IP Law Daily, TRADEMARK—D. Ariz.: Cancellation counterclaims brought by seller of odor-blocking bags pared, (Nov 18, 2019)

By Peter Reap, J.D., LL.M.

Counterclaims based on the genericness of several SKUNK marks were tossed, but those based on fraud, descriptiveness, and abandonment would proceed.

Counterclaims brought by Skunk, Inc., against BBK Tobacco and Foods, LLP, seeking cancellation of five of BBK’s registered trademarks for SKUNK or SKUNK BRAND for electronic cigarettes and smoking paraphernalia, mostly survived a motion to dismiss brought by BBK, the federal district court in Phoenix has decided. The court partially dismissed, with one exception, because it did not allege that the word "skunk" itself identifies smoking paraphernalia, but granted Skunk leave to amend these counterclaims. Skunk’s other counterclaims for cancellation, based on fraudulent procurement, the alleged merely descriptive nature of the marks, and abandonment, adequately stated claims for relief and would proceed (BBK Tobacco & Foods LLP v. Skunk Inc., November 15, 2019, Teilborg, J.).

BBK designs and sells various smoking-related products and accessories. It holds five trademarks, registered with the USPTO, for the marks SKUNK or SKUNK BRAND for these products, registration numbers: 2435666 (Reg. No. ‘666), 4436677 (Reg. No. ‘677), 4569712 (Reg. No. ‘712), 5344902 (Reg. No. ‘902), and 5344903 (Reg. No. ‘903). BBK filed suit, alleging that Skunk, a marketer of various smell-proof bags, is infringing BBK’s rights in each of these marks "by using the Skunk name in promoting, advertising, distributing, selling, and offering to sell [its] ‘smell proof’ bag products." In a prior ruling, the court determined that BBK plausibly alleged trademark infringement and related claims.

Skunk responded to the lawsuit with counterclaims seeking cancellation of BBK’s registrations. As relevant here, Skunk alleged that: (1) Reg. No. ‘666 should be cancelled for fraudulent procurement; (2) Reg. Nos. ‘712, ‘902, and ‘903 should be cancelled for being merely descriptive; (3) all the registrations should be cancelled for genericness; and (4) Reg. No. ‘666 should be cancelled for abandonment. BBK’s motion to dismiss these counterclaims was before the court.

Fraudulent procurement. BBK first argued that Skunk’s counterclaim for cancellation based on fraudulent procurement must be dismissed on the basis that Skunk only "identified the alleged fraud of others, but not [BBK]." The court disagreed. 15 U.S.C. § 1064(3) provides that an aggrieved party may "petition to cancel a registration of a mark . . . [a]t any time if . . . its registration was obtained fraudulently." 15 U.S.C. § 1064(3). Because the statute broadly speaks of "registration[s] . . . obtained fraudulently," without reference to the registration’s current owner, its plain language authorizes cancellation of a registration so long as the actor who first obtained the registration did so fraudulently. To read the statute as limiting fraudulent procurement claims to only those situations where the registration’s current owner committed fraud, would require reading into the statute the words "by the current owner." The court refused to do so and refused to dismiss Skunk’s counterclaim for cancellation based on fraudulent procurement on this ground.

BBK further argued that Skunk pleaded insufficient facts to state a counterclaim for cancellation based on fraudulent procurement because: (1) allegations made "on information and belief" do not satisfy Rule 9(b)’s heightened pleading requirements and (2) Skunk’s counterclaim failed to sufficiently allege which goods were out-of-use when the representations were made to the USPTO or "an actual false representation of fact." To the contrary, Skunk complied with the requirements of Rule 8(a)(2) and Rule 9(b). Although many of its allegations do begin with "on information and belief," they still sufficiently explain the "who, what, when, where, and how" of the alleged fraud, and why it was false. Further, although BBK was correct that Skunk did not specify exactly how many of the goods were out of use at the time of each representation to the USPTO, Rule 9(b) does not require mathematical perfection, the court observed. BBK’s argument that Skunk was required to specify how many of the goods were out of use in order to comply with Rule 9(b) was rejected.

Genericness. BBK also argued that all of Skunk’s counterclaims for cancellation based on genericness must be dismissed, contending that Skunk has "not allege[d] that the term ‘skunk’ is the generic term for" any of the goods listed in BBK’s registrations. To state a claim for genericness requires alleging that the putative mark, standing on its own, is a generic name for the goods or services listed in the registration or application, the court noted.

As relevant here, any claim of genericness against BBK’s registrations must be premised on an allegation that either "skunk" or "skunk brand" are themselves generic words for the various items of smoking paraphernalia listed in the registrations (cigarette rolling papers, cigarette tubes, electronic cigarettes, etc.). But, with one exception, Skunk’s counterclaims stopped short of making any such allegations, the court determined. Instead of claiming that the words "skunk" or "skunk brand" themselves refer to smoking paraphernalia or a subset of smoking paraphernalia, Skunk alleged that the words mean cannabis and only take on this latter meaning when affixed to the particular item of paraphernalia. Thus, Skunk failed to allege that the words "skunk" or "skunk brand" themselves are generic names for the products listed in BBK’s registrations and, consequently, failed to adequately plead its genericness counterclaims. The one exception was that Skunk alleged that "skunk" is a generic term for cannabis and, thus, that the term "skunk" identifies a subcategory of herbs for smoking—cannabis. Because these allegations were based on the meaning of the word "skunk" itself, they properly stated a claim for cancellation based on genericness. Thus, the court only partially dismissed Skunk’s counterclaims for cancellation based on genericness.

Descriptiveness. Skunk’s counterclaims for cancellation of Reg. Nos. ‘712, ‘902, and ‘903 for mere descriptiveness alleged that because the term "skunk," when used in connection with smoking paraphernalia, was merely descriptive because it "describes a quality, characteristic, function, feature, purpose, or use of the specified goods … the ability to use the product with cannabis" and had no secondary meaning.

BBK first argued that Reg. No. ‘903 is incontestable as to "cigarette rolling papers" because it is an iteration of Reg. No. ‘666, which is incontestable under 15 U.S.C. § 1115(b). The court rejected this argument, noting that even an incontestable mark may be cancelled at any time if it was obtained fraudulently.

Next, BBK contended that Skunk failed to state plausible counterclaims for cancellation based on descriptiveness because the connection Skunk drew between the marks and the goods necessarily requires the exercise of imagination, rendering them "at least, suggestive marks." The court disagreed. Skunk sufficiently alleged its counterclaims for cancellation based on descriptiveness because it alleged that (1) "skunk" is a generic/slang term for cannabis; (2) the goods listed in Reg. Nos. ‘712, ‘902, and ‘903 are employed frequently by cannabis users; and (3) when such goods are labeled with the term "skunk," the relevant public would understand that the goods’ purpose is use with cannabis. Assuming the truth of these allegations, they sufficiently stated counterclaims for cancellation based on descriptiveness because the purchasing public could plausibly perceive "skunk" to describe the purpose or utility of BBK’s smoking paraphernalia. BBK’s other arguments for dismissal of these counterclaims were without merit.

Abandonment. BBK argued for dismissal of the counterclaims based on abandonment only to the extent Skunk sought full cancellation for abandonment of only some of the goods listed in the registration, and now asked the court to make Skunk amend its counterclaim to clarify the relief sought. Accordingly, the court denied the motion to dismiss the counterclaims based on abandonment but ordered Skunk to amend this counterclaim for purposes of clarification.

This case is No. 2:18-cv-02332-JAT.

Attorneys: Casandra Carin Markoff (Dickinson Wright PLLC) for BBK Tobacco & Foods LLP. Majed Dakak (Kesselman Brantly Stockinger LLP) for Skunk Inc. and Vatra Inc.

Companies: Skunk Inc.; Vatra Inc.

Cases: Trademark ArizonaNews