Restoration by Modernization: How the Trademark Modernization Act of 2020 Supports Consumer Expectations and Promotes Access to Justice
Rukayatu Tijani | February 04, 2021
Rukayatu “Ruky” Tijani is the Founder, Creator, and Chief Esquire Officer of Firm for the Culture. Ruky founded the Firm for the Culture after years of serving as an intellectual property attorney in the Silicon Valley Office of the top litigation firm in the country. Firm for the Culture was borne out of Ruky’s passion for the law, social impact, social entrepreneurship, and strategically scaling to create sustainable change. Drawing on her extensive experience as an intellectual property attorney in the Silicon Valley office of the top litigation firm in the Country, Ruky provides extensive, detail-oriented and comprehensive trademark education, strategy, and application services to a host of social entrepreneurs and innovative founders at accessible flat-fee prices.
Introduction
Trademark Law is getting its groove back.
On December 27, 2020, trademark law stepped into the modern era, finessing its 74-year-old body of laws into something for the businesses of today. Congress enacted several amendments to the Trademark Act of 1946—otherwise known as the Lanham Act—in an effort to remove trademark “deadwood” and fraudulent marks from the United States Patent and Trademark Office register, enhance commercial innovation, and bolster the integrity of the USPTO processes and procedures.
So, what is this new law, and why has it received so much fanfare from legal experts and business owners alike? Known officially as House of Representative Bill 6196 and colloquially as the Trademark Modernization Act of 2020 (“TMA”), the new bipartisan legislation (1) codifies the heretofore informal “letter of protest” trademark process, (2) allows trademark examining attorneys the flexibility to shorten times required to respond to office actions, (3) provides, for third parties, two significantly streamlined alternatives to the inevitably protracted and expensive TTAB [1] cancellation process, and (4) protects business owners’ intellectual property by codifying the “irreparable harm” standard in trademark injunction suits brought before federal courts.
Get to Know the “OG”
Before jumping into the TMA, it’s important to know a little bit about the OG [2] here — the Lanham Act of 1946.
The Lanham Act of 1946 was instituted to protect “word[s], name[s], symbol[s], or device[s]” used “to identify and distinguish [one’s] goods … from those manufactured or sold by others and to indicate the source of the goods.” [3] In other words, the Lanham Act was instituted to protect … you guessed it … trademarks. In promulgating an entire body of federal law to protect business names and brand identities, the Lanham Act set out to accomplish two major goals: (1) to safeguard the public so that “in purchasing a product bearing a particular trade-mark which it favorably knows, [the consumer would] get the product […] [they] ask[ed] for and want[ed] to get” [4]; and (2) to protect a business’s investment of “energy, time, and money” in promoting its brand [, …] establishing goodwill, and “[preventing] misappropriation by pirates and cheats.” [5] In serving these goals, the Lanham Act sought to promote an economic function by “enabling consumers to quickly, easily, and efficiently differentiate between the myriad product offerings that flood modern-day store shelves, catalogs, and Internet websites,” thereby “lower[ing] search costs and foster[ing] quality control rather than promot[ing] social waste and consumer deception. [6]
But recent events have frustrated the purpose of the Lanham Act. In the last five years, the USPTO has experienced an overwhelming deluge of fraudulent applications, with a disproportionate share of applications coming from China. [7] Indeed, in a recent Congressional hearing predating the TMA, intellectual property Professor Barton Beebe of New York University School of Law testified about the dramatic increase in foreign applications, noting many ultimately successful applicants used doctored photos as evidence of “use in commerce.” [8] In fact, 60% of fraudulent applications (for t-shirts) filed in 2017 successfully proceeded to publication and almost 40% successfully matured into federal trademark registrations. [9] The resulting trademark depletion and clutter on the Principal Register have stifled the Lanham’s Act’s efforts to protect consumers and to promote equitable competition.
Against this backdrop, the TMA was born. With the TMA in place, Congress promises to streamline an otherwise protracted and unnecessarily expensive process at the USPTO, protect business owners’ investments of “energy, time, and money,” and protect consumers from a deluge of fraudulent or misappropriated marks in the marketplace.
So let’s see how Trademark Law has reclaimed its time and realigned with its original purpose.
The TMA Codifies the Letter of Protest Process
The TMA’s first major change pays homage to informal practices of yesteryear.
Before the TMA, a relatively obscure protest process generally only known in elite and exclusive trademark circles allowed third parties to challenge pending trademark applications before such marks proceeded to publication or registration. Serving as an inexpensive alternative to the often laborious and protracted TTAB cancellation process, [10] letters of protest allowed third parties to protest a pending trademark application on “any reasonable ground for refusal appropriate in ex parte examination.” [11]
Such “reasonable ground[s]” could include, for example, a claim that an applicant sought to register a “generic or descriptive” mark, that an applicant’s mark was likely to be confused with a “federally registered mark or prior-pending application,” or that suspension was warranted “pending litigation claiming infringement based on the applicant’s use of the applied-for mark.” [12]
While the process often saved third parties time and expense, the protest procedure was administered at the “discretion of the USPTO” [13] and remained largely underutilized, thus allowing businesses with institutional know-how or resources to take advantage of a “loophole” small businesses knew little about.
The TMA now brings to light what was once obscure, formalizing the protest process by allowing any party to submit evidence relevant to a reasonable ground for refusal, together with an explanation, for a prescribed fee of $50. After this, the Director of the USPTO will have two months to determine whether to include such evidence in the record of the application. While the Director’s determination as to whether to include the submitted evidence is final and non-reviewable, the applicant is not barred from raising any issue regarding the ground for refusal in the application or any proceeding.
This amendment, in the end, “provides a time-limited process by which a third party can submit to the USPTO evidence relevant to the examination of a trademark application for consideration in deciding whether a trademark registration should issue,” [14] thus managing applicant and third party expectations while providing greater access to a powerful prosecution tool.
The TMA Provides for Flexible Office Action Response Times
The TMA provides the USPTO flexibility in setting times to respond to office actions issued during examination. Before the TMA, the USPTO was required to provide six months for an applicant to respond to an office action, regardless of the simplicity or complexity of the examining attorn
ey’s initial registability determination. [15] The new provision would “allow the office to set response periods, by regulation, for a time period between 60 days and six months, with the option for an applicant to request extensions to a full six-month period.” [16] Only time will tell whether different time periods will be applied to different types of office actions. [17]
The TMA Provides Cheaper Ways to Challenge Deadwood on Trademark Register
As a result of the recent increase of trademark registrations procured using fake specimens, trademark depletion and clutter are significant problems that the TMA helps to address. Before the TMA, parties seeking to challenge existing USPTO registrations could only do so through an inter partes cancellation proceeding before the TTAB or through a lawsuit in federal court. If the parties were fortunate enough to catch the application in the midst of publication, initiating an opposition proceeding to cancel the application would be the most effective tactic.
Under this regime, inaccessibility to justice abounded. Indeed, one study reported the average cost of a trademark opposition in the United States ranged from $150,000 to $500,000, [18] whereas another estimated the median cost of a U.S. opposition or cancellation proceeding to be $95,000. [19]
The status quo as we knew it hit small businesses the hardest; it was prohibitively expensive to challenge trademarks that were not actually in use and preventing these businesses from filing new trademark applications.
The TMA established two new procedures for third parties to challenge trademark registrations that were procured using fake specimens and/or not actually in use, causing clutter and depletion on the register: (1) mark expungement and (2) mark reexamination.
For the mark expungement process “any person” or third party can challenge a trademark registration on the ground that it was never “used in commerce,” the standard required for registration. [20] To initiate a challenge, the person is required to: (1) identify each registration at issue in the petition; (2) identify each good or service recited in the registration for which it is alleged that the mark has never been used in commerce; and (3) include a verified statement that the mark, after a “reasonable investigation” was deemed not to be in use. [21] After the expungement petition is submitted, the USPTO Director determines if the petitioner made a “prima facie” showing that the mark at issue was never used. [22] If the “prima facie” standard is met, the Director initiates ex parte proceedings and notifies the petitioner and the registrant of the same. Once proceedings commence, the registrant can overcome a potential order to cancel by providing evidence of use. [23] Evidence of use can come from any period that would have “supported registration at the time the application was filed or [when] the relevant allegation of use was made” [24] or at any period “after registration, but before the petition to expunge [wa]s filed.” [25] If the registrant fails to provide evidence of use, and if the mark is otherwise deemed to have never been used in commerce as reflected in the registration, the registration is cancelled. [26]
The reexamination process similarly allows third parties to submit a petition challenging a registration, but not on a ground of nonuse, but instead on the ground that the “mark was not in use in commerce … on or before the relevant date.” [27] The TMA notes the “relevant date” can be any one of the following: (1) the initial filing date of a 1(a) application; (2) the date a statement of use was filed to satisfy the use in commerce requirement of a 1(b) application; or (3) the period by which filing a statement of use expired. [28] To initiate a reexamination challenge, the petitioner is required to (1) identify each registration at issue in the petition; (2) identify each good and service recited in the registration for which it is alleged that the mark was not used in commerce on or in connection with the mark at issue on or before the relevant date; and (3) include a verified statement that the mark, after a “reasonable investigation” was deemed not to be in use on or before the relevant date. [29] As in the case of expungement proceedings for the “never used” standard, the Director determines if the petitioner made a “prima facie” showing that the mark at issue was not in use on or before the relevant date. If the standard is met, reexamination proceedings commence, and a cancellation will be issued unless the registrant submits evidence showing use on or before the relevant date. [30]
The TMA also allows the USPTO Director to initiate an expungement or reexamination proceeding on its own initiative, effectively allowing the cancellation of a mark to occur without the need for third party intervention or contribution. [31] This sua sponte protocol is not dissimilar to the USPTO’s post registration proof of use audit program – a random audit of registered marks to ensure such marks on the USPTO register continue to accurately reflect “use in commerce.” [32] Under the audit program, the registrant must prove use of the mark in relation to each of the goods or services the USPTO chooses from the registration at random. [33] Alternatively, the registrant can also delete from its registration goods or services for which no proof of use can be provided. Failure to provide proof of use or delete unused goods or services may result in cancellation of the mark in its entirety, [34] a result no bona fide trademark owner wants as they grow and scale their business.
Copending challenges and estoppel procedures are also in place to prevent trademark owner harassment and process abuse. No more than one expungement or reexamination proceeding can take place at a time with respect to the same goods and services at issue, and if the registrant successfully proves “use” to overcome the threat of cancellation, no further ex parte expungement or reexamination proceedings may be initiated as to those goods or services, regardless of the identity of the petitioner. [35]
The TMA also provides time limits to expungement and reexamination proceedings. An expungement petition can be filed, or a proceeding can be instituted by the Director on his own initiative, beginning three years after registration. [36] Reexamination proceedings, on the other hand, can be commenced within “five years after the date of registration of a mark registered based on use in commerce.”[37]
The TMA Restores the Irreparable Harm Presumption in Trademark Suits for Injunctive Relief
Lastly, the TMA restores a historical norm frustrated by a recent Supreme Court ruling. In Ebay v. Merc Exchange, LLC, 547 U.S. 388 (2006), the United States Supreme Court ruled that an injunction should not be automatically issued based on a finding of patent infringement. Several courts extended this ruling to trademark cases and nixed the rebuttable presumption of irreparable harm in trademark proceedings. This left trademark litigants with little choice but to provide evidence in an attempt to satisfy the strict four part standard governing injunction claims. [38] While seemingly innocuous, the practical realities of this “nix” proved fatal to many trademark cases; without the rebuttable presumption of harm in trademark cases, litigants would have to prove a harm that, in the context of trademark law, was “primarily reputational, which by its very nature cannot be quantified or compensated with mere money.” [39]
The TMA codified the rebuttable presumption in trademark suits for injunctive relief, effectively restoring a commonplace practice in trademark cases. With the presumption back in place, parties can take back rightful ownership of their brands by precluding infringers from the marketplace and serving as the “sole source of the product or service at issue…[, all in efforts to] ensure the quality of the products sold or services provided under its trademark.” [40]
Getting Back to the “OG”
The Trademark Modernization Act will allow small business and legitimate third parties a cheaper and more efficient avenue to challenge pending applications and existing registrations. With a one-year buffer to implement the TMA’s sweeping changes, time will tell whether the TMA will provide the access to justice it purports to administer. What is known, however, is that the TMA will require a “report on efforts to declutter the trademark register” which should signal to the public at large that Congress is making continual efforts to achieve the purposes of the Lanham Act, the original “OG.”
Footnotes
1 “TTAB” stands for Trademark Trial and Appeal board, the appellate arm for trademark disputes before the United States Patent & Trademark Office.
2 For Trademark nerds like Ruky, we’re not talking about the “official gazette” in this context. We’re talking about the “original gangsta,” the Lanham Act.
3 15 U.S.C. § 1127.
4 Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 782 n.15 (1992) (Stevens, J., concurring), see also Testimony of Douglas A. Rettew before the Senate Judiciary Committee on December 3, 2019 (“Rettew Testimony”), located at https://www.judiciary.senate.gov/imo/media/doc/Rettew%20Testimony.pdf.
5 Rettew Testimony.
6 Rettew Testimony.
7 See the December 3, 2019 hearing before the Senate Judiciary Intellectual Property subcommittee, located at https://www.judiciary.senate.gov/meetings/fraudulent-trademarks-how-they-undermine-the-trademark-system-and-harm-american-consumers-and-businesses.
8 “Use in Commerce” is the standard that must be met to obtain a federal trademark registration in the United States. But see 15 U.S.C. §1126 for foreign applications submitted on the basis of §44(e) and 15 U.S.C. §1141f for applicants submitted on the basis of §66(a), both of which allow issuance of a registration based on a “bona fide intention to use the mark in commerce.”
9 Testimony of Professor Barton Beebe before the Senate Judiciary Committee on December 3, 2019 (“Bebee Testimony”), located at https://www.judiciary.senate.gov/download/beebe-testimony.
10 According to the USPTO, filing a Letter Protest requires $50 in total as opposed to the Cancellation filing fee of $400 – $600 per class.
11 See Trademark Manual of Examining Procedure (“TMEP”) §1715 (October 2018 Edition).
12 See id.; Additional “reasonable ground[s]” are discussed further therein.
13 Id.
14 TMA Section by Section Analysis, located at https://hankjohnson.house.gov/sites/hankjohnson.house.gov/files/documents/TM%20Act%20-%20Section-by-Section%20.pdf.
15 Id.
16 Id.
17 There are several types of office actions an examining attorney can issue. The most common non-substantive types require the applicant to disclaim portions of their mark or reclassify certain goods and services. The most common substantive types require the applicant to show why a purported mark functions as a trademark, why the applicant’s mark is not confusingly similar with a pending or registered mark, or why the applicant’s mark is not merely descriptive or generic.
18 Paul F. Kilmer, The Value Equation of Trademark Oppositions: A Multinational Comparison of Costs and Perceived Benefits, INTABULLETIN, Mar. 1, 2013, located at https://www.inta.org/INTABulletin/Pages/ TheValueEquationofTrademarkOppositionsAMultinationalComparisonofCostsandPerceivedBenefits.aspx; see also Bebee Testimony.
19 AIPLA, REPORT OF THE ECONOMIC SURVEY 2015, at 39 (2015), http://files.ctctcdn.com/e79ee274201/b6ced6c3-d1ee-4ee7-9873-352dbe08d8fd.pdf.
20 See Testimony of Mr. Thomas Williams before the Senate Judiciary Committee on December 3, 2019 (“Williams Testimony”), located at https://www.judiciary.senate.gov/download/williams-testimony.
21 HR Bill 6196 §5.
22 Id.
23 Id.
24 For instance, in 1(b) applications, if an allegation of use was made after filing.
25 HR Bill 6196 §5; but see §5 (For foreign marks registered pursuant to Sections 44(e) or 66, registrant need not show use but must “demonstrate[] that any nonuse is due to special circumstances that excuse such nonuse.”)
26 HR Bill 6196 §5.
27 HR Bill 6196 §5.
28 Id.
29 Id.
30 Id.
31 Id.
32 See UPSTO Post Registration Proof of Use Audit Program, located at https://www.uspto.gov/trademarks/maintain/post-registration-audit-program.
33 Id.
34 Id.
35 HR Bill 6196 §5.
36 Id.
37 Id.
38 The four part test for injunctive relief requires the plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
39 Testimony of Megan K. Bannigan before the Senate Judiciary Committee on December 3, 2019 (“BanniganTestimony”), https://www.judiciary.senate.gov/download/bannigan-testimony.
40 Id.