Considering sovereign immunity in the context of trademark infringement claims, the U.S. Court of Appeals for the Seventh Circuit held that a software company’s trademark infringement claims against a public university were barred, determining that the university did not waive immunity by affirmatively participating in the federally regulated trademark registration process or by instituting a district court proceeding challenging the cancellation of its trademark registration by the Trademark Trial and Appeal Board (TTAB). Bd. of Regents of the Univ. of Wisc. Sys. v. Phoenix Int’l Software, Inc., Case No. 08-4164 (7th Cir., Dec. 28, 2010) (Tinder, J.) (Wood, J., dissenting).

Both parties owned U.S. trademark registrations for the mark CONDOR for computer software. Phoenix International obtained its registration first, covering software used on mainframe systems. Junior user University of Wisconsin later obtained a registration covering software used on a network of individual computers. Phoenix filed a petition to cancel UW’s registration with the U.S. Patent and Trademark Office’s Trademark Trial and Appeal Board based on likelihood of confusion. The TTAB granted Phoenix’s petition and cancelled UW’s registration because the marks were identical and the actual use of the parties’ respective software showed that the marks were being used in related fields.

UW then filed suit against Phoenix in district court, challenging the TTAB’s cancellation of its CONDOR mark. Phoenix counterclaimed against UW for trademark infringement and false designation of origin. The district court held that the TTAB erred when it considered the actual nature of the parties’ goods, rather than comparing the goods as described in their respective registrations. Considering the parties’ goods only as described in the parties’ registrations, the district court reversed the TTAB and granted summary judgment to UW, finding the types of systems listed as used with the parties’ software to be sufficiently distinguishable to negate likelihood of confusion. The district court also dismissed Phoenix’s trademark infringement and false designation of origin counterclaims based on sovereign immunity, under which states are immune from being sued in federal court without their consent or waiver. Phoenix appealed

The 7th Circuit concluded that the district court misapplied the likelihood of confusion test and improperly rejected the TTAB’s factual findings when the court made the similarity of the functions on which the marks were used the dispositive issue. The proper inquiry, the 7th Circuit explained, “is whether the parties’ products are the kind the public might very well attribute to a single source.” Because Phoenix had presented evidence at the TTAB showing the existence of material fact that should have precluded the grant of summary judgment at the district court, the 7th Circuit remanded the likelihood of confusion inquiry for trial.

On the sovereign immunity issue, the 7th Circuit affirmed the district court’s dismissal of Phoenix’s trademark infringement and false designation of origin claims against UW. Phoenix argued that UW waived sovereign immunity by voluntarily participating in the federal trademark registration system and by instituting the federal court action to challenge the TTAB’s cancellation of UW’s CONDOR registration. However, the court rejected both arguments under precedent in patent cases involving sovereign immunity. Further, the court viewed the district court proceeding as a continuation of the TTAB cancellation proceeding where, as the defendant, UW was not a voluntary participant.

The 47-page dissent argued that Phoenix’s counterclaims should have been sustained because an effective waiver had occurred. The dissent noted that UW had multiple options for addressing the dispute other than instituting a de novo proceeding at the district court in which UW could present new evidence, such as a straight appeal to the Federal Circuit. Further, the dissent noted that it was inequitable for UW to seek to block Phoenix’s compulsory counterclaims while seeking relief from that court in the very same lawsuit.