Defendant can’t take advantage of TM abandonment it created

Axiom Worldwide, Inc. v. HTRD Group Hong Kong Ltd., 2015 WL
8113965, No. 8:11–cv–1468–T–33 (M.D. Fla. Oct. 30, 2015)
 
Axiom sued seeking to confirm its ownership of certain IP,
including trademarks, related to medical devices, and for infringement resulting from its unauthorized use.  It won summary judgment against numerous
defendants, and prevailed again after a non-jury trial, receiving damages and a
permanent injunction, which was affirmed.
 
Defendants sought modification of the permanent injunction,
which enjoined them from using Axiom’s trademarks, including “DRX 9000” and
“Axiom Worldwide” for any commercial purpose. 
Defendants alleged that Axiom had abandoned the marks for medical
devices; that the federal registrations for Axiom Worldwide and DRX 9000 had
been cancelled; that Axiom has had no substantive operations in the United
States since 2010; and that at least since 2011, no new devices in the “DRX”
line could be offered for sale in the U.S. because the FDA 510(k) pre-market
clearances for those devices were de-listed. Thus, the legal basis for the
injunction allegedly no longer existed.
 
Axiom responded that it hadn’t abandoned the marks but
rather licensed them to other companies, who were using them on the internet at
http://ift.tt/1TS7ejI, in fax blasts to doctors, and at trade shows both
domestically and internationally. Also, Axiom argued that defendants had
flagrantly violated the injunction, and that any nonuse was their fault.  The court heard testimony from James Gibson,
president of Axiom.
 
An injunction may be modified when its original purposes are
not being fulfilled in any material respects, or perhaps when the party seeking
modification shows that a significant change in circumstances warrants revision.
 Either way, defendants failed to show
entitlement to a change.  Defendants
argued that the abandonment of the marks, and their consequent availability to
the public, constituted a change in circumstances.
 
Gibson conceded that Axiom had no substantive business
operations in the United States, apart from litigation, since 2010, although he
testified to Axiom’s efforts post-judgment and post-appeal to regain a footing
in the DRX medical device service and sales market.  Nonuse for three years is prima facie
evidence of abandonment, creating a rebuttable presumption of intent not to
resume use.  Moreover, intent to resume
use “cannot be far-flung or indefinite; rather there must be an intent to
resume use within the reasonably foreseeable future.”  However, here, much of the period of nonuse
was caused by defendants and others like them, and was excusable; further, Axiom
took efforts to resume meaningful use of the marks in a timely manner.
 
For some background: Axiom created an LLC and transferred
certain assets to the LLC; the LLC ran into financial trouble and its assets
were bought by HTRD, which filed paperwork with the PTO to assign Axiom’s
trademarks to itself.  HTRD used Excite
Medical to make and sell DRX devices using Axiom’s trademarks, designs, and
other intellectual property.  It was this
that led to the lawsuit which established that Axiom owned the relevant IP. The
court ordered the cancellation of HTRD’s registrations of the trademarks and
directed the PTO to amend its records to show Axiom as the owner.
 
The first notice of cancellation for failure to file a
section 8 declaration for “Axiom Worldwide” came while HTRD claimed to own the
marks and before the district court’s ruling that Axiom owned the marks. A
later notice of cancellation, for the “DRX 9000” word mark, came after the
entry of judgment, when the marks had been reassigned to Axiom.  HTRD filed the first required Section 8
Declarations for both marks between the fifth and sixth anniversaries of the
registration, but the PTO rejected the declaration for “Axiom Worldwide”
because HTRD didn’t have proper chain of title. For the “DRX 9000” mark, the
PTO accepted the declaration from HTRD, but cancelled the registration for
failure to file the declaration at the ten-year mark.  In any event, the owner didn’t properly file
section 8 declarations, and that couldn’t be blamed on the PTO or someone else.
 
In April 2011, purportedly to protect the marketplace from
counterfeit goods, Axiom de-listed its DRX 9000 series of products with the
FDA, which prevented it from making DRX devices in the U.S. After the
litigation, Axiom conveyed the trademarks to other entities, as a result of
substantial judgments against it.  One of
those other entities is currently authorized by the FDA to manufacture DRX 9000
devices, because it re-listed the 510(k) clearance with the FDA this year.  Although these entities haven’t made new
devices, Gibson testified that they could do so if they received a customer
order, and that they’d been advertising new machines for sale since attending a
trade show in January 2015 in Dubai. They also attended trade shows in Nevada
and the West Coast and intended to go to others ithis fall. The DRX 9000 mark
and the Axiom Worldwide trademark and logo have been used at these trade shows.
Axiom also showed “fax blasts” from between February and June 2014, promoting
the sale of service parts and used devices for the DRX machines (the latter for
international customers, which would seem to create a use in the US issue). Gibson
further testified that he attempted to regenerate Axiom’s business activity but
was unable to obtain investors who were fearful of the injunction and of defendants’
continued violations.
 
Axiom showed that defense counsel, on behalf of defendant
Excite Medical, filed an application with the PTO to register “DRX 9000” for
medical devices in May 2015.  Its declaration
that “the applicant is the owner of the trademark or service mark” or
alternatively, that “the applicant is entitled to use the mark in commerce” and
that “the signatory believes …. no other person has the right to use the mark
in commerce ….” was, according to Axiom, clearly false, and a blatant
violation of the injunction. Defendants responded that it was merely an ITU
application, and that  Excite Medical
intended to use the mark for “back braces,” not for the spinal decompression
device at issue in this litigation.
 
The court concluded that, “despite some missteps and
apparent difficulty getting business restarted, the whole of this litigation
demonstrates Axiom’s efforts to reclaim the marks for use of the marks in
commerce.”  Its actions of suing after
learning that HTRD claimed ownership of the intellectual property and had
reassigned the Axiom trademarks to itself and begun manufacturing and selling
DRX 9000 devices weighed against any finding of inexcusable nonuse. “While
Axiom ceased further operations pending a determination that it owned the
marks, its conduct in seeking to regain control of its marks and intellectual
property simply does not lend support to Defendants’ claims of abandonment nor
their request for modification.”  The court
wasn’t willing to allow defendants to benefit from a problem they’d helped
cause.  Their attempts to do so included
the ITU, since the injunction explicitly prevented defendants from “[m]aking
representations that they own or are authorized to use any of the trademarks or
intellectual property rights and proprietary information this Court has found
belong to Axiom.” Defendants’ and their counsel’s belief in the marks’
abandonment didn’t displace the injunction, and their insistence on testing its
boundaries weighed against a finding that the injunction had served its
intended purpose.
 
Although Axiom’s financial circumstances made it doubtful
that Axiom itself could reenter the DRX sales or service business, it had
post-litigation licensing agreements that allowed it and its transferee to do
so, and those entities were actively marketing the DRX products and using the
marks for their sales and service efforts. (The court again didn’t address the
international v. use in the US aspects of this marketing.)  “[T]hese intentional and concrete efforts to
reestablish business in the DRX line of machines are not far flung or
indefinite.”

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