2d Cir.: Nike's broad covenant-not-to-sue for TM infringement kills jurisdiction over invalidity/cancellation DJ under MedImmune test

Nike was recently rewarded for pulling a potentially risky litigation move: trying to avoid a troublesome DJ/cancellation counterclaim by unilaterally issuing a broad covenant-not-to-sue. This move is a little like surrendering without knowing for sure if the adversary can shoot you when you raise your hands.


After filing an action alleging Yums infringed Nike’s marks for its “Air Force 1” shoes, Yums filed a counterclaim for a DJ of invalidity and a demand that Nike’s registrations be cancelled. Apparently the counterclaim gave Nike second thoughts, because it then sent Yums a covenant not to sue for footwear “based on the appearance of any [Yum’s] current and/or previous footwear product designs.” Nike then moved to dismiss: (1) its own infringement claims without prejudice under FRCP 41(a)(2) and (2) Yum’s counterclaim without prejudice for lack of a case or controversy under FRCP 12(b)(1).

The 2d Circuit affirmed the dismissal of the counterclaims for lack of a case or controversy. Applying the test under MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the court ignored whether Yums retained any “reasonable apprehension” of suit, and focused only on whether there remained any “real and substantial” controversy after the broad covenant was issued.

Based primarily on the breadth of the covenant (which covered all past and present Yum’s designs and any future sales of present designs) and on the lack of any evidence that Yum’s intends to infringe or counterfeit through any future design, the Second Circuit held that the basis for a DJ evaporated upon issuance of the covenant, and that the request for cancellation (under 15 U.S.C. § 1119) is merely a remedy, not an independent source of jurisdiction.

The case is Nike, Inc. v. Already, LLC d/b/a Yums, No. 11-314-cv (2d Cir. Nov. 10, 2011).

5th Circuit: Need "Fixed" Product Design to Invoke DJ Jurisdiction in Trade Dress Dispute

On May 8, the 5th Circuit affirmed the dismissal of a declaratory judgment action concerning the trade dress of a bottom-dump truck trailer design. In Vantage Trailers, Inc. v. Beall Corp., No. 08-21039 (5th Cir. May 8, 2009), the defendant Beall owned a registered trademark for the design of its bottom-dump trailer. It learned that its rival, Vantage, had begun to manufacture and offer to sell a competing bottom-dump trailer, and so wrote Vantage a nasty letter accusing the new trailer design of trade dress infringement. Vantage sued for a declaration of noninfringement.

The 5th Circuit, however, pointed out that during the litigation Vantage had made certain modifications to the external configuration of the trailers. During this period, Vantage also sent one of its customers different depictions of the trailer. Based primarily on these facts, the 5th Circuit concluded that Vantage was thus “not immediately prepared to manufacture and sell trailers at the time it filed suit.” As a consequence, the courts entertaining the dispute would be unable to “compare [the shape of Vantage’s trailers] against that of Beall’s trailers” to determine whether trade dress infringement existed. Citing two patent DJ decisions (one from the Federal Circuit and a much older one from the 7th Circuit), the 5th Circuit held that Vantage “failed to meet its burden to show that its design was substantially fixed as to the potentially infringing elements, i.e., the appearance of the trailers, at the time of suit” (emphasis added), and therefore affirmed dismissal of the declaratory judgment action for lack of an immediate and real controversy.

10th Circuit decision on whether TTAB proceedings and old C&D letters create DJ jurisdiction

I think this is the first appeals court decision to address whether the nascently infamous footnote 11 in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007) applies to trademark cases. Yup, it does.

In Surefoot LC v. Sure Foot Corp., No. 06-4294 (10th Cir. July 8, 2008), the DJ defendant had sent the DJ plaintiff several cease & desist letters making accusations of infringement in 1998-99. Then it stopped. In 2002, the DJ plaintiff started filing applications to register the mark at issue. When the first one issued, the DJ defendant petitioned the TTAB to cancel it. After that, any time the DJ plaintiff filed an application, the DJ defendant opposed it. All these TTAB disputes are still pending. But since 1999, there were no further threats of infringement lawsuits.

The 10th Circuit first held that MedImmune applied to Lanham Act cases and that its footnote 11 overruled its former “reasonable apprehension of imminent suit” standard for DJ jurisdiction in trademark cases. It held that under MedImmune the controversy must be “definite and concrete, touching the legal relations of parties having adverse interests” and that the dispute be “real and substantial and admit of specific relief through a conclusive decree, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.”

Applying this test, the 10th Circuit held that the combination of the several TTAB proceedings, taken together with the 1990s cease and desist letters and threats (which the DJ defendant never withdrew) satisfied the requirements for DJ jurisdiction. It remanded for the district court to determine whether it should nevertheless exercise its discretion (based on a multi-factor test) not to entertain the suit.

The court refused to opine whether the lapse of more time since the last cease and desist letters or fewer TTAB proceedings would satisfy the new, yet old, MedImmune test.