Mislabelled Dietary Supplement Loses Trademark Priority

In CreAgri, inc. v. USANA Health Sciences, Inc. (January 16, 2007) the Ninth Circuit Court of Appeals denied trademark priortiy where an earlier user of the mark that failed to comply with federal labelling requirements.

In the spring of 2001, Appellant CreAgri, Inc. ("CreAgri") began selling Olivenol, a dietary supplement containing an apparently beneficial antioxidant found in olives called hydroxytyrosol. More than a year after CreAgri began selling Olivenol, USANA Health Sciences, Inc. ("USANA") filed an intent to use application with the Patent and Trademark Office ("PTO") asserting that it intended to begin selling a series of vitamins, minerals, and nutritional supplements containing an ingredient called Olivol, which ike Olivenol, is an olive extract containing apparently beneficial polyphenols. USANA began selling these products in August 2002, the PTO granted USANA's application, and "Olivol" is now listed on the principal register with a priority date of June 18, 2002.

According to the opinion by Circuit Judge Hawkins:

It has long been the policy of the PTO's Trademark Trial and Appeal Board that use in commerce only creates trademark rights when the use is lawful. [citations omitted] At least one circuit has adopted and applied this rule. See United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1225 (10th Cir. 2000). A question of first impression in this circuit, we also agree with the PTO's policy and hold that only lawful use in commerce can give rise to trademark priority.

The rationale for this rule is twofold. First, as a logical matter, to hold otherwise would be to put the government in the "anomalous position" of extending the benefits of trademark protection to a seller based upon actions the seller took in violation of that government's own laws. See In re Stellar, 159 U.S.P.Q. at 51. It is doubtful that the trademark statute- passed pursuant to Congress's power under the Commerce Clause-"was . . . intended to recognize . . . shipments in commerce in contravention of other regulatory acts promulgated [by Congress] under [that same constitutional provision]." Id. Second, as a policy matter, to give trademark priority to a seller who rushes to market without taking care to carefully comply with the relevant regulations would be to reward the hasty at the expense of the diligent.

Here, it is undisputed that, at all times prior to USANA's priority date, Olivenol's labels were not in compliance with the labeling requirements of 21 C.F.R. § 101.9(g)(4)(i) and, thus, Olivenol was being sold in violation of 21
U.S.C. §§ 331(a), 343(a) (prohibiting sale of misbranded food as determined by reference to the relevant regulations). By CreAgri's own admission, each tablet sold under the Olivenol name before June 18, 2002 contained, at most, 3mg of hydroxytyrosol, while Olivenol's label claimed that each tablet contained either
25mg or 5mg of this nutrient. 21 C.F.R. § 101.9(g)(4)(i), however, requires that the actual amount of a nutrient added to a product be "at least equal to the value for that nutrient declared on the label." Because the actual amount of hydroxytyrosol (at most 3mg) was less than the values for hydroxytyrosol declared on Olivenol's labels (25mg and 5mg), CreAgri's product was, at all relevant times, in violation of 21 C.F.R. § 101.9(g)(4)(i).

CreAgri seeks to avoid the consequences of its noncompliance in three ways: first, by arguing that the nexus between its labeling violation and its use of the Olivenol mark is too attenuated to justify depriving "Olivenol" of trademark protection; second, by contending that it was technologically infeasible to accurately measure the content of hydroxytyrosol when Olivenol was mislabeled and that, because the regulations provide for an exemption in such circumstances, sale of Olivenol was not actually unlawful; and third, by asserting that its violation was not material, citing General Mills, Inc. v. Health Valley Foods, 24 U.S.P.Q.2d 1270, 1274 (T.T.A.B. 1992). We are not
persuaded by these arguments. . . .