## United States Court of Appeals for the Federal Circuit

2010-1007 (Cancellation No. 92048454)

FRED BEVERAGES, INC., Appellant,

v. FRED’S CAPITAL MANAGEMENT COMPANY, Appellee.
H. Jay Spiegel , H. Jay Spiegel & Associates, of Mount Vernon, Virginia, argued for appellant. Simor L. Moskowitz , Jacobson Holman PLLC, of Washington, DC, argued for appellee. With him on the brief was Matthew J. Cuccias

. Appealed from: United States Patent and Trademark Office Trademark Trial and Appeal Board

## United States Court of Appeals for the Federal Circuit

2010-1007 (Cancellation No. 92048454)

FRED BEVERAGES, INC., Appellant,

v. FRED’S CAPITAL MANAGEMENT COMPANY, Appellee. Appeal from the United St ates Patent and Trademark Office, Trademark Trial and Appeal Board.

__________________________ DECIDED: May 12, 2010

__________________________ Before MICHEL, Chief Judge , CLEVENGER and PROST, Circuit Judges

. PROST, Circuit Judge

. This case presents an appeal from a Trademark Trial and A ppeal Board (“TTAB”) decision denying a motion for leave to amend a pending petition to cancel a trademark. The TTAB found that Fred Beverages, Incorpor ated, failed to perfect its Motion for Leave to Amend the Petition for Cancellation bec ause it did not submit the cancellation fee corresponding to the product classes it sought to add through the desired amendment. Because we conclude that the TTAB’s denial of the Motion for Leave on the stated grounds was arbitrar y and capricious, we reverse the decision of the TTAB and remand for further proceedings consistent with this opinion. BACKGROUND Appellee Fred’s Capital Management Com pany (“Appellee”) obtained registrationfor its trademarked name in 2006. The regi stration covered a variety of goods in International Classes 1, 2, 3, 5, 6, 8, 16, 25, 28, 29, 31, and 32. In an effort to support its own trademarked name, Appellant Fr ed Beverages, Incorporated (“Appellant”), sought cancellation of Appellee’s registrati on in International Class 32 on the ground of abandonment. Accordingly, Appellant filed wit h the U.S. Patent and Trademark Office (“USPTO”) a Petition for Partial Cancellation of Appellee’s Federal Registration No. 3,051,906 in International Class 32. Pursuant to 37 C.F.R. § 2.6(a)( 16), all petitions for cancellation of registered trademarks must be accompanied by a fee of $300.00 per class for which cancellation is sought. A ppellant’s Petition was accompanied by the requisite $300.00 payment. Cancellati on Proceeding No. 92048454 commenced in the USPTO before the TTAB on November 13, 2007. During the course of proceedings, Appellant filed a Motion for Leave to Amend Appellant’s Petition to state new grounds of cancellation against International Classes 2, 25, 28, and 29 of the same r egistration, and to include fraud as an additional ground for cancellation of Class 32. Appellant attached to its Motion, as an exhibit, a copy of the Amended Petition for Partial Cancellation sho wing the desired changes. Appellee filed a response opposing the Motion for Leave on the me rits. Appellant then filed a reply in further support of its Motion. Appellant di d not submit any fee in connection with the Motion or the Reply. During the several months that the TTAB was considering Appellant’s Motion for Leave to Amend, the parties completed di scovery, including discovery related to Appellant’s allegations of fraud. Appellee s ubmitted a Motion for Voluntary Surrender of its registration with respect to International Class 32.

2010-1007 2The TTAB issued a final decision on J une 26, 2009 terminating the cancellation proceeding. The TTAB technically rejected Appellee’s Motion for Voluntary Surrender because it was opposed, but entered judgment cancelling the regi stration in class 32. The TTAB denied Appellant’s Motion for Leave to Amend on the grounds that the Motion was not accompanied by the fee required under Trademar k Rules 2.111(c)(1) and 2.112(b). Appellant timely appealed to this court. This court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(B). DISCUSSION Appellant argues that the TTAB erred in denying the Motion for Leave, because it applied to the Motion rules 2.111(c)(1) and 2. 112(b) governing Petitions, as though the Motion was the underlying Petition. Appellant argues that until the Motion for Leave to Amend the Petition is granted, no petition for cancellation is actually under consideration or even filed. Appellant concludes that the st atutory fee is not required until the Motion for Leave is decided on the merits and leave to amend is granted. Appellee argues that the TTAB did not err in requiring the fee to accompany the Motion for Leave. Petitions for cance llation are not accepted for filing unless accompanied by the statutory fee. 37 C.F.R. § 2.111(c)(1), (c)(3)(i); see also 15 U.S.C. § 1064 (“A petition to cancel a registration of a mark, stating the grounds relied upon, may, upon payment of the pr escribed fee, be filed as follows by any person who believes that he is or will be damaged . . . .”); Aries Sys. Corp. v. World Book, Inc. , 23 USPQ2d 1742, 1748 (TTAB 1992) (explaining that the payment of the cancellation fee is a jurisdictional requirement for consider ation of the petition for cancellation). Appellant’s Motion was accompanied by an Amended Petition, which sought to add

2010-1007 3additional product classes to the proceeding. Appellee concludes that because the Amended Petition did not meet t he statutory requirements for consideration, namely that it did not include the requisite cancellati on fees, the TTAB was co rrect in denying the Motion for Leave to Amend. We disagree. For analogous filings in the judicial context, a motion for leave to amend a pleading more than twenty days after the date of service may only be filed by leave of court, and such leave is freely given when justic e so requires. Fed. R. Civ. P. 15(a). The TTAB follows Rule 15(a), and liberally grants leave to amend petitions and pleadings where the other party will not be prejudi ced thereby. See Buffett v. Chi-Chi’s, Inc. , 226 USPQ 428 (TTAB 1985); Cool-Ray, Inc. v. Eye Care, Inc. , 183 USPQ 618 (TTAB 1974). Here, the TTAB did not cite any equitable reason to deny the Motion, but relied solely on Appellant’s failure to file t he fee associated with the underlying Petition. It is common judicial procedure to r equire that motions for discretionary consideration from a tribunal be accompanied by the filing sought to be considered, and any requisite fee. See, e.g. , N.D. Cal. Local R. 11-3 (r equiring a motion to appear pro hac vice to be accompanied by an affidavit and a registration fee, even though the motion may be denied and the fee returned); Fed. R. App. P. 29(b) (requiring a motion for leave to file an amicus brief to be accompanied by the proposed brief, even though the motion may be denied and the brief ignored). Such requirements, however, are set forth in stated rules of practice pertaining to the tribunal. There is no stated rule of the TTAB that a motion for leave to amend a petition for cancellation must be accompanied by the stat utory fee corresponding to the classes for which cancellation is sought by amendment. Ther e is also no rule that such a fee, if

2010-1007 4tendered, would be refunded in the event that the motion for leave were denied. Cf. 37 C.F.R. § 2.209(a) (permitting the Director to “refund a fee paid by mistake or in excess of that required,” neither of which applies to motions for leave to amend petitions); Trademark Trial and Appeal B oard Manual of Procedure § 119.03 (providing that “if because of a defect in an oppositi on or a petition for cancella tion filed with the Board, a proceeding is not instituted, [then] any submitted fee will be refunded,” which does not apply to the present case because it was the motion and not the petition that was denied). The rules relied on by the TTAB in deciding this case, Trademark Rules 2.111(c)(1) and 2.112(b) relate only the require ments for filing an initial petition for cancellation, and do not speak to subsequent motion practice. In the absence of a stated rule, t he TTAB might still justify requiring a cancellation fee to accompany a motion for leave to amend if such requirement were consistent with established prac tice. There is, however, no su ch established practice at the TTAB. It appears, in fa ct, that the TTAB has previously, under similar circumstances, granted or deferred ruling on mo tions for leave to amend filings without concurrent payment of the st atutory cancellation fee. See, e.g. , Ayush Herbs, Inc. Hindustan Lever Ltd. , Opposition No. 91172885 (TTAB 2009) (granting a motion for leave to amend a counterclaim and giving the app licant thirty days fr om the date of the order in which to submit t he statutory fee supporting the cancellation requested in the amended counterclaim); Tribal Sportswear, Inc. v. Torquay Enter. , Opposition No. 91171576 (TTAB 2007) (deferring a decision on the merits of a motion for leave to amend a counterclaim for fifteen days to allow t he applicant time in which to submit the statutory fee in support of the cance llation sought through the amendment).

2010-1007 5Moreover, in a case that closely resemb les the present facts, the TTAB granted a motion for leave to amend a petition for canc ellation to add product classes, provided that the moving party paid the cancellation f ee within thirty days of the order granting the motion for leave. See Dollar Tree Stores, Inc. v. Ever ything for a Dollar Store, Inc. , 2001 WL 315045 at *3, Cancellation No . 26,850 (March 30, 2001). Thus, Ayush Herbs , Tribal Sportswear , Dollar Tree , and other cases suggest that a motion for leave to amend is considered separatel y from the underlying filing, and that a jurisdictional prerequisite for the underlying filing, such as the statutorily requir ed filing fee, is not grounds for denying the motion. At a minimu m, these cases demonstrate that there is no established practice for deciding whether the statutory fee must accompany a motion for leave to amend a pending petition for cancellation. It therefore appears that t he TTAB has no stated rule and no established practice of requiring that a supplement al cancellation fee be included with a motion for leave to amend a petition for cancellation. The la ck of authority for the TTAB’s decision is further confirmed by the fact that the TTAB opinion cited no rule or precedent on point in support of its decision to deny the Motion for Leave in this case. There is no basis on which to distinguish the circumstances of the present case from those in which the TTAB granted or def erred ruling on motions for leave and set a subsequent deadline for the paym ent of the underlying fee. Where an agency departs from established precedent wit hout a reasoned explanation, its decision will be vacated as arbitrary and capricious. Pontchartrain Broad. Co. v. FCC , 15 F.3d 183, 185 (D.C. Cir. 1994); Graphic Commc’ns Int’l Union, Local 554 v. Salem-Gravure , 843 F.2d 1490, 1493 (D.C. Cir. 1988). In determining whet her an agency has provided a reasoned

2010-1007 62010-1007 7 explanation for departing from precedent or treat ing similar situations differently, the court looks only to the reas ons given by the agency. SEC v. Chenery Corp. , 318 U.S. 80, 88, (1943). Accordingly, we find that TT AB’s decision in the present case to deny the Motion for Leave was arbitr ary and capricious. We hereby reverse the decision of the TTAB denying the Motion for Leave to Am end on the grounds that the filing fee did not accompany the Motion, and remand the ca se to the TTAB for further proceedings consistent with this opinion. REVERSED AND REMANDED