Court Opinion

ID: 2963957
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:17:58.716797+00
Date Added: 2024-06-11T11:42:49.214657
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 95-1525

                                      PHC, INC.,

                                Plaintiff, Appellant,

                                          v.

                          PIONEER HEALTHCARE, INC., ET AL.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                      [Hon. Nancy Gertner, U.S. District Judge]
                                           ___________________

                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
                                        _____________

                            Bownes, Senior Circuit Judge,
                                    ____________________

                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Michael Arthur Walsh with whom Lisa  A. Richards and Choate,  Hall
            ____________________           _________________     _____________
        & Stewart were on brief for appellant.
        _________
            Esther J.  Horwich with  whom Steven  J. Brooks  was on brief  for
            __________________            _________________
        appellees.

                                 ____________________

                                  February 12, 1996
                                 ____________________

                 BOUDIN,  Circuit  Judge.   This  case  presents familiar
                          ______________

            problems  of federal jurisdiction,  civil procedure,  and the

            relationship between court and agency; but the problems arise

            in an unusual context:  that of the unique and  complex legal

            regime that governs trademarks and unfair competition.  Since

            the appeal is from an order granting  a motion to dismiss, we

            draw our facts from the pleadings.

                                          I.

                 Plaintiff-appellant,  PHC,  Inc.,  is   a  Massachusetts

            corporation based in  Peabody, Massachusetts, which  operates

            alcohol and  substance  abuse  centers  across  the  country.

            Defendant-appellees  are Pioneer  Health Care,  Inc.  and its

            management   affiliate   Pioneer  Management   Systems,  Inc.

            (collectively,  "the Pioneer  companies"); the  former offers

            medical  care services  in  and near  the  Pioneer Valley  in

            western   Massachusetts.      The   Pioneer   companies   are

            Massachusetts  corporations  based  in  West  Springfield and

            their   names  are  recorded  with  the  Massachusetts  state

            secretary under Mass. Gen. L. ch. 156B,   11.

                 At  some point it came  to the attention  of the Pioneer

            companies that PHC was using the name "Pioneer Healthcare" or

            "Pioneer  Health Care"  in its literature.   On  December 13,

            1993,  the  Pioneer companies  sent  a  letter to  PHC  which

            asserted  that  this  use  violated  Massachusetts  law   and

            demanded that it  stop.   The letter also  demanded that  PHC

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            cancel its earlier registration (as of  February 16, 1993) of

            the  mark  PIONEER  HEALTHCARE   with  the  U.S.  Patent  and

            Trademark  Office.    A   second  letter  to  PHC  threatened

            litigation.    

                 PHC responded in a March  17, 1993, letter, declining to

            comply with any  of the  demands.  The  letter asserted  that

            geographic and  product differences  meant that there  was no

            confusion  between  the  parties'  respective   uses  of  the

            disputed  terms.    It  asserted equitable  defenses  to  any

            infringement claim.  And it said that the registration of the

            Pioneer  companies' names with  the Massachusetts authorities

            was irrelevant.  

                 The Pioneer companies in turn filed a petition with  the

            U.S. Patent  and Trademark Office  on May 25,  1994, claiming

            longstanding use of the marks PIONEER HEALTH CARE and PIONEER

            HEALTH and asking  the office to cancel PHC's registration on

            grounds  of  confusion.   15 U.S.C.      1052(d), 1064.   The

            Pioneer companies' marks  were not federally  registered, but

            confusion   between  a   registered  mark   and   an  earlier

            unregistered "mark or trade name," id.   1052(d), may lead to
                                               ___

            the cancellation of the registered mark.  Blanchard Importing
                                                      ___________________

            &  Distributing Co. v. Societe E. Blanchard et Fils, 402 F.2d
            ___________________    ____________________________

            797 (C.C.P.A.  1968).   An  administrative  proceeding  began

            before the Trademark Trial and Appeal Board ("the  Board"), a

            component of the Patent and Trademark Office.

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                 On December 9, 1994, PHC responded by filing the present

            declaratory  judgment action in  the district court.   In its

            first count, PHC sought a declaration that its own use of the

            mark it had  registered--PIONEER HEALTHCARE--did not  violate

            any rights  of the Pioneer  companies under section  43(a) of

            the Lanham Act, 15 U.S.C.   1125(a).  The second count sought

            a preemptive  declaratory judgment  that PHC was  entitled to

            maintain its  registration  of the  mark  at the  Patent  and

            Trademark Office.  

                 After filing  its district  court action, PHC  asked the

            Trademark Trial and Appeal  Board to suspend its cancellation

            proceeding  pending the  outcome of  the court  action.   The

            Board has a rule contemplating such suspensions where a court

            action may  moot the matter before  the agency.  37  C.F.R.  

            2.117.   The  Board  complied  with PHC's  request,  and  the

            administrative proceeding is now in abeyance.

                 Thereafter, the Pioneer companies moved in the  district

            court for  dismissal  of  the  declaratory  judgment  action,

            urging  inter alia  that  the district  court lacked  subject
                    __________

            matter  jurisdiction  and  that  the action  itself  was  "an

            improper attempt  to circumvent the  administrative process."

            In a  detailed opinion  dated  April 12,  1995, the  district

            court granted  the motion, relying  upon both of  the grounds

            urged and  its own discretion not to "take this case from the

            . . . administrative scheme designed to hear it."

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                                         II.

                 The  district court's first  ground for dismissing PHC's

            complaint was jurisdictional and bore  directly on count I of

            the complaint.  The district court construed the letters from

            the  Pioneer companies  to PHC  as threatening  a suit  under

            Massachusetts state law to protect their corporate names; the

            court said that these letters "cannot be construed as federal

            charges  of  infringement.   Pioneer [the  Pioneer companies]

            does not own a  federally registered mark which would  enable

            them to bring a federal infringement action."

                 Taking  this view of the matter, the district court then

            invoked  the  settled rule  that  where  a plaintiff  asks  a

            federal court  for a declaration that  it is not  liable on a
                                                         ___

            state  claim,   there  is  ordinarily  no   federal  question

            jurisdiction.  Public Serv. Comm'n of Utah v. Wycoff Co., 344
                           ___________________________    __________

            U.S.  237, 248 (1952).  This is  generally true even if it is

            assumed  that a federal  defense might  have been  offered to

            defeat the  state claim.   Id.; see  also Skelly  Oil Co.  v.
                                       ___  _________ _______________

            Phillips Petroleum Co., 339 U.S. 667, 672 (1950).
            ______________________

                 On appeal,  PHC  responds that  what  it sought  in  the

            district court was a declaration that it was not liable on an

            anticipated  federal  claim against  it, namely,  a potential
                         _______

            claim by  the Pioneer  companies that PHC's  conduct violated

            section  43(a)  of the  Lanham  Act,  a provision  explicitly

            referenced  in count  I of  PHC's complaint.    Section 43(a)

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            creates a federal civil  cause of action for any  one damaged

            inter alia by another's use in commerce of any word, term, or
            __________

            name that

                 is likely to cause  confusion, or to cause mistake,
                 or to deceive as to the affiliation, connection, or
                 association of  such person with another person, or
                 as to  the origin, sponsorship, or  approval of his
                 or her goods, services, or commercial activities by
                 another person.

                 This "false designation  of origin" claim  under section

            43(a) is  a close  cousin to  a claim  for infringement  of a

            federally  registered mark  authorized by  section 32  of the

            Lanham  Act, 15 U.S.C.    1114.  An  infringement claim under

            section  32 requires that the  mark be a federally registered

            trademark.  Id.    But  a  section  43(a)  claim,  which  PHC
                        ___

            purported to  anticipate, does not  require that the  mark or

            name be  federally registered, Quabaug Rubber  Co. v. Fabiano
                                           ___________________    _______

            Shoe  Co., 567 F.2d 154, 160 (1st Cir. 1977), and is commonly
            _________

            used to  prevent infringement of unregistered  trademarks.  3

            J.  Thomas  McCarthy,  McCarthy   on  Trademarks  and  Unfair
                                   ______________________________________

            Competition   27.03  (3d ed.  1992).  A  claim under  section
            ___________

            43(a) is  a federal  cause of action,  automatically invoking

            federal question jurisdiction.   28 U.S.C.   1331.   See also
                                                                 ________

            15 U.S.C.   1121(a).     The   more  difficult   question  is

            whether PHC could reasonably have anticipated a claim against

            it  under  section  43(a) of  the  Lanham  Act and  therefore

            brought a declaratory  judgment to forestall it.   Whether or

            not  conceived  of  as  "jurisdictional,"  such    reasonable

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            anticipation   is   a  settled   requirement  in   a  federal

            declaratory  judgment  action  of  this  character.     E.g.,
                                                                    ____

            Sweetheart Plastics,  Inc. v. Illinois Tool  Works, Inc., 439
            __________________________    __________________________

            F.2d  871, 873  (1st Cir. 1971).   A  federal court  will not

            start up the  machinery of adjudication to  repel an entirely

            speculative threat.  

                 If  one looked solely at the letters sent by the Pioneer

            companies,  one  might  be  genuinely puzzled  whether  those

            letters threatened  only a  suit under Massachusetts  law for

            the misuse of  a corporate  name or whether  they implied  as

            well an intent to resort to the Lanham Act.  The only statute

            mentioned in the letters was "Massachusetts General Laws" and

            the mention was in the context of referring to PHC's use of a

            corporate "name."   The  letters did request  cancellation of

            PHC's federal trademark, but  they made no specific reference

            to a suit for infringement or under section 43(a).

                 On the other hand,  the conduct of PHC, as  described by

            the  Pioneer companies'  letters,  could easily  amount to  a

            violation of  section 43(a);  the second letter  alleged that

            PHC's alleged use was "misleading, confusing, and will result

            in  irreparable  harm"--language  typical of  a  claim  under

            section 43(a).  The first letter threatened to seek  recovery

            of damages, as well as an injunction.  Damages are a standard

            remedy   under  section   43(a),  15   U.S.C.      1117;  the

            Massachusetts  statute  protecting  corporate names  provides

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            only for administrative and injunctive relief.  Mass. Gen. L.

            ch. 156B,   11.

                 In  all  events, the  question  under  the case  law  on

            declaratory  judgments is  not whether the  Pioneer companies

            made a specific threat to bring a section 43(a) claim or even

            had such a claim  in mind.  The federal  declaratory judgment

            statute   aims   at  resolving   potential   disputes,  often

            commercial in character, that can  reasonably be feared by  a

            potential  target  in  light  of the  other  side's  conduct.

            Cardinal  Chem. Co. v. Morton  Int'l, Inc., 113  S. Ct. 1967,
            ___________________    ___________________

            1974-75  (1993).  No competent lawyer advising PHC could fail

            to tell it  that, based  on the threatening  letters and  the

            surrounding circumstances, a section  43(a) suit was a likely

            outcome.  

                 Quite  likely PHC  had  tactical advantages  in mind  in

            bringing  the declaratory  judgment  action.   But, absent  a

            showing of bad faith so substantial as to foreclose equitable

            relief, its subjective aims  do not matter.  The  question is

            whether the  Pioneer companies' letters made  a section 43(a)

            claim  against  PHC  a  reasonable prospect.    Although  the

            district court did not pass explicitly upon this question, an

            affirmative answer is so clear to  us that there is no reason

            to  remand on  this  issue.   Thus,  the district  court  had

            federal subject-matter jurisdiction as to count I.

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                 Federal  subject  matter jurisdiction  over count  II is

            equally plain.  In count  II, PHC asked the court  to declare

            that  its federally  registered  mark was  valid;  this is  a

            matter governed  entirely by  federal law and  plainly within

            the  federal  question  jurisdiction  of  a  district  court.

            Additionally, section 37 of the Lanham Act, 15 U.S.C.   1119,

            cited in count  II, empowers the federal courts to "determine

            the  right to  registration [and]  order the  cancellation of

            registrations" in civil cases  in which a registered mark  is

            at issue, and provides that such determinations shall control

            the Patent and Trademark Office.

                                         III.

                 Although federal subject  matter jurisdiction is  secure

            as to  both count I and  count II, a judge  might well wonder

            whether  it  ought  to  be  exercised  in  the  teeth  of  an

            administrative  proceeding pending before  the Board.   PHC's

            claim under count II sought a declaration  that PHC's federal

            mark was valid; that was the very subject of the cancellation

            proceeding.  As for  count I, issues of confusion,  likely to

            be  addressed in the Board proceeding, might easily have been

            pertinent, perhaps even controlling.

                 Problems of coordination and priority  between court and

            agency  are usually  discussed  under the  rubric of  primary

            jurisdiction.  E.g., Massachusetts v. Blackstone Valley Elec.
                           ____  _____________    _______________________

            Co., 67  F.3d 981, 992 (1st  Cir. 1995).  The  district court
            ___

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            did not use this phrase, but it did rely upon  two cases from

            the  Seventh Circuit that  dismissed as premature declaratory

            judgment suits brought solely to affirm federal  registration

            of trademarks;  in each  case proceedings were  still pending

            before the Board.1   The  district court also  noted that  it

            saw no  reason "to take  this case"  from "an  administrative

            scheme designed to hear it."

                 The  primary  jurisdiction rubric  is less  an organized

            doctrine  than  a  set of  precedents  that  guide  courts in

            deciding  when  an  issue should  be  resolved  in the  first

            instance  by an agency that has special competence to address

            it.  United States v. Western Pacific R.R. Co.,  352 U.S. 59,
                 _____________    ________________________

            64  (1956).    The  expertise  of  the  agency,  avoidance of

            conflict,  indications  of  legislative  intent,   and  other

            factors may permit, sometimes even require, such deference by

            court to  agency.  Pierce, Shapiro  & Verkuil, Administrative
                                                           ______________

            Law and Process    5.8 (2d ed. 1992).  Although  the agency's
            _______________

            own decision may be  subject to judicial review, such  review

            is customarily of a limited kind.

                 Two  factors  weigh  heavily against  deference  to  the

            administrative proceeding here.   First, the Board  is not an

            ordinary  administrative agency whose findings control unless

                                
            ____________________

                 1Homemakers, Inc.  v. Chicago  Home for the  Friendless,
                  ________________     _________________________________
            313 F. Supp. 1087 (N.D. Ill. 1970), aff'd,  169 U.S. P.Q. 262
                                                _____
            (7th  Cir., cert.  denied,  404 U.S.  831 (1971);  Merrick v.
                        _____________                          _______
            Sharpe & Dohme, 185  F.2d 713 (7th Cir. 1950),  cert. denied,
            ______________                                  ____________
            340 U.S. 954 (1951).

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            set  aside  after court  review  under  a highly  deferential

            standard.   Under  the Lanham  Act,  where a  contested Board

            proceeding has  already addressed  the validity of  the mark,

            the Board's findings can  be challenged in a civil  action in

            district court through new evidence, and, at least to a large

            extent,  the issues  can be  litigated afresh.   15  U.S.C.  

            1071(b).2  And  Congress permits an initial proceeding in the

            district court  to challenge  or affirm a  federal registered

            mark in civil suits  in which a federally registered  mark is

            in issue,  even without any  prior resort to  the Board.   15

            U.S.C.   1119.  

                 Second,  at  least  where   an  infringement  claim   is

            involved--whether   directly  asserted   by  an   "owner"  or

            challenged  in  a  declaratory action--there  is  often  some

            urgency.   Ongoing business conduct is  likely to be involved

            and harm,  possibly irreparable,  may be accruing.   Further,

            the  Board  cannot give  relief  for  an infringement  claim,

            either  injunctive  or  by  way  of  damages.    Under  these

            circumstances,   awaiting  the   Board's   action   is   less

            attractive;  and this is doubly so because (as already noted)

                                
            ____________________

                 2The  law  in  this  area is  complicated,  and  perhaps
            confused; no  simple generalization does  it justice.   See 3
                                                                    ___
            Mccarthy, supra,   21.05.  For present purposes, it is enough
                      _____
            that  something  close  to  de  novo  proceedings  are  often
                                        __  ____
            possible.  See Goya Foods, Inc. v. Tropicana Prod., Inc., 846
                       ___ ________________    _____________________
            F.2d 848, 853 (2d Cir. 1988). 

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            its administrative  findings can so easily  be relitigated in

            court.

                 Such reasons persuaded the Second Circuit in Goya Foods,
                                                              ___________

            Inc. v. Tropicana Prod.,  Inc., 846 F.2d 848 (2d  Cir. 1988).
            ____    ______________________

            There, a  district court  had dismissed a  declaratory action

            brought to  declare the plaintiff  not liable for  a possible

            trademark claim; the  district court had  relied on the  fact

            that  a  proceeding  to  oppose the  declaratory  plaintiff's

            trademark application was pending before the Board in denying

            the  plaintiff leave  to  proceed in  court.   Distinguishing

            ordinary primary jurisdiction cases, the Second Circuit ruled

            that  the declaratory  judgment  on  the  infringement  claim

            should proceed and should not await the Board's action.

                 We  take the  same view  and conclude  that the  section

            43(a)  claim in the present case should not be deferred based

            on primary jurisdiction concerns.  The Second Circuit did not

            decide whether, given that the  infringement claim was to  be

            heard by  the district court at once, a companion declaratory

            claim  addressed to  the validity  of a  federally registered

            mark should also be  heard despite the pendency of  the Board
                        ____

            proceeding.  Our case does present that wrinkle, but we think

            that the answer is  clear at least in principle:  both claims

            should be heard if this  course is more efficient; otherwise,

            not.

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                 If no infringement claim were made in the district court

            but only a claim that  a federal registration was or  was not

            valid, a good argument might exist (absent unusual facts) for

            awaiting the  completion  of  any  pending  Board  proceeding

            addressed to the mark's validity.  See Goya, 846 F.2d at 853.
                                               ________

            But  where an infringement claim is also present and is going

            to be  considered promptly  by the  court, it normally  makes

            sense  for the court to resolve a companion validity claim at

            the  same  time,  if the  issues  underlying  the  two claims
                              __

            overlap to an extent that makes this course sensible.

                 It is hard  to say in the abstract that  such an overlap

            will  always exist,  but  our own  case  is probably  a  good

            illustration.   Seemingly, the  section 43(a) claim  may turn

            largely on whether there  is confusion between the registered

            PHC  mark  and  the   unregistered  marks  that  the  Pioneer

            companies  use to  describe  their services;  and it  appears

            likely  that this is also  a central issue,  perhaps the only

            issue,   in  determining   the  validity  of   PHC's  federal

            registration.  Put differently,  if deciding count I requires

            the district court to resolve much or all of the substance of

            count  II, it would waste  everyone's time not  to settle the

            registration issue now.

                      We are not in  a position to make a  final judgment

            whether in this  case count  II should be  litigated at  this

            time,  stayed, or  dismissed.   Neither the  parties  nor the

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            district  court   has  sought   to  analyze  in   detail  the

            relationship between the issues  underlying the two counts in

            the factual  context of  this case; our  conjecture, pointing

            toward immediate consideration of  count II, is plausible but

            it may or may not  be warranted here.  The district  court is

            free to make its own initial judgment.

                                      CONCLUSION

                 We conclude that the  district court erred in dismissing

            the complaint.  There  is nothing in the record  or arguments

            before us that makes it appropriate for the district court to

            dismiss or defer  consideration of count I.  As  to count II,

            the district  court does  have authority  to decide  count II

            and, in our  view, that  would be the  appropriate course  if

            deciding count I effectively entailed deciding many or all of

            the issues underlying count II.    

                 The  judgment  of  dismissal  is vacated  and  the  case
                                                  _______

            remanded for proceedings consistent with this opinion.
            ________

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