Source: https://propertyintangible.com/2017/05/the-naked-registration.html
Timestamp: 2019-04-25 14:26:02+00:00

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I’ve written before about the trademark dispute over the Camellia Grill restaurant in New Orleans. The restaurant closed after Hurricane Katrina, after which the original owner, Shwartz, disposed of the business in various transactions with Khodr.1 The ultimate ownership of the CAMILLIA GRILL trademark is what I’ve been writing about.
To briefly summarize the several state and federal lawsuits, as it stands now the law of the case is that Shwartz sold the trademark for the original location on Carrollton Avenue to Khodr, but the transaction also included a license agreement. Khodr describes the transaction as the purchase of the Carrollton location as a fully functioning unit and a license agreement governing the use of the mark at any future location. By now, a state court has held that the license was terminated for breach. Khodr had opened another Camillia Grill restaurant in the French Quarter, which according to my Google skills is now renamed “The Grill,” and one in Destin, Florida, which has closed. Therefore, the only restaurant currently operating as “Camillia Grill” is the original location, for which Khodr owns the common law trademark rights.
“A federal registration does not create the trademark; the trademark is acquired by use.” [Shwartz]’s pre-Bill of Sale rights were acquired through its use of the marks at Carrollton Avenue, and those rights were, without reservation, transferred to [Khodr’s] Uptown Grill. The parties have not shown that there was any use of Camellia Grill trademark rights by any Shwartz entity at any other location; accordingly, they cannot have acquired trademark rights associated with any other location. The Court finds no basis to rule that the Shwartz parties have any remaining protectable interest under trademark law, and therefore denies their request to find that they are the owner of the Camellia Grill trademarks beyond Carrollton Avenue.
But what we really have is a bifurcation of the underlying common law rights and the trademark registration based on those rights. Even if one assigns the common law rights that were used as the predicate to a trademark registration, might someone with a valid registration still be able to exert some degree of exclusivity?
The court thinks not. In saying “A federal registration does not create the trademark; the trademark is acquired by use,” the court assumed that the registration has no remaining effect. That is an error in logic. One cannot obtain a registration without having common law rights, but there nothing in the statute that says the registration remains dependent on them: “Any registration … of a mark registered on the principal register provided by this chapter and owned by a party to an action shall be admissible in evidence and shall be prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the registration.” Lanham Act § 33, 15 U.S.C. § 1115 (2012). We also know from Dawn Donut and What-a-Burger that there is a concept of inchoate rights, only exercisable when the two uses reach a stage where there is a possibility of confusion.
The decision in Lee v. Tam may help answer the question. Brief for Respondents at 19-21 (“ ‘Registration is significant. The Lanham Act confers important legal rights and benefits on trademark owners who register their marks.’ B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1300 (2015).”) The registrant will have to worry about defending a charge of abandonment, but intent not to resume use is a hard thing to prove. The registrant will also have to maintain the registration, which may be difficult to do without use,3 but perhaps it could file a Declaration of Excusable Nonuse. It is entirely possible to maintain a valid registration when the underlying rights no longer exist, so they must mean something. Why couldn’t a registrant, for example, ask the court for an injunction to prevent the opening of another restaurant that would negatively impact its ability to do so itself? Shwartz’s request for a declaration of ownership was not just theoretical; he is planning to open a location in Orleans county.4 It was a valid legal question properly before the court.
Appeal, here we come again.
Uptown Grill v. Shwartz, No. 13-6560 (E.D. La. May 26, 2017).
As part of the seriously convoluted history in B&B Hardware v. Hargis, at one point B&B Hardware had a registration but lacked common law rights. A jury had found that its mark SEAL TIGHT was merely descriptive of metal fasteners. But the opposing party hadn’t asked for cancellation of the registration. So B&B Hardware was able later on to rely on its incontestable federal registration for SEAL TIGHT in opposing Hargis’ SEALTITE mark for metal screws. B&B Hardware, Inc. v. Sealtite Bldg. Fasteners, 2004 TTAB LEXIS 451 (T.T.A.B. 2004) (not citable as precedent).
The Board said in later proceedings: “Despite the fact that opposer’s mark has been found to be merely descriptive, opposer, as the owner of a registered trademark, is entitled to challenge the registration of applicant’s mark on the ground of priority of use and likelihood of confusion. . . . [W]e find ourselves in the unusual situation whereby opposer is precluded from enjoining applicant from using its mark, but opposer may nevertheless prevent applicant from registering its mark.” B&B Hardware, Inc. v. Sealtite Building Fasteners, Opp. No. 91155687 (T.T.A.B. 2007) (not published) (not citable as precedent).
Thanks! It’s a really interesting issue, just how far registrability and use can be dissected. I fervently believe that whether a mark is unregistrable is irrelevant to its enforceability. I think a court would have no basis to refuse to decide a case between, say, two scandalous trademarks or two flags or coats of arms. But in fact others disagree. Surprising that this is not a settled issue in 2017.
Putting aside Section 44, registration does not exist apart from use based rights. The benefits of registration you cite shift burdens and provide for a constructive date of first use; but those procedural and evidentiary benefits do not exist apart from the underlying use based rights. Shwartz perhaps should have argued a contract claim — that the contract was consent for him to use the mark outside of the Carrollton area in some sort of co-existence arrangement.

References: § 33
 § 1115
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