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Federal Circuit Holds One Sale Satisfies “Use In Commerce” Rule

The United States Court of Appeals, Federal Circuit issued a ruling on November 14, 2016 that encouraged small business owners all over the country. This was a David and Goliath battle that started in 2009. The Christian Faith Fellowship Church (the “Church” or “Appellant”) takes on Goliath, Adidas AG, the apparel giant (“Adidas” or the “Appellee”). The Church started selling apparel and caps with the mark ADD A ZERO in January 2005 as a campaign to encourage fundraising for the church by increasing the contribution of the donor by adding one zero. In February 2005, the Church made one sale of two caps to an out-of-state resident bearing the mark ADD A ZERO. One month later, the Appellant filed for federal trademark registration with the United States Patent & Trademark Office (“USPTO”). Approximately four years later, Adidas filed a trademark application for the mark ADIZERO for clothing.

The USPTO refused Adidas’ application based on likelihood of confusion grounds citing the Church’s mark ADD A ZERO as a conflict. Adidas filed a petition to cancel with the Trademark Trial and Appeal Board (the “Board”) based on various grounds, one of which was failure to use the mark in commerce prior to filing the trademark application. The Board found in Adidas’ favor holding the one sale made by the Church was de minimus and thus not sufficient to satisfy the “use in commerce” requirement. The Church filed this appeal.

The Board further held that the sale for $38.34 did not effect interstate commerce. The Federal Circuit reversed the Board’s decision, holding that it was in error for the Board to rely on a precedent that required a trademark applicant to engage in commercial activity beyond the Commerce Clause’s threshold. The Lanham Act defines commerce as all activity lawfully regulated by Congress. The Federal Circuit held that Congress did have power to regulate the out-of-state sale of the two caps made by the Church. For a basic understanding of use in commerce, see our webpage entitled, For The Purposes Of Trademark Law What Is Use In Commerce.

The sale was an intrastate sale made to an out-of-state resident. It is well settled precedent that Congress’ power under the Commerce Clause is broad. The Federal Circuit relied on Wickard v. Filburn, 317 U.S. 111 (1942), where the Supreme Court interpreted the Commerce Clause to give Congress the power to regulate activity that has a substantial effect on interstate commerce. This principle was broadened in subsequent cases. Cases following Wickard held that all that is needed to satisfy the commerce clause standard is proof that the activity falls within a category of conduct that in the aggregate has the “requisite” effect on commerce and not a substantial effect.

In the past, this Court has rejected the concept that an increased threshold level of interstate activity is required before a single location restaurant can file for federal trademark protection. The Board concluded with two important findings: (1) the Church did not have to present evidence that the sale of the two caps had a specific effect on interstate commerce; the sale alone was sufficient; and (2) the church did not have to prove that the hats were going to be traveling outside of the state or across state lines. In Larry Harmon Pictures Corp. v. Williams Rest. Corp., 929 F.2d 662, 664 (Fed. Cir. 1991), the Federal Circuit made it clear that Congress’ powers were broad when enforcing the Commerce Clause and that it does not make a difference if the effect on commerce is substantial or minimal.

In Harmon, the Court refused to adopt a de minimus test for the use in commerce requirement. The Federal Circuit held that the Board erred when relying on In re Cook, United, Inc., 188 USPQ 284 (TTAB 1975), and In re The Bagel Factory, Inc. 183 USPQ 553 (TTAB 1974), for the proposition that an intrastate sale of goods can never be a sale in commerce without there being something more, such as moving the goods across state lines. The Court reversed the Board’s cancellation of the Church’s mark because the Federal Circuit found use of the mark in commerce, but remanded the matter for consideration on the other grounds stated in the Petition to Cancel. If you have questions regarding trademark use in commerce, please contact our office for a courtesy consultation