[00:00:07] Speaker 00:
Good morning.

[00:00:08] Speaker 01:
Good morning, Your Honors.

[00:00:09] Speaker 01:
Matteo Fowler on behalf of the defendant and appellant, Smarter Vitamins Corporation.

[00:00:16] Speaker 01:
May it please the court?

[00:00:20] Speaker 01:
The trial court's judgment should be reversed as to Smarter Vitamins Corporation for three reasons.

[00:00:28] Speaker 01:
Findings as to plaintiffs, the appellee's use in commerce date was clearly erroneous.

[00:00:35] Speaker 01:
Second, applying the wrong, substantially exclusive use test to determine secondary meaning was clearly erroneously applied and prejudiced SmarterVitamin's ability to prove secondary meaning at the trial level.

[00:00:50] Speaker 01:
And the third issue is that the trial court's decision to dismiss the counterclaims for trademark cancellation should be reversed in part because the trademarks were found to be invalid.

[00:01:08] Speaker 00:
Council, I think in going through this case, the posture of the case is that you've gone through a whole trial.

[00:01:15] Speaker 00:
The district court, no matter how closely we look at the record, the district court is going to have a much better command of the facts and the evidence that we do because the district court weighs the testimony as they come in live.

[00:01:31] Speaker 00:
were being asked to reverse on clear error ground that leads us to the factual findings made by the court.

[00:01:38] Speaker 00:
And that's not easy to do because the district court did make very specific findings backed up by citations to the evidence in the record.

[00:01:48] Speaker 01:
And I appreciate that question, Your Honor, and we're not asking you to reweigh the evidence.

[00:01:54] Speaker 01:
That's not your role.

[00:01:55] Speaker 01:
But even assuming all of the evidence that was before the court, it's still not enough.

[00:02:00] Speaker 01:
And that's because of the standard that we see in chance, elements of actual use, elements of actual display.

[00:02:08] Speaker 01:
You go through the record, you can't find one instance of actual display of the mark in commerce.

[00:02:15] Speaker 01:
There was no picture, no contemporaneous documentation to support that.

[00:02:19] Speaker 01:
So now, if what we're saying is true, any trademark holder or mark holder can come in and say, well, we used it back then, and you have to believe that.

[00:02:28] Speaker 01:
How could that show that the mark could create an association of the owner with the brand if we don't even know how it was actually seen, if at all, by the consuming public?

[00:02:43] Speaker 01:
That's the one problem I think with the record is if you were to paw through it and by no means are we asking you to do that, you won't find that actual element of display that chance requires.

[00:02:54] Speaker 01:
So unfortunately, you can look at this record by not reweighing it and make that determination that the trial court got it wrong in assessing that February 9, 2017 use in commerce date.

[00:03:08] Speaker 02:
Council, I do have a question.

[00:03:11] Speaker 02:
And it's on the secondary use argument.

[00:03:15] Speaker 02:
As I understand it, first of all, you're not challenging the factual findings of the district court, correct?

[00:03:24] Speaker 01:
We are challenging the finding of February 9, 2017 as the use in commerce date for the plaintiff.

[00:03:32] Speaker 02:
Why is that clearly erroneous?

[00:03:34] Speaker 01:
Because it's an insufficient evidence to show that it was actually used in commerce under the chance standard.

[00:03:42] Speaker 02:
In what way?

[00:03:44] Speaker 02:
How is that the case?

[00:03:46] Speaker 02:
Because as I understand it, wasn't that the date?

[00:03:50] Speaker 02:
Well, explain to me your view of it.

[00:03:53] Speaker 01:
Right.

[00:03:53] Speaker 01:
So at most, we have there was testimony that some samples were given to a store, and that's where the evidence stops.

[00:04:04] Speaker 01:
Now, the testimony continued on to say that the products were placed on shelves.

[00:04:10] Speaker 02:
Did I misunderstand the findings that the district court found that on January 2017, SNI designed the label?

[00:04:20] Speaker 02:
Is that correct?

[00:04:21] Speaker 01:
That was what the court determined.

[00:04:24] Speaker 02:
Well, okay.

[00:04:26] Speaker 02:
And that they provided the label to the manufacturer at that time.

[00:04:34] Speaker 02:
that they put bottles that were shipped to NutriVita, I believe, in February 2017, that they began shipping bottles to the consumers February 9, 2017.

[00:04:48] Speaker 02:
So what's clearly erroneous about that?

[00:04:54] Speaker 01:
So those efforts had nothing to do with drawing an association

[00:04:58] Speaker 01:
between the mark and the owner.

[00:05:00] Speaker 01:
Moreover, there's really no prelaunch activities can support.

[00:05:05] Speaker 00:
I think you're looking at it really narrowly, right?

[00:05:08] Speaker 00:
So tell me why we're wrong in looking at the case this way.

[00:05:12] Speaker 00:
We start with the factual finding by the district court, which very specifically says because plaintiffs were both selling smarter nutrition's branded products directly to consumers and displaying their branded products at new

[00:05:28] Speaker 00:
new Trevita by February 9, 2017.

[00:05:30] Speaker 00:
So that's the finding.

[00:05:32] Speaker 00:
And then we asked, well, what did the district court cite to in the evidence that relies on that?

[00:05:39] Speaker 00:
One of the pieces of evidence is the first invoice to a brick and mortar store has a shipment of 25 bottles and that's dated February 9, 2017.

[00:05:50] Speaker 00:
That's support.

[00:05:51] Speaker 00:
I mean, we can quarrel with that whether that's sufficient support.

[00:05:55] Speaker 00:
But once we accept that there is evidence in the record that ties the use and commerce date to February 9, 2017, I would have a hard time finding that that was clearly erroneous.

[00:06:10] Speaker 01:
And I appreciate your position on that.

[00:06:13] Speaker 01:
If we look at it in a broader context, I don't mean to approach it from a myopic view, but that strikes me as token use.

[00:06:22] Speaker 01:
We don't see any real action taking place until months and months later.

[00:06:28] Speaker 01:
Right?

[00:06:28] Speaker 01:
It was not until the late summer that there was an aggressive launch, which coincided with the transfer of brand.

[00:06:36] Speaker 01:
It went from smarter nutrition now to smarter curcumin.

[00:06:40] Speaker 01:
Two separate products.

[00:06:41] Speaker 01:
There was no allegation of tacking.

[00:06:44] Speaker 01:
We don't have anything in the record that says these two marks are the same.

[00:06:47] Speaker 01:
You start over.

[00:06:48] Speaker 01:
You start from scratch.

[00:06:50] Speaker 01:
So if we rushed to, the trademark officer rushed a product to market,

[00:06:56] Speaker 01:
before was actually ready well it's very similar to just an intent to use application at that point because it's token use it has nothing to do with associating the mark with the owner that's what i mean by yes there is some evidence but just some evidence is not enough under the actual use an actual display requirements you need more than just handing off a couple freebies to uh...

[00:07:20] Speaker 01:
to a brick-and-mortar store?

[00:07:22] Speaker 00:
Well, 50 to 100 bottles of supplements were shipped to brick-and-mortar store, which started displaying them.

[00:07:31] Speaker 00:
I take your point.

[00:07:32] Speaker 00:
I understand better now what your point is, is that the evidence is simply too thin.

[00:07:38] Speaker 00:
But since it's post-trial, they do get the benefit of reasonable inferences as well.

[00:07:46] Speaker 01:
Absolutely, and I do appreciate that they are into that judge are entitled to reasonable inference looking at the record We still believe it is insufficient to make that case now that that's only half the coin right Even establishing that the February 9 date Let's just say you agree with that it can kind of swing into a

[00:08:08] Speaker 01:
the opposition to why the trial courts judgment dismissing the plaintiff's claims should be affirmed because if it is that date

[00:08:19] Speaker 01:
february nine twenty seventeen that's the date by which the plaintiff should prove up the validity of his trademark and determined in secondary meaning of his mark before the acts of infringement began now because the district court determined that the defendant my client smart vitamins began using its mark in commerce in october of twenty sixteen that he has priority

[00:08:46] Speaker 01:
forty years of this court's uh... precedent should not be upended uh... because there's really no good reason to at this point if we've used the mark in congress and i think where the distinction is with smarter vitamins and smarter nutrition's perspective as to this issue we believe the court was making its determination as to the validity of the marks not the scope

[00:09:15] Speaker 01:
the rights in a priority case or in determining whether the natural zone of expansions are.

[00:09:22] Speaker 01:
So it's a little bit of a cart before the horse.

[00:09:24] Speaker 01:
We don't need to determine market penetration to determine whether a mark is even valid in its own stance.

[00:09:31] Speaker 01:
So for instance, if the mark Smarter Vitamins was used at that brick and mortar and we have to determine whether or not that mark has secondary meaning because it was determined to be descriptive,

[00:09:45] Speaker 01:
The scope could just be where it's being used, which really differentiates our situation from Grupo Gigante, which you had a company in Mexico who wanted to come into San Diego.

[00:09:57] Speaker 01:
Now, the courts, in any of the cases we saw, were not determining the validity of the trademark.

[00:10:03] Speaker 01:
They were determining whether or not there were likelihood of confusion or what zone of expansion and or cancellation should occur.

[00:10:12] Speaker 02:
Just so that I understand your argument, you are though conceding, or you are agreeing that assuming the date is in fact February 2017, that smarter vitamins have not acquired that secondary meaning by that date.

[00:10:32] Speaker 01:
By February 9, 2017?

[00:10:35] Speaker ?:
Correct.

[00:10:35] Speaker 01:
Yeah.

[00:10:36] Speaker 01:
I hate to concede, but on this point, it would be hard for me to argue that we have changed secondary meaning in six weeks.

[00:10:44] Speaker 01:
Great.

[00:10:45] Speaker 01:
Thank you.

[00:10:47] Speaker 01:
I'm going to reserve my time.

[00:10:49] Speaker 00:
All right.

[00:10:59] Speaker 03:
If it will please the court, my name is Joseph Trojan.

[00:11:01] Speaker 03:
I'm appellant for

[00:11:03] Speaker 03:
Mr. Nguyen and also for Smarter Nutrition.

[00:11:08] Speaker 03:
And looking at that last issue of the evidence in 2017, somehow the argument that the February sales went to this brick and mortar stores were just a token use.

[00:11:19] Speaker 03:
and then there was a long delay.

[00:11:20] Speaker 03:
There wasn't a long delay.

[00:11:21] Speaker 03:
If we look at 2ER at 316, that is the profit and loss statement for 2017 for Smarter Nutrition and it shows that significant sales began in, well, sales began in July quarter at $16,000 and then by the fourth quarter of that year,

[00:11:48] Speaker 03:
they had risen to 1.2 million in sales.

[00:11:52] Speaker 03:
So the idea that you're shipping product to get started in February, it's a shipment in commerce and then you're launching into major sales in the second half of the year while you're trying to promote the products, that is definitely

[00:12:13] Speaker 03:
does not mean your token sale.

[00:12:16] Speaker 03:
You're putting it into commerce and then you're having significant sales.

[00:12:20] Speaker 03:
And this argument that somehow that that was because there was this transition to smart or curcumin, that's simply not true.

[00:12:26] Speaker 03:
There is a, when you look at the bottle for smart or curcumin, you see,

[00:12:32] Speaker 03:
that the Smarter Nutrition trademark is on that bottle.

[00:12:36] Speaker 03:
So that was a use of the Smarter Nutrition trademark from the very beginning even though different products were added to that lineup such as Smarter Curcumin.

[00:12:49] Speaker 03:
Critically, there's a huge order of magnitude difference between the two parties.

[00:12:57] Speaker 03:
From 2017 to 2021,

[00:13:01] Speaker 03:
Mr. Wen spent $36 million in advertising to support sales of $73 million.

[00:13:12] Speaker 03:
By contrast, before the time period they need to show that they had acquired Secondary Meaning and had a trademark would be before we began sales.

[00:13:22] Speaker 03:
For that period, they only had 33 orders.

[00:13:26] Speaker 03:
between December and February, December of 2016 and February 2017.

[00:13:31] Speaker 03:
Even if we move the date off to what they want which is December of 2017, they only had 240 orders.

[00:13:40] Speaker 03:
So when you look at the huge order of magnitude, there's a, I don't think there's any question of who was able to create secondary meaning in the mark and that's clearly Mr. Winn.

[00:13:52] Speaker 03:
And so if I back out, if I, the numbers are really critical.

[00:13:57] Speaker 00:
So that part of the- When do you think he acquired the secondary meaning?

[00:14:00] Speaker 03:
I think that Mr. Wen acquired the secondary meaning probably by the end of December of 2017.

[00:14:09] Speaker 03:
But critically,

[00:14:10] Speaker 03:
When would be the last date upon which he would have not needed to do that, for example, for example, the common law rights that are alleged in the complaint?

[00:14:23] Speaker 03:
It would have been by May of 2021 because that's when he filed the complaint.

[00:14:30] Speaker 03:
So by when he filed the complaint in May of 2021, he would have needed to have had secondary meaning by that particular time for the common law rights.

[00:14:41] Speaker 03:
By that point in time, so I gave you the numbers earlier, I need to back out the numbers to May.

[00:14:46] Speaker 03:
So by that point between 2017 and May of 2021, he had spent $31 million in advertising to support $65 million in sales.

[00:14:59] Speaker 03:
I don't think there's any question by the time he filed the complaint, he had created secondary meaning in this smarter nutrition mark

[00:15:10] Speaker 03:
And that raises the issue of our appeal.

[00:15:16] Speaker 03:
And that's the, we're not appealing any factual finding.

[00:15:22] Speaker 03:
We're critical of the issue of law.

[00:15:26] Speaker 03:
And the issue of law is in the findings of fact and conclusions of law at ER 1, ER 15 in paragraphs 41 and 42.

[00:15:38] Speaker 03:
Paragraph 41 is really a statement of law.

[00:15:42] Speaker 03:
Here, a defendant began using their mark in commerce in October of 2016.

[00:15:46] Speaker 03:
Thus, plaintiffs, which is us, must show that the smarter nutrition acquired meaning before then, okay, so he's setting up a test for when we needed to have secondary meaning.

[00:15:59] Speaker 03:
We had to, he's saying we had to have secondary meaning before we even started.

[00:16:04] Speaker 03:
because our first date of use is in February of 2017 when it was launched.

[00:16:10] Speaker 03:
That is wrong because the junior user,

[00:16:15] Speaker 03:
When the senior user, meaning the person who first started using the term, it's not even a trademark at that point because it's descriptive.

[00:16:23] Speaker 03:
When the second person comes into the market and the first person has not acquired any secondary meaning in the mark, they're not using it as a trademark, so you're not violating the rights.

[00:16:35] Speaker 03:
But the second user is entitled to develop secondary meaning.

[00:16:40] Speaker 03:
And so, if anything,

[00:16:43] Speaker 03:
I think the law, if there was ever a need for clarification from this court would be this idea is it a race to acquire secondary meaning between both the junior and senior user.

[00:17:02] Speaker 03:
The case law for example that we cite to indicates that once the,

[00:17:09] Speaker 03:
Once the, if the senior user has not acquired secondary meaning by the time that the junior user enters the market, then they're cut off from ever being able to do that.

[00:17:21] Speaker 03:
So that's, there's starry decisis for that principle but then there's suggestions sometimes in the case law, well, it's a race to who creates secondary meaning first.

[00:17:33] Speaker 03:
The outcome remains the same for us because Mr. Nguyen is a powerhouse marketer.

[00:17:39] Speaker 03:
And so he clearly created the secondary meaning on a scale that the other party could not do.

[00:17:46] Speaker 03:
So, but that's really an interesting question that the court may want to take up.

[00:17:53] Speaker 00:
Is it fair to say, counsel, that he had started the advertising and promotion but the real ramp up wasn't until the summer of 2017?

[00:18:04] Speaker 00:
Is that what the record reflects?

[00:18:08] Speaker 03:
I would agree with that.

[00:18:10] Speaker 03:
There's all, in any startup, there's the beginning is a little rough.

[00:18:16] Speaker 03:
But clearly, he's even, that was not some token use because you look at the amount of money even in the first half, he's spending $300,000 in advertising.

[00:18:27] Speaker 03:
You look at the number of units he's buying, he's buying huge numbers, building up an inventory of hundreds of thousands of dollars with the product.

[00:18:35] Speaker 03:
in the first half.

[00:18:37] Speaker 03:
He started ordering that in late 2016.

[00:18:41] Speaker 03:
So he's, that gets into, you know, the fact that in these cases that they sometimes look to priority based upon the pre-start date uses.

[00:18:53] Speaker 03:
But if anything,

[00:18:56] Speaker 03:
That shows that it was not some kind of token use because he was committing hundreds of thousands of dollars to this project to get it up off the ground.

[00:19:06] Speaker 03:
And the fact that he knows how to do this and he did, he approached it that way and then by the end of the year he has sales of 1.25 million dollars.

[00:19:17] Speaker 03:
That kind of indicates that, yeah, he definitely knows what he's doing and he's doing it correctly and not just doing it to reserve a name because what token use is really about is trying to reserve a name.

[00:19:29] Speaker 03:
If anyone's trying to reserve a name, it was the other party who had gotten rejected, gave up on the project, then comes back to it

[00:19:38] Speaker 03:
It tries to make some token sales.

[00:19:41] Speaker 03:
Certainly, if you're going to talk about token sales, 33 orders in December to February sounds more like token sales to me.

[00:19:52] Speaker 02:
Well, Council, you indicate that you, the product, Smarter Nutrition, gained that secondary meaning.

[00:20:00] Speaker 02:
possibly by the end of December 2017.

[00:20:07] Speaker 02:
What's incorrect again about the district court's conclusion, legal conclusion?

[00:20:14] Speaker 03:
The legal conclusion is that the court said that we had to show we had acquired secondary meaning before the smarter vitamins

[00:20:29] Speaker 02:
October 2016 I believe.

[00:20:31] Speaker 03:
Right.

[00:20:32] Speaker 03:
And so we're, and so it wasn't, that would be true if in fact these were not descriptive marks.

[00:20:43] Speaker 03:
But when you're looking at two parties who have adopted descriptive marks, then you, then when their first uses are not trademark uses in the strict sense, they're using a term that's not yet acquired

[00:20:59] Speaker 03:
trademark status because the descriptive term has to have secondary meaning.

[00:21:06] Speaker 03:
And so the fact that the court found that we had not acquired secondary meaning by February, that's not something I'm trying to overturn.

[00:21:20] Speaker 03:
I don't even disagree with that if that would be true.

[00:21:25] Speaker 03:
That's when it first started.

[00:21:27] Speaker 03:
So you can look

[00:21:28] Speaker 03:
You can look at your first use date and later acquire secondary meaning and your first use date is still used as your date of your first use for your date of your registration.

[00:21:44] Speaker 03:
if in fact you've acquired secondary meaning.

[00:21:46] Speaker 03:
It goes into the whole process in the trademark office, you get a rejection on the descriptiveness and then you have the option of going to the supplemental register which the examiner did not require for our marks or you could or you can argue you have the evidence for secondary meaning and present it directly to the examiner.

[00:22:06] Speaker 03:
When you present it directly to the examiner, the examiner does not then say, okay, well we're going to change the first use date to the date that I think you first acquired secondary meaning.

[00:22:16] Speaker 03:
Your first use date still remains the first date in commerce that you used it.

[00:22:23] Speaker 03:
So.

[00:22:24] Speaker 02:
And in this case would be February.

[00:22:27] Speaker 03:
Right.

[00:22:28] Speaker 03:
The first use date was in February, correct.

[00:22:33] Speaker 03:
And then it needed, but it needed more than that, I agree.

[00:22:36] Speaker 03:
It needed to acquire secondary meaning.

[00:22:38] Speaker 03:
Our disagreement is that legally the district court was wrong in saying when we had to acquire the secondary meaning by.

[00:22:48] Speaker 03:
And so it wasn't October 2016.

[00:22:50] Speaker 00:
If we disagree with that proposition, then you would lose on that issue because you're not contesting the facts that the district court relied on.

[00:22:59] Speaker 03:
You're absolutely correct.

[00:23:00] Speaker 03:
I would lose on that.

[00:23:02] Speaker 03:
Absolutely.

[00:23:04] Speaker 03:
So, right, I would, had planned on arguing clearly erroneous standard.

[00:23:15] Speaker 03:
I think the court's fully aware of that particular issue so I won't get into that.

[00:23:20] Speaker 03:
And so I'll just yield the balance of my time.

[00:23:23] Speaker 00:
Yeah.

[00:23:24] Speaker 00:
I'm assuming that the parties are before the USPTO hashing out

[00:23:29] Speaker 03:
uh... the rights of the mark and there's no proceedings before the p two right now no current proceedings estate of state opposition waiting the outcome of the final determination cousin they don't act until there's a uh... final obviously repealed whose finality okay thank you counsel

[00:24:01] Speaker 01:
Just a few last minutes, Your Honor.

[00:24:05] Speaker 01:
We heard a lot about the size of advertising and the size of dollars made.

[00:24:11] Speaker 01:
But one thing that's not in the record and one thing that wasn't argued is how do those numbers associate the mark with the owner?

[00:24:21] Speaker 01:
Numbers don't matter unless they draw a connection.

[00:24:23] Speaker 01:
That's the purpose of trademark rights.

[00:24:25] Speaker 01:
So when there was nothing in the records that said, customers identify that smarter nutrition, a customer did not testify.

[00:24:34] Speaker 01:
There was no direct evidence of secondary meaning.

[00:24:37] Speaker 01:
It was all circumstantial.

[00:24:39] Speaker 01:
So that's one thing I believe.

[00:24:41] Speaker 01:
Big numbers seem exciting, and it's romantic.

[00:24:47] Speaker 01:
But at the end of the day, once you look through it, there's not much there when you can't see how it connects the mark to the owner.

[00:24:55] Speaker 01:
and then circling back to secondary meaning and the time when a party needs to prove secondary meaning.

[00:25:05] Speaker 01:
There are two issues here.

[00:25:06] Speaker 01:
One's determining the validity of the mark.

[00:25:09] Speaker 01:
And because both of these marks were descriptive, or at least found to be descriptive, the parties had to prove secondary meaning in order to establish rights.

[00:25:17] Speaker 01:
Now, during likelihood of confusion for descriptive marks and trade dress,

[00:25:23] Speaker 01:
You're required to also prove, you know, a geographic scope or your natural zone of expansion for where would customers likely confuse these marks.

[00:25:33] Speaker 01:
That's why we do secondary meaning.

[00:25:35] Speaker 01:
But I haven't heard any argument.

[00:25:36] Speaker 01:
I haven't seen any case law to upend over 40 years of precedent in this circuit and also echoed by McCarthy on trademarks as well as the various circuits that were cited to in the briefs.

[00:25:48] Speaker 01:
everybody that we've looked at comes down on the line that secondary meaning and scripted mark must be proved before the defendant began using it's brand its mark in commerce otherwise we might as well get rid of the affirmative defense of prior use not yield the rest of my time thank you very much counsel to both sides for your helpful arguments this morning the matter is submitted