Trademark Board's Precedential Ruling on Use in Commerce

In Tao Licensing, however, the TTAB distinguished these latter two decisions, emphasizing that parties still must prove use and provide the board with a “sense of the degree of consumer exposure.”

Tao Licensing, the owner of several popular TAO nightclubs and restaurants that are perennially among the highest-grossing restaurants in the United States, sought to cancel a registration for TAO VODKA owned by Bender Consulting Ltd., a company based in Honolulu, HI. The record showed that Tao and its upscale Asian-themed venues sold many millions of dollars' worth of alcoholic beverages, including vodka, and had run several cross-promotional campaigns with alcoholic beverage brands.

In 2010, a beverage industry executive and proprietor named Marcus Bender visited a TAO venue and tried to sell Tao his Kai Vodka company's rice-based vodka, which was sold under the trademark KAI VODKA. Tao rejected Bender's offer In 2011, Bender's other company, Bender Consulting, filed an “intent-to-use” application for the mark TAO VODKA to cover a product that had the same formula as KAI VODKA, but which, according to Bender Consulting, had a different “[] name, [] positioning, and [] target audience.” Bender Consulting later filed a “statement of use” for TAO VODKA, claiming the mark had been used by April 2012.

Tao sought to cancel the registration just after it had issued. Whether the parties had sufficiently established use — Tao's use, Bender Consulting's use, and third-party use — was the driving force behind TTAB's decision to cancel Bender Consulting's registration.

As part of its likelihood of confusion analysis, based on Tao's use the board found the TAO mark to be famous. The record showed that the TAO venues had millions of customers, spent millions of dollars on advertising, routinely topped the list of highest-grossing restaurants, and were frequented by famous celebrities, politicians and athletes. Given the fame of Tao's mark and venues, and Bender Consulting's history with Tao, the TTAB found likelihood of confusion to be strong. That said, even if the board “were to find the mark to be of average strength,” it would nonetheless have reached the same ruling with regards to likelihood of conclusion. The record showed that Tao itself annually sold many millions of dollars worth of alcohol, engaged in promotions with vodka brands, sold alcoholic beverages whose names contained TAO, and had been previously approached by a third party to create a private label alcoholic beverage with its mark.

The same could not be said for Bender Consulting and its supposed use of the TAO VODKA mark. Critically, Bender Consulting could not establish it made sufficient use of its mark in commerce when it filed its alleged statement of use with the U.S. Patent and Trademark Office. Bender Consulting's alleged use of its TAO VODKA mark as of April 2012 was based on Kai Vodka's importation of 12 sample bottles of a product called TAO VODKA and on Marcus Bender's testimony that he provided two to three bottles to an investor, a distributor and a local restaurant, to gauge their interest in the product. The TTAB found Bender's testimony was not credible. Other than the shipping receipt from the manufacturer (which identified the buyer as Kai Vodka, not Bender Consulting), Bender did not have any evidence, beyond his oral testimony, supporting Bender Consulting's alleged use. On cross-examination, Bender admitted that the potential investor was a part-owner of Kai Vodka (the entity that imported the bottles), and that the restaurant and distributor were given the bottles in or near his office in Honolulu.

Although the TTAB emphasized that, in keeping with the Federal Circuit's decision in Adidas AG, intrastate sales could still qualify as sufficient use in interstate commerce under the Lanham Act, Bender Consulting did not have any written evidence to verify that these distributions actually occurred. Similarly, the board noted that while distribution of samples may qualify as use in commerce under appropriate circumstances, Bender Consulting's distribution could not qualify because it was simply trying to drum up interest in the product and not prepared to make sales at that time. In fact, it took Bender Consulting more than another two years before it had any sales of its TAO VODKA product. Thus, the TTAB found that even if Bender Consulting's version of events were to be believed, it “was not yet using or even ready to use the mark in the ordinary course of trade, but was merely exploring such use at some point in the future.”

Bender Consulting also came up short in trying to show that the TAO mark was weak by relying on Internet evidence of allegedly extensive third-party use of “TAO.” Bender Consulting introduced this evidence to show that the term “TAO” was found in several other composite marks for Asian-themed products or services, relying on the Federal Circuit's Jack Wolfskin and Juice Generation decisions, which stated that Internet evidence of significant third-party use was “powerful on its face.”

The TTAB, however, noted this Internet evidence was old and gave “no sense of the degree of consumer exposure to these marks.” The board also found that most of the Internet printouts covered irrelevant, disparate goods, as compared to the goods and services at issue in the cancellation proceeding. Thus, the TTAB concluded Jack Wolfskin and Juice Generation should not be construed to require the board to blindly rely on third-party Internet references and registrations to support a claim of a mark's weakness when there is no evidence of the extent to which the third party marks are actually used or presented to consumers.

Indeed, with its Tao Licensing decision, the TTAB jettisoned the mistaken belief that the Lanham Act's low standard of use means that parties need not go through the efforts of proving use, whether their own or that of others. Although the legal standard may be low, the evidentiary standard has not changed.

The Tao Licensing decision also gave the TTAB an opportunity to comment on the use of written declarations in trial testimony, which is particularly important given the recent changes to board practice permitting the use as of right for direct testimony. Although the testimony in Tao Licensing was taken before the new rules went into effect on Jan. 14, 2017, the parties' stipulation permitted this practice. But under cross-examination, it became clear that Marcus Bender had little knowledge of the evidence and arguments; Bender admitted he was simply relying on the declaration testimony prepared by his attorney. The board noted that because Bender himself lacked any knowledge concerning several underlying facts in his declaration, his testimony on those facts constituted hearsay. For the documents for which Bender lacked personal knowledge, the board would only consider such evidence to the extent permissible under a “notice of reliance.”

As more and more parties begin to submit their direct testimony via declaration, attorneys should keep in mind that their role is to record the information that witnesses provide to them, not the other way around.

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Howard J. Shire is a Partner in the New York office of Andrews Kurth Kenyon and Editor-in-Chief of Intellectual Property Strategist, a LJN sister publication of Entertainment Law & Finance. He can be reached at [email protected], Jeremy S. Boczko is an associate with the firm. He can be reached at [email protected]. Note: The authors represented Tao Licensing in the proceeding discussed in this article.