Trademark Trial and Appeal Board
Patent and Trademark Office (P.T.O.)
*1 MARSHALL FIELD & COMPANY
MRS. FIELDS COOKIES
Opposition No. 78,031
Cancellation No. 16,572
March 7, 1989
J. E. Rice, G. D. Krugman and T. J. Quinn
The Board, in an order issued September 22, 1988, granted defendant's motion to consolidate Opposition No. 78,031 and Cancellation No. 16,572, reset discovery and trial dates herein, approved defendant's motion for leave to amend its registrations, that is, Registration Nos. 1,241,619, 1,256,315 and 1,299,149, in part, and deferred ruling on such motion in part, and allowed defendant until October 24, 1988 to file corrected applications for amendment.
Defendant, on October 24, 1988, filed its corrected applications for amendment, together with a motion for leave to amend its answer to assert a counterclaim for cancellation of plaintiff's pleaded registration, that, is Registration No. 1,304,257. Defendant also filed a request, in essence, that discovery and trial periods be reset after ruling by the Board on the pending motion.
The counterclaim defendant seeks to file challenges the validity of a registration for the mark 'FIELD'S' for 'retail department store services'.
The counterclaim sets forth three grounds for cancellation of plaintiff's pleaded registration. These are: (1) that plaintiff committed fraud in declaring that use of its mark was 'substantially exclusive' inasmuch as plaintiff either was aware, or should have been aware, of numerous third-party uses of its mark; (2) that plaintiff committed fraud in declaring that use of its mark was 'continuous' inasmuch as plaintiff has admitted that it had made no use of the mark 'FIELD'S' in any public fashion during the period of the declarant's employment; and (3) that the specimens submitted in support of the application which matured into the registration here at issue do not show use of 'FIELD'S' as a valid service mark.
Inasmuch as the counterclaim defendant seeks to file is a compulsory counterclaim within the meaning of Trademark Rule 2.114(b)(2)(i), plaintiff seeks to bar defendant's counterclaim on the grounds that the counterclaim was not pleaded 'promptly' after the grounds therefor were learned. Plaintiff also argues that none of the grounds set forth in defendant's counterclaim states a claim upon which relief can be granted and that therefore entry of the amendment would be futile. See, Foman v. Davis, 371 US 178 (1962). The essential portions of the counterclaim that defendant seeks to plead are set forth below:
2. Marshall Field is the owner of the service mark Registration No. 1,304,257, as described above, issued on November 6, 1984. Marshall Field obtained said registration pursuant to Section 2(f) of the Lanham Act 15 (U.S.C. § 1052(f). In its original application, executed on July 25, 1983, Marshall Field expressly admitted that the mark was in use by third parties:
Third-parties have used and/or are using the trade style 'Fields' in connection with local retail stores, but applicant believes that it is the earliest user of the service mark in commerce.
*2 3. In a supplement to its original application, however, Marshall Field stated its belief that its FIELD's mark had 'become distinctive as applied to the services by reason of substantially exclusive and continuous use by applicant in interstate commerce for five (5) years next preceding the date of the filing of the applicant.' (That is, that Marshall Field had made substantially exclusive and continuous use of the FIELD'S mark from August 1978 to August 1983.) Marshall Field's Chairman signed and submitted an affidavit under 18 U.S.C. § 1001 in which he stated that the:
. . . facts set forth in this application as amended are true . . . and further, that all statements made herein are made with the knowledge that willful false statements and the like so made are punishable by fine or imprisonment or both, under Section 1001 of Title 18 of the United States Code, and that such willful false statements may jeopardize the validity of the application or any registration resulting therefrom.
4. Marshall Field's registration was obtained fraudulently or through willful falsehood in that its Chairman's statement of 'substantially exclusive and continuous use' was knowingly false, unsupported, and without adequate investigation or inquiry. At the time of the signing and filing of the Section 2(f) supplemental affidavit, Marshall Field and its attorneys had knowledge of widespread and active third-party use of marks consisting of or including the term FIELD's, FIELD or FIELDS in connection with similar services during the subject time period from 1978 to 1983. In fact, the Applicant's use of FIELD'S during this period was substantially nonexclusive. For example, Applicant's Chairman knew of the mark FIELD BROTHERS, used by Field Brothers in New York for men's apparel and specialties. Applicant also knew of the existence of a clothing store named FIELD'S located in Decatur, Illinois. Applicant knew of other users of the term FIELD'S, or terms substantially similar thereto in connection with similar of related services, including FIELD'S OF JACKSON, a women's apparel store in Jackson, Mississippi.
5. Applicant's Chairman has admitted that, before he signed the supplemental affidavit, he did not examine company records to determine whether others were using the name FIELD'S nor, to his knowledge, did any other Marshall Field employee. Applicant's Chairman has admitted that Marshall Field has not used the FIELD'S service mark, Reg. No. 1,304,257, as a service mark in any public fashion during the term of his employment, which renders fraudulent his statement in the supplemental affidavit that Marshall Field had made 'continuous' use of the term for the prior five years. Said statements were made by Marshall Field with the knowledge and belief that said statements were false. Said false statements were made with the intent to induce authorized agents of the U.S. Patent and Trademark Office to grant said registration, and, reasonably relying upon the truth of said false statements, the U.S. Patent and Trademark Office did, in fact, grant said registration to Marshall Field.
*3 7. As a further ground for cancellation, Mrs. Fields Cookies states that the advertising specimen submitted in support of Marshall Field's application Serial No. 73/437,573, upon which Reg. No. 1,304,257 was issued, represents only trade name use and not service mark use. The specimen cannot support service mark registration/(See Trademark Manual of Examining procedure Section 1301.04), and the Examiner erred in allowing said application.
We turn first to plaintiff's allegation that defendant's counterclaim fails to state a claim upon which relief can be granted.
With respect to the first ground for cancellation, plaintiff alleges that there can be no fraud as a matter of a law because there is no duty to disclose the existence of junior third party users of a mark in connection with the filing of a Section 2(f) affidavit. In support of these arguments, plaintiff relies on Rosso and Mastracco, Inc. v. Giant Food Inc., 219 USPQ 1052 (Fed. Cir. 1983), wherein the court stated:
The statute does not, however, obligate one seeking federal registration of a mark to investigate and report all other possible uses of an identical or confusingly similar mark. We agree that a senior user ordinarily need not identify junior users in the oath.
Alternatively, plaintiff argues that even if there is a duty to reveal the existence of junior third party users, this duty was discharged because, as the counterclaim concedes, plaintiff disclosed to the Examiner the existence of third-party uses of the mark.
While we agree with plaintiff that there is no duty to specify the names of third party users, unless asked for such information by the Examiner, the oath, on the other hand, must be truthful, and if it is shown that no reasonable person knowingly could represent that its use of a mark was 'substantially exclusive,' the signing of a declaration attesting to so material a misrepresentation would, in our opinion, if relied upon by the Examiner, constitute fraud on the Patent Office. The case cited by petitioner is inapposite in that it dealt with the duty to disclose the existence of junior third-party users in connection with the filing of a Section 1 affidavit. It did not deal with the filing of a Section 2(f) affidavit. The materiality of this distinction becomes apparent when one considers the differing purposes of these affidavits. The purpose of the Section 1 oath or affidavit is to establish a colorable claim of title to a geographically unrestricted registration. Normally, the first user of a mark in the United States is considered to be the owner of the mark for purposes of a nationwide registration. Thus the existence of junior users, except in those cases delineated by the court in the case cited by petitioner, would not normally serve as a basis for the denial by the examiner of a party's request for a geographically unrestricted registration. On the other hand, the purpose of a Section 2(f) affidavit is to persuade the Examiner that a mark otherwise not entitled to a Principal Register registration has acquired sufficient distinctiveness through widespread use by the applicant in commerce such that the mark now designates only one source of origin. In this latter context, the existence of numerous third-party users of a mark, even if junior, might well have a material impact on the Examiner's decision to accept a party's claim of distinctiveness.
*4 In this case, even though plaintiff disclosed the existence of third party users of the mark 'FIELD'S' to the Examiner in charge of plaintiff's application for registration, the thrust of defendant's counterclaim, as we take it, is that the extent of the third-party users was so substantial, and was known by plaintiff to be so substantial, that plaintiff could not reasonably and in good faith have signed that portion of the affidavit alleging substantially exclusive use of its own mark in commerce; and that the Examiner materially relied upon such representations in allowing plaintiff's application for registration. While these allegations may be difficult to prove, in our opinion, they state a claim upon which relief may be granted. Thus the defendant should be afforded an opportunity to test its claim on the merits. [FN1]
With respect to the second ground for cancellation, plaintiff alleges that there can be no fraud as a matter of law in plaintiff's statement that its use of the mark 'FIELD'S' was 'substantially continuous' in that a Section 2(f) declaration simply recites a belief; and that even if the belief is not technically correct, there is no fraud as a matter of law. Again, by this portion of the counterclaim, defendant is challenging the reasonableness of the declarant's belief that there had been substantially continuous use of the mark in commerce for five years prior to the filing of the affidavit, and plaintiff's arguments are a matter for proof, not pleading. Accordingly, we find that defendant's allegation that plaintiff fraudulently declared that its use of the mark 'FIELD'S' had been substantially continuous states a claim upon which relief can be granted.
With respect, however, to defendant's motion to amend its answer to assert the insufficiency of the specimens, per se, as a ground for cancellation, we agree with plaintiff that these allegations fail to state a claim upon which relief can be granted. The law is settled that the insufficiency of the specimens, per se, does not constitute grounds for cancelling a registration. See, Granny's Submarine Sandwiches, Inc. v. Granny's Kitchen, Inc., 199 USPQ 564 (TTAB 1978). While we expressly disagree with any rationale premised on the belief that an issue of law is inherently ex parte rather than inter partes in nature, we agree for both legal and equitable reasons that the insufficiency of the specimens, per se, is not a ground for cancellation. As stated by the Board in a recent opinion, whose analysis of the issue we expressly adopt herein,
The reason why unacceptable specimens, per se, should not be a ground for cancellation becomes apparent when one considers the purpose of specimens. The specimens are to show the mark as it is actually used (Section 1 of the Trademark Act 15 USC 1051; Trademark Rules 2.56 through 58), so that it can be determined whether the matter for which registration is sought is being used as a trademark or service mark. Objections to the specimens made by the Examining Attorney are not actually to the acceptability of the specimens themselves, but are that the specimens do not show trademark use of the matter for which registration is sought. Thus, in the present case, even assuming, arguendo, that applicant's specimens are unacceptable, if the Examining Attorney had refused registration based on them it would have been because they did not show that applicant's mark was being used as a service mark, and the ground for refusal would have been, not the insufficiency of the specimens, but that the matter did not function as a mark. Moreover, fairness dictates that the ex parte question of the sufficiency of the specimens not be the basis for sustaining a petition for cancellation. If the Examining Attorney had objected to the specimens during the examination of the application, the applicant would have had an opportunity to submit acceptable substitute specimens. Assuming, arguendo, that registrant's specimens are unacceptable, it would be unfair to penalize registrant for not submitting substitute specimens when that requirement was never made by the Examining Attorney.
*5 Century 21 Real Estate Corp. v. Century Life of America, ___ USPQ2d ___ (TTAB 1989).
To this we might add that the proper ground for cancellation of an existing registration is that the term for which registrant obtained registration has not been used as a trademark or service mark. Accordingly, if, after review of the discovery which defendant has obtained and consideration of the parameters of Rule 11, defendant can allege that petitioner did not use the term shown in Registration No. 1,304,257 as a service mark, defendant may file a motion to amend its answer to plead lack of use as a service mark as an additional ground for cancellation.
This brings us now to plaintiff's arguments that defendant delayed unduly in asserting its counterclaim and that therefore the counterclaim should not be permitted. More particularly, plaintiff alleges that the first ground for defendant's counterclaim is untimely inasmuch as registrant acknowledged in the application itself the believed existence of third-party users and that if defendant had exercised due diligence in obtaining the file history of the registration for which cancellation is sought, the asserted grounds for the counterclaim, if any, would have been learned sooner.
The Board is not persuaded that the factual basis for the allegation that plaintiff committed fraud in alleging 'substantially exclusive' use of the mark for the five years preceding the filing date of the application that evolved into this registration would have been revealed merely from a review of the file history of the registration herein challenged, and therefore we are not persuaded that defendant delayed unduly in asserting this ground for cancellation. A pleading of fraud requires a showing of intent and, in this case, also requires a showing of the extent of third party uses known to plaintiff at the time it filed its Section 2(f) affidavit. This type of information ordinarily is obtainable only through discovery. In this case, the record reveals that defendant obtained the information necessary to assert its counterclaim through the production of documents and the taking of depositions of several persons, including the affiant, throughout July and September of 1988. Defendant's counterclaim was pleaded promptly thereafter and before discovery in this proceeding had closed. Moreover, we agree with defendant that the concept of 'undue delay' is inextricably linked with the concept of prejudice to the non-moving party and, in this case, we find no such prejudice.
In view thereof, defendant's motion to amend its answer to assert the first two grounds for its counterclaim, that is, Paragraphs 1 through 6 of defendant's counterclaim, is granted. With respect to the third ground for the counterclaim, that is, Paragraph 7 of defendant's counterclaim, this motion is denied. Accordingly, plaintiff is allowed thirty days from the mailing date of this order to file its answer to defendant's counterclaim, as amended by this order, following which, trial dates, including the period for discovery, shall be rescheduled.
*6 Although we have disposed of defendant's motion to amend its answer, one further matter requires our attention. Pursuant to Board order, defendant, on October 24, 1988, filed corrected copies of applications for amendment of Registration Nos. 1,241,619, 1,256,315, and 1,299,149. One portion of these amendments, that is, the amendment to correct the name of registrant, was approved by the Board in our order dated September 22, 1988. Ruling on that portion of the amendment which seeks to make a change in the statement of dates of use was deferred until final hearing. Accordingly, Registration Nos. 1,241,619, 1,256,315 and 1,299,149 are forwarded herewith to the post registration section of this office, together with the applications for amendment, for entry only of that portion of that amendment which seeks a change in the name and address of the registrant. As indicated above, ruling on that portion of the amendment which seeks to change a statement in the dates of use will be deferred until after final hearing.
Except to the extent indicated above, and except for ruling on petitioner's motion for an order enabling disclosure of confidential information to its survey expert, which was received by the Office on February 3, 1989, proceedings herein are otherwise suspended. Upon receipt of plaintiff's answer to defendant's counterclaim, as amended herein, and defendant's response, if any, to petitioner's motion for disclosure, trial dates, including the period for discovery, shall be rescheduled. [FN2]
J. E. Rice
T. J. Quinn
Members, Trademark Trial and Appeal Board
FN1. The Board notes that in addition to pleading that plaintiff's claim of substantially exclusive use in commerce was knowingly false, defendant pleads that plaintiff's claim was made without the requisite duty of investigation. Our review of the case law persuades us that the law is not settled on the degree of investigation, if any, necessary to support an applicant's claim of distinctiveness. Moreover, registrant's allegation that petitioner signed the affidavit without sufficient investigation seemingly is at adds with registrant's allegations that petitioner signed the affidavit knowing the statements to be false and with the intent to deceive the Patent and Trademark Office. Nevertheless, since the federal rules allow for inconsistent pleadings, and since we deem it inappropriate to determine at this juncture, the degree of investigation necessary to support an affidavit of distinctiveness, such allegations shall not be stricken and shall be construed, for purposes of this proceeding, as an alternative basis for the claim of fraud.
FN2. The consented motion for an extension of discovery filed by the parties on December 9, 1988 is granted. Accordingly, discovery is considered to have been ongoing up to and including February 6, 1989.