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TM Application Stating Mark First Used In 2010 Doesn't Establish Use in Commerce

Friday, November 22, 2013
By Tamlin H. Bason

Nov. 20 --A statement made in a now-withdrawn trademark application in which the subject mark was stated to have first been used in commerce in 2010 does not conclusively demonstrate that the mark was, in fact, used in commerce, the U.S. District Court for the Eastern District of Pennsylvania ruled Nov. 12 (Southco, Inc. v. Fivetech Tech. Inc., E.D. Pa., No. 2:10-cv-01060-MAM, 11/12/13).

The court dismissed the plaintiff's trademark infringement claim after determining that none of the defendant's allegedly infringing activities constituted a use of the subject mark in commerce. One of the proffered uses rested on statements that the defendant's attorney made in the withdrawn trademark application. The court determined that statements contained in the application, on their own, did not demonstrate that the defendant's mark was ever used in commerce.

Furthermore, the court said that sales of the defendant's product to consumers in Asia also do not constitute use in commerce within the meaning of the Lanham Act. Those foreign sales, the plaintiff argued, resulted in domestic harm since the plaintiff was unable to sell its product to the consumers who had purchased the defendant's goods. The court, however, said that a mere claim of lost sales abroad, without more, is not sufficient to support extraterritorial application of the Lanham Act

Patent, Trademark Claims Filed Over Fastener Screws

Southco Inc. is a Pennsylvania based manufacturer of fasteners, latches, hinges, handles and pulls. Fivetech Technology Inc. is a Taiwan-based competitor of Southco.

Southco filed lawsuit against Fivetech claiming that a fastener being sold by Fivetech infringed patents and trademarks that Southco owned with respect to panel screws, which are also called captive screws or fastener screws.

Specifically, Southco claimed that Fivetech's product infringed three patents (U.S. Patent Nos. 5,851,095; 6,280,131; 6,468,012) and two trademarks (U.S. Trademark Nos. 2,478,685; 3,678,153).

Fivetech was granted summary judgment with respect to all the patent claims. Fivetech then moved to dismiss the trademark infringement claim. That claim is based on allegations that a “Five Pentagon” mark that Fivetech uses on its fastener screws infringes Southco's registered segmented circle mark.

Fivetech argued that it has never used its allegedly infringing mark in commerce in a manner proscribed by the Lanham Act.

Four Allegations of Use in Commerce

Southco proffered four arguments that it claimed constitute use in commerce.

The first instance of use in commerce, Southco argued, was in 2009 when Fivetech sold 500 fasteners to a Pennsylvania company, Specialty Resources Inc.

Next Southco pointed to the 2010 trademark application in which Fivetech's attorney claimed in the application that the five pentagon mark bad been used in commerce since March 2010.

Fivetech has also advertised the five pentagon mark in catalogs in the United States and Southco argued that such advertisements constituted use in commerce.

Lastly, Southco argued that Fivetech's sale of fasteners that incorporated the allegedly infringing design to customers in Taiwan and China constituted use in commerce, and justified extraterritorial application of the Lanham Act.

The court considered, and rejected, all four of Southco's instances of use in commerce.

The fasteners sold to Specialty Resources did not have the pentagon mark, and therefore that sale did not demonstrate use in commerce of the mark, the court said.

TM Application Not Enough to Show Use in Commerce

Turning to the trademark application, the court noted that the application was withdrawn and abandoned three months after it was filed. Furthermore, the application was filed without the knowledge of Fivetech's president who has consistently maintained that it does not and has not used the pentagon mark in commerce in the United States.

“[N]o reasonable jury could find that Fivetech's Five Pentagon mark was used in United States commerce solely on the basis of the trademark application,” Judge Mary A. McLaughlin said.

As to the advertising, “Absent unusual circumstances, advertising alone is not enough to constitute 'use in commerce' because the statute requires that the good itself be sold or transported in commerce,” the court said. Southco has not demonstrated any unusual circumstances and so Fivetech's advertisements do not constitute use in commerce, the court ruled.

Asian Sales Do Not Support Application of Lanham Act

Finally, the court addressed Southco's argument that Fivetech's sale of the allegedly infringing mark in Asia constituted use in commerce. The argument was that the Asian customers that purchased the product then included the screws in computer servers that were sold to Hewlett-Packard, which in turn sold the servers in the United States.

In order for extraterritorial application of the Lanham Act, a plaintiff must demonstrate that the defendant's foreign activity had a substantial effect on United States commerce.

In this case, “[T]here is no evidence that the presence of Fivetech fasteners in servers confuses purchasers of the HP servers or cause consumers to look less favorably upon Southco's Segmented Circle mark,” the court said.

“An American company's lost sales abroad because of trademark infringement can be considered when in the substantial effect analysis,” the court noted. But in such cases a plaintiff must demonstrate “additional effects in the United States beyond the diverted sales,” the court said. Southco proffered no additional effects beyond the allegedly diverted sales, leading the court to conclude that it was not appropriate to apply the Lanham Act to Fivetech's conduct. The court thus dismissed the trademark claim.

Southco was represented by Alex R. Sluzas of Paul & Paul, Philadelphia. Fivetech was represented by Michael C. Falk of Reed Smith LLP, Philadelphia.


Text is available at http://www.bloomberglaw.com/public/document/SOUTHCO_INC_v_FIVETECH_TECHNOLOGY_INC_Docket_No_210cv01060_ED_Pa_.

To contact the reporter on this story: Tamlin Bason in Washington at tbason@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

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