The Trademark Trial and Appeal Board (TTAB) granted a Petition to Cancel based on an abandonment claim involving a parent-subsidiary relationship. Floorco Enterprises applied for and received a registration for the mark NOBLE HOUSE for “furniture.” Noble House Home Furnishings later applied for the NOBLE HOUSE HOME FURNISHINGS mark for “on-line retail store services featuring furniture and home furnishings.” Unsurprisingly that application was denied registration based on a likelihood of confusion with the NOBLE HOUSE mark owned by Floorco. Noble House Home Furnishings then petitioned to cancel Floorco’s registration based on abandonment.
The two elements of abandonment are non-use of the mark and and intent not to resume use. After showing three years of non-use to create a rebuttable presumption of abandonment, the issue became whether Floorco intended to resume use of the mark. Floorco, a wholly owned subsidiary of Furnco International Corporation, put forth evidence of marketing, advertising, and several attempts to make sales as evidence of its intent to resume use. The TTAB took issue with the fact that the attempts to make sales were made by Furnco, the parent, not Floorco, the mark owner.
Furnco is a company based in China that created Floorco to conduct its operations in the United States. As is often the case with smaller, related companies, some employees appear to hold positions in both Furnco and Floorco. Emails that were sent in relation to sales pitches came from Furnco email addresses. Employees trying to make sales referred to themselves as employees of Furnco. The TTAB found that, with one exception, none of the activity involving the mark even mentioned Floorco as the source of the products. This led the TTAB to find that customers would view Furnco as the source of the products.
Their sales material doesn’t even mention Floorco.
A representative of Furnco/Floorco testified and all Floorco’s major decisions were made with the consent and approval of Furnco. Furnco exercised complete control over Floorco and no agreements existed between the two companies relating to the NOBLE HOUSE mark. While use of a mark by a subsidiary will often inure to the benefit of a parent, this is not necessarily a two way street. Control over the nature and quality of the products is an essential part of trademark ownership. A parent company may not need a licensing agreement to accomplish this if they exercise sufficient control over the subsidiary (though a licensing agreement is generally a good idea anyway).
The pivotal issue that the TTAB had to resolve was whether the parent company’s use of the mark would inure to the benefit of the wholly owned subsidiary. The Trademark Act allows for registrants and applicants to rely on use by related companies. However, the definition of “related company” makes clear that the use of the mark must be controlled by the mark owner. This is why a parent company can often claim benefits from a subsidiary’s use.
The TTAB found that Furnco not only controlled Floorco, but also the use of the mark and the nature and quality of the goods. Importantly, no licensing agreement providing Floorco any authority over Furnco’s use existed. Floorco’s only role in the entire affair was to own the mark and act as directed by Furnco. It appears the TTAB would have found an intent to resume use and no abandonment had Furnco been the owner of the mark. But the relevant intent here is that of Floorco. Because Floorco had no control whatsoever over the use of the mark and customers viewed Furnco as the source, the TTAB found no intent to resume use and deemed the mark abandoned.
So what’s the lesson here? First, it’s important to figure out who the owner of a mark should be. You can’t just blindly rely on the fact that the companies are related (which is a defined term). And second, when in doubt, a licensing agreement that gives the mark owner control is probably a good idea. A licensing agreement alone may not be enough but its one less bad fact if nothing else. Oh, and its not a bad idea for customers to view the products as coming from the mark owner, at least absent a licensing agreement.