General Healthcare Ltd. v. Qashat
2003 U.S. Dist. LEXIS 5258, 2003 WL 1785769, 254 F. Supp. 2d 193 (2003)
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Rule of Law:
Under the Lanham Act, shipping trademarked goods from a U.S. manufacturer to the mark holder's foreign location for subsequent assembly and sale exclusively in other foreign markets does not constitute 'use in commerce' sufficient to maintain trademark rights and prevent abandonment.
Facts:
- In 1982, Healthcare International (HCI) began using the 'KENT' trademark for a hair bleach product.
- After HCI's principal died, General Healthcare Limited (GHL), a British company, allegedly purchased the rights to the KENT mark from his widow in 1989.
- Since 1989, GHL has never sold any products under the KENT mark to consumers in or from the United States.
- Beginning in 1990, GHL contracted with a U.S. manufacturer to produce the creme for its KENT product and ship the components (creme-filled tubes bearing the trademark) to GHL in the United Kingdom.
- GHL performed final assembly of the product in the U.K. and sold it exclusively to customers in the Middle East.
- In 1990, Isam Qashat began selling a competing hair bleach product under the KENT mark in the United States through his company, Kent International Products (KIP), using packaging that was virtually identical to HCI's original design.
- KIP made sales of its KENT product from the United States to customers both abroad and within the United States.
Procedural Posture:
- General Healthcare Limited (GHL) filed a complaint against Isam Qashat and Kent International Products, Inc. (KIP) in U.S. District Court, alleging unfair competition, false advertising, and seeking cancellation of KIP's trademark registrations.
- The defendants (Qashat and KIP) filed an answer and counterclaims against GHL for trademark infringement.
- GHL filed its answer to the defendants' counterclaims.
- Following discovery, both GHL and the defendants filed cross-motions for summary judgment with the court.
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Issue:
Does a company's practice of having its trademarked goods manufactured in the United States and shipped to itself in the United Kingdom for subsequent sale exclusively in the Middle East constitute 'use in commerce' under the Lanham Act sufficient to prevent trademark abandonment?
Opinions:
Majority - Collings, United States Magistrate Judge
No. A company's practice of having trademarked goods manufactured in the U.S. and shipped internally to a foreign location for sale in other foreign markets does not constitute 'use in commerce' under the Lanham Act sufficient to avoid abandonment. The court determined that GHL abandoned any rights it may have had to the KENT trademark. Under the Lanham Act, a mark is abandoned if its use has been discontinued with an intent not to resume. Nonuse for three consecutive years creates a prima facie case of abandonment, shifting the burden to the owner to show an intent to resume use. The court found that 'use in commerce' requires more than secret, internal shipments from a manufacturer to the mark owner; it requires use that is 'sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind.' GHL's transportation of components from the U.S. to the U.K. was not a public use and did not make the goods available to the U.S. purchasing public. Since GHL had not used the mark in U.S. commerce since 1989, a prima facie case of abandonment was established. GHL failed to rebut this presumption, as its principal's vague testimony about 'maybe' selling in the U.S. in the future was insufficient to show a concrete plan to resume use in the reasonably foreseeable future. Because GHL abandoned the mark, it lacks standing to seek cancellation of KIP's trademark registrations.
Analysis:
This decision clarifies that the 'use in commerce' requirement under the Lanham Act is not satisfied by leveraging the U.S. solely for manufacturing or as a part of a supply chain for foreign sales. It reinforces the principle that trademark rights in the U.S. are grounded in public, market-facing activities within the U.S. The ruling serves as a crucial precedent for foreign trademark holders, establishing that they cannot maintain U.S. trademark rights without engaging in actual commercial activity directed at the U.S. public, such as sales or open and notorious marketing. This case solidifies the high bar for rebutting a presumption of abandonment, requiring objective evidence of concrete plans to resume use, not just subjective, speculative statements of future intent.
