Whining About Wine
The Winestore is a wine retailer based in North Carolina. And all it wants (for purposes of this discussion) is to sell a California cabernet sauvignon called OVERBROOK. The Winestore doesn’t make the wine, of course, but it appears that it’s the exclusive distributor. This means that the trademark OVERBROOK (for wine) likely belongs to The Winestore because it’s who the public will look to as controlling the wine’s quality.
So, planning ahead, The Winestore applied to register OVERBROOK for wine with the United States Patent and Trademark Office (USPTO) in 2015, two years before the wine would actually go on sale. This was permissible because The Winestore had real, concrete plans to use (“bona fide intent to use”) OVERBROOK to sell wine in the fairly near future. If the application were successful, the law would pretend that The Winestore had been using OVERBROOK for wine since 2015, not whenever The Winestore actually started using OVERBROOK for wine. This is kind of an exception to the rule in the United States that trademark rights begin upon use in commerce, not when a government agency gives approval.
But trademark rights in the United States still don’t arise until use in commerce. The Winestore’s intent-to-use trademark application was just a potentiality. The Winestore would still need to use OVERBROOK for wine in commerce. Only then would The Winestore get trademark rights. It’s just that the trademark rights would become retroactive to the day The Winestore filed its intent-to-use application.
Overlooking a Problem?
Actual use wouldn’t be a problem. You can buy OVERBROOK wine from The Winestore right now. But The Winestore wasn’t out of the woods. Even intent-to-use applications may be challenged during the application
stage through a process known as an “opposition.” After the USPTO’s examiner has approved your application, the application is “published” for 30 days, during which time others may try to block the application.1By the way, you’re not entirely out of the woods if no one opposes your application because, once your application becomes a registration, others can still try to “cancel” the registration.” But at least you have a registration in the meantime.
That’s what happened to the OVERBROOK application. Another wine retailer, called Justin Vineyards & Winery, already had a registered trademark for OVERLOOK (for wine). It asserted that OVERBROOK was so similar to OVERLOOK that it was likely to cause confusion among wine consumers.
A Court of a Hypothetical Universe
Normally, at this point, an applicant will just fight the opposition through USPTO’s special Trademark Trial and Appeals Board (“TTAB”). TTAB proceedings are 85% like normal federal lawsuits, but with two major differences. First, the TTAB isn’t a court. It’s court-like, but it’s really an administrative proceeding.
Second, the proceedings take place in a kind of hypothetical universe where the words on The Winestore’s application and on Justin Vineyards’ registration are reality. Thus, when the application and the registration say that they’re for “wine,” it’s assumed that they are used in connection with every type of wine you can imagine. Normally, it might matter if Justin Vineyards uses OVERLOOK solely for Chardonnay2I’m not sure what the relationship between Justin Vineyards and Landmark Vineyards is, but they’re clearly closely related., and The Wineshop uses OVERBROOK solely for cabernet sauvignon. But not in a TTAB proceeding. It’s assumed that OVERLOOK and OVERBROOK are being used for all types of wine, including Chardonnay and Cabernet Sauvignon.
It might also matter that Justin Vineyards never seems to use OVERLOOK except in connection with LANDMARK VINEYARDS. But again, in the universe of a TTAB proceeding, it’s assumed that OVERLOOK is always used by itself with wines.
And this makes sense when you consider what TTAB proceedings are for: to determine whether a registration should issue3Or, in the case of a cancellation proceeding, to remain. The TTAB is concerned almost solely with what rights the registration would bring if issued. When Justin Vineyards and The Winestore wrote “wine” down on their respective applications, they were essentially reserving the entire class of wines as the goods and services that their respective marks would be used with. The TTAB is, therefore, concerned with the entire class of wines and effect that a registration for the entire class of wine would have.
Sometimes You Just Want the Real Thing
The Wineshop didn’t want to have the fight under the TTAB’s purview. I don’t know why. Instead, it sued in regular federal court for a “declaration” that its use of OVERBROOK for wine doesn’t infringe Justin Vineyards’ rights in OVERLOOK for wine. Twice. It failed both times. See Winestore Holdings LLC v. Justin Vineyards & Winery LLC. Why it failed is interesting.
In the United States, courts aren’t allowed to issue advisory opinions.4U.S. courts, at least, and I think the vast majority of state courts. But I think there are some exceptions out there. If a city is thinking of banning commercial signs from residential neighborhoods, it can’t go to a court and ask whether the ban would violate its residents’ First Amendment right to free expression. All it can really do is ban the signs and wait for some annoyed resident to sue. Only then can a court issue an opinion about the constitutionality of the ban.
This rule against advisory opinions stems from Article III of the U.S. Constitution, which extends federal (as opposed to state) judicial power to things called “cases” and things called “controversies.” The courts have interpreted “cases” and “controversies” to mean real disputes between adversaries. The advantage of this system is that the issues are much more likely to be worked out vigorously and thoroughly. Consider the example above. If the city were able to obtain an advisory opinion from a court, who would contest it? How would anyone know they would necessarily be affected by it? You could lose rights and never know it.
The downsides are fairly evident. Above all, it’s inefficient. We often don’t know what’s legal or illegal until the right adversaries bring the right lawsuit at the right time. And by “the right people,” I don’t just mean legal adversaries, but people with the resources and stamina to voluntarily go through litigation. In the example above, some brave soul must put out a commercial sign in a residential neighborhood and be arrested for it, then challenge the law on constitutional grounds. Another downside is the old adage about “hard cases make bad law”: one of the parties might be so sympathetic that the court rules in that party’s favor, even though it would have been more socially beneficial to rule the other way. Relatedly, it’s a bit risky to place society’s needs on the shoulders of a single party. Parties without adequate resources often argue poorly or incompletely, or entirely miss stronger arguments, and we end up with bad laws because of it.
In Case of Controversy, Smash Glass
But so it is. U.S. courts require that the parties have an honest-to-goodness controversy going on before they will get involved. They are especially wary of “declaratory” actions like the ones The Wineshop brought because, by definition, there isn’t yet a legal dispute. Thus, courts demand that declaratory actions seek more than just permission; e.g., may I use OVERBROOK for wine? Courts want a dispute hot enough that a lawsuit is in the offing. A lawsuit doesn’t have to be explicitly threatened, but the other side—The Winestore, in this case—must be reasonably apprehensive of a lawsuit.
In this case, Justin Vineyards has (a) written a fairly anodyne letter to The Winestore expressing concern, and (b) opposed The Winestore’s application. (It might be relevant that the anodyne letter was written before Justin Vineyards was aware that The Winestore had actually started to use OVERBROOK.) Is that enough to create a case or controversy?
You might think: well, yes. An opposition is a lot like a lawsuit, even if it isn’t technically one. If someone is attacking your application on grounds of likelihood of confusion5There are other grounds, but this is the main one., that’s almost the same thing as saying that you’re infringing their mark. And some courts agree with this position.
But you might also think: well, no. Sure, oppositions look like lawsuits, but they’re not. Remember how oppositions take place in a hypothetical universe? You can oppose a trademark application without actually accusing someone of infringement. Indeed, it’s entirely possible for there to be a finding of likelihood of confusion such that the application should be refused without trademark infringement. For example, what if it really mattered what kind of wine the parties used their marks with? What if a jury really could find that consumers aren’t likely to confuse OVERBROOK for cabernet sauvignon with OVERLOOK for chardonnay?6This example would work better if there wasn’t an OVERLOOK pinot noir, i.e., a red wine. What if the wines were really expensive, such that consumers are especially careful and are thus less likely to be confused?7In truth, neither wine is expensive. As it happens, are roughly in the price category known as slightly-more-than-I-would-be-willing-to-pay-except-maybe-if-company-was-coming-over. What if the use of “house marks” (i.e., LANDMARK VINEYARDS) alleviated confusion? And a lot of courts agree with this position, including the court in this case.
Hardware for a Soft Issue
So, the naysayers are right, obviously. TTAB proceedings are totally different from regular court proceedings. Except for one thing: a case called B&B Hardware v. Hargis Industries. In that case, the U.S. Supreme Court shocked trademark lawyers everywhere by holding that a finding of likelihood confusion in a TTAB proceeding could be used in a regular court proceeding. In other words, if the TTAB found likelihood of confusion between two marks, a court could consider that issue—which is the main issue—definitively established in a lawsuit for trademark infringement.
Previously, it was assumed that the two types of proceedings were so different that there could be no such leakage between them. This was a big deal. TTAB proceedings are limited to just the existence of trademark registrations: the TTAB can toss an application8Or, in a cancellation proceeding, toss a registration., and that’s it. Courts, by contrast, can do all kinds of awful stuff to you. They can, for example, (a) stop you from using a trademark, and (b) make you pay damages. Suddenly those sleepy little opposition proceedings became a big deal.
Now, if B&B Hardware had held that TTAB findings must always be used preclusively in trademark infringement lawsuits, then the initiation of a TTAB proceeding should always give rise to a case or controversy. If you lose before the TTAB, you’ll lose at court. What’s worse, you’d be prevented from using relevant evidence that might change the result. If the wines were $1000 a bottle9Which, again, they aren’t., you wouldn’t be able to introduce that into evidence at the TTAB proceeding. But once you lose and then get sued in court, you can’t enter that into evidence because the issue has already been decided and you can’t re-litigate it. Better, then, to start in regular court where you can introduce the widest variety of evidence?
Fortunately, B&B Hardware didn’t hold that. It merely held that a finding in a TTAB proceeding could be used in a lawsuit for trademark infringement. Put another way, there isn’t a blanket rule against such use. The Supreme Court recognized that sometimes the actual use of the marks are so different that it would be inappropriate for a TTAB finding of likelihood of confusion to be used in a later lawsuit for trademark infringement. If $1000 a bottle would make a difference, then you should be able to introduce that into evidence and thus re-litigate the issue of likelihood of confusion.
Having said that, it’s a nervy, nervy thing to lose before the TTAB, then try to convince the federal court to let you re-litigate likelihood of confusion.
Finally, there is one other reason why the court here might’ve been correct to decline The Winestore’s declaratory lawsuit. In TTAB proceedings, it’s assumed that both parties are using their marks everywhere in the United States. But in a regular court proceeding, there’s infringement only if the trademarks are being used in the same markets. If The Winestore sold primarily in North Carolina, and Justin Vineyards sold primarily in California, Justin Vineyards wouldn’t have standing to sue The Winestore yet. There can’t be confusion if consumers can’t be exposed to both products.10This principle is known as “geographic remoteness,” but I think it’s better to think of it as “market remoteness.” The internet, of course, mucks this up, but even so, I’m not sure Justin Vineyards could sue The Winestore if it wanted to. But it can’t wait to file an opposition—that opportunity only comes around once.11Again, it could wait until the registration issues, then attack it, but even then, if it waits more than five years, that becomes really hard. For reasons I’m not going to get into here.
Thanks for reading!