*This article is based in part on a presentation moderated by Bridget Labutta during the Annual Meeting of the International Trademark Association on May 22, 2018 in Seattle, Washington.
Equity aids the vigilant and not those who slumber on their rights.
Owning a trademark brings certain benefits, as well as certain obligations. If you are the first entity in a particular geographic area to use a distinctive word (or phrase, logo, color, etc.) to sell a product or to provide a service, then you may claim exclusive rights in that area for that trademark on those products or services. Your trademark rights allow you to preclude subsequent entities in the same area from using the same, or confusingly similar, trademark on related products or services.
As a trademark owner, you have the right but also the responsibility to protect your trademark from infringement – i.e., the unauthorized use of your trademark on related products or services in a manner that is likely to cause confusion among consumers. Failure to take action against infringers will weaken your trademark and/or eliminate your trademark rights.
A common way to take action against infringers is to send a cease and desist letter advising an infringer of your trademark rights and demanding that they cease using the infringing trademark and desist from further unauthorized activities. This is generally a direct and (relatively) inexpensive option for trademark owners to pursue. And it often resolves the situation by initiating a conversation between the parties with the goal of reaching a mutually agreeable solution to the problem.
Admittedly, owning a trademark is expensive. If you choose to register the trademark, it can cost several thousand dollars in filing and maintenance fees over the years. Enforcing the trademark can set you back several hundred dollars for each cease and desist letter sent, and a trademark opposition or cancellation proceeding, or infringement lawsuit, can cost several hundreds of thousands of dollars if taken to trial. Enforcement activities are a necessary business expense that every trademark owner must take into account.
A problem arises if a trademark owner ignores or delays taking action against an infringer, or does not promptly follow up on an unanswered cease and desist letter. If the trademark owner waits to take action for any reason – Panitch Schwarze has seen many trademark owners that are risk-adverse, or don’t want to spend the money, or need to wait until next year’s budget is implemented, or want to resolve another legal dispute first – then the infringer can defend the case by raising the equitable defense of laches.
Laches is raised as an affirmative defense by an alleged infringer who seeks refusal or dismissal of a claim because the trademark owner waited too long to assert the claim. In order to prevail with a laches defense, the alleged infringer must establish that there was undue or inexcusable or unreasonable delay by the trademark owner in asserting its rights, and that the delay resulted in prejudice to the alleged infringer.
The U.S. Supreme Court has held that a laches defense is not available in patent and copyright cases brought within the statute of limitations period set forth in the U.S. Copyright and Patent Acts. But a recent circuit court case shows that laches is still alive and well in trademark infringement cases. The foundation for the decision is that the Lanham (Trademark) Act sets forth no statute of limitations on trademark infringement and expressly provides for a laches defense in certain trademark disputes.
In Pinkette Clothing, Inc. v. Cosmetic Warriors, Ltd., the circuit court considered that Cosmetic Warriors, Ltd. (CWL) has been selling LUSH branded cosmetics and related goods since 1996. It is a fairly well-known international brand, with about 940 LUSH retail stores in 49 different countries. CWL opened its first LUSH store in the U.S. in 2002.
Pinkette Clothing, Inc. (Pinkette) has been selling LUSH branded clothing in the U.S. since 2003 through several major American retail stores. Pinkette’s U.S. application to register the LUSH trademark for clothing was granted in 2010, which provided CWL with constructive notice of Pinkette’s trademark. CWL claims it gained actual notice of Pinkette’s trademark in 2014 when CWL applied to register its own LUSH trademark for clothing, which was rejected based on Pinkette’s pre-existing registration.
CWL waited until 2015 – nearly five years after Pinkette’s registration was issued, and beyond the term that most statute of limitations would run – to petition to cancel Pinkette’s registration. Pinkette then filed an action in federal court seeking a declaratory judgment of non-infringement, or alternatively, a determination that laches bars CWL’s claims of trademark infringement.
Even though Pinkette’s use of the trademark LUSH for clothing was found to be infringing, the case was decided in Pinkette’s favor. As a result of laches, the court held that CWL can neither enforce its trademark rights against Pinkette’s use of the LUSH mark on clothing nor cancel Pinkette’s registration for use of the LUSH mark on clothing. During the nearly five years that CWL had notice of Pinkette’s trademark, Pinkette acted in good faith and invested substantially in developing its brand; the parties coexisted peacefully; and none of Pinkette’s profits were attributable to infringement.
CWL’s situation confirms the importance of diligently enforcing your trademark rights.