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Leonard P. Stark: Rejection of Mark Does Not Preclude Reliance Argument

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Last week, District Judge Leonard P. Stark rejected an attempt to dismiss a trademark-fraud defense on particularity grounds. In the underlying action, Pennsylvania Engineering & Manufacturing (PEM) leveled a trademark-infringement claim against Southco. Southco counterclaimed, asserting that PEM defrauded the PTO while attempting to register the mark. PEM responded by arguing that the PTO could not have relied on PEM’s allegedly fraudulent statements. Why? Because the PTO ultimately rejected PEM’s application.

The Court disagreed with PEM. It noted that, while the Examiner rejected the registration, she left open the possibility that additional evidence could change the outcome:

“In the Court’s view, these statements [by the Examiner rejecting the registration] do not show, as PEM contends, that the Examiner did not rely on the alleged misrepresentations identified by Southco. Rather, the Examiner merely expressed the view that the assertions in the application and affidavit were insufficient standing alone to establish acquired distinctiveness . . . . That the examiner sought additional evidence on the issue of distinctiveness does not, in the Court’s view, establish that she did not rely on the initial evidence submitted.”

With the reliance objection resolved, the Court concluded that Southco pleaded its counterclaim with sufficient particularity. By doing so, the Court also established that, at least under these circumstances, reliance in the trademark arena is not outcome determinative.

Postscript: For those of you wondering how the infringement claim made its way into the litigation, the PTO eventually registered the mark after receiving additional evidence.

Southco, Inc. v. Penn Eng’g & Mfg. Corp., C.A. No. 10-03-LPS (D. Del. March 7, 2011) (Stark, J.).

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