Jun
03

Are Trademark Licenses Subject to Rescission Under the Bankruptcy Code? No According to the U.S. Supreme Court

Intellectual property law is not an island all to itself but can show up as an issue in many other areas of the law: securities law, contract law, employment law, family law, estate planning law, successions law, bankruptcy law, social media law, tax law, etc.  Indeed, in the May 20, 2019 decision by the U.S. Supreme Court in Mission Product Holdings, Inc. v. Tempnology, LLC, three areas of the law were actually involved: intellectual property law, bankruptcy law and contract law.  The Court held that a trademark licensing agreement does not become rescinded (i.e. terminated) upon the debtor’s rejection of the agreement under Section 365 of the Bankruptcy Code (“Code”).

This article summarizes the case’s background and the High Court’s reasoning. It ends with a discussion of the practical aspects of the decision for trademark licensors who declare bankruptcy.  It is the first in a series of planned articles on cases where intellectual property issues have overlapped with at least one other area of the law.

Note: Our firm is available to collaborate with lawyers who do not practice intellectual property law on a day-to-day basis and may need guidance on intellectual property issues arising in their own cases.

  • Background

Tempnology had granted Mission a non-exclusive license to use Tempnology’s registered Coolcore trademarks in the U.S. and around the world and to serve as Temnology’s exclusive distributor for certain Coolcore products in the U.S. Tempnology filed a petition under Chapter 11 Bankruptcy in September 2015, or about nine months before the agreement was set to expire.

The filing of the “reorganization” petition created a bankruptcy estate consisting of all of Tempnology’s assets and rights for use in paying off creditors’ claims based on creditors’ superior rights and the value of the available assets/rights. Bankruptcy estates are administered by either a trustee or the debtor.  In this case, the debtor (the trademark licensor) administered the estate.

Executory contracts include provisions that confer value/rights on the debtor and are therefore a possible estate asset. Such contracts generally represent both an asset (i.e., the receipt of a benefit resulting from the counterparty’s future performance) and a liability (the debtor’s own obligation to perform).  The Code provides that a “trustee [or debtor] subject to the court’s approval may assume or reject any executory contract.”  Slip opinion at 2 quoting §365(a) of the Code.

Intellectual property licensing agreements are executory contracts. Regarding the trademark licensing agreement between Temptology and Mission, the obvious benefit for Tempnology was the receipt of royalty payments from the sales made by Mission. Tempnology’s liability was its agreement that mission could use its registered trademarks for a specified period of time.  As the licensor of a federal registered trademark, Tempnology also had another obligation imposed by trademark law which will be discussed in Part 3.

In determining how to handle executory contracts, debtors will decide whether the negotiated contract terms are still a good deal for the estate in going forward. If so, the debtor will likely want to assume the contract to continue benefitting from it as well as continuing to fulfill its own obligations.  If not, the debtor will want to reject the contract, repudiating any further performance of its duties. Slip opinion at 2.

What happens when the court approves rejection of an executory contract by the debtor? The rejection constitutes a breach of the contract by the debtor. Now the counterpart has a claim against the estate for damages resulting from the debtor’s nonperformance and this breach is deemed to occur immediately before the date of the filing of the bankruptcy claim. Slip opinion at 3 citing §365(g)(1).

What’s the practical effect a debtor’s rejection of an executory contract? The counterparty is now categorized as an unsecured creditor along with the debtor’s other unsecured creditors; these creditors often receive peanuts for their claims against the estate.

Under the instant case, Tempnology could stop performing under the rejected contract. Mission could assert a pre-petition claim in damages resulting from Tempnology’s non-performance.

Maybe with an eye towards trying get a licensing agreement with more favorable terms with another party, Tempnology then sought a declaratory judgment from the Bankruptcy Court that its rejection of the trademark licensing agreement also terminated the rights it had granted to Mission to use the Coolcore trademarks.  In essence, Tempnology was seeking rescission/revocation of the licensing agreement.

Numerous appeals ensued. The High Court granted certiorari because of a conflict between the First and Seventh Circuits over whether or not a debtor-licensor’s rejection of a trademark licensing contract deprives the licensee of its rights to use the trademark until the rejected contract expired.

  1. The High Court’s Reasoning
  • Allowing Rescission of a Trademark Licensing Agreement Is Inconsistent with the Code’s Stringent Limits Designed to Prohibit a Debtor from Getting Out of Its Obligations

In finding for Mission, the Court was careful to emphasize the Bankruptcy Code’s stringent limits on “debtor avoidance of obligation” actions, in particular the Code’s prohibition on a debtor’s fraudulent conveyance(s) to deplete the estate (and so cheat creditors) on the eve bankruptcy. Slip opinion at 11 citing §§544-553.  The power to reject an executory contract, on the other hand, has no strict limitation and can be exercised for any plausible economic reason.  Absent “strange” circumstances, the bankruptcy courts generally give much deference to the debtor’s “rejection” choice under the “business judgment” rule.  Slip opinion at 3. “If trustees or debtors could use rejection to rescind previous granted interests, then rejection would become functionally equivalent to avoidance” contrary to the Code’s clear intent and language to cabin avoidances. Slip opinion at 12.

  • Breach by a Debtor-Licensor (or Licensee-Debtor) Does not Revoke a License Outside of the Bankruptcy Context

The Court emphasized that under contract law outside the context of bankruptcy law, a breach of the licensing agreement by a licensor does not revoke the license or stop the licensee from doing what it allows – i.e., using the licensed intellectual property. Slip opinion at 10.  This of course does not mean that the licensee will be able to effectively continue using the licensed intellectual property.  For example, if the licensor is supposed to provide goods bearing the registered trademark to the licensee and stops doing so, then the licensee will be effectively prevented from using the licensed trademark.   However, the licensee will have recourse in a court of law to address the licensor’s breach – where state law will generally apply.

The Court further emphasized that a bankruptcy estate cannot possess anything more that the debtor itself did prior to the bankruptcy; the debtor is not entitled to augmented rights. Slip opinion at 11. The Code’s articulated rejection-as-breach rule in lieu of Tempnology’s proposed rejection-by-rescission-rule ensures that the same counterparty rights (Mission’s rights) survive rejection as they would survive al allegation of breach in a non-bankruptcy proceeding prevents a debtor in bankruptcy (Tempnology) from recapturing interests it had given up. Slip opinion at 11.

  • Tempnology’s Negative Inference Argument Lacks Merit

Tempnology also argued that certain provisions under § 365 of the Code actually articulate certain situations where a counterparty “may retain specified contract rights notwithstanding rejection [by the debtor]. As the argument went, the Code does not intend that a rejection of any type of executory contract not specifically identified in the Code means that such “unmentioned”  rejected contracts are actually rescinded contracts.

Interestingly, §365(n) of the Code applies specifically to patent and copyright licensing agreements but not trademark licensing agreements. Congress enacted this section in response to the Fourth Circuit’s decision in Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d 1043, 1045-1048 (1985) wherein the court had held that the debtor’s rejection of the patent licensing agreement worked to revoke its grant of a patent license.   Section 365(n) corrected the perception that “Section 365 was ever intended to be a mechanism for stripping an innocent licensee[s] or rights.” Slip opinion at 14.   As Temptology’s argument went, absent a specific limitation within the Code stating that the rejection of a particular type of executory contract is to be construed only as a breach of the contract by the debtor, a debtor’s rejection means rescission or revocation of the contract.  Because the Code does not specifically address trademark licensing agreements, Temptology’s rejection licensing agreement must therefore a treated as a rescinded agreement wherein neither party has any further obligations. Slip opinion at 14. See also Justice Sotomayer’s concurring opinion, pg. 2 (also stating that under §365(n), “a covered licensee that chooses to retain its rights post rejection must make all of its royalty payments; the licensee has no right to deduct damages from its payments even if it otherwise could have done so under nonbankruptcy law [i.e. state contract law]. This provision . . .  means that the covered intellectual property types are covered by different rules than trademark licenses.”

The High Court gave short shrift to Tempnology’s round-about argument, noting that Congress has enacted specific provisions to the Code at different times over a period of fifty years more often than not to “correct a judicial ruling of just the type Tempnology urges.” Slip opinion at 13.  In other words, the legislative record shows that Congress has expressed its disapproval by amending § 365 whenever a court has terminated all contractual rights for executory contracts subject to a bankruptcy proceeding.  Tempnology was asking the Court to make a ruling contrary § 365’s long legislative history.

  • Unique Aspects of Trademark Licenses

The strongest argument Temptology offered in the commentator’s opinion as that trademark law imposes a duty on trademark licensor to exercise quality control over the goods and services sold under the terms of a license.  The public policy behind this requirement is that trademark law’s focus is the consumer.  The registered trademark owner (licensor) is in charge of ensuring that the quality/characteristics the consumer has come to associate with a good/service are consistently present.

What is the trademark licensor/debtor to do during a bankruptcy proceeding?  Temptology argued that “unless rejection of a trademark licensing agreement terminates the licensee’s rights to use the mark, the debtor will have to choose between expending scarce valuable resources on quality control and risking the loss of a valuable asset,” thereby impeding a [debtor’s] ability to reorganize inconsistent with a fundamental tenant of the Code.  Slip opinion at 15.

The High Court was unwilling to use the unique requirements of trademark licensing to adopt Temptology’s construction § 365 that will govern not just trademark licensing agreements but pretty nearly every executory contract.  In essence, Bankruptcy law is intended to balance the legitimate interests and expectation of the debtor’s counterparties which is inconsistent with granting debtors a right, through rejection of an executory contract, to escape all of its future contract obligations. Slip opinion at 15.

  1. Practical Considerations

Trademark Licensors should have a clearly articulated/implemented approach for monitoring the quality of all goods/services sold under its registered marks by a licensee from the get- go.  This approach should include maintaining records showing the monies spent on monitoring its licensees and the actual steps taken by the licensor.  Such information could sometime be invaluable to a bankruptcy trustee/debtor in allocating reasonable funds to continue overseeing a licensee’s goods/services until the licensing agreement terminates according to the agreement’s specified date.

THE FOREGOING IS NOT LEGAL ADVICE NOR SHOULD YOU CONSIDER IT AS SUCH. IT IS FOR INFORMATIONAL PURPOSES ONLY. YOU SHOULD CONSIDER CONSULTING WITH AN ATTORNEY IF YOU ARE CONTEMPLATING AN ACTION WHICH MAY HAVE LEGAL CONSEQUENCES.

 

© Troy & Schwartz, LLC 2019

Where Legal Meets Entrepreneurship™

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Posted in Uncategorized on June 03,2019 11:06 AM

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Jun
03

Maintaining Registered Trademarks & Patents – Do It or Lose Your Rights!

  • Background

So you or your company have met the requirements for receiving a registered trademark or patent from the United States Patent and Trademark Office (USPTO). Your efforts to obtain these valuable intellectual property rights (especially for the patent) involved considerable costs ranging from legal fees to filing fees charged by the USPTO and maybe even an appeal. Does your success in obtaining a registered trademark or a patent mean that your “interaction” with the USPTO is now over and done with? Not if you wish to retain your trademark registration and patent rights!

Both registered trademark rights and patents require the payment of maintenance fees to the USPTO to maintain their “active” status. Additionally, the owner of registered trademarks must also establish periodically that the mark is still in use to enjoy the benefits of registration. Patents, on the other hand, need never be practiced to enjoy continuing patent rights during the effective patent term providing the maintenance fees are timely paid.

Unfortunately, many patent and registered trademark owners are not aware of the ramifications of failing to pay maintenance fees until it’s too late. This article summarizes important information related to maintaining the active status of registered trademarks and issued patents.

  • Maintenance of Registered Trademarks

The USPTO is required to strictly comply with the federal statute governing registered trademark maintenance fees.  Failure to timely pay the maintenance fees will result in administrative cancellation of the mark by the USPTO. These fees are due within the 5th and 6th years of registration, the 9th and 10th years of registration and every 10th year thereafter. Once cancelled as the result of non-payment of the required maintenance fee, the only way to again acquire registration rights in that mark is to file another trademark application and go through the prosecution process again.

This new trademark prosecution process may not necessarily result in registration of the mark that had been cancelled. This commentator encountered such a scenario with a client who had inadvertently failed to pay the maintenance fee by the 6th year of registration on a valuable registration originally obtained by the client. The commentator was retained to file a new application for the cancelled mark. The new examining attorney initially refused registration of the mark as being merely descriptive despite the fact that the same mark had once been registered. The commentator was able to obtain registration of the mark on distinctiveness grounds.

Proving distinctiveness to the satisfaction of the USPTO is no easy task as the case law demonstrates and can be a very costly endeavor because of the legal fees. The commentator’s client would have appealed any final rejection by the examining attorney to the Trademark Trial and Appeal Board (TTAB) because of the value of mark. Appeals are expensive and time-consuming. Additionally, statistics available for TTAB decisions show that examining attorneys’ rejections are affirmed more often than not. Hence another reason for ensuring that trademark registration fees are timely paid to prevent a situation where a new examining attorney may conclude that the “re-filed” mark does not qualify for registration.

In addition to paying the maintenance fee, the mark owner must file documentation with the maintenance fees declaring that the mark is still in use and provide specimens proving as such. As long as the declaration and specimens are filed according to the above specified schedule and the declaration/specimens meet the requirements USPTO’s requirements, the registered trademark will remain in effect with three exceptions: (1) it becomes cancelled as the result of a cancellation proceeding filed with the TTAB by a third party; (2) it becomes cancelled as the result of a trademark infringement lawsuit in federal court wherein the court issues an order directing the USPTO to cancel the mark; or (3) it is voluntarily cancelled by the registrant, the mark’s current owner, or the registrant/owner’s legal representative. See 37 U.S.C. § 1904.07(a).

Registered trademarks that end up being cancelled by the USPTO for any statutory reason will be designated as cancelled in the records of the USPTO. Registered trademarks may also be cancelled by a federal court to which a party (petitioner or registrant) in a TTAB cancellation proceeding has appealed the TTAB’s cancellation decision.

The actual trademark registration maintenance fees due are dependent upon the number of international classes designated for the registered trademark. If the trademark owner is no longer using the mark with one more of the designated classes in a multi-international class registration, then the declaration should indicate as such and request deletion of the “inactive” classes of goods/services. The payment due is based on the number of “remaining” classes and the registrant must provide specimens showing how the mark is still being used with the “remaining” classes.

A registered mark may remain in effect indefinitely providing declarations/fees are timely submitted to the USPTO and accepted and assuming that the registered mark is not cancelled as the result of one of the above three specified scenarios. That is, there is no statutory “cut-off” period for enjoying registered mark status.

  • Maintenance of Patents

Maintenance fees on utility patents in the United States are due 3½, 7½ and 11½ years after grant of the utility patent. In contrast to many other countries, no maintenance fees are due while a US patent application is pending.  Maintenance fees are not required for design patents and plant patents.

Patents have a defined lifetime generally equal to twenty (20) years from the application’s filing date; the actual expiration date is determined under the patent term extension statute where the 20 year date may be adjusted to a later or earlier date according to the patent’s prosecution history. Patents therefore have a cut-in-stone expiration date while registered trademarks may last indefinitely.

Patent maintenance fees may not be paid in advance; the patentee must wait until the payment window opens six months before the due date before paying a maintenance fee. At the end of the half-year window during which a maintenance fee may be paid, a six-month grace period begins during which a patentee may still pay the maintenance fee along with a small surcharge. The maintenance fees are determined on the basis of the patentee’s designated status: large entity, small entity, or micro entity. This status must be reasserted with the payment of each maintenance fee.

If the maintenance fee has not been paid at the conclusion of the grace period, the patent expires for non-payment of maintenance fees. In contrast to trademark registrations for which the declaration/maintenance fee was not timely filed, a patentee may file a petition indicating that the non-payment was unintentional. This petition must be timely filed and there is no guarantee that the petition will be granted and the expired patent reinstated.

Patent claims may be invalidated as the result of proceedings involving the USPTO’s Patent Trial & Appeal Board (PTAB) (see 35 U.S.C. § 311) or by federal court order resulting from: (1) a patent infringement case wherein the alleged infringer successfully argues that at least some of the patent claims should be invalidated; or (2) an appeal of a PTAB decision to the court. As long as an issued patent has claims that are not invalidated as the result of proceedings before the PTAB or a federal court, maintenance fees will be due.

  • Assignment of Registered Trademarks and Patents

The assignee of any registered trademark or patent rights will generally assume the responsibility of paying any future maintenance fees as the mark owner and filing the required declaration/specimens. Any assignment document should always specify which party has the obligation to pay the maintenance fees. Assignees should always ensure that any assigned trademark registration or patent is full effect and that the assignor is indeed the legal owner of an “active” trademark registration or patent. Recordation of any trademark or patent assignment with the USPTO is highly recommended. Licensors of trademarks and patents are generally responsible for paying the maintenance fees, but any licensing agreement should nevertheless clearly state who has the obligation to do so. The licensor remains the owner of the registered mark or patent.

  • Ensuring that Valuable Registered Trademark and Patent Rights Are Not Lost for Failure to Maintain

Large companies generally have procedures in place for monitoring the status of their trademark and/or patent intellectual property. The in-house legal team, if any, is generally involved in monitoring the “active” status of the company’s IP.

Startups and small companies, on the other hand, often do not have a formal mechanism in place for ensuring that the future required maintenance fee dates are adhered to.  Furthermore, these time periods occur over a period of many years and can easily be “forgotten.” It is thus highly recommended that any entity owner of any registered trademark and/or patent adopt a procedure for annually reviewing the status of its intellectual property by designated managers/officers to ensure that maintenance dates are kept on the radar. Additionally, a department and/or employee should be assigned the responsibility of ensuring compliance with registered trademark and patent maintenance fee/document filing requirements by the due date. Payments/filings are preferably made “earlier” rather than “later.” Proof of payment/document filings should be maintained with the other records associated with the corresponding patent or registered trademark.

For registered trademarks, either in-house counsel or outside counsel should be consulted if there are any questions concerning the declaration/specimen documents that will need to be filed with the USPTO to ensure that the registration status will remain in effect. The USPTO will reject declarations that do not meet statutory requirements, including establishing that the declaration filer is the owner of the registered mark.

  • A Brief Comment on Copyright and Trade Secret Lifetimes

Although not discussed above, registered copyrights enjoy decades of protection under the copyright statute and maintenance fees are not required. Trade secret protection can last for decades or far beyond the lifetime a patent providing, of course, that the trade secret remains just that – secret. The best example of a long-time trade secret is the formulation for Coca Cola.

…………………………………………………………………………………………………

The foregoing is not legal advice but is provided for information only. Contact the office to receive a complimentary checklist for monitoring the status of your valuable IP at sdtroy@troyandschwartzlaw.com. The commentator is available to assist clients in obtaining and maintaining intellectual property rights protection as well as protecting their valuable intellectual property from the unauthorized use by others at a predictable, reasonable legal fee.

© Troy & Schwartz, LLC 2019

Where Legal Meets Entrepreneurship™

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Jun
03

A Practical Tip for Trademark Registrants & Applicants – Don’t Fall for Trademark Scammer Scare Tactics!

It seems that clients for whom our law firm has obtained registered trademarks are receiving more letters from scammers than in the past. One client reported receiving five different scammer letters in one week!  These letters are purposely intended to suggest that: 1) the letter was sent from the United States Patent & Trademark Office; or 2) the scammer is a recognized affiliate of the USPTO authorized to send such correspondence.  The USPTO’s website has a notice warning the public about these scam tactics.  Also, the USPTO sends out a notice with each Registered Trademark Certificate warning the trademark owner about “scamming” activities by third parties.

For our trademark clients, we provide a detailed letter specifying the future dates by which the registered mark/patent owner must take “action” to maintain the active status of the mark/patent. One thing is for sure:  the inadvertent loss of registered trademark rights resulting from the failure to properly maintain a registered trademark can have serious, costly consequences.  Don’t let that happen to you by failing to understand your date-specific obligations as a registered trademark owner. See the website’s blog on Trademark and Patent Maintenance Fees.

Many of the commentator’s clients have forwarded copies of scammer letters which have actually specified wrong trademark registration date information! The sender also requested hefty fees without any detail as to what the suggested fees cover or the information that the third party will require from the registered trademark owner or applicant to comply with the USPTO’s maintenance requirements. What these scammer letters all have in common is the following: a request to send money!

By way of example, one long-time client recently received a letter from a scammer by the name of PTMI (Patent & Trademark Institute) purporting to be a “register of trademarks.” No physical address was provided.  For $765.00, PTMI would apparently list the client’s registered mark in a data base under the scammer’s control for one year.   This type of service is a joke since all countries through a bona fide governmental intellectual property agency such as our own USPTO list all existing registered marks, abandoned marks, and cancelled marks.  Additionally, the World Intellectual Property Organization (WIPO) also maintains records of registered marks throughout the world.  There is absolutely no need to pay a third party to list one’s registered mark.  Such a data base would also be useless for trademark search purposes since it’s highly likely the data base would be incomplete or provide incorrect information.   This commentator would not even rely on any information provided in “sketchy” data bases when conducting a trademark or “knockout” search and neither would other trademark attorneys.

Another client received a notice from Glo Trade, S.R.O. requesting over $2800 to monitor the client’s soon-to-be registered trademark for one year. The notice indicated a registration date for the client’s mark even though the application is at the publication stage.  The incorrect notice doesn’t provide much confidence that Glo Trade, S.R.O. would do a decent job of tracking conflicting marks if it can’t even get the client’s registration date right, does it?  The commentator notes that there are legitimate companies for tracking potentially infringing applied-for trademarks; these legitimate companies do not send out solicitation letters.

Registered trademark owners who do not already have a trademark attorney are welcome to contact contact us at (305) 279-4740 about any “scam” letters they receive to verify for their own peace of mind that the letter is indeed from a “scamming” third party.   We will provide the complimentary service of checking the caller’s trademark registration date/patent issuance date based on USPTO records to determine the next actual date by which the trademark/patent owner must take action to maintain the active status of the trademark/patent.

If the caller requests us to do so, we will handle the steps required for maintaining a trademark(s)/patent(s) at an attractive legal fee that will be substantially less than what the scammer hopes to obtain for questionable services. The owner of a trademark registration can also always file the required documentation directly with the USPTO to maintain a registered trademark.  The owner just needs to make sure that all representations to the USPTO are accurate and comport with the USPTO’s requirements.

We hope you find this blog useful.   However, it is not legal advice and is provided for informational purposes only!

 

© Troy & Schwartz, LLC 2019

Where Legal Meets Entrepreneurship™

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Jun
03

Trademark Symbol Usage – Are You Using the Correct Symbol?

The three trademark symbols are the circled R, and the capital letters TM for trademark and SM for service mark.  All three symbols are generally presented as a superscript.

The circled R symbol (federal registration notice) is reserved for those trademarks and service marks that have been registered by the USPTO as the result of a formal trademark application evaluation process.   Additionally, the circled R should only be used in connection with the goods or services that are listed in the federal registration issued by the USPTO.  For example, if a mark is registered for clothing goods only as evidenced by the federal registration, the federal registration symbol should not be used by the mark owner on any non-clothing goods.  The owner of the “initial” registered marks may apply for registration of the mark for non-clothing goods to obtain broader “registered mark” coverage.

Nor does registration of a mark in one or more of the fifty states of the United States entitle a person to use the federal registration notice.  The circled R is to be used only to denote actual registration of the mark by the USPTO for the goods and services shown in the registration.

The mere submission of a trademark application in no way means that the applicant can start using the registered mark while the application is pending.  Any usage of the circled R absent formal registration of the mark is a violation of federal law and may cause the USPTO to deny registration of the trademark application even if the application is otherwise acceptable.

The USPTO’s refusal to register a mark may have unintended economic consequences for applicants who have spent already considerable funds on developing their brand only to be denied registration of the mark. For example, a registered trademark can be a valuable business asset.   Lack of a formally registered mark may reduce the value of the business or interfere with the franchising process which generally involves the licensing of a federally registered mark(s). Although other factors may result in refusal by the USPTO to register the mark, applicants should also avoid losing out on acquiring registered trademark rights by misusing the circled R symbol.

Until when and if a mark is formally registered with the USPTO, the provider of goods and/or services should use the TM (trademark) or SM (service mark). These are not official or statutory symbols of federal registration.  Nevertheless, both symbols provide notice to would-be infringers that the mark owner views the mark as a trademark/service mark and that it will defend it against would-be infringers. It is entirely acceptable if specimens submitted to the USPTO’s trademark application examining attorney includes either the TM or the SM.

Specimens submitted to the USPTO examining attorney that include the circled R may present problems for the applicant. For applicants not using the services of a trademark attorney, it is therefore cautioned that the applicant ensure that website pages, marketing materials, displays, etc. submitted to the examining attorney as specimens do not show the circled R. An advantage of hiring a trademark attorney to handle trademark applications is that the attorney will:  1) verify that the specimens are suitable for submission by personally evaluating the specimens for compliance with the law prior to submission; 2) alert the applicant of any observed misusage of the federal registration notice in the specimens; 3) request new specimens for submission to the USPTO; and 4) direct the applicant to immediately refrain from using the circled R.   That is, a thorough trademark attorney will do much more than merely fill out a trademark application form.

Besides possible problems with trademark applications, are there any other legal ramifications associated with the usage of the circled R for unregistered marks?  Many times the usage of the circled R is inadvertent and based on a misunderstanding of how and when the circled R can be used.  That is, the misuse is an honest mistake.

However, the misuse of the circled R can also result in allegations of fraud to knowingly and willfully deceive or mislead consumers or others in the trade into believing that the mark was registered.  Where the cause of action is before the Trademark Trial and Appeal Board (TTAB) such as an opposition proceeding, the TTAB may deny registration of an otherwise registrable mark.  Such conduct would also likely sustain a petition to cancel a registered mark with the TTAB.

Where the cause of action is before a federal court in a trademark infringement proceeding, fraud claims may result in invalidation of a registered mark.  Also, the defendant in a trademark infringement lawsuit may have possible false advertising claims against the mark owner who has knowingly misused the circle R symbol and a possible unclean hands defense especially when the plaintiff’s misuse of the circled R symbol is accompanied by a bad faith intent to deceive.

Generally, fraud claims must be alleged with particularity whether the matter is before the TTAB or a federal court.   Fraud claims are not easy to prove because of the requisite intent requirement as it pertains to deceiving of the public.  The Federal Circuit has held that how quickly a trademark owner corrects misuse of the registration symbol after learning of the misuse, will impact the determination of whether the trademark owner is charged with an intention to deceive the public.  Therefore, trademark owners should periodically review the presentation of their marks to the public to ensure that the proper trademark symbol is being used.

Example: A website designer is told that the owner of the website has a trademark or service mark. The website designer, thinking that the mark(s) is registered, uses the circled R when the appropriate symbol was the TM or SM.   The mark owner should ensure that the circled R symbol wherever used on the website is removed and replaced with the appropriate TM or SM symbol until when and if a registered mark is secured.

In conclusion, to avoid any unpleasant legal surprises resulting from the misuse of the circled R symbol, just don’t use this symbol unless the mark is listed as a registered mark according to the public records available at www.uspto.gov.   And then use it only with the mark owner’s goods and services specified for the registered mark.

WE HOPE YOU FIND THE ARTICLE INSTRUCTIVE. HOWEVER, THE INFORMATION PRESENTED IS NOT LEGAL ADVICE AND IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

 

© Troy & Schwartz, LLC 2019

Where Legal Meets Entrepreneurship™

 

 

 

 

 

 

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Jun
03

Trademark Registration Pitfalls: Not Understanding that Certain International Classifications of Goods/Services Are Considered Closely Related by the USPTO for Section 2(d) Rejection Purposes

A company wanting to protect its brand identity and thereby enhance its valuation generally seeks federal registration of its trademark/service marks which may include names, logos, and slogans.   In applying for a mark that is “close” to an already registered mark, applicants sometimes make the mistake that the examining attorney will not find a likelihood of confusion if the applicant’s mark involves a different international classification (IC) of goods/services from the registered mark’s specified IC(s).

This assumption is incorrect.   Sometimes applied-for marks that are deemed by the USPTO’s examining attorney to convey a similar commercial impression with an existing registered mark will be denied registration even if the two marks do not involve the same international classifications of goods/services.   One of the determining factors is whether the specified international classes involve closely related goods/services.  Thus a registered mark for IC class 030 (e.g., pizza as a food product) and an applied-for mark for IC 035 (restaurant services) may be found to involve related goods and services that could result in a likelihood of confusion as to the provider of the pizza food product/restaurant services.

Similarly, IC 025 for clothing is a class that the USPTO routinely finds overlaps with other IC classes, particularly jewelry (IC 014), purses (IC 018), and eyewear (IC 09). The “clothing” applicant will generally not prevail if the examining attorney can provide evidence that a single entity is likely to offer for sale both clothing and complementary items such as jewelry, purses, and eyewear.  For example, in In re Manja Studio SDN BHD (May 17, 2019), the Trademark Trial and Appeal Board (TTAB) affirmed the rejection of the applicant’s mark for clothing, finding that the applied-for mark was likely to cause confusion with an existing similar registered mark for watches.    The rejection was affirmed even though that applicant’s mark was for relatively inexpensive “T-shirts, outerwear, and hats” while the registrant’s mark was for “luxury designer watches.”

Take Home Points:

The trademark registration is not as simple as it seems.  Many factors can enter into the calculus.  An experienced trademark attorney can help identify pitfalls upfront.  Sure, an applicant can appeal a rejection to the TTAB but statistics show that the TTAB affirms about ninety percent (90 %) of likelihood of confusion rejections.  Besides, appeals are expensive.  Why spend money on the process if there is a solid chance of rejection?

If you are considering filing a trademark application with the USPTO or have encountered trademark registration problems, contact the commentator to discuss your trademark registration questions and learn about our reasonable legal fees for prosecuting trademark registrations on behalf of clients both in the U.S. and abroad. Clients’ applications are handled at all stages by an attorney and all clients are advised upfront of potential registration issues.

 

WE HOPE YOU FIND THE ARTICLE INSTRUCTIVE. HOWEVER, THE INFORMATION PRESENTED IS NOT LEGAL ADVICE AND IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

 

© Troy & Schwartz, LLC 2019

Where Legal Meets Entrepreneurship™

 

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