Last week, Christian Faith Fellowship Church prevailed at the U.S. Court of Appeals for the Federal Circuit on its appeal of a final judgment of the Trademark Trial and Appeal Board (TTAB) that, in response to a petition filed by adidas AG (Adidas), cancelled its trademarks for failing to use the marks in commerce before registering them. Last year, the TTAB held that the Church’s documented sale of two marked hats to an out-of- state resident were de minimis and therefore did not constitute use of the marks in commerce under the Lanham Act. In its decision, Christian Faith Fellowship Church v. adidas AG, the Federal Circuit reasoned that the Lanham Act defines commerce as all activity regulable by Congress and that the Church’s sale to an out-of-state resident fell within Congress’s power to regulate under the Commerce Clause.

This David-versus-Goliath story began in January 2005 when a small Illinois-based church began selling apparel, both caps and shirts, emblazoned with the phrase “ADD A ZERO.” A month later, the Church had sold two “ADD A ZERO”-marked hats for $38.34 to a Wisconsin parishioner. Later, the Church sought a federal trademark for the “ADD A ZERO” mark at the U.S. Patent and Trademark Office (USPTO). The Church filed two clothing-based trademark applications, one for use of “ADD A ZERO” in standard characters and another for a stylized design of the phrase. The Church’s applications relied on actual use of the marks in commerce, not intent to use the marks in commerce. The USPTO granted the Church’s applications and registered the marks.

In 2009, Adidas sought a clothing trademark for the phrase “ADIZERO,” the name Adidas uses for its super lightweight line of sneakers, but the USPTO refused the application for likelihood of confusion with the Church’s “ADD A ZERO” marks. Adidas then brought an action before the TTAB to cancel the Church’s marks, arguing three grounds for cancellation: (1) the Church’s failure to use the marks in commerce before registration; (2) the marks’ failure to function as trademarks; and (3) the Church’s abandonment of the marks for nonuse. Regarding its failure-to-use argument, Adidas argued that the Church had not made sufficient “use in commerce” of the mark when it filed its use-based applications back in 2005 (as required by the Lanham Act, the governing federal trademark law statute).

Last year, in adidas AG v. Christian Faith Fellowship Church, Cancellation No. 92053314, 2015 WL 5882313 (T.T.A.B. Sept. 15, 2015) (Board Op.), the TTAB agreed with Adidas’s failure-to-use argument, concluding that the Church’s sale of two hats to the Wisconsin parishioner did not meet the required level of use to maintain trademark rights. In other words, the sale of two hats did not have a “substantial effect on interstate commerce.” For that reason, the TTAB cancelled the Church’s marks, without addressing Adidas’s other cancellation grounds.  The Church appealed the TTAB’s decision to the Federal Circuit.

The Federal Circuit (Judges Kara Fernandez, Jimmy Reyna, and Todd Hughes), wrote last week that the Church’s sale of two “ADD A ZERO”-marked hats to an out-of-state resident was “quintessentially economic” and thus regulable by Congress under the Commerce Clause. And, therefore, according to the court, the sale constitutes “use in commerce” under the Lanham Act. Specifically, the court wrote that the transaction at issue fell “comfortably within the bounds” of the Commerce Clause powers sketched by the U.S. Supreme Court. The Federal Circuit, however, did not announce a magic number of transactions to meet the “use in commerce” standard.  As part of its ruling, the Federal Circuit expressly disavowed two TTAB’s decisions, In re Cook, United, Inc., 188 U.S.P.Q. 284 (T.T.A.B. 1975), and In re The Bagel Factory, Inc., 183 U.S.P.Q. 553 (T.T.A.B. 1974), which the TTAB relied on for the proposition that an intrastate sale of goods can never be a sale “in commerce” without the trademark applicant doing something more, such as knowingly directing the movement of goods across state lines. The Federal Circuit remanded for the TTAB to address Adidas’s other cancellation grounds— the marks’ failure to function as trademarks and the Church’s abandonment of the marks for nonuse.