‘Naked’ Condom Maker May Get Its Trademark Stripped

WASHINGTON—A federal appeals court has reversed a Trademark Trial and Appeal Board’s decision over an attempt to cancel registration for the mark “Naked” for condoms. In its decision handed down Monday, the U.S. Court of Appeals for the Federal Circuit ruled that Australian Therapeutic Supplies Pty. Ltd. has “a real interest” in cancelling the registration for the mark, which is owned by Naked TM LLC. While the Trademark Trial and Appeal Board had found that Australian lacked standing to petition for cancellation because “it had contracted away its proprietary rights in its unregistered marks,” an appeals court panel, 2-1, held that “a petitioner seeking to cancel a trademark registration establishes an entitlement to bring a cancellation proceeding under 15 U.S.C. § 1064 by demonstrating a real interest in the cancellation proceeding and a reasonable belief of damage regardless of whether petitioner lacks a proprietary interest in an asserted unregistered mark.” Australian Therapeutic’s fight for Naked condoms began in the early 2000s. The company adopted and began using the mark Naked for condoms in early 2000 in Australia and by April 2003 in the U.S. Through its website, Australian Therapeutic began advertising, selling and shipping condoms featuring its unregistered mark to customers in the U.S. Naked TM’s predecessor, meanwhile, filed an application for the trademark Naked in September 2003 and was granted Registration No. 3,325,577. Australian Therapeutic contacted Naked TM in 2006 and the companies engaged in settlement negotiations until 2007. While Naked TM asserted that communications between the parties show that they agreed Australian would stop use of its mark in the U.S. and consent to Naked TM’s use of the mark, Australian Therapeutic said that no agreement on the final terms of a settlement were reached. During settlement discussions, Australian Therapeutic petitioned the U.S. Patent and Trademark Office for cancellation of the mark Naked on the grounds of fraud, likelihood of confusion, false suggestion of a connection and lack of a bona fide intent to use the mark. The Trademark Trial and Appeal Board denied both parties’ requests for summary judgment, urging the companies to focus on the issues of standing and priority at trial. But, later, the board ruled that, “although no formal written agreement existed, the parties entered into an informal agreement through email communications and the parties’ actions” and “that Australian led Naked to ‘reasonably believe that [Australian] had abandoned its rights in the U.S. to the Naked mark in connection with condoms.’”   In its ruling on Monday, the Federal Circuit said that under the terms of 15 U.S.C. § 1064, “a petitioner may seek cancellation of a registered trademark if the petitioner ‘believes that he is or will be damaged’ by the registered trademark.” “Neither § 1064 nor our precedent requires that a petitioner have a proprietary right in its own mark in order to demonstrate a cause of action before the Board,” the court wrote. “We also conclude that based on the facts established before the Board, Australian has a real interest in the cancellation proceeding and a reasonable belief of damage, thereby satisfying the statutory requirements to seek cancellation of a registered trademark,” the court wrote. “We reverse and remand to the Board for further proceedings consistent with this opinion.”