Opinion ID: 612451
Heading Depth: 1
Heading Rank: 7

Heading: Patsy's Pizzeria Only Partially Abandoned Its Marks

Text: The district court's decision to cancel appellants' '836 and '866 Registrations pursuant to section 37 of the Lanham Act, codified as amended at 15 U.S.C. § 1119, depended on its conclusion that I.O.B. Realty had retained some rights even after the jury's abandonment finding. Patsy's Italian Rest. IV, 575 F.Supp.2d at 465-68. The district court concluded that, because the jury found that I.O.B. Realty continuously used the marks, the finding of abandonment had to have been based on a finding of naked licensing. Id. at 452. Appellants do not challenge this reasoning, but argue, rather, that the jury's verdict was one of total abandonment. A district court's determination to grant relief pursuant to 15 U.S.C. § 1119 is reviewed for an abuse of discretion. See Empresa Cubana del Tabaco v. Culbro Corp., 541 F.3d 476, 478 (2d Cir.2008) ([S]ection 1119's use of the permissive `may' in authorizing courts to grant relief, [is] distinct from its use of the mandatory `shall' in requiring any orders or decrees that are entered to be sent to and followed by the PTO.). Appellants argue that our review should be de novo because the district court based its decision on [its] disagreement with the jury's fact findings and [its] misreading of the Lanham Act. Appellant's Br. at 47. However, while claims of factual error or mistakes of law may inform the determination of abuse of discretion, they do not alter the standard of review. Appellants first argue that any finding of naked licensing necessarily acted as a total abandonment of all rights. We disagree. Although some forms of trademark abandonment may result in a loss of all rights in the mark, see e.g., Feathercombs, Inc. v. Solo Prods. Co., 306 F.2d 251, 256 (2d Cir.1962), abandonment of a mark through naked licensing has different effects on the validity of the mark in different markets. See Dawn Donut Co. v. Hart's Food Stores, Inc., 267 F.2d 358, 369 (2d Cir.1959) (a finding of naked licensing in the retail market would not result in the loss of trademark rights in the wholesale market). For example, if a restaurant operates in both New York and California, but engages in naked licensing only in California, the restaurant's registered mark may lose its significance in California while retaining its significance in New York. Thus, naked licensing will lead to an abandonment of a mark only where the mark loses its significance. 15 U.S.C. § 1127. As a result, we agree with the district court that a mark owner can abandon a mark through naked licensing in a particular geographic area without abandoning its rights throughout the entire United States. See also Tumblebus Inc. v. Cranmer, 399 F.3d 754, 765-66 (6th Cir.2005) (recognizing that there is considerable support for the concept that rights in a mark may be abandoned in certain geographic areas but not others); Sheila's Shine Prods., Inc. v. Sheila Shine, Inc., 486 F.2d 114, 125 (5th Cir.1973) (recognizing abandonment in some areas but not others); E.F. Prichard Co. v. Consumers Brewing Co., 136 F.2d 512, 521-22 (6th Cir.1943); Snuffer & Watkins Mgmt. Inc. v. Snuffy's Inc., 17 U.S.P.Q.2d 1815, 1816 (T.T.A.B.1990) (Accordingly, an allegation of abandonment in a specific geographic location is an insufficient pleading in a cancellation proceeding.); 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 18:48 (4th ed.2008). [4] The district court limited the scope of I.O.B. Realty's abandonment pursuant to Fed.R.Civ.P. 49(a)(3) (A party waives the right to a jury trial on any issue of fact raised by the pleadings or evidence but not submitted to the jury unless, before the jury retires, the party demands its submission to the jury. If the party does not demand submission, the court may make a finding on the issue....). In its answer to a special interrogatory, the jury concluded that Patsy's Pizzeria abandoned its marks. Patsy's Italian Restaurant argues that the verdict encompassed the Staten Island location, the Syosset location, and all Manhattan locations other than the East Harlem location. We disagree. [5] [S]pecial interrogatories must be read in conjunction with the district court's charge. Romano v. Howarth, 998 F.2d 101, 104 (2d Cir.1993) (internal quotation marks omitted). The jury was asked to determine whether there was abandonment but not the geographic scope of any such abandonment. Appellants requested no instruction on whether the naked licensing was limited to certain entities or certain geographical areas. While the abandonment instructions never identified as their subject the specific licenses granted to the Staten Island location or the Syosset location, those are the entities that were the subject of the naked licensing claim at trial. Therefore, the district court properly resolved the scope of abandonment issue pursuant to Fed.R.Civ.P. 49(a)(3). Finally, Patsy's Italian Restaurant argues that Patsy's Pizzeria's limited rights in the Manhattan area do not warrant cancellation of their registration. They contend that they are entitled to expand nationwide because Patsy's Pizzeria's rights are limited. Moreover, they suggest that the expansion by Patsy's Pizzeria outside Manhattan that caused the likelihood of confusion occurred after their applications for registration were filed. They argue, therefore, that the cancellation was in violation of their rights and should not affect their registrations. We disagree. Local rights owned by another have been consistently viewed as sufficient to prevent a party from obtaining registration of a federal mark. See Giant Food, Inc. v. Nation's Foodservice, Inc., 710 F.2d 1565, 1571 (Fed.Cir.1983) (refusing registration due to likelihood of confusion, even where there was no evidence of actual confusion mainly [due] to the geographical separation of the two parties' operations); Peopleware Sys., Inc. v. Peopleware, Inc., 226 U.S.P.Q. 320, 321 (T.T.A.B. 1985) (noting that geographical separation of the parties' principal places of business cannot be considered to be of significance in determining registrability of applicant's mark since it seeks a geographically unrestricted registration); 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 20:15 (4th ed.2008) (Geographical separation of the parties is not relevant in an opposition.). Indeed, this is consistent with the principle in trademark law that the second comer has a duty to so name and dress his product [or service] as to avoid all likelihood of consumers confusing it with the product [or service] of the first comer. Harold F. Ritchie, Inc. v. Chesebrough-Pond's, Inc., 281 F.2d 755, 758 (2d Cir.1960). Because registration of a federal mark confers upon the owner of the mark a presumption that the owner has the exclusive right to use the mark nationwide, 15 U.S.C. § 1115(a), it is proper to consider the rights of users nationwide when determining whether a party is entitled to registration of their mark. See 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 20:15 (4th ed.2008). In fact, Section 1052(d) itself provides that a mark cannot be registered if it [c]onsists of or comprises a mark which so resembles a mark registered in the Patent and Trademark Office, or a mark or trade name previously used in the United States and not abandoned, as to be likely ... to cause confusion.... 15 U.S.C. § 1052(d). Thus, the very language of the statute contemplates that a mark used anywhere in the United States can be sufficient to block federal registration. See id. In these circumstances, the principles applicable to the initial registrability of a mark should also be applied to a claim seeking the cancellation of a registration that has not yet become incontestable pursuant to Section 1065. Id. § 1065. Young v. AGB Corp., 152 F.3d 1377, 1380 (Fed. Cir.1998) (The linguistic and functional similarities between the opposition and cancellation provisions of the Lanham Act mandate that we construe the requirements of these provisions consistently. There is no basis for interpreting them differently.) (internal citations omitted); 3 McCarthy on Trademarks and Unfair Competition § 20:52 ([F]or Principal Register marks not yet five years on the register, cancellation may be based on any ground in the Lanham Act that would have barred registration in the first instance.). Cf. 15 U.S.C. § 1064 (limiting the grounds on which cancellation can be sought after the mark has been registered for five years). In conclusion, the district court did not abuse its discretion by cancelling appellants' registrations. Nevertheless, the lack of a federal registration does not prevent Patsy's Italian Restaurant or Patsy's Pizzeria from expanding as they so desire, so long as they respect each other's existing rights. Rather, the cancellation simply precludes appellants from utilizing the statutory presumptions and other benefits conferred to a mark owner through federal registration. See 15 U.S.C. § 1115 (setting forth the evidentiary presumptions a mark owner is entitled to and limiting the defenses against an incontestable registration); cf. id. § 1125(a) (providing a federal cause of action for infringement of an unregistered mark).