312.02 Setting Aside Notice of Default
If a defendant who has failed to file a timely answer to the complaint responds to a notice of default by filing a satisfactory showing of good cause why default judgment should not be entered against it, the Board will set aside the notice of default. [ Note 1.] Similarly, if the defendant files such a showing in response to a motion by the plaintiff for default judgment, or in support of its own motion asking that its late-filed answer be accepted, default judgment will not be entered against it.
Good cause why default judgment should not be entered against a defendant, for failure to file a timely answer to the complaint, is usually found when the defendant shows that (1) the delay in filing an answer was not the result of willful conduct or gross neglect on the part of the defendant, (2) the plaintiff will not be substantially prejudiced by the delay, and (3) the defendant has a meritorious defense to the action. [ Note 2.] The showing of a meritorious defense does not require an evaluation of the merits of the case. All that is required is a plausible response to the allegations in the complaint. [ Note 3.]
The determination of whether default judgment should be entered against a party lies within the sound discretion of the Board. [ Note 4.] In exercising that discretion, the Board must be mindful of the fact that it is the policy of the law to decide cases on their merits. Accordingly, the Board is very reluctant to enter a default judgment for failure to file a timely answer, and tends to resolve any doubt on the matter in favor of the defendant. Nevertheless, entry of default judgment may be necessary in some cases. [ Note 5.]
NOTES:
1. See Fed. R. Civ. P. 55(c).
2. See DrDisabilityQuotes.com, LLC v. Krugh, 2021 USPQ2d 262, at *2 (TTAB 2021) (setting aside notice of default; one-day delay in filing motion to dismiss); DeLorme Publishing Co v. Eartha’s Inc., 60 USPQ2d 1222, 1224 (TTAB 2000) (willful conduct shown where although applicant may not have intended that proceedings be resolved by default, applicant admittedly intended not to answer for six months); Paolo’s Associates L.P. v. Bodo, 21 USPQ2d 1899, 1903-04 (Comm’r 1990) (no evidence that failure was willful; costs incurred in preparing and filing motion not sufficient to support finding of prejudice); Fred Hayman Beverly Hills, Inc. v. Jacques Bernier, Inc., 21 USPQ2d 1556, 1557 (TTAB 1991) (failure to answer due to inadvertence on part of applicant’s counsel; answer had been prepared and reviewed by applicant but counsel inadvertently failed to file it; nine-day delay would cause minimal prejudice; by submission of answer which was not frivolous meritorious defense was shown). Cf. regarding a motion to set aside judgment under Fed. R. Civ. P. 60(b), Djeredjian v. Kashi Co., 21 USPQ2d 1613, 1615 (TTAB 1991) (the two other factors having been shown, applicant was allowed time to show meritorious defense by submission of answer).
3. See DeLorme Publishing Co v. Eartha’s Inc., 60 USPQ2d 1222, 1224 (TTAB 2000).
4. See, e.g., Identicon Corp. v. Williams, 195 USPQ 447, 449 (Comm’r 1977) (fact that in response to order to show cause applicant filed answer but no response to show cause order does not mandate entry of default judgment; applicant allowed time to show cause). See also 10A C. WRIGHT, A. MILLER& M. KANE, FEDERAL PRACTICE AND PROCEDURE CIVIL § 2693 (4th ed. April 2021 update) (setting aside entry of default is addressed to the sound discretion of the court).
5. See DeLorme Publishing Co v. Eartha’s Inc., 60 USPQ2d 1222, 1224 (TTAB 2000) (although no specific prejudice to opposer, and while meritorious defense was shown, Board found applicant’s conduct amounted to gross neglect and granted motion for default judgment where applicant filed its answer six months late, viewing the notice of opposition as "incomplete," instead of filing appropriate motion or taking other appropriate action). See also 10A C. WRIGHT, A. MILLER& M. KANE, FEDERAL PRACTICE AND PROCEDURE CIVIL § 2693 (4th ed. April 2021 update) (default judgments viewed with disfavor).