Introduction  

Occasionally, intellectual property owners find themselves doing battle in proceedings conducted before boards administered by USPTO, rather than in the court system, such as in cancellation proceedings before the Trademark Trial and Appeal Board (TTAB), in which a trademark owner petitions to cancel another’s federal trademark registration. 

On September 27, 2012, the TTAB issued a decision dismissing a dilution claim in a cancellation proceeding.  The registrant successfully invoked the “federal registration defense” of § 43(c)(6) of the Lanham Act (15 U.S.C. § 1125(c)(6)).  That result seems unjust, because it was based on statutory text that Congress passed in error.  Congress intended for that defense to only apply to dilution claims under state, not federal law.  That is not how the statute reads, however, and the TTAB was bound by the statutory text as written.  The TTAB ruled that it was up to Congress to amend the statute to cure any flaws.

Thankfully, in just the couple of months preceding that decision, Congress already took steps to amend the statute.  The U.S. Senate just passed the bill to amend the statute, HR 6215, following its passage in the U.S. House of Representatives.  Certain legal associations, like the Intellectual Property Owners Association (“IPO”) helped to alert Congress to the error in the statute.  This author was privileged to participate in the preparation of the IPO resolution addressing this issue, and to then deliver a presentation at the IPO’s 2012 Annual Meeting, summarizing the problem in the statute and providing an update on the status of HR 6215.

All that remains for HR 6215 to become law is a signature from the President.  Its passage demonstrates that Congress appreciated the harmful consequences that could flow from the existing statute.  The TTAB's decision unfortunately illustrates just such a consequence, and stands as "Exhibit A" in how a seemingly minor error in statutory drafting can result in the loss of important rights.  Help comes too late for that cancellation petitioner.

The “Scrivener’s Error” in the Statute

Section 43(c)(6) of the Lanham Act  contains a drafting error, made in the passage of the Trademark Dilution Revision Act of 2006 ("TDRA"), that results in a provision immunizing owners of federal trademark registrations from all dilution claims – even those based on federal law.  The current text of the statute reads as follows:

(6)  Ownership of valid registration complete bar to action. -- The ownership by a person of a valid registration under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register under this Act shall be a complete bar to an action against that person, with respect to that mark, that—

(A)(i) is brought by another person under the common law or a statute of a State; and

(ii) seeks to prevent dilution by blurring or dilution by tarnishment; or

(B) asserts any claim of actual or likely damage or harm to the distinctiveness or reputation of a mark, label, or form of advertisement.

15 U.S.C. § 1125(c)(6) (2006).  Subsection (A) bars only state law dilution claims.  However, subsection (B) contains no such limitation.  Consequently, in its entirety, § 43(c)(6) appears to bar all types of dilution claims, both state and federal.  This result appears to be contrary to the history and intent behind the TDRA. 

The drafting error in § 43(c)(6), and the proposed correction of that error that is now reflected in HR 6215, were brought to light primarily by a thorough law review article addressing this subject, namely, Timothy Lemper & Joshua R. Bruce, Beware the Scrivener’s Error: Curing the Drafting Error in the Federal Registration Defense to Trademark Dilution Claims, 19:2 Tex. Intell. Prop. L. J. 169 (2011) (“Lemper”).

In 2005, the Trademark Dilution Revision Act was introduced in Congress, its primary purpose being to replace the “actual dilution” standard applied in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003) with a “likelihood of dilution” standard.[1]  Additionally, this legislation sought to expand the federal registration defense to protect against all types of state law dilution claims, so that it would not be limited to just dilution-by-blurring claims.[2]  That expansion was embodied in a new proposed section § 43(c)(6) to replace an earlier, similar statute.[3]  As originally introduced in the House of Representatives, proposed § 43(c)(6) read:

The ownership by a person of a valid registration . . . shall be a complete bar to an action against that person, with respect to that mark, that is brought by another person under the common law or a statute of a State and that seeks to prevent dilution by blurring or dilution by tarnishment, or that asserts any claim of actual or likely damage or harm to the distinctiveness or reputation of a mark . . . .[4]

Following the House’s approval, the Senate amended the House bill for reasons unexplained, splitting the above text into two subsections - the “(A)” and “(B)” parts quoted above.[5]   Professor Lemper observes: “The Senate bill made virtually no change to the wording in the statute.  But by reorganizing the language of the statute as it did, the Senate version drastically changed the scope of the federal registration defense.”[6]  Subsection (A) bars only state law dilution claims.  However, subsection (B) does not contain the same limitation.  “[B]oth the Senate and the House approved the Senate bill without any testimony, discussion, or written report explaining the change to the federal registration defense in § 43(c)(6) of the Lanham Act.”[7] 

Professor Lemper observes several consequences and potential consequences stemming from this drafting error:

  • “By making federal registration a complete defense to federal dilution claims, § 43(c)(6) already creates conflicts with PTO procedures and §§ 14 and 24 of the Lanham Act, which allow parties to assert dilution claims as a basis for cancelling existing federal registrations.”[8] 
  • “The drafting error in § 43(c)(6) also poses a very real threat to the protection of famous marks.”[9] 
  • An application for a diluting mark is more likely to pass by the examining attorney in the prosecution process since it, being a diluting mark, would be directed to goods or services distinct from those offered under a famous mark.[10]  Once registered, the diluting mark could not be canceled by the owner of a famous mark, because a dilution-based action for cancellation would arguably be barred by § 43(c)(6).[11]  The only real solution would be to pay the registrant to abandon its registration and cease use of the mark, which would spur even more unscrupulous parties to adopt the registration tactic as a moneymaking scheme.[12] 

By restructuring § 43(c)(6) as set forth at page 184 of his article, writes Professor Lemper, Congress can head off these problems.[13]  He comments that “an ounce of prevention is worth a pound of cure.”[14] 

The Amendment to § 43(c)(6) in HR 6215

Legal associations like the IPO took note of Professor Lemper’s article.  For instance, on June 22, 2012, the IPO adopted a resolution supporting the amendment of § 43(c)(6), restructuring the subsections in the manner suggested by Professor Lemper.

On July 26, 2012, Representative Lamar Smith, the Chairman of the House Judiciary Committee, introduced bill HR 6215.  Part (a) of that bill proposes to amend § 43(c)(6) in the exact manner proposed by Professor Lemper, as follows (underlines and strikethroughs showing the changes):

(6)  Ownership of valid registration complete bar to action. -- The ownership by a person of a valid registration under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register under this Act shall be a complete bar to an action against that person, with respect to that mark, that—

(A)(i) is brought by another person under the common law or a statute of a State; and that

(ii)(B)(i) seeks to prevent dilution by blurring or dilution by tarnishment; or

     (B) (ii) asserts any claim of actual or likely damage or harm to the distinctiveness or reputation of a mark, label, or form of advertisement.

The amended statute thus makes clear that the “federal registration defense” only applies to dilution claims under state, not federal, law.

Part (b) of HR 6215 states: “Effective Date. – The amendment made by subsection (a) shall apply to any action commenced on or after the date of the enactment of this Act.” 

On August 1, 2012, Representative Smith stated to the House Judiciary Committee: “Last year, two law professors discovered a problem with one of the 2006 changes [to the dilution legislation].”  He then described what occurred during enactment of the 2006 legislation, reiterated the concerns expressed by Professor Lemper, and commented: “This produced an unexpected and unintended change to the law.”  “This bill,” declared Smith, “ensures that the trademark community is protected from those who look to use this loophole as a way to disparage legitimate trademarks and cost their holders time and money.”  Ranking Member John Conyers concurred with Chairman Smith’s statement. 

Letters of support for HR 6215 from the IPO (dated July 31, 2012), the International Trademark Association, and the American Intellectual Property Law Association were then entered into the record of the House Judiciary Committee.

Given the lack of opposition to HR 6215, it rapidly progressed through Congress.  The House passed it on September 11, 2012 with a “suspension of rules” procedure, an expedited process for voting on measures that have strong bipartisan support.  Just 11 days later, the Senate followed with its approval, passing the bill on September 22.  Upon signing by the President, HR 6215 will become law, enacting the amendment to § 43(c)(6).

The TTAB’s Academy Decision

Just five days after Senate’s passage of HR 6215, the TTAB issued an order in Academy of Motion Picture Arts and Sciences v. Alliance of Prof’ls & Consultants, Inc., Cancellation No. 92055081 (TTAB Sept. 27, 2012).

The Alliance of Professionals & Consultants, Inc. (“APC”) owns a federal registration for the mark OSCAR, for “providing recognition and incentives by the way of awards and contests to demonstrate excellence in the field of business consultation and information technology.”

The Academy petitioned to cancel APC’s registration on three grounds: (1) likelihood of confusion of prospective consumers; (2) false suggestion of a connection with the Academy; and (3) dilution under § 43(c) of the Lanham Act.[15]  APC filed a motion to dismiss the dilution claim, arguing that § 43(c)(6) completely barred that claim, since APC owns a federal registration for its OSCAR mark.[16]

The TTAB granted APC’s motion.  Notably, it observed that never before has either the TTAB or any federal court considered the federal registration defense of § 43(c)(6).[17]  The TTAB remarked: “The parties agree with legal commentators that a clerical error occurred during the passage of the TDRA, but disagree as to how that ‘error’ should be interpreted.”[18]   It cited Chairman Smith’s August 1 statement attesting to how the Senate altered the meaning of § 43(c)(6) when it split part of that statute into the two subsections.[19]  Nevertheless, the TTAB held that it was required to apply the statute in its current form:

The Board must apply and enforce the statute as written, rather than picking and choosing a preferred interpretation.  “Congress’ intent is found in the words it has chosen to use.”  Petitioner characterizes the Senate reorganization of the language as creating an “unintended” change to the statute, and argues Congress clearly meant to retain possible federal dilution claims.  Nonetheless, this Board must assume that Congress means what it says.  If Congress has enacted into law something different from what was intended, then Congress must amend the statute to achieve its desired results.[20]

The TTAB commented that § 43(c)(6) has “scant legislative history, and certainly not enough to support an alternative reading in this case.”[21]  Thus, the TTAB struck the dilution allegations from the Academy’s petition, and ordered that “[t]his case will move forward on petitioner’s remaining claims.”[22]

Conclusion

Academy of Motion Picture Arts and Sciences proves all too well that fears about a defective statute can easily come to pass.  Professor Lemper, IP legal associations, and Congress had good reason to be concerned about the potential consequences of § 43(c)(6) being applied literally, even if it appears that Congress did not intend such a result. 

Despite Congress’ prompt action to fix § 43(c)(6), the Academy will not benefit from those efforts, since HR 6215 will only apply prospectively.  Thus, important trademark rights have been permanently lost simply because Congress made a “scrivener’s error” in drafting a statute.

Hopefully, the President will act quickly to sign HR 6215 into law and thereby prevent any more cases from reaching the unjust result reflected in the Academy decision.

UPDATE:  President Obama signed HR 6215 on October 5, 2012.  The commendable, swift action by Congress on this bill is the latest demonstration of bipartisanship on intellectual property issues.  Owners of famous trademarks will be tremendously grateful.