In Luca McDermott Catena Gift Trust v. Fructuoso-Hobbs SL (“Luca McDermott”) 1, the Court of Appeals for the Federal Circuit (“CAFC” or “Federal Circuit”) held that a minority limited partner of a limited partnership, Paul Hobbs Winery, LP (“Hobbs Winery”), could not satisfy the statutory-standing requirement and therefore was not entitled to a statutory cause of action. Specifically, the minority limited partner could not meet the (1) zone-of-interests requirement and the (2) proximate-causation requirement for seeking cancellation of two other wineries' marks.
Whether a case may be heard in federal court requires a petitioner to establish constitutional standing under Article III. In addition, if the law at issue is statutory, then petitioner must also show that there is an actual statutory cause of action under the statutory-standing requirement. The law at issue in Luca McDermott is 15 U.S.C. § 1064 which provides for cancellation of a trademark on the grounds of likelihood of confusion and fraud.
Appellant Luca McDermott Catena Gift Trust (“Appellant”) was a limited partner owning a minority share in Hobb's Winery. Appellant and two other minority limited partners collectively owning 21.6% in Hobb's Winery, filed a consolidated petition to cancel two other wineries' marks under § 1064 on the grounds of likelihood of confusion and fraud. Appellant and the two other minority limited partners owned the registered trademark PAUL HOBBS. The two other wineries, Fructuoso-Hobbs SL (“Fructuoso-Hobbs”) and Hillick & Hobbs Estate, LLC (“Hillick & Hobbs”) (collectively, “Appellees”), owned registered trademarks ALVAREDOS-HOBBS and HILLICK AND HOBBS respectively. PAUL HOBBS, ALVAREDO-HOBBS, and HILLICK AND HOBBS were all registered in International Class 33 for “Alcoholic beverages except beers; wines.” Appellant was loosely associated with Appellees through winemaker and partial owner of Hobbs Winery, Paul Hobbs.
In a consolidated petition, Appellant and the two other minority limited partners claimed that the use of ALVAREDO-HOBBS and HILLICK AND HOBBS by Appellees was likely to cause confusion with the use of PAUL HOBBS by Hobbs Winery for the same goods in the marketplace. Appellant also claimed that Appellees committed fraud through a declaration that stated that Appellees' marks would not likely cause confusion with another mark and that the attorney making the declaration knew or should have known the declaration was false. The Trademark Trial and Appeal Board granted the motion to dismiss by Appellees, and Appellant, alone, appealed the decision by the Board to the CAFC.
The issue before the CAFC was whether Appellant fell within the class of plaintiffs who Congress has authorized to seek cancellation of Appellees' trademarks under 15 U.S.C. § 1064.
The test for whether Appellant fell within the class of plaintiffs who Congress authorized to seek cancellation of Appellees' trademarks comes from Lexmark Int'l, Inc. v. Static Control Components, Inc., 2 which provides two requirements to establish entitlement to a statutory cause of action. First, Appellant must show that its interests are within the “zone of interests” that Congress intended to protect by enacting the relevant statute. Second, Appellant must show that the violation of the relevant statute by Appellees proximately caused the injuries of the Appellant. Specifically, with respect to the proximate-causation requirement, Appellant must show that the harm Appellant experienced is not “too remote” from the alleged violation of the relevant statute by Appellees.
(1) Zone-of-Interests Requirement
To establish that the interests of a petitioner fall within the zone of interests intended for protection by the relevant statute, the petitioner must have a “legitimate commercial interest” in the allegedly infringed mark where the petitioner has claimed that the challenged marks are confusingly similar. 3 Although the Luca McDermott court cited a “legitimate commercial interest,” “direct commercial interest” may be more apt considering the reasoning by the Federal Circuit. 4 The CAFC held that because Appellant (1) did not individually own or conduct any business under the PAUL HOBBS trademark; (2) sought to cancel Appellees' marks only on behalf of the interests of Hobb's Winery; and (3) held only a minority ownership interest in the owner of the PAUL HOBBS trademark, the interests of Appellant did not fall within the zone of interests. Therefore, the interests of Appellant were insufficient to support a right to seek cancellation of the challenged marks. In making this conclusion, the CAFC relied on the Supreme Court, which interpreted the intent of Congress in enacting the Lanham Act. The Supreme Court provided a statutory interpretation of the congressional intent of the Lanham Act as providing a cause of action primarily to persons “engaged in commerce” rather than consumers or “mere intermeddlers.” 5
The Federal Circuit held that Appellant, while not a mere intermeddler, lacked a direct commercial interest in the PAUL HOBBS trademark. The CAFC distinguished from cases holding that a direct proprietary interest of a harmed party was not required for the right to seek cancellation of challenged marks. For example, a petitioner who has been denied a trademark application due to a challenged mark may have a cause of action to cancellation of the challenged mark because the petitioner in the application attested to the use or intention to use the allegedly infringed mark. Therefore, the inability of the Petitioner to use their allegedly infringed mark through the denial of their trademark application is a legitimate commercial interest.
Additionally, the CAFC has held in the past that a trademark association comprised of individual members with a commercial interest in cancelling a challenged mark has a right to oppose the registration of a challenged mark. But here, Appellant is a minority limited partner with no individual commercial interest in the PAUL HOBBS trademark. Therefore, a mere minority ownership interest by Appellant in the owner of the PAUL HOBBS trademark alone is insufficient to support a right to seek cancellation of the ALVAREDO-HOBBS and HILLICK AND HOBBS trademarks.
(2) Proximate-Causation Requirement
In Lexmark, the Supreme Court reasoned that a harm to a petitioner will be “too remote” if it is purely derivative of unlawful conduct by a defendant. For example, a competitor who “is forced out of business” due to the unlawful conduct by a defendant generally may have a cause of action to bring suit. However, other commercial parties engaged with the harmed competitor such as landlords and electric companies who suffer financially due to the losses of the competitor are deemed to have a merely derivative harm. 6
The Federal Circuit analogized the harm alleged by Appellant to the merely derivative harm of a commercial party engaged in business with a party harmed by the unlawful conduct of a defendant. By holding this, the CAFC at least implies that for the purposes of proximate causation, the minority ownership interest of Appellant in Hobb's Winery was effectively equivalent to the contractual relationship between a landlord and tenant. Because an initial harm to Hobb's Winery was required for Appellant to experience any harm at all, the harm to Appellant was merely derivative to the initial harm to Hobb's Winery. Therefore, the harm to Appellant was too remote to support a cause of action under § 1064.
Conclusion
The Federal Circuit held that the interests of Appellant do not fall within the zone of interests Congress intended for protection under § 1064 because Appellant failed to allege any individual commercial interests adversely affected by the use by Appellees of the challenged marks. Even if the interests of Appellant fell within the zone of interests required by § 1064, Appellees' allegedly confusingly similar marks did not proximately cause the harm experienced by Appellant.
Footnotes
1. Luca McDermott Catena Gift Trust v. Fructuoso-Hobbs SL, 102 F.4th 1314 (Fed. Cir. 2024).
2. Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 n.6 (2014).
3. Empresa Cubana del Tabaco v. General Cigar Co., 753 F.3d 1270, 1275 (Fed. Cir. 2014) (citing Lipton Indus., Inc. v. Ralston Purina Co., 670 F.2d 1024, 1029 (CCPA 1982)).
4. Cunningham v. Laser Golf Corp., 222 F.3d 943, 945 (Fed. Cir. 2000) (“A belief in likely damage can be shown by establishing a direct commercial interest.”).
5. See POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102, 107 (2014).
6. Lexmark, 572 U.S. at 134.
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