2:08-cv-07830-CBM (C.D. Cal. Aug. 13, 2009)

ABSTRACT

The Central District of California dismissed a declaratory-judgment action seeking a ruling of nongenericness for the FRISBEE, SLIP ‘N SLIDE, and HULA HOOP marks on grounds that the mere fi ling of a cancellation action before the PTO did not create a justiciable controversy. Notably, this decision appears to veer away from the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), which purportedly lowered the threshold for proving the presence of an actual case or controversy.

CASE SUMMARY

FACTS

Toymaker Wham-O, Inc. (“Wham-O”) owns a federal registration for the mark FRISBEE for “toy fl ying saucers for toss games” that dates back to 1959. Since the 1960s, Wham-O has also owned registrations for the marks SLIP ‘N SLIDE for water slides and HULA HOOP for plastic hoops. A competing toy manufacturer, Manley Toys, Ltd. (“Manley”), with whom Wham-O has been engaged in bitter legal battles for a number of years, fi led petitions to cancel each of the FRISBEE, SLIP ‘N SLIDE, and HULA HOOP marks on genericness grounds before the TTAB.

In November 2008, Wham-O brought a declaratory-judgment action in the Central District of California seeking a ruling that its federally registered marks FRISBEE, SLIP ‘N SLIDE, and HULA HOOP have not become generic. The complaint alleges that Wham-O has exclusively used the marks for over forty years and that “[t]oys sold under the marks are among the most popular ever sold, with sales in the hundreds of millions of units.” Wham-O accuses Manley of engaging in “a wide-ranging scheme to destroy Wham-O’s business and the enormous goodwill associated with many of its famous brands.” The complaint also provides the history of Wham-O and Manley’s rocky relationship, including an award of $6 million in actual and exemplary damages for the intentional infringement and dilution of Wham-O’s SLIP ‘N SLIDE design marks and a permanent injunction against the use of Wham-O’s federally registered FRISBEE and SUPERBALL marks.

Wham-O subsequently filed a motion pursuant to Trademark Rule 2.117(a) (37 C.F.R. § 2.117(a)) and Trademark Board Manual of Procedure (“TBMP”) § 510.02(a) asking the TTAB to suspend the cancellation proceedings pending the disposition of the civil action between the parties. The TTAB suspended the proceedings on March 19, 2009.

Manley moved to dismiss the declaratory-judgment action with prejudice based on: (1) lack of subject-matter jurisdiction; (2) the complaint’s failure to present a case or controversy as required by Article III of the U.S. Constitution; and (3) the fact that the issues presented in the case are identical to those pending before the TTAB.

ANALYSIS

The court dismissed Wham-O’s declaratory-judgment action on the grounds of lack of federal subject-matter jurisdiction and a failure to present a justiciable case or controversy.

Wham-O alleged federal subject-matter jurisdiction based on diversity of citizenship and a federal question. Under 28 U.S.C. § 1332, a federal district court has jurisdiction over cases where all plaintiffs are of different citizenship than all defendants, and the amount in controversy exceeds $75,000. Wham-O failed to make an allegation in the complaint regarding the amount in controversy. The court, therefore, concluded that Wham-O had not suffi ciently pled a basis for a diversity jurisdiction. With regard to Wham-O’s argument that jurisdiction is based on a federal question, the court noted that 15 U.S.C. § 1121 provides that district courts have original jurisdiction in all actions arising under the Lanham Act and that “federal courts may determine the validity of trademark registrations that are otherwise before them, e.g., in an infringement action.” The court held, however, that it lacked original jurisdiction over the case because “the courts do not have ‘jurisdiction under the Declaratory Judgment Act to determine the validity of [a] trademark where there is no issue of infringement.’” The court emphasized that “[t]here are no infringement claims or any other legal claims between the parties and the Marks involved in this action. Nor can the TTAB proceedings be construed as a potential claim for infringement.”

Turning to the case or controversy requirement under Article III, the court relied on the standard articulated in MedImmune, which requires that “the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of suffi cient immediacy and reality to warrant the issuance of a declaratory-judgment.” The 2007 Supreme Court decision in MedImmune overruled a more stringent two-pronged test that the Federal Circuit developed in Windsurfing International Inc. v. AMF Inc., 828 F.2d 755 (Fed. Cir. 1987), requiring a plaintiff in a declaratory-judgment action to prove both reasonable apprehension of litigation and that it has engaged in a course of conduct which brought it into “adversarial confl ict” with the declaratory defendant.

Citing MedImmune, the court concluded that there was no justiciable case or controversy before it because “[t]here [was] no evidence of a threat of litigation or liability hanging over Wham-O as a result of any activity on Defendants’ part.” The court specifi cally noted that Manley never threatened to sue Wham-O for Wham-O’s use of the marks FRISBEE, SLIP ‘N SLIDE, and HULA HOOP, and this was “not a case of two entities actively using competing trademarks.” The court characterized as “instructive” the Federal Circuit’s decision in SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1381 (Fed. Cir. 2007), a patent case, where the court held that “Article III jurisdiction can be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.” The court concluded that “Wham-O is not being faced with either of these undesirable ‘choices.’” Dismissing the case, the court held, will “preserve the status quo” because Wham-O is allowed to continue to use the marks and Manley is refrained from doing so until the TTAB renders a decision in the proceedings before it. The court ultimately granted Manley’s motion to dismiss the action with prejudice.

Wham-O has appealed the district court’s decision to the United States Court of Appeals for the Ninth Circuit.

CONCLUSION

The district court’s decision suggests that even under the liberalized standards articulated in MedImmune, the fi ling of a cancellation or opposition proceeding based upon claims other than likelihood of confusion, which could implicate infringement concerns, will not present suffi cient case or controversy to justify a declaratory-judgment action.