This week, the Court addresses whether a validity challenge to a trademark remains justiciable after a judgment of non-infringement.
The Court holds that the district court lacked Article III jurisdiction to determine the validity of a declaratory-judgment defendant’s trademark after granting summary judgment of non-infringement to the declaratory-judgment plaintiff.
The panel: Judges Bea, Ikuta, and Christen, with Judge Bea writing the opinion.
Key highlight: “After a party obtains declaratory relief which decrees that it is not infringing a trademark, does it retain Article III standing to invalidate that mark? That is the central question presented in these appeals, and we answer it: No.”
Background: Defendant Citizens Equity First Credit Union (CEFCU) petitioned the Trademark Trial and Appeal Board (TTAB) to cancel a trademark registration belonging to plaintiff San Diego County Credit Union (SDCCU) claiming that SDCCU’s registration covered a mark that is confusingly similar to both CEFCU’s registered mark and its alleged common-law mark. SDCCU filed a declaratory judgment action seeking a declaration that it was not infringing CEFCU’s marks and to establish that those marks are invalid. At summary judgment, the district court granted a judgment of non-infringement in favor of SDCCU, but it then proceeded to hold a bench trial, after which it also held that CEFCU’s common-law mark was invalid and awarded SDCCU attorneys’ fees. Both sides appealed.
Result: The Ninth Circuit affirmed in part, vacated in part, and remanded. The Court first held that the district court erred in invalidating CEFCU’s common-law mark because, after it granted summary judgment of non-infringement, SDCCU no longer had a “personal stake” in invalidating CEFCU’s common-law trademark and therefore no longer had Article III standing on its invalidation claim. The Court began by noting that it has previously held that a plaintiff has standing to seek declaratory relief of non-infringement if he demonstrates a real and reasonable apprehension that he will be subject to liability if he continues with his course of conduct. The Court explained that this principle remains good law even after the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), which found Article III jurisdiction even though the plaintiff’s payment of royalties to the defendant claiming patent infringement obliterated any reasonable apprehension that plaintiff would be sued for infringement. Although MedImmune may have abrogated the Federal Circuit’s reasonable apprehension test, it did not abrogate the Ninth Circuit’s version of this test because the Federal Circuit’s test required an explicit threat, whereas the Ninth Circuit’s reasonable apprehension test does not. Similarly, the Ninth Circuit’s reasonable apprehension test survived Clapper v. Amnesty Int’l, 568 U.S. 398 (2013), which stated that future legal liability must be certainly impending to support standing. Clapper does not require plaintiffs to demonstrate that it is literally certain that the harms they identify will come about, but rather recognized that standing may exist when there is a substantial risk that the harm will occur. In this case, the Court continued, a justiciable controversy existed at the pleading stage because CEFCU alleged at the TTAB that SDCCU’s use of its mark created a likelihood of confusion and discovery during TTAB proceedings showed that CEFCU’s corporate representative believed SDCCU’s mark constituted trademark infringement and that actual customer confusion was only a question of time because CEFCU was attempting to increase brand awareness outside of the Bay Area, and already had many members in Southern California, where SDCCU used its mark. But once the district court granted summary judgment of non-infringement, it no longer possessed Article III jurisdiction to proceed to trial on SDCCU’s invalidity claim. Although declining to adopt a bright line rule against ever reaching validity in the face of non-infringement, the Court concluded that the district court could not do so here because the record was devoid of any evidence that an ongoing threat of liability was causing SDCCU to engage in any “self-avoidance” of harm or was “chilling” SDCCU’s use of its mark.
The Court next held that the district court erred in awarding attorneys’ fees to SDCCU under 15 U.S.C. § 1117(a) because that award was partly based on the merits of the invalidity claim over which it lacked jurisdiction. The Court remanded for the district court to determine whether SDCCU remains a prevailing party, as the attorneys’ fee statute requires, even absent a trial victory on invalidity and to revisit its exceptional-case determination.
The Court also held that CEFCU is subject to personal jurisdiction in California because CEFCU purposefully directed its activity toward California by using its trademarks there and operating several branches in the Bay Area, and by filing a TTAB petition alleging that SDCCU’s trademark (used solely in California) must be cancelled because of CEFCU’s prior use of its markets (used in Illinois and California), and SDCCU’s non-infringement claims arose out of CEFCU’s use of its trademarks in California because those are the same trademarks that CEFCU used to attack SDCCU’s trademark registration in the TTAB proceedings.
Finally, the Court held that the district court correctly dismissed without prejudice (instead of with prejudice) CEFCU’s counterclaim seeking to cancel SDCCU’s trademark registration. 15 U.S.C. § 1119 authorizes cancellation only where a party has proved infringement, and since the district court granted summary-judgment of non-infringement, which was not appealed, § 1119 did not give the district court independent jurisdiction over the cancellation claim.