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Docketing Error and Birth of Child Did Not Constitute Excusable Neglect

February 27, 2007
Main Ph.D., Denise

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Last Month at the Federal Circuit - March 2007

Judges: Bryson, Gajarsa, Linn (author)

[Appealed from: TTAB]

In FirstHealth of the Carolinas, Inc. v. CareFirst of Maryland, Inc., No. 06-1148 (Fed. Cir. Feb. 27, 2007), the Federal Circuit affirmed the Board’s denial to reopen the testimony period for FirstHealth of the Carolinas, Inc. (“FirstHealth”) and dismissal of FirstHealth’s counterclaim to cancel trademarks registered by CareFirst of Maryland, Inc. (“CareFirst”).

FirstHealth filed two intent-to-use trademark applications for the FIRSTCAROLINACARE mark used in conjunction with healthcare insurance claims administration and health maintenance organizations (“HMOs”). Alleging a likelihood of confusion and dilution with its registered CAREFIRST mark, CareFirst filed notices of opposition to FirstHealth’s applications. Seeking cancellation of the CAREFIRST trademark registration through counterclaim, FirstHealth alleged that CareFirst had abandoned its mark due to uncontrolled licensing and failure of use in services other than HMO services.

Stipulating a two-month extension of FirstHealth’s case-in-chief testimony period, both parties agreed to the deadline of January 31, 2004. Missing the deadline, FirstHealth filed a motion to reopen its testimony period on February 26, 2004, ascribing the filing delay to “the birth of counsel’s son, the significant amount of testimony that was taken, counsel’s time conflicts with unrelated matters, and a docketing error made by a new paralegal.” Slip op. at 2. Reopening FirstHealth’s testimony period would have allowed for a heavily relied-upon deposition to become of record.

The Board dismissed FirstHealth’s motion to reopen testimony, finding failure to demonstrate excusable neglect. As such, the Board dismissed FirstHealth’s counterclaims for failure to prove uncontrolled licensing or failure of use of CareFirst’s mark. The Board further dismissed CareFirst’s oppositions, finding no likelihood of confusion or dilution of CareFirst’s mark. Although both parties appealed the Board’s decision, CareFirst moved to dismiss its appeal, leaving only FirstHealth’s appeal of the cancellation ruling.

CareFirst first asserted that the appeal was moot, arguing that the result of the Board’s ruling on the likelihood of confusion with and dilution of the CAREFIRST mark precluded any future assertion of the CAREFIRST mark against FirstHealth’s FIRSTCAROLINACARE mark, and thus, there could be no potential damage under 15 U.S.C. § 1064 to support FirstHealth’s cancellation counterclaim.

Citing the Board’s regulations that the Board is not authorized to determine right to use, infringement, or unfair competition, the Federal Circuit held that the Board’s decision did not preclude CareFirst from asserting its mark in future claims against FirstHealth for infringement or unfair competition. Rather, CareFirst would only be precluded from relitigating the narrow issue of likelihood of confusion and dilution. Accordingly, the Court ruled that the appeal was not moot.

The Federal Circuit further held that the Board did not abuse its discretion in denying FirstHealth’s motion to reopen the testimony period. The Federal Circuit noted that the Board’s regulations allow for reopening of a testimony period if “excusable neglect,” a term not defined in the regulations, is demonstrated. Citing Thomas Jefferson University v. Shalala, 512 U.S. 504 (1994), the Federal Circuit pointed out that even though the Board may interpret within reason the meaning of “excusable neglect” in the context of its own regulations, the Board turned to a ruling by the Supreme Court for guidance, which was also acceptable. In determining whether FirstHealth had demonstrated “excusable neglect,” the Board applied a balancing test to weigh certain factors as outlined by the Supreme Court in Pioneer Investment Services o. v. Brunswick Associates Ltd., 507 U.S. 380 (1993). Pioneer requires that all relevant circumstances surrounding a party’s omission be taken into account when determining whether a party’s neglect is excusable. According to Pioneer, those circumstances include “[1] the danger of prejudice to the [non-moving party], [2] the length of the delay 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.” Id. at 395.

The Federal Circuit noted that the Board had previously applied the Pioneer test in Pumpkin Ltd. v. The Seed Corps, 43 U.S.P.Q.2d 1582 (1997). Relying heavily on the third factor of the Pioneer test, the Board in Pumpkin denied a motion to reopen the testimony period, finding a docketing error wholly within the control of the movant. Similarly emphasizing the third factor of the Pioneer test, the Federal Circuit held that FirstHealth’s reasons for delay, including a docketing error and an attorney’s absence due to family matters, were wholly within FirstHealth’s reasonable control. Citing HKG Industries, Inc. v. Perma-Pipe, Inc., 49 U.S.P.Q.2d 1156 (1998), the Federal Circuit observed that other authorized individuals in the firm could have ssumed responsibility for the case. Noting that the Board’s finding was consistent with its prior practice, e.g., as in Pumpkin, the Court affirmed the Board’s denial to reopen the testimony period for FirstHealth.

Second, the Federal Circuit held that the Board did not err in dismissing FirstHealth’s counterclaim for cancellation of CareFirst’s trademark. The Federal Circuit rejected FirstHealth’s argument that even without the testimony evidence, the facts of record alone proved FirstHealth’s cancellation claims. The Court emphasized that the burden of proving abandonment is by a preponderance of the evidence, and that burden falls upon FirstHealth. Without the excluded evidence, the Court found that FirstHealth failed to show uncontrolled licensing or failure to use, thereby affirming the Board’s decision.