In Crash Dummy Movie, LLC v. Mattel, Inc., the Federal Circuit recently affirmed a decision by the Trademark Trial and Appeal Board (the “Trademark Board”) refusing to issue registration of The Crash Dummy Movie, LLC’s (“CDM”) intent-to-use trademark application for the mark CRASH DUMMIES for toys and related goods (“CDM’s mark”), which CDM filed in March 2003. No. 2009-1239, slip op. at 8 (Fed. Cir. Apr. 16, 2010). Mattel Inc. opposed CDM’s application based on a likelihood of confusion with the marks CRASH DUMMIES and THE INCREDIBLE CRASH DUMMIES (collectively, the “CRASH DUMMIES marks”), which Mattel had purchased from Tyco Industries, Inc. in 1997 and had began using in December 2003. CDM attempted to defend against Mattel’s claim of likelihood of confusion by asserting Mattel or its predecessor-in-interest had abandoned the CRASH DUMMIES marks. In its decision, the Federal Circuit affirmed that Mattel took sufficient steps to rebut the presumption of abandonment raised by CDM.

Abandonment

A trademark is considered abandoned if the trademark owner ceases use with an intent not to resume use. See 15 U.S.C. § 1127. A statutory presumption of abandonment arises when a trademark owner fails to make use of its mark for at least a three-year period. See id. An assertion of abandonment can be used offensively, e.g., as a basis to seek cancellation of a registration, and also defensively, as used by CDM in this case, to defend against a claim of likelihood of confusion.

To rebut the presumption of abandonment, a trademark owner must demonstrate “reasonable grounds for the suspension and plans to resume use in the reasonably foreseeable future when the conditions requiring suspension abate.” Silverman v. CBS, Inc., 870 F.2d 40, 47, 9 U.S.P.Q.2d 1778, 1773 (2nd Cir. 1989) (citations omitted). Therefore, to defend against an abandonment claim, a trademark owner must provide the reason for nonuse of the mark as well as sufficient evidence that the owner made continuous efforts to resume use of the mark. See id.

Trademark Board Proceeding

In the proceeding before the Trademark Board, both Mattel and CDM agreed that a likelihood of confusion existed between CDM’s mark and the CRASH DUMMIES marks. Mattel, Inc. v. Crash Dummy Movie, LLC, Opposition No. 91159002 (T.T.A.B. Nov. 25, 2008) [not precedential]. Thus, the primary issue before the Trademark Board was abandonment of Mattel’s marks. Mattel purchased the CRASH DUMMIES marks from Tyco in 1997, and these marks were properly assigned to Mattel during that transaction, along with nearly 300 other marks that Tyco owned at that time. Mattel completely acquired Tyco a few months thereafter. Subsequently, Mattel was unable to make use of Mattel’s marks until December 2003, equaling an eight-year period of non-use. Accordingly, the Trademark Board found a prima facie case of abandonment, and noted that the burden of proof regarding the issue of abandonment shifted to Mattel.

A prima facie case of abandonment can be rebutted by (1) evidence of use, or (2) an explanation of nonuse and evidence of efforts to resume use of a mark. See On-Line Careline, Inc. v. Am. Online, Inc., 229 F.3d 1080, 1087 (Fed. Cir. 2000). While Mattel admitted that it did not use the CRASH DUMMIES marks until 2003, Mattel provided the reason for nonuse as well as evidence of its efforts to resume use of its CRASH DUMMIES marks. Mattel asserted that during the period of nonuse it was retooling the product line sold under the CRASH DUMMIES mark to comply with Mattel’s very strict safety standards for toys and playthings. The Trademark Board found that reason to be a sufficient explanation for nonuse.

Mattel also provided testimony and internal documents evidencing its efforts to resume use of the CRASH DUMMIES marks. Mattel’s evidence revealed that, in 1998, a third party approached Mattel and offered to assist in the sale of toy products under the CRASH DUMMIES marks. Mattel declined this proposal, noting that it was unable to completely retool the product line at that time. Mattel further explained that, during the period from 1997 through 2004, it was integrating its business with Tyco, working to make use of the CRASH DUMMIES marks and making decisions regarding the other 300 marks Mattel had acquired in the purchase of Tyco. Additionally, Mattel’s internal documents showed that Mattel began research and development for products associated with the CRASH DUMMIES marks in 2000 and began selling CRASH DUMMIES brand products in December 2003. The Trademark Board found that Mattel’s evidence was sufficient to prove Mattel’s intent to resume use of the CRASH DUMMIES marks and that Mattel had provided a sufficient explanation for nonuse of the CRASH DUMMIES marks during the eight-year period of nonuse.

Based on Mattel’s evidence of its constancy of effort to make use of the CRASH DUMMIES marks, along with the recognized industry practice to reuse acquired brands, the Trademark Board concluded that Mattel had successfully rebutted the presumption of abandonment and therefore refused registration of CDM’s mark based on likelihood of confusion with the CRASH DUMMIES marks.

Federal Circuit Decision

CDM appealed the decision, challenging the Trademark Board’s finding that Mattel intended to resume use of the CRASH DUMMIES marks after purchasing the marks from Tyco in 1997. The Federal Circuit specifically noted that the following evidence substantially supported the finding of Mattel’s intent to resume use of the CRASH DUMMIES marks:

(1) documents demonstrating that Mattel contemplated the offer it received in 1998 from a third party to assist in the sale of products under the CRASH DUMMIES marks;

(2) the recordation of Tyco’s assignment of the CRASH DUMMIES marks to Mattel with the United States Patent and Trademark Office (“USPTO”);

(3) internal documents and testimony evidencing Mattel’s research and development efforts from 2000 to 2003; and

(4) culmination of the R&D efforts via actual use of the CRASH DUMMIES marks in 2003.

This finding established that Mattel had an intent to resume use of the CRASH DUMMIES marks prior to actually using the marks in December 2003. See Crash Dummy Movie, LLC,No. 2009-1239, slip op. at 7-8. The Federal Circuit affirmed that Mattel did not abandon the CRASH DUMMIES marks, and instead had priority in the CRASH DUMMIES mark, preventing registration of CDM’s mark with the USPTO.

Practice Pointers

The Federal Circuit’s decision affirming the Trademark Board’s holding that Mattel did not abandon its trademarks exemplifies the importance of maintaining sufficient business records in an era when businesses are inclined to quickly destroy records deemed unnecessary or outdated under company-based document retention programs. In situations where a trademark owner has discontinued use of a trademark on a temporary basis, the trademark owner and its legal counsel must be cautious and maintain sufficient records documenting the trademark owner’s reasons for temporarily discontinuing use of the trademark and efforts to resume use of the trademark.

Trademark owners should also be cautious about making any statements publicly or internally documenting any statements that could be interpreted as stating that the trademark owner has no intention to resume use of the trademark. A registered trademark which has not been used for a period of three years or more becomes vulnerable to an attack based on presumed abandonment. Trademark owners should remember that this presumption is rebuttable. A reasonable explanation for nonuse and evidence of efforts to make use can suffice to rebut abandonment assertions.

If you find yourself in a position of trying to resume use of a trademark after a period of nonuse, you should document both the reasons for the suspension of use as well as all efforts and discussions evidencing an intent to resume use of the mark. Additionally, be sure to promptly record the assignments of trademarks you purchase or otherwise acquire. In summary, even if your mark is not currently in use, you may still be able to rightfully resume use and maintain priority if you have a reasonable explanation for nonuse and you are documenting your continuing efforts to resume use of the mark in commerce.

This article was prepared by Erin Frazier (efrazier@fulbright.com or 214 855 7104) and Patrick J. Gallagher (pgallagher@fulbright.com or 612 321 2812) from Fulbright’s Intellectual Property and Technology Practice Group. For additional information, please feel free to contact Erin Frazier or Patrick Gallagher.