Intellectual Property Law

Ninth Circuit Modifies Tests for Laches and Acquiescence

By Michael Atkins

Counterclaim plaintiff Joe Kennedy, owner of counterclaim plaintiff Kennedy Center for Real Estate Education, Inc., created an educational curriculum called the “Accredited Seller Representative” (ASR) program. Counterclaim plaintiffs developed and registered several trademarks in connection with their ASR program.

Counterclaim plaintiffs alleged that counterclaim defendants Seller Agency Council, Inc., and RealtyU, Inc., used counterclaim plaintiffs’ marks under the ASR program but diverted to RealtyU certain revenue the parties had agreed would go to counterclaim plaintiffs.

Counterclaim defendants defended on the ground of acquiescence, among other defenses.

The Central District of California concluded that counterclaim plaintiffs’ conduct after sending a cease-and-desist letter led the counterclaim defendants to believe they had permission to continue using the ASR marks. 

The counterclaim plaintiffs appealed, which on Sept. 3 led the Ninth Circuit to modify the circuit’s tests for laches and acquiescence. 

It found: “Because laches and acquiescence are closely related concepts, we agree with the approach taken by the Eleventh Circuit that modifying our current test for laches is an appropriate way to provide a practical test for acquiescence. In the Eleventh Circuit, the prima facie case for laches required ‘(1) a delay in asserting a right or claim; (2) that the delay was not excusable; and (3) that the delay caused the defendant undue prejudice.’ The prima facie case for laches in our own circuit is essentially identical. ‘The test for laches is two-fold: first, was the plaintiff’s delay in bringing suit unreasonable? Second, was the defendant prejudiced by the delay?’ The first aspect of our test in turn consists of two sub-parts: an assessment of the length of the delay followed by an assessment of the reasonableness of the delay.

“Because we agree with the Eleventh Circuit that acquiescence differs from laches principally in that it requires some form of active consent, we conclude that the Coach House [Rest., Inc. v. Coach & Six Rests., Inc., 934 F.2d 1551 (11th Cir.1991)] test largely comports with our own understanding of the prima facie case for acquiescence. Accordingly, we adopt that test. The elements of a prima facie case for acquiescence are as follows: (1) the senior user actively represented that it would not assert a right or a claim; (2) the delay between the active representation and assertion of the right or claim was not excusable; and (3) the delay caused the defendant undue prejudice.

Applying this test, the court found the district court did not make factual findings as to the scope of the counterclaim plaintiffs’ active representations or the reasonableness of the counterclaim defendants’  reliance on those representations. Therefore, it vacated the district court’s judgment that the counterclaim plaintiffs had had acquiesced in counterclaim defendants’ use of its marks and remanded for the court’s determination.

The case cite is Seller Agency Council, Inc. v. Kennedy Center for Real Estate Education, Inc., __ F.3d. __, 2010 WL 3448107, No. 08-56791 (9th Cir. Sept. 3, 2010).

Full post as published by Seattle Trademark Lawyer on September 07, 2010 (boomark / email).