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Trademark Use and Registration Issues

Date: Feb 24, 1997


Trademarks or service marks (herein collectively referred to astrademarks) include any word, name, symbol or device, or combination thereof, that isadopted and used to identify and distinguish an entity's goods or services from those ofothers. In the United States a dual scheme of trademark protection exists, one based oncommon law, and one by virtue of federal registration under the provisions of the LanhamAct. Trademark protection afforded by registration at the federal level, as opposed tostate registration, is very broad. The differences in the extent of protection offered byfederal and state registration are discussed below. In addition, a review of trademarklicensing programs is also included.

Federal Versus State Protection

In accordance with the Lanham Act, federal registration on the PrincipalRegister of the United States Patent and Trademark Office (PTO) confers significantlegal benefits on the trademark owner. The primary advantages of registering a trademarkon the Principal Register of the PTO include presumptions of a) validity of aregistration, b) the registrant's ownership of the mark, and c) the registrant's exclusiveright to use the mark for the goods or services for which the mark is registered.Additionally, once a mark has been registered and used for five years, the registrant mayfile an affidavit of incontestability with the PTO. This greatly limits the grounds onwhich a third party may seek to cancel the mark.

Federal registration is only proper for marks used in interstate orforeign commerce. Use in interstate commerce is interpreted broadly, particularly whereservice marks are concerned. Thus, for example, a mark identifying a single restaurantoperating in one state, but which serves interstate customers, may be entitled to federalregistration.

Federal trademark protection can be obtained by filing an application toregister the mark either on an actual use or a bona fide intent to usebasis. The "intent to use" application in essence provides trademark owners witha mechanism to "reserve" a trademark or trade name. The applicant thus has anopportunity to "clear" the mark without having to spend substantial sums onmarketing. Actual use must follow within a statutorily defined time period before acertificate of registration will be issued to the applicant. A third method of obtainingfederal trademark protection can only be used by qualifying owners of foreign trademarksseeking to register such marks in the U.S. Under the Lanham Act, a foreign applicant whosecountry is a party to any convention or treaty to which the U.S. is a party, or extendsreciprocal rights to U.S. nationals, may pursue registration in the U.S. under section 44of the Act. Section 44 entitles qualifying foreign applicants to priority of registrationin the U.S. Priority of registration allows a qualifying foreign applicant to (1) use thefiling date of its original application in the foreign nation as the effective filing dateof its U.S. application, and (2) obtain a U.S. registration without providing actual useof the mark in the U.S. (or in any other country where registration is unrelated to use).For a foreign national to receive priority of registration for its U.S. application, tworequirements must be met. First, priority must be claimed and proof given of theregistration in the foreign country. Second, the U.S. application must not seek to covergoods or services other than those provided for in the application filed in the foreignnation. Failure to comply with these requirements will result in the foreign nationalbeing denied the ability to receive priority of registration. Furthermore, if the U.S.application is based on a foreign application, as opposed to a foreign registration,the U.S. application must be filed within 6 months from the date the foreign applicationwas filed in order to be eligible for priority status.

Regardless of the basis for the application, all federal registrations arevalid for a period of ten years and then must be renewed. Trademark rights will be lostwhen the name is no longer used. They will also be lost (or rights will not be granted inthe first instance) if the mark becomes a generic term.

In contrast, those who rely on common law rights generally must prove thatthey own the mark, and must provide evidence of the geographic extent of their use of themark, in an infringement action. Typically, only distinctive marks are protected understate law. This can be a great disadvantage to those who are using marks which may becharacterized as descriptive (See p. 4, infra.). Marks used solely within aparticular state may be able to register with a state trademark registry or with thestate's Department of State, but registration at the state level confers no substantivelegal benefits upon the trademark owner. Finally, at the state level, trademark protectiondepends on actual use of the mark or name.

The scope of legal protection for trademarks, under both the Lanham Actand the common law, varies depending on the strength of the mark. The more distinctive themark is in the mind of the public, the greater the scope of protection to prevent the useof the same or a similar term by others.

Scope of Protection Varies Based on Strength

There are several categories of trademarks, in increasing order as tostrength. Generic terms are not in and of themselves capable of trademark significance.Thus, a word like "television" is not capable of trademark significance, apartfrom its use in a mark as a whole, as it is a generic term. A generic or descriptive termmay be part of a trademark, but typically, the PTO will require that these words be"disclaimed." Disclaimers indicate that the owner of the mark claims noexclusive right in a particular word or phrase, apart from the mark as a whole.

The weakest type of marks are descriptive trademarks. A descriptive markdescribes the product or service itself, and might include marks such as "TheAmerican Bar Association Journal."

Suggestive marks fall in the next category of trademarks. A suggestivetrademark infers characteristics of a product, but does not actually describe the product.A suggestive mark might include the mark "Caterpillar" for tractors.

Arbitrary trademarks, which are subject to the broadest scope of trademarkprotection, are in the last category of marks. An arbitrary mark may be a commonly usedword, but only if it is applied to a product unrelated to its meaning so that the wordneither describes nor suggests the product or service. Thus, the mark "Camel"for cigarettes would be considered an arbitrary trademark. Arbitrary trademarks alsoinclude coined names, such as "Xerox." Coined names are words invented solelyfor the purpose of identifying the product or service, and are the strongest types oftrademarks.

As noted above, generic terms are entitled to no trademark protection.Descriptive names or marks may be entitled to trademark protection once the owner of themark demonstrates, usually through extensive use and advertising over a period of time,that the mark has become distinctive. The acquisition of distinctiveness is termed"secondary meaning." Descriptive names or marks can be strengthened by additionof some unique design element to the mark, but design elements can also be descriptive.For example, a depiction of a television set for a television repair service could beconsidered a descriptive design. Descriptive names are the weakest types of trademarks,but many businesses select descriptive trademarks because they are easier to market thanmore distinctive trademarks.

Under the Lanham Act, marks which are in use in interstate commerce for aperiod of five years are presumed to have become distinctive, i.e., acquiredsecondary meaning, and thus are presumptively entitled to registration. An applicant maybe able to demonstrate secondary meaning with fewer years of use, but only by showingextensive advertising and promotion of the mark. For very weak marks, even five years ofuse may not be adequate to demonstrate that the requisite distinctiveness has beenacquired.

Marks which are found to be so descriptive that they are not entitled toregistration on the Principal Register of the PTO may be subject to registrationon the Supplemental Register. Registration on the Supplemental Registerdoes not confer the substantive benefits of registration on the Principal Registerenumerated above, but registrants are entitled to use the symbol to denote federal registration. It should be notedthat an application for registration on the Supplemental Register may not befiled based on an intent to use basis. Further, even Supplemental Registration isnot an option if the mark is deemed so descriptive that it is incapable of acquiringsecondary meaning.

Types of Trademarks

There are several types of marks which may be registered at the PTO.Trademarks are used to identify goods. Service marks are used to identify services.Service categories include advertising and business, education and entertainment,communications, and "miscellaneous," which includes trade association or tradeshow services, as well as other miscellaneous types of service-oriented activities. Thethird category of trademarks includes collective marks, which are used to denotemembership in an organization. Trade association or fraternal organization membershipmarks fall in this category. Certification marks fall in the last category of trademarks.Certification marks, such as the Underwriters Laboratories "UL" symbol, areowned by one entity, but, rather than being used to identify the goods and services whichthat entity offers, are used to denote the quality or characteristics in the goods orservices offered by another. Thus, a certification mark may not be used to identify thegoods or services of the owner. Using the mark in that way may be grounds forcancellation. All of these marks are generically referred to as trademarks.

Trademark Application and Registration Issues

Applications to register a currently used trademark with the PTO mustinclude: 1) the date of first use of the mark; 2) the date of first use of the mark ininterstate commerce; 3) the name, type of entity (e.g., corporation, partnership)and domicile of the registrant(s); 4) three identical specimens showing how the mark isactually used in interstate commerce; 5) a verification statement by an officer of theapplicant; 6) a specially prepared drawing of any design mark or a mark presented in adistinctive graphic configuration; and 7) the appropriate application fees. Filing feesvary depending on the number of classes in which registration of the mark is sought.

To seek registration of a mark on an intent to use basis, the applicantmust comply with many of the same requirements. Obviously, actual use (includingspecimens) need not be shown in such applications initially. The applicant, however, muststate that it has bona fide intent to use the mark. Although not defined in theLanham Act, the term "bona fide intent" is generally recognized to meana genuine interest to use the mark in a real and legitimate commercial sense, as opposedto a "token use." For example, the filing of applications for a great number ofnames for a particular product or service would not be viewed as bona fide.

Applications for foreign marks that are filed pursuant to section 44 ofthe Lanham Act are prosecuted in much the same fashion as actual use-based applications.The only difference is that before the U.S. application can be approved for registration,the applicant must file a certified copy of the foreign registration during theexamination phase. Upon issuance of a U.S. registration based upon a foreign registration,under section 44 of the Act, the registrant will be subject to all rules and requirementsof the U.S. law. The registrant must therefore proceed to use the registered mark ininterstate commerce in the ordinary course of trade or the registration will be subject tocancellation.

If the PTO is satisfied that the essential requirements for registrationhave been met for an application filed on an intent to use basis, a notice of allowancewill be issued. Thereafter, the applicant has six months to provide evidence of use (i.e.,a verified statement, specimens, and a description of the mode and manner of use, alongwith a filing fee), or to seek an extension. A six-month extension will be grantedautomatically. Additional extensions, totalling no more than 24 months, may be granted forgood cause. All requests for extension must be accompanied by a verified statementindicating that the applicant has a continued bona fide intent to use the mark,and along with the requisite filing fee. Thus, prosecuting an application to register amark on an intent to use basis will be somewhat more expensive than prosecuting anapplication based on actual use.

One of the principal hurdles to registration involves the PTO's statutoryprohibition against registering any mark which is "confusingly similar" toanother existing registered mark. Judgments as to confusing similarity are subjective, andinvolve a multitude of factors. These include initially the similarity in sound andappearance of the marks at issue, with consideration as to whether the marks aredescriptive, suggestive or arbitrary. Additional factors include the similarity of thegoods or services on which the marks may be used, the channels of trade in which the goodsor services are sold, and the sophistication of the consumers for the products or servicesinvolved. For example, if identical or very similar marks are used on totally disparategoods, there may be little chance of confusion, and the PTO will not likely refuseregistration, particularly where the marks fall in one of the weaker categories. If thegoods and services identified by similar marks overlap, however, or if customers for evenwidely different products are the same, there is a greater likelihood of consumerconfusion, and a stronger possibility that registration would be refused by the PTO. Thisis one reason why it is often advisable to conduct a trademark search prior to seeking toregister a trademark, since it provides a basis for assessing the likelihood thatregistration would be refused.

Costs involved in seeking to register a trademark vary depending onfactors such as: 1) the number of categories which must be searched if a trademark searchis needed; 2) the number of classes in which the mark is sought to be registered; 3) thecomplexity of the mark and any drawing needed; and 4) the basis for the application (i.e.,actual use or intent to use). Filing fees, trademark search fees, and drawing fees aredirect costs imposed by the PTO, trademark search firms, and graphic artists. Legal feesinclude evaluating search reports to provide a legal opinion about the chances of successof the registration effort, preparing the application, and monitoring and providingfollow-up information on an application at the PTO.

Applications are assigned to PTO Examiners, generally attorneys, whoreview them for technical compliance with the numerous PTO rules, as well as determinewhether a mark sought to be registered will conflict with an existing registered mark. Inthe event registration is sought for a very descriptive mark, significant effort may berequired in order to persuade the PTO that the mark is entitled to registration.

Trademark Opposition

In addition to helping assess the possibility that registration would berefused, trademark searches also indicate potential opposition to registration fromothers. The Lanham Act provides that anyone who believes he would be damaged byregistration of a particular mark may file an opposition to the registration. This meansthat anyone who may be using similar trademarks, even those not registered at the PTO, mayfile an opposition proceeding. Essentially, an opposer must simply demonstrate that it isusing the same or a very similar mark in order to have standing to oppose, so trademarksearch reports also help locate potential opposers.

Opposition may be filed within a limited period after the PTO publishes anapplicant's mark in the Official Gazette of the PTO. If no opposition is filed, acertificate of registration will be issued in due course. If an opposition is filed, aseparate proceeding takes place before the Trademark Trial and Appeals Board (Board). Thisproceeding amounts to a "paper trial," with concomitant costs. The Board isgiven great discretion and may cancel a registration in whole or in part, or modify anapplication or registration to restrict the goods or services involved.

Trademark Protection

It is extremely important that owners of trademarks protect their marksfrom conflicting use. Failure to do so can lead to a loss of trademark rights, and maymean that another user can "poach" on the mark. Cease and desist letters,settlement agreements, requests for disclaimers (i.e., "not affiliatedwith"), and actual litigation are the typical tools of a trademark protectionprogram.

Trademark Licensing

Under the Lanham Act, a trademark owner may license others the right touse his trademark provided the licensor maintains adequate control over the nature andquality of the goods and/or services sold under the mark by the licensee. Inadequatequality control could cause the mark to become abandoned, thereby allowing other partiesto use the mark without authorization from the trademark owner. In addition, uncontrolledor "naked" licensing could cause the trademark to lose significance as a symbolof quality and an indication of origin. It is therefore imperative that licensors oftrademarks adopt a licensing program which provides them with broad oversight and control,as well as actively monitor the uses of their trademarks by licensees.The most essentialelement of any trademark licensing program is an effective license agreement. Under thelicense agreement, the licensor maintains ownership of the trademark, and the licensee isauthorized to use the trademark only in accordance with the terms and conditions of thelicense. The license agreement should be in writing so that the terms under which therights are granted are clearly set forth.

The license agreement should define the goods or services covered by theagreement and on which the trademark may be used, and should include only those specificrights the licensor intends to convey. The agreement should also list whether the licenseis an exclusive or non-exclusive license. If it is a non-exclusive license, the agreementshould expressly reserve the licensor's right to license others to use the mark. Otherissues which should be addressed in the license agreement include (1) license fees and/orroyalty provisions, if any, (2) the territory in which the license will apply, (3) theterm of the agreement, and whether it is renewable by the parties, (4) quality standardsand controls, (5) use of proper symbols (i.e., 7or J), (6) whether any taglines denotingownership of the mark must be used, (7) sublicensing and assignability, (8) production anddelivery of samples for approval, (9) accounting and recordkeeping, (10) warranties andindemnification, and (11) termination, including the procedure the licensee must followfor dealing with any remaining inventory. Depending on the arrangement, and the types ofgoods involved, an assessment of product liability exposure may be needed. If so, thelicense agreement should include references to safety and quality standards, minimuminsurance requirements, and a hold harmless/indemnification provision. Other standardterms should also be included.

A comprehensive license agreement, coupled with the active participationby a licensor in monitoring the use of his trademarks by licensees, are essentialcomponents for avoiding problems in a trademark licensing program. Failure to take thesesteps could result in the trademark owner losing certain rights in his trademark.

Conclusion

Federal trademark registration is not absolutely necessary to claimtrademark rights in a mark, since the common law provides protection for trademarks. Thosewho do not seek or who do not yet have federal registration for a trademark may use thesignal "TM" (or "SM" for service mark) to denote a claim of trademarkrights in a word, symbol, name or slogan. Only those who have actually succeeded inregistering a mark are entitled to use the symbol, ®, or the words "Registered,United States Patent and Trademark Office," or similar terms to denote federalregistration. Improper use of these symbols can engender legal consequences. Conversely,failure to use the symbols can limit the ability of the owner of the mark to recover costsand attorney's fees it incurs in prosecuting an action for infringement.

As noted above, federal trademark registration does provide significantbenefits to the trademark owner, and should always be considered where appropriate.

For more information, please contact Sheila Millar at (202) 434-4143, millar@khlaw.com.