By John E. Lyhus
The Court of Appeals for the Seventh Circuit
recently issued an opinion having important ramifications for trademark
disputes that involve state entities: Board of Regents of the University of Wisconsin System v. Phoenix International Software, Inc.
Significantly, this case addresses an important question of state
immunity in trademark actions under the Eleventh Amendment to the U.S.
The Eleventh Amendment generally provides that individual states,
including state entities such as public universities, are immune from
lawsuits filed in the federal court system. This doctrine is subject to
several exceptions, one of which is that a state may waive its Eleventh
Amendment immunity. The state's waiver may be express, or the state may
take action that implicitly leads to a waiver of immunity.
In the Phoenix case, the University of Wisconsin ("UW") had
obtained a trademark registration for the mark "CONDOR." Phoenix
software had an earlier identical registration for the CONDOR mark and
sought cancellation in an administrative proceeding before the Trademark
Trial and Appeal Board (TTAB). The TTAB determined that the UW
registration was likely to cause confusion with the earlier Phoenix
registration and cancelled the UW mark. The UW sought redress in the
A party who has lost a cancellation proceeding may appeal to the
Court of Appeals for the Federal Circuit, with review limited to the
record before the TTAB and entitlement to trademark registration.
Another option is to file an action in federal court against the
opposing party. This procedure allows for the admission of new evidence
and has certain other procedural differences. The UW sought the latter
route and brought an action in federal district court.
Phoenix raised counterclaims alleging trademark infringement and
false designation of origin against the UW's use of the CONDOR mark. The
UW sought to dismiss these counterclaims on the grounds of Eleventh
Amendment immunity. The district court agreed with the UW and dismissed
the counterclaim. The Seventh Circuit disagreed, and reversed.
Referring to the earlier Supreme Court case Lapides v. Board of Regents of the University System of Georgia [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]
the court reasoned that "Waivers by litigation conduct depend on
whether the state has made a voluntary change in behavior that
demonstrates it is no longer defending the lawsuit and is instead taking
advantage of the federal forum." The court found "it would be
manifestly unfair if Wisconsin were allowed to enjoy the advantages of
the district court while using sovereign immunity to avoid the
disadvantages." The court also noted that the UW had not chosen
alternative procedures that would have preserved the UW's immunity, such
as the noted appeal to the Federal Circuit or refusing to acquiesce to
the TTAB proceedings, among others.
The court found that Phoenix's counterclaims were compulsory under
the federal rules. "Compulsory" claims are those claims that arise out
of the transaction or occurrence that is the subject matter of the
opposing party's claim and that the court is empowered to resolve. The
court held that the UW's filing of the federal action constituted a
waiver of Eleventh Amendment immunity at least for such compulsory
counterclaims. The court expressly declined to decide whether the filing
of a federal action constituted a waiver of other counterclaims.
Finally, the court noted that at least one other appellate court has
rendered a contrary ruling under the Eleventh Amendment. This suggests
that the Eleventh Amendment question may be appropriate for Supreme
The Phoenix decision has important ramifications both for
universities and other trademark-holding state entities and for parties
who hold competing trademarks. If you would like more information or
have questions concerning this case, please contact Fitch Even partner John E. Lyhus.
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