Commissioner of Patents and Trademarks
Patent and Trademark Office (P.T.O.)
PAOLO'S ASSOCIATES LIMITED PARTNERSHIP
v.
PAOLO BODO
90-102
September 24, 1990
*1 Filed: May 17, 1990
Cancellation No. 18,242
on petition to the Commissioner filed May 17, 1990
Attorney for Petitioner
Howard G. Slavit
Corriea, Tierney & Slavit, P.C.
Jeffrey M. Samuels
Assistant Commissioner
for Trademarks
DECISION
Paolo's Associates
Limited Partnership (hereinafter "petitioner") has petitioned the
Commissioner for review of an interlocutory order of the Trademark Trial and
Appeal Board, issued in the above referenced cancellation proceeding. The order
denied petitioner's motion for judgment by default and granted the motion by
cancellation respondent Paolo Bodo (hereinafter "registrant") that
its late-filed answer to the cancellation petition be accepted. The instant
petition and the Board's action will be reviewed pursuant to Rule 2.146(e)(2),
37 C.F.R. § 2.146(e)(2).
Facts
Registration No.
1,344,564 for the mark "PAOLO'S and design" issued June 25, 1985 to
registrant Paolo Bodo. The registration covers certain clothing items in
class25 and restaurant services in class 42. On January 19, 1988, petitioner
filed an application seeking registration of "PAOLO'S RISTORANTE and
design" for restaurant services. The mark was refused registration under
Section 2(d) of the Trademark Act, 15 U.S.C. §
1052(d), based on the prior registration
of registrant's mark "PAOLO'S and design." The refusal was made final
in an action issued February 23, 1989. [FN1] On June 21, 1989, petitioner filed
a petition with the Trademark Trial and Appeal Board seeking cancellation of
the registration.
On November 8, 1989, the
Board notified registrant of the filing of the cancellation petition and noted
that a responsive pleading was due no later than forty days thereafter. On
December 18, 1989, with the consent of petitioner, registrant requested a one
month extension of time to file its answer to the cancellation petition. The
request was approved by an Attorney- Examiner for the Board on January 10,
1990, thus extending the due date for registrant's answer through January 18,
1990. Petitioner has acknowledged receipt of a copy of the approved request
"on or about January 11, 1990."
Registrant filed its
answer on February 7, 1990, 20 days after the extended due date, with a motion
requesting that the late-filed pleading be accepted. Petitioner, on February
15, 1990, filed a motion requesting the Board to enter judgment by default. Each
of the two parties subsequently filed arguments opposing the respective
motions. A three-member panel of the Board issued a decision on April 17, 1990
granting registrant's motion to accept the late- filed answer and denying
petitioner's motion for entry of judgment by default. Petitioner thereafter
filed the instant petition seeking review of the Board's order.
Decision
*2 Under Rule
2.113, 37 C.F.R. § 2.113, when a
petition for cancellation is filed, the Board "shall designate a time ...
within which an answer must be filed." If the cancellation respondent
fails to file an answer within the time set by the Board, "the petition
may be decided as in case of default." Rule 2.114, 37 C.F.R. § 2.114.
In practice, the
cancellation respondent that fails to file a timely answer is "in
default" once the due date for the answer has passed. Notice of the
default may be provided through the issuance by the Board of an order to show
cause why a default judgment should not be entered. However, in a case where the
cancellation petitioner files a motion for entry of judgment by default,
service of the motion substitutes for the Board's notice. In either scenario,
the respondent must then prove there is "good cause" not to enter
judgment by default.
In the instant case,
registrant had not, at the time its late answer was filed, received
"notice" that it was "in default." However, registrant
anticipated that it would have to establish "good cause" for avoiding
entry of judgment by default. Thus, counsel for registrant explained in the
motion seeking acceptance of the late answer that the failure to file an answer
in timely fashion was inadvertent and the
result of docketing errors. It was asserted that the facts set forth in the
motion were sufficient to establish good cause not to enter judgment by
default. The Board agreed and accepted the late filed answer, notwithstanding
petitioner's arguments in support of entry of judgment by default. Petitioner's
motion for judgment by default was consequently denied and discovery and trial
dates were set.
Petitioner seeks review
of the Board's order by the Commissioner on two grounds. First, petitioner
asserts that the Board committed clear error when it applied the "good
cause" standard of Rule 55(c) of the Federal Rulesof Civil Procedure.
Petitioner asserts that registrant instead should have been required to prove
that its failure to file a timely answer was the result of "excusable
neglect," as would be required if registrant's motion to accept the late
answer was taken as a request to enlarge the time for filing the pleading
pursuant to Rule 6(b) of the Federal Rules of Civil Procedure. Second,
petitioner asserts that even under the more lenient standard of Rule 55(c), the
Board abused its discretion by finding that registrant had not acted willfully
in failing to file its answer in timely fashion and that petitioner had not
been prejudiced by the late filing.
The Commissioner will
exercise supervisory authority under Trademark Rule 2.146(a)(3), 37 C.F.R.
§ 2.146(a)(3), to vacate an action of
the Trademark Trial and Appeal Board only where the Board has committed a clear
error or abuse of discretion. Riko
Enterprises, Inc. v. Lindsley, 198 USPQ 480 (Comm'r Pats.1977). For the reasons
set forth below, petitioner's request that the Board's ruling be overturned
must be rejected.
1. The Board Acted Properly in Applying Rule
55(c)
*3 In inter partes
cases before the Board, the Federal Rules of Civil Procedure apply
"wherever applicable and appropriate," unless the Rules of Practice
in Trademark Cases provide otherwise. Rule 2.116, 37 C.F.R. § 2.116. The Trademark Rules do not establish
a standard for determining the circumstances under which an answer to a
cancellation petition may be filed late. Similarly, the Trademark Rules do not
establish a standard for determining when a default or a default judgment may
be set aside. Accordingly, Federal Rules 6(b), 55(c) and 60(b) all apply.
Registrant's motion
requesting acceptance of its late filed answer invited the Board to consider
the motion as either a "nunc pro tunc request for extension of time"
to file the answer, or an anticipatory showing of good cause why judgment by
default should not be entered. The motion may just as readily be viewed as a
request under Federal Rule 6(b)(2) to enlarge the time for registrant to file
its answer to petitioner's complaint. If viewed as a motion under Rule 6(b)(2),
registrant's motion would have had to be denied by the Board, since the Board found that the
docketing problems of registrant's counsel did not constitute "excusable
neglect." However, the Board chose to apply Rule 55(c) rather than Rule
6(b)(2) and exercised sound judgment in doing so.
The courts and the Board
are reluctant to grant judgments by default and tend to resolve doubt in favor
of setting aside a default, since the law favors deciding cases on their
merits. Morris v. Charnin, 85 F.R.D. 689 (S.D.N.Y.1980); Alopari v. O'Leary,
154 F.Supp. 78 (E.D.Penn.1957); Thrifty Corporation v. Bomax Enterprises, 228
USPQ 62 (TTAB 1985); Regent Baby Products Corp. v. Dundee Mills, Inc., 199 USPQ
571 (TTAB 1978).
A motion to set aside a
default is addressed to the sound discretion of the court, may be granted for
good cause, and "is usually granted when no substantial prejudice will
result to the plaintiff and [when] the defendant, not being guilty of gross
neglect, claims the existence of a meritorious defense." Kulakowich v. A/S
Borgestad, 36 F.R.D. 185, 186 (E.D.Penn.1964); See also, Seanor v. Bair
Transport Company of Delaware, Inc., 54 F.R.D. 35 (E.D.Penn.1971). Further, one
court has held that it is abuse of a court's discretion not to set aside a
default when circumstances are such that a plaintiff would not be prejudiced,
the defendant has established a meritorious defense and defendant did not
engage in willful or bad faith conduct leading to default. Heleasco Seventeen,
Inc. v. Drake, 102 F.R.D. 909, 917 (D.Del.1984).
Finally, where it is the attorney rather than the party itself that is
responsible for the failure to properly defend an action, as is true of the
instant case, courts are likely to vacate a default. Trust Company Bank v.
Tingen-Millford Drapery Company, Inc., 119 F.R.D. 21, 22 (E.D.N.C. Raleigh
Div.1987).
*4 It has been
noted "that the case law with respect to default judgments appears to be
inconsistent with Rule 6(b)(2)'s provision for extending the time to file an
answer ... only in cases of excusable neglect." Kleckner v. Glover
Trucking Corporation, 103 F.R.D. 553, 556 (M.D.Penn.1984). Thus, even in a case
when excusable neglect could not be shown and Rule 6(b)(2) would therefore have
required denial of a motion for leave to file an answer out of time, thus
prompting entry of a default judgment, it was held that the clear import of the
case law interpreting Rules 55(c) and 60(b) would nonetheless require the
judgment to be set aside on a showing of good cause as outlined above.
Kleckner, 103 F.R.D. at 556.
The Kleckner court was
"sympathetic to [plaintiff's] frustration with the dilatory conduct of
[defendant's] counsel" and noted that if it "had the discretion to do
so" it would have relied on the "egregious facts" of the case to
deny defendant's motion for leave to file its answer out of time. Kleckner, 103
F.R.D. at 556. The court also specifically noted its concern that decisions
interpreting Rules 55(c) and 60(b) act to severely limit the courts' "ability to 'secure the just,
speedy, and inexpensive determination of every action' " because the
decisions preclude application of any "substantial sanction against a
defendant who fails to file an answer" within the specified time, in the
absence of prejudice to the plaintiff. Kleckner, 103 F.R.D. at 556.
Nonetheless, the court concluded that case law did not allow it to deny the
motion for leave to file a late answer. Kleckner, 103 F.R.D. at 556.
In the instant case,
direct application by the Board of the "good cause" standard of Rule
55(c) was proper and expedient and avoided what would have been a pointless
application ofthe "excusable neglect" standard of Rule 6(b)(2). In
fact, given the case law on the subject, it might have been clear error for the
Board not to accept registrant's late answer and deny petitioner's motion for
entry of judgment by default.
2. Evidence of Bad Faith and Prejudice is
Lacking
Distinct from its
argument urging an artificial application of Rule 6(b)(2), petitioner also
argues that the Board ought to have entered a default judgment because
registrant willfully refused to file an answer in timely fashion, causing
prejudice to petitioner. [FN2] Specifically, petitioner argues that registrant
received actual notice that its answer was due on January 18, 1990 approximately a week before that date
and its failure to file the answer must be viewed as willful and prejudicial to
petitioner, which bore the expense of preparing and filing its motion for entry
of judgment by default. Petitioner concludes that the Board's failure to adopt
such a view constitutes an abuse of discretion.
(A) The Board Could Reasonably Have Found the
Delay Was Not Proved to be
Willful
*5 If the Board
receives and approves a request for an extension of time to file an answer in a
cancellation proceeding, then the request is stamped as "approved"
and copies are mailed to the parties to the proceeding. In the instant case,
the Board approved registrant's request for an extension of time on January 10,
1990. Petitioner has acknowledged that it received a copy of the approved
extension request on or about January 11, 1990, and it reasons that registrant
must also have received a copy on or about that date. Accordingly, petitioner
argues that registrant received "actual notice" that its answer was
due on January 18, 1990 approximately one week before the due date and its
failure to file the answer must therefore be viewed as willful.
The Board did not abuse
its discretion or commit clear error in failing to accept petitioner's
contention on this point. First, registrant's receipt of a copy of the approved extension request has
not been proved. Second, even if receipt is assumed, it does not necessarily
follow that such receipt would actually serve as a reminder to registrant of
the due date for its answer. Rather, it is entirely possible that the approved
request would simply be associated with the file for the cancellation
proceeding by a clerk in the office of registrant's counsel, without it ever
having been reviewed by counsel, who may have relied on his docketing system to
provide him with notice of the due date for his client's answer. Thus, while it
may be reasonable to presume, for the sake of argument, that the Board followed
its usual practice and mailed to registrant's counsel a copy of the approved
extension request, and counsel's office may also be presumed to have received
the copy, these presumptions do not necessarily establish actual notice to
counsel of the due date for the answer.
The Board was presented
with no evidence that registrant's counsel acted willfully in failing to file a
timely answer and petitioner's argument on this point cannot be considered
conclusive. The Board was entitled to rely on the representation of
registrant's counsel that his docketing system failed him in this case.
Therefore, the Board cannot be found to have acted improperly in failing to
find that registrant's counsel acted willfully when he filed out of time the
answer to the cancellation petition.
(B) The Board Could Reasonably Have Found Substantial
Prejudice Was Not Proved
In denying petitioner's
motion for entry of a default judgment, the Board stated "we believe that
petitioner has incurred no substantial prejudice." Petitioner, however,
argues that this finding was wrong and that it "has suffered
prejudice" because of the costs it incurred in preparing and filing its
motion for entry of a default judgment. [FN3]
In one case, in which
defendant's motion to set aside a default was alleged by the plaintiff to have
caused prejudice through delayed satisfaction of plaintiff's claim and because
of the costs incurred in responding to the motion, the court held
"plaintiff has suffered no substantial, let alone prejudicial,
injury." General Tire & Rubber Company v. Olympic Gardens, Inc., 85
F.R.D. 66, 70 (E.D.Penn.1979). In another decision, it was noted that
litigation can reasonably be expected to be expensive and, in the absence of an
allegation that the defendant's delay would result in "substantially
greater" litigation expenses, the fees and expenses incident to a variety
of motions that resulted from defendant's delay were held insufficient to
support a claim of prejudice. Kleckner, 103 F.R.D. at 556. Thus, petitioner's
allegation that the costs associated with one motion are, in this case,
sufficient to support a finding of prejudice could properly have been rejected
by the Board.
*6 The Board
properly applied the Trademark Rules, the Federal Rules and relevant case law
in issuing the interlocutory order that is the subject of this petition.
Petitioner has failed to establish any error or abuse of discretion by the
Board. The petition seeking reversal of the Board's order is, therefore,
denied. The cancellation file will be returned to the Board for resumption of
the cancellation proceeding.
FN1. Office records now list the application as abandoned, as of
September 30, 1989, for failure to respond to the final refusal. It must be
noted that petitioner's filing of a cancellation petition with the Board did
not serve as a response to the final Office action and did not toll the six
month response period following issuance of the action.
FN2. As noted, "good cause" for avoiding entry of a
default judgment can be established when (1) the defendant's delay has not
resulted from an act that is willful, in bad faith, or in gross neglect, (2)
the defendant's delay has not resulted in substantial prejudice to the
plaintiff, and (3) the defendant has a meritorious defense. In this case,
petitioner contends registrant's delay was a willful act and did result in
prejudice. Petitioner has not contended that registrant
has failed to assert a meritorious defense. While the cancellation petition
asserts improper issuance of the registration under Section 2(f) of the
Trademark Act because the mark had not been in use, the registration, in fact,
did not issue under Section 2(f); use dates were asserted in the original
application, and registrant denies the allegations of nonuse and improper
issuance. Further, while petitioner argues in the alternative that registrant
has abandoned use of its mark, registrant has denied the allegation.
FN3. Petitioner requested the Board to require registrant to pay
the relevant attorneys' fees for this motion. In the order that is the subject
of this petition, the Board clearly pointed out that Rule 2.127(f), 37 C.F.R.
§ 2.127(f), denies the Board authority
to award either attorneys' fees or costs to any party. Nonetheless, petitioner
has complained in the petition that the Board should have awarded fees. The
Board acted properly in denying the request for an award of fees and
petitioner's resurrection of the argument in the context of this petition was
superfluous and might have been avoided had petitioner noted the Rule and case
law cited by the Board on this point.
21 U.S.P.Q.2d 1899
END OF DOCUMENT