USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 95-1525
PHC, INC.,
Plaintiff, Appellant,
v.
PIONEER HEALTHCARE, INC., ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nancy Gertner, U.S. District Judge] ___________________
____________________
Before
Boudin, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Stahl, Circuit Judge. _____________
____________________
Michael Arthur Walsh with whom Lisa A. Richards and Choate, Hall ____________________ _________________ _____________
& Stewart were on brief for appellant. _________
Esther J. Horwich with whom Steven J. Brooks was on brief for __________________ _________________
appellees.
____________________
February 12, 1996
____________________
BOUDIN, Circuit Judge. This case presents familiar ______________
problems of federal jurisdiction, civil procedure, and the
relationship between court and agency; but the problems arise
in an unusual context: that of the unique and complex legal
regime that governs trademarks and unfair competition. Since
the appeal is from an order granting a motion to dismiss, we
draw our facts from the pleadings.
I.
Plaintiff-appellant, PHC, Inc., is a Massachusetts
corporation based in Peabody, Massachusetts, which operates
alcohol and substance abuse centers across the country.
Defendant-appellees are Pioneer Health Care, Inc. and its
management affiliate Pioneer Management Systems, Inc.
(collectively, "the Pioneer companies"); the former offers
medical care services in and near the Pioneer Valley in
western Massachusetts. The Pioneer companies are
Massachusetts corporations based in West Springfield and
their names are recorded with the Massachusetts state
secretary under Mass. Gen. L. ch. 156B, 11.
At some point it came to the attention of the Pioneer
companies that PHC was using the name "Pioneer Healthcare" or
"Pioneer Health Care" in its literature. On December 13,
1993, the Pioneer companies sent a letter to PHC which
asserted that this use violated Massachusetts law and
demanded that it stop. The letter also demanded that PHC
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cancel its earlier registration (as of February 16, 1993) of
the mark PIONEER HEALTHCARE with the U.S. Patent and
Trademark Office. A second letter to PHC threatened
litigation.
PHC responded in a March 17, 1993, letter, declining to
comply with any of the demands. The letter asserted that
geographic and product differences meant that there was no
confusion between the parties' respective uses of the
disputed terms. It asserted equitable defenses to any
infringement claim. And it said that the registration of the
Pioneer companies' names with the Massachusetts authorities
was irrelevant.
The Pioneer companies in turn filed a petition with the
U.S. Patent and Trademark Office on May 25, 1994, claiming
longstanding use of the marks PIONEER HEALTH CARE and PIONEER
HEALTH and asking the office to cancel PHC's registration on
grounds of confusion. 15 U.S.C. 1052(d), 1064. The
Pioneer companies' marks were not federally registered, but
confusion between a registered mark and an earlier
unregistered "mark or trade name," id. 1052(d), may lead to ___
the cancellation of the registered mark. Blanchard Importing ___________________
& Distributing Co. v. Societe E. Blanchard et Fils, 402 F.2d ___________________ ____________________________
797 (C.C.P.A. 1968). An administrative proceeding began
before the Trademark Trial and Appeal Board ("the Board"), a
component of the Patent and Trademark Office.
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On December 9, 1994, PHC responded by filing the present
declaratory judgment action in the district court. In its
first count, PHC sought a declaration that its own use of the
mark it had registered--PIONEER HEALTHCARE--did not violate
any rights of the Pioneer companies under section 43(a) of
the Lanham Act, 15 U.S.C. 1125(a). The second count sought
a preemptive declaratory judgment that PHC was entitled to
maintain its registration of the mark at the Patent and
Trademark Office.
After filing its district court action, PHC asked the
Trademark Trial and Appeal Board to suspend its cancellation
proceeding pending the outcome of the court action. The
Board has a rule contemplating such suspensions where a court
action may moot the matter before the agency. 37 C.F.R.
2.117. The Board complied with PHC's request, and the
administrative proceeding is now in abeyance.
Thereafter, the Pioneer companies moved in the district
court for dismissal of the declaratory judgment action,
urging inter alia that the district court lacked subject __________
matter jurisdiction and that the action itself was "an
improper attempt to circumvent the administrative process."
In a detailed opinion dated April 12, 1995, the district
court granted the motion, relying upon both of the grounds
urged and its own discretion not to "take this case from the
. . . administrative scheme designed to hear it."
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II.
The district court's first ground for dismissing PHC's
complaint was jurisdictional and bore directly on count I of
the complaint. The district court construed the letters from
the Pioneer companies to PHC as threatening a suit under
Massachusetts state law to protect their corporate names; the
court said that these letters "cannot be construed as federal
charges of infringement. Pioneer [the Pioneer companies]
does not own a federally registered mark which would enable
them to bring a federal infringement action."
Taking this view of the matter, the district court then
invoked the settled rule that where a plaintiff asks a
federal court for a declaration that it is not liable on a ___
state claim, there is ordinarily no federal question
jurisdiction. Public Serv. Comm'n of Utah v. Wycoff Co., 344 ___________________________ __________
U.S. 237, 248 (1952). This is generally true even if it is
assumed that a federal defense might have been offered to
defeat the state claim. Id.; see also Skelly Oil Co. v. ___ _________ _______________
Phillips Petroleum Co., 339 U.S. 667, 672 (1950). ______________________
On appeal, PHC responds that what it sought in the
district court was a declaration that it was not liable on an
anticipated federal claim against it, namely, a potential _______
claim by the Pioneer companies that PHC's conduct violated
section 43(a) of the Lanham Act, a provision explicitly
referenced in count I of PHC's complaint. Section 43(a)
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creates a federal civil cause of action for any one damaged
inter alia by another's use in commerce of any word, term, or __________
name that
is likely to cause confusion, or to cause mistake,
or to deceive as to the affiliation, connection, or
association of such person with another person, or
as to the origin, sponsorship, or approval of his
or her goods, services, or commercial activities by
another person.
This "false designation of origin" claim under section
43(a) is a close cousin to a claim for infringement of a
federally registered mark authorized by section 32 of the
Lanham Act, 15 U.S.C. 1114. An infringement claim under
section 32 requires that the mark be a federally registered
trademark. Id. But a section 43(a) claim, which PHC ___
purported to anticipate, does not require that the mark or
name be federally registered, Quabaug Rubber Co. v. Fabiano ___________________ _______
Shoe Co., 567 F.2d 154, 160 (1st Cir. 1977), and is commonly _________
used to prevent infringement of unregistered trademarks. 3
J. Thomas McCarthy, McCarthy on Trademarks and Unfair ______________________________________
Competition 27.03 (3d ed. 1992). A claim under section ___________
43(a) is a federal cause of action, automatically invoking
federal question jurisdiction. 28 U.S.C. 1331. See also ________
15 U.S.C. 1121(a). The more difficult question is
whether PHC could reasonably have anticipated a claim against
it under section 43(a) of the Lanham Act and therefore
brought a declaratory judgment to forestall it. Whether or
not conceived of as "jurisdictional," such reasonable
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anticipation is a settled requirement in a federal
declaratory judgment action of this character. E.g., ____
Sweetheart Plastics, Inc. v. Illinois Tool Works, Inc., 439 __________________________ __________________________
F.2d 871, 873 (1st Cir. 1971). A federal court will not
start up the machinery of adjudication to repel an entirely
speculative threat.
If one looked solely at the letters sent by the Pioneer
companies, one might be genuinely puzzled whether those
letters threatened only a suit under Massachusetts law for
the misuse of a corporate name or whether they implied as
well an intent to resort to the Lanham Act. The only statute
mentioned in the letters was "Massachusetts General Laws" and
the mention was in the context of referring to PHC's use of a
corporate "name." The letters did request cancellation of
PHC's federal trademark, but they made no specific reference
to a suit for infringement or under section 43(a).
On the other hand, the conduct of PHC, as described by
the Pioneer companies' letters, could easily amount to a
violation of section 43(a); the second letter alleged that
PHC's alleged use was "misleading, confusing, and will result
in irreparable harm"--language typical of a claim under
section 43(a). The first letter threatened to seek recovery
of damages, as well as an injunction. Damages are a standard
remedy under section 43(a), 15 U.S.C. 1117; the
Massachusetts statute protecting corporate names provides
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only for administrative and injunctive relief. Mass. Gen. L.
ch. 156B, 11.
In all events, the question under the case law on
declaratory judgments is not whether the Pioneer companies
made a specific threat to bring a section 43(a) claim or even
had such a claim in mind. The federal declaratory judgment
statute aims at resolving potential disputes, often
commercial in character, that can reasonably be feared by a
potential target in light of the other side's conduct.
Cardinal Chem. Co. v. Morton Int'l, Inc., 113 S. Ct. 1967, ___________________ ___________________
1974-75 (1993). No competent lawyer advising PHC could fail
to tell it that, based on the threatening letters and the
surrounding circumstances, a section 43(a) suit was a likely
outcome.
Quite likely PHC had tactical advantages in mind in
bringing the declaratory judgment action. But, absent a
showing of bad faith so substantial as to foreclose equitable
relief, its subjective aims do not matter. The question is
whether the Pioneer companies' letters made a section 43(a)
claim against PHC a reasonable prospect. Although the
district court did not pass explicitly upon this question, an
affirmative answer is so clear to us that there is no reason
to remand on this issue. Thus, the district court had
federal subject-matter jurisdiction as to count I.
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Federal subject matter jurisdiction over count II is
equally plain. In count II, PHC asked the court to declare
that its federally registered mark was valid; this is a
matter governed entirely by federal law and plainly within
the federal question jurisdiction of a district court.
Additionally, section 37 of the Lanham Act, 15 U.S.C. 1119,
cited in count II, empowers the federal courts to "determine
the right to registration [and] order the cancellation of
registrations" in civil cases in which a registered mark is
at issue, and provides that such determinations shall control
the Patent and Trademark Office.
III.
Although federal subject matter jurisdiction is secure
as to both count I and count II, a judge might well wonder
whether it ought to be exercised in the teeth of an
administrative proceeding pending before the Board. PHC's
claim under count II sought a declaration that PHC's federal
mark was valid; that was the very subject of the cancellation
proceeding. As for count I, issues of confusion, likely to
be addressed in the Board proceeding, might easily have been
pertinent, perhaps even controlling.
Problems of coordination and priority between court and
agency are usually discussed under the rubric of primary
jurisdiction. E.g., Massachusetts v. Blackstone Valley Elec. ____ _____________ _______________________
Co., 67 F.3d 981, 992 (1st Cir. 1995). The district court ___
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did not use this phrase, but it did rely upon two cases from
the Seventh Circuit that dismissed as premature declaratory
judgment suits brought solely to affirm federal registration
of trademarks; in each case proceedings were still pending
before the Board.1 The district court also noted that it
saw no reason "to take this case" from "an administrative
scheme designed to hear it."
The primary jurisdiction rubric is less an organized
doctrine than a set of precedents that guide courts in
deciding when an issue should be resolved in the first
instance by an agency that has special competence to address
it. United States v. Western Pacific R.R. Co., 352 U.S. 59, _____________ ________________________
64 (1956). The expertise of the agency, avoidance of
conflict, indications of legislative intent, and other
factors may permit, sometimes even require, such deference by
court to agency. Pierce, Shapiro & Verkuil, Administrative ______________
Law and Process 5.8 (2d ed. 1992). Although the agency's _______________
own decision may be subject to judicial review, such review
is customarily of a limited kind.
Two factors weigh heavily against deference to the
administrative proceeding here. First, the Board is not an
ordinary administrative agency whose findings control unless
____________________
1Homemakers, Inc. v. Chicago Home for the Friendless, ________________ _________________________________
313 F. Supp. 1087 (N.D. Ill. 1970), aff'd, 169 U.S. P.Q. 262 _____
(7th Cir., cert. denied, 404 U.S. 831 (1971); Merrick v. _____________ _______
Sharpe & Dohme, 185 F.2d 713 (7th Cir. 1950), cert. denied, ______________ ____________
340 U.S. 954 (1951).
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set aside after court review under a highly deferential
standard. Under the Lanham Act, where a contested Board
proceeding has already addressed the validity of the mark,
the Board's findings can be challenged in a civil action in
district court through new evidence, and, at least to a large
extent, the issues can be litigated afresh. 15 U.S.C.
1071(b).2 And Congress permits an initial proceeding in the
district court to challenge or affirm a federal registered
mark in civil suits in which a federally registered mark is
in issue, even without any prior resort to the Board. 15
U.S.C. 1119.
Second, at least where an infringement claim is
involved--whether directly asserted by an "owner" or
challenged in a declaratory action--there is often some
urgency. Ongoing business conduct is likely to be involved
and harm, possibly irreparable, may be accruing. Further,
the Board cannot give relief for an infringement claim,
either injunctive or by way of damages. Under these
circumstances, awaiting the Board's action is less
attractive; and this is doubly so because (as already noted)
____________________
2The law in this area is complicated, and perhaps
confused; no simple generalization does it justice. See 3 ___
Mccarthy, supra, 21.05. For present purposes, it is enough _____
that something close to de novo proceedings are often __ ____
possible. See Goya Foods, Inc. v. Tropicana Prod., Inc., 846 ___ ________________ _____________________
F.2d 848, 853 (2d Cir. 1988).
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its administrative findings can so easily be relitigated in
court.
Such reasons persuaded the Second Circuit in Goya Foods, ___________
Inc. v. Tropicana Prod., Inc., 846 F.2d 848 (2d Cir. 1988). ____ ______________________
There, a district court had dismissed a declaratory action
brought to declare the plaintiff not liable for a possible
trademark claim; the district court had relied on the fact
that a proceeding to oppose the declaratory plaintiff's
trademark application was pending before the Board in denying
the plaintiff leave to proceed in court. Distinguishing
ordinary primary jurisdiction cases, the Second Circuit ruled
that the declaratory judgment on the infringement claim
should proceed and should not await the Board's action.
We take the same view and conclude that the section
43(a) claim in the present case should not be deferred based
on primary jurisdiction concerns. The Second Circuit did not
decide whether, given that the infringement claim was to be
heard by the district court at once, a companion declaratory
claim addressed to the validity of a federally registered
mark should also be heard despite the pendency of the Board ____
proceeding. Our case does present that wrinkle, but we think
that the answer is clear at least in principle: both claims
should be heard if this course is more efficient; otherwise,
not.
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If no infringement claim were made in the district court
but only a claim that a federal registration was or was not
valid, a good argument might exist (absent unusual facts) for
awaiting the completion of any pending Board proceeding
addressed to the mark's validity. See Goya, 846 F.2d at 853. ________
But where an infringement claim is also present and is going
to be considered promptly by the court, it normally makes
sense for the court to resolve a companion validity claim at
the same time, if the issues underlying the two claims __
overlap to an extent that makes this course sensible.
It is hard to say in the abstract that such an overlap
will always exist, but our own case is probably a good
illustration. Seemingly, the section 43(a) claim may turn
largely on whether there is confusion between the registered
PHC mark and the unregistered marks that the Pioneer
companies use to describe their services; and it appears
likely that this is also a central issue, perhaps the only
issue, in determining the validity of PHC's federal
registration. Put differently, if deciding count I requires
the district court to resolve much or all of the substance of
count II, it would waste everyone's time not to settle the
registration issue now.
We are not in a position to make a final judgment
whether in this case count II should be litigated at this
time, stayed, or dismissed. Neither the parties nor the
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district court has sought to analyze in detail the
relationship between the issues underlying the two counts in
the factual context of this case; our conjecture, pointing
toward immediate consideration of count II, is plausible but
it may or may not be warranted here. The district court is
free to make its own initial judgment.
CONCLUSION
We conclude that the district court erred in dismissing
the complaint. There is nothing in the record or arguments
before us that makes it appropriate for the district court to
dismiss or defer consideration of count I. As to count II,
the district court does have authority to decide count II
and, in our view, that would be the appropriate course if
deciding count I effectively entailed deciding many or all of
the issues underlying count II.
The judgment of dismissal is vacated and the case _______
remanded for proceedings consistent with this opinion. ________
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