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TTAB May Have New Standard For Interstate Commerce

Scott J. Slavick & Arturo Ishbak Gonzalez

Reprinted with permission from the March 18, 2016 edition of Law30.com.

In February 2014, Italian restaurant Readi Spaghetti applied to register the "Flatizza" mark for pizza. When it filed, the company was operating a single location in Bothell, Washington, just north of Seattle. Flatizza was the name of one of its flat pizzas.

Doctor's Associates Inc., the company associated with the Subway restaurant chain, applied for the marks Flatizza and Flatizzas for sandwiches in April 2014, almost two months after Readi Spaghetti's application was filed.

Despite filing later, Doctor's Associates opposed Readi Spaghetti's application. It claimed that Janco LLC, which owns Readi Spaghetti, did not use its mark in interstate commerce because it operated only one restaurant at the time it filed its application. It argued that Readi Spaghetti's use was only intrastate commerce.

In its defense, Readi Spaghetti argued that it did make interstate use of its Flatizza mark, through online and social media advertising, adding that its pizza was frequently rated on Yelp with reviews from local and out-of-state patrons alike, including visitors from Arizona, New York, Colorado, Florida and Oregon — even Singapore. In addition, Janco pointed out that its Bothell Readi Spaghetti restaurant was less than one mile from Interstate 405 and only three miles from Interstate 5, according to Readi Spaghetti the West Coast's major north/south transportation corridor, and clearly serving interstate commerce.

This argument failed. On Jan. 7 of this year, in Doctor's Associates Inc. v. Janco LLC, Opposition No. 91217243, the Trademark Trial and Appeal Board sustained the opposition, rejecting Readi Spaghetti's application in a nonprecedential ruling. The board concluded that Readi Spaghetti's Flatizza application was void ab initio because Readi Spaghetti neither met the interstate use requirement nor impacted interstate commerce enough to qualify as a valid actual use trademark application at the time it was filed.

Because the parties did not dispute that their marks were confusingly similar and that their goods were related, the sole issue before the board involved a dispute over priority. And typically in such cases, the board bends over backward to find use of a mark in interstate commerce.

That didn't happen here. Any way you slice it, the board took a narrow stance on what constitutes use of a mark in interstate commerce. And despite the ruling's not being precedential, the board's decision casts doubt on the threshold level of interstate commerce required for an actual use trademark application to qualify as valid.

The board reasoned that even though a certain threshold level of interstate activity is not required before registration of a mark, in this case, Readi Spaghetti had not shown that its services were rendered to any customers out-of-state. The board admitted that there are situations in which intrastate sales may be found to have such an effect on interstate commerce that the activities constitute acceptable use in commerce for purposes of trademark registration, but there must be a showing that the activities have such an effect in each specific case.

The board didn't find so here. And while in a parallel universe, a customer buying a pizza in one place then crossing a state line while eating it could be stretched to be interstate commerce, that wasn't the board's reasoning. Instead, its opinion focused on the lack of evidence of any written review of the restaurant or of access by customers to Readi Spaghetti's social media pages.

Moreover, the board held there was no evidence that out-of-state travelers took Interstate 5 to get to Readi Spaghetti's Bothell restaurant and, in a curiously odd judgment, opined that Interstate 405, despite its name, was not an interstate highway.

Aside from the board's half-baked understanding of what an interstate highway is, this case is interesting because the scope of the Commerce Clause is typically construed broadly. In its seminal 1964 decision in Katzenbach v. McClung, 379 U.S. 294, 85 S. Ct. 377, the U.S. Supreme Court stated that the Commerce Clause was "an express grant of power to Congress to regulate interstate commerce, which consists of the movement of persons, goods or information from one state to another."

In ruling in Katzenbach, the court also found that the Commerce Clause was a grant of power "to regulate intrastate activities, but only to the extent that action on its part is necessary or appropriate to the effective execution of its expressly granted power to regulate interstate commerce." Therefore, there must be a close and substantial relation between local activities and interstate commerce which requires control of the former in the protection of the latter.

In its 2006 ruling in Gonzales v. Raich, 545 U.S. 1, 125 S. Ct. 2195, the Supreme Court identified three general categories in which Congress is authorized to exercise its power under the Commerce Clause. First, Congress can regulate the channels of interstate commerce. Second, it can regulate and protect the instrumentalities of interstate commerce, and persons or things in interstate commerce. Third, it can regulate activities that substantially affect interstate commerce.

One might think that Readi Spaghetti's case would be controlled by this third category: that the restaurateur would by necessity qualify as engaging in interstate commerce because interstate travelers would normally stop in restaurants around the country and consume food products like pizza. It seems logically impossible that only local customers had purchased Flatizzas in Readi Spaghetti's Bothell restaurant.

Moreover, to make its Flatizzas, one might safely assume that Readi Spaghetti purchased some or all of the ingredients from interstate vendors. (It's hard to imagine an indigenous maker of pepperoni, for example, in a state more noted for its apples!) Arguably, Readi Spaghetti "moved" goods from one state to another, and as explained by the court in Katzenbach, this activity is regulated by Congress under the Commerce Clause.

On the other hand, the Supreme Court in Gonzales held that "our case law firmly establishes Congress' power to regulate purely local activities that are part of an economic ‘class of activities’ that have a substantial effect on interstate commerce." The court also concluded that "Congress can regulate purely intrastate activity that is not itself 'commercial,' in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity."

Notably, Readi Spaghetti was applying for the mark Flatizza not for use in connection with restaurant services, but strictly in connection with its pizzas. Since Section 45 of the Lanham Act provides that "the word 'commerce' means all commerce which may lawfully be regulated by Congress," there appears no constitutional or statutory reason why "in commerce" does not include local sales which substantially affect interstate or foreign commerce. Katzenbach confirmed that "the power of Congress extends to activities of retail establishments, including restaurants, which directly or indirectly burden or obstruct interstate commerce." It would seem to follow that Readi Spaghetti’s use of the mark Flatizza would be considered as use in commerce and a valid application under the Lanham Act.

Will Readi Spaghetti challenge the board’s ruling, or reapply for its mark for restaurant services, now that it has a second location (though still in Washington)? We will see. And, even though this decision was issued as nonprecedential, we’ll see if future litigants reference it for what appears to be a heightened standard for what constitutes interstate commerce.

Click here to read the article on Law360.com.


Reprinted with permission from the March 18, 2016 edition of Law30.com.
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