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Author: Dennis S. Prahl | Practices: , | Tags: , , , ,

CHURCH’S APPEAL TO A HIGHER AUTHORITY PREVAILS OVER ADIDAS

bigstock-Clouds-2_2_2017-4879708-72dpismA previous update reported that, in Adidas AG v Christian Faith Fellowship Church (Cancellation No. 92053314), the Trademark Trial and Appeal Board (TTAB) had cancelled two federal trademark registrations for ADD A ZERO, owned by the Christian Faith Fellowship Church, on the grounds that the Illinois church’s sale of just a few apparel items at its bookstore to out-of-state parishioners did not meet the interstate ‘use in commerce’ requirements within the meaning of Section 1(a) of the Lanham Act. Specifically, the TTAB noted that although at least one of the purchasers of items bearing the ADD A ZERO mark was a Wisconsin resident, sales and transfers of goods were made in the church bookstore in Illinois and were thus de minimis and insufficient to constitute interstate commerce.

The church appealed the TTAB’s decision to the US Court of Appeals for the Federal Circuit which reversed it. The court specifically considered whether an intrastate sale to an out-of-state resident satisfied the ‘use in commerce’ requirement under the Lanham Act (ie, whether such a sale could be regulated by Congress under the commerce clause).

The court focused on the ‘substantial effects’ doctrine laid out by the US Supreme Court (SCOTUS) in Wickard v Filburn, 317 US 111 (1942) which stated that even a local activity may be regulated by Congress if it exerts a substantial economic effect on interstate commerce. The court also noted that under the aggregation approach to the ‘substantial effects’ doctrine laid out by the SCOTUS in Taylor, 136 S Ct at 2077–78, a defendant need not prove that its conduct in and of itself affected or threatened interstate commerce. The defendant needs to prove only that its conduct fell within a category of conduct that, in the aggregate, had the requisite effect. Finally, the court noted that its past Lanham Act decisions have supported a broader scope of interpretation of the Congress’s Commerce Clause powers.

Applying the aggregation approach to the ‘substantial effects’ doctrine to the facts of this case, the Federal Circuit ruled that an intrastate sale to an out-of-state resident is a transaction which, when taken in the aggregate, would cause a substantial effect on interstate commerce and be capable of being regulated by the Congress. The Federal Circuit rejected the TTAB’s de minimis rationale because it conflicted with SCOTUS’s decision in Gonzales v Raich, 545 US 1, 6–8 (2005), which ruled that “the de minimis character of individual instances” arising under a valid statute enacted under the Commerce Clause “is of no consequence”. The Federal Circuit also found the TTAB’s de minimis rationale at odds with its own Lanham Act-specific decisions in Larry Harmon Pictures Corp v Williams Rest Corp, 929 F.2d 662, 18 USPQ2d 1292 (Fed Cir 1991) and In re Silenus Wines Inc, 557 F.2d 806, 194 USPQ 261 (CCPA 1977).

Importantly, the Federal Circuit also clarified that the transaction in question falls comfortably within the bounds of Congress’s power under the Commerce Clause and that it does not define the outer contours of such power.

As a result of this decision, future trademark applicants and current registrants with only small amounts of interactions with customers in states other than their own, or the potential for goods to cross state borders, can breathe more easily as the more generous standard of analysis of the quantity and types of activity that are considered interstate commerce for trademark registration purposes seems to have been restored.

The article was originally published on January 12th, 2017 in the World Trademark Review (WTR).

 

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