Arnold Ceballos Click here to see full sized version.

As a result of a recent U.S. federal Court of Appeals decision, Canadian entities that apply for trademark protection in the U.S. could find themselves dragged into an American court even when they have no business presence in the country.

As in Canada, it is possible for business entities to file trademark applications in the U.S. to protect marks that are not yet in use, but which the applicant eventually plans to use in the country. A registration may then issue if the applicant subsequently files a statement that the mark is in use in commerce.

Applicants may seek such protection even if they have no business activity in the U.S. They are, however, required to designate a person residing in the U.S. on whom notice may be served in proceedings affecting the trademark. In many cases, this designee will be the agent or lawyer handling the trademark application. If no such designation is made, by default the Director of Patents and Trademarks, located in Alexandria, Virginia, is deemed to be the designee.

In a 2-1 decision issued in late December of 2007, the Fourth Circuit Court of Appeals has held that the service of a subpoena on a foreign applicant’s domestic representative is sufficient to compel the non-U.S. applicant to appear and give testimony regarding the trademark application (Rosenruist-Gestao E Servicos LDA v. Virgin Enterprises Ltd., No. 06-1588 (4th Cir. Dec. 27, 2007)).

This particular case involved a trademark opposition filed by Virgin Enterprises Ltd. against Rosenruist-Gestao E Servicos LDA, a Portuguese company that had filed an intent-to-use trademark application in the U.S. Rosenruist conducted no business in the U.S. and had no employees in the country. In the context of the opposition, Virgin served Rosenruist’s appointed domestic representative and sought to compel Rosenruist to produce a witness in the U.S. to give testimony relevant to the trademark opposition.

Rosenruist challenged the validity of the subpoena, arguing that it could not be compelled to appear for the deposition, since the company lacked sufficient contacts in the Eastern District of Virginia. In the lower courts’ legal wrangling, the Trademark Trial and Appeal Board (TTAB) had agreed with Rosenruist, noting that according to its manual of procedure, a party residing in a foreign country may be compelled to appear for an oral testimonial deposition only through the procedures provided in The Hague Convention or the issuance of letters rogatory to the appropriate Portuguese legal authority.

The appellate court disagreed, echoing a lower court ruling that the subpoena was valid and that the civil procedure rules governing the issuance of subpoenas applied in this case. Without having to decide the issue, the appellate court also added in a footnote that were the issue before it, the court would conclude that Rosenruist’s activities were sufficient to qualify it as “being within” the district for the purposes of establishing jurisdiction.

As for the TTAB’s interpretation, the majority, made up of Senior Circuit Judge Wilkins and Circuit Judge Traxler, dismissed it, arguing that the manual of procedure “merely sets forth the TTAB’s informal opinion” and is not binding on the court nor particularly persuasive.

There is a surprisingly candid and strong dissent by Circuit Judge Wilkinson, who argued that the decision “is bound to embroil foreign trademark applicants in lengthy, procedurally complex proceedings” and invites “international discord.”

“The imposition of new burdens upon foreign companies, when they take no more than the first perfunctory step to register their trademark here, undermines a predicate of international commerce that a more modest conception of the judicial function would avoid,” wrote Judge Wilkinson. Judge Wilkinson takes particular exception to the majority’s conclusory statement being expressed as dicta in a footnote, stating that “it is not a good idea to have a single sentence of dicta pass upon matters of such foreign and domestic import.”

The dissenting judge correctly pointed out that the decision creates a national standard, since the Patent and Trademark Office, the default designee for trademark applicants, is located in the Eastern District of Virginia.

Barring a successful appeal by Rosenruist, this decision will have important practical ramifications for non-U.S. trademark applicants looking to secure protection in the U.S. Such applicants in Canada, as well as their Canadian lawyers and agents, should be aware that they may now be forced to testify in the U.S. if they apply for registration of trademarks in that country. If no domestic representative is appointed, they may find themselves subject to jurisdiction in the Eastern District of Virginia.

Applicants should also review their existing U.S. trademark portfolios to determine if they are satisfied with the location of their domestic representatives, since they may find themselves subject to that particular jurisdiction in a dispute. Clients doing business in the U.S. will now have to consider where geographically within the U.S. they might be required to defend their application and appoint a domestic representative accordingly. 

Arnold Ceballos practises intellectual property law with Pain & Ceballos LLP in Vaughan, Ontario.