Monday, November 14, 2016

Christian Faith beats Adidas at CAFC on "use in commerce" issue; TTAB reversed

The outcome of the case before the CAFC, Christian Faith Fellowship beats Adidas:

Christian Faith Fellowship Church appeals a final judgment of the Trademark Trial and Appeal Board that, in response to a petition filed by adidas AG, cancelled its trademarks for failing to use the marks in commerce before registering them. The Board held that the Church’s documented sale of two marked hats to an outof-state resident were de minimis and therefore did not constitute use of the marks in commerce under the Lanham Act. Because the Lanham Act defines commerce as all activity regulable by Congress, and because the Church’s sale to an out-of-state resident fell within Congress’s power to regulate under the Commerce Clause, we reverse the Board’s cancellation of the Church’s marks on this basis and remand for further proceedings.

The CAFC stated the issue:

The dispute between the parties in this case is limited to whether the Church, which filed its applications under § 1051(a)’s “use in commerce” subsection, made a sale of marked goods in commerce regulable by Congress before applying for its marks.

Of the hearsay issue:

We review the Board’s admission of the check for abuse of discretion. Coach Servs., Inc. v. Triumph Learning LLC, 668 F.3d 1356, 1363 (Fed. Cir. 2012) (citing Crash Dummy Movie, LLC v. Mattel, Inc., 601 F.3d 1387, 1390 (Fed. Cir. 2010)). “We will reverse only if the Board’s evidentiary ruling was: (1) ‘clearly unreasonable, arbitrary, or fanciful’; (2) ‘based on an erroneous conclusion[] of law’; (3) premised on ‘clearly erroneous findings of fact’; or (4) the record ‘contains no evidence on which the Board could rationally base its decision.’” Id. (quoting Crash Dummy Movie, 601 F.3d at 1390–91).

The Federal Rules of Evidence provide, however, an exception to the bar on hearsay evidence for business records of regularly conducted conduct kept in the ordinary course. Fed. R. Evid. 803(6). The Board relied on this exception in admitting Ms. Howard’s check. A Church pastor, whose duties included Church recordkeeping, testified that the check was maintained in the Church’s records in the normal course of Church bookstore sales, along with the corroborating entry in the bookstore ledger of sales. Adidas argues that the pre-printed address on the check had nothing to do with Church business, and therefore, the check should not have been admissible under the business records exception. We disagree.

The business records exception “does not require that the document actually be prepared by the business entity proffering the document.” Air Land Forwarders, Inc. v. United States, 172 F.3d 1338, 1343 (Fed. Cir. 1999). When a business relies on a document it has not itself prepared, two factors bear on the admissibility of the evidence as a business record: “[1] that the incorporating business rely upon the accuracy of the document incorporated[;] and [2] that there are other circumstances indicating the trustworthiness of the document.” Id. We hold that the Board did not abuse its discretion in determining that the Church relied on the check, a bank-issued negotiable instrument, as accurate and trustworthy. We also hold that the check is self-authenticating as commercial paper under Federal Rule of Evidence 902(9). See United States v. Pang, 362 F.3d 1187, 1192 (9th Cir. 2004) (“[A] check is a species of commercial paper, and therefore selfauthenticating” (citing Fed. R. Evid. 902(9))). Based on the admitted check and a Church pastor’s testimony that many Church parishioners reside in Wisconsin, the Board found that Ms. Howard resided in Wisconsin. Adidas argues this factual conclusion was unsupported. We review the Board’s factual determinations under a substantial evidence standard. In re Chippendales USA, Inc., 622 F.3d 1346, 1350 (Fed. Cir. 2010) (citing In re Pacer Tech., 338 F.3d 1348, 1349 (Fed. Cir. 2003); 5 U.S.C. § 706(2)(E)). We conclude that the admitted check and the Church pastor’s testimony constitute substantial evidence to support the Board’s determination regarding Ms. Howard’s residence.

As to the "use in commerce" issue:

Moving to the facts of this case, it is clear in light of the foregoing precedent that the Church’s sale of two “ADD A ZERO”-marked hats to an out-of-state resident is regulable by Congress under the Commerce Clause and, therefo
re, constitutes “use in commerce” under the Lanham Act. We reach this conclusion without defining the outer contours of Congress’s Commerce Clause powers because the transaction at issue falls comfortably within the bounds of those powers already sketched for us by the Supreme Court. The Lanham Act is a comprehensive scheme for regulating economic activity—namely the marking of commercial goods—and the “use in commerce” pre-registration requirement is an “essential part” of the Act. Lopez, 514 U.S. at 561. Further, it cannot be doubted that the transaction at issue—the private sale of goods, particularly apparel, to an out-of-state resident—is “quintessentially economic.” Raich, 545 U.S. at 25; see United States v. Morrison, 529 U.S. 598, 611 (2000)


This transaction, taken in the aggregate, would cause a substantial effect on interstate commerce and thus it falls under Congress’s Commerce Clause powers. Taylor, 136 S. Ct. at 2080–81; Raich, 545 U.S. at 17; Wickard, 317 U.S. at 125. The Church did not need to present evidence of an actual and specific effect that its sale of hats to an out-ofstate resident had on interstate commerce. Nor did it need to make a particularized showing that the hats themselves were destined to travel out of state. See Taylor, 136 S. Ct. at 2081. The Board’s rationale that the sale to Ms. Howard was “de minimis” and thus “insufficient to show use that affects interstate commerce” is squarely at odds with the Wickard progeny of Commerce Clause cases. Board Op. at *7. In particular, the Board’s reasoning contravenes Raich, which expressed that “the de minimis character of individual instances” arising under a valid statute enacted under the Commerce Clause “is of no consequence.” 545 U.S. at 17. “[I]t makes no difference under our cases that any actual or threatened effect on commerce in a particular case is minimal.” Taylor, 136 S. Ct. at 2081 (citing Perez, 402 U.S. at 154); see also Larry Harmon, 929 F.2d at 666.

Adidas’s argument that the Church must present actual proof that its sale to Ms. Howard directly affected commerce also contradicts precedent. “[P]roof that the defendant’s conduct in and of itself affected or threatened commerce is not needed. All that is needed is proof that the defendant’s conduct fell within a category of conduct that, in the aggregate, had the requisite effect.” Taylor, 136 S. Ct. at 2081.


For the foregoing reasons, we reverse the Board’s cancellation of the Church’s “ADD A ZERO” marks for not using them in commerce before federally registering them and remand for the Board to address Adidas’s other cancellation grounds.



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