On May 16, 2017 Division 3 of the Federal Court of Appeals in Civil and Commercial Matters, in re “Nike Argentina S.R.L. v. Pace, Susana” (Case No. 4176/08), reversed the district court’s decision that had cancelled the trademark registration for “ZOOM” (design) in Class 25, but upheld it with respect to the counterclaim filed by the defendant seeking that use of the trademark be discontinued plus damages.
The plaintiff, Nike Argentina S.R.L., sued the owner of the registered trademark “ZOOM” in Class 25 seeking cancellation as provided for in section 24, subsections b) and c), of the Trademark Law, on the grounds that since 1999 Nike had been using “ZOOM” worldwide to market a running shoe which had an air chamber in the forefoot. The defendant counterclaimed, seeking to enjoin use of “ZOOM” by Nike as well as damages arising from such alleged unauthorized use.
In the counterclaim Ms. Pace argued that she had been using trademark “ZOOM” since 2003 for a teenagers’ clothing project. She had applied for registration in 2004 and obtained it the following year. Incidentally, Nike had not registered this trademark or any other one which included the word “ZOOM”.
Ultimately, the parties sued each other alleging rights in trademark “ZOOM” in Class 25.
The district court admitted the claim and cancelled Ms. Pace’s registration of the trademark “ZOOM” pursuant to section 24, subsection b), of the Trademark Law, arguing that “NIKE” was a well-known trademark and “ZOOM” had been linked to a specific shoe since 1999. Nonetheless, the court dismissed any speculative behavior by Ms. Pace.
On appeal, the decision was reversed by the Court of Appeals with respect to the cancellation of registered trademark “ZOOM”, and upheld regarding the rejection of the counterclaim.
In the decision, the judges of Division 3 reaffirmed two essential requirements for a trademark cancellation action to proceed: (a) the marks have to be identical or at least bear a high degree of similarity; and (b) the alleged infringer must have acted in bad faith, i.e., that, when filing for registration, the titleholder of the mark knew or should have known that it belonged to a third party.
With regard to the first requirement, although the Court of Appeals acknowledged protection of the so-called de facto or "common law trademarks", it pointed out that the burden of proof rests with the interested party. Therefore, it has to be proved that the trademark has been used for many years, that products have been sold under such trademark and that a clientele has been acquired through the sale of products.
In this case Nike had not proved the use of “ZOOM” in isolation, without the trademark “NIKE”. In fact, the word “ZOOM” was also used jointly with the famous “swoosh” logo, undermining the distinctiveness as trademark which had been recognized by the district court.
Lastly, the Court of Appeals concluded that the well-known character of the trademark “NIKE” could not be automatically extended to any other name, number, acronym, design or logo that the company might link to their products.
Regarding the second requirement, the judges ruled that there was no evidence incorporated into the file that proved that Ms. Pace knew or should have known that “NIKE” was using “ZOOM” since 1999, given that such use was not widespread by the time she had launched her brand.
Furthermore, the Court of Appeals ruled that there was no risk of likelihood of indirect confusion in view of the fact that Nike had not used “ZOOM” as a trademark.
For the same reason, the judges of Division 3 upheld the dismissal of the counterclaim for lack of liability.
Thus, the Court of Appeals ruled once again on the necessary requirements to cancel a registered trademark and, more importantly, on the extent of the special protection gained by famous trademarks, restricting it to the trademark itself and excluding any other marks that might be used jointly therewith.