Trademark Trial and Appeal Board
Patent and Trademark Office (P.T.O.)
*1 LIBERTYVILLE SADDLE SHOP, INC.
E. JEFFRIES & SONS LIMITED
Cancellation No. 19,719
March 17, 1992
Before Sams, Rice and Cissel
By the Board:
Sams, Rice and Cissel
Libertyville Saddle Shop, Inc. has filed a petition to cancel a registration, owned by E. Jeffries & Sons Limited, of the mark "E JEFFRIES" which is registered for "saddlery and harness; and ladies shoulder bags." [FN1]
As grounds for the petition to cancel, petitioner alleges that it is engaged in the business of distributing and selling saddlery and horse equipment, namely halters, leads, cribbing straps and protective horse boots; that since 1980 it has continuously used, applied and displayed the mark "JEFFERY & LORD" in connection with its goods; that its goods and respondent's goods are of substantially the same class and are used by substantially the same class of customers; that petitioner filed an application to register its mark "JEFFERY & LORD", which was opposed by respondent alleging likelihood of confusion between its mark, "E JEFFRIES" and petitioner's mark, "JEFFERY & LORD" [FN2]; that in the opposition respondent asserted ownership of Reg. No. 1,389,905; that petitioner filed no answer in the opposition proceeding but that both parties filed motions for summary judgment; that on January 17, 1991, the Board granted opposer's [respondent, here] motion for summary judgment and sustained the opposition on the grounds of confusing similarity between the two marks [FN3]; that respondent's registration was issued based on a Section 2(f) affidavit asserting distinctiveness by virtue of five years of substantially exclusive and continuous use in interstate commerce prior to the filing of the application; that petitioner does not believe respondent's use of the mark "E JEFFRIES" was substantially exclusive and continuous; that petitioner does not believe respondent's mark has acquired distinctiveness; that petitioner believes respondent's registration was obtained fraudulently; and that petitioner has been and will continue to be damaged by the registration.
An answer has not yet been filed by respondent.
This case now comes upon on respondent's motion, filed on August 14, 1991, to dismiss the petition for cancellation on the ground that petitioner has failed to state a claim upon which relief can be granted. In support thereof, respondent asserts that petitioner failed to assert its attack on the validity of Registration No. 1,389,905, pleaded by respondent as opposer in Opposition No. 81,960, as a compulsory counterclaim; that petitioner is therefore barred from now attacking the validity of the registration; and that petitioner has not alleged facts which would, if proved, entitle it to relief.
Petitioner has filed a brief in opposition to the motion. [FN4] In support thereof, petitioner asserts that it was not required to file its petition to cancel by way of a compulsory counterclaim in the opposition, as no answer had been filed; that it was not aware of the grounds for attacking the validity of the registration at the time that an answer could have been filed in the opposition; and that in the interests of justice the petition for cancellation should be allowed to proceed.
*2 Respondent's motion to dismiss the petition for cancellation relies on matters outside the pleadings, namely, the record in Opposition No. 81,960 and actions taken by the parties in litigating that proceeding. If, in connection with a motion to dismiss, matters outside the pleadings are submitted and not excluded by the Board, the Board ordinarily will treat the motion as a motion for summary judgment, under Fed.R.Civ.P. 56, and give the parties a reasonable opportunity to present all material pertinent to the motion. See Selva & Sons, Inc. v. Nina Footwear, Inc., 705 F.2d 1316, 217 USPQ 641 (Fed.Cir.1983). We believe that is the proper course to follow in this case, but we do not believe this case is ripe for summary judgment.
The basis for respondent's motion is Trademark Rule 2.106(b)(2)(1), which provides for compulsory counterclaims in opposition proceedings. The rule provides a means for complete litigation in one proceeding of all claims that parties may have with respect to each other so that a multiplicity of proceedings is avoided. The rule states, in pertinent part, that:
A defense attacking the validity of any one or more of the registrations pleaded in the opposition shall be a compulsory counterclaim if grounds for such counterclaim exist at the time when the answer is filed. If grounds for a counterclaim are known to the applicant when the answer to the opposition is filed, the counterclaim shall be pleaded with or as part of the answer. If grounds for a counterclaim are learned during the course of the opposition proceeding, the counterclaim shall be pleaded promptly after the grounds therefore are learned ...
In support of its motion, respondent offers evidence that, in a prior proceeding between these parties (Opposition No. 91,960), petitioner (applicant therein) moved for summary judgment on the ground that there was no likelihood of confusion between the parties' marks as a matter of law. Respondent (opposer therein) then cross-moved for summary judgment on the ground that there was a likelihood of confusion as a matter of law. Petitioner raised no challenge to respondent's pleaded registration, and summary judgment was entered in respondent's favor.
In response to respondent's motion herein, petitioner states that it learned of the information which serves as the basis for this cancellation proceeding after consideration of respondent's cross-motion for summary judgment. From the papers now before us, we find it probable that petitioner was aware, at the time the cross-motions for summary judgment were pending before the Board in Opposition No. 81,960, of the facts that support the claims it now makes in its petition for cancellation. Nonetheless, because, in making its argument, petitioner was opposing respondent's motion to dismiss and was not on notice that the Board would treat respondent's motion as one for summary judgment, we believe fairness demands that petitioner be given an opportunity to make a showing that there exists for trial a genuine issue as to whether, at the time the cross-motions for summary judgment were under consideration in Opposition 81,960, petitioner had knowledge of the facts that form the basis for the claims now asserted in the petition to cancel. Petitioner may, of course, in the alternative, file a cross-motion for partial summary judgment on the issue of whether its petition to cancel should be denied under the Board's compulsory counterclaim rule. Moreover, respondent will be given an opportunity to supplement the evidentiary showing in support of its motion.
*3 Although we will allow the parties to make additional evidence of record before we decide the pending motion, we want to clarify certain points of law which will be applied to the facts of this case. The filing of an answer is not a condition precedent to the operation of Trademark Rule 2.106. Rather, the rule requires that, if the grounds for a counterclaim are known when the answer is filed, those grounds be pleaded with or as part of the answer. Where the grounds are learned during the course of the proceeding, even during the pendency of a summary judgment motion and even where no answer has been filed, the counterclaim is to be promptly filed after the grounds therefor are learned. This makes sense, because a summary judgment motion potentially involves a determination of the merits of the case, that is, whether there is a genuine issue of material fact for trial and if not, whether the moving party is entitled to judgment as a matter of law. Having been confronted with such a motion, we believe it was incumbent upon petitioner, as defendant in the prior proceeding, to set forth any counterclaim or defense then known to petitioner which might serve to defeat the claim of respondent, as plaintiff in the prior proceeding.
We are aware that some courts have reached a different result where a party fails to assert a counterclaim in an action that is terminated as a result of a pretrial dismissal. In particular, those courts have ruled that a party who has moved successfully to dismiss an action for failure to state a claim under Fed.R.Civ.P. 12(b)(6) will not be barred from bringing his own action against the same opponent on a claim arising out of the transaction that formed the basis of the original action. See Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 1417 (1990). However, a motion to dismiss is a test solely of the legal sufficiency of the plaintiff's pleadings. No matters outside the pleadings are considered. A motion to dismiss does not involve a determination of the merits of the case as may a summary judgment motion. Thus, a party may not be obligated to assert a counterclaim in such a situation. However, for the reasons stated above, we believe that where a party confronted with a motion for summary judgment, knows of claims or defenses (including a defense in the nature of a counterclaim) which might serve to defeat the motion, it is obligated to assert them at that time, failing which it will be estopped to do so later.
We note also petitioner's reliance on the Board's decision in See's Candy Shops, Inc. v. Campbell Soup Co., 12 USPQ2d 1395 (TTAB 1989). There, the Board allowed a petition to cancel to go forward, even though the party filing the petition to cancel knew of the grounds for the petition at the time it filed its answer in a prior pending opposition proceeding and failed to raise the grounds for cancellation by way of a counterclaim. The Board, reading the Trademark Rules of Practice in conjunction with Fed.R.Civ.P. 13(f), found that a counterclaim not seasonably asserted could nonetheless be entertained where the failure to assert it was through oversight, inadvertence, or excusable neglect, or where justice so required. The facts in See's Candy that caused the Board to find that justice required its entertaining the petition to cancel were that (i) petitioner had filed its petition for cancellation within a mere two weeks of the date it filed its answer in the prior pending opposition and (ii) the opposition proceeding was still in the early stages of discovery. Neither of these facts is present in the case now before us.
*4 IT IS ORDERED: Petitioner is permitted thirty (30) days from the date of this order to supplement its response to respondent's motion, which motion is being treated by the Board as a motion for summary judgment, under Fed.R.Civ.P. 56, or to state that it does not wish to supplement its response of record. Respondent is permitted fifteen (15) days after service of petitioner's supplemental response (or statement that it does not wish to supplement its response) to supplement its motion for summary judgment. Proceedings remain otherwise suspended.
Members, Trademark Trial and Appeal Board
FN1. Registration No. 1,389,905, issued April 15, 1986 under Section 2(f).
FN2. Opposition No. 81,960.
FN3. Petitioner indicates that the Board's decision in Opposition No. 81,960 is being appealed. The decision of the Board was affirmed by the Court of Appeals for the Federal Circuit on October 17, 1991.
FN4. Petitioner's motion, filed on September 3, 1991, requesting an extension of time to respond to respondent's motion to dismiss, with respondent's consent, is granted. Petitioner's brief in opposition to respondent's motion to dismiss, filed on September 16, 1991, with a certificate of mailing dated September 13, 1991, is therefore accepted as timely filed.