Trademark Trial and Appeal Board No Substitute for Federal Court When Infringement Action is Threatened

Case: Rhoades v. Avon Products, Inc., Case No. 05-56047 (9th Cir. 10/15/07)

The One Sentence Summary: Allegations of threats sufficient to create "reasonable apprehension" of an infringement suit stated an actual controversy for purposes of declaratory judgment jurisdiction and plaintiffs were not required to wait for the completion of Trademark Trial and Appeal Board (TTAB) proceedings before seeking declaratory relief.


What They Were Fighting About: Plaintiffs sought a declaration that their trademarks on skin-care products like DermaNew did not infringe Avon's trademarks on a skin-care product line called ANEW.

Ninth Circuit Holdings:

• In the Ninth Circuit, an action seeking a declaration that a patent or trademark is invalid, or that plaintiff is not infringing, presents a justiciable case or controversy if the plaintiff has a real and reasonable apprehension that he will be subject to liability. The Ninth Circuit takes a flexible approach and, unlike the Federal Circuit, does not require concrete or explicit threats by the patent or trademark owner. In this case, however, plaintiffs alleged that Avon made three concrete threats of infringement litigation and the court must accept that as true at the motion to dismiss stage.


• A letter in the settlement context promising that Avon will "initiate whatever additional proceedings or litigation is necessary" was admissible to satisfy the jurisdictional requirements of an action for declaratory relief because Federal Rule of Evidence 408 only precludes evidence from settlement negotiations when offered to "prove liability for, invalidity of, or amount of a claim . . . or to impeach."


• Whether a district court should defer, on primary jurisdiction grounds, a trademark declaratory relief action pending the completion of related TTAB proceedings was an issue of first impression in the Ninth Circuit. Adopting approaches from the First and Second Circuits, the Ninth Circuit reasoned that declining to hear a declaratory relief action on a primary jurisdiction rationale is sensible only if the agency is better equipped to handle the action. Where there is potential infringement litigation, federal courts are particularly well-suited to handle the claims. While the powers of the TTAB are limited to determining and deciding the respective rights of trademark registration, a federal district court may also determine infringement and grant damages and injunctive relief.


• Avon's evidence of plaintiffs' "bad faith"was irrelevant or de minimis and did not undermine the case and controversy established by the complaint. Avon's bad faith argument had three incorrect premises: 1) the assumption that Avon would prevail on the trademark dispute, 2) that DermaNew's years of participation in settlement talks evidenced bad faith, and 3) that DermaNew's action was an attempt to avoid TTAB discovery.