CAFC Says District Court Erred in Rejecting Unlawful-Use Defense in Trademark Infringement Context

The U.S. Court of Appeals for the Federal Circuit (CAFC) today vacated and remanded a district court’s grant of a preliminary injunction to VPR Brands, LP, which accused Shenzhen Weiboli Technology Co. Ltd of infringing its ELF trademark for electronic cigarettes and associated products.

VPR sued Weiboli in the U.S. District Court for the Southern District of Florida, alleging infringement via Weiboli’s distribution of its ELFBAR branded e-cigarettes, which VPR said were likely to cause confusion in the marketplace. The next day, VPR filed a motion for preliminary injunction against the ELFBAR products.

In response, Weiboli argued that the “ELF” mark was invalid under the “unlawful use doctrine,” and that VPR would not prevail on its infringement claim. Under the unlawful use doctrine, the use of a mark in commerce must be lawful, and Weiboli claimed that VPR failed to obtain the proper pre-marketing authorizations from the Food and Drug Administration (FDA) before selling a “new tobacco product.” This unlawful use made the registration invalid and unenforceable, argued Weiboli.

The district court ultimately granted the preliminary injunction, rejecting Weiboli’s argument that the unlawful use doctrine should be applied in an infringement context. Whle the court acknowledged that Weiboli presented relevant  evidence to prove the unlawful use under the Food, Drug, and Cosmetics Act (FDCA), it “declined to analyze Weiboli’s evidence to determine whether it was sufficient to show unlawful use,”  explaining that to do so “would require extrapolations and inferences from the present record,” which the court said was best left to the FDA.

On appeal, the CAFC said “the district court committed legal error by misinterpreting the Eleventh Circuit’s guidance and unreasonably rejecting Weiboli’s unlawful-use defense without adequate legal or factual analysis.” In administrative proceedings before the U.S. Patent and Trademark Office (USPTO), where the doctrine has primarily been addressed, the Office has consistently held that the use of a trademark must be lawful. Outside of the USPTO, a few district courts and several appellate courts have dealt with the doctrine, with the Eleventh, Ninth and Tenth Circuits having recognized some form of the doctrine as a defense to infringement while the Fifth Circuit has not adopted it. The district court interpreted the Eleventh Circuit’s treatment of the doctrine in FN Herstal SA v. Clyde Armory Inc., 838 F.3d 1071, 1086–87 (11th Cir. 2016) as not providing  “definitive guidance” on whether to adopt the doctrine in an infringement context but as also providing “caution signals” against doing so. In FN Herstal, the Eleventh Circuit ultimately affirmed the district court’s rejection of the unlawful-use defense based on evidentiary deficiencies, according to the CAFC, finding that Clyde Armory had “failed to establish, under the clear and convincing standard, a sufficient showing of unlawful use to justify denial of the trademark owner’s trademark rights.”

In contrast, said the CAFC, “[h]ere, the district court did not, as the Eleventh Circuit did in FN Herstal, assess the evidentiary basis asserted by Weiboli to support its defense.” The CAFC declined to make evidentiary findings in the first instance, but said the grant of a preliminary injunction “cannot stand” because the district court erred in its misreading of the Eleventh Circuit’s application of the unlawful use doctrine. “To be clear, 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,” wrote the CAFC. It continued:

“Nor does our decision predetermine whether Weiboli’s unlawful-use defense in this case survives at the preliminary injunction or a later stage. The district court is entrusted, consistent with this decision, to reconsider all pertinent issues and reevaluate VPR’s motion for a preliminary injunction.”

The CAFC thus vacated the grant of a preliminary injunction and remanded for reconsideration of all pertinent issues, including potentially all of the preliminary injunction factors.

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