Minority Ownership Alone = No Standing in TM Cancellation

In a significant decision for trademark owners and business stakeholders, the U.S. Court of Appeals for the Federal Circuit (CAFC) reaffirmed the strict standing requirements for pursuing trademark cancellation actions. In Luca McDermott Catena Gift Trust v. Fructuoso-Hobbs SL, 102 F.4th 1314 (Fed. Cir. 2024), the court held that a minority limited partner in a winery lacked the statutory standing necessary to seek cancellation of trademarks owned by two other wineries, despite claiming likelihood of confusion and fraud. This ruling underscores the importance of understanding both constitutional and statutory standing when considering trademark disputes, particularly in the context of ownership structures.

The case arose under 15 U.S.C. § 1064, the section of the Lanham Act that governs trademark cancellations. To successfully bring such an action, a petitioner must satisfy not only the constitutional standing requirements under Article III but also meet statutory standing criteria. Specifically, the petitioner must demonstrate both that their interests fall within the “zone of interests” protected by the statute and that the alleged trademark violation proximately caused their injury. These two elements—zone of interests and proximate causation—are derived from the Supreme Court’s standing framework established in Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014).

In Luca McDermott, the petitioner, a minority limited partner in Paul Hobbs Winery, sought to cancel the trademarks ALVAREDOS-HOBBS and HILLICK AND HOBBS, owned by Fructuoso-Hobbs SL and Hillick & Hobbs Estate, LLC, respectively. The petitioner and two other minority partners, together holding a 21.6% stake in the winery, argued that these marks created a likelihood of confusion with the winery’s PAUL HOBBS trademark for wines. They also alleged that the owners of the contested marks committed fraud when they represented to the U.S. Patent and Trademark Office (USPTO) that their marks would not cause confusion with existing marks. After the Trademark Trial and Appeal Board (TTAB) dismissed the petition, only the Luca McDermott trust appealed to the Federal Circuit.

The Federal Circuit examined whether the petitioner qualified under the Lanham Act’s statutory standing framework. First, the court addressed the “zone of interests” requirement, which mandates that a petitioner demonstrate a legitimate commercial interest in the trademark allegedly infringed. Importantly, the petitioner in this case did not individually own or conduct business under the PAUL HOBBS mark; instead, its interest derived solely from its minority ownership in the winery that did. The court concluded that such indirect ownership does not confer standing, as the Lanham Act’s protections primarily extend to parties engaged in commerce, not passive investors or those without a direct commercial stake. The court’s interpretation followed prior rulings, including Empresa Cubana del Tabaco v. General Cigar Co., 753 F.3d 1270 (Fed. Cir. 2014), and Cunningham v. Laser Golf Corp., 222 F.3d 943 (Fed. Cir. 2000), which emphasized that a “direct commercial interest” is essential to meet this threshold.

Next, the court analyzed the proximate causation requirement, asking whether the alleged harm to the petitioner flowed directly from the challenged trademarks’ existence. Drawing on Lexmark, the court likened the petitioner’s alleged injury to that of third-party business partners—such as landlords or utility companies—who might suffer economic harm indirectly from a trademark dispute affecting their clients. Because any injury the petitioner faced hinged on harm first occurring to the winery itself, the court deemed the injury too remote and derivative to satisfy proximate causation.

Ultimately, the Federal Circuit affirmed that neither a minority ownership stake nor indirect financial interest in a trademark owner’s business is sufficient to support a cancellation action under § 1064. This decision reinforces that standing to challenge a trademark requires more than a financial connection—it demands a clear, direct commercial interest and a concrete, non-derivative harm.

For business owners, investors, and trademark holders, Luca McDermott serves as a critical reminder: legal rights to enforce or challenge trademarks are closely tied to one’s role in commerce. Passive stakeholders and minority investors must carefully evaluate their legal footing before initiating trademark disputes. At Campo Law, we advise clients on navigating the complexities of trademark enforcement, ownership structures, and dispute resolution, ensuring they meet the necessary legal thresholds before pursuing any action.

For more insights on trademark law and intellectual property strategies tailored to your business, contact Campo Law today.

 
Let me know if you’d like adjustments to tone, keyword density, or further SEO refinements.