. . . The Federal Circuit emphasized that the district court’s “blanket rejection of the unlawful use defense” was unfounded. . . .
Introduction
In VPR Brands, LP v. Shenzhen Weiboli Technology Co. Ltd., No. 2023-1544 (Fed. Cir. Aug. 14, 2024) (“Decision”), the United States Court of Appeals for the Federal Circuit vacated and remanded the district court’s preliminary injunction order in a trademark infringement dispute. The court’s decision focused on the “unlawful use doctrine” and the district court’s failure to fully analyze and apply that doctrine as a defense to trademark infringement. The Federal Circuit held that the lower court had misunderstood precedential Eleventh Circuit guidance concerning the doctrine and, therefore, improperly rejected Weiboli’s defense without sufficient analysis and consideration.
The Parties and the District Court’s Ruling
Plaintiff VPR is the owner of U.S. Trademark Registration No. 5,486,616 for the mark “ELF,” used in connection with electronic cigarette products. Decision at 2. VPR markets two primary products under the ELF mark: a reusable e-cigarette vaporizer and a high-capacity e-cigarette battery. Id. Weiboli, a Chinese manufacturer of e-cigarettes, markets its products in the United States under the name “ELFBAR.” Id. at 3. VPR filed suit against Weiboli in the United States District Court for the Southern District of Florida, alleging that Weiboli’s use of the ELFBAR mark infringed VPR’s ELF trademark, resulting in likely confusion in the marketplace. Id. at 2-3. VPR moved for a preliminary injunction. Id. at 3.
In response, Weiboli raised the unlawful use doctrine as an affirmative defense, arguing that VPR’s ELF trademark registration was invalid because VPR’s products were allegedly sold in violation of the Federal Food, Drug, and Cosmetic Act (“FDCA”). Id. at 3. Specifically, Weiboli asserted that VPR’s e-cigarettes constituted “new tobacco products” that had not received the necessary pre-marketing authorization from the Food and Drug Administration (“FDA”). Id. Weiboli argued that, under the unlawful use doctrine, a trademark used in violation of federal law is considered invalid and unenforceable. Id.
The district court, however, rejected Weiboli’s unlawful use defense and granted VPR’s preliminary injunction. Id. at 4. The court declined to apply the unlawful use doctrine to bar VPR’s trademark claims, concluding that there was no definitive guidance from the Eleventh Circuit on whether the doctrine should be adopted as a defense in an infringement context. Id. In its decision, the district court cited FN Herstal SA v. Clyde Armory Inc., 838 F.3d 1071, 1086-87 (11th Cir. 2016), where the Eleventh Circuit had acknowledged the doctrine’s existence but did not apply it as a defense to trademark infringement due to insufficient evidence. Id. According to the district court’s reading of the decision, FN Herstal provides “caution signals” against applying the doctrine in the context of an infringement action. Id.
Further, the district court reviewed other district court decisions and determined that the landscape of cases applying the unlawful use doctrine was “mixed” “at best.” Id. For example, relying on Hi-Tech Pharms. Inc. v. Dynamic Sports Nutrition LLC, No. 16-CV-00949, 2020 WL 10728951, at *6 (N.D. Ga. Jan. 10, 2020), the district court concluded that the unlawful use doctrine should not be wielded to “strip a party of its trademark rights” in civil infringement actions without a concrete basis for doing so. Id. at 4.
The district court emphasized that the doctrine is more commonly and appropriately applied in administrative proceedings before the Trademark Trial and Appeal Board (“TTAB”), which is the “primary vehicle” for challenging trademark registrations. Id. at 4-5. Moreover, the district court pointed out that the FDCA does not provide a private right of action for enforcing FDA regulations, and there was no evidence that the FDA had determined that VPR’s product sales violated the FDCA. Id. at 5. While acknowledging that Weiboli had offered evidence tending to show that VPR’s sales violated the FDCA, the court reasoned that “it would require extrapolations and inferences from the present record” to determine whether VPR’s use of the mark violated FDCA requirements, and that such determinations are “a matter best left for the FDA.” Id.
The Federal Circuit’s Analysis
The Federal Circuit vacated the district court’s preliminary injunction and remanded the case for reconsideration of Weiboli’s unlawful use defense. Central to the Federal Circuit’s ruling was its assessment that the district court had misinterpreted the Eleventh Circuit’s FN Herstal decision regarding the unlawful use doctrine and had failed to conduct a satisfactory analysis of the defense presented by Weiboli.
The Federal Circuit began its analysis by tracing the origins of the unlawful use doctrine to administrative proceedings within the Patent and Trademark Office (PTO). Decision at 7 (citing In re Stellar Int’l, Inc., 159 U.S.P.Q. 48, 1968 WL 8159, at 3–5 (T.T.A.B. 1968)). During its seventy-year history, the doctrine has been applied by the TTAB to refuse or cancel trademark registrations when the mark’s use in commerce violated federal law. See, e.g., Coahoma Chem. Co. v. Smith, 113 U.S.P.Q. 413, 1957 WL 7113, at 6 (Com’r Pats. & Trademarks 1957) (marks used on insecticides sold in violation of federal law). The court observed that, consistent with that early case law, the PTO promulgated regulations forbidding the registration of marks used in violation of law. See Stellar, 1968 WL 8159, at *4; see also 37 C.F.R. § 2.69.
The fundamental principle undergirding the doctrine is that, because trademark rights stem from a mark’s use in commerce, a mark that is used in an illegal manner cannot serve as the basis for trademark protection. See, e.g., Satinine Società in Nome Collettivo di S.A. e M. Usellini v. P.A.B. Produits et Appareils de Beaute, 209 U.S.P.Q. 958, 1981 WL 48126, at *10 (T.T.A.B. 1981) (Kera, M., concurring) (“[I]t would be anomalous for the [PTO] to accord recognition to the use of a mark when the use relied upon was unlawful”). Other courts have explained that the doctrine “has its origins in the common law doctrine of ‘unclean hands.’” Dessert Beauty, Inc. v. Fox, 617 F. Supp. 2d 185, 190 (S.D.N.Y. 2007).
Although the unlawful use doctrine’s application by the TTAB is well-established, the Federal Circuit observed that its extension beyond administrative proceedings into civil litigation, particularly in district court trademark infringement cases, has been less consistent. Decision at 9. Indeed, the Federal Circuit noted that “[t]here remains a lack of consensus as to the statutory basis for this doctrine and the bounds of its application.” Id. (citing Pac-West Distrib. NV LLC v. AFAB Indus. Servs., Inc., 674 F. Supp. 3d 132, 139 (E.D. Pa. June 13,2023) (collecting cases); see also generally Mikos, 75 Vand. L. Rev. at 188 (discussing the unlawful usedoctrine in trademark infringement litigation)).
The recognition of the doctrine among appellate courts is likewise inconsistent. In addition to the Eleventh Circuit, the Ninth Circuit and Tenth Circuit have “recognized some form of the doctrine in infringement cases as a defense.” Decision at 9 (citing CreAgri, Inc. v. USANA Health Scis., Inc., 474 F.3d 626, 630 (9th Cir. 2007) (“only lawful use in commerce can give rise to trademark priority”); United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1225 (10th Cir. 2000) (trademark owner “needed to show the [mark] was lawfully used in commerce”). The Fifth Circuit, however, has departed from its sister courts and “has not adopted the unlawful use doctrine.” Decision at 9 (quoting Perry v. H. J. Heinz Co. Brands, L.L.C., 994 F.3d 466, 475 (5th Cir. 2021)).
According to the Federal Circuit’s review, the Eleventh Circuit has provided one of the more detailed discussions of the doctrine in the infringement context. In FN Herstal, the Eleventh Circuit found that “the TTAB interpret[ed] the ‘use in commerce’ requirement to mean ‘lawful’ use.” FN Herstal, 838 F.3d at 1086-87. And “a use is unlawful if (1) a court or agency with competent jurisdiction has previously found a violation or (2) ‘there has been a per se violation of a statute regulating the sale of a party’s goods.’” Decision at 11 (quoting FN Herstal, 838 F.3d at 1087 (citations omitted)). In applying that standard, the Eleventh Circuit requires that the unlawful use defense be established “by clear and convincing evidence.” Id.
Although the Eleventh Circuit ultimately declined to apply the doctrine in FN Herstal due to insufficient evidence, it did not reject the doctrine outright. Instead, the Eleventh Circuit left open the possibility of applying the unlawful use doctrine under the right factual circumstances, where a clear and material violation of law can be established. Decision at 11-12 (“To the extent FN Herstal did not provide a ‘positive inclination’ towards adopting the doctrine, the Eleventh Circuit did not show any ‘positive inclination’ towards rejecting it”). Indeed, the Eleventh Circuit not only recognized the doctrine “but also set out what an accused infringer must show to succeed on an unlawful-use defense.” Id. at 12.
The Federal Circuit thus criticized the district court’s misreading of FN Herstal as issuing “caution signals” against the doctrine’s use in an infringement context. Id. at 13. The Federal Circuit emphasized that the district court’s “blanket rejection of the unlawful use defense” was unfounded. Id. The Federal Circuit explained that FN Herstal required the district court to assess whether the evidence presented by Weiboli satisfied the unlawful use doctrine by clear and convincing evidence, which the district court failed to do. Id. at 13-14. “Indeed, the court declined to determine whether Weiboli’s evidence sufficed to show VPR was non-compliant.” Id. at 14. The Federal Circuit thus concluded that the district court had failed to adequately assess whether Weiboli had provided sufficient evidence to invoke the unlawful use doctrine, and by doing so, had improperly dismissed the defense without a full legal and factual analysis. That failure was legal error that required vacating the preliminary injunction and remanding the case for further proceedings. Id. at 14-15.
The Federal Circuit was nevertheless careful to explain that “our decision today does not predetermine whether the district court must adopt the unlawful use doctrine or the scope of its application as pertinent here.” Id. at 15. The Federal Circuit also noted that it had not prejudged “whether Weiboli’s unlawful-use defense in this case survives at the preliminary injunction or a later stage.” Id. On remand, the district court was instructed to reconsider its analysis of Weiboli’s unlawful use defense and “reevaluate VPR’s motion for a preliminary injunction.” Id.
Conclusion
The Federal Circuit's decision in VPR Brands LP v. Shenzhen Weiboli Technology Co. Ltd. serves as a definitive recognition of the unlawful use doctrine as not merely an administrative remedy before the TTAB but as a valid defense to trademark infringement allegations in federal district court. By vacating the district court's preliminary injunction and emphasizing the need for a full legal and factual analysis of the unlawful use defense, the Federal Circuit has authoritatively affirmed that a trademark’s validity can be challenged in civil litigation based on its illegal use in commerce, setting a clear precedent for future trademark disputes in the federal courts.
Comments