Rhoades V. Avon, 2007 US App LEXIS 24096 (9th Cir. 2007). Decided October 15, 2007
Ruling: TTAB proceedings do not need to be completed as a prerequisite to bringing a declaratory action in Federal Court to determine whether one mark infringes another.
Threat of litigation made in settlement discussions are not inadmissible under Federal Rule of Evidence 408.
Procedural History: Plaintiff brought an action for declaratory relief that Plaintiff’’s trademark did not infringe Defendant’s trademark. Plaintiff had registered for a trademark with the USPTO and Defendant filed an opposition proceeding. Both parties had been engaged in protracted negotiations and the TTAB proceedings were not yet completed. The district court (Central District California) granted Defendant’s 12(b)(6) motion to dismiss based on the court lacking subject matter jurisdiction because of the pending TTAB proceedings. Plaintiff appealed.
Factual Background: Plaintiff attempted to register the mark DermaNew for microdermabrasion devices. Defendant opposed registration based on its product line called ANEW. The parties engaged in lengthy negotiations in which Defendant sent several letters for settlement purposes which threatened pursuing money damages (which can only be obtained in litigation). Plaintiff therefore filed for declaratory relief.
Legal Analysis: Defendant’s threats to litigate in settlement letters gave rise to Plaintiff’s reasonable aprehension of liability should Plaintiff continue marketing its product while awaiting the outcome of the TTAB proceedings. Furthermore, a TTAB decision in Plaintiff’s favor would not preclude Defendant from bringing a federal action for infringement. As such Plaintiff’s action for declaratory judgment was appropriate. Additionally, Federal Rule of Evidence 408 (making statments regarding liability in settlement communications inadmissible) did not preclude admission of Defendant’s settlement letters threatening litigation because the letters were not offered to prove liability.
Plaintiff-Appellant: Dean Rhoades, Dermanew, Inc., a California corporation
Counsel: Steven A. Freund and Donald B. Rosen, Law Offices of Steven A. Freund; and Howard Posner (Los Angeles, CA)
Defendant-Respondent: Avon Products, Inc.
Counsel: Michelle M. Graham and William R. Golden, Jr., Kelley Drye & Warren, LLP (New York, NY)
Judges: Richard A. Paez (Opinion), John T. Noonan, Andrew J. Kleinfeld