IP Law Daily, TRADEMARK—E.D. La.: Pending TTAB proceeding did not give rise to declaratory judgment jurisdiction, (Sep 28, 2015)

By Jody Coultas, J.D.

The federal district court in New Orleans lacked subject matter jurisdiction to hear a Declaratory Judgment Act claim filed by SnoWizard, Inc. based on a lack of a justiciable case (SnoWizard, Inc. v. Snow Ball’s Chance, Ltd., September 25, 2015, Brown, N.). Should it later be determined a justiciable issue was presented, the court declined to decide the case pursuant to the Declaratory Judgment Act. The court also declined to exercise ancillary jurisdiction over SnoWizard’s claims for declaratory judgment.

Snow Ball’s Chance, Ltd. filed two petitions for the cancellation of SnoWizard’s “CAJUN RED HOT” and “WHITE CHOCOLATE & CHIPS” trademarks. SnoWizard now seeks a declaratory judgment that it continues to own valid and enforceable federally registered trademarks for the snowball flavors “CAJUN RED HOT” and “WHITE CHOCOLATE & CHIPS.”

In a separate case, a jury held that SnoWizard owned the “CAJUN RED HOT” and “WHITE CHOCOLATE & CHIPS” marks. The Federal Circuit affirmed the court’s verdict concerning SnoWizard’s ownership of the trademarks.

Subject matter jurisdiction. SnoWizard failed to show an actual case or controversy in its claims for declaratory judgment and therefore, the court lacked subject matter jurisdiction. SnoWizard asked the court to declare that Snow Ball’s Chance was barred by the doctrine of res judicata from attacking the validity of SnoWizard’s trademarks. The Declaratory Judgment Act requires an actual case or controversy. SnoWizard argued that there was a justiciable controversy because it has a res judicata defense in the U.S. Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) proceedings based upon a final judgment of the court. There was no “useful purpose to be achieved” in declaring once again that “CAJUN RED HOT” and “WHITE CHOCOLATE & CHIPS” were valid and enforceable federally registered trademarks. The filing of a claim before the TTAB did not automatically create a case or controversy that could be adjudicated in the district court.

Dismissal of declaratory action. Courts have identified seven nonexclusive factors for district courts to consider in determining whether to decide or dismiss a declaratory action: (1) whether there is a pending state action in which all of the matters in controversy may be fully litigated; (2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant; (3) whether the plaintiff engaged in forum shopping in bringing the suit; (4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exist; (5) whether the federal court is a convenient forum for the parties and witnesses; (6) whether retaining the lawsuit would serve the purposes of judicial economy; and (7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.

The court declined to decide the case pursuant to the Declaratory Judgment Act after weighing the seven factors outlined above. There was no pending state action, only the cancellation proceedings in the TTAB. A party may therefore challenge a trademark, even after it has been adjudicated to be valid by claiming a change in circumstances. The forum shopping factor also weighed in favor of dismissal, as SnowWizard sought some advantage by filing in this court. SnoWizard invoked res judicata as a basis to circumvent a claim of whether SnoWizard held a valid and enforceable trademark and its filing caused a stay of the TTAB proceedings. Furthermore, the inequities of permitting SnoWizard to delay an actual adjudication of its trademarks, if the TTAB were to find such an adjudication to be proper, weighed in favor of dismissal. Finally, judicial economy weighed in favor of dismissal.

This suit was filed in response to proceedings filed before the TTAB, which did not weigh in favor of dismissal. Also, the fact that each of the parties resided and conducted business in New Orleans weighed in favor of the court hearing the case. The seventh factor, whether the court was asked to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties was pending, was not applicable.

Ancillary jurisdiction. SnoWizard did not met its burden of establishing that the court had ancillary jurisdiction over its claims by a showing that the proceedings before the TTAB would “effectively nullify” the court’s prior judgments, according to the court. A district court can exercise ancillary jurisdiction in order “to secure or preserve the fruits and advantages of a judgment or decree rendered” by that court. However, this jurisdiction is limited to cases involving “attempts to execute, or to guarantee eventual executability of, a federal judgment. Snow Ball’s Chance sought to cancel two trademarks on the grounds that they are generic, merely descriptive, functional, and obtained by fraud. The Lanham Act allows for parties to petition for cancellation of trademarks due to a change in circumstances. Therefore, a judgment by the TTAB canceling the marks upon a finding that the registered marks had become generic, was functional, or obtained fraudulently would not “effectively nullify” the previous judgment.

The case is No. 15-1002.

Attorneys: Jack Edward Morris (Jack E. Morris, Attorney At Law) for SnoWizard, Inc. Mark Edw. Andrews (Andrews Arts & Sciences Law, LLC) for Snow Ball's Chance, Ltd.

Companies: SnoWizard, Inc.; Snow Ball’s Chance, Ltd.

Cases: Trademark LouisianaNews