Earmarks and Trademarks Collide: Fourth Circuit Reverses District Court in The Last Best Beef, LLC v. Jonathan W. Dudas et al.

B) File an infringement lawsuit.

C) Have your U.S. senator sponsor a special appropriations measure to forbid Congress from using any funds to register, issue, transfer, or enforce any trademark of the phrase to which your client objects, and have the president of the United States sign it into law.

This is the story of Choice 'C,' resulting in a law that the U.S. District Court for the Eastern District of Virginia found invalid, with potential for 'destabilizing intellectual property at the whim of special interests outside the existing structure of trademark law.' Last Best Beef, LLC v. Jonathan Dudas, et al., 455 F. Supp. 2d 496, 502 (E.D. Va. 2006). However, the Fourth Circuit reversed and remanded, and held the law valid as a matter of statutory construction. The Last Best Beef, LLC. v. Jonathan W. Dudas et al. __ F. 3d__, 2007 WL 3087186 (4th Cir., Oct. 24, 2007), reversing Last Best Beef, LLC v. Jon Dudas, et al., 455 F. Supp. 2d 496 (ED VA 2006).

The Facts

Here's what happened. A Montana writer, William Kittredge, titled his Montana-themed anthology 'The Last Best Place' in 1988. Local businesses and the Montana state government used the phrase. The Last Best Beef, LLC v. Jonathan W. Dudas et al., __ F.3d__, 2007 WL 3087186 at *1 (4th Cir., Oct. 24, 2007). Between 2001 and 2004, The Last Best Beef, a Nevada business, filed eight applications with the PTO to register THE LAST BEST PLACE for a variety of goods and services, including cookware, jewelry, household items, and apparel, and had used the mark for some time. On the day the President signed the appropriations bill into law, the PTO (unaware of the Act) had issued Last Best Beef two registrations for THE LAST BEST PLACE.

In 2005, President Bush signed the Science, State, Justice, Commerce, and Related Agencies Appropriations Act of 2006, Pub. L. 109-108, 119 Stat. 2290 (2006) ('the Act'). [It has been extended]. At issue is '206 of the Act, which falls within the section titled: 'General Provisions ' Department of Commerce,' and states in full: 'Notwithstanding any other provision of this Act, no funds appropriated under this Act shall be used to register, issue, transfer, or enforce any trademark of the phrase 'The Last Best Place.” Pub. L. 109-108, 119 Stat. at 2315. This appropriations bill also provided, inter alia, that the Executive Office for Weed and Seed would receive $50 million, and that NASA must allow 100% of its workforce to telecommute.

It happened like this. U.S. Senator Conrad Burns of Montana was upset. His constituents had heard about Last Beef's efforts to claim exclusivity in the Montana state slogan. And they were mad. So the senator enthusiastically sponsored what became '206, stating that its purpose was 'to forbid the usage of any federal dollars to trademark the phrase 'Last Best Place,” because it 'belongs to the State of Montana.' Last Best Beef, LLC, 455 F. Supp. 2d at 489. The state of Montana does not hold any registration or ownership of the phrase 'Last Best Place.' Id.

When President Bush signed the Appropriations Act into law, Last Best Beef's trademark applications were in various stages of prosecution. Four of the applications were at the Notice of Allowance stage. Oppositions were pending before the Board to two of the applications, filed by the state of Montana, on the grounds that THE LAST BEST PLACE is primarily a geographically descriptive term identifying Montana, and not registrable. And two applications had matured into registrations the day the president signed '206 into law, but before the PTO learned of the law's passage.

When the PTO learned of '206, it perceived it had no choice under the federal law but to cancel the Notices of Allowance and suspend the applications for which Notices of Allowance had issued, suspend the proceedings in the Oppositions, and cancel the two issued registrations, returning them to 'pending' status. It proceeded to do so. In response, Last Best Beef sued Jon Dudas (as Under Secretary of Commerce for IP and director of the PTO) and Lynne G. Beresford (as Commissioner for Trademarks).

Last Best Beef contended that '206 improperly circumvented the Lanham Act so that the PTO's actions with respect to its marks were unlawful. It moved for summary judgment, seeking an injunction requiring the PTO to reinstate its cancelled registrations and Notices of Allowance. The district court agreed with Last Best Beef's position, and entered summary judgment for Last Best Beef. The district court pointed to the Supreme Court's ruling in Tennessee Valley Auth. v. Hill, 437 U.S. 153, 190-1 (1978), that if Congress wants to use appropriations acts to modify or repeal existing law, 'it must do so explicitly.' (emphasis in original). And it pointed to U.S. v. Will, 449 U.S. 200, 222 (1980), that '('As a general rule,' repeals by implication are not favored.' [citation omitted]. This rule applies with especial force when the provision advanced as the repealing measure was enacted in an appropriations bill. ”)' Last Best Beef, LLC, 455 F. Supp. 2d at 499.

The District Court Decision

The district court clarified that '1052 of the Lanham Act provides that no trademark capable of distinguishing the applicant's goods from those of others shall be refused registration on account of its nature, absent enumerated exceptions not applicable to LAST BEST PLACE. 'Section 206 conflicts with this provision by insisting that any trademark for the phrase 'Last Best Place' be refused registration. However, Section 206 fails to explicitly mention any suspension, modification or repeal of Section 1052 of the Lanham Act or even the Lanham Act itself, as required by Tennessee Valley Authority.' Last Best Beef, LLC, 455 F. Supp. 2d at 500.

Moreover, '[t]he court finds it significant that neither the government nor LBB can point to another instance in which congress has suspended trademark law with respect to a single phrase. ' In the absence of any precedent, the Court is not inclined to open the door to a litany of whimsical exceptions to the Lanham Act like those that riddle the Tax Code.' Last Best Beef, LLC, 455 F. Supp. 2d at 500-501. The district court set out three developed reasons 'that cut against this practice of carving out narrow trademark monopolies for special interests through one phrase buried in an appropriations bill.' Last Best Beef, LLC, 455 F. Supp. 2d at 501. The reasons are: a) the potential of '206 to destabilize a business's ability to brand its products and services, b) the potential of '206 to turn the trademark procedures set out in the law into a statute full of holes and exceptions, and c) the reality that '206 has stranded Last Best Beef's applications and registrations with none of the procedures and protections afforded by the Lanham Act and the Trademark Manual of Examining Procedure, including the right of appeal to the Trademark Trial and Appeal Board.

The court set out a roster of other states' slogans, saying: 'Today it is Montana making a claim to a phrase outside the spectrum of existing trademark law. Tomorrow, it will be 'Virginia is for lovers.” Last Best Beef, LLC, 455 F. Supp. 2d at 502. 'As it stands, the Court is unwilling to infer from Section 206 that Congress intended to undermine well-established provisions of trademark law in order to protect a single phrase from commercial control. The Court notes that Section 206 does not grant a trademark to the State of Montana.' Last Best Beef, LLC, 455 F. Supp. 2d at 505.

The Fourth Circuit Decision

The Fourth Circuit reversed, finding that, '[w]hile the canon of statutory interpretation disfavoring implied repeals in appropriations bills is strong, it is still just a canon of interpretation. It is not an absolute rule.' The question whether Congress has, through '206, 'impliedly suspended the Lanham Act in one particular instance ' requires us to determine whether or not Congress clearly expressed its intention to repeal through an irreconcilable conflict ' ' between '206 and 15 U.S.C. '1052. 'The conclusion that Congress intended to enact a discrete and narrow exception to the Lanham Act is unavoidable.' The Last Best Beef, LLC at*4.

The Fourth Circuit used as examples of why this should not surprise anyone the 'special legislation' certain trademarks enjoy by statutes other than the Lanham Act, saying: 'Congress has often removed specific trademarks from the general application process. See, e.g. 18 U.S.C. Sec. 711 (2000) (giving the Department of the Interior the exclusive right to use the character and name of 'Smokey Bear'); 36 U.S.C. Sec. 80305 (2000) (giving 'The Girl Scouts of America' the exclusive right to use all emblems and badges ' the [Girl Scouts of America] adopts. ” The Last Best Beef, LLC at *4. Congress has also granted exclusive rights to Little League Baseball, and the U.S. Olympic Committee.

Contrary to the Fourth Circuit's implicit characterization, these special laws do not prohibit use of Congressional funds for the registration or enforcement of these trademarks. They are not targeted against a specific entity claiming trademark rights. Instead, they give the entity that is the owner of the mark special exclusivity in the mark. Trademark Manual of Examining Procedure '1205, 'Statutory Protection' states as follows:

Congress has created about 70 statutes that grant exclusive rights to use certain designations to federally created private corporations and organizations. ' However, the statutes themselves do not provide the basis for refusal of a trademark registration. To determine whether registration should be refused ' the examining attorney should consult the relevant statute. ' If a statute provides that a specific party or government agency has the exclusive right to use a designation, and a party other than that specified in the statute has applied to register the designation, the examining attorney must refuse registration on the ground that the mark is not in lawful use in commerce '

The Fourth Circuit was not unsympathetic to the district court's frustration. It stated 'while the district court expressed the view that it was unwilling to see the Lanham Act punctuated by the types of exceptions that characterize such complex bodies of law as the Internal Revenue Code, the wisdom of tradeoffs between simplicity and complexity is for Congress to decide, not the federal courts. What may seem inadvisable on the part of Congress is not unconstitutional.' The Last Best Beef, LLC at *5 (emphasis added).

So the next time your trademark client has a beef, rather than spending time grappling with the new TTAB rules or seeking injunctions, just write to your senator.

Jane Shay Wald is a partner of Irell & Manella LLP, Los Angeles, and chairs the firm's trademark practice group.

'Earmark' is a 16th century form of cattle branding. But this case presents a contemporary Congressional earmark that cut out the right of Last Best Beef, LLC to register or enforce its brand.

If your client is aggrieved by another's trademark claim, consider one of these steps:

A) File an Opposition or Petition to Cancel.

B) File an infringement lawsuit.

C) Have your U.S. senator sponsor a special appropriations measure to forbid Congress from using any funds to register, issue, transfer, or enforce any trademark of the phrase to which your client objects, and have the president of the United States sign it into law.

This is the story of Choice 'C,' resulting in a law that the U.S. District Court for the Eastern District of Virginia found invalid, with potential for 'destabilizing intellectual property at the whim of special interests outside the existing structure of trademark law.' Last Best Beef, LLC v. Jonathan Dudas, et al., 455 F. Supp. 2d 496, 502 (E.D. Va. 2006). However, the Fourth Circuit reversed and remanded, and held the law valid as a matter of statutory construction. The Last Best Beef, LLC. v. Jonathan W. Dudas et al. __ F. 3d__, 2007 WL 3087186 (4th Cir., Oct. 24, 2007), reversing Last Best Beef, LLC v. Jon Dudas, et al., 455 F. Supp. 2d 496 (ED VA 2006).

The Facts

Here's what happened. A Montana writer, William Kittredge, titled his Montana-themed anthology 'The Last Best Place' in 1988. Local businesses and the Montana state government used the phrase. The Last Best Beef, LLC v. Jonathan W. Dudas et al., __ F.3d__, 2007 WL 3087186 at *1 (4th Cir., Oct. 24, 2007). Between 2001 and 2004, The Last Best Beef, a Nevada business, filed eight applications with the PTO to register THE LAST BEST PLACE for a variety of goods and services, including cookware, jewelry, household items, and apparel, and had used the mark for some time. On the day the President signed the appropriations bill into law, the PTO (unaware of the Act) had issued Last Best Beef two registrations for THE LAST BEST PLACE.

In 2005, President Bush signed the Science, State, Justice, Commerce, and Related Agencies Appropriations Act of 2006, Pub. L. 109-108, 119 Stat. 2290 (2006) ('the Act'). [It has been extended]. At issue is '206 of the Act, which falls within the section titled: 'General Provisions ' Department of Commerce,' and states in full: 'Notwithstanding any other provision of this Act, no funds appropriated under this Act shall be used to register, issue, transfer, or enforce any trademark of the phrase 'The Last Best Place.” Pub. L. 109-108, 119 Stat. at 2315. This appropriations bill also provided, inter alia, that the Executive Office for Weed and Seed would receive $50 million, and that NASA must allow 100% of its workforce to telecommute.

It happened like this. U.S. Senator Conrad Burns of Montana was upset. His constituents had heard about Last Beef's efforts to claim exclusivity in the Montana state slogan. And they were mad. So the senator enthusiastically sponsored what became '206, stating that its purpose was 'to forbid the usage of any federal dollars to trademark the phrase 'Last Best Place,” because it 'belongs to the State of Montana.' Last Best Beef, LLC, 455 F. Supp. 2d at 489. The state of Montana does not hold any registration or ownership of the phrase 'Last Best Place.' Id.

When President Bush signed the Appropriations Act into law, Last Best Beef's trademark applications were in various stages of prosecution. Four of the applications were at the Notice of Allowance stage. Oppositions were pending before the Board to two of the applications, filed by the state of Montana, on the grounds that THE LAST BEST PLACE is primarily a geographically descriptive term identifying Montana, and not registrable. And two applications had matured into registrations the day the president signed '206 into law, but before the PTO learned of the law's passage.

When the PTO learned of '206, it perceived it had no choice under the federal law but to cancel the Notices of Allowance and suspend the applications for which Notices of Allowance had issued, suspend the proceedings in the Oppositions, and cancel the two issued registrations, returning them to 'pending' status. It proceeded to do so. In response, Last Best Beef sued Jon Dudas (as Under Secretary of Commerce for IP and director of the PTO) and Lynne G. Beresford (as Commissioner for Trademarks).

Last Best Beef contended that '206 improperly circumvented the Lanham Act so that the PTO's actions with respect to its marks were unlawful. It moved for summary judgment, seeking an injunction requiring the PTO to reinstate its cancelled registrations and Notices of Allowance. The district court agreed with Last Best Beef's position, and entered summary judgment for Last Best Beef. The district court pointed to the Supreme Court's ruling in Tennessee Valley Auth. v. Hill , 437 U.S. 153, 190-1 (1978), that if Congress wants to use appropriations acts to modify or repeal existing law, ' it must do so explicitly.' (emphasis in original). And it pointed to U.S. v. Will , 449 U.S. 200, 222 (1980), that '('As a general rule,' repeals by implication are not favored.' [citation omitted]. This rule applies with especial force when the provision advanced as the repealing measure was enacted in an appropriations bill. ”)' Last Best Beef, LLC, 455 F. Supp. 2d at 499.

The District Court Decision

The district court clarified that '1052 of the Lanham Act provides that no trademark capable of distinguishing the applicant's goods from those of others shall be refused registration on account of its nature, absent enumerated exceptions not applicable to LAST BEST PLACE. 'Section 206 conflicts with this provision by insisting that any trademark for the phrase 'Last Best Place' be refused registration. However, Section 206 fails to explicitly mention any suspension, modification or repeal of Section 1052 of the Lanham Act or even the Lanham Act itself, as required by Tennessee Valley Authority.' Last Best Beef, LLC, 455 F. Supp. 2d at 500.

Moreover, '[t]he court finds it significant that neither the government nor LBB can point to another instance in which congress has suspended trademark law with respect to a single phrase. ' In the absence of any precedent, the Court is not inclined to open the door to a litany of whimsical exceptions to the Lanham Act like those that riddle the Tax Code.' Last Best Beef, LLC, 455 F. Supp. 2d at 500-501. The district court set out three developed reasons 'that cut against this practice of carving out narrow trademark monopolies for special interests through one phrase buried in an appropriations bill.' Last Best Beef, LLC, 455 F. Supp. 2d at 501. The reasons are: a) the potential of '206 to destabilize a business's ability to brand its products and services, b) the potential of '206 to turn the trademark procedures set out in the law into a statute full of holes and exceptions, and c) the reality that '206 has stranded Last Best Beef's applications and registrations with none of the procedures and protections afforded by the Lanham Act and the Trademark Manual of Examining Procedure, including the right of appeal to the Trademark Trial and Appeal Board.

The court set out a roster of other states' slogans, saying: 'Today it is Montana making a claim to a phrase outside the spectrum of existing trademark law. Tomorrow, it will be 'Virginia is for lovers.” Last Best Beef, LLC, 455 F. Supp. 2d at 502. 'As it stands, the Court is unwilling to infer from Section 206 that Congress intended to undermine well-established provisions of trademark law in order to protect a single phrase from commercial control. The Court notes that Section 206 does not grant a trademark to the State of Montana.' Last Best Beef, LLC, 455 F. Supp. 2d at 505.

The Fourth Circuit Decision

The Fourth Circuit reversed, finding that, '[w]hile the canon of statutory interpretation disfavoring implied repeals in appropriations bills is strong, it is still just a canon of interpretation. It is not an absolute rule.' The question whether Congress has, through '206, 'impliedly suspended the Lanham Act in one particular instance ' requires us to determine whether or not Congress clearly expressed its intention to repeal through an irreconcilable conflict ' ' between '206 and 15 U.S.C. '1052. 'The conclusion that Congress intended to enact a discrete and narrow exception to the Lanham Act is unavoidable.' The Last Best Beef, LLC at*4.

The Fourth Circuit used as examples of why this should not surprise anyone the 'special legislation' certain trademarks enjoy by statutes other than the Lanham Act, saying: 'Congress has often removed specific trademarks from the general application process. See, e.g. 18 U.S.C. Sec. 711 (2000) (giving the Department of the Interior the exclusive right to use the character and name of 'Smokey Bear'); 36 U.S.C. Sec. 80305 (2000) (giving 'The Girl Scouts of America' the exclusive right to use all emblems and badges ' the [Girl Scouts of America] adopts. ” The Last Best Beef, LLC at *4. Congress has also granted exclusive rights to Little League Baseball, and the U.S. Olympic Committee.

Contrary to the Fourth Circuit's implicit characterization, these special laws do not prohibit use of Congressional funds for the registration or enforcement of these trademarks. They are not targeted against a specific entity claiming trademark rights. Instead, they give the entity that is the owner of the mark special exclusivity in the mark. Trademark Manual of Examining Procedure '1205, 'Statutory Protection' states as follows:

Congress has created about 70 statutes that grant exclusive rights to use certain designations to federally created private corporations and organizations. ' However, the statutes themselves do not provide the basis for refusal of a trademark registration. To determine whether registration should be refused ' the examining attorney should consult the relevant statute. ' If a statute provides that a specific party or government agency has the exclusive right to use a designation, and a party other than that specified in the statute has applied to register the designation, the examining attorney must refuse registration on the ground that the mark is not in lawful use in commerce '

The Fourth Circuit was not unsympathetic to the district court's frustration. It stated 'while the district court expressed the view that it was unwilling to see the Lanham Act punctuated by the types of exceptions that characterize such complex bodies of law as the Internal Revenue Code, the wisdom of tradeoffs between simplicity and complexity is for Congress to decide, not the federal courts. What may seem inadvisable on the part of Congress is not unconstitutional.' The Last Best Beef, LLC at *5 (emphasis added).

So the next time your trademark client has a beef, rather than spending time grappling with the new TTAB rules or seeking injunctions, just write to your senator.

Jane Shay Wald is a partner of Irell & Manella LLP, Los Angeles, and chairs the firm's trademark practice group.