Nursery Decals v. Neat Print ( 2023 )

Case: 22-10065 Document: 00516841001 Page: 1 Date Filed: 08/01/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
August 1, 2023
No. 22-10065 Lyle W. Cayce
____________ Clerk
Nursery Decals and More, Inc.,
Plaintiff—Appellee,
versus
Neat Print, Inc.,
Defendant—Appellant.
______________________________
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:19-CV-2606
______________________________
Before Haynes and Engelhardt, Circuit Judges, and deGravelles,
District Judge. *
Per Curiam: **
Defendant-Appellant Neat Print, Inc., (“Neat Print”) appeals the
district court’s cancellation of four of its trademarks by partial summary
judgment. Specifically, Neat Print contends that its Updated Covenant Not
*
United States District Judge for the Middle District of Louisiana, sitting by
designation.
**
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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to Sue Plaintiff-Appellee Nursery Decals and More, Inc. (“Nursery Decals”)
rendered the cancelation claims moot under Already, LLC v. Nike, Inc., 568
U.S. 85 (2013). For the following reasons, we agree and REVERSE as to
those issues.
I. Background
Neat Print and Nursery Decals sell novelty t-shirts. Both use online
platforms like Amazon and Etsy.
This dispute centers on four trademarks which Neat Print registered
with the United States Patent and Trademark Office (“USPTO”) in 2014. 1
Nursery Decals alleged that, just before Father’s Day in 2018, Etsy informed
Nursery Decals that Neat Print had complained to Etsy about Nursery
Decals’ alleged trademark infringement. According to Nursery Decals, Etsy
issued it a “final warning” to the effect that a future violation would result in
the company being banned from Etsy. Nursery Decals claims it was forced to
comply, resulting in a significant loss of sales. Nursery Decals also pulled the
shirts from Amazon to avoid similar issues, resulting in further loss of sales.
Nursery Decals asserted eleven (11) claims, including nine for declaratory
and injunctive relief essentially alleging non-infringement and seeking to
invalidate the four marks (Counts I–IV and VI–IX), 2 and three for damages—
1
The trademarks are as follows: (1) the “BE NICE TO ME, MY WIFE IS
PREGNANT” mark (Registration No. 4,746,598); (2) the “THE MAN BEHIND THE
BUMP” mark (Registration No. 4,746,597); (3) the “YOU CAN’T SCARE ME” mark
(Registration No. 5,256,615); and (4) the “WORLD’S OKAYEST” mark (Registration
No. 5,076,010). All are for use on clothing.
2
These claims of declaratory and injunctive relief include: (1) a declaratory
judgment of non-infringement (Count I); (2) a declaratory judgment of lack of secondary
meaning (Count II); (3) a declaratory judgment of genericness (Count III); (4) a declaratory
judgment of invalid trademark registration (Count IV); (5) cancellation of U.S. Registration
4,746,598 (Count VI); (6) cancellation of U.S. Registration 4,746,597 (Count VII); (7)
2
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one for fraud on the USPTO (Count V), one for tortious interference with
existing business relationship under Texas law (Count X), and one for
tortious interference with prospective business relationship under Texas law
(Count XI).
On August 3, 2021, Nursery Decals moved for summary judgment on
all claims. On the same day, Neat Print filed a cross-motion for partial
summary judgment on the fraud and tortious interference claims.
On August 30, 2021, when Neat Print filed its opposition to Nursery
Decals’ motion, it also filed a Covenant Not to Sue. The Covenant was nearly
identical to the one in Already, 3 and Neat Print claimed its Covenant
cancellation of U.S. Registration 5,076,010 (Count VIII); and (8) cancellation of U.S.
Registration 5,256,615 (Count IX).
3
Neat Print’s Covenant Not to Sue provided in relevant part:
COVENANT
NEAT PRINT for and on behalf of itself, its parents, subsidiaries,
divisions, related companies, affiliated companies, licensees, independent
contract manufacturers, assigns, and/or other related business entities, as
well as any of their predecessors, successors, directors, officers,
employees, agents, distributors, attorneys, representatives, and employees
of such entities, hereby unconditionally and irrevocably covenants to
refrain from making any claim(s) or demand(s), or from commencing,
causing, or permitting to be prosecuted any action in law or equity, against
NURSERY DECALS or any of its parents, subsidiaries, divisions, related
companies, affiliated companies, licensees, independent contract
manufacturers, assigns, and/or other related business entities, as well as
any of their predecessors, successors, directors, officers, employees,
agents, distributors, attorneys, representatives, and employees of such
entities and all customers of each of the foregoing (whether direct or
indirect), on account of any possible cause of action based on or involving
trademark infringement, unfair competition, or dilution, under state or
federal law in the United Sates relating to the MARKS based on the
appearance of any of NURSERY DECALS’ current and/or previous
clothing product designs, and any colorable imitations thereof, regardless
3
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rendered all declaratory and cancellation claims moot. Neat Print later filed
a motion to dismiss for lack of subject matter jurisdiction, echoing the same
arguments.
On October 22, 2021, the district court denied the motion to dismiss.
The district court found the case “procedurally and substantively
distinguishable” from Already because “Neat Print’s Covenant Not to Sue
has not definitely eliminated Nursery Decals’ past and potential future
injuries.” Specifically, the Covenant had a potentially cognizable claim for
tortious interference with prospective business relationships under Texas
law which survived summary judgment, and “[t]he Covenant would not
remove this past injury.” Further, unlike Already, it was not “absolutely clear
that this Covenant Not to Sue would prevent Neat Print from filing future
take-down notices based on the disputed trademarks.” Thus, the case was
not moot.
of whether that clothing is produced, distributed, offered for sale,
advertised, sold, or otherwise used in commerce before or after the
Effective Date of this Covenant.
Similarly, the Covenant in Already obligated Nike:
to refrain from making any claim(s) or demand(s), or from commencing,
causing, or permitting to be prosecuted any action in law or equity, against
[Already] or any of its [successors or related entities and their customers],
on account of any possible cause of action based on or involving trademark
infringement, unfair competition, or dilution, under state or federal law in
the United Sates [sic] relating to the NIKE Mark based on the appearance
of any of [Already]’s current and/or previous footwear product designs,
and any colorable imitations thereof, regardless of whether that footwear
is produced, distributed, offered for sale, advertised, sold, or otherwise
used in commerce before or after the Effective Date of this Covenant.
Nike, Inc. v. Already, LLC, 663 F.3d 89, 92 (2d Cir. 2011), aff’d, 568 U.S. 85 (2013).
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The district judge also went on to grant Nursery Decals’ motion for
summary judgment on the various cancellation claims. The court then
ordered the USPTO to cancel the four marks.
As to the damage claims, the lower court granted Neat Print’s motion
for summary judgment as to tortious interference with existing business
relationship (Count X) and tortious interference with prospective business as
to Amazon (Count XI). But the court found questions of fact on the claims
for fraud on the USPTO (Count V) and tortious interference with
prospective business relationship as to Etsy (Count XI).
On the same day, less than ten minutes before the district court’s
ruling was docketed, Neat Print submitted an Updated Covenant Not to Sue.
The Updated Covenant added that “NEAT PRINT will not send any more
‘takedown’ or infringement notices relative to the MARKS to Amazon, Etsy,
or any other marketplace (online or physical) for any products now or in the
future sold by NURSERY DECALS.”
On December 2, 2021, the day before the pretrial conference and jury
selection, Neat Print filed a motion for reconsideration. Neat Print argued (1)
that the Updated Covenant addressed the trial court’s holding with respect
to possible future injuries, and (2) Nursery Decals had no viable past injury
because fraud on the USPTO cannot serve as the basis for a tortious
interference claim under Texas law.
The district court heard argument at the December 3, 2021, pretrial
conference. The court denied the motion with written reasons to follow after
trial.
On December 6, 2021, the matter proceeded to trial on the claims for
fraud on the USPTO and tortious interference with prospective business
relationship as to Etsy. The jury ultimately found no liability on both claims.
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On December 16, 2021, the district court issued written reasons on
the motion for reconsideration. The court found that the Updated Covenant
“definitely eliminate[d] Nursery Decals’s . . . potential future injuries.” But
the court also found that, under Already, the existence of a legally cognizable
injury—here, tortious interference—allowed Nursery Decals to maintain the
action despite the Updated Covenant. Neat Print had argued that the tortious
interference claim was not viable because (1) it required an underlying
tortious act under state law and (2) a federal claim for fraud on the USPTO
cannot not serve as the predicate offense. But the district court concluded
that “the allegedly tortious act in this case is the sending of a takedown notice
that the sender knows to have been procured by fraud, not the preceding act
of fraud upon the USPTO”—that is, the tortious act was fraud under Texas
state law. The district court reasoned that its earlier ruling “correctly
determined that Neat Print’s Updated Covenant . . . did not eliminate all
Nursery Decals’s legally cognizable injuries and that Nursery Decals’s
claims were not moot.” As with its last ruling, the district court relied on
Already’s statement that the “only legally cognizable injury” in that case was
that Already had suffered from “‘the fact that Nike took steps to enforce its
trademark’ by sending a cease and desist letter and then filing an
infringement suit.” Thus, the district court found subject matter jurisdiction
and denied the motion for reconsideration.
Judgment was entered on December 20, 2021. Nursery Decals did not
appeal the take nothing part of the judgment dismissing its damage claims,
and, thus, this part of the district court’s judgment is not affected by this
ruling. However, Neat Print timely appealed, urging that we vacate the
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portion of the judgment canceling its marks because the district court lacked
subject matter jurisdiction on that issue as to mootness. 4
II. Legal Standard
“Questions of subject-matter jurisdiction are reviewed de novo.”
Hous. Ref., L.P. v. United Steel, Paper & Forestry, Rubber, Mfg., 765 F.3d 396,
400 (5th Cir. 2014) (citing Wagner v. United States, 545 F.3d 298, 300 (5th
Cir. 2008)). This Court also reviews a district court’s granting of summary
4
Nursery Decals did not submit an appellee brief. Instead, Nursery Decals’
President submitted a letter stating (1) that it did not have the resources to retain counsel
to pursue the appeal; (2) that it knew that, as a corporation, it could not proceed pro se, but
(3) that it hoped this Court would decide the issue on the merits and affirm the lower
court’s decision, for the reasons given below and in Nursery Decals’ earlier briefing.
Putting aside the conflict between Nursery Decals’ alleged lack of resources and its
allegation in the complaint that it had $3.5 million in annual sales, Nursery Decals is correct
that “[t]he rule is well established that a corporation can appear in a court of record only
by an attorney at law.” Southwest Exp. Co. v. I. C. C., 670 F.2d 53, 55 (5th Cir. 1982)
(citations omitted). Because Nursery Decals cannot appear through its President, see id.,the Court must thus disregard this letter.
However, Nursery Decals’ sole penalty for the failure to file a brief is the loss of
oral argument. See Fed. R. App. P. 31(c). See also Texas Democratic Party v. Abbott, 978
F.3d 168, 177 (5th Cir. 2020), cert. denied, 141 S. Ct. 1124 (2021) (“[E]ven an appellee’s
failure to file a brief does not cause an automatic reversal of the judgment being appealed.
By appellate rule, so extreme a lapse does cause the appellee to lose the right to appear at
oral argument.”); Hager v. DBG Partners, Inc., 903 F.3d 460, 464 (5th Cir. 2018) (“We
note that DBG has elected not to file a brief in this matter, but that does not preclude our
consideration of the merits.”); Schmidt v. Gray, 399 F. App’x 925, 926 n.2 (5th Cir. 2010)
(explaining that appellee “failed to file a response brief, but neither the Federal Rules of
Appellate Procedure nor our circuit rules suggest that an appellee’s failure to file a brief
should have any effect on the appeal beyond the sanction provided in Federal Rule of
Appellate Procedure 31(c)” and collecting decisions from other circuits holding the same);
16AA Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3977.2 (5th
ed. 2023) (“Because no rule compels an appellee to file a brief, and because Rule 31(c)
already provides a specific consequence for an appellee’s failure to file a brief (exclusion
from participation in oral argument), a court should not impose additional consequences
on an appellee who does not file a brief, unless the court had specifically ordered the
appellee to file a brief and the appellee had disobeyed that order.”).
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judgment under the same standard. Id. (citing Resolution Performance Prods.,
LLC v. Paper Allied Indus. Chem. & Energy Workers Int'l Union, Local 4–1201,
480 F.3d 760, 764 (5th Cir. 2007)).
“Subject-matter jurisdiction cannot be forfeited or waived and should
be considered [by the Court] when fairly in doubt.” Id. (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 671 (2009)). “When a requirement goes to subject-
matter jurisdiction, courts are obligated to consider sua sponte issues that the
parties have disclaimed or have not presented.” Punch v. Bridenstine, 945
F.3d 322, 330 (5th Cir. 2019) (quoting Gonzalez v. Thaler, 565 U.S. 134, 141
(2012)).
III. Discussion
At the outset, we emphasize that Nursery Decals has not appealed
that part of the judgment in which it took nothing on its damage claims
(Counts V, X, and XI). The sole issue before the Court is whether the
Updated Covenant Not to Sue rendered moot Nursery Decals’ claims
seeking to declare the four trademarks invalid (Counts I–IV) and to cancel
them (Counts VI–IX).
“Article III of the Constitution grants the Judicial Branch authority to
adjudicate ‘Cases’ and ‘Controversies.’” Already, 568 U.S. at 90. “In our
system of government, courts have ‘no business’ deciding legal disputes or
expounding on law in the absence of such a case or controversy.” Id. (quoting
DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006)). Consequently,
“those who invoke the power of a federal court [must] demonstrate
standing—a ‘personal injury fairly traceable to the defendant’s allegedly
unlawful conduct and likely to be redressed by the requested relief.’” Id.(quoting Allen v. Wright, 468 U.S. 737, 751 (1984)). “An actual controversy
must exist not only at the time the complaint is filed, but through all stages of
the litigation.” Id. at 90–91 (cleaned up).
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“A case becomes moot—and therefore no longer a ‘Case’ or
‘Controversy’ for purposes of Article III—'when the issues presented are no
longer “live” or the parties lack a legally cognizable interest in the
outcome.’” Id. at 91 (quoting Murphy v. Hunt, 455 U.S. 478, 481 (1982) (per
curiam) (some internal quotation marks omitted)). “No matter how
vehemently the parties continue to dispute the lawfulness of the conduct that
precipitated the lawsuit, the case is moot if the dispute ‘is no longer
embedded in any actual controversy about the plaintiffs’ particular legal
rights.’” Id. (quoting Alvarez v. Smith, 558 U.S. 87, 93 (1984)).
“[A] defendant cannot automatically moot a case simply by ending its
unlawful conduct once sued,” as that would run the risk of a defendant
stopping any unlawful conduct once sued just to obtain a finding of mootness,
then resuming the unlawful conduct again once the case was dismissed, thus
“repeating this cycle until he achieves all his unlawful ends.” Id. (internal
citation omitted). “Given this concern, our cases have explained that ‘a
defendant claiming that its voluntary compliance moots a case bears the
formidable burden of showing that it is absolutely clear the allegedly wrongful
behavior could not reasonably be expected to recur.’” Id. (quoting Friends of
the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 190 (2000)).
If such a defendant “demonstrat[es] that [its] [C]ovenant [Not to
Sue] encompasses all of its allegedly unlawful conduct, it [becomes]
incumbent on” the plaintiff asserting standing and denying mootness “to
indicate that [the plaintiff] engages in or has sufficiently concrete plans to
engage in activities not covered by the covenant.” Id. at 94. “The case is
moot if the court, considering the covenant’s language and the plaintiff’s
anticipated future activities, is satisfied that it is ‘absolutely clear’ that the
allegedly unlawful activity cannot reasonably be expected to recur.” Id. at 94–
95.
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For example, in Already, Nike filed claims for trademark infringement
and dilution, and Already counterclaimed that the trademark was invalid. Id.
at 88. Eight months after filing its complaint and four months after the
counterclaim, Nike issued a Covenant Not to Sue and claimed this mooted
the action. Id. at 88–89.
“The question” before the Supreme Court was “whether a covenant
not to enforce a trademark against a competitor’s existing products and any
future ‘colorable imitations’ moots the competitor’s action to have the
trademark declared invalid.” Id. at 88. The Supreme Court agreed with the
two lower courts that the Covenant mooted the case. Id. at 92–93.
The breadth of this covenant suffices to meet the burden
imposed by the voluntary cessation test. The covenant is
unconditional and irrevocable. Beyond simply prohibiting Nike
from filing suit, it prohibits Nike from making any claim or any
demand. It reaches beyond Already to protect Already’s
distributors and customers. And it covers not just current or
previous designs, but any colorable imitations. . . . We agree
with the Court of Appeals “that it is hard to imagine a scenario
that would potentially infringe [Nike’s trademark] and yet not
fall under the Covenant.”
Id. at 93–94 (bracketed alteration and emphasis in original) (quoting Already,
663 F.3d at 97). Further, Already did not “indicate that it engages in or has
sufficiently concrete plans to engage in activities not covered by the
covenant,” id. at 94, as “Already did not assert any intent to design or market
a shoe that would expose it to any prospect of infringement liability,” id. at
95. Thus, the action was moot. Id.Here, Neat Print contends that, though the district court correctly
found that the Updated Covenant “satisfied the Already test as to future
harm[,]” the district court erred in invalidating its trademarks based on past
harm. Further, Neat Print maintains that the “invalidity claims (Counts I–IV
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and VI–IX) had no bearing on the then-pending tortious interference claim
(Count XI) for a past harm analysis” and that “[t]he trial court improperly
conflated all of the trademark-related claims and failed to conduct a claim-
by-claim analysis for subject matter jurisdiction.” Id.We agree. The district court found that case was not moot because
“Neat Print’s Updated Covenant . . . did not eliminate all Nursery Decals’s
legally cognizable injuries,” namely, the tortious interference claim. But this
was error for two reasons.
First, while Already spoke of cases being mooted, “the court must
evaluate mootness on a claim-by-claim basis to determine whether each claim
satisfies the constitutional requirements for Article III jurisdiction.” United
States v. Vega, 960 F.3d 669, 673 (5th Cir. 2020) (citing In re Pac. Lumber Co.,
584 F.3d 229, 251 (5th Cir. 2009)). See also Wilson v. Birnberg, 667 F.3d 591,
595 (5th Cir. 2012) (“A suit may become moot only as to a particular form of
relief. Therefore, we separately analyze mootness as to the claims supporting
money damages and for equitable relief.”) (citing Henschen v. City of Houston,
959 F.2d 584, 587 (5th Cir. 1992) (finding claim for immediate injunctive
relief moot but claim for damages live)); JSLG, Inc. v. City of Waco, 504 F.
App'x 312, 315–19 (5th Cir. 2012) (per curiam) (analyzing mootness
separately as to claims for injunctive and declaratory relief and for damages);
13B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §
3533.2 (3d ed. 2023) (“Individual issues may be mooted [through voluntary
action by the defendant that accords [ ] the relief demanded by the plaintiff]
if all other matters are resolved, or even though other matters remain to be
resolved.”). Cf. also Opulent Life Church v. City of Holly Springs, Miss., 697
F.3d 279, 286 (5th Cir. 2012) (“[A] plaintiff seeking both injunctive relief and
money damages can continue to pursue the case, even after the request for
an equitable remedy is rendered moot.” (quoting Erwin Chemerinsky,
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Federal Jurisdiction § 2.5.2 (6th ed. 2012))). 5 Thus, even if the case as a
whole was not mooted, the survival of the tortious interference claims does
not necessarily imply that the invalidity claims are live.
Second, the language of Already demonstrates that a claim for past
damages has no bearing on a Covenant Not to Sue and its effects on an
invalidity claim. See Already, 568 U.S. at 94–95 (“The case is moot if the
court, considering the covenant’s language and the plaintiff’s anticipated
future activities, is satisfied that it is ‘absolutely clear’ that the allegedly
unlawful activity cannot reasonably be expected to recur.” (emphasis
added)).
Consequently, this Court finds this case is squarely governed by
Already. The district court properly found that the Updated Covenant was
broad enough to preclude any claim of future injury. Indeed, Nursery Decals
has not disputed this finding, nor can it; as shown above, Neat Print’s original
Covenant was virtually identical to Nike’s, and Neat Print’s Updated
Covenant went even further than Nike’s. Thus, Neat Print has met its
“formidable burden of showing that it is absolutely clear the allegedly
5
See also Hodge v. Jones, 31 F.3d 157, 166 (4th Cir. 1994) (finding claims for
injunctive and declaratory relief moot and analyzing appeal as to “justiciable claims for
damages and attorney fees”); 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition § 32:2.50 (5th ed. 2023) (“Case or Controversy Analysis May Be for Each
Trademark, Not for the Whole Case.” (citing Lontex Corp. v. Nike, Inc., No. 18-5623, 2020
WL 5947852, at *3 (E.D. Pa. Oct. 7, 2020))). Cf. also 15 Moore’s Federal Practice - Civil §
101.100 (2023) (“If a plaintiff interposes a request for several forms of relief, the fact that
some of the claims have been rendered moot will not divest the court of jurisdiction to
entertain any residual claim that may be viable and on which effective judicial relief may
still be granted . . . . [T]he mere fact that an intervening event or a change in circumstances
may have alleviated the need for a declaration or injunction will not automatically moot the
plaintiff’s residual request for compensatory or punitive damages”).
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wrongful behavior could not reasonably be expected to recur.” Already, 568
U.S. at 91 (quoting Laidlaw, 528 U.S. at 190).
Given this showing, “it was incumbent on [Nursery Decals] to
indicate that [Nursery Decals] engages in or has sufficiently concrete plans
to engage in activities not covered by the covenant.” Id. at 94. Nursery Decals
failed to do so, and the lower court’s finding that claims of future injury are
barred reflects that.
As a result, under Already, the Updated Covenant rendered any claim
for invalidity moot. No separate claim for past damages changes that, and the
district court’s finding to the contrary was error.
IV. Conclusion
Accordingly, we again note that Counts V, X, and XI are not before us
on appeal, and we find that Counts I–IV and VI–IX were mooted by Neat
Print’s Updated Covenant Not To Sue. In light of that document, we
VACATE as MOOT the portion of the final judgment concluding that Neat
Print’s four contested trademarks are not protected by the Landham Act and
the portion of the final judgment cancelling the Registrations of the four
contested trademarks.
13