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Relevance of Economic and Reputational Injury in a Cancellation Action

posted 1 year ago

By Madhu Rewari, Partner, and Sannat Chandna, Senior Associate, at Anand and Anand

In a recent case i.e. MEENAXI ENTERPRISE INC V. COCA-COLA COMPANY before the US Federal Court of Appeals for the Federal Circuit (CAFC), Coca-Cola failed to evidence lost sales and reputational injury and consequently, was unable to cancel registrations for the marks ‘THUMS UP’ and ‘LIMCA’ in the name of an unrelated third party.

BACKGROUND:

The Coca-Cola Company, which acquired rights within the marks ‘THUMS UP’ and ‘LIMCA’ from Parle in the year 1993, claimed to have imported the ‘THUMS UP’ and ‘LIMCA’ beverages into the US ever since the year 2005. On the other hand, Meenaxi Enterprise, had been selling and marketing beverages in the US under the ‘THUMS UP’ and ‘LIMCA’ marks since the year 2008. In the year 2012, Meenaxi registered the ‘THUMS UP’ and ‘LIMCA’ marks with US Trademarks and Patents Office (‘USTPO’). In 2016, Coca-Cola initiated cancellation actions under the provisions of Section 14(3) of the Lanham Act to cancel Meenaxi’s registrations for the marks due to misrepresentation that the use of the marks were bound to cause. Subsequently, the Trademark Trial and Appellate Board (‘The Board’) held that Meenaxi was attempting to dupe customers in the United States who were familiar with Coca-Cola’s THUMS UP by representing that Meenaxi’s THUMS UP beverage was the same as that of Coca-Cola’s beverages sold in India. An appeal was filed by Meenaxi before the CAFC.

RELEVANT LEGAL PROVISIONS:

 

Section 14(3) of the Lanham Act:

A petition to cancel a registration of a mark, stating the grounds relied upon, may . . . be filed as follows by any person who believes that he is or will be damaged . . . by the registration of a mark on the principal register[:] . . .

(3) At any time . . . if the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used.”

FINDINGS:

 

  1. CAUSE OF ACTION THRESHOLD UNDER SECTION 14(3) OF THE LANHAM ACT

 

As a threshold matter, the Court first addressed whether Coca-Cola had a valid statutory cause of action to seek cancellations of Meenaxi’s registrations for the ‘THUMS UP’ and ‘LIMCA’ marks. In accordance with the threshold established by the US Supreme Court for an action under the Lanham Act, it was held that the plaintiff must demonstrate (1) an interest falling with the zone of interests protected under the Lanham Act and (2) a proximate injury caused by the violation of the Act. In the context of Section 14(3) in particular, the zone of interest prong would encompass a reputation capable of protection within the territorial limits of US in accordance with the territoriality principle. Insofar as the proximate injury prong is concerned, it is an injury or damage to the commercial interests or reputation of the Plaintiff as it is the trade which is protected under Section 14(3) rather than the mark per se. In other words, the provisions of Section 14(3) protects marks from unauthenticated use that could cause commercial injury even if the injured party itself is not the proprietor of the trademark in question.

  1. TERRITORIALITY PRINCIPLE AND THE ZONES-OF-INTEREST PRONG

In the context of the zones-of-interest test, the Court discussed the territoriality principle at length to conclude that the foreign reputation of a mark would not be determinative of the rights that the plaintiff would have within the US territory over the mark. In this regard, the Court referred to the Person’s case wherein the mark of a well-known Japanese retailer (Person’s) was used by a US citizen subsequently in US and the retailer did not have any trademark rights in US. After discovering the use of the mark by the US citizen, an application seeking cancellation of the mark was filed by the retailer. Rejecting the application, the Court held that reliance by Person’s on its foreign use in Japan could not support its priority claim because foreign use had no effect on US commerce and could not form the basis for holding that Person’s has priority within US.

In light of the above, the Court observed that the territoriality principle did not apply to the current dispute as Coca-Cola had not sought the protection/enforcement of its trademark rights but rather the protection of the commercial reputation of its marks from injury.

  1. THE INJURY PRONG

The court observed that the extent to which the territoriality principle applies to aspects of the Lanham Act was not required to be answered in the instant case since the basis of the Plaintiff’s claim was entirely on alleged injury occurring within the US. The Court disagreed with the conclusions of the Board on the aspect of lost sales to Coca-Cola as a result of Meenaxi’s use of the marks as there was a lack of substantial evidence provided by Coca-Cola to that effect. With respect to reputational injury, it was observed that there were conflicting views on the ‘well-known’ mark being an exception to the territoriality principle, however, since Coca-Cola did not rely on the well-known mark exception, it was therefore held to be inapplicable to the matter at hand.

FINAL DECISION & OUR VIEWS:

It was held that the United States Patent and Trade Marks Office had erred in concluding that there was a likelihood of reputational injury to Coca-Cola since there was no evidence that the relevant sections of the public were even aware of the reputation of their marks. Hence, the cancellation order of the board was reversed by the Court.

  • Registration: The above decision should act as an eye-opener for all brand owners and communicate the message that obtaining a registration for a brand is not its melting point but only the commencement of its journey.
  • Use of the mark: It is not only imperative to put the brand to “Actual Use” in trade and commerce, but also, ensuring that relevant documentary material pertaining to such use is collated and maintained which could be necessary to establish the repute, goodwill and a certain valuation which the brand possesses, before a Court of Law.
  • International Use and Registrations: Despite the applicability of the territoriality principle, there is settled case law in India that has recognized International use and registrations which should be brought on record to initiate the process of building a brand identity in India.
  • Vigilance: Successful enforcement acts as a certain tool in building a notorious nature for the brand, enhancing its valuation and ensuring that no unrelated third party is permitted to take advantage of its reputation which has been acquired over the years.
  • Well-Known Status: Once a mark has amassed a significant repute, proprietors must look at the provisions for having the mark recorded on the list of well-known mark maintained by the Trade Marks Registry in India.

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