Australian Therapeutic v Naked
Australian Therapeutic Supplies Pty. Ltd. v Naked TM, LLC
No. 2019-1567 Fed. Cir. December 4 , 2020 Circuit Judge Wallach, dissenting from denial of a petition for rehearing en banc.
Naked and Australian both sell condoms. Pursuant to an “informal” settlement agreement, Australian agreed that it would not use or register the mark NAKED for condoms in the United States. Years later, Australian filed a petition to cancel Naked’s registration of the NAKED mark before the TTAB. The TTAB found that Australian had “contracted away its right to use and register NAKED and by extension NAKED CONDOMS,” had “failed to prove that it has standing to cancel the [NAKED] registration” due to it’s settlement agreement with Naked.
On appeal, the Court reversed and remanded. The Court held that Australian has a real interest in the cancellation proceeding and a reasonable belief of damage, thereby satisfying the statutory requirements to seek cancellation under 15 U.S.C. § 1064, stating that Australian had “demonstrate[d] a real interest in the proceeding because it twice filed an application to register its unregistered mark,” and had undertaken “advertising and sales in the United States.” (Wallach, J. dissenting).
Naked petitioned for rehearing en banc, which was denied. Judge Wallach dissented from the denial for hearing, expressing his view (1) that Australian did not have a legitimate commercial interest in the action; (2) the Court’s holding undermined case law favoring the enforcement of settlement agreements; and (3) raised questions as to the impact of Supreme Court precedent on statutory cause of action jurisprudence.
Judge Wallach stated “finding a valid cause of action in breach of a settlement agreement, is contrary to our case law requiring a petitioner have a ‘legitimate commercial interest.’” He also opined that the Court’s holding “is contrary to our case law favoring enforcement of settlement agreements.”
Australian filed its trademark application for NAKED after filing the petition for cancellation. Judge Wallach notes that the Court’s decision does not address the issue of whether Australian must possess its rights before filing. In his view, “by accepting the [Australian trademark] application as evidence of statutory standing without comment, [the Court] appears to extend Lexmark sub silentio.”
Read more: Federal Bar member attorneys may access the full case summary by registered patent attorney B.C. “Bill” Killough in the January 2021 issue of Federal Circuit Case Digest.
B.C. Killough is a registered patent attorney based in Charleston, SC. On behalf of his clients, Bill has obtained more than 300 United States patents, participated in prosecuting more than 100 foreign patent applications and he has filed more than 1000 trademark applications with the US Patent and Trademark Offices.
Additionally, you may read the full opinion here.