Addressing whether use in commerce must be lawful in order to establish trademark priority, the Ninth Circuit, in a case of first impression, adopted the U.S. Patent and Trademark Office (USPTO) policy that “only lawful use in commerce can give rise to trademark priority.” To be lawful, a use must be compliant with federal labeling requirements. CreAgri, Inc. v. USANA Health Sciences, Inc., 2007 U.S. App. LEXUS 866 (9th Cir., Jan 16, 2007) (Hawkins, J.).

CreAgri began using the OLIVENOL mark in 2001 on dietary supplements. At the time, the active ingredient in CreAgri’s product was not capable of being accurately measured. Although CreAgri could have applied for an exemption from Food and Drug Administration (FDA) labeling restrictions, it did not do so. However, CreAgri twice changed the label, indicating the content of the active ingredient in OLIVENOL. Meanwhile, the USPTO, when examining CreAgri’s application to register its OLIVENOL mark on the principal register, noted that OLIVENOL is the German word for “olive oil,” and that the product contained no olive oil. The USPTO therefore denied registration on the principal register on the basis that the mark, as applied to the goods, was deceptively misdescriptive. CreAgri amended its application to one for registration on the supplemental register and CreAgri’s OLIVENOL mark was so registered.

Meanwhile, USANA obtained a 2002 date for its application to register its OLIVEOL mark for use on vitamins, minerals and nutritional supplements. That application matured to a registration on the principal register.

CreAgri sued USANA for trademark infringement based on CreAgri’s prior use in commerce of the mark OLIVENOL. USANA moved for summary judgment on the trademark claims and requested cancellation of CreAgri’s supplemental register registration in favor of USANA’s OLIVEOL principal register registration. The district court granted USANA’s motion for summary judgment, dismissing CreAgri’s claims and canceling CreAgri’s OLIVENOL registration. CreAgri appealed.

The Ninth Circuit, agreeing with the USPTO, found that CreAgri could establish priority over the OLIVEOL registration through “use in commerce.” However, adopting the long-standing USPTO policy that any “use in commerce” must be lawful, the court noted that CreAgri’s OLIVENOL product was, at all relevant times, inaccurately labeled and found CreAgri’s the use of its OLIVENOL mark was not lawful under federal labeling requirements.

CreAgri therefore argued that the nexus between the labeling violation and the use was too attenuated to justify the denial of priority, that FDA regulations provided an exemption making CreAgri’s use lawful and that the lawfulness of the use was not material. The Court rejected CreAgri’s arguments finding that the nexus between the labeling requirements and the use of the OLIVENOL was satisfied, that the FDA required CreAgri to apply for and be granted the exemption (CreAgri had not done either) and that the unlawful use of the OLIVENOL mark on every bottle sold prior to USANA’s priority date was material.

The Ninth Circuit thus upheld USANA’s motion for summary judgment on CreAgri’s trademark infringement claims and cancellation of the OLIVENOL mark from the supplemental register.