In Spireon, Inc. v. Flex Ltd., No. 2022-1578 (Fed. Cir. June 26, 2023), the Federal Circuit took a surprising turn in which it held that it is the trademark owner’s burden to prove that identical third-party marks put forth by defendants are not in use, overturning years of precedent. Before this decision, it was the defendant’s burden to not only put forth evidence of third-party marks, but also prove the extent of the use in the market; otherwise, the marks would be given little weight. The appeals court also found that the Trademark Trial and Appeal Board (the “TTAB” or “Board”) failed to give proper weight to third-party composite marks because the defendant’s mark was a composite mark and they were viable evidence going to the conceptual strength—or lack thereof—of opposer’s marks. This precedential decision will shift the costs and burdens between the parties in favor of defendants. The way the TTAB analyzes third-party marks in future disputes with third-party marks will also be more significant in the likelihood of confusion analysis.
In October 2018, Spireon, a California-based producer of vehicle intelligence solutions, applied to register the mark FL FLEX in connection with electronic location tracking devices for trailers, cargo containers and mobile assets. Flex, a Texas electronics manufacturer, opposed the application on the grounds of priority and likelihood of confusion with Flex’s FLEX, FLEX (stylized) and FLEX PULSE trademarks, registered for transportation logistics services, supply chain and inventory management, and related software and solutions (among other products and services).
The Board sustained Flex’s opposition, finding a likelihood of confusion under the DuPont factors (as enumerated in In re E.I. DuPont DeNemours & Co., 476 F.2d 1357, 1361 (CCPA 1972)). But the Federal Circuit vacated the Board’s decision and remanded, finding several critical errors in the Board’s analysis of the conceptual and commercial strength of Flex’s marks.
First, the court found that the Board failed to give sufficient weight to evidence of composite third-party marks (i.e., marks containing “FLEX” plus other elements) when analyzing Flex’s marks’ conceptual strength, even though Spireon’s mark itself is a composite mark. According to the court, “[a]t least where the registrations and application are for nonidentical marks ... it is [an] error for the Board to effectively disregard third-party composite marks,” as such marks are “relevant to the question of whether the shared segment ... has a commonly understood descriptive or suggestive meaning in the field and whether there is a crowded field of marks in use.” The Board compounded this error by giving no weight to Spireon’s argument that “flex” is highly suggestive because it is short for “flexible,” finding that there was insufficient evidence that Flex’s marks are highly suggestive or weak with respect to the goods and services in Flex’s registrations.
Second, the court found that the Board also erred in failing to consider composite marks with accompanying evidence of use when analyzing Flex’s marks’ commercial strength (or “the degree of commercial recognition by the relevant purchasing public”). The Federal Circuit challenged the Board’s assertion, highlighting that Spireon’s evidence of third-party FLEX-based marks was relevant evidence of the marks’ weakness in the relevant industry.
Finally, Spireon argued that the Board erred by failing to consider evidence of three identical FLEX marks Spireon had introduced without evidence of actual use. Though it’s well settled that opposers bear the burden of proof in opposition proceedings, the court recognized that, in previous cases, the burden of proving nonuse of third-party marks was presumed to fall on defendants. While the court declined to decide the broader issue of which party bears the burden of establishing nonuse of third-party marks in opposition proceedings, it instead narrowly held that the burden of showing nonuse of identical third-party marks for identical goods lies with the opposer. “Otherwise,” the court explained, “the opposer would be able to dismiss the commercial significance of previously registered identical marks for identical goods where the opposer’s own mark should perhaps not have been granted registration in the first place.” The court directed that, on remand, Flex should be permitted to show that the identical FLEX marks Spireon introduced were not in use. And if it can’t, “the commercial strength of the Flex marks must be considered weak as to Spireon’s nonidentical mark.”
After Spireon, it will be easier for defendants to weaken trademark owners’ registrations with third-party marks. Not only can defendants use third-party composite marks to prove that the opposer’s registrations are commercially and conceptually weak, but now, trademark owners have the burden to prove nonuse of identical third-party marks. This will likely increase costs for trademark owners protecting their brands, as they will now have to investigate nonuse for all identical third-party marks a defendant puts into play (and defendants may be inclined to introduce more third-party marks into the record as a tactic to increase costs for opposers). Opposers will also have to manage the logistical challenges of proving a negative.