In trademark cancellation action by the maker of LUSH cosmetics against maker of LUSH apparel, Ninth Circuit holds that laches is available as defense because Lanham Act, unlike Copyright and Patent Act, has no statute of limitations and expressly makes laches defense to cancellation.
Cosmetic Warriors Limited, the owner of multiple LUSH trademarks for cosmetic products, petitioned the Trademark Trial and Appeal Board in 2015 to cancel Pinkette Clothing Inc.’s 2010 registration of the LUSH trademark for its clothing line after CWL’s LUSH trademark registration for clothing was rejected. Pinkette sought a declaratory judgment that it did not infringe on CWL’s trademark rights, or alternatively that laches barred CWL from asserting its rights against Pinkette. CWL counterclaimed for trademark infringement and cancellation of Pinkette’s registration, among other claims. After a five-day trial, the jury returned a verdict finding for CWL on its infringement and cancellation claims, but also found, in an advisory capacity, for Pinkette on its laches defense. After reviewing additional evidence regarding laches, the district court issued an oral decision holding that laches barred CWL’s claims and entered judgment for Pinkette.
On appeal, CWL argued that laches cannot bar its claims, and relied on Perella v. Metro-Goldwin-Mayer, Inc. (involving the Copyright Act) and SCA Hygiene Products v. First Quality Baby Products, LLC, 137 S. Ct. 954 (involving the Patent Act), which held that laches could not bar infringement claims brought within the statute of limitations provided by the Copyright Act and the Patent Act. The Ninth Circuit distinguished these cases, reasoning that the concern in those cases — laches overriding a statute of limitations — did not apply here. The Lanham Act expressly makes laches a defense to cancellation, and Congress did not set forth a statute of limitations in the Lanham Act, and thus “[a]pplying laches to a cancellation claim against a contestable mark neither overrides a clear directive from Congress nor fills a gap where there is none to fill.”
Finding that the laches defense could apply, the Ninth Circuit then used a two-step process to determine whether laches barred CWL’s claims. First, the Ninth Circuit assessed CWL’s delay by looking to whether the most analogous statute of limitation has expired. If it has, then there is a strong presumption in favor of laches. Here, there was a strong presumption in favor of laches because CWL did not bring its claim within California’s four-year statute of limitations for trademark infringement claims, the most analogous state statute of limitations.
Second, citing Ninth Circuit precedent in E-Sys., Inc. v. Monitek, Inc., the panel also found that the equity of applying laches weighed in favor of Pinkette. The E-Systems factors are (1) “strength and value of trademark rights asserted”; (2) “plaintiff’s diligence in enforcing mark”; (3) “harm to senior user if relief denied”; (4) “good faith ignorance by junior user”; (5) “competition between senior and junior users”; and (6) “extent of harm suffered by junior user because of senior user’s delay.” The Ninth Circuit found that while CWL’s marks are strong, CWL was not diligent in enforcing its mark because it “should have known about its claims no later than when Pinkette’s registration was issued in 2010,” nearly five years before the cancellation petition was filed; that CWL would not suffer harm if the injunction was denied; that Pinkette acted in good faith; and that Pinkette was harmed by CWL’s delay.
CWL also argued that the doctrine of clean hands should preclude Pinkette’s assertion of laches, because Pinkette’s founders knew of CWL’s LUSH trademark in 2003 and knew that there was a likelihood of confusion when Pinkette’s 2010 Canadian application for the LUSH mark was denied because it was too similar to CWL’s LUSH mark. The panel rejected this argument because under the territoriality principle, the use of a mark in another country cannot serve to give the user trademark rights in the U.S., and thus the denial of Pinkette’s Canadian application would not cast doubt on the validity of its U.S. registration.
CWL also asserted that the inevitable confusion doctrine is applicable to preclude the application of laches. Under the inevitable confusion rule, if it is inevitable that a significant amount of confusion will be created by the junior user’s actions, then the right of the public not to be confused and deceived may outweigh the inequity to the junior user of the trademark owner’s delay in suing and defeat a defense of laches. However, the public’s interest will trump laches only when the suit concerns allegations that the product is harmful or otherwise a threat to public safety and well-being. Because there was no evidence that Pinkette’s clothing is harmful or otherwise a threat to public safety and well-being, the Ninth Circuit held that the inevitable confusion doctrine was inapplicable.
CWL also challenged the district court’s evidentiary finding preventing the jury from hearing about the history of its Canadian trademark. The panel rejected this argument, holding that the lower court did not abuse its discretion because under the territoriality principle, “the history of the Canadian trademark was not relevant to the infringement-related question for which the jury was the sole trier of fact” and, while relevant to the laches issue, the history’s probative value was substantially outweighed by the danger of confusing and misleading the jury, which only served in an advisory capacity on the issue of laches. Furthermore, the district judge considered this evidence after the jury returned their verdict, rendering any error harmless.
Summary prepared by Linna Chen and Peter Pottier