Federal Circuit Contradicts Itself in Playdom Service Mark Ruling

Author: Jon Siderits, Associate Member, University of Cincinnati Law Review

On March 2, 2015, the United States Court of Appeals for the Federal Circuit affirmed the Trademark Trial and Appeal Board’s (TTAB) decision to cancel David Couture’s registration on the mark PLAYDOM.[1] The Federal Circuit found that Couture, who applied to register the mark on May 30, 2008, failed to sufficiently use the mark in commerce to qualify for a trademark registration.[2] The decision is controversial due to the Federal Circuit’s failure to follow established precedent regarding what constitutes “use” in commerce and its creation of a new distinction between the “use” required for service marks and marks for goods. The decision ignored the Federal Circuit’s own guidance from its previous encounter with the issue, which supported a ruling in favor of Couture, and instead concluded that the “actual provision” of services is required before a service mark may be registered.[3]

Trademarks and the “Use” Requirement

Federal trademark registrations are valuable assets that allow businesses to protect their brands and overall reputation. Businesses are not obligated to register their marks with the Patent and Trademark Office; however, a trademark registration provides important presumptions of validity, ownership, and the mark holder’s exclusive right to use the mark in commerce with the specified goods and services. These presumptions can play a significant role in the trademark holder’s ability to enforce its rights in any action for infringement on its mark.[4]

Under the Lanham Act, which governs the federal registration of trademarks, a mark must be “used in commerce” before it can be registered.[5] Service marks are used in connection with a service, while trademarks are used in connection with a product. In order to be used in commerce, a service mark must be “used or displayed in the sale or advertising of services and . . . the services [must be] rendered in commerce.”[6] Moreover, the term “use in commerce” means “the bona fide use of a mark in the ordinary course of trade, and not [a use] made merely to reserve a right in a mark.”[7] These definitions prevent disingenuous claims of trademark protection by parties that fail to truly use their mark.

In Aycock Engineering, Inc. v. Airflite, Inc., the Federal Circuit explored the use requirement for service marks in great detail.[8] In Aycock, the court emphasized that “mere preparations” to begin use of a mark are not sufficient.[9] Quoting a previous decision by the TTAB, the court stated that “[a]t the very least, in order for an applicant to meet the use requirement, there must be an open and notorious public offering of the services to those for whom the services are intended.”[10] The court concluded that advertising alone is insufficient to establish use, unless it “relates to an existing service which has already been offered to the public.”[11] Therefore, in assessing the validity of the registration, the court examined whether the registrant “ever gave an intended customer the opportunity to use his . . . service.” In other words, the court must determine whether the purported mark holder “made an open and notorious rendering, or offering, of his services to the public.”[12]

Couture v. Playdom

David Couture filed his application for registration of the PLAYDOM mark on May 30, 2008.[13] In his application, Couture submitted a screenshot of his website, which offered entertainment services.[14] Specifically, the website stated: “[w]elcome to PlaydomInc.com. We are proud to offer writing and production services for motion picture film, television, and new media. Please feel free to contact us if you are interested: playdominc@gmail.com.”[15] No services were provided until March 2010.[16] During the interim, a game developing business named Playdom Inc. (acquired by Walt Disney Co. in 2010) filed an application to register its identical “Playdom” mark. The application was rejected due to Couture’s mark.[17] Following the rejection, Playdom Inc. filed a petition to cancel Couture’s registration, arguing that it was void ab initio because Couture had not satisfied the use requirement.[18] The TTAB agreed, finding that Couture “had not rendered his services as of the filing date of his application . . . [but had] merely posted a website advertising his readiness, willingness and ability to render said services.”[19]

Couture appealed to the Federal Circuit, which stated that it had “not previously had occasion to directly address whether the offering of a service, without the actual provision of a service, is sufficient to constitute use in commerce.”[20] The court referenced its decision in Aycock, including its comment that “[a]t the very least . . . there must be an open and notorious public offering of the services.”[21] The court then stated that it “did not suggest in Aycock that an open and notorious public offering alone is sufficient to establish use in commerce.”[22] Rather, the court stated that the statute is clear “on its face” that a service mark is only used in commerce “when both (1) it is used or displayed in the sale or advertising of services and (2) the services are rendered.”[23] The court, relying on other circuit court decisions, the TTAB, and a well-respected trademarks treatise as support, concluded that the statute requires the “actual provision” of services.[24] Because Couture did not provide services until 2010, long after he had filed his application, the court found that the TTAB’s cancellation of his registration was appropriate.[25]

A Critique of Playdom

In Playdom, the Federal Circuit disingenuously treated the issue of the use requirement for service marks as one of first impression, and then proceeded to contradict its own statements from Aycock. In Aycock, the Federal Circuit not only “suggested” that an open and notorious public offering alone is sufficient to establish use in commerce, but explicitly stated that such an offering is required “[a]t the very least.”[26] By its plain meaning, that seems to strongly suggest that such an offering is the minimum threshold requirement.

“Rendered” = “Offering”

The Playdom court acknowledged that the statute requires that services must be rendered, but it failed to recognize that the Aycock court equated “rendering” and “offering.” In assessing whether the registrant sufficiently rendered his service, the Aycock court asked whether the registrant “made an open and notorious rendering, or offering, of his service.”[27] This language suggests that, for purposes of registration, “offering” and “rendering” should be treated as one and the same.

The Aycock court also discussed a number of the registrant’s “attempts to build the service’s infrastructure, which, when completed, could then be offered to the public (and thus rendered in commerce).”[28] At a minimum, Aycock proposed that offering a service to the public constitutes rendering the service, so long as the service is ready to be performed. The concern in Aycock was over registrants attempting to use mere preparation to satisfy the use requirement, and so that decision was decided adversely to the registrant because of his lack of readiness to perform the service. However, Couture “openly and notoriously” offered services which he was ready to perform, as evidenced by his solicitation for business on his website. The TTAB acknowledged that the website advertised “his readiness, willingness and ability to render [the] services.”[29] Under the Aycock standard, Couture’s actions were enough to satisfy the statutory use requirement.

Misguided Use of Precedent

The Playdom court looked to other circuits, the TTAB, and the well-known treatise McCarthy on Trademarks to support its conclusion regarding the use requirement.[30] The Federal Circuit’s reliance upon such authority was misplaced. First, no authority—except the Supreme Court—is more binding on the Federal Circuit than its own precedent. In fact, the TTAB is bound by Federal Circuit’s case law; therefore, the TTAB should have interpreted the use requirement in accordance with the Federal Circuit’s decision in Aycock.[31] It was improper for the binding authority (the Federal Circuit) to rely on the lower authority (the TTAB). Moreover, the Playdom court cited McCarthy to support its position that “rendering services requires actual provision of services,” but the cited section merely echoed the statutory language, and offered no guidance on the definition of the term “rendering.”[32] Therefore, all of the authorities cited by the Federal Circuit were either inapposite or not controlling. The Aycock decision, compelling a decision for Couture on the other hand, was both on-point and precedential.

Unfounded Distinction Between Service Marks and Trademarks

In addition to its failure to follow Federal Circuit precedent, the Playdom court’s ruling was contrary to 15 U.S.C. § 1053, which states that “service marks used in commerce shall be registrable, in the same manner and with the same effect as are trademarks . . . . Applications and procedure [for service marks] shall conform as nearly as practicable to those prescribed for the registration of trademarks.”[33] Contrary to this requirement, the Playdom court established an entirely different standard of use for registering service marks. The Playdom standard effectively requires that services offered under a mark must actually be performed for the end consumer before the mark can qualify for registration. In contrast, the Patent and Trademark Office allows marks for goods to be registered as soon as the goods are “sold or transported in commerce.”[34] In other words, mere distribution of goods can qualify as use sufficient to support trademark registration; no end consumer is required. Therefore, the Playdom standard puts a heavier burden on service providers, who must now actually procure a customer prior to registration and complete performance of the service. Indeed, even an actual sale of a service may not be enough to support registration if the service is to be performed sometime in the future. The Playdom court’s fabricated distinction between service providers and goods providers lacks justification and is contrary to the statute’s mandate requiring equal treatment of trademarks and service marks.[35]

Conclusion

The Federal Circuit’s decision in Playdom established a new standard for service mark holders, which now requires them to actually perform their services under the mark prior to registration. The decision is wholly unsupported by the court’s own precedent, and clearly violates 15 U.S.C. § 1053 by establishing a different standard of use for services than for goods. Service providers like David Couture who fail to satisfy the new standard of use risk cancellation of their trademark registrations. This decision is problematic because it could undermine existing federal trademark registrations in service industries, and could threaten any service provider’s ability to gain federal registration for new trademarks if it is unable to satisfy the new, higher standard of use.

[1] Couture v. Playdom, Inc., 778 F.3d 1379 (Fed. Cir. 2015). See also Bill Donahue, Fed. Circ. Says Trademark ‘Use’ Needs More Than Advertising, Law360 (Mar. 2, 2015, 3:38 PM), http://www.law360.com/ip/articles/626617?nl_pk=c04f6202-9de5-4f91-88d8-8a97d280475b&utm_source=newsletter&utm_medium=email&utm_campaign=ip.

[2] Playdom, 778 F.3d 1379.

[3] Id.

[4] See, e.g., 3 McCarthy on Trademarks and Unfair Competition § 19:9 (4th ed.).

[5] 15 U.S.C. § 1051(a)(1). Notably, an applicant may also file an “intent to use” application under § 1051(b), which has a separate set of requirements not covered in this article. David Couture filed an “actual use” application under § 1051(a)(1).

[6] 15 U.S.C. § 1127.

[7] Id. A use made merely to reserve a right in a mark is often referred to as “token” use, and is insufficient.

[8] 560 F.3d 1350 (Fed. Cir. 2009).

[9] Aycock Eng’g, Inc. v. Airflite, Inc., 560 F.3d 1350, 1360 (Fed. Cir. 2009).

[10] Id. at 1358 (quoting Intermed Commc’ns, Inc. v. Chaney, 197 USPQ 501, 507 (TTAB 1977)) (internal quotations omitted).

[11] Id. at 1360.

[12] Id.

[13] See Couture v. Playdom, Inc., 778 F.3d 1379 (Fed. Cir. 2015).

[14] Id.

[15] Id.

[16] Id.

[17] Id. See also Donahue, supra note 1.

[18] Playdom, 778 F.3d 1379.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id. (emphasis in original).

[24] Id.

[25] Id.

[26] Aycock Eng’g, Inc. v. Airflite, Inc., 560 F.3d 1350, 1358 (Fed. Cir. 2009).

[27] Id. at 1360 (emphasis added).

[28] Id. at 1361 (internal quotations omitted).

[29] Playdom, Inc., CANCELLATION 9205111, 2014 WL 788346, at *5 (Feb. 3, 2014).

[30] Playdom, 778 F.3d 1379.

[31] Legal conclusions of the TTAB are reviewed by the Federal Circuit de novo. In re Pacer Tech., 338 F.3d 1348, 1349 (Fed.Cir. 2003). Moreover, the TTAB’s cancellation of Couture’s mark is stamped with the disclaimer “THIS OPINION IS NOT A PRECEDENT OF THE TTAB.” Playdom, 2014 WL 788346.

[32] See McCarthy on Trademarks and Unfair Competition, supra note 3 at 19:103 (“To qualify for registration, the Lanham Act requires that the mark be both used in the sale or advertising of services and that the services themselves have been rendered in interstate or foreign commerce.”) (emphasis in original). In fact, McCarthy recognizes that the Federal Circuit’s decision in Aycock was based on the registrant’s failure to use the mark where he had only prepared to do so and “had never offered the services to potential passengers.” Id. at note 5.50. Moreover, McCarthy cautions that “[w]here a registration is attacked as being void ab initio . . . based on an alleged insufficient “use” of the mark, the policy of permitting early application or early registration should caution the decision-maker against hyper-technical scrutiny of the sufficiency of the challenged first use.” Id. at § 19:109.

[33] Emphasis added.

[34] Trademark Manual of Examining Procedure § 901.01 (quoting 15 U.S.C. § 1127) (emphasis added).

[35] See 15 U.S.C. § 1053.

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