Product Source International, LLC v. Nahshin
112 F. Supp. 3d 383
E.D. Va.2015Background
- Nahshin (sole proprietor of P. Service, Israel) developed and sold NIC OUT cigarette filters beginning in 2000 and distributed them in the U.S. via distributor Maslov/Safety Aid Supplies (SAS) from 2002 onward; P. Service also made direct U.S. sales and operated www.nic-out.com.
- PSI (U.S. company) began selling NIC OUT product in the U.S. in 2003 after purchasing from SAS, entered a representation/license arrangement with SAS, and filed an intent-to-use application to register NIC OUT on March 21, 2006; registration issued December 4, 2007.
- Relationship between Nahshin, SAS, and PSI evolved: PSI later purchased directly from P. Service (2007), asked P. Service to change packaging to show PSI as importer and to include PSI’s application number, and PSI made substantial U.S. marketing investments for NIC OUT.
- Nahshin petitioned the TTAB to cancel PSI’s registration; the TTAB granted cancellation in 2013, finding PSI was not the owner. PSI filed a § 1071(b) action in district court seeking reinstatement; Nahshin asserted counterclaims including trademark infringement and cancellation grounds.
- On cross-motions for summary judgment, the court reviewed the TTAB record plus additional evidence de novo and found Nahshin was the common-law owner of NIC OUT prior to PSI’s 2006 application.
- The court held that Nahshin’s prior use via SAS (and direct U.S. sales) established priority; however, Nahshin’s conduct (approving packaging changes, failing to object to PSI’s ownership assertions) amounted to acquiescence that bars recovery of past monetary damages though it does not bar injunctive relief going forward.
Issues
| Issue | Plaintiff's Argument (PSI) | Defendant's Argument (Nahshin) | Held |
|---|---|---|---|
| Ownership at time of PSI's 2006 application | PSI contends it acquired rights via distribution relationship with SAS and later direct purchases; any oral agreement with SAS transferred rights to PSI | Nahshin contends he used NIC OUT in U.S. commerce beginning 2002 via SAS and direct sales, so he had common-law ownership before PSI's application | Nahshin owned NIC OUT prior to PSI's application; PSI not entitled to registration reinstatement |
| Whether acquiescence bars Nahshin from cancelling PSI’s registration | PSI argues Nahshin impliedly consented to PSI's use/ownership (packaging changes, emails) so cancellation should be barred | Nahshin argues public interest in avoiding confusion and ownership priority preclude acquiescence from defeating cancellation | Court: acquiescence cannot bar cancellation when likelihood of confusion is inevitable; TTAB cancellation stands |
| Whether acquiescence/laches bar Nahshin’s infringement claim or damages | PSI asserts acquiescence and laches bar both injunctive and monetary relief because Nahshin tolerated PSI’s use and PSI invested in the mark | Nahshin contends he retained rights and may seek injunctive relief; equitable defenses should not strip him of trademark rights | Court: acquiescence bars recovery of retrospective monetary damages (economic prejudice shown) but does not bar prospective injunctive relief against PSI |
| If Nahshin were not owner, whether PSI would be owner and get reinstatement | PSI claims it developed U.S. market and invested sufficiently to deserve registration reinstatement | Nahshin disputes transfer of rights to PSI and shows prior U.S. use | Court did not reach this in favor of PSI because it found Nahshin was the prior owner; PSI's reinstatement claim denied |
Key Cases Cited
- Swatch AG v. Beehive Wholesale, LLC, 739 F.3d 150 (4th Cir. 2014) (district court review under 15 U.S.C. § 1071(b) may consider additional evidence and proceed de novo)
- Emergency One, Inc. v. American Fire Eagle Engine Co., Inc., 332 F.3d 264 (4th Cir. 2003) (common-law trademark rights acquired by actual use in commerce)
- Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455 (4th Cir. 1996) (acquiescence and laches doctrines in trademark cases; estoppel may not bar injunctive relief when likelihood of confusion exists)
- Sengoku Works Ltd. v. RMC International, Ltd., 96 F.3d 1217 (9th Cir. 1996) (presumption that foreign manufacturer retains trademark rights when using a U.S. distributor absent an agreement to transfer rights)
- George & Co., LLC v. Imagination Entertainment Ltd., 575 F.3d 383 (4th Cir. 2009) (nine-factor test for likelihood of confusion referenced for public-interest analysis)