Two weeks ago the Trademark Trial and Appeal Board (the “Board”) issued a precedential decision involving issues of parent and subsidiary trademark use and abandonment. See Noble Home Furnishings, LLC v. Floorco Enterprises, LLC, Cancellation No. 92057394 (April 4, 2016) [precedential]. Noble Home Furnishings, LLC (the “Petitioner”) filed a petition to cancel the word mark NOBLE HOUSE for furniture owned by Floorco Enterprises, LLC (the “Respondent”). The grounds for cancellation were abandonment and fraud. Petitioner’s application was attempting to register the mark NOBLE HOUSE HOME FURNISHINGS for various services including online retail store services featuring furniture and home furnishings. Respondent did not contest Petitioner’s standing in the matter. Petitioner asserted that it filed a trademark application that was rejected on likelihood of confusion grounds due to Respondent’s registration.
The first ground asserted in the petition to cancel was abandonment. To prove this claim before the Board a party must show that there is non-use of the trademark and that there is no intent to resume use. If a plaintiff or petitioner can show three years of consecutive non-use then it has satisfied its burden of proof to show a prima facie case of abandonment. Then, it is up to the registrant or respondent to rebut this presumption by showing use of the trademark or intent to resume use of the mark.
The Respondent filed a Statement of Use on August 18, 2011. The last documented sale under the mark NOBLE HOUSE was on July 14, 2009. Since that date, the Respondent claimed it periodically marketed the products, but there were no further sales. Although, one would think that the period of nonuse would commence after the last sale date, the Board held that the three-year period would start running from the date the Respondent filed its Statement of Use. The rationale for this finding is that an intent-to-use applicant is under no requirement to use its trademark until it files the Statement of Use. To prove use in commerce for goods under Section 45 of the Trademark Act, the mark must be placed on the product and the goods sold or transported in commerce. Typically, there can be no use in commerce unless there is either sales or transportation of the goods even if there is marketing and promotion.
However, there is an exception to the general rule, if there is non-use due to lack of demand and the trademark owner continues marketing efforts, use may be shown. The problem with the case at bar is that the Respondent’s parent company, Furnco International Inc. conducted the advertising and marketing with only one exception where the Respondent promoted the goods. Furnco International Inc. was represented as the source of the goods not the respondent. In addition, the parent company controlled the nature and quality of the goods and not the respondent. The Board had to decide whether the use of the trademark by the parent entity inured to the benefit of the wholly owned subsidiary when the parent entity controlled the nature and quality of the goods.
Here, the parent entity authorized its subsidiary the Respondent to be the owner of the subject trademark NOBLE HOUSE. The Respondent is viewed as a distinct legal entity from the parent company, even though Furnco International Inc. is the owner of the Respondent. Although Section 5 of the Trademark Act allows a party to rely on use by a “related company”, Furnco International Inc. does not meet the definition of a related company under the Trademark Act. See our firm page entitled, Trademark Use By Trademark Applicant’s Related Company, for more details on this subject matter.
The definition of a related company is an entity whose use of the mark is controlled by the registrant of the mark, meaning the registrant is controlling the nature and quality of the goods. The parent entity’s marketing efforts (Furnco) cannot be deemed use by the Respondent for the purpose of demonstrating that the Respondent intended to resume use of the mark. Therefore, the Board determined that the Respondent did in fact, abandon the mark with no intent to resume use. If you have questions concerning trademark use involving a parent and wholly-owned subsidiary, please do not hesitate to contact our office for a courtesy consultation.