Property, intangible

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Litigation Strategy

Here’s a TTAB case that I think presents an interesting procedural question.  The situation:

Bello Fitness Ltda, petitioner, is a Brazilian clothing manufacturer.  It owns the BODY UP mark in Brazil and had a relationship with non-party Body Up, LLC to distribute the BODY UP clothing in the U.S.

Fernando Homem da Costa Filho was an officer and 49% shareholder of Bello Fitness and a 20% owner of Body Up, LLC.  He testified that Body Up was created to be Bello Fitness’s distributor in the U.S. and that his part ownership of Body Up was to “insure Bello Fitness Ltda interest in the ‘BODY UP’ trademark was protected.”

The distribution agreement provided that

 If you can’t see the image, it says:
Supplier … hereby grant[s] DISTRIBUTOR an exclusive and irrevocable license to register for and use the trademark “Body UP” throughout the Territory. Notwithstanding anything contained in this Agreement to the contrary, in the event of termination of this Agreement, all ownership rights in and to the trademark “Body Up” and all corresponding logos shall remain with as [sic] shall be assigned to DISTRIBUTOR with nothing further necessary or required.
The agreement also had a provision for arbitration, where “any controversy or claim arising out of or relating to this Agreement” would be arbitrated.

Registrant Body Up Fitness, LLC acquired the distribution agreement when Gilda Almeida, the manager of both Body Up and respondent Body Up Fitness, signed a bill of sale transferring Body Up’s assets to Body Up Fitness. Mr. Filho testified that Bello Fitness never agreed to the assignment. Body Up Fitness subsequently filed an application to register the BODY UP mark, which was granted. While Body Up had distributed the Bello Fitness clothing, Body Up Fitness did not. Bello Fitness ultimately filed a petition to cancel the registration when it learned that other companies were using the BODY UP mark.

Body Up Fitness argued that, based on the distribution agreement, it is the rightful owner of the BODY UP mark. Maybe it is, maybe it isn’t,* but the kicker is the arbitration clause. According to the Trademark Trial and Appeal Board:

The dispute arises over whether Body Up, LLC acquired ownership rights in the mark BODY UP based on this agreement and subsequently whether respondent acquired such rights in the sale of Body Up, LLC’s assets. What is clear in the agreement is that such disputes must be submitted for arbitration[.]

The Board therefore would not consider the effect of the distribution agreement on the issue of ownership. Instead, it looked at the evidence of priority of use, found Bello Fitness had first use in the United States through an individual named Marcia Garcia and original distributor Body Up, and cancelled Body Up Fitness’ trademark registration.

Here’s the question. Once the issue was raised by Bello Fitness, should Body Up Fitness have invoked an arbitration and asked that the cancellation be stayed? While it may not do any better in arbitration, Body Up Fitness’ position without the agreement looks like a pretty lost cause.

Body Up Fitness has requested reconsideration of the decision. I don’t think there’s much chance that the TTAB will reverse, but I also think the case is a long way from over.  At this point, I think the only question is whether it goes to the district court or the Federal Circuit.

Bello Fitness Ltda v. Body Up Fitness, LLC, Cancellation No. 92049838 (T.T.A.B. Oct. 28, 2011).

*In a footnote the TTAB notes obtusely that “paragraph 6 of the distribution agreement grants the distributor ‘an exclusive and irrevocable license to register for and use the trademark.’ However, only the owner of the mark may file an application to register the mark.”

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