IP Law Daily, TRADEMARK—Fed. Cir.: Preliminary injunction vacated in trademark dispute between e-cigarette manufacturer and Chinese competitor, (Aug 14, 2024)

By Saurabh Kashyap, B.A., LL.B., LL.M.

District court misinterpreted case law and unreasonably rejected defendant’s unlawful use defense.

The U.S. Court of Appeals for the Federal Circuit vacated a district court’s preliminary injunction in a trademark infringement lawsuit, which enjoined defendant Shenzhen Weiboli Technology Co. Ltd. and its U.S.-based distributors from marketing its ELFBAR branded e-cigarettes. Awarding costs against the plaintiff VPR Brands, LP and remanding the case, the appellate court ruled that the district court misinterpreted the unlawful use doctrine, which was central to Weiboli's defense (VPR Brands, LP v. Shenzhen Weiboli Technology Co. Ltd., No. 23-1544 (Fed. Cir. Aug. 12, 2024)).

Background. The plaintiff/appellee, VPR Brands, LP, manufactures and distributes electronic cigarette products and owns U.S. Trademark Registration No. 5,486,616 for the use of the mark ELF under International Class 34 for electronic cigarette lighters, electronic cigarettes, and smokeless cigarette vaporizer pipes. The defendants/ appellants include Shenzhen Weiboli Technology Co. Ltd., a Chinese manufacturer of e-cigarettes, and its U.S. distributors, which market Weiboli's e-cigarette products under the ELFBAR brand.

VPR filed this lawsuit against Weiboli and its distributors, alleging that the ELFBAR e-cigarettes infringed its ELF trademark, leading to consumer confusion and violating the Lanham Act. Following the filing of the lawsuit, VPR sought a preliminary injunction to stop Weiboli and its distributors from marketing the ELFBAR products during the pendency of the case.

After holding a two-day hearing on the motion, the district court granted the preliminary injunction in favor of VPR. The court concluded that VPR had demonstrated a substantial likelihood of success on the merits of its trademark infringement claim and that it would suffer irreparable harm without the injunction. In rejecting Weiboli's defense, the court held that the unlawful use doctrine did not apply, as the Eleventh Circuit had not definitively adopted this doctrine in trademark cases, and there was no enforcement action by the FDA against VPR's ELF-branded products.

Unlawful use doctrine. On appeal, Weiboli argued that the district court erred in rejecting the unlawful use doctrine. The unlawful use doctrine holds that for a trademark to be valid and enforceable, the use of the trademark in commerce must be lawful. Weiboli contended that VPR’s use of the ELF mark was unlawful under the Food Drug and Cosmetic Act (FDCA) because VPR had not obtained the required FDA authorization for its e-cigarette products.

The Federal Circuit reviewed the case, noting that the Eleventh Circuit, in FN Herstal SA v. Clyde Armory Inc., 838 F.3d 1071 (11th Cir. 2016), had recognized the potential applicability of the unlawful use doctrine in trademark infringement cases but had not adopted it due to evidentiary shortcomings in that case. The Eleventh Circuit in FN Herstal highlighted that for the unlawful use doctrine to apply, there must be clear and convincing evidence of a per se violation of a federal statute regulating the sale of goods, and the violation must be material.

The appellate court criticized the district court for failing to thoroughly evaluate the evidentiary basis of Weiboli's defense, including whether the statutory and regulatory requirements under the FDCA applied to VPR's products. The court also referenced the foundational Coahoma Chem. Co. v. Smith, 113 U.S.P.Q. 413 (1957), where the U.S. Patent and Trademark Office canceled trademarks used in violation of federal law, emphasizing that the doctrine's application should consider whether there is a nexus between trademark use and unlawful activity.

Given these considerations, the Federal Circuit vacated the preliminary injunction, awarded costs against VPR, and remanded the case, instructing the district court to reevaluate the unlawful use defense and reassess VPR’s motion for a preliminary injunction.

The Case is No. 23-1544.

Judge: Reyna, J.

Attorneys: Joel Benjamin Rothman (SRIPLaw, PA) for VPR Brands, LP. Eric Heyer (Thompson Hine LLP) for Shenzhen Weibo Technology Co. Ltd., YLSN Distributors LLC, D&A Distribution LLC, Unishow [USA], Inc., SV3 LLC, and Kingdom Vapor Inc.

Companies VPR Brands, LP; Shenzhen Weibo Technology Co. Ltd.; YLSN Distributors LLC; D&A Distribution LLC; Unishow (USA), Inc.; SV3 LLC; Kingdom Vapor Inc.; SAFA Goods LLC

Cases: Trademark FedCirNews FloridaNews GCNNews