For the second time, the US Court of Appeals for the Federal Circuit examined the standard for demonstrating fraud in a party’s claim of a trademark’s acquired distinctiveness for purposes of registration under Section 2(f) of the Lanham Act. The Federal Circuit found that a party challenging an applicant’s Section 2(f) claim based on substantially exclusive use of that trademark does not need to establish secondary meaning in its own mark to undercut the applicant’s claim of substantially exclusive use. The Court also found that use of the mark by any party, regardless of its relationship to the challenger, may undercut a trademark applicant’s claim of substantially exclusive use. Galperti, Inc. v. Galperti S.R.L., Case No. 21-1011 (Fed. Cir. Nov. 12, 2021) (Taranto, J.)
Galperti S.R.L. (Galperti-Italy) filed a US trademark registration for the mark GALPERTI in 2008. In an effort to overcome the US Patent and Trademark Office’s (PTO) initial refusal to register the trademark as “primarily merely a surname” (and therefore not registrable unless the mark has become distinctive of the applicant’s goods in commerce), Galperti-Italy asserted acquired distinctiveness of the GALPERTI mark under Section 2(f) and stated that the mark had become distinctive of Galperti-Italy’s metal hardware goods through its substantially exclusive and continuous use in commerce for the five years prior to the trademark registration. In 2013, Galperti-USA, a US company unrelated to Galperti-Italy that operates in the similar business of metal flanges and related products, petitioned to cancel Galperti-Italy’s registration on various grounds, including fraud in Galperti-Italy’s claim of substantially exclusive use of the GALPERTI trademark during the years 2002 – 2007. Galperti-USA claimed that it and other third parties also used the mark during that time, undercutting Galperti-Italy’s “substantially exclusive use” claims.
The Trademark Trial and Appeal Board (Board) rejected Galperti-USA’s cancellation claims, including the fraud claim. Galperti-USA filed its first appeal, and the Federal Circuit vacated the Board’s determination that Galperti-USA failed to prove the falsity of Galperti-Italy’s Section 2(f) claim. The Court remanded to the Board to assess whether the other uses of GALPERTI noted by Galperti-USA were significant or inconsequential, which would impact the proof of falsity of Galperti-Italy’s representations to the PTO. On remand, the Board again found that Galperti-USA failed to prove significant—rather than inconsequential—uses of GALPERTI between the years 2002 – 2007 so as to make Galperti-Italy’s representations of “substantially exclusive use” false. Galperti-USA filed its second appeal.
In this appeal, Galperti-USA challenged the Board’s conclusions that (1) Galperti-USA had to show that it acquired secondary meaning in its own GALPERTI trademark during the relevant time period, and (2) Galperti-USA could not undercut Galperti-Italy’s claims of substantially exclusive use with evidence of use by third parties with no privity to Galperti-USA. The Federal Circuit determined that both of the Board’s premises for its fraud analysis were incorrect as a matter of law, and it was therefore unclear whether the Board’s determination was affected by these errors. Taking a closer look at the Board’s conclusions, the Court found that the Board’s requirement that Galperti-USA demonstrate its own acquired distinctiveness in the GALPERTI trademark to undermine Galperti-Italy’s claim of substantially exclusive use of the mark was counter to Federal Circuit precedent. Citing multiple supporting cases, the Court explained that even marketplace uses of a term lacking secondary meaning are uses that might undermine an applicant’s assertions that its own trademark use has been substantially exclusive. The Court noted that significant marketplace use of a term not as a source-identifying trademark might be highly relevant to show that a mark is descriptive and that a party does not have substantially exclusive use of that same term.
The Federal Circuit also explained that the Board erred in requiring that Galperti-USA demonstrate privity with other users of the GALPERTI mark during the 2002 – 2007 period. Again referring to its own precedent, the Court noted that “any” third-party use may frustrate a claim of substantially exclusive use of a trademark, regardless of such third party’s relationship to the challenging party. The Court therefore vacated the Board’s decision and remanded for further analysis of the falsity issue under the correct framework.