Marshak v. Treadwell ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
2-9-2001
Marshak v. Treadwell
Precedential or Non-Precedential:
Docket 99-5614
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Filed February 9, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No: 99-5614
LARRY MARSHAK,
Appellant
v.
FAYE TREADWELL; TREADWELL DRIFTERS, INC; THE
DRIFTERS, INC.; BOWEN AGENCY LTD/ADMIRAL
TALENT
On Appeal from the United States District Court
for the District of New Jersey
Dist. Ct. No. 95-cv-03794
District Court Judge: The Honorable Nicholas H. Politan
Argued: January 13, 2000
Before: ALITO and BARRY, Cir cuit Judges,
and ALDISERT, Senior Circuit Judge
(Opinion Filed: February 9, 2001)
Stephen B. Judlowe, Esq. (argued)
Lisa M. Ferri, Esq.
Eve Kunen, Esq.
Vincent A. Sireci, Esq.
Hopgood, Calimafde, Kalil &
Judlowe, LLP
60 East 42nd Street
New York, New York 10165
Kenneth D. McPherson, Jr., Esq.
Mark J. Ingber, Esq.
Waters, McPherson, McNeill
300 Lighting Way
P.O. Box 1560, 7th Floor
Secaucus, New Jersey 07096
Attorneys for Appellant
James P. Flynn, Esq. (argued)
Epstein Becker & Green, P.C.
Gateway Two
12th Floor
Newark, New Jersey 07102
Joshua Levine
Law Office of Ira Levine
0-99 Plaza Road
P.O. Box 2777
Fair Lawn, New Jersey 07410
Attorneys for Appellees
OPINION OF THE COURT
ALITO, Circuit Judge:
This is an appeal from orders enter ed by the District
Court after a trial concerning the right to use the mark
"The Drifters" for a singing group. Larry Marshak, who
acquired a federally registered service mark for "The
Drifters" name in 1978, brought this action against Faye
Treadwell and others, claiming that they were infringing his
mark. The defendants contended that Marshak's federally
registered mark had been procur ed by fraud and that
Marshak was infringing senior common-law rights. After a
2
trial and post-trial motions, the District Court or dered that
Marshak's federally registered mark be canceled,
permanently enjoined Marshak from using the mark in
commerce, and required an accounting of all profits
received by Marshak since he began using the mark.
Marshak then took this appeal. We affir m in part and
dismiss in part for lack of appellate jurisdiction.
I.
The Drifters were one of the classic popular singing
groups of the 1950s and early 1960s. Among their well-
known hits were "Under the Boardwalk," "On Broadway,"
and "Save the Last Dance for Me."
The Drifters first appeared in 1953 and came under the
management of George Treadwell the following year. From
then until his death in 1967, George T readwell managed
the group through The Drifters, Inc., a New York
corporation that he formed. George T readwell hired and
paid salaries to the members of the group, who changed
continually over the years. He also scheduled the gr oup's
performances, negotiated their r ecording contracts, and
chose their music and arrangements.
In 1959, George Treadwell r eleased all of the then-
current members of the group and signed the former
members of a group called the Five Crowns to perform as
The Drifters. The new members included Charlie Thomas,
Elsbeary Hobbs, and Dock Green. Like all other members of
the Drifters, Thomas, Hobbs, and Green signed contracts
that provided in pertinent part as follows:
The Artist agrees that the name THE DRIFTERS
belongs exclusively to the employer and that he will not
at any time use the name of The Drifters or any name
similar thereto or any name incorporating The Drifters.
In the event the employee leaves the employ of The
Drifters he will not in any way advertise or attempt to
publicize the fact that he had been a member of a
singing group known as The Drifters and will not
associate his name in any manner with The Drifters;
and he further acknowledges that the name, The
Drifters, is a valuable property and any violation of this
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paragraph could not be adequately compensated by
money damages and he therefore agr ees that the
employer shall be entitled to an injunction in any
Court of competent jurisdiction to enjoin any violation
or threatened violation of the contract by the Artist.
App. at 1264.
When George Treadwell died, his wife, Faye Treadwell,
whom he married in 1955, became the sole shar eholder of
The Drifters, Inc., and she took over the management of the
group. She later formed Treadwell's Drifters, Inc., a New
Jersey corporation, and all of the assets and contractual
rights of The Drifters, Inc. were transferr ed to the new
corporation.
By the time of George Treadwell's death, Hobbs and
Green had already left the group. Charlie Thomas left
shortly thereafter, but other members continued to perform
under Treadwell's direction. By the late 1960s, however, the
popularity of "The Drifters" and similar gr oups had waned
in this country, and Treadwell focused her efforts on
Europe, where the group remained popular. After 1970, the
Drifters made few live appearances in this country, but the
group's classic recordings continued to be played on the
radio, and Atlantic Records continued to pay r oyalties to
The Drifters, Inc. or Treadwell's Drifters, Inc. See App. at
720.
Larry Marshak's involvement with The Drifters began in
1969. CBS radio had recently changed fr om a
contemporary to an "oldies" format. T o generate
enthusiasm for its format change, CBS appr oached Rock
Magazine and proposed a partnership to r eunite old singing
groups to perform live concerts. Marshak, who was an
editor at Rock Magazine, was given the task of reuniting
some of these groups for the first revival concert at the New
York Academy of Music. Among the groups that Marshak
attempted to reunite was "The Drifters." Marshak contacted
several former members of the group, including Thomas,
Hobbs, and Green, all of whom agreed to perform for
Marshak. The revival concerts were a success, and the
reunited members agreed to continue per forming under
"The Drifters" name. In 1972, Thomas, Hobbs, and Green
signed an exclusive management contract with Marshak.
4
Soon after the revival group began per forming, Marshak
received a letter from Treadwell's attorney asserting that
Marshak was infringing her right to use the gr oup's name.
App. at 244. The letter pointed out that the for mer
members of the group had signed contracts with The
Drifters, Inc. in which they had given up any right to use
the group name. Id. Despite this war ning, Marshak
persisted in his efforts to promote and market his group.
In 1971, Treadwell brought an action against Marshak in
state court in New York. Treadwell's request for a
preliminary injunction to prevent Marshak and his group
from using "The Drifters" name was denied, and the suit
was eventually dismissed in 1973 because Tr eadwell
"willfully defaulted and failed to answer interr ogatories
propounded by defendants." App. at 1245. At the trial in
the current case, Treadwell testified that she and her group
stopped performing in the United States in part because
she did not have the financial resour ces to defend her mark
against Marshak through extended litigation. See App. at
598.
Marshak, in contrast, benefitted from a r enewed interest
in "The Drifters" in the United States that had resulted
from a wave of nostalgia for the early days of rock and roll.
Throughout the 1970s, Marshak's group made recordings,
appeared on television, and gave live per formances.
Marshak began to litigate against other groups that used
the name "The Drifters" or a variant. In 1976, Marshak
learned that "The Platters," another r evived 1950s singing
group, had been successful in preventing others from using
their name by registering their service mark, and Marshak
urged Thomas, Hobbs, and Green to do the same. Marshak
convinced the trio that if they agreed to assign their rights
to the name to him, he would continue as their manager
and prevent others groups from using"The Drifters" name.
In December 1976, Thomas, Hobbs, and Green, acting as a
partnership, filed an application with the United States
Patent & Trademark Office (PTO) to r egister "The Drifters"
as a service mark for a singing group, and they assigned
their rights to Marshak. See App. at 1267. In their
registration application, Thomas, Hobbs, and Gr een each
attested that
5
no other person, firm, corporation, or association, to
the best of his knowledge and belief, has the right to
use such mark in commerce either in the identical
form thereof or in such near resemblance thereto as to
be likely, when applied to the goods of such other
person, to cause confusion, or to cause mistake, or
deceive.
See 15 U.S.C. S 1051 (1976).
Marshak filed the present action in 1995, following the
publication of Faye Treadwell's book, Save the Last Dance
for Me, in which Treadwell claimed to be the sole owner of
the Drifters mark. See App. at 875. Named as defendants
were Faye Treadwell, The Drifters, Inc., Treadwell's Drifters,
Inc., and a booking company. Marshak alleged that the
defendants had infringed his mark and had thr eatened to
continue to do so by offering Tr eadwell's book for sale and
by engaging a group to perform as The Drifters. He asserted
a claim under Section 32 of the Lanham Act, 15 U.S.C.
S 1114(a), for infringement of his federally r egistered mark,
as well as a claim under Section 43(a), 15 U.S.C.S 1125(a),
and under the statutes of New York for violation of his
common-law rights. He sought declaratory and injunctive
relief and treble and punitive damages.
In their answer, the defendants claimed that Treadwell's
Drifters had a superior common-law right to the mark, and
they asserted as an affirmative defense that Marshak's
federal registration had been procur ed by fraud. As a
counterclaim, Treadwell's Drifters r epeated the allegation of
fraudulent procurement. In addition, alleging that Marshak
had infringed and continued to infringe its common-law
right to the mark, Treadwell's Drifters asserted a claim
under Section 43(a) of the Lanham Act and a state-law
claim for unfair competition. The counterclaim sought,
among other things, cancellation of Marshak's mark,
declaratory and injunctive relief, and an accounting of
Marshak's profits.
The case was tried before a jury, which found that
Marshak or his assignors had perpetrated a fraud on the
PTO in 1976. See App. at 1562. In accor dance with this
finding, the District Court ordered the PTO to cancel
6
Marshak's federal registration. The jury also found,
however, that Treadwell and her corporation had
abandoned their common-law right to "The Drifters" mark
by 1976. Moreover, the jury found that Marshak had
established protectable common-law rights in the name by
that time.
On cross post-trial motions, the District Court upheld the
jury's verdict regarding Marshak's fraud on the PTO, but
the Court vacated the jury verdict insofar as it found that
Treadwell had abandoned her rights in 1976. Instead, the
Court held that the continuous stream of r oyalty revenues
collected by Treadwell since the 1960s was sufficient to
defeat Marshak's claim of abandonment. See Marshak v.
Treadwell, 58 F. Supp. 2d 551 (D.N.J. 1999). After
additional briefing regarding appr opriate remedies, the
Court molded the judgment to reflect that Marshak had
infringed Treadwell's Drifters' common law rights. The
Court then permanently enjoined Marshak fr om further use
of the "The Drifters" mark in commerce and ordered an
accounting of Marshak's profits for the entir e period of his
infringement -- viz., from 1970 to 1998. Marshak appealed.
II.
We begin by examining our jurisdiction to r eview the
various orders challenged on appeal. Under 28 U.S.C.
S 1292(a)(1), we plainly have jurisdiction to review the
permanent injunction prohibiting Marshak from using The
Drifters mark. Under Santana Products, Inc. v. Compression
Polymers, Inc., 8 F.3d 152 (3d Cir . 1993), the order
requiring cancellation of Marshak's federally r egistered
mark, standing alone, is not appealable under S 1292(a)(1),
but Santana Products did not r each the question whether
an order of cancellation may be reviewed pursuant to
S 1292(a)(1) when a district court also issues an injunction
against the use of the mark, as occurred her e. 8 F.3d at
155 & n.3.
When we have jurisdiction to review an or der relating to
an injunction under S 1292(a)(1), our jurisdiction extends to
matters inextricably linked to the appealable or der. See
S.E.C. v. Black, 163 F.3d 188, 194 (3d Cir. 1998). In this
7
case, the ground on which cancellation of the federally
registered mark was ordered-- fraud on the PTO -- was
also asserted by Treadwell as a defense to Marshak's claim
that she was infringing his incontestable mark. All of the
arguments raised by Marshak on appeal in connection with
the cancellation order apply as well to that defense. Under
these circumstances, the link between the or der of
cancellation and the injunctive order is close enough to
permit review of the order of cancellation at this time. See
Wrist-Rocket Mfg. Co. v. Saunders Archery Co., 516 F.2d
846, 849 (8th Cir. 1975) (court has jurisdiction under 28
U.S.C. S 1292(a)(1), to examine the merits of order granting
a permanent injunction and ordering the cancellation of
registration).
By contrast, we lack jurisdiction to review the portion of
the District Court order requiring an accounting of
Marshak's profits. Marshak contends that we have
jurisdiction under the final order rule of 28 U.S.C. S 1291,
but we do not agree. A final order is one that "leaves
nothing for the court to do but execute the judgment."
Catlin v. United States, 324 U.S. 229, 233 (1945). A finding
of liability that does not also specify damages is not a final
decision. See, e.g., Liberty Mut. Ins. Co. v. Wetzel, 424 U.S.
737, 744 (1976); Sun Shipbldg. & Dry Dock Co. v. Benefits
Rev. Bd., 535 F.2d 758, 760 (3d Cir . 1976). Although the
practical finality rule, also known as the For gay-Conrad
doctrine, permits appellate review of an order that is not
technically final but resolves all issues that are not purely
ministerial, see Forgay v. Conrad, 47 U.S. (6 How.) 201,
204-05 (1848); Cromaglass Corp. v. Fer m, 500 F.2d 601,
605 (3d Cir. 1974) (en banc), the accounting at issue in this
case does not come within that rule.
Our decision in Apex Fountain Sales, Inc. v. Kleinfeld, 27
F.3d 931 (3d Cir. 1994), a trademark infringement case, is
apposite. In Apex Fountain Sales, the District Court entered
a contempt order that, among other things, or dered an
accounting of the net profits realized from sale of the
infringing items. We held that the or der was not reviewable
under the Forgay Conrad doctrine because the
determination of net profits would not be easily reached.
See id. at 936.
8
In Goodman v. Lee, 988 F.2d 619 (5th Cir. 1993), the
Fifth Circuit addressed circumstances similar to those with
which we are confronted. In that case, Shirley Goodman
sued the heirs of her former recor ding partner, Audrey Lee,
for copyright ownership rights to their 1956 hit song, "Let
the Good Times Roll." The jury found in favor of Goodman,
and the District Court ordered the r egistrar of copyrights to
correct the records of the copyright office to reflect
Goodman's ownership. Furthermore, the Court ordered
Lee's heirs to account to Goodman for one-half of all
royalties paid over the 29-year period between the time of
the song's release and the date of the judgment. The
District Court did not reduce the award to a certain sum.
On appeal, the Fifth Circuit acknowledged a line of cases
in which appeal had been permitted prior to afinal
accounting because the accounting was viewed as"purely
`ministerial' and/or `mechanical.' " Id. at 626 (citing Winston
Network v. Indiana Harbor Belt R. Co., 944 F .2d 1351 (7th
Cir. 1991); Parks v. Pavkovic, 753 F .2d 1397 (7th Cir.
1985)). However, the Goodman Court concluded that the
accounting in the case before it would not be purely
ministerial:
The award contemplates identifying royalties paid on
one particular song to songwriter now dead and
thereafter to his heirs over an almost thirty (30) year
period. . . . Clearly, the amount to be divided is not
known, was not identified in the extensive district
court experience and must be reconstructed r equiring
factual determinations by the district court.
Id. at 627. Therefore, the Court held that the judgment was
not within the Forgay-Conrad rule and was not an
appealable final order. Id.
A similar result was reached in Zwack v. Kraus Bros &
Co., 237 F.2d 255 (2d Cir. 1956). There, a Hungarian firm
sought injunctive relief against its United States distributor
to enforce its trademark, as well as damages and an
accounting of profits. The District Court held the
distributor liable but referred the matter to a special master
for an accounting of profits. The Second Cir cuit held that
the reference to the special master to determine damages
rendered the entire order interlocutory. See id. at 261.
9
In this case, as in the cases noted above, the accounting
cannot reasonably be characterized as mer ely ministerial.
The District Court ordered Marshak "to account to
Treadwell for the profits he ear ned in each year, beginning
with the first act of infringement in 1970 and ending with
the first day of trial testimony in this case." App. at 87. As
in Apex Fountain Sales, the parties her e have a long history
of contentious litigation, and there is a substantial
likelihood that "one or both parties will dispute the ultimate
amount of damages awarded, leading to a second appeal.
This would be contrary to the federal judiciary's general
policy against piecemeal litigation." Apex Fountain Sales, 27
F.3d at 935.
We are aware that the District Court, in denying
Treadwell's request that a special master be appointed,
expressed the opinion that "the accounting will not be
complicated or exceptional," App. at 1687 n.2, but that
statement was made in a notably differ ent context. An
accounting may seem simple enough to persuade a District
Court that the appointment of a special master is not
necessary and still be far from ministerial in the sense
relevant here. We must ther efore dismiss Marshak's appeal
insofar as it contests the portion of the district court order
requiring an accounting.1
III.
Turning to the merits of the issues over which we have
jurisdiction, we first consider Marshak's ar guments relating
to Treadwell's fraudulent procur ement defense and
counterclaim.
_________________________________________________________________
1. We are thus unable to expr ess our view as to whether any accounting
should have been limited to the period of the appr opriate statute of
limitations. If on remand the District Court goes forward with the
accounting, consideration of the propriety of that remedy will have to
await the completion of the accounting and the entry of a final order. We
recognize that this procedure may r esult in a considerable waste of time
and resources in connection with the accounting, but the scope of our
appellate jurisdiction leaves no alternative.
10
A.
Marshak argues that the fraudulent procur ement defense
and counterclaim are time-barred. Relying chiefly on our
decision in Beauty Time, Inc. v. VU Skin Sys., Inc., 118 F.3d
140, 143 (3d Cir. 1997), Marshak maintains that the
Lanham Act does not specify the time within which a claim
of fraudulent procurement may be asserted, that it is
therefore appropriate to borr ow the most analogous state
statute of limitations, and that under the most analogous
state statute -- either the New York or the New Jersey six-
year statute of limitations for actions sounding in fraud --
Treadwell's claim is barred. W e reject this argument based
on the plain language of the Lanham Act.
Treadwell's counterclaim was br ought under Section 14
of the Lanham Act, 15 U.S.C. S 1064, which specifies in
detail the time limits for petitioning to cancel a mark on
various grounds. This provision states in relevant part:
A petition to cancel a registration of a mark, stating the
grounds relied upon, may, upon payment of the
prescribed fee, be filed as follows by any person who
believes that he is or will be damaged . . . by the
registration of a mark on the principal r egister
established by this chapter . . .
* * *
(1) Within five years from the date of the registration
of the mark under this chapter.
(2) Within five years from the date of publication
under section 1062(c) of this title of a mark
registered under the Act of March 3, 1881, or the Act
of February 20, 1905.
(3) At any time if the register ed mark becomes the
generic name for the goods or services, or a portion
thereof, for which it is registered, or has been
abandoned, or its registration was obtained
fraudulently or contrary to the provisions of section
1054 of this title or of subsection (a), (b), or (c) of
section 1052 of this title for a registration under this
chapter.
11
Lanham Act S 14, 15 U.S.C. S 1064 (emphasis added).
The first step in interpreting a statute is to determine
"whether the language at issue has a plain and
unambiguous meaning with regard to the particular
dispute in the case." Robinson v. Shell Oil Co., 519 U.S.
337, 340 (1997). See also, e.g., Michael C. v. Radnor
Township Sch. Dist., 202 F.3d 642, 648-49 (3d Cir. 2000);
Deane v. Pocono Med. Ctr., 142 F .3d 138, 146 (3d Cir. 1998)
(en banc). "The plainness or ambiguity of statutory
language is determined by reference to the language itself,
the specific context in which that language is used, and the
broader context of the statute as a whole." Robinson, 519
U.S. at 341. Where we find that the statutory language has
a clear meaning, we need not look further. Id. at 340.
Here, the meaning of the phrase "at any time" in Section
14 (3) is clear even if that particular subsection is viewed in
isolation. Moreover, the contrast between the five-year time
limits imposed in subsections (1) and (2) and the use of the
phrase "at any time" in subsection (3) r einforces the point
that the language of subsection (3) means what it says: a
petition falling within subsection (3), including a petition
seeking cancellation based on fraud, is not subject to any
time limit but may be filed "at any time." W e note that the
Supreme Court has recognized that the pr edecessor of the
current Section 14(3) "allows cancellation of an
incontestable mark at any time . . . if it was obtained
fraudulently." Park `n Fly, Inc. v. Dollar Park and Fly, Inc.,
469 U.S. 189, 195 (1985) (emphasis added).2
We recognize that Section 14(3) itself applies to a petition
filed with the Patent and Trademark Office, rather than a
claim asserted in court, but Section 37 of the Lanham Act,
15 U.S.C. S 1119,3 gives federal courts concurrent authority
_________________________________________________________________
2. We also note that the PTO has consistently held that the phrase "at
any time" precludes a laches defense to a cancellation action premised
on fraudulent procurement. See Harjo v. Pro Football, Inc., 30 U.S.P.Q.2d
1828, 1831 (T.T.A.B. 1994); TBC Corp. v. Grand Prix Ltd., 12 U.S.P.Q.2d
1311, 1313 (T.T.A.B. 1989); Bausch & Lomb, Inc. v. Leupold & Stevens,
Inc., 1 U.S.P.Q.2d 1497, 1499-1500 (T .T.A.B. 1986).
3. Section 37 provides:
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to cancel registered marks when the validity of the mark is
called into question in a judicial proceeding. See Ditri v.
Coldwell Banker Residential Affiliates, Inc., 954 F.2d 869,
873 (3d Cir. 1992); Simmonds Aerocessories, Ltd. v. Elastic
Stop Nut Corp., 257 F.2d 485, 491 (3d Cir . 1958). As we
explained in Ditri, "[a]lthough a petition to the Patent and
Trademarks Office is the primary means of securing a
cancellation, the district court has concurr ent power to
order cancellation as well for the obvious r eason that an
entire controversy may thus be expediently resolved in one
forum." Id. at 873. We see no r eason why Congress would
have wanted to allow a petition for cancellation under
Section 14(3) to be filed with the PTO "at any time" but to
subject an identical request, when entertained by a District
Court pursuant to its concurrent power under Section 37,
to a state statute of limitations. Such a regime would
prevent a case like the one before us fr om being
"expediently resolved in one forum." Id.
The language of the Lanham Act also makes it clear that
there is no time limit on the assertion of fraudulent
procurement as a defense to an infringement claim brought
by the holder of a mark that has become incontestable.
Under Section 15 of the Lanham Act, 15 U.S.C. S 1065, an
otherwise incontestable mark may be attacked "on a
ground for which application to cancel may befiled at any
time under paragraphs (3) and (5) of section 1064 of this
title." Accordingly, the language of the Lanham Act makes
it clear that a claim for cancellation of a mark based on
fraudulent procurement and a defense to an otherwise
_________________________________________________________________
In any action involving a registered mark the court may determine
the right to registration, order the cancellation of registrations,
and
otherwise rectify the register with r espect to the registrations
of any
party to the action. Decrees and orders shall be certified by the
court to the Director, who shall make appropriate entry upon the
records of the Patent and Trademark Office, and shall be controlled
thereby.
15 U.S.C. S 1119.
13
incontestable mark on a similar ground may be asserted at
any time.4
The reason for this rule is quite simple--the interest
vindicated by Section 14 is not just the injury to the
challenging party, but the integrity of the r egister. Where
the interest at issue is the integrity of the federal register,
a statute of limitations should not operate to frustrate that
interest. See Harjo v. Pro Football, Inc., 30 U.S.P.Q.2d 1828,
1831 (T.T.A.B. 1994) ("The Boar d has held that the
equitable defenses of laches and estoppel ar e not available
against claims of fraud and abandonment because ther e
exists a broader interest--a `public policy' interest--in
addition to a private interest in removing from the register
those registrations procured or maintained by fraud and
those registrations for marks that have been abandoned.");
TBC Corp. v. Grand Prix Ltd., 12 U.S.P.Q.2d 1311, 1313
(T.T.A.B. 1989) ("Where the pr oposed ground for
cancellation is abandonment, equitable defenses should be
unavailable for the same reason they have been held
unavailable when the ground asserted is descriptiveness or
fraud. It is in the public interest to r emove abandoned
registrations from the register . We therefore hold that the
_________________________________________________________________
4. The origins of the "at any time" language of Section 14(3) support this
conclusion. This language derives from Section 13 of the Trademark Act
of 1905, 15 U.S.C. S 93. That section pr ovided that "whenever any
person shall deem himself injured by the r egistration of a trade-mark in
the Patent Office he may at any time apply to the Commissioner of
Patents to cancel the registration." (emphasis added). The accepted
meaning of the phrase "at any time" under the 1905 Act was that it
excluded the defense of laches in a cancellation pr oceeding. See Dwinell-
Wright Co. v. National Fruit Prod. Co., 129 F.2d 848, 853 (1st Cir. 1942);
White House Milk Prods. Co. v. Dwinell-W right Co., 111 F.2d 490, 493
(C.C.P.A. 1940); Cluett, Peabody & Co. v. Hartogensis, 41 F.2d 94, 97
(C.C.P.A. 1930). The language in the 1905 Act, in turn, was derived from
a line of Supreme Court precedent holding that laches would not bar an
injunction against future infringement, but only an accounting for past
profits. See Saxlehner v. Eisner & Mendelson Co., 179 U.S. 19 (1900);
Menendez v. Holt, 128 U.S. 514 (1888); McLean v. Fleming, 96 U.S. (6
Otto.) 245 (1877). It is telling that although the Lanham Act now
specifically provides that an infringement action is subject to equitable
defenses, see 15 U.S.C. S 1125, the statute continues to provide that a
mark is vulnerable to a cancellation proceeding"at any time."
14
prior registration defense is unavailable in a proceeding
where the issue is abandonment."). Accor dingly, we hold
that Treadwell's fraudulent procur ement defense and
counterclaim were not time-barred.
Marshak's only attempt to address the language of the
Lanham Act permitting fraudulent procur ement to be
asserted in these contexts "at any time" appears in his
reply brief, where he argues that this language merely
reflects the fact that the grounds for cancellation covered
by Section 14(3), such as a mark's becoming generic,"are
of a type in which the right to bring cancellation may arise
`at any time', i.e., some years (very possibly more that the
five years of Section 1064(1)) after trademark r egistration."
Reply Br. at 4 (emphasis in original). Marshak suggests that
once a plaintiff has become aware of the necessary
predicate for bringing a cancellation pr oceeding, the
plaintiff should be required to do so within the limitations
period specified by the most analogous state statute.
Marshak's argument cannot be reconciled with the plain
language of Section 14(3), which, as noted, pr ovides
unambiguously that a petition seeking cancellation based
on fraudulent procurement "may . . . befiled" "at any time."
Marshak would read Section 14(3) as essentially a tolling
provision, but the drafters of this provision would surely
have selected different language if that is what they had
intended. For all these reasons, we hold that T readwell's
counterclaim and defense are not time-barr ed.
This holding is entirely consistent with our decision in
Beauty Time, on which Marshak relies. In Beauty Time,
count XI of the complaint asserted a claim under Section
38 of the Lanham Act, 15 U.S.C. S 1120, which provides as
follows:
Any person who shall procure registration in the Patent
and Trademark Office of a mark by a false or
fraudulent declaration or representation, oral or in
writing, or by any false means, shall be liable in a civil
action by any person injured thereby for any damages
sustained in consequence thereof.
A claim for damages brought under Section 38 is not
governed by any of the time limits set out in Section 14(3)
15
or any other provision of the Act specifying a limitations
period, and therefore we held that the plaintiff 's Section 38
claim for fraud was subject to Pennsylvania's two-year
statute of limitations for actions based on fraud. 118 F.3d
at 143-49. We did not mention Section 14(3) or suggest that
a request for cancellation pursuant to that section is
subject to a state statute of limitations. Thus, Beauty Time
does not support Marshak's argument her e.5
B.
Marshak argues that Treadwell's fraudulent procurement
defense and counterclaim were barr ed by principles of
collateral estoppel. In the District Court, Marshak relied on
several prior adjudications, but on appeal he focuses on
Marshak v. Sheppard, 666 F. Supp. 590 (S.D.N.Y. 1987), a
Lanham Act action brought by Marshak against, among
_________________________________________________________________
5. Marshak also relies (see Appellant's Br . at 33, Reply Br. at 2) on the
statement in 5 J. Thomas McCarthy, McCarthy on T rademarks and
Unfair Competition S 31:59, at 31-108 (4th ed. 2000), that "[w]hen fraud
is used as a basis for challenging the validity of an incontestable
registration, the claim must be asserted within the relevant statute of
limitations." On its face, this statement supports Marshak's argument,
but we decline to follow it in the particular context here, i.e., where
Section 14(3) applies. The treatise does not attempt to explain how this
sweeping statement can be reconciled with the language of Section 14(3),
and elsewhere the treatise recognizes that a request to cancel based on
fraud may be filed at any time. 5 McCarthy, supra, S 31:80.
Furthermore, the authority cited by the treatise in support of this
statement, Calzaturificio Rangoni S.p.A. v. United States Shoe Corp., 868
F. Supp. 1414 (S.D.N.Y 1994), is unconvincing. Borrowing a state statute
of limitations, the District Court in that case r elied solely on a prior
District Court decision that had applied a state statute to a false
advertising claim brought under Section 43(a) of the Lanham Act. See
868 F. Supp. at 1420 (relying on PepsiCo., Inc. v. Dunlop Tire & Rubber
Corp., 578 F. Supp. 196, 198 (S.D.N.Y . 1984)). A false advertising claim
under Section 43(a), however, is quite dif ferent from a request for
cancellation under Section 14(3). Assuming that it is appropriate to
apply a state statute to such a Section 43(a) claim, it does not follow
that
all other Lanham Act claims or defenses relating to fraud must be
treated similarly even if the language of the Act expressly addresses the
question of the time within which those claims or defense may be
asserted.
16
others, a performer who appeared with a group called "Rick
Sheppard and the Drifters."6 In that case, Sheppard
unsuccessfully sought cancellation of Marshak's r egistered
mark on grounds very similar to those asserted by
Treadwell in this case, and Marshak contends that
Treadwell is bound by the judgment in that case. Marshak
acknowledges that Treadwell was not a party in Marshak v.
Sheppard, but he maintains that she is bound on the
ground that she wielded a "laboring oar" on behalf of the
defendants. Appellant's Br. at 49.
The principle on which Marshak relies is aptly stated as
follows in the Restatement (Second) of JudgmentsS 39:
A person who is not a party to an action but who
controls or substantially participates in the control of
the presentation on behalf of a party is bound by the
determination of issues decided as though he were a
party.
Comment c. adds:
To have control of litigation requir es that a person have
effective choice as to the legal theories and proofs to be
advanced in behalf of the party to the action. He must
also have control over the opportunity to obtain review.
Cf. Collins v. E.I. DuPont de Nemours & Co., 34 F.3d 172,
176 (3d Cir. 1994) (New Jersey law).
Here, Marshak has not pointed to any dir ect evidence
that Treadwell exercised any contr ol over the prior
litigation. Indeed, his brief notes only two concr ete facts
that are relevant: Treadwell testified in the prior case and
had an interest in the outcome (in the sense that she would
have benefitted if Marshak's federally registered mark had
_________________________________________________________________
6. The section of Marshak's brief concerning collateral estoppel
(Appellant's Br. at 48-49) does not r efer to the dismissal of Treadwell's
1971 action in New York state court. As noted, that case was dismissed
because Treadwell did not comply with discovery. The District Court held
that, under New York law, such a dismissal was without prejudice. See
Marshak, 58 F. Supp. 2d at 562 n.17 (citing Maitland v. Trojan Elec. &
Mach. Co., 480 N.E.2d 736, 737 (N.Y. 1985)). Because Marshak does not
rely on this dismissal as a basis for his collateral estoppel argument, we
need not consider that issue here.
17
been ordered canceled). Appellant's Br . at 49. Without
more, these facts are plainly insufficient to permit a
reasonable inference that she exer cised any control over
litigation decisions or strategy. Marshak's collateral
estoppel argument must therefore be rejected.
C.
Marshak contends that the jury's finding of fraud was
based on an erroneous jury instruction, which stated that
fraud on the PTO could be shown by proof that the
applicants "should have known" about T readwell's superior
right to "The Drifters" name. Although we agr ee with
Marshak that this instruction was erroneous, we are
convinced that the error was harmless.
Most of the District Court's lengthy instruction on
fraudulent intent is unobjectionable,7 but at several points,
the Court told the jury that "[t]he defense of fraud will turn
upon whether you believe that the persons who r egistered
the mark knew or reasonably should have known that
someone else had legal rights to the name `The Drifters.' "
App. at 1482-83 (emphasis added). Marshak objects that
the "should have known" language misstates the nature of
the PTO oath and the requisite measure of proof.
At the time when Thomas, Hobbs, and Green submitted
their declaration, an applicant was requir ed to state that
no other person, firm, corporation, or association, to
the best of his knowledge and belief, has the right to
use such mark in commerce either in the identical
form thereof or in such near resemblance thereto as to
be likely, when applied to the goods of such other
person, to cause confusion, or to cause mistake, or
deceive.
15 U.S.C. S 1051 (1976) (emphasis added). Thus, applicants
attested only to their own subjective knowledge and belief.
To demonstrate that a federal registration was
fraudulently procured, therefor e, a challenging party must
_________________________________________________________________
7. Much of the charge is set forth in the District Court's opinion. See
Marshak, 58 F. Supp. 2d at 566-67.
18
adduce evidence that the registrant actually knew or
believed that someone else had a right to the mark. See
Metro Traffic Control, Inc. v. Shadow Network Inc., 104 F.3d
336, 340 (Fed. Cir. 1997); see also 5 McCarthy supra,
S 31:76. Accordingly the instruction given by the District
Court was not entirely correct.8
The error, however, was har mless because " `it is highly
probable that [it] did not affect the outcome of the case.' "
West v. Philadelphia Elec. Co., 45 F .3d 744, 752 (3d Cir.
1995). The "should have known" language used by the
District Court could have affected the ver dict only if a
properly instructed jury would have found that the
applicants had an actual but unreasonable belief that no
one else had a right to use "The Drifters" name. However,
based on the evidence in this case, we are convinced that
a properly instructed jury would not have made such a
finding. Marshak has not called to our attention any
appreciable evidence that the applicants had a sincere
belief that no one else had a right to the mark, and there
was very strong evidence to the contrary. Marshak's cross-
_________________________________________________________________
8. In support of its instruction, the District Court relied on G.H. Mumm
& CIE v. Desnoes & Geddes, Ltd., 917 F.2d 1292, 1296 (Fed. Cir. 1990),
and Torres v. Cantine Torresella S.r.l., 808 F.2d 46, 49 (Fed. Cir. 1986).
In both of those cases, the Court stated that an applicant knowingly
attempts to mislead the PTO if the applicant files a renewal application
stating that its mark is currently in use in interstate commerce but the
applicant "knows or should know" that this is not true. Neither case
involved a jury instruction, and we do not interpr et those cases as
taking
the position that proof of subjective bad faith is unnecessary in order to
prove fraud on the PTO. On the contrary, T orres emphasizes that an
applicant must act "knowingly" in order to commit such a fraud. 808
F.2d at 48. We understand these opinions to mean simply that in the
particular context presented there -- where the representation related to
a matter about which the applicant almost certainly had subjective
knowledge, i.e., whether the applicant's own company was using the
mark in commerce -- proof that the applicant should have known was
ample to prove actual knowledge. We note that the Federal Circuit has
subsequently held that proof of actual knowledge or belief is necessary
in the context of fraudulent procurement.See Metro Traffic Control, 104
F.3d at 340. We also note that even T readwell's brief seems to give G.H.
Mumm and Torres a similarlynarrow interpretation. See Appellee's Br. at
48-49 & n. 12.
19
examination, in which excerpts of Thomas' deposition were
read, essentially produced the admission that George
Treadwell had been "the true owner of the Drifters' name,"
that George Treadwell "had rights to the name," and that
Thomas had simply been "an employee." App. 470.
Similarly, when Marshak was asked whether a member of
"The Drifters" during the George T readwell era "would . . .
have had the right to use the name Drifters," Marshak
responded that "[t]he only person who has the right to the
name is the person that develops it and keeps it in the
public's eye." App. 510. Marshak also testified that a
member of "The Drifters" was simply an "employee" and
that an employee of a group that provides entertainment
cannot "go around saying he is [the gr oup]." See App. 1662.
In view of the evidence, we are convinced that the mistake
in the jury instruction was harmless.
D.
Marshak's final argument concerning fraudulent
procurement is that there was insufficient evidence to
support the jury's finding. The jury's ver dict must be
sustained if it is rationally supported, see Starceski v.
Westinghouse Elec. Corp., 54 F.3d 1089, 1098 (3d Cir.
1995), and the verdict here has ample support. In addition
to the direct evidence just mentioned r egarding the
applicants' and Marshak's subjective knowledge and belief,
there was substantial circumstantial evidence from which
such knowledge or belief could be inferred. As noted, the
applicants had signed contracts acknowledging that the
name "The Drifters" belonged exclusively to their employer
and that they had no right to that name. Under those
contracts, if they left the group, they could not even
publicize the fact that they had been members.
In arguing that the evidence was insufficient, Marshak
relies on the 1971 ruling of the New York state court
denying Treadwell's request for a pr eliminary injunction
and opining that Treadwell had not established that
Marshak or the members of his group "ha[d] been infringing
upon [her] good name and good will." App. 724. This was
certainly evidence for the jury to consider, but it is
20
insufficient to overturn the jury's ver dict.9 We thus hold
that fraud in the procurement of the federal mark was
properly proven and that cancellation was justified.
IV.
We now consider Marshak's arguments r elating to
Treadwell's claim that Marshak was infringing upon her
superior common-law right. As previously noted, the
counterclaim of Treadwell's Drifters asserted a claim under
Section 43(a) of the Lanham Act, 15 U.S.C. S 1125(a), based
on Marshak's alleged infringement of their common law
right to "The Drifters" mark. In order to prove this claim,
the counterclaimant was required to show that "(1) the
mark [was] valid and legally protectable; (2) the mark [was]
owned by the plaintiff; and (3) [Marshak's] use of the mark
to identify goods or services [was] likely to create confusion
concerning the origin of the goods or services." Fisons
Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 472 (3d
Cir. 1994). The jury did not find that the counterclaimant
had established these elements. On the contrary, the jury
found that Treadwell and her companies had abandoned
their common law rights and that Marshak had not used
"The Drifters" name in such a way as to misr epresent the
source of his goods or services or to falsely suggest a
connection between those services and Tr eadwell's Drifters.
App. at 1562. The District Court, however, explicitly
granted judgment as a matter of law in favor of the
counterclaimant on the issue of abandonment and, in
effect, did the same thing with respect to the entire Section
_________________________________________________________________
9. The evidence regarding the 1971 state court ruling does not
undermine our conclusion that the error in the jury instruction
discussed in part III.C, supra, was har mless. The jury instruction error
related to the question of subjective knowledge or belief, but the
evidence
concerning the 1971 state court ruling is evidence of objective
reasonableness, not the applicants' subjective state of mind. As the
District Court noted, "Marshak has cited no testimony or other evidence
that he or his assignors subjectively believed that the dismissal of
Treadwell's 1971 lawsuit constituted afinal adjudication of their
trademark rights," 58 F. Supp. 2d at 562, and thus established that
Treadwell had no right to the use of"The Drifters" name.
21
43(a) counterclaim. On appeal, Marshak challenges this
disposition on several grounds.
A.
Marshak contends that the District Court err ed in
entering judgment as a matter of law against him on the
issue of abandonment.10 W e do not agree.
Section 45 of the Lanham Act, 15 U.S.C. S 1127, provides
that "[a] mark shall be deemed abandoned . . . [w]hen its
use has been discontinued with intent not to r esume use."
"To establish the defense of abandonment it is necessary to
show not only acts indicating a practical abandonment, but
an actual intent to abandon." Saxlehner v. Eisner &
Mendelson Co., 179 U.S. 19, 31 (1900). "Intent not to
resume may be inferred from cir cumstances," 15 U.S.C.
S 1127, but "abandonment, being in the nature of a
forfeiture, must be strictly proved." United States Jaycees v.
Philadelphia Jaycees, 639 F.2d 134, 139 (3d Cir. 1981).
Thus, in order to show that there was an abandonment
of the common law rights originally acquired by George
Treadwell and The Drifters, Inc., Marshak bore the burden
_________________________________________________________________
10. Even if the jury had sustained Marshak's federal registration, it
would still be necessary to consider the question of abandonment. Even
if a junior user's mark has attained incontestable status, such status
does not cut off the rights of a senior user . See Natural Footware Ltd.
v.
Hart, Schnaffner & Marx, 760 F.2d 1383, 1395 (3d Cir. 1985) ("[A] federal
registrant is still subject to the defense of a prior user of the mark who
has established a market in specific areas notwithstanding that senior
user's failure to register.");see also 815 Tonawanda Street Corp.v. Fay's
Drug Co., 842 F.2d 643, 646 (2d Cir . 1988) ("[T]he plain meaning of the
S 1065 exception is that if a party has acquir ed common-law trademark
rights continuing since before the publication of the federal
registration,
then to that extent the registration will not be incontestable.")
(citations
omitted)); Cuban Cigar Brands N.V. v. Upmann Int'l, Inc., 457 F. Supp.
1090, 1100 (S.D.N.Y. 1978) ("[D]efendant's marks are not incontestable
as against that of plaintiff for, since defendant's use infringes
plaintiff 's
valid common law rights obtained long prior to defendant's registration,
it has no shield of incontestability in a suit by plaintiff to enforce
that
mark."). Since Marshak has used "The Drifters" continuously since 1970,
his ability to enjoin Treadwell's use depends on whether she abandoned
the mark.
22
of "strickly" proving (a) that use of The Drifters mark had
been discontinued in the United States1 1 and (b) that the
owner of the common law rights had the actual intent to
abandon the mark. Marshak could have established a
prima facie case of abandonment, however, by proving non-
use in this country for two consecutive years. Lanham Act
S 45, 15 U.S.C. 1127 (1994).12
Here, the District Court found that ther e was no
abandonment as a matter of law because "the original
Drifters recordings have been played on the radio and sold
in record stores, without interruption, for the past 40
years." Marshak, 58 F. Supp. 2d at 575. The District Court
adopted the reasoning of The Kingsmen v. K-Tel Int'l, Ltd.,
557 F. Supp. 178, 183 (S.D.N.Y. 1983), in which the court
held that a mark designating a disbanded singing gr oup
remained in use because the group's r ecordings were
played and the group continued to collect r oyalties. The
court wrote:
We find that defendants have failed to show either non-
use or intent to abandon. Even though plaintif fs
disbanded their group in 1967 and ceased r ecording
new material, there is no evidence suggesting that they
failed to use the name Kingsmen during the period
from 1967 to the present to promote their previously
recorded albums. Moreover, the fact that these
individuals continue to receive royalties for Kingsmen
recordings flies in the face of any suggestion of intent
to abandon use of the name Kingsmen. These plaintif fs
have no more abandoned their right to pr otect the
name of Kingsmen than have The Beatles, The
Supremes or any other group that has disbanded and
ceased performing and recor ding, but continues to
collect royalties from the sale of pr eviously recorded
material. We must reject defendants' contentions that
_________________________________________________________________
11. For purposes of trademark rights in the United States, "use" means
use in the United States, not in other nations. See Rivard v. Linville,
133
F.3d 1446, 1448-49 (Fed. Cir. 1998).
12. In 1994, the statute was amended to pr ovide that three, not two,
years of nonuse were needed to make out a prima facie case of
abandonment.
23
the name Kingsmen has been abandoned to the public
domain.
Id.
We concur with this reasoning, and we also agree with
the District Court that it mandates the entry of judgment
as a matter of law against Marshak. As the District Court
put it, "[a] successful musical group does not abandon its
mark unless there is proof that the owner ceased to
commercially exploit the mark's secondary meaning in the
music industry." Marshak, 58 F. Supp. 2d at 575; see also
Robi v. Reed, 173 F.3d 736 (9th Cir . 1999); HEC Enters.,
Ltd. v. Deep Purple, Inc., 213 U.S.P.Q. 991 (C.D. Cal. 1980).
Marshak bore the burden of proving non-use and actual
intent to abandon. United States Jaycees v. Philadelphia
Jaycees, 639 F.2d at 139. Tr eadwell's Drifters were entitled
to judgment as a matter of law on the issue of
abandonment because, even giving Marshak the benefit of
all reasonable inferences, Bar na v. City of Perth Amboy, 42
F.3d 809, 813 n.5 (3d Cir. 1994), the evidence was
insufficient to establish those elements. Motter v. Everest &
Jennings, Inc., 883 F.2d 1223, 1228-29 (3d Cir. 1989).
Marshak did not prove non-use, i.e., that the classic
recordings of "The Drifters" wer e not played and that the
resulting royalties were not paid. On the contrary, the
parties stipulated that "The Drifters" r ecords and albums
continue to be played and sold in the United States and
that many of their songs have now been recor ded on
compact disk and re-released. App. at 110. In addition,
Treadwell testified that The Drifters, Inc. and Treadwell
Drifters, Inc. have continuously received r oyalties from
Atlantic Records for the sale of Drifters r ecords in the
United States. App. at 720. Likewise, Marshak failed to
prove an actual intent to abandon. The continuous use of
the mark in connection with the commercial exploitation of
the group's recordings in this country gave rise to a strong
inference of an intent not to abandon the mark.
In arguing that judgment as a matter of law was
improper, Marshak relies on the following evidence. First,
Treadwell dropped her 1971 action against Marshak in New
York state court after the court denied her application for a
24
preliminary injunction and issued an unfavorable opinion.
Second, Treadwell did not oppose the federal registration of
Marshak's mark or previously seek to have it canceled.
Third, Treadwell failed to challenge numerous violations of
"The Drifters" name, whereas Marshak stopped those uses
through legal action. Fourth, Treadwell left for England in
1972. Fifth, Treadwell's English r ecording contracts did not
provide for distribution in the United States. However, once
it is recognized that the commercial exploitation of classic
Drifters recordings in this country constitutes use, it is
apparent that the evidence that Marshak cites is
insufficient to show either the non-use and or the actual
intent to abandon that are necessary for afinding of
abandonment.
B.
Marshak argues that the District Court err ed in holding
that he infringed the common-law rights held by
Treadwell's Drifters. We conclude, however, that Treadwell's
Drifters were entitled to judgment as a matter of law on
their infringement claim.
As previously noted, Treadwell's Drifters were required to
show (1) that their mark was valid and legally pr otectable;
(2) that they owned the mark; and (3) that Marshak's use
of the mark to identify his group was likely to create
confusion concerning their origin. Fisons Horticulture, Inc.,
30 F.3d at 472. In view of our holding r egarding
abandonment, there can be no question r egarding elements
one and two, and we do not understand Marshak to contest
those elements on any other ground.
With regard to the third element, Marshak argues that
the District Court should not have disturbed the jury's
finding that Marshak had not used "The Drifters" name in
such a way as to misrepresent the sour ce of his goods or
services or to falsely suggest a connection between those
services and Treadwell's Drifters. App. at 1562. We agree
with the District Court, however, that a r easonable
factfinder could not fail to find a likelihood of confusion on
the facts of this case. As the District Court wr ote,
"Marshak's group performs under the name `The Drifters'
25
and sings the same hit songs that were r ecorded and made
famous by the original Drifters in the fifties and sixties.
There is surely a likelihood of confusion because the public
is misled to believe that Marshak's singers and the famous
Drifters records originate from the same source." App. at
1681-82. Although infringement is generally a question for
the jury, the evidence here mandated judgment for the
counterclaimant and justified the entry of the permanent
injunction barring Marshak from using the Drifters mark.
We have considered all of Marshak's ar guments, and we
find no basis for reversal of the portions of the District
Court's orders that are properly before us.
V.
For these reasons, we affirm the or ders of the District
Court insofar as they order cancellation of Marshak's
federal registration and permanently enjoin Marshak from
using The Drifters name in commerce. We dismiss the
appeal insofar as it contests the order for an accounting of
profits.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
26