Subsidiary-Owned Trademarks Vulnerable to Cancellation

In Noble House Home Furnishings, LLC v. Floorco Enterprises, LLC, the Trademark Trial and Appeal Board (“TTAB”) created new precedent by granting a petition to cancel a mark registered by a subsidiary due to the fact that the defendant could only demonstrate requisite use of the trademark through its parent company. Petitioner Noble House asked the TTAB to cancel defendant Floorco’s registration for the mark NOBLE HOUSE on the grounds of abandonment. To successfully argue a claim for abandonment, the petitioner must prove to the TTAB that: (1) the mark in dispute is not in use, and (2) there is no intent to resume use. Moreover, if the petitioner is able to demonstrate that the defendant has not used the mark for at least three consecutive years, it automatically meets the standard for a prima facie showing of abandonment. This then shifts the burden to the defendant to provide evidence of use of the mark or evidence that demonstrates an intent to resume use in the relevant period of time.

While defendant Floorco was able to provide evidence that the NOBLE HOUSE mark was still in use, through a combination of marketing materials and advertisements, the TTAB took issue with the fact that the evidence could only demonstrate that Floorco’s parent company, Furnco, was the actual entity using the mark, not Floorco, the listed owner of the mark in the trademark registration.

Furthermore, the TTAB was not persuaded by Floorco’s arguments that the subsidiary-parent company relationship met the definition of “related companies,” and as such, Furnco’s use of the mark would inure to the benefit of Floorco under Section 5 of the Trademark Act. Disagreeing with Floorco, the TTAB cited Section 45 of the Trademark Act, which specifically defines that a “related company” is “any person whose use of a mark is controlled by the owner of the mark….” As such, because Furnco, the parent company, was the controlling entity in the company-relationship, but Floorco, the subsidiary, was the owner of the mark, the TTAB held that Furnco did not meet the definition of a “related company” under the Trademark Act. The TTAB held that because Floorco was the entity listed on the registration and the entity that submitted the Statement of Use, it was Floorco’s legal responsibility to control and use the mark. Furnco’s use of the mark, as a parent company, could not inure to the benefit of Floorco, and as such, the TTAB found that Floorco had abandoned its mark, granting the petition for trademark cancellation.

The precedential weight of this decision should give any companies operating under separate entities pause when filing trademark applications. As intellectual property holding companies are relatively common for tax purposes, and parent-subsidiary relationships are similarly common for a plethora of legal reasons, trademark applicants should ensure that the entity listed on the trademark application as owner of the mark is indeed the company specifically using the mark, or at the very least, is the parent if there is a relevant parent-subsidiary relationship. If the applications or registrations have already been filed, companies may want to consider the use of well-drafted trademark licensing agreements in order to avoid potential cancellation of their registration.

For more information on this topic, please visit our Trademark Oppositions & Cancellations service page, which is part of our Trademark practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the trademark firm and its trademark attorneys may be found at www.klemchuk.com.

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