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In In re California Innovations, 02-1407 (Fed. Cir.May 22, 2003), the U.S. Court of Appeals for the Federal Circuit revisited thestandard to be applied in ascertaining whether a mark is primarilygeographically deceptively misdescriptive. The court reversed the decision ofthe Trademark Trial and Appeal Board, holding that it had applied an outdatedtest for making this determination, when it refused registration to Applicantfor the mark CALIFORNIA INNOVATIONS & DESIGN for thermal insulated bags andwraps. The court found that changes to the Trademark Act brought about bypassage of the North American Free Trade Agreement Treaty (“NAFTA”) requireduse of a heightened standard before categorizing marks as primarilygeographically deceptively misdescriptive. Accordingly, the court confirmedthat a mark may not be refused registration unless the alleged “deception” ismaterial to the consuming public’s purchasing decision for the goods orservices in question. PRE-NAFTA DECEPTIVENESS UNDER � 2 OF THE TRADEMARKACT Section 2 of the Trademark Act, 15 U.S.C. � 1052, guaranteesthat trademarks are entitled to registration unless they fall within certainenumerated categories. For example, � 2(a) prohibits registration of amark if it is “deceptive.” 15 U.S.C. � 1052(a). A mark that is deceptive cannever acquire distinctiveness (i.e., secondary meaning) and, thus, can never beregistered. See In re Loew’s Theatres, 769 F.2d 764, 768 n.6, 226U.S.P.Q. 865, 868 n.6 (Fed. Cir. 1985); 15 U.S.C. 1052(f). Similarly, �2(e)(3) prohibits registration of marks that are “primarily geographicallydeceptively misdescriptive.” 15 U.S.C. �1052(e)(3). Prior to 1994, the principal difference between thetreatment of a mark that was held to be deceptive under � 2(a) and a markheld to be primarily geographically deceptively misdescriptive under �2(e)(3) [then � 2(e)(2)], was that the latter could qualify forregistration upon a showing of secondary meaning. By contrast, a deceptive markcould never acquire secondary meaning under � 2(f) and could never beregistered. In re Loew’s Theatres, 769 F.2d at 768 n.6, 226 U.S.P.Q. at868 n.6.� Because of the absolute ban created by a finding ofdeceptiveness, the test for determining whether a mark is deceptive has alwaysbeen much stricter than the test for geographically deceptivemisdescriptiveness. In particular, the test for deceptive marks under �2(a) requires an element of materiality. Thus a mark is held unregisterableunder � 2(a) if it falsely denotes a feature of the goods or services andthat feature is material to the purchasing public. See In re Budge, 857F.2d 773, 775, 8 U.S.P.Q.2d 1259, 1260-61 (Fed. Cir. 1988). Under � 2(e)(3) [then � 2(e)(2)], however, thetest historically contained no requirement of materiality with respect to anygeographically deceptively misdescriptive component of the mark. The testconsisted of only two prongs: (1) whether the primary significance of the mark as it isused is a generally known geographic place; and (2) whether the public would make a “goods/placeassociation, i.e., believe that the goods for which the mark is sought to beregistered originate in that place.” Institut Nat’l Des Appelations d’Origine v. VintnersInt’l Co., 958 F.2d 1574, 1580, 22 U.S.P.Q.2d 1190 (Fed. Cir. 1992)(quoting In re Societe General Des Equx Minderals de Vittel, S.A., 824F.2d 957, 959, 3 U.S.P.Q.2d 1450, 1452 (Fed. Cir. 1987)). In Professor Kenneth B. Germain’s article “TrademarkRegistration Under �� 2(a) and 2(e) of the Lanham Act: The DeceptionDecision,” 44 FORDHAM L. REV. 249 (Nov. 1975), reprinted in 66 TRADEMARKREP. 97 (Mar. – Apr. 1976), he discussed at length the evolution of thedifferences in the tests for applicability of �� 2(a) deceptiveness and2(e) deceptive misdescriptiveness of the Lanham Act. Professor Germainconcluded that the distinction is one of “material deceptiveness,” i.e., thedeception is material to the consuming public, in that the matter of thedeception is important to the selection of the product or service offered underthe mark: Material deceptiveness is deemed most offensive anddangerous and accordingly is classified as fatally unregistrable under �2(a). If not material, the deceptiveness is deemed less offensive and dangerousand is only initially unregistrable as deceptively misdescriptive under �2(e), and may be salvaged by � 2(f) secondary meaning. In this fashionconsumers are adequately protected from material deceptions and are even giventhe initial benefit of the doubt vis-�-vis “immaterial” deceptions. By focusing on materiality, courts can protect consumers’interests by using � 2(e) to reject possibly misleading marks … withoutnecessarily damning them to eternal unregistrability under � 2(a). 66 TRADEMARK REP. at 117-118. Thus, the pre-NAFTA distinction between the treatment of2(a) deceptiveness and 2(e) deceptive misdescriptiveness or geographicaldeceptive misdescriptiveness, allowed the courts to give dissimilar meanings tothe terms “deceptive” in � 2(a) and “deceptively” in � 2(e). Thiswas seemingly in contravention of the rule of statutory construction thatcourts should ordinarily give similar statutory terms in the same section asimilar reading. See Commissioner v. Lundy, 516 U.S. 235, 248(1996).� The materiality of the deception thus became the hallmark ofdistinction between the test for whether a mark was deceptively misdescriptiveor primarily geographically deceptively misdescriptive (i.e., potentiallyregistrable) or whether it was deceptive (i.e., never registrable). SeeJ. MCCARTHY ON TRADEMARKS � 14.39. Both types of marks were, therefore, deemed”deceptive,” but the deception for geographically deceptively misdescriptivemarks was merely a legal fiction that existed only until such time as secondarymeaning could be established. POST-NAFTA DECEPTIVENESS REQUIRES A FINDING OF MATERIALITY In 1994, the Trademark Act was amended as a result of theNAFTA. See NAFTA Implementation Act, Subtitle C — Intellectual Property �333, 107 Stat. 2114, P.L. 103-182 (Dec. 8, 1993); In re Wada, 194 F.3d1297, 1301, 52 U.S.P.Q. 2d 1539, 1541 (Fed. Cir. 1999). The amendmentseliminated the possibility of proving that primarily geographically deceptivelymisdescriptive marks had acquired secondary meaning, thus making them foreverunregistrable, and placing them on the same footing as deceptive marks under� 2(a). Id. As a result of the NAFTA Amendments, geographicallydeceptively misdescriptive marks, which formerly qualified for protection,became fair game for infringers. Even though the public might associate suchmarks with a particular company or source, unscrupulous individuals could usesimilar marks with impunity. That is, such marks are now treated “the same asdeceptive marks.” In re Wada, 194 F.3d at 1301, 52 U.S.P.Q.2d at 1541. THE APPEAL IN ‘IN RE CALIFORNIA INNOVATIONS’ On March 23, 1995, California Innovations Inc. filed anapplication for registration with the U.S. Patent and Trademark Office for thecomposite mark CALIFORNIA INNOVATIONS and Design for certain goods, includingthermal insulated bags and wraps. The application was based on an intent to useunder � 1(b) of the Trademark Act as well as � 44(e), because theApplicant owns Canadian Registration No. 491,564 for the same mark and goods inCanada. Applicant’s mark was published, and no oppositions were filed. Insteadof issuing a registration, however, the PTO restored jurisdiction to theExamining Attorney nearly one year after publication and refused registrationunder � 2(e)(3) of the Trademark Act, alleging that the Mark wasprimarily geographically deceptively misdescriptive. Notwithstanding the lackof evidentiary support for the Examining Attorney’s decision, the TrademarkTrial and Appeal Board affirmed the refusal. On appeal to the Federal Circuit, California Innovationsargued that if marks under �� 2(a) and 2(e)(3) of the Trademark Act areto be treated the same as a result of NAFTA (i.e., both are now incapable ofregistration), equity and the rules of statutory construction demand that thetest for geographically deceptive misdescriptiveness be as stringent as thatfor deceptiveness. The court was urged to adopt a three-prong test, similar tothat adopted by the court in In re Budge, which requires proof that thealleged “deception” be shown to be material to the consuming public. California Innovations maintained that “[e]ach part orsection of a statute should be construed in connection with every other part orsection so as to produce a harmonious whole.” In re Nantucket, 677F.2d at 98, 213 U.S.P.Q. at 892. Here, the only reason for treating the testunder � 2(a) and 2(e)(3) differently was the salvation that could befound previously for all geographically deceptively misdescriptive marks under� 2(f) through proof of acquired distinctiveness. As that avenue forregistration has disappeared, a materiality test is now appropriate for allmarks of a “deceptive” nature that are forever unregistrable. Equitydemanded that such a death sentence should not be applied without a showingthat consumers are likely to be deceived in a material way. On May 22, 2003, the Court of Appeals for the FederalCircuit handed down its decision in In re California Innovations,adopting the revised three-pronged test for geographic misdescriptiveness under� 2(e)(3) and incorporating materiality as a requirement.� The court explained that the pre-NAFTAdistinction for the courts’ and the PTO’s tests under �� 2(a) and 2(e)(3)”was justified because rejection under subsection (a) was final, whilerejection under pre-NAFTA subsection (e)(2) was temporary until the applicantcould show that the mark had become distinctive. The more dramatic consequence[now required by subsection (e)(3) as a result of NAFTA] establishes the proprietyof the elevated materiality test in the context of a permanent ban onregistration under � 1052(a).” The Federal Circuit observed that NAFTA “obliterated thedistinction between geographically deceptive marks and primarily geographicallydeceptively misdescriptive marks,” because NAFTA shifted the focus “toprevention of any public deception” by elimination of the ability for thelatter to ever acquire distinctiveness under � 2(f). “Accordingly, marks determined to beprimarily geographically deceptively misdescriptive are permanently deniedregistration, as are deceptive marks under � 1052(a).” Thus, it is not simply a”lack of distinctiveness, but the higher showing of deceptiveness” that isrequired to classify a mark under � 2(e)(3). The court established therevised standard under � 2(e)(3), as follows: [T]he PTO must deny registration under � 1052(e)(3) if (1)the primary significance of the mark is a generally known geographic location,(2) the consuming public is likely to believe the place identified by the markindicates the origin of the goods bearing the mark, when in fact the goods donot come from that place, and (3) the misrepresentation was a material factorin the consumer’s decision. The court then remanded the case to the TTAB forconsideration under this revised standard. The California Innovations opinion brings �2(e)(3) into the 21st Century. The world is a vastly different place now thanwhen the geographically deceptively misdescriptive language was added to theTrademark Act a century ago. With the advent of the Internet and the World WideWeb, CNN, satellite television, low-cost travel providers and the relaxation oftrading barriers with Canada, Mexico and others, consumers are better-educated,more well-informed and significantly less likely to be deceived by marks simplybecause they contain geographical terms. Consumers today do not care aboutwhether a trademark informs them about the origin of many of their goods. In sum, as a result of the court’s opinion, the PTO now hasthe burden of showing that the geographical component of a mark is deceptive ina material way before it can refuse registration based on primarilygeographical deceptive misdescriptiveness. While it is unlikely that thecourt’s decision will result in a flood of new applications for markscontaining a geographic component, it is likely to result in a more equitabletreatment of marks containing geographical terms. If there is a real concern bythe public, such concerns can be aired and addressed through the filing of anopposition or through cancellation proceedings. Michael Grow ([email protected]) and Evan Stolove([email protected]) represented California Innovations Inc. before theU.S. Court of Appeals for the Federal Circuit. They practice law, with aconcentration on intellectual property, at the law firm of Arent Fox KintnerPlotkin & Kahn, PLLC in Washington, D.C. They can be reached at202-857-6000 and through their firm’s Web site: www.arentfox.com. If you are interested in submitting an article to law.com, please click here for our submission guidelines.

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