A state university (the University of Wisconsin) waived its sovereign immunity under the Eleventh Amendment against a software company's trademark infringement counterclaims, by bringing a civil lawsuit in federal district court to challenge a determination of the Trademark Trial and Appeal Board that granted the software company's petition to cancel the university's allegedly infringing CONDOR trademark for software, the U.S. Court of Appeals in Chicago has determined. In a decision issued in December 2010 (TRADEMARK LAW GUIDE ¶61,739), the court had held that the university was immune from the counterclaims and that the question of whether there was a likelihood of confusion between the parties' CONDOR marks could not be determined on summary judgment. The court granted rehearing limited to the immunity question. On rehearing, the software company requested that its counterclaims be reinstated.

Likelihood of Confusion

The court first reaffirmed its ruling that the district court erred by finding, as a matter of law, that the university's registered CONDOR mark was not likely to be confused with the software company's previously registered CONDOR mark, when both were used in connection with the parties' respective software products. The district court had improperly rejected the TTAB's factual findings as to the relatedness of the parties' software and misapplied the likelihood of confusion test. Although the university had presented new evidence --particularly with regard to the sophistication of purchasers --that evidence did not render the TTAB's findings immaterial. The university's new evidence raised genuine issues of material fact. Therefore, the district court's entry of summary judgment in the university's favor was reversed.

Sovereign Immunity

Turning to the question of the university's immunity as a state agency, the appellate court noted that the Trademark Remedy Clarification Act of 1992 (TRCA) did not abrogate the university's immunity, the court said. The TRCA was not materially different from the Patent Remedy Act, under which Congress had sought to abrogate states' immunity from patent infringement suits, and which had been found unconstitutional by the U.S. Supreme Court in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 627 (1999). This decision appeared to foreclose the argument that Congress had abrogated the university's immunity from the software company's Lanham Act counterclaims.

The university had, however, waived its immunity from suit through its litigation conduct, the court said. As recognized by the U.S. Supreme Court in Lapides v. Board of Regents of the University System of Georgia, 535 U.S. 613 (2002), a state can waive its immunity by voluntary conduct in particular cases, and the potential sovereign immunity of a state does not implicate the federal court's subject-matter jurisdiction. In Lapides, a state entity's removal of a lawsuit to federal court was deemed a voluntary waiver of sovereign immunity. There was no reason to think that a state's use of any other mechanism for invoking a federal court's jurisdiction --such as filing an original action in federal court --carried less force for waiver purposes.

In this case, the university did not initiate the TTAB proceeding, but it did choose to go to court after the software company prevailed in the TTAB. The university did not engage in merely defensive, involuntary measures; it made an active, voluntary decision to entrust the matter to federal court. The university had availed itself of the advantages of a fresh lawsuit --instead of appealing the TTAB's decision by other means, such as bringing a direct appeal to the U.S. Court of Appeals for the Federal Circuit. The university apparently had done so to maximize its chances of reversing the TTAB's decision. It would be anomalous if, after invoking federal jurisdiction, the university could declare that the federal court has no authority to consider related aspects of the case, the court said.

The civil suit was both an appeal of the TTAB decision and a new action. The university was not compelled to bring the federal district court action. It could have done nothing and let the TTAB's decision stand, it could have refused to acquiesce in the TTAB's decision or the TTAB proceedings in the first place, it could have taken action against the software company in state court before the TTAB proceeding began, or it could have appealed the TTAB decision directly to the Federal Circuit.

The university should not be able to reap litigation advantages through its selection of a forum and subsequent assertion of sovereign immunity as a defense, according to the court. Its choice of the district court as a forum gave it at least three advantages: (1) the opportunity to introduce new evidence, (2) the option to add supplemental claims to broaden the relief sought, and (3) a de novo standard of review, rather than the more deferential stance that the Federal Circuit would have taken toward the TTAB's findings and conclusions.

The software company's counterclaims were compulsory under Federal Rule of Civil Procedure 13(a) and, therefore, were within the scope of the university's waiver. The counterclaims arose out of the transaction or occurrence that was the subject matter of the university's claim. There was a logical relationship between the university's claim and the software company's counterclaims. They focused on a single factual dispute: the conflict between the two CONDOR marks. To prove a case of infringement, the software company would have to show that it had a protectable mark and that the university's use of that mark was likely to cause confusion. The university's attempt to overturn the TTAB decision would depend almost entirely on how the fact-finder resolved the question of whether the university's registration of the CONDOR mark was likely to cause confusion among consumers.

The software company's counterclaims were reinstated, and the case was remanded for further proceedings.

Board of Regents of the University of Wisconsin System, 7th Cir., ¶61,854.