General Healthcare Ltd. v. Qashat

United States Court of Appeals
For the First Circuit

No. 03-1968

GENERAL HEALTHCARE LTD.,

Plaintiff, Appellant,

v.

ISAM QASHAT; KENT INTERNATIONAL PRODUCTS, INC.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Robert B. Collings, U.S. Magistrate Judge]

Before

Howard, Circuit Judge,
Coffin and Campbell, Senior Circuit Judges.

Adam K. Derman with whom Peter E. Nussbaum, R. Jonas Geissler,
and Wolff & Samson PC were on brief for appellant.
Michael A. Albert with whom Laura Topper, and Wolf, Greenfield
& Sacks, P.C. were on brief for appellees.

April 13, 2004
 COFFIN, Senior Circuit Judge. In this dispute, both

parties claim ownership of the United States trademark rights in

"Kent Creme Bleach" (the Kent mark). Appellant General Healthcare

International (GHL), a United Kingdom corporation, appeals the

district court's grant of summary judgment in favor of Kent

International Products (KIP), a United States corporation. The

district court concluded that GHL never used the Kent trademark in

commerce in the United States and therefore did not own the

contested rights in the mark. Because GHL lacked ownership, the

district court also held that GHL did not have standing to seek

cancellation of KIP's allegedly infringing registration. On

appeal, GHL argues that the transportation of goods bearing the

Kent trademark from a manufacturer in the United States to its

offices in the United Kingdom is sufficient to confer ownership

rights in the mark. We disagree, and affirm the district court.

I. Factual Background

The heart of this dispute lies in Saudi Arabia, where both GHL

and KIP sell Kent Creme Bleach, a personal care product that

lightens body hair. The product has several components, including

the actual cream itself, the tubes (bearing the Kent mark) in which

the cream is placed, an instructional insert, and an applicator.

Together, these elements are packaged in a box (also bearing the

Kent mark) for sale to consumers. The complete product of both

companies is identical in packaging and - for purposes of this

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appeal - substance.1 In this case, KIP and GHL contest only

trademark rights in the United States, where both companies

manufacture the product.2

The undisputed first user of the Kent mark was a third

company, Healthcare International (HCI), which has since been

dissolved. From 1982 until approximately 1989, HCI sold Kent Creme

Bleach in the Middle East. Both Adel Kseib, principal of GHL, and

Isam Qashat, principal of KIP,3 were aware of the Kent product by

virtue of their respective businesses involving the export of

personal care products to the region. Sometime after the death of

HCI principal Salvatore Rodino in 1989, Kseib and Qashat learned

(through various business contacts) that supplies of Kent Creme

Bleach were dwindling. Each then set about gearing up his own

manufacture and export of the product. Kseib allegedly purchased

the Kent trademark from Rodino's widow and received HCI's list of

suppliers; Qashat, unable to reach anyone at HCI, engaged counsel

to conduct a trademark search to determine the status of the Kent

trademark. The search revealed that HCI's application for

1
There is an allegation in the deposition of Adel Kseib,
principal of GHL, that KIP's product may have been of inferior
quality, but that is not material to the issue before us.
2
The record contains some indication of proceedings - the
exact nature of which is unclear - in Saudi Arabia, but in the
current posture of the case, such activity is of no consequence.
3
We use the names of the individuals and their respective
companies interchangeably.

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registration of the Kent mark was rejected and ultimately abandoned

in 1986. In light of what seemed to be the permanent cessation of

HCI's activity, Qashat presumed the mark to be available for

appropriation. He ascertained the Kent formula based on a sample

of the then-existing product and established his own manufacturing

and export network in the United States.

KIP subsequently obtained United States registrations for both

the word mark and the trade dress. The word mark has since become

incontestable.4 GHL, on the other hand, never attempted to

register its interest in the Kent mark, relying instead on

protection afforded by common law.

The only material difference in the operation of the two

companies is that KIP sells to the Middle East directly from its

United States offices. GHL, on the other hand, manufactures the

cream in the United States, but assembles the final product in the

United Kingdom. All sales to the Middle East occur from GHL's

United Kingdom offices.

Qashat and Kseib have been aware of each other's competing

activity since 1990, as evidenced by a cease-and-desist letter sent

from GHL to KIP in March 1991. GHL did not file suit, however,

4
Under 15 U.S.C. § 1065, after five consecutive years of
continuous use, a registrant may file an affidavit of
incontestability. Such status limits the circumstances under which
a registration may be cancelled to: fraudulent acquisition, failure
to properly control use of a certification mark, and, situations in
which a valid common law owner has established a date of use prior
to that of the registered mark.

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until February 1, 2000, when it brought claims under the Lanham Act

for unfair competition and false advertising, and also sought to

cancel KIP's United States registration. See 15 U.S.C. §§ 1064,

1119, 1125(a). KIP responded with a counterclaim against GHL for

infringement. Following discovery, each party moved for summary

judgment.

II. Basics of Trademark Law

Under the Lanham Act, a trademark includes "any word, name,

symbol, or device or any combination thereof" used by an individual

or entity "to identify and distinguish his or her goods . . . from

those manufactured or sold by others." 15 U.S.C. § 1127.

Trademark rights may arise under either the Lanham Act or under

common law, but in either circumstance, the right is conditioned

upon use in commerce.5 United Drug Co. v. Theodore Rectanus Co.,

248 U.S. 90, 97 (1918) (establishing that "the right to a

particular mark grows out of its use, not its mere adoption"). A

mark is deemed "in use in commerce" when it is affixed to the goods

with which it is associated and those goods are then "sold or

transported in commerce." 15 U.S.C. § 1127. Of particular

5
Since 1988, the United States has permitted applications for
registration on the basis of an intent to use. Such application
must be supplemented by a verified statement of use, submitted no
later than 24 months after issuance of a notice of allowance, else
the registration will be deemed abandoned. See 15 U.S.C. § 1051
(d) (setting forth initial six month period within which to submit
a statement of use and detailing conditions for extension of time
to file the statement).

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relevance to this appeal is that sales of goods within or from the

United States are not necessary to establish trademark ownership;

for purposes of the Lanham Act, transportation alone qualifies.

See New England Duplicating Co. v. Mendes, 190 F.2d 415, 417 (1st

Cir. 1951) ("The use of the disjunctive 'or' between 'sold' and

'transported' leaves no doubt that a transportation . . . is enough

to constitute a 'use' even without a sale.").

However, "not every transport of a good is sufficient to

establish ownership rights in a mark." Planetary Motion, Inc. v.

Techsplosion, Inc., 261 F.3d 1188, 1196 (11th Cir. 2001). In

assessing rights stemming from transportation, courts and

commentators have required an element of public awareness of the

use. Mendes, 190 F.2d at 418 (requiring "first, adoption, and,

second, use in a way sufficiently public to identify or distinguish

the marked goods in an appropriate segment of the public mind. .

."); see also Planetary Motion, Inc., 261 F.3d at 1195 (citing

Mendes, 190 F.2d at 418); Brookfield Comm., Inc. v. West Coast

Entm't Corp., 174 F.3d 1036 (9th Cir. 1999) (citing Mendes, 190

F.2d at 418); Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260,

(5th Cir. 1975) ("Secret, undisclosed shipments are generally

inadequate to support the denomination 'use.'"); 3 J. Thomas

McCarthy, McCarthy on Trademarks and Unfair Competition § 19:118

(4th ed. 2003) ("It seems clear that 'transportation,' as an

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alternative to 'sale,' requires the same elements of open and

public use before customers.").

GHL contended below that the shipment of Kent Creme Bleach

from the United States manufacturer to its United Kingdom office,

followed by subsequent sales from the United Kingdom to the Middle

East, was use in commerce sufficient to sustain United States

ownership rights. The crux of the district court opinion was that

GHL's activities lacked the public use element necessary to assert

trademark rights based on transportation. Using the two step test

for abandonment set forth in 15 U.S.C. § 1127, the district court

then found that any trademark rights acquired by GHL from HCI had

long since been abandoned on the basis of nonuse. The court thus

granted KIP's request for summary judgment, which we now review de

novo. See Calero-Cerezo v. U.S. Dep't of Justice, 355 F.3d 6, 19

(1st Cir. 2004).

In evaluating this claim we, like the district court, assume

but do not decide that GHL legitimately acquired trademark rights

from HCI in 1989. To prevail on appeal, however, GHL must

demonstrate that since that acquisition, it has continued to use

the mark in commerce in the United States. A trademark owner who

fails to use a mark for three consecutive years may be deemed to

have abandoned the mark, which would then fall into the public

domain. We therefore focus our inquiry on GHL's most recent three

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years of use; if GHL has failed to maintain its common law rights,6

there will be no basis for its claim of infringement.7

III. GHL's Ownership Rights

GHL contends that the district court inappropriately focused

on the public nature (or lack thereof) of GHL's use in commerce.

The company argues that, under our decision in Purolator, Inc. v.

EFRA Distrib. Inc., 687 F.2d 554 (1st Cir. 1982), the fact that

GHL's use included both transportation and subsequent sales to

consumers eliminates the need for such an inquiry. In Purolator,

we held that interstate shipment of automobile filters in unmarked

boxes, followed by solely intrastate sale, was sufficient use in

interstate commerce so as to bring the dispute within the

jurisdiction of the Lanham Act. Id. at 559. GHL cites cases from

other circuits that similarly find jurisdiction based on a

combination of non-public transportation and consumer sales. See,

e.g., John Walker and Sons Ltd. v. DeMert & Dougherty, Inc., 821

6
Although GHL alleges ownership under common law, we draw on
the statutory definition of use in commerce to determine whether
GHL's activities merit protection. See Two Pesos, Inc. v. Taco
Cabana, Inc., 505 U.S. 763, 768 (1992) (noting that "the general
principles qualifying a mark for registration under the Lanham Act
are for the most part applicable in determining whether an
unregistered mark is entitled to protection. . . .").
7
Federal registration is not required to bring a Lanham Act
claim, see U.S.C. §§ 1064, 1125 (action may be brought by "any
person" who believes he or she may be damaged), but the scope of
any common law rights vindicated would be limited to areas where
the mark is in use. See United Drug Co. v. Theodore Rectanus Co.,
248 U.S. 90, 97-98 (1918)(clarifying that a trademark is not a
right in gross or at large, but is confined to territories of use).

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F.2d 399, 408 (7th Cir. 1987) (interstate shipment of cans bearing

allegedly infringing trademark, followed by subsequent sales

overseas, brought dispute within jurisdiction of Lanham Act);

Scotch Whiskey Ass'n v. Barton Distilling Co., 489 F.2d 809, 812-13

(7th Cir. 1973) (determining that shipments of infringing labels

from the United States to Panama gave rise to extraterritorial

jurisdiction under Lanham Act). What GHL fails to recognize,

however, is the distinction between a jurisdictional inquiry and an

ownership dispute. The "use in commerce" test for establishing

jurisdiction looks at whether shipments traveled from state to

state or from the United States to a foreign jurisdiction, and not

at whether the shipments were exposed to the public. See

Techsplosion, 261 F.3d at 1195 n.8 (citing Mendes, 190 F.2d at 417-

418)("[The Mendes] ownership test is not for the purpose of

establishing the 'use in commerce' jurisdictional predicate of the

Lanham Act.").

In a second line of attack on the continuing validity of the

public use requirement, GHL argues it became obsolete with adoption

of the intent to use system in 1988. As noted earlier, see supra

n.5, applicants may now obtain registration based on plans to use

the trademark in the near future. GHL contends that if future use

is sufficient, demonstrated public awareness could not be a

prerequisite to ownership. This argument again mixes apples and

oranges. An applicant may obtain registration of a mark based on

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anticipated use, but registration connotes ownership only if the

applicant ultimately demonstrates actual use. Courts have

continued to incorporate the public use requirement as set forth in

Mendes in their ownership analyses. See Techsplosion, 261 F.3d at

1195; CCBN.com v. C-call.com, 73 F. Supp. 2d 106, 110 (D. Mass.

1999). Moreover, the requirement retains vitality as a matter of

logic. The public purpose underlying trademark protection is the

preservation of good will associated with the mark, and public

awareness is obviously a requisite of good will. See Brookfield

Comm., Inc., 174 F.3d at 1051 (observing that a mark is not

"meritorious of trademark protection until it is used in public in

a manner that creates an association among consumers between the

mark and the mark's owner").

To the extent that wholly foreign sales - thus outside the

scope of commerce regulated by Congress - are a key element of

GHL's claimed use, GHL runs into a further stumbling block. In

Avakoff v. Southern Pacific Co., 765 F.2d 1097 (Fed. Cir. 1985), a

case relied on by the district court, the Federal Circuit held that

a trademark applicant could not bolster an application for

registration based primarily on intra-corporate shipments

(admittedly nonuse) by pointing to a concurrent advertising

campaign.8 This is because advertising is not a "use within the

8
Although rendered in the context of whether the particular
use in question was sufficient to support an application for
registration, the reasoning is congruous. See Two Pesos, Inc., 505

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meaning of the statute." Id. at 1098. Under the rubric of

Avakoff, the fact that GHL follows intra-corporate shipments

(serving no source identifying function) with overseas sales is

likewise insufficient to garner trademark protection in the United

States. The subsequent sales between the United Kingdom and the

Middle East are not a "use in commerce" within the purview of the

Lanham Act. See Buti v. Perosa, S.R.L, 139 F.3d 98, 103 (2d Cir.

1998) (promotional activities in the United States did not merit

Lanham Act protection for a mark associated entirely with ongoing

business overseas).

On this basis, we affirm the district court's conclusion that,

at least as to the most recent three years of activity, GHL has not

used the Kent mark in commerce and therefore KIP demonstrated prima

facie evidence of abandonment.

IV. Intent to Resume Use

To rebut a prima facie showing of abandonment, a purported

trademark owner must demonstrate that it intends to resume use "in

the reasonably foreseeable future." Silverman v. CBS, Inc., 870

F.2d 40, 45 (2d Cir. 1989). Conclusory testimony will not

suffice; we look for evidence of "activities . . . engaged in

during the nonuse period" that manifest such intent. Imperial

Tobacco Ltd. v. Philip Morris, Inc., 899 F.2d 1575, 1581 (Fed. Cir.

1990). See also McCarthy at § 17:13 (the "vague and nebulous"

U.S. at 768.

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statements of a party can be "outweighed by his actions, which may

speak louder than words"). There is no such evidence here.

At his deposition, Kseib testified that he had never sold

goods in the United States and had taken no steps to introduce his

version of Kent Creme Bleach to the domestic market. Nothing in

GHL's method of operation suggests any interest in developing the

United States market. In fact, in the years since its alleged

purchase of the Kent mark, GHL actually decreased the minimal

contacts it had with the United States by shifting final assembly

of the product to the United Kingdom. Although Kseib said that the

prospect of litigation kept him from increasing his United States

presence, GHL failed to assert its alleged ownership for nearly a

decade after learning that KIP was also manufacturing Kent Creme

Bleach. GHL's professed interest in the United States market would

have been strengthened had GHL taken more timely action.

The district court thus properly concluded that GHL's

noncommittal, indefinite assertion of intent to resume use was

insufficient as a matter of law to rebut the presumption of

abandonment.

V. Cancellation

Having found that GHL had no United States rights in the Kent

trademark, the district court found there was no standing to pursue

cancellation of KIP's registration. We agree that GHL's claim for

cancellation is unsuccessful, but on different grounds.

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 Although the incontestable status of KIP's registration limits

the grounds for cancellation, see 15 U.S.C. § 1065, GHL bases its

claim on circumstances available to it notwithstanding such status.

In particular, GHL alleges that it has common law trademark rights

with a priority use date trumping KIP's registration, that the

registration was fraudulently obtained, and that KIP's registration

misrepresents the source of the good.

We can easily dispose of GHL's priority use claim by reference

to our determination that GHL has abandoned whatever common law

rights it may have acquired. The statutory exception for

challenging an incontestable registration based on priority common

law rights requires "use . . . continuing from a date prior to the

date of registration." 15 U.S.C. § 1065 (emphasis added).

GHL next alleges that KIP's registration was fraudulently

obtained because at the time Qashat filed his application, he was

aware of HCI's prior use of the Kent mark. An applicant for

trademark registration must submit a verified statement that no

party other than the applicant is entitled to use the mark. 15

U.S.C. § 1051(a). Qashat knew HCI had used the mark; the district

court supportably found, however, that he reasonably believed that

he was simply appropriating an abandoned mark. See Dial-a-Mattress

Operating Corp. v. Mattress Madness, Inc., 841 F. Supp. 1339, 1355

(E.D.N.Y. 1994) ("Once abandoned, the mark reverts back to the

public domain whereupon it may be appropriated by anyone who adopts

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the mark for his or her own use."). To the extent that Qashat was

aware of GHL's (rather than HCI's) operations in the Middle East,

such is not ground for fraud, especially absent any visible indicia

of GHL's use in commerce in the United States. See Person's Co. v.

Christman, 900 F.2d 1565, 1569-70 (Fed. Cir. 1990) ("Knowledge of

a foreign use does not preclude good faith adoption and use in the

United States.").

Moreover, we are satisfied that Qashat's counsel conducted a

thorough trademark search, investigating both applications and

registrations at the United States Patent and Trademark Office

(PTO). Counsel learned that HCI's application for registration had

been rejected, and the file subsequently destroyed. Upon

contacting HCI to determine whether the mark was still in use,

counsel learned of Rodino's death and the cessation of HCI's

operations. We have no illusions that Qashat sought to do anything

but capitalize on the legacy of HCI's operations in the Middle

East, but the record indicates this was permissible behavior based

on the reasonable belief that the mark was available for

appropriation.

GHL has offered no plausible reason why it waited over ten

years after KIP's application for registration to bring an action

for fraudulent acquisition. GHL's protestation that it was

difficult to locate KIP is particularly suspect in light of the

fact that an opposition or cancellation proceeding would have

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required only a filing with the PTO; KIP's whereabouts were thus

immaterial. See 37 C.F.R. §§ 2.101, 2.111 (2003).

GHL's final ground for cancellation is that KIP misrepresented

the source of the product. In light of our determination that KIP

validly adopted an abandoned mark, however, we do not see how KIP's

mark, which has included the name "Kent International Products" or

"Hair Care International" (an earlier unincorporated export venture

of Qashat's), can be said to mislead consumers.

Affirmed.

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