October 13, 2022

Long Live the Kingpin: No Abandonment Based on Nonuse During Drug Sanctions Period

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In a precedential decision, the Trademark Trial & Appeal Board (Board) dismissed an opposition, finding that the trademark applicant's long period of nonuse due to government sanctions was excusable nonuse and not abandonment. ARSA Distributing, Inc. v. Salud Natural Mexicana S.A. de C.V., Opposition No. 91240240, 91243700 (TTAB Sept. 28, 2022) (Taylor, Greenbaum, English, ATJ)

Salud sought a trademark registration of the standard character mark EUCALIN for "pharmaceutical products, namely, vitamin supplements, nutritional supplement made with a syrup with jelly base, honey base, and with a mixture of plants with propolis base, and herbal remedies in the nature of herbal supplements," and the composite mark set forth below for "herbal supplements; nutritional supplements; vitamin supplements."

ARSA opposed the registration, alleging prior common law use of the mark EUCALIN for "dietary and nutritional supplements." ARSA argued that its sales and advertising of its EUCALIN product from 2008 to October 6, 2015, and October 9, 2017, established that ARSA had used its EUCALIN mark long before the constructive use filing dates of Salud's application. Thus, ARSA had priority of use of the EUCALIN mark on nutritional and dietary supplements.

In response, Salud asserted it had priority in the EUCALIN mark based on use since 1999. Salud argued that between 1999 and October 2008, ARSA was Salud's US distributor and, therefore, all goodwill for any EUCALIN-labeled product went to Salud as the supplier of the goods and products.

ARSA asserted that there was no distribution agreement between the parties, but even if Salud "could have reasonably claimed rights based on some alleged distribution agreement before 2008," Salud "has long since abandoned any rights it would have had." ARSA asserted that Salud was legally banned from conducting business in the United States between October 2, 2008, and May 2015 because it was declared a Specially Designated Narcotics Trafficker (SDNT). ARSA argued that Salud failed to produce any evidence establishing that it had concrete plans or intent to resume use between 2008 and 2015.

The Board found that there was no clear manufacturing-distribution agreement between the parties, and therefore there was a rebuttable presumption that the manufacturer (Salud) owned the mark. The Board explained that the following six factors are considered in determining which party has superior rights:

  1. Which party created and first affixed the mark to the product
  2. Which party's name appeared with the trademark on packaging and promotional materials
  3. Which party maintained the quality and uniformity of the product, including technical changes
  4. Which party the consuming public believes stands behind the product (g., the party to which customers direct complaints and contact for correction of defective products)
  5. Which party paid for advertising
  6. What a party represents to others about the source or origin of the product.

The Board concluded that, on the balance, the factors favor Salud. The Board explained that the first, second, third and sixth factors favored Salud because it created the mark and product, maintained quality control over the product and was identified on product packaging as the manufacturer of the goods. The Board explained that the fourth and fifth factors favored ARSA because ARSA's telephone number and website address were provided on product packaging for consumer inquiries, and it paid for advertising the products. As a result of this analysis, the Board found that ARSA had not rebutted the presumption that its use of Salud's mark from 1999 to 2008 inured to the benefit of Salud.

The Board next addressed whether Salud abandoned its rights to the EUCALIN mark through nonuse between 2008 and 2015 and found that ARSA failed to prove that Salud abandoned the mark with an intent not to resume use. The Board explained that there are two elements to a nonuse abandonment claim: nonuse of the mark and intent not to resume use. The Board found that ARSA had established a prima facie case of abandonment based on any three-year period of consecutive nonuse since October 2, 2008, and thus the burden shifted to Salud to produce evidence of an intent to resume use. To satisfy its burden, Salud was required to present evidence of activities it engaged in during the nonuse period or events from which an intent to resume use during the nonuse period might reasonably be inferred.

Salud argued that the ban on conducting business in the United States as a sanction constituted excusable nonuse. Additionally, Salud argued that its intent to resume use of the mark was evidenced by the following actions:

  • Salud filed its trademark applications as soon as it was permitted to do business in the United States.
  • Salud filed infringement actions in Mexico against two companies supplying ARSA's US EUCALIN products.
  • Salud submitted a petition to cancel ARSA's non-cancelled registration marks for the mark EUCALIN.

The Board found that Salud had not decided to cease use of its mark for business reasons, and that abandonment did not result from Salud's temporary withdrawal from the market forced by outside causes. The Board found that because Salud had no choice but to cease use of its mark because of government sanctions banning it from doing business in the United States, it did not abandon its mark. The Board also noted that as soon as it became legally permissible for Salud to resume business in the United States, Salud took steps evidencing an intent to resume use of the mark in the United States. The Board also noted that Salud's infringement actions in Mexico demonstrate its efforts to resume using the mark in the United States. The Board concluded that these activities, all taken soon after the SDNT sanctions were lifted, demonstrate that Salud maintained an intent to resume use of the EUCALIN mark during its period of compulsory nonuse and beyond.

Accordingly, the Board dismissed ARSA's opposition for failure to establish priority in the EUCALIN mark.

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