Cancellation Fee Not Required at the “Motion for Leave to Amend” Stage
May 12, 2010
Last Month at the Federal Circuit - June 2010
Judges: Michel, Clevenger, Prost (author)
[Appealed from: TTAB]
In Fred Beverages, Inc. v. Fred’s Capital Management Co., No. 10−1007 (Fed. Cir. May 12, 2010), the Federal Circuit reversed the TTAB’s decision denying Fred Beverages, Inc. (“Fred Beverages”) Motion for Leave to Amend the Petition for Cancellation for failure to submit the cancellation fee.
Fred’s Capital Management Company (“Fred’s Capital”) obtained registration for its trademarked name covering a variety of goods. In an effort to support its own trademarked name, Fred Beverages sought cancellation of Fred’s Capital’s registration in one class on the ground of abandonment and filed a Petition for Partial Cancellation. All petitions for cancellation of registered trademarks must be accompanied by a fee of $300.00 per class for which cancellation is sought. Fred Beverages’ Petition was accompanied by the requisite $300.00 payment.
During the course of the proceedings, Fred Beverages filed a Motion for Leave to Amend Its Petition to add further product classes. It attached to its Motion, as an exhibit, a copy of the Amended Petition for Partial Cancellation showing the desired changes. Fred Beverages did not submit any fee in connection with the Motion or the Reply. The TTAB denied this Motion for Leave to Amend on the ground that the Motion was not accompanied by the fee required under the Trademark Rules. Fred Beverages argued that it was not required to submit the cancellation fee until the Motion for Leave to Amend had been granted and appealed to the Federal Circuit.
On appeal, the Federal Circuit reversed the TTAB’s denial of Fred Beverages’ Motion for Leave to Amend, finding its denial arbitrary and capricious. According to the Court, the TTAB had no authority for denying Fred Beverages’ Motion for Leave to Amend based on its failure to submit a cancellation fee at that stage in the proceeding. The TTAB should liberally grant leave to amend petitions and pleadings where the other party will not be prejudiced thereby. In this case, the TTAB did not cite any equitable reason to deny the Motion, but relied solely on Fred Beverages’ failure to file the fee associated with the underlying Petition.
In reviewing the relevant law, the Court found that it is common judicial procedure to require that motions for discretionary consideration from a tribunal be accompanied by the filing sought to be considered and any requisite fee. Such requirements, however, are set forth in stated rules of practice pertaining to the tribunal. There is no stated rule of the TTAB that a motion for leave to amend a petition for cancellation must be accompanied by the statutory fee corresponding to the classes for which cancellation is sought by amendment. There is also no rule that such a fee, if tendered, would be refunded in the event that the motion for leave were denied. Slip op. at 4−5. The rules relied on by the TTAB in deciding this case, Trademark Rules 2.111(c)(1) and 2.112(b), relate to only the requirements for filing an initial petition for cancellation and do not speak to subsequent motion practice.
In the absence of a stated rule, the Court noted that the TTAB might still justify requiring a cancellation fee to accompany a motion for leave to amend if such requirement were consistent with established practice. The Court found there is, however, no such established practice at the TTAB. It appeared to the Court that, in fact, the TTAB has previously, under similar circumstances, granted or deferred ruling on motions for leave to amend filings without concurrent payment of the statutory cancellation fee. Moreover, in a case that closely resembled the facts in this case, the TTAB granted a motion for leave to amend a petition for cancellation to add product classes, provided that the moving party paid the cancellation fee within thirty days of the order granting the motion for leave. It therefore appeared to the Court that the TTAB had no stated rule and no established practice of requiring that a supplemental cancellation fee be included with a motion for leave to amend a petition for cancellation.
The Court explained that the lack of authority for the TTAB’s decision is further confirmed by the fact that the TTAB opinion cited no rule or precedent on point in support of its decision to deny the Motion for Leave in this case. Id. at 6. The Court found no basis on which to distinguish the circumstances of the present case from those in which the TTAB granted or deferred ruling on motions for leave and set a subsequent deadline for the payment of the underlying fee. The Court held where an agency departs from established precedent without a reasoned explanation, its decision will be vacated as arbitrary and capricious.
Therefore, the Court reversed the decision of the TTAB denying the Motion for Leave to Amend on the ground that the filing fee did not accompany the Motion, and remanded the case to the TTAB for further proceedings consistent with its opinion.
Summary authored by Constance B. Jones, Esq.