Article Title

 

Trademarks 101

 

Author

 

Jennifer Ward

 

Article Type

 

Article

 

There are few, if any, business clients who will not need trademark consultation and advice at some time during the course of their representation. Trademarks1 are the labels under which all goods and services are marketed and constitute valuable assets that can be assigned, licensed, or otherwise transferred. A business may spend substantial time and money in developing a trademark and marketing its products under the mark only to be found liable for unknowing infringement of a prior mark; or, may see the goodwill associated with its mark injured by the infringement of its mark by another. For a lawyer, the terrain of trademark issues is varied and extensive. This article serves to familiarize non-trademark lawyers with trademark law basics. Identifying a Trademark. A trademark is defined as any "word, name, symbol or device, or any combination thereof" used "to identify and distinguish" goods or services from those manufactured, sold or offered by others and to indicate the source of the goods or services.2 Consequently, a trademark can take many forms, including the following: words (for example, the mark MOUNTAIN DEW VERTICAL CHALLENGE, for organizing ski and snowboarding races); letters and/or numbers (for example, the mark R4 for insulation fabric sold as a component of ski wear); slogans (for example, the mark SKI ABOVE ALL (this author's sentiments exactly) for operation of a ski resort and providing ski lessons); logos and designs; color on a particular product or service (for example, KODAK yellow background on photographic goods); product and package configurations (called "trade dress") (for example, the shape of a COCA COLA bottle; the exterior design and shape of a FERRARI; the shape of GOLDFISH crackers, and; the decor, menu and building design of a restaurant for aprŽs ski dining); sounds (for example, NBC tones); and fragrance applied to goods.3 The following are not considered trademarks: An Internet domain name is not considered a trademark if it functions merely as a web site address used to locate your client on the Internet.4 If, however, the domain name also serves as a source identifier for goods and services, then it is a trademark. For example, SKI.COM functions as a uniform resource locator but is also the name under which ski vacation packages are provided.5 Numbers or letters that are used only to indicate the size, style, quality, or capacity of a product are not trademarks.6 For example, MARKER is a trademark for ski bindings, but the style number on each type of binding probably is not. A trade name is the name used to identify the business entity and is not registrable as a trademark unless the name is also used to identify and distinguish the goods or services sold by the business.7 For example, an on-line computer database providing ratings and review of ski equipment is offered under the mark SKI REVIEW but the tradename of the business is Consumer Review, Inc. Lawyers need to be careful, however, when advising clients on the adoption of business entity names because they may function as trademarks in addition to trade names. The foregoing examples of trademarks and non-trademarks are very general classifications; ultimately, it is the facts and circumstances of each case and, particularly, how the mark is used on the goods or services and how consumers associate or perceive, or are likely to associate or perceive, the mark with the good and services that is determinative. A party is entitled to use as many marks as it chooses on a particular product or service so long as each mark is recognized as being an indication of source of the product or service. For example, Alta ski resort is recognized both by the word mark ALTA SKI AREA and its snowflake-type logo mark. Common Law, State, and Federal Trademark Rights. Common Law. Trademark rights are not created by state or federal registration of the mark but, instead, are created by actually using the mark in commerce to identify a product or service. Trademark rights are based on priority of use. This means that as between two users of a trademark, the senior user (first in time) is the owner of the mark. The senior user has superior rights in the trademark even if the junior user is the first to obtain state or federal registration of the mark. A common law trademark user has rights in the mark in the geographic area where the mark is being used as well as its "zone of natural expansion."8 Although registration of a mark is not necessary, registration grants several procedural and substantive rights not available under common law. State Registration. The current session of the Utah Legislature has enacted the Registration and Protection of Trademarks and Service Marks Act,9 effective May 6, 2002, to be codified at Utah Code Annotated section 70-3a-101 et seq, which will govern the registration and use of trademarks in Utah (and repeals Utah Code Annotated section 70-3-1 et seq.). This Act should be interpreted to "provide for the registration and protection of trademarks and service marks consistent with the federal system of trademark registration and protection"10 which is discussed later in this article. A person seeking state registration must file an application with the Division of Corporations and Commercial Code and pay a regulatory fee. The application must include, among other things, a verified statement that the mark is in use and that to the best of the signatory's knowledge, no other person has registered, either federally or in the state of Utah, or has the right to use, the identical mark or a mark in such close resemblance as to be likely to cause confusion, mistake or to deceive.11 The Division of Corporations and Commercial Code will examine the application and give the applicant an opportunity to respond to any objections or rejections.12 Upon acceptance of the application, the Division the will issue a certificate of registration of the trademark.13 The certificate of registration is valid for a period of five years, unless it is earlier canceled, and can be renewed for additional five year periods.14 The Act entitles the owner of a state registered mark to file an action to enjoin the "manufacture, use, display, or sale of any counterfeits or imitations of the mark."15 The owner may also be awarded in some cases treble the amount of profits derived from, or damages suffered as a result of, the wrongful use of the registered mark, plus attorney fees, and the court may order that any counterfeits or imitations be destroyed.16 Other benefits of state registration are that it puts others on notice of the registrant's use of the trademark, and is inexpensive. Although state registration is not without its benefits, and is the only option available to trademark owners who do not use the mark in interstate commerce, significantly more benefits are available to trademark owners under federal law. Federal Registration: Benefits. The federal trademark statute, called the Lanham Act, is found at 15 U.S.C. ¤ 1051 et seq. The benefits of federal registration (not available to state trademark registrants) include the following: 1. A Section 1(b) intent-to-use application allows an applicant to apply for registration of a trademark prior to actually using the trademark on goods or services.17 The filing date of the application becomes the "constructive use date."18 2. A certificate of registration is prima facie evidence of the validity of the registered mark, registration of the mark, the registrant's ownership of the mark, and the registrant's exclusive right to use the registered mark in connection with the specified goods or services.19 A certificate of registration may also be prima facie evidence that the mark is not confusingly similar to other registered marks, or that the mark has acquired distinctiveness.20 3. After five years of continuous use, the mark may become "incontestable" as conclusive evidence of the owner's right to use the mark so that the mark may be canceled only in limited circumstances.21 4. A federal registrant is entitled to use the ¨ which provides actual notice of the registrant's use of the mark.22 This is significant because profits or damages under the Lanham Act can only be awarded if the infringer had actual notice of the registration.23 5. Federal courts have jurisdiction over claims of infringement of federally registered marks regardless of diversity of citizenship or amount in controversy.24 6. Registration is constructive notice nationwide of the registrant's use of the mark and claim of ownership.25 7. Federal registration confers rights upon the trademark owner nationwide which means the owner can stop infringing use of its mark anywhere in the United States,26 whereas State registration gives the registrant, at most, statewide rights, and probably only rights in the area of use and recognition.27 Treble damages, treble the amount of an infringer's profits, costs, and attorney fees may be awarded in some cases for infringement of a federally registered mark.28 Federal Registration: Choosing a Registrable Mark. There are two common hurdles to federally registering a trademark: (1) confusing similarity, and (2) descriptiveness.29 With the enactment of Utah's Registration and Protection of Trademarks and Service Marks Act, these bumps may now be encountered by applicants for state registration as well. 1. Confusing Similarity. A trademark will be refused federal registration if it "so resembles" another mark "as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive."30 When registration of a mark is applied for, the examining attorney conducts a search of the United States Patent and Trademark Office records for any registered marks, or marks for which registration is pending, that the examining attorney considers to be confusingly similar to the applied-for mark. The applicant then has the opportunity to submit an argument as to why no likelihood of confusion exists between the marks. The marks do not need to be identical, or be used on identical goods or services, to be deemed confusingly similar. For example, the mark K2 for filter cigarettes was found confusingly similar to the mark K2 for skis.31 The oft-cited list of thirteen factors relevant to a determination of likelihood of confusion is set forth in In re E.I. du Pont de Nemours & Co., 476 F.2d 1357 (C.C.P.A. 1973), and includes, by way of example: the similarity or dissimilarity of the marks in sound, sight, and meaning; the relatedness of the goods or services used in connection with the marks; the similarity or dissimilarity of established channels of trade; and any instances of actual confusion. Whether marks are deemed confusingly similar is a fact intensive determination made on a case by case basis. The owner of a prior, potentially confusing mark may be willing to enter into a consent agreement with the trademark applicant agreeing to the applicant's use of its mark and setting forth the reasons why the parties do not believe confusion is likely. Courts have held that such consent agreements "carry great weight" because the parties "are in a much better position to know the real life situation than bureaucrats or judges."32 If the examining attorney is unpersuaded, registration will be refused. The test of "Ôlikelihood of confusion" is also the crux of common law and federal statutory trademark infringement and unfair competition claims. Upon the effective date of Utah's new trademark statute, this test will apply to state statutory infringement actions as well. Because use of a trademark that is confusingly similar to another's mark is grounds for infringement, and also considering that the non-refundable application fee for federal registration of a mark is currently $325 per class of goods or services, prior to a client's adoption of a trademark (regardless of whether the client intends to apply for federal registration), lawyers should, at minimum, conduct an on-line "knock-out" search of the records of the PTO and advise their clients of the existence of any potentially similar marks and the potential for rejection of their application on those bases.33 More thorough searches of federal, state, and various common law databases are available through professional trademark search firms at varying prices. Lawyers should advise their clients of the availability of these services and the extent of the search conducted should be determined by their client's risk willingness and the amount of time and money to be invested in, and the intended scope of use and advertising of, the mark. The importance of due diligence in adoption of a mark has been emphasized by recent federal decisions which have suggested that an attorney who does not at least advise its client to obtain a comprehensive trademark search may be liable for negligence constituting malpractice, and a client who fails to heed such advise may be liable for "willful" infringement.34 Clients should be advised that even if the examining attorney approves the mark for registration, there is a 30 day opposition period prior to issuance of a Certificate of Registration during which time another trademark owner may file an opposition to registration on the basis of confusing similarity. Once the mark is registered, the registration is subject to cancellation proceedings by anyone who believes it may be damaged by the registration. Therefore, paying for trademark searches at the outset may save costs of legal battles in the future. Of course, even comprehensive trademark searches do not provide a guarantee that no prior, conflicting marks exist but such searches do provide a certain level of comfort. 2. Descriptiveness. Under Section 2(e) of the Lanham Act, a mark which "merely describes" the goods or services with which it is used is not registrable. Trademarks are categorized along a continuum from arbitrary/fanciful marks on one end, to suggestive marks, descriptive marks, and, finally, generic marks on the opposite end of the continuum.35 Fanciful marks are comprised of unknown, made up words (for example, DYNASTAR for skis) or words which are no longer in common usage. Arbitrary marks are comprised of common terms being used with goods or services that are unrelated to the term (for example, SPYDER for ski coats). Fanciful and arbitrary marks are always registrable. Suggestive marks are described as "those which require imagination, thought or perception to reach a conclusion as to the nature of the goods or services" as opposed to descriptive marks which describe "an ingredient, quality, characteristic, function, feature, purpose or use of the specified goods or services."36 The line between suggestive and descriptive marks is obscure and often-litigated. The distinction is important because while suggestive marks are always registrable on the federal Principal Register, descriptive marks can be registered on the Principal Register only upon proof that the mark has "acquired distinctiveness."37 Generic names for the goods or services are not registrable as trademarks under any circumstances.38 Federal Registration Process. The federal registration process begins with filing an application with the Patent and Trademark Office (applications can now be completed and submitted electronically). The applicant may file either an actual use application which requires that the mark is at use in interstate commerce at the time the application is filed, or the applicant may file an intent-to-use application which merely requires that the applicant have a bona fide intention to use the mark in interstate commerce in the near future. When an application is submitted, the application is assigned a serial number.39 An examining attorney will review the application and notify the applicant of any reasons why the mark cannot be registered.40 The applicant then has six months to correct any deficiencies, or otherwise respond to any objections raised by the examining attorney.41 This procedure may be repeated until the examining attorney issues a final refusal or the applicant fails to respond.42 If on examination or reexamination of an application, the trademark appears to be entitled to registration, the mark will be published in the Official Gazette triggering a thirty day public comment period during which any party who believes it will be damaged by registration of the mark may file an opposition.43 If no oppositions are filed, or all oppositions are dismissed, then in the case of an actual use application, a Certificate of Registration will issue.44 For intent-to-use applications, a notice of allowance will issue giving the applicant six months to file a statement of use attesting to use of the mark in interstate commerce (additional six month extensions are available),45 and a Certificate of Registration will issue after the statement of use is filed. After registration, the trademark owner must file a declaration of continued use or excusable nonuse of the mark between the fifth and sixth year anniversary of registration, and within the year before the tenth year anniversary, or registration will be canceled.46 Subject to timely filing these declarations, federal trademark registrations are for valid for a period of 10 years and may be renewed for additional 10 year periods.47 Once registration has been obtained, a client should be advised to take steps to monitor and police its mark against any infringers. The Role of a Trademark Attorney Trademarks are a critical component of a successful business. A lawyer's role in this aspect of a client's business is no less critical. Prior to adoption of a trademark, the lawyer is responsible for advising its client to conduct a trademark search, and will often be relied upon to analyze the search results and advise the client accordingly. Once a client determines to go forward with using a trademark, the lawyer often represents the client throughout the trademark registration process, including responding to any bases for refusing registration raised by the examining attorney. Finally, once registration has been procured, a lawyer can provide for proper transfer of trademark rights, follow up with the client in maintaining trademark registration, and aid the client in defending against and prosecuting possible infringement claims. As this article has shown, trademarks pervade even the snowy slopes where we find respite - from stepping into your powder boards, to purchasing the all-terrain lift ticket, to relishing maki rolls after a rigorous day down the backside. In this era of intensive "branding," lawyers are confronted with trademarks at every turn of their practice. Footnotes 1 The term "trademark" is used broadly in this article to include service marks. 2 See Lanham Act ¤ 45, 15 U.S.C. ¤ 1127. 3 Fragrances of products which are sold primarily for their scent such as air fresheners or perfumes are not protectable trademarks. PTO Examination Guide No. 1-91, sec. B-7 (March 28, 1991) (cited in 1 J. Thomas McCarthy, Trademarks and Unfair Competition ¤ 7:105 (4th ed. 2001)). 4 See United States Dept. of Commerce, Examination Guide No. 2-99. Marks Composed, in Whole or in Part, of Domain Names (September 29, 1999) (reprinted in 1 J. Thomas McCarthy, Trademarks and Unfair Competition ¤ 7:17.1 (4th ed. 2001)). 5 See id. 6 See Trademark Manual of Examining Procedure (TMEP) ¤ 1202.10 (3rd ed. Jan. 2002) <http://www.uspto.gov/web/offices/tac/tmep/> [hereinafter TMEP]. 7 See id. ¤ 1213.4. 8 See 4 J. Thomas McCarthy, Trademarks and Unfair Competition ¤ 26:20 (4th ed. 2001). 9 See S.B. 150, Gen. Sess. (Utah 2002). 10 Utah Code Ann. ¤ 70-3a-102 (2002). 11 See ¤ 70-3a-302. 12 See ¤ 70-3a-303. 13 See ¤ 70-3a-304. 14 See ¤ 70-3a-305. 15 ¤ 70-3a-404. 16 See id. 17 See Lanham Act ¤ 15 U.S.C. ¤ 1051. 18 See ¤ 7. 19 See id. 20 See 3 McCarthy, supra note 8, ¤ 19:9 (and cases cited therein). 21 See Lanham Act ¤ 15, 15 U.S.C. ¤ 1065. 22 See ¤ 29. 23 See id. 24 See ¤ 40. 25 See ¤ 22. 26 See 4 McCarthy, supra note 8, ¤ 26:32, at 26-52; First Sav. Bank, F.S.B. v. First Bank System, Inc., 101 F.3d 645 (10th Cir. 1996). 27 See 3 McCarthy, supra note 8, ¤ 22:1. 28 See Lanham Act ¤ 35, 15 U.S.C. ¤ 1117. 29 Section 2 of the Lanham Act, 15 U.S.C. ¤ 1052, sets forth all of the bases for refusal to register a trademark on account of its nature. Refusal on the basis of confusing similarity is addressed in subsection (d) and descriptiveness is addressed in subsection (e) of section 2. Other bases for refusal to register a trademark under section 2 include that the mark consists of immoral or scandalous matter, comprises a flag or coat of arms of the U.S. or other country, is deceptively misdescriptive of the goods, is primarily geographically descriptive of the goods, is merely functional, etc. 30 ¤ 2(d). 31 See Philip Morris Inc. v. K2 Corp., 555 F. 2d 815 (C.C.P.A. 1977). 32 See Bongrain Int'l (American) Corp. v. Delice de France Inc., 811 F.2d 1479, 1484-85 (Fed. Cir. 1985). 33 The web site address for accessing the Patent and Trademark Office records is http://www.uspto.gov/main/trademark.htm. 34 See Int'l Star Class Yacht Racing v. Tommy Hilfiger U.S.A., 205 F.3d 1323 (2nd Cir. 2000); Sands, Taylor & Wood Co. v. Quaker Oats Co., 976 F.2d 947 (7th Cir. 1992). But see, King of the Mtn. Sports, Inc. v. Chrysler Corp., 185 F.3d 1084 (10th Cir. 1999) (holding that intent to take a free ride on plaintiff's good will could not be inferred merely because defendant Chrysler failed to conduct a full search before using the mark KING OF THE MOUNTAIN for downhill ski races sponsored by Chrysler). 35 See TMEP, See note 6, ¤ 1209.01. 36 See id. 37 A mark acquires distinctiveness (also called secondary meaning) if the mark has come to be associated with the particular product "so that to the consuming public the word has come to mean that the product is produced by that particular manufacturer." Id. ¤ 1212. 38 See id. ¤ 1209.01. 39 37 C.F.R. ¤ 2.23. 40 See Lanham Act ¤ 12, 15 U.S.C. ¤ 1062. 41 See id. 42 See id. 43 See ¤¤ 12, 13. 44 See ¤ 13. 45 See id. 46 See ¤ 8. 47 See id.