IP Law Daily, TRADEMARK—E.D. Pa.: Cancelation of cleaning supplier’s marks based on unlawful use denied, (May 24, 2023)

By Kevin M. Finson, J.D.

Counterclaims for cancelation based on unlawful use failed because the court found no textual support in the Lanham Act for a lawfulness requirement.

In a trademark infringement suit brought by a seller of cleaning products against a competitor, the seller was entitled to summary judgment on the competitor’s counterclaims for tortious interference and cancellation of registered marks based on unlawful use, the U.S. District Court in Philadelphia has held. The court declined to cancel the plaintiff’s marks use on the ground that they contained banned hazardous products because the Lanham Act does not impose a general lawful use requirement for trademark protection (Pac-West Distributing NV LLC v. AFAB Industrial Services, Inc., May 19, 2023, Pratter, G.).

Pac-West Distributing NV, LLC (Pac-West) was a seller of cleaning products under the IRON HORSE, RUSH ORIGINAL, and GOLD RUSH marks, among others. In 2016, Pac-West settled a trademark and trade dress infringement dispute with a competitor, AFAB Industrial Services, Inc. and Everett Farr, III (collectively, AFAB). In 2019, Pac-West brought a new suit against AFAB alleging breach of the settlement agreement and new claims of trademark and trade dress infringement, along with a claim for tortious interference with prospective contractual relationships. The court twice rejected AFAB’s motion to dismiss the suit as barred by the settlement agreement. AFAB counterclaimed for tortious interference with contracts and cancellation of Pac-West’s marks. Pac-West moved for summary judgment against the counterclaims.

Tortious interference. Pac-West argued that AFAB failed to identify the particular contractual relations interfered with, specify the wrongful conduct alleged, or provide evidence of damages. The only evidence AFAB put forward was the deposition of an employee of one of AFAB’s distributors, who testified that communications from Pac-West “damaged” her company’s relationship with AFAB but that they did not cease doing business and did not explain the nature of the damage. The court held that no reasonable jury could calculate damages from this evidence and granted the motion for summary judgment.

Lawful use in commerce. AFAB sought cancellation of the marks on the ground that Pac-West’s products were not “used in commerce” under the Lanham Act because they contained butyl nitrite and volatile alkyl nitrites which were considered banned hazardous products under 15 U.S.C. §§ 2057a and 2057b. There is an exception for products that are manufactured or sold "for any commercial purpose," AFAB argued that the products were intended for unlawful use as inhalants.

The court noted that the Trademark Trial and Appeal Board and several courts had adopted the “unlawful use doctrine,” under which goods which could not be sold legally did not meet the “use in commerce” requirement of the Lanham Act. The court noted that the question before it was whether the court may cancel a trademark already registered by the USPTO based on the court's own determination that the mark has been used in a way that violates federal law.

The court declined to adopt the unlawful use doctrine because it found no basis for it in the text of the Lanham Act. The circumstances of this case also presented a “more fundamental problem with the proposed invocation of the unlawful use doctrine” because the cited statutes were enforceable by the did not include a right of private action. The court granted Pac-West’s motion for summary judgment on the claims which relied on it.

Fraud on the PTO. AFAB also sought cancellation of the marks on the ground that they had been obtained by fraud on the PTO; specifically, that Pac-West had deceived the trademark office by stating that its goods were intended for lawful use as cleaning products and not unlawful use as inhalants.

Reviewing the statements, the court found that the actual statements were only that the products complied with the law, including by placing warnings on the products indicating they should not be consumed or inhaled. The court found that no reasonable jury could find the required clear and convincing evidence of fraud from these statements and granted the motion for summary judgment.

The Case is No. 19-3584.

Attorneys: Robert R. Axenfeld (Axenfeld Law Group LLC) for Pac-West Distributing NV LLC. Barry A. Solodky (Saxton & Stump LLC) for AFAB Industrial Services, Inc.

Companies: Pac-West Distributing NV LLC; AFAB Industrial Services, Inc.

Cases: Trademark PennsylvaniaNews