintiff had no way of knowing that the invasion and theft 

were taking place, since "[h]e [could not] be present 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 was not. 

Therefore, while in the usual trespass case the statute of 

limitations begins running upon commission of the 

trespass, "the statute runs against an injury committed in 

or to a lower stratum from the time of actual discovery, or 

the time when discovery was reasonably possible." Id. at 264.1 

_________________________________________________________________ 

1. Contrary to the majority's implication, Lewey is poor authority for the 

application of the discovery rule to fraud causes of action for the 

 21 
In contrast, since fraud always involves an element of 

concealment, something more is needed to distinguish a 

particular fraud claim from the norm. Accordingly, while 

the presence of concealment in a particular personal 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 independent

act of concealment, is required for tolling in a fraud case. 

This reasoning might lead one to question the wisdom of 

the legislature's enactment of a two-year statute of 

limitations for fraud claims. But it goes without saying that 

we are bound to apply the law of Pennsylvania whether 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 upon a 

showing that the defendant engaged in affirmative acts of 

concealment, independent of the original fraud. The

majority concludes that, at the present time, "there is no 

such general rule in Pennsylvania," and indeed holds 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 wrongdoer, until 

the fraud should have been discovered by the plaintiffs." 

Maj. Op. at 10-11. In reaching this conclusion, the majority 

distinguishes the cases I have cited and relies upon some 

_________________________________________________________________ 

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 applied by courts of 

law" confronted with claims for equitable relief. Id. at 264. I do not 

dispute that "[g]enerally, courts have followed the old chancery rule 

adopted by the United States Supreme Court that when a party `has 

been injured by fraud and remains in ignorance without any fault or 

want of diligence or care on his part, the bar to the 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 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 applicable only to claims in 

equity. Here, it is not contended that plaintiffs' Lanham Act fraud claim 

sounds in equity. The majority's reliance on Holmberg is thus unsound. 

 22 
recent cases (mostly not decisions of the Pennsylvania 

Supreme Court) that create some ambiguity regarding the 

current state of Pennsylvania law with respect to the 

requirement of fraudulent concealment independent of the 

original fraud.2 

I acknowledge that the cases have not been free from 

ambiguity in confirming the vitality of the rule dating 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 do I 

see any clear evidence in the state appellate decisions 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 predict such 

a result. 

_________________________________________________________________ 

2. In fact, several of the cases cited by the majority are at best 

ambiguous in their support of its conclusion. In Bickell v. Stein, 435 

A.2d 610 (Pa. Super. 1981), the court stated that 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 deception 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 went on to note its 

opinion that the doctrine of fraudulent concealment had been "relaxed," 

id., but the case hardly stands clearly for the holding announced by the 

majority. The same is true of Knuth v. Erie-Crawford Dairy Cooperative

Assoc., 463 F.2d 470, 482 (3d Cir. 1972), where we in fact held that "the 

governing standard" was whether there was "an affirmative, 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 the statute 

of limitations tolled because of "inherent fraud" in 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 wrong sued upon (the 

failure to pay the contributions). Finally, the majority 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 prelude 

to finding that the plaintiff's claim was time-barred in any event because 

it could have learned of its injury through the exercise of reasonable 

diligence. Id. at 471. In addition to the cases cited by the majority, see

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

 23 
II. 

Accordingly, it seems to me that under Pennsylvania law, 

as it now stands, a different showing is required to 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 the 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. Since 

plaintiffs here do not even contend that defendants

committed any independent acts of concealment, I would 

hold that plaintiffs cannot avail themselves of tolling 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 prevented

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 found, by 

a scheme of the grossest fraud and deception, and used 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 undisputed that 

plaintiffs' Lanham Act fraud claim is barred by§ 5524(7)'s 

two-year statute of limitations. I would therefore affirm the 

district court's dismissal of plaintiffs' Lanham Act fraud 

claim.3 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________ 

3. I agree with the majority's affirmance of the dismissal of plaintiffs' 

state law dilution and infringement claims. Plaintiffs have not appealed 

the dismissal of the remainder of their federal claims, so I would affirm 

the district court's decision not to exercise supplemental jurisdiction over 

plaintiffs' other state law claims once all of their federal claims had been 

dismissed. 

 24