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Very Broad Reach of Federal Law Governing Trademarks is Good News for Local Businesses
Very Broad Reach of Federal Law Governing Trademarks is Good News for Local Businesses

The Federal Court of Appeals has clarified that the federal law governing trademarks has a very broad reach.

The case is Christian Faith Fellowship Church v. Adidas AG, which the Court of Appeals for the Federal Circuit decided on Nov. 14, 2016. Adidas had applied to register the ADIZERO trademark for clothing, but its application was refused based on a registration owned by a church for the mark ADD A ZERO, also covering use with clothing. Adidas brought an action at the Trademark Trial and Appeal Board to cancel the church’s registration on the ground that the church had not used its mark “in commerce” before it filed its application, which would make the resulting registration invalid.

Like many federal laws, the federal trademark law – the Lanham Act – is based on Congress’s power to regulate interstate commerce. The Lanham Act allows registration of trademarks that are used in commerce, and defines “commerce” as “all commerce which may lawfully be regulated by Congress.” As a result, a business wanting to register a trademark must confirm in its application that the mark is in use “in commerce.”

There has been some question about exactly what is necessary to satisfy the requirement that the use of a mark be “in commerce.” Is it necessary that goods be sold outside the seller’s home state? Must services be provided in more than one state? How much activity is required? The Christian Faith Fellowship case answers that question: not much.

To briefly review the facts, the Christian Faith Fellowship Church is located in Illinois within five miles of the Wisconsin border. Some of its parishioners live in Wisconsin. The church has a bookstore, where it sold apparel bearing the ADD A ZERO mark. Based on those sales, the church obtained two federal registrations for the mark. When Adidas petitioned to cancel those registrations on the ground that the church had not used the marks in interstate commerce, the church produced a check for $38.34 with a preprinted Wisconsin address, reflecting the sale of two ADD A ZERO hats. The Board cancelled the registrations despite that sale, holding that it was de minimis use and insufficient to affect interstate commerce. The church appealed.

To resolve whether the church had used its mark in commerce, the court reviewed Supreme Court decisions showing that “use in commerce” presents a very low hurdle. In Wickard v. Filburn, the Supreme Court held that it was within Congress’s power to regulate a farmer’s growing wheat for personal use because, in the aggregate, such uses could affect interstate commerce. In Gonzales v. Raich, the court held that when a general regulatory statute bears a substantial relation to commerce, the fact that the particular use under consideration may be de minimis “is of no consequence,” so growing marijuana strictly for personal use was within the commerce power. In Taylor v. U.S., the court held that defendant charged with theft of drugs could be liable under the federal Hobbs Act; the fact that it was a local act was not important if “defendant’s conduct fell within a category of conduct that, in the aggregate, had the requisite effect” on commerce. The Federal Circuit also looked to its own precedent, which confirms that the reach of the Lanham Act is broad indeed.

Under this precedent, the court concluded that the sales of two hats to an out-of-state resident was “comfortably” within Congress’s power under the Commerce Clause, and that the church was not required to show any specific effect on interstate commerce or that the hats it sold would be transported out of state. It reversed the cancellation of the church’s registrations.

The effect of the ruling is to clarify that sales do not have to be made across state lines, nor services rendered to customers in more than one state, in order to support protection under the Lanham Act. A local business serving local customers may register its mark with the U.S. Patent and Trademark Office. It may be that there are some enterprises that are so inherently local and isolated that they would not meet the requirement that their activities, if aggregated with all other similar activities, would affect interstate commerce. But it is hard to think what those hyperlocal enterprises would be.




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