IP Law Daily, TRADEMARK—D. Utah: Challenge to USPTO’s CARES Act powers rejected, (May 8, 2023)

By George Basharis, J.D.

A company sued for trademark infringement did not have standing to challenge the reinstatement of a cancelled trademark pursuant to emergency powers granted to the USPTO under the CARES Act.

A Utah federal district court has dismissed counterclaims by apparel company IBKUL Corp. in a trademark infringement suit filed by competing apparel manufacturer Alfwear, Inc. IKBUL claimed that Alfwear’s underlying mark had been cancelled and that the USPTO’s authority under the CARES Act to reinstate the mark had expired. However, the court found that IBKUL Corp. did not have standing to challenge the USPTO’s authority under either the CARES Act or the Administrative Procedure Act. Additionally, the court rejected claims that Alfwear’s trademark had been reinstated by fraudulent means or had otherwise been abandoned for nonuse (Alfwear, Inc. v. IBKUL Corp., May 5, 2023, Barlow, D.).

Alfwear is an outdoor apparel manufacturer that owns the U.S. trademark “KUHL,” which it uses as the name of a clothing brand. The company registered the mark in February 2011. In February 2020, the USPTO sent Alfwear’s counsel a courtesy notice stating that the KUHL registration was up for renewal. However, counsel failed to file a renewal application before the statutory deadline, and as a result, the USPTO cancelled Alfwear’s KUHL registration in August 2021.

In September 2021, Alfwear filed a petition for excusal, claiming that it had not received the courtesy renewal notice “as a result of COVID-19.” The USPTO asked for additional information as to how the pandemic affected Alfwear’s ability to file the renewal application. Alfwear responded by claiming that its counsel had contracted COVID-19 multiple times during the statutory period and could not access online files, emails, and the docket.

In April 2022, the USPTO reinstated the KUHL mark using the office’s emergency powers under the CARES Act to modify deadlines and excuse compliance if COVID-19 prevented a trademark owner from filing a document. However, the CARES Act expired in March 2022.

Meanwhile, Alfwear filed a trademark infringement lawsuit against IBKUL and opposed IBKUL’s application to register the stylized mark “IBKUL” for clothing and activewear. The Trademark Trial and Appeal Board denied registration of the proposed mark, citing a likelihood that consumers would confuse it with Alfwear’s registered KUHL trademark for outdoor clothing. IBKUL appealed the decision, and while the appeal was pending, Alfwear’s KUHL mark was cancelled.

As a result, the U.S. Court of Appeals for the Federal Circuit vacated the Board’s decision and remanded the case for reconsideration in light of the cancellation. Although the registration was later reinstated, the Board proceeding was stayed pending the outcome of Alfwear’s infringement lawsuit.

IBKUL asserted three counterclaims against Alfwear in the district court case. First, the company requested a declaratory judgment that the USPTO exceeded its authority under the CARES Act to reinstate the KUHL registration because the emergency authorization ended in March 2022, a month before the trademark was reinstated. Second, IBKUL sought to cancel the KUHL mark on the basis that it was renewed using fraudulent information and had been abandoned by Alfwear. Finally, IBKUL requested the cancellation of six related Alfwear marks, arguing that they too had been abandoned. Alfwear responded by moving to dismiss all three counterclaims.

Declaratory judgment. IBKUL argued that the USPTO lacked authority under the CARES Act to waive the deadline for Alfwear’s late-filed renewal application because the Act had expired before the reinstatement. It also challenged the office’s authority to reinstate the KUHL mark under the Administrative Procedures Act (APA). Alfwear countered that IBKUL lacked standing to challenge the Office’s decision to reinstate and failed to establish a valid APA claim. Additionally, Alfwear argued that the CARES Act did not create a private right of action.

The court found that IBKUL failed to establish how it was harmed by the USPTO’s late acceptance of Alfwear’s application, nor did it establish a causal connection between any injury to IBKUL and the Office’s decision. IBKUL also failed to allege any injury stemming from the Office's actions, making it difficult to offer redress even if the court found that the Office exceeded its authority under the CARES Act. Therefore, IBKUL lacked standing to challenge the USPTO’s decision.

Similarly, IBKUL failed to establish a claim under the APA because it did not demonstrate how it was aggrieved by the USPTO's actions. The court pointed out that the APA does not expand standing, and judicial review is limited to parties claiming to have been aggrieved by an adverse agency action.

Lastly, the court noted that the Declaratory Judgment Act requires an underlying private cause of action and an actual controversy. IBKUL failed to establish either, as the CARES Act did not provide a private right of action, and IBKUL’s assertion that the USPTO exceeded its statutory authority was deemed “bare” and did not create an actual controversy.

Cancellation. Alfwear contended that IBKUL did not establish that it made a material misrepresentation with the intent to deceive the USPTO. However, the court disagreed, stating that IBKUL plausibly alleged that Alfwear’s counsel’s statement in September 2021 was false and meant to deceive. The Office sent the courtesy notice to the same email address used by counsel to file 50 other documents later with the USPTO, which called into question counsel’s claim that he had not received the courtesy notice because of COVID. Nevertheless, the court found that the statement was not material.

According to the court, a material misrepresentation arises in the trademark context only if the registration would not have been issued if the truth were known to the USPTO. The courtesy notice explicitly stated that failure to receive a reminder did not excuse the mark owner from maintaining the registration. Moreover, the Office acknowledged Alfwear’s failure to file a timely renewal application but found that COVID-19 affected Alfwear’s ability to do so. The Office never indicated that it relied on Alfwear’s response to the courtesy notice to grant the renewal extension. Additionally, IBKUL’s allegations that Alfwear’s counsel filed other documents did not create an inference that he misled the Office regarding COVID-19’s impact on the KUHL mark renewal.

The court also rejected IBKUL’s claim that Alfwear had abandoned the KUHL mark and six related marks. IBKUL failed to allege facts about how long the mark lay dormant, when the nonuse took place, and whether Alfwear intended to abandon the mark. A prima facie case of abandonment requires a showing of three consecutive years of nonuse. Even if allegations that Alfwear’s website did not show trademark use were sufficient to allege nonuse for pleading purposes, IBKUL did not allege an intent not to resume trademark use, which is a required element for abandonment based on nonuse.

The Case is No. 2:21-cv-00698-DBB-JCB.

Attorneys: Trent Baker (Baker IP PLLC) for Alfwear, Inc. H. Dickson Burton (Traskbritt PC) for Ibkul Corp.

Companies: Alfwear, Inc.; Ibkul Corp.

Cases: Covid19 Trademark UtahNews GCNNews USPTO