Kaszuba v. Iancu

• Court: Court of Appeals for the Federal Circuit
• Decided: August 5, 2020
• Docket: 19-1547
• Status: Unpublished

Opinion

Case: 19-1547 Document: 62 Page: 1 Filed: 08/05/2020

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

KRIS KASZUBA, DBA HOLLYWOOD GROUP, Appellant

v.

ANDREI IANCU, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, Intervenor ______________________

2019-1547 ______________________

Appeal from the United States Patent and Trademark Office, Trademark Trial and Appeal Board in No. 92061976. ______________________

Decided: August 5, 2020 ______________________

KRIS KASZUBA, Del Mar, CA, pro se.

THOMAS L. CASAGRANDE, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, for intervenor. Also represented by CHRISTINA J. HIEBER, THOMAS W. KRAUSE, FARHEENA YASMEEN RASHEED, ERICA JEUNG DICKEY. Case: 19-1547 Document: 62 Page: 2 Filed: 08/05/2020

______________________

Before O’MALLEY, BRYSON, and REYNA, Circuit Judges. O’MALLEY, Circuit Judge. This appeal stems from a cancellation proceeding be- fore the Trademark Trial and Appeal Board (“Board”). The record reveals a proceeding peppered with unnecessary fil- ings, ultimately concluding with sanctions in the form of default judgment. Finding no abuse of discretion or legal error in the Board’s determinations, we affirm. I. BACKGROUND Cancellation proceedings before the Board are largely governed by the Federal Rules of Civil Procedure. See 37 C.F.R. § 2.116(a). This cancellation proceeding presents a tangled procedural history. We discuss only those aspects relevant to our decision. A. Pleadings Appellant Kris Kaszuba (“Kaszuba”) successfully reg- istered his mark HOLLYWOOD BEER on the Supple- mental Register on July 15, 2008, as Registration No. 4,469,935. The registration was based on the mark’s pur- ported use in commerce for beer. On August 4, 2015, Hol- lywood Vodka, LLC (“HVL”) filed an application for cancellation of Kaszuba’s mark under Section 1064 of the Lanham Act. 1 HVL alleged that: (1) the Board had refused registration of HVL’s pending trademark application partly because of the registration of Kaszuba’s mark; (2) Kaszuba had committed fraud on the USPTO in obtaining

1 Despite several notices from the court, Petitioner HVL did not file an entry of appearance in this appeal. The Director of the United States Patent and Trademark Office (“USPTO”) filed a notice of intervention pursuant to 35 U.S.C. § 143. Case: 19-1547 Document: 62 Page: 3 Filed: 08/05/2020

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registration of his mark; and (3) Kaszuba had not used his mark in commerce. Kaszuba filed an answer to the petition on September 15, 2015. He followed this filing with a motion to dismiss, which the Board refused to consider because Kaszuba filed it after filing his answer. The Board subsequently con- ducted a discovery conference, and, upon reviewing the pleadings, determined that HVL had failed to properly plead its fraud claim. Accordingly, the Board directed HVL to file an amended petition repleading the fraud claim within fifteen days. It is undisputed that HVL did not meet its Friday, March 25, 2016 deadline to file an amended petition. In- stead, HVL filed serial amended petitions on March 28, 2016 (“Amended Petition”) and March 29, 2016 (“Second Amended Petition”), respectively. 2 These amended peti- tions were only a few days late, and differed materially in just one respect: the Second Amended Petition corrected a typographical error, specifying that in its “Claim 1,” HVL was seeking cancellation based on “fraud” not “abandon- ment.” In response, Kaszuba filed a motion to dismiss, as- serting, inter alia, that HVL’s amended pleadings were untimely and that HVL did not have a real interest in the cancellation proceeding. HVL opposed the motion to dis- miss, arguing that the Board, in its discretion, should ac- cept the untimely filing because of excusable neglect and that it had plausibly alleged a real interest in the proceed- ing. The Board construed HVL’s excusable neglect argu- ments as a request to reopen the time to file HVL’s amended petition and to accept the Second Amended Peti- tion as the operative pleading in the matter. J.A. 366

2 The Board received paper copies of these petitions on March 31, 2016, and April 4, 2016, respectively. Case: 19-1547 Document: 62 Page: 4 Filed: 08/05/2020

(citing Fed. R. Civ. P 6(b)). It granted HVL’s request based on excusable neglect after conducting an analysis of the factors articulated in Pioneer Investment Services Co. v. Brunswick Associates L.P., 507 U.S. 380 (1993). J.A. 366–69. The Board also concluded that HVL had (1) suffi- ciently pled entitlement to bring this cancellation proceed- ing; and (2) adequately pled its fraud claim; and (3) failed to plead the elements of an abandonment claim. J.A. 372– 73. B. Discovery Like the pleadings stage, discovery was belabored. On January 23, 2017, in response to Kaszuba’s motion to dis- qualify HVL’s newly appointed counsel, the Board issued an order denying the motion and noting that “[p]rogress in this case has been delayed significantly based on the filings of both parties.” J.A. 528. The Board required Kaszuba to obtain leave of the Board’s Interlocutory Attorney before filing any future submissions in the case. It did not require HVL to do the same because HVL had retained new coun- sel. On November 27, 2017, the Board granted-in-part HVL’s motion to compel discovery after Kaszuba failed to respond to interrogatories and document requests. The Board ordered Kaszuba to provide discovery but denied HVL’s motion to the extent HVL requested sanctions against Kaszuba. At the same time, the Board warned Kaszuba that if he failed to respond to the discovery, HVL’s “remedy may lie in a renewed motion for sanctions, includ- ing entry of judgment as appropriate.” J.A. 744. The Board also required both parties to seek leave before filing any motions. Rather than responding to the discovery, Kaszuba filed a request for permission to submit a request for reconsid- eration of the Board’s November 27, 2017 order. After con- ducting a telephone conference, the Board denied this request. Case: 19-1547 Document: 62 Page: 5 Filed: 08/05/2020

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Kaszuba again failed to respond to the discovery re- quests. Another round of a motion for sanctions (filed by HVL without leave), denial, and a motion for reconsidera- tion (filed by Kaszuba without leave), and denial followed. In its denials of these motions, the Board remarked that Kaszuba had “deliberately sought to evade and frustrate” HVL’s efforts to obtain discovery. J.A. 821. Although the Board concluded that imposing sanctions would be unduly harsh, and gave Kaszuba an extension to serve the delayed discovery, it again warned Kaszuba that if he failed to com- ply with the discovery order, judgment would be entered against him on motion by HVL. J.A. 822. Undeterred, Kaszuba continued to file additional “communications” with the Board, seeking reconsideration of its orders. He also filed two untimely petitions with the Director alleging unfair treatment by the Board, despite the Board granting him a third extension to serve the delayed discovery. Kaszuba never served the requested discovery. After the time for service had passed, HVL filed a renewed mo- tion for sanctions after obtaining leave from the Board, seeking either an entry of judgment against Kaszuba or an order precluding Kaszuba from introducing any evidence at trial. On December 13, 2018, the Board granted the mo- tion for sanctions—this time entering judgment against Kaszuba. The Board recognized in its decision that default judgment is a harsh remedy. It found, however, that it was warranted under the circumstances because “no less dras- tic remedy would be effective and there is a strong showing of willful evasion.” J.A. 5. Kaszuba timely filed a notice of appeal. We have juris- diction under 28 U.S.C. § 1295(a)(4)(B). II. DISCUSSION We review the Board’s legal conclusions de novo, and its factual findings for substantial evidence. In re Pacer Tech., 338 F.3d 1348, 1349 (Fed. Cir. 2003) (citations omit- ted). On appeal, Kaszuba argues that the Board Case: 19-1547 Document: 62 Page: 6 Filed: 08/05/2020

(1) impermissibly allowed HVL’s “untimely” and “futile” amendments to the petition; (2) erred in denying Kaszuba’s motion to dismiss for failure to plead entitlement to the cancellation proceeding and fraud; and (3) abused its dis- cretion in imposing sanctions and entering default judg- ment against Kaszuba. We address each issue in turn. A. Excusable Neglect After analyzing HVL’s claim of excusable neglect under the four factors identified in Pioneer Investment Services Co., the Board accepted the Second Amended petition even though it was filed out of time. In Pioneer, addressing the meaning of “excusable neglect” (as used in the Federal Rules), the Supreme Court explained that the determina- tion is: [A]t bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission. These include . . . [1] the danger of prej- udice to the [non-movant], [2] the length of the de- lay and its potential impact on judicial proceedings, [3] the reason for the delay, including whether it was within the reasonable control of the movant, and [4] whether the movant acted in good faith. 507 U.S. at 395. We have endorsed the Board’s use of the Pioneer factors for determining excusable neglect in the context of its own regulations. FirstHealth of Carolinas, Inc. v. CareFirst of Maryland, Inc., 479 F.3d 825, 828–29 (Fed. Cir. 2007). We review the Board’s application of the factors for an abuse of discretion. Id. On appeal, Kaszuba argues that the Board erred in its excusable neglect determination. Specifically, Kaszuba contends that the Board combined the first two factors and overlooked the fact that HVL filed the amended petitions seven months after the initial petition. Appellant’s Br. 13. In Kaszuba’s view, this negates the Board’s finding that HVL’s delay was “short.” Kaszuba therefore asks us to Case: 19-1547 Document: 62 Page: 7 Filed: 08/05/2020

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reverse the Board’s ruling. We see no error or abuse of dis- cretion in the Board’s analysis. With respect to the first Pioneer factor, the Board found that there was no evidence of prejudice to Kaszuba by reo- pening the time for HVL for file its amended petition. The Board did not see any “surprise” to Kaszuba or disruption to the orderly administration of the proceeding on account of the minimally delayed filing. As to the second factor, the Board determined that the delay was not significant. HVL filed an amended petition only three days out of time, and most of that period fell over a weekend. The Board deter- mined that the third factor (reason for delay) was within HVL’s reasonable control. As to the fourth factor (bad faith), the Board concluded that there was no allegation or evidence of any bad faith. Considering the four factors to- gether, the Board found that the lack of prejudice out- weighs the fact that the delay was caused by HVL’s negligence. It therefore concluded that HVL had estab- lished excusable neglect. We have previously affirmed the Board’s refusal to find excusable neglect where counsel did not provide an expla- nation as to why other authorized individuals in the same firm could not have assumed responsibility for the case. See FirstHealth, 479 F.3d at 829 (finding no excusable ne- glect where the second and third factors weighed against such a finding). But, as the Supreme Court has explained, the excusable neglect inquiry is an equitable one, and the Board properly considered all the circumstances surround- ing HVL’s delay. Here, as the Board noted, the delay was short. Given these circumstances, we see no abuse of dis- cretion in the Board’s determination of excusable neglect. 3

3 We reject Kaszuba’s contention that HVL’s filing was, in fact, delayed by seven months. Kaszuba either mis- understands or misrepresents the procedural posture at Case: 19-1547 Document: 62 Page: 8 Filed: 08/05/2020

Having determined that there was no abuse of discre- tion in excusing the three-day delay in HVL’s filing of its amended petition, we now turn to the remaining issues on appeal with the understanding that HVL’s Second Amended Petition is the operative petition in this proceed- ing. B. Motion to Dismiss The Board’s denial of a motion to dismiss pursuant to Rule 12(b)(6) is a question of law that we review de novo. See Sunrise Jewelry Mfg. Corp. v. Fred S.A., 175 F.3d 1322, 1324 (Fed. Cir. 1999). On review, we accept the non-mo- vant’s allegations as true and draw all reasonable infer- ences in the non-movant’s favor. Id. “Dismissal is appropriate ‘if it is clear that no relief could be granted un- der any set of facts that could be proved consistent with the allegations.’” Young v. AGB Corp., 152 F.3d 1377, 1379 (Fed. Cir. 1998) (quoting Abbott Labs. v. Brennan, 952 F.2d 1346, 1353 (Fed. Cir. 1991)). On appeal, Kaszuba chal- lenges the Board’s determination that HVL sufficiently pled entitlement to bring this cancellation proceeding and its fraud claim. We address each in turn. 1. Entitlement to Seek Cancellation We note, as we have in other recent cases, that it is im- proper to discuss requirements for establishing a statutory cause of action in terms of “standing.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 n.4 (2014); Australian Therapeutic v. Naked TM, LLC, No. 19- 1567, Slip. Op. at 5 (Fed. Cir. July 27, 2020); Ritchie v. Simpson, 170 F.3d 1092, 1094 (Fed. Cir. 1999) (“‘case’ and

issue. Kaszuba answered HVL’s initial petition, and the Board instituted the proceeding. It was only after a discov- ery conference months later that the Board directed HVL to amend its petition, which HVL did, albeit three days late. Case: 19-1547 Document: 62 Page: 9 Filed: 08/05/2020

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‘controversy’ restrictions for standing do not apply to mat- ters before administrative agencies and boards, such as the [US]PTO.”). Kaszuba and the Board both make this mis- take in this cancellation proceeding, as does the Director. The requirements to bring a cancellation proceeding under 15 U.S.C. § 1064 are appropriately viewed as interpreta- tions of a statutory cause of action. See Empresa Cubana Del Tabaco v. General Cigar Co., Inc., 753 F.3d 1270, 1275 (Fed. Cir. 2014) (citing Lexmark, 572 U.S. at 125–28). Section 1064 permits a petitioner to seek cancellation of a registered trademark if he believes that he is or will be damaged by the registered trademark. Id. The petitioner must demonstrate (1) a real interest in the proceeding and (2) a reasonable belief of damage. Empresa Cubana, 753 F.3d at 1275. These “element[s] of a cause of action . . . must be adequately alleged at the pleading stage in order for the case to proceed.” Lexmark, 572 U.S. at 134 n.6 (cit- ing Ashcroft v. Iqbal, 556 U.S. 662, 678–679 (2009)). For purposes of our review, we “accept as true all well-pled and material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Ritchie, 170 F.3d at 1097. Kaszuba argues that HVL did not adequately plead “standing” to bring the cancellation proceeding because it failed to allege a reasonable belief of damage from Kaszuba’s registered mark. Appellant’s Br. 10. In Kaszuba’s view, HVL should have addressed the other is- sues raised in the Board’s rejection before it could allege a reasonable belief of damage from Kaszuba’s mark. Id. at 11. Kaszuba also challenges HVL’s ownership of the re- jected trademark application, arguing that, without an ownership interest in the application, HVL cannot bring this cancellation proceeding. Id. at 9–10. Kaszuba’s argu- ments are meritless. A petitioner may demonstrate entitlement to seek can- cellation of a registered mark if the USPTO rejects its Case: 19-1547 Document: 62 Page: 10 Filed: 08/05/2020

trademark application based on a likelihood of confusion with the registered mark. See Empresa Cubana, 753 F.3d at 1274–75. In Empresa Cubana, we held that petitioner’s trademark application is a “legitimate commercial inter- est,” satisfying the real interest requirement. Id. And, we explained that “blocking” of a petitioner’s trademark appli- cation was sufficient to demonstrate a reasonable belief of damage. Id. HVL’s Second Amended Petition included al- legations along exactly these lines. Specifically, HVL pled a real interest in the proceeding because it stated that its predecessors-in-interest filed Trademark Application No. 86/069,833, to register the HOLLYWOOD VODKA mark. J.A. 260–61. HVL also al- leged that it acquired all interest and goodwill in that ap- plication from the original applicants by virtue of an assignment. J.A. 261. And, HVL alleged that the USPTO rejected its application based on a likelihood of confusion with Kaszuba’s registered HOLLYWOOD BEER mark. Thus, HVL sufficiently pled both the real interest and rea- sonable belief of damage elements of the cause of action un- der § 1064. This is hardly a case, therefore, where the petition contains general allegations of harm. See e.g. Bank v. Al Johnson’s Swedish Rest. & Butik, Inc., 795 F. App’x 822, 825 (Fed. Cir. 2019) (finding claimant had failed to plead a reasonable basis for his belief of damage where he alleged that the Goats on the Roof Registration was “of- fensive to numerous persons” including himself). We also reject Kaszuba’s arguments based on HVL’s al- leged lack of ownership in the HOLLYWOOD VODKA ap- plication. First, at the pleadings stage, “the facts asserted by [the petitioner] need not prove his case on the merits.” Ritchie, 170 F.3d at 1098. Of course, HVL’s allegations do not conclusively establish entitlement to bring this cancel- lation proceeding and it must prove its case. But, as dis- cussed above, HVL’s allegations survive a motion to dismiss. Second, we have recently held that “neither § 1064 nor our precedent require that a petitioner in a Case: 19-1547 Document: 62 Page: 11 Filed: 08/05/2020

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cancellation proceeding must prove that it has proprietary rights in its own mark in order to demonstrate a real inter- est in the proceeding and a belief of damage.” Australian Therapeutic, Slip. Op. at 7. Accordingly, the Board did not err in concluding that HVL sufficiently pled entitlement to bring this cancellation proceeding. 2. Fraud “Fraud in procuring a trademark registration or re- newal occurs when an applicant knowingly makes false, material representations of fact in connection with his ap- plication.” In re Bose Corp., 580 F.3d 1240, 1243 (Fed. Cir. 2009) (internal quotations and citations omitted). Federal Rule of Civil Procedure 9(b), applicable to Board proceed- ings under 37 C.F.R. § 2.116(a), requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). But, the rule explains, “[m]alice, intent, knowledge, and other conditions of a person’s mind may be averred generally.” Id. We have construed the rule to re- quire “identification of the specific who, what, when, where, and how of the material misrepresentation or omis- sion committed before the [US]PTO.” Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1328 (Fed. Cir. 2009) (construing Rule 9 in the context of pleading inequitable conduct in patent cases). The Board concluded that HVL had sufficiently pled its claim of fraud by alleging that: (1) Kaszuba submitted fab- ricated specimens during prosecution of his trademark; (2) Kaszuba knew that his representation was false at the time he signed the statement of use in his application; (3) this false representation was material to the USPTO’s exami- nation of Kaszuba’s application for registrability; and (4) Kaszuba intended to deceive the USPTO into issuing the registration. J.A. 371. Kaszuba argues that, contrary to the Board’s conclu- sion, HVL did not plead fraud with a heightened degree of Case: 19-1547 Document: 62 Page: 12 Filed: 08/05/2020

particularity and did not allege any instances of willful or knowingly-made false representations during prosecution of the application. Appellant’s Br. 15. Kaszuba takes issue with the fact that HVL alleged fraudulent representations “on information and belief.” Id. He also contends that HVL’s fraud allegations are premised on allegations that Kaszuba “knew or should have known” that his statements were false. Id. Such allegations, according to Kaszuba, al- lege mere negligence, not fraud or intent to deceive. Id. at 16. We are not convinced. As the Director points out, Kaszuba misunderstands Rule 12(b)(6) and the Board’s orders. Director’s Br. 41–43. For one, Kaszuba points to cases that discuss the require- ments of proving allegations of fraud and intent to deceive. But on a motion to dismiss pursuant to Rule 12(b)(6), we are not concerned with whether HVL can prove its allega- tions of fraud and intent to deceive on the merits. Instead, we look to whether HVL has pled its fraud claim with par- ticularity. We conclude that it has. In its Second Amended Petition, HVL alleged that, pur- suant to applicable federal regulations, Kaszuba was re- quired to register his beer label on the Certificate of Label Approval (“COLA”) registry before selling beer in com- merce. J.A. 262. HVL alleged that no such label was reg- istered on the COLA registry, even though Kaszuba represented to the USPTO during prosecution of his trade- mark registration application that he was selling beer in commerce. HVL also alleged that Kaszuba knowingly made false material statements to the USPTO by stating that the HOLLYWOOD BEER mark was in use on goods as of the date of the application. J.A. 264. And, HVL al- leged that Kaszuba submitted false specimens of labels to fraudulently induce the USPTO to issue his use-based trademark registration. Id. HVL alleged that Kaszuba knew that the HOLLYWOOD BEER mark was not in use in commerce on beer as of the filing date of his application. J.A. 265. Finally, HVL alleged that Kaszuba similarly Case: 19-1547 Document: 62 Page: 13 Filed: 08/05/2020

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misrepresented to the USPTO that the HOLLYWOOD BEER mark was in use on goods as of the date of filing his Section 8 Affidavit in order to maintain his registration of the mark. J.A. 266. These allegations, taken together, provide the “specific who, what, when, where, and how of the material misrep- resentation or omission committed before the [US]PTO.” Exergen Corp., 575 F.3d at 1328. 4 Accordingly, we hold that the Board did not err in concluding that HVL suffi- ciently pled its fraud claim. C. Default Judgment In cases of “repeated failure to comply with reasonable orders of the . . . Board, when it is apparent that a lesser sanction would not be effective[,]” the Board may order ap- propriate sanctions as defined in Trademark Rule 2.120(g)(1) and Fed. R. Civ. P. 37(b)(2), including entry of judgment. Benedict v. Super Bakery, Inc., 665 F.3d 1263, 1268–69 (Fed. Cir. 2011). We review decisions concerning discovery sanctions for abuse of discretion. Carolina Ex- ports Int’l, Inc. v. Bulgari, S.p.A., 108 F.3d 1394 (Fed. Cir. 1997). Kaszuba argues that the cancellation of his mark as a sanction was unjust and based on “erroneous and inade- quate findings.” Appellant’s Br. 21. He laments being un- able to have his day in court and being denied his right to be heard on the merits. But, Kaszuba does not offer any explanation for his refusal to comply with the Board’s or- ders compelling discovery, despite the multiple extensions afforded to him. Nor does he provide any basis for us to

4 Kaszuba also argues that the “late-filed” Amended Petition pled “abandonment,” not fraud. Appellant’s Br. 15. We reject this argument because it focuses on a ty- pographical error in HVL’s Amended Petition that was cor- rected by HVL in the operative Second Amended Petition. Case: 19-1547 Document: 62 Page: 14 Filed: 08/05/2020

conclude that the Board abused its discretion in imposing the sanction of default judgment. Instead, Kaszuba con- tends that it was unjust to cancel his mark given the “con- fusion” regarding the operative pleading, the contention regarding which of the attorneys represented HVL, and the fact that the discovery was outside the scope of the un- dismissed claim at issue. Appellant’s Br. 21. We do not agree. The record supports the conclusion that the Board did not abuse its discretion in imposing the sanction of default judgment, harsh as it may be. The Board found that no less drastic remedy would be effective and that there was a strong showing of willful evasion by Kaszuba. See J.A. 5 (“We believe [such a] situation exists here.”). In entering default judgment, the Board concluded that, rather than complying with its orders, Kaszuba “repeatedly and will- fully acted in a manner to evade” the discovery requests. We see no abuse of discretion here. The November 27, 2017 Order compelling discovery warned Kaszuba that he was risking default judgment by not responding to the dis- covery. In subsequent orders and communications, the Board repeatedly reminded Kaszuba to comply with the November 27, 2017 Order. It also denied HVL’s initial mo- tions for sanctions, and gave Kaszuba multiple extensions to comply with the November 27, 2017 Order. Rather than complying with the discovery order, Kaszuba chose to file untimely petitions with the Director requesting review of the Board’s orders and alleging unfair treatment by the Board. Kaszuba never served the discovery responses. Like the trademark owner in Benedict, Kaszuba “continu- ally failed to comply with Board orders, and . . . hampered reasonable procedures appropriate to resolution of this trademark conflict [and] . . . offered no explanation of why no discovery responses had been made.” Benedict, 665 F.3d at 1269. Accordingly, we conclude that the Board did not abuse its discretion in entering default judgment against Kaszuba. Case: 19-1547 Document: 62 Page: 15 Filed: 08/05/2020

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CONCLUSION We have considered Kaszuba’s remaining arguments and find them unpersuasive. For the foregoing reasons, the decision of the Board is affirmed. AFFIRMED COSTS The parties shall bear their own costs.