Incontestable - April 2010 - City of New York v. Tavern on the Green, L.P.

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April 2010 Issue

Civil Cases

City of New York v. Tavern on the Green, L.P.,
2010 WL 841322 (S.D.N.Y. Mar. 10, 2010)

ABSTRACT
Granting summary judgment on behalf of the City of New York, the Southern District of New York determined that the City had rights to the name “Tavern On The Green” that predated the incontestable TAVERN ON THE GREEN registration owned by the bankrupt vendor who most recently operated the well-known Central Park restaurant. Further, the court determined that the applicant for the mark knew of the City’s prior right to use the name, and not only failed to disclose the City’s right to use, but also affirmatively declared to the PTO that no other entity had any such rights. The court found that these misrepresentations were part of a deliberate attempt to mislead the PTO as to material facts and ordered the TAVERN ON THE GREEN registration cancelled.

CASE SUMMARY

FACTS
The City of New York (the “City”) opened a restaurant in Central Park called “Tavern On The Green” in 1934 and hired a vendor to operate the restaurant. The restaurant operated over the years under various vendors, occasionally closing for renovations and improvements, including closing for renovations in 1973 and reopening in August 1976.

In conjunction with the 1973 renovations, the City entered a license agreement (“the 1973 Agreement”) with Warner LeRoy to operate “Tavern On The Green” as a restaurant and cabaret. The 1973 Agreement was not termed a trademark license and did not have terms specifically directed to trademark ownership or to any termination of the vendor’s ability to use the name. The agreement did, however, reserve for the City various rights to oversee and approve the operation of the restaurant, as well as the right to approve or reject any proposed name change.

After taking over operation of the restaurant, LeRoy filed an application for the mark TAVERN ON THE GREEN for restaurant services, claiming a first use on the date the restaurant reopened after the 1973 renovations. The application was filed on behalf of a joint venture formed by LeRoy to operate the restaurant and included a declaration that the company had the right to use the mark. The declaration further affirmed that “no other person, firm, corporation or association has the right to use said mark in commerce . . . .” During the application process, LeRoy never informed the PTO of the 1973 Agreement or of the City’s prior use of the name “Tavern On The Green” in association with the restaurant. The application was approved and the mark registered in 1981. The joint venture later filed a Section 15 affidavit, claiming continuous use of the mark, and the mark became incontestable pursuant to 15 U.S.C. § 1065. The City first objected to the federal registration in 2006.

In 2009, the successors to the operating company created by LeRoy (and owners of the registration) filed for bankruptcy. Among the issues in the bankruptcy was ownership of the name “Tavern On The Green” and the incontestable TAVERN ON THE GREEN registration. The trademark ownership issue was heard by the Southern District of New York where the City and mark owners in bankruptcy (“Debtors”) filed opposing summary judgment motions. The City’s motion sought a declaration of prior rights to the name under New York law as well as cancellation of the Debtors’ registered mark. The Debtors’ motion sought a declaration that they had the exclusive rights to TAVERN ON THE GREEN for restaurant services, and an injunction against the City’s use of the name in commerce. The court granted the City’s motion and ordered cancellation of the Debtors’ TAVERN ON THE GREEN mark for restaurant services.

ANALYSIS
Acknowledging the incontestability of the Debtors’ mark for restaurant services, the court noted that the mark could not be cancelled except under one of the statutory exceptions to incontestability, which include infringement of prior state law rights in the registered mark and fraudulent registration. The court determined that the City had a valid claim of prior rights to the name “Tavern On The Green” under New York law pursuant to Section 1065, and also that the Debtors’ mark was obtained fraudulently under Section 1064(3).

Applying New York law, the court determined that the proper test for prior rights to the mark was whether the City’s use of the mark began before the Debtors’ mark was registered, and whether there had been a continuous use by the City. Citing the 1973 Agreement for operation of a restaurant under the specific name “Tavern On The Green,” the court found compelling evidence that the City had used the mark before the Debtors’ registration. The 1973 Agreement lacked specific language addressing ownership of the mark or termination of the Debtors’ use of the mark. However, the court pointed to the agreement provision that the restaurant’s name could not be changed without the City’s permission, as well as to the provisions for the City’s oversight of the restaurant, as a recognition of the City’s preexisting interest in the restaurant and the mark. The court also noted that the City chose the name and each vendor, and made significant investments to ensure the success of the restaurant, such that “Tavern On The Green” was closely associated in the public mind with a building owned by the City and located in New York’s Central Park. The court found that these agreement provisions, coupled with the City’s use of the mark for over 30 years prior to the 1973 Agreement, demonstrated the City’s protectable interest under New York law.

The court also held that the City’s use of “Tavern On The Green” had been continuous, rejecting the Debtors’ arguments that the various closings for renovations and improvements broke the City’s chain of continuous use. According to the court, the renovations demonstrated an intention to continue operations. Thus, the court found that the Debtors’ registration for restaurant services was not incontestable as against the City.

Having determined that the City had an independent right to use the mark, the court turned to the issue of cancellation of the registration. Cancelling the registration due to fraud required the City to establish misstatements by the applicant indicating a deliberate attempt to mislead the PTO about a material fact that would have affected the PTO’s action on the application. Noting that an applicant’s statements to the PTO must reflect “uncompromising candor,” the court held that a deliberate omission in a trademark application of information regarding another’s right to use the mark was a material omission justifying cancellation of the mark.

Addressing the applicant’s intent, the court again relied on the 1973 Agreement, stating that the agreement demonstrated LeRoy’s knowledge of another’s right to use the “Tavern On The Green” mark, as well as awareness that the City had used the mark for decades prior to the date of first use claimed in the application. These facts that LeRoy failed to disclose to the PTO, coupled with the declaration asserting that “no other person, firm, corporation or association has the right to use said mark in commerce,” compelled the inference that LeRoy had attempted to mislead the PTO. Thus, the court determined that the registration had been obtained by fraud, granted the City’s summary judgment motion, and ordered the TAVERN ON THE GREEN registration for restaurant services cancelled.

In reaching its decision, the court rejected a laches defense that the Debtors raised for the fraud accusations, holding that the Lanham Act makes clear that a claim for cancellation based on fraud may be asserted at any time. Moreover, the court noted that to assert an equitable defense such as laches, the Debtors must come before the court with clean hands. Where, as here, the restaurant services registration was obtained through fraud on the PTO, the Debtors could not meet the requirement for clean hands.

CONCLUSION
This opinion emphasizes the importance of accuracy in the declarations and other papers filed with trademark applications. While recent major cases addressing fraud on the PTO have focused on the descriptions of goods and services, this case highlights the need for accuracy in all of the application language, especially the language in declarations submitted during the application process.