USPTO Changes in Requirements for Declarations of Use

We previously reported the Declarations of Use pilot program by the USPTO. Examiners could request additional evidence when they questioned the evidence filed. These requests applied to both national and international registrations. As a result of the pilot program, the goods and services listed in the vast majority of the registrations questioned were limited to those in actual use. The USPTO is now proceeding to make the pilot program procedures part of the official rules. The objective is to have a more precise register of trademarks. Although the entire rulemaking process is not complete, these new regulations are likely to be implemented swiftly.

The key provision is:

The Office may require the owner [or holder of an International Registration] to furnish such information, exhibits, affidavits or declarations, and such additional specimens as may be reasonably necessary to the proper examination of the affidavit or declaration under section 8 [section 71] of the Act or for the Office to assess and promote the accuracy and integrity of the register.

See Federal Register – 6/22/2016 amending TMEP Sections 2.161 and 7.37

This rule gives the USPTO great latitude. Examiners can request additional information from a registrant to determine that the affidavit of use is accurate, and in particular that the mark is in use for all of the goods and services listed in the registration. United States law requires that an application filed on the basis of intent-to-use and converted to use, or based on use, must be in use for all of the goods and services. This is also true for the filing of Declarations of Use.

This new rule will be particularly problematic to foreign registrants where there is a tendency to include items in the list of goods and services that are beyond the scope of the business of the trademark owner. This common practice is because foreign trademark rights are more specifically limited to the actual goods and services listed in the registration. Rather under US law rights are evaluated under a likelihood of confusion analysis which can extend beyond the specific goods and services listed in the registration.

This rule further supports our regular recommendation to trademark owners to list those goods and services that are in actual use for the mark in order to minimize problems with the registration in the future. A likelihood of confusion determination is made on a variety of factors. Importantly, when pursuing an infringement, a trademark owner should not have to defend the registration from attack on the basis of non-use or fraud in the procurement or maintenance of the registration. The mark must be in use for all of the goods and services listed.

The USPTO published in the Federal Register on February 10, 2017, that there would be a 60 day freeze of the implementation of the foregoing rule change given the January 20, 2017 Presidential Executive Order requiring that any agency rule change comply with the order. The effective date was March 21, 2017, and as of now, no additional rules or regulations have been published or apparently implemented.

We note that the proposed rule went through exhaustive testing, analysis and public comment, and the Trademark Bar has supported the implementation of the rule to effectuate a cleaner and more accurate registry of trademarks.

USPTO will suspend examination – Section 2(a)’s Scandalousness and Disparagement Provisions

Among the many reasons available to the USPTO to reject trademark applications is Section 2(a) of the Lanham Act, 15 U.S.C. § 2(a). This provision bars registration of marks that consist of or comprise immoral or scandalous matter, or matter which may disparage persons, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.  The constitutionality of provisions of Section 2(a) are the subject of active court litigation and the outcome of these actions is relevant to the issue of registrability of marks in the United States.

In re Brunetti, Case No. 15-1109, (Fed. Cir. filed November 6, 2015) a Federal Circuit appeal denying registration of the mark “FUCT” where the Applicant argued that prohibition of the registration of scandalous marks under Section 2(a) of the Lanham Act is unconstitutional.

Pro-Football v. Blackhorse (No. 15 1874, Fourth Circuit). This is an appeal from the (TTAB) petition granting cancellation of six registrations for word and design marks containing the word, REDSKINS for entertainment services. See our June 20, 2014 blog post for a case analysis.

In re Tam, 808 F.3d 1321, 1358, 117 USPQ2d 1001, 1025 (Fed. Cir. 2015) (en banc), as corrected (Feb. 11, 2016) where the Federal Circuit determined that Section 2(a) barring registration of disparaging marks was unconstitutional.  See our December 24, 2015 blog post for a case analysis. On March 9, 2016, the USPTO filed a request to extend the time to file a Petition for a Writ of Certiorari (Supreme Court No.15A925).

Consistent with USPTO procedures, on March 10, 2016, the USPTO issued guidance to the examiners to suspend action on pending applications involving marks subject to refusal under these provisions in Section 2(a), provided that all other issues raised by the examiner have been resolved. Clearly, the USPTO is waiting for a Supreme Court determination of the constitutionality of Section 2(a) of the trademark statute, namely, can the USPTO deny registration of marks that are scandalous, immoral or disparaging.

Changes to European Trademarks

Update to our December 1, 2015 post Changes to the European Trademark System are Imminent, as of March 23, 2016, the Office of Harmonization in the Internal Market (OHIM) will have a new name. It will be known as the European Union Intellectual Property Office (EUIPO). The Community trade mark will be renamed the European Union trade mark.

A summary of noteworthy changes are as follows:

  • An application covers a single class, but additional classes can be added upon payment of additional per class fees. (The pay for one, get two extra classes for free no longer applies.)
  • Non-displayable signs such as smells and sounds may be registered. (Previously only graphically displayable marks were permitted.)
  • Applicant must clearly and accurately describe the goods and services in the classes in question. (Class headings are no longer permitted.)
  • Certification marks can now be registered.
  • Grounds for Refusal have been expanded. Namely adding, designations of origin, geographical indications, protected traditional terms for wine and traditional specialities. (Previously, there were limited substantive grounds that OHIM could assert to deny registration of a mark. )
  • Opposition Grounds have been expanded. Importantly, a revision of the relevant five year period for proof of use of the earlier mark in opposition proceedings to be the date of filing or the date of priority of the EU trade mark application, not the date of publication of the opposed mark.
  • National offices must implement within seven years procedures for revocation and nullification of national trademarks. (Presently, many EU member countries do not provide an administrative way to cancel a national trademark registration requiring all such proceedings to be in the court.)
  • “Goods-in-transit” procedures to prevent the EU from being used as a transit hub for counterfeit goods. These are new provisions that will require each of the EU member countries to implement in their customs regulations.
  • New prohibitions on the use of signs (marks) in comparative advertising where that advertising is misleading. Comparative advertising is permitted, but is more restrictive.

Again, we note that there are many companies out there fraudulently soliciting for payments. The EUIPO has restated its concern about these Fraudulent Solicitations in light of the potential confusion while the OHIM office changes its name to EUIPO and the CTM trade mark registration is renamed the EU trade mark. See our Fraudulent Solicitations link for additional information about the many entities soliciting misleading payments for services.

The full text of the new directive is available. 

New Life for Outdated Trademark Registrations

On September 1, 2015, the USPTO announced a Pilot Program to Allow Amendments to Identifications of Goods and Services in Trademark Registrations Due to Technology Evolution. The intent of the program is to permit “amendments to identifications of goods/services in trademark registrations that would otherwise be beyond the scope of the current identification” with the “goal of preserving trademark registrations in situations where technology in an industry has evolved in such a way that amendment of the goods/services in question would not generate a public-notice problem.” That is to say, where a trademark registration claims a manner or means or medium of distribution that has changed due to changes in technology, it may be possible to amend the identification of goods and services reflecting the current manner or means or medium of distribution. This is what is being termed an “evolved designation.”

Since commencing the program, the USPTO has published examples of permissible evolved designation amendments. Examples are:

Registration ID Proposed ID Change
Prerecorded audio and video tapes featuring religious topics Prerecorded CDs and DVDs featuring religious topics
Pre-recorded audio cassettes Audio recordings featuring religious content
Pre-recorded audio/video cassettes for use in the field of pre-school and primary education Sound and video recordings for use in the field of preschool and primary education
House mark for use with type face fonts recorded on magnetic and optical media House mark for use with type face fonts on electronic storage media and downloaded provided by means of electronic transmission
Retail store services and on-line retail store services featuring musical instruments, bows, strings, instrument cases, sheet music, books pre-recorded video tapes and pre-recorded CDs featuring musical performances or musical instruction Retail store services and on-line retail store services featuring musical instruments, bows, strings, instrument cases, sheet music, books, video recordings and pre-recorded CDs featuring musical performances or musical instruction
DOS-based application software to manage and forecast inventory for the direct marketing industry Application software to manage and forecast inventory for the direct marketing industry
Videotapes, videocassettes, all on the subjects of ancient peoples and cultures around the world Video recordings on the subjects of ancient peoples and cultures around the world

It may even be possible to change the class coverage of the registration when the proper current description of the goods or services are in a different class from what was originally registered (e.g.: printed publication are class 16 while downloadable publications are class 9).

At the end of the process the USPTO will issue a new registration certificate, maintaining the priority of the original registration.

Requirements:

  • Amendments are made via the post-registration petition to the Director provisions and the certificate of registration amendment provisions with a government fee of $200.00.
  • Amendments cannot be made that would expand the scope of the registration. If the registration is limited to a specific subject matter, then the amendment would continue with the same subject matter, merely altering the distribution mechanism.
  • The registrant must have discontinued the prior technology and the designation is removed from the description in the registration. Otherwise, the registrant would be compelled to file a new application.
  • The amendments must conform to the current USPTO practice requirements for proper descriptions of goods and services.
  • A US registration based on an International Registration (Madrid Protocol), must conform with the underlying IR during the first five years of registration. However, US registrations based on national foreign registrations are not similarly limited.
  • There are a number of technical requirements, including:
    •     A request for a waiver of what is known as the “scope rule” which essentially permits only restrictions to identifications that would not require republication;
    •     A declaration that that the registrant will not file (or re-file) an incontestability affidavit for at least five years from the amendment acceptance date for the evolved designation;
    •     Submission of a specimen showing current use of the mark in commerce, along with the dates of first use of the evolved designation along with a declaration in support. (Note: the original first use dates would continue in the registration); and
    •     The request for the amendment must be filed electronically.

Once accepted by the USPTO, the amended registration will be published in the Official Gazette along with other Section 7 amendments.

The USPTO has considered third party harm considerations, and in the amendment examination process will:

  •     Conduct a search for possible conflicting marks;
  •     Require that the incontestability status applicable to any evolved designation will not apply for five years;
  •     Provide a mechanism for interested parties to comment about proposed amendments prior to acceptance, and
  •     Publish the proposed amendments on its website allowing interested parties to comment for thirty days.

What does this mean for trademark owners?

    Depending upon the specific circumstances, it may be more prudent to file a new application claiming not only the new delivery mechanism, as an example, but additional goods and services that may be of interest to the registrant. Often, business changes over time, and trademark owners typically expand their product offerings.

    When filing either a Section 8 (use) or 9 (renewal), it may be more prudent to delete the goods and services that are no longer of interest.

    Ultimately, it really depends on the exact wording in the registration, and on what goods and services the trademark owner is using the mark that will determine the best procedure to deal with changes in technology.

Depending upon how many trademark owners take advantage of the pilot program will determine if the trademark office will continue with this special procedure. So, if you have any trademark registrations that claim outdated technology (or need to claim new technology), and could benefit from this program, feel free to contact us for a consultation.

Who Stole the Milano Cookie from the Cookie Jar?

On December 2, 2015, Pepperidge Farm filed suit against Trader Joe’s in Connecticut federal district court, alleging that Trader Joe’s Crispy Cookies infringe on Pepperidge Farm’s Milano cookie configuration trademark and causes “dilution by blurring,” a term of art in trademark law that indicates “an association arising from the similarity between a mark and a famous mark that impairs the distinctiveness of the famous mark.” Trademark Dilution Revision Act of 2006 (“TDRA”), Section 43(c), Lanham Act, 15 U.S.C. § 1125(c)(2)(B) (2006). Some might call the TDRA a license to bully, but in this case Pepperidge Farm has hardly picked on a small fry.

Pepperidge Farm’s trademark, which registered on September 28, 2010, but was first used (and first used in commerce) on December 31, 1977, is described in the registration as follows:

The mark consists of a configuration of a cookie comprised of a filling sandwiched between two oval-shaped cookies. The notch depicted near the upper portion of one of the cookies represents a small portion of the cookie that bumps out of the otherwise flat contoured surface.

Both the mark (the “Milano Configuration”) and a specimen cookie are pictured below. Pepperidge Farm Milano TMcontends that its Milano Configuration is famous, and it may well be: a well-regarded treatise on trademark law, McCarthy on Trademarks, argues that a mark is famous if “it is known to more than fifty percent of the defendant’s potential customers.” Marks that have been determined to be famous include VICTORIA’S SECRET, BEANIE BABIES, WAWA, COCA-COLA, THE GREATEST SHOW ON EARTH, 7-ELEVEN, NIKE, BUICK, DUPONT and KODAK.

Famous marks are generally afforded a greater scope of protection than non-famous marks. Indeed, if Pepperidge Farm is able to show that the Milano Configuration is famous, then in order to win on its claim of “dilution by blurring,” at least in the Second Circuit where this case has been brought, Pepperidge Farms will not need to prove that Crispy Cookies are visually substantially similar to Milano cookies.* Rather, it will only need to prove that they are similar enough, along with other factors weighed in Pepperidge Farm’s favor, including:

  • the degree of inherent or acquired distinctiveness of the Milano Configuration;
  • the extent to which Pepperidge Farm is engaging in substantially exclusive use of its Milano Configuration;
  • the degree of recognition of the the Milano Configuration;
  • whether Trader Joe’s use of the Milano Configuration is intended to create an association with the Milano Configuration; and
  • any actual association between the Crispy Cookie and the Milano Configuration.

(*Note: Some circuits still require substantial similarity as a threshold test for trademark dilution.)

crispy cookiesWhether Crispy Cookies are similar enough to the Milano Configuration is a judgment call. In the complaint, Pepperidge Farm describes the Crispy Cookie as “a chocolate filling sandwiched between two rounded rectangular cookies, mimicking an overall oval shape.” The use of of the word “oval” is somewhat misleading, as the Crispy Cookie is more rectangular than oval, and it doesn’t contain the Milano’s famous notch, as can be seen in the image below. How a jury comes out on that question is anyone’s guess.

To bolster its infringement and dilution claims, Pepperidge Farm also contends that Trader Joe’s mimics Pepperidge Farm’s packaging. Displayed on the package of Crispy Cookies (see below) are three cookies upright in a fluted (apricot-hued) paper cup, but there are no fluted paper cups in Trader Joe’s packaging: the cookies sit in a plastic tray. Pepperidge Farm uses fluted (white) cups inside the package, but has not shown fluted cups on its packaging since the 1990s. Pepperidge Farm further claims that Trader Joe’s upright bag is intended to mimic that of the Milano, when most cookie packs are oriented horizontally.

Current packagingPepperidge Farm’s argument that Trader Joe’s use of an image of Crispy Cookies sitting in a fluted (albeit apricot-hued) paper cup to create an association in consumers’ minds is not a bad one, given that the actual Crispy Cookies packaging includes no fluted paper cups inside. However, claiming that the image on Trader Joe’s packaging is mimicking the image on Pepperidge Farm’s packaging from twenty years ago seems to be a stretch.

As a separate claim, Pepperidge Farm alleges that Trader Joe’s product is “likely to cause confusion, mistake, and/or deceive purchasers, potential purchasers, and the relevant public and trade at the time of purchase, as well as post purchase as to the source or sponsorship or approval of the Infringing Product, and/or as to its affiliation with Pepperidge Farm.” Pepperidge Farm will have a very difficult time convincing a judge or jury that any significant consumer confusion could arise at the time of purchase, given the sophistication of consumers of Milano cookies, few people shopping at Trader Joe’s will think that Milano cookies were inside the Crispy Cookies bag or that Pepperidge Farm was affiliated with Trader Joe’s. Most people will recognize Crispy Cookies as a merely competing product, with biscuits of similar texture and color, and chocolate filling — configurations not owned by Pepperidge Farm. However, if the Milano Configuration is famous, the question won’t be consumer confusion at the time of purchase, but consumer association. Regardless of whether the Milano Configuration is famous, Trader Joe’s will surely have its greatest difficulty in a post-purchase context, where consumers may not see the associated packaging. As with many trademark infringement suits involving claims of fame and similarity, the case will likely be determined by consumer surveys.

The TDRA poses the greatest risk of liability to Trader Joe’s because Pepperidge Farm’s burden of proof regarding the similarity of the two products will be so much lower. Moreover, in most instances, the statute provides only for an injunction against further dilution; but if Pepperidge Farm can show that Trader Joe’s sought willfully to trade on Pepperidge Farm’s reputation or to cause dilution, then Pepperidge Farm may be able to recover Trader Joe’s profits and, if the facts revealed in the case are egregious enough, legal fees. Recovery of profits and an award of legal fees is also possible if the jury finds that the Milano Configuration is not famous, but the configuration of Crispy Cookies is substantially similar to the Milano Configuration, and Trader Joe’s acted intentionally and egregiously. It wouldn’t be a surprise to see Trader Joe’s withdraw its Crispy Cookies from the marketplace in the near future, at least in their present form.

 

Changes to the European Trademark System are Imminent

A major revision to the European Union trademark system that will affect both Community trademarks (CTM) and individual country trademarks (of EU member states) is imminent. Some of the changes are administrative and some legal, while others directly affect trademark filings and renewals. A summary of the changes is as follows:

Administrative:

  • The Community Trademark will be renamed European Union Trade Mark
  • OHIM (the name of the trademark office as of the date of this post) will be renamed to European Union Intellectual Property Office

Changes Affecting Trademark Filing and Renewal:

  • Goods and services will have to be specifically described. Filing for class headings &/or listing all of the goods in a class will no longer be permitted.
  • There will be separate fees for each class in which trademark registration is sought, as is already the case in the United States. (As of the date of this posting, a single trademark application could include up to three classes for no additional fee.)

Legal:

  • All National offices will be required to implement administrative procedures for trademark cancellation. (Until now, trademark cancellation has only been possible in some countries via court proceedings.)
  • Some of the changes will require EU member states to harmonize their laws regarding trademark infringement and remedies, as well as make it somewhat easier for trademark holders to stop infringing goods from coming into the EU or being distributed thereafter. Also in the package, which can be viewed online, are directives aimed at protecting the public from overzealous and overreaching trademark owners.

Although still proposed, the new regulations, as my recent trip to Europe made clear, are destined to be implemented quickly — possibly as early as Q2-2016, although EU member states will have three years in which to implement them. This is the first significant change to the European trademark system in more than 20 years.

From my perspective, these are all welcome changes, with the possible exception of additional fees for filing in multiple classes. However, the goal of the fee change is laudable. By modestly reducing the cost of trademark registration, while adding fees where more than one class is claimed in an application or renewal, the European Union Intellectual Property Office hopes to discourage overbroad trademark claims — a typical problem in the EU. Our clients have often faced the situation where they wish to clear their marks for use in the EU, but are blocked by a substantially similar mark covering a class that isn’t even in use. Hopefully the new regulations will clear out a lot of this “dead wood.”

REDSKINS Marks Cancelled, Found to Disparage Native Americans

REDSKINS

On June 18th, the United States Trademark Trial and Appeal Board (TTAB) granted a petition to cancel six registrations for word and design marks containing the word, REDSKINS for entertainment services. The action, Amanda Blackhorse, Marcus Briggs-Cloud, Philip Gover, Jillian Pappan, and Courtney Tsotigh v. Pro-Football, Inc., Cancellation No. 92046185 (June 18, 2014) (“Blackhorse”), was brought by six Native Americans (later narrowed to five), who argued that the word “Redskin” was disparaging to Native Americans. Two of the three judges on the TTAB panel agreed and one dissented.

This was the second cancellation action brought by Native Americans against trademarks owned by the Washington Redskins. In the first, Harjo v. Pro Football, Inc., brought in 1992, the TTAB granted the petition for cancellation, but the federal courts ruled that the petitioners were barred by the doctrine of laches — i.e., they had waited too long after reaching the age of majority to file their action.

The registrations sought to be cancelled in Blackhorse were registered between 1974 and 1990. When the petition was filed in 2006 (shortly after the federal courts dismissed the Harjo petition), each of the petitioners had only recently reached the age of majority. Laches was no longer at issue.

Under 15 USC § 1052 of the Lanham Act, marks that “may disparage” persons or institutions “or bring them into into contempt or disrepute” are forbidden from being registered. Moreover, while the Lanham Act requires many cancellation petitions to be brought within five years of registration of the disputed mark, it provides no statute of limitation for cancellation petitions based on disparagement. Under 15 U.S.C. § 1064(3), such petitions may be brought “[a]t any time.” In the final Harjo appeal, Pro-Football, Inc. v. Harjo, 415 F.3d 44 (2005),the Court speculated that Congress “may well have denied companies the benefit of a statute of limitations for potentially disparaging trademarks for the very purpose of discouraging the use of such marks,” citing In re Riverbank Canning Co., 25 C.C.P.A. 1028, 95 F.2d 327, 329 (1938), which noted that the “field is almost limitless from which to select words for use as trademarks, and one who uses debatable marks does so at the peril that his mark may not be entitled to registration.”

Nevertheless, there was no fixed test for determining whether a mark is disparaging until Harjo. As re-stated in Blackhorse, the test is two-fold:

  1. What is the meaning of the matter in question, as it appears in the marks and as those marks are used in connection with the goods and services identified in the registrations?
  2. Is the meaning of the marks one that may disparage Native Americans?

In answer to the first question, the TTAB found that REDSKINS, even when used in connection with the presentation of football games, clearly refers to Native Americans. This is demonstrated by the design marks (visible on Washington Redskins helmets and elsewhere) and by the use of Native American garb and headdresses by the Washington Redskins’ band and cheerleaders (called “Redskinettes”).

In answering the second question, the TTAB noted that in addition to other evidence, it must take into account the views of a “substantial composite,” but not necessarily a majority, of the group which the mark is claimed to disparage. In addition, it had to find that REDSKINS was disparaging in connection with entertainment services (i.e., the presentation of football games) at the time the marks were registered.

Petitioners submitted two types of evidence to prove their case. General evidence as to the meaning of the word REDSKINS consisted of dictionary definitions, reference books and testimony from experts in linquistics. Specific evidence as to the views of Native Americans consisted of personal testimony and letters, newspaper articles and official records, including a 1993 Resolution of the National Congress of American Indians declaring that the REDSKINS trademarks were “offensive and disparaging.” The evidence left no doubt in the minds of the majority that REDSKINS was disparaging at the time the marks were filed. The respondent’s argument, that REDSKINS had acquired a separate meaning as the name of a football team, thereby neutralizing any disparaging effect, was rejected.

The dissent, on the other hand, believed that the petitioners failed to prove that the term was disparaging at the time of registration when used in connection with football. Furthermore, he said, dictionary definitions that labelled REDSKIN as “usually offensive” left open the possibility that it might not be in certain contexts, one of which could be football.

The TTAB ruling does not affect the ability of the Washington Redskins owner to continue using its REDSKINS trademarks. The only issue at stake in the case was whether federal law permitted registration of the mark in the US Patent and Trademark Office, thereby invoking the additional protections that registration provides. There is no question but that the USPTO made the right decision. Indeed, no federal agency should put a stamp of approval on conduct (or a trademark) that plainly disparages a segment of the population on the basis of race, religion, ethnicity, gender or sexual orientation.

Registering Product Configurations as Trademarks

What you need to know if you want to “trademark” a product configuration.

by Lawrence Stanley and Gordon Troy

In an era of fierce competition, brand owners are constantly looking for ways to foster brand identity, distinguish their products from those of competitors, and build and protect their marketing space. One method of doing that is by creating and promoting unique product configurations. Product features that have successfully registered as trademarks in the United States include shapes, designs, colors and smells. The possibilities are wide-ranging.

Furniture manufacturer Knoll has registrations for configurations of a couch, a table, two different chairs and a stool. Chocolate-maker Lindt and Sprungli registered a mark for chocolate in the three-dimensional shape of a closed umbrella. Guitar manufacturers have obtained registered marks for guitar body shapes, pearl fret board inlays and designs encircling the guitar’s sound hole. After taking its case to the Trademark Trial and Appeal Board (TTAB), confectioner Hershey’s succeeded in registering the manner in which squares of its chocolate bars are scored. The TTAB also permitted registration of a fragrance (Plumeria blossoms) for thread and yarn; and allowed Bottega Veneta’s “intrecciato” leather weave design to be published for opposition, potentially paving the way for registration.

One of the attractions of making a key aspect of a product function as a trademark is that it eliminates the need to stamp the brand owner’s logo all over the product in order for it to be recognizable. The most compelling attraction, however, is that it closes off competitors from imitating a brand owner’s  non-functional designs. It is the question of fair competition that leads the United States Patent & Trademark Office (USPTO) and the TTAB to disfavor registration in all but the most compelling instances. As one TTAB judge has observed:

[W]hen one is faced with a putative source indicator such as the configuration of a product or its packaging or any product feature that enhances the attractiveness of the product, it is logical to ask as a first question whether the public interest is best served by refusing to permit a particular feature to be taken from the “public domain.” This is, at root, a public policy question, and turns on whether the non-traditional indicator should remain permanently available for competitors to freely use.

Determining registrability

While product features are almost never inherently distinctive, they can acquire distinctiveness – and hence, trademark status in the US – through exclusive use if they also satisfy certain criteria. A brief explanation of the analytical framework employed by the USPTO to determine the registrability of product configuration trademarks is helpful.

For a trademark to be registrable, it must be “distinctive.” A mark is “inherently distinctive” if its very nature serves to identify a particular source. Yves Saint Laurent’s interlocking “YSL” is inherently distinctive, but the shape of a product, a type of weave or a color must acquire distinctiveness by accruing what is referred to as “secondary meaning” in the mind of the consumer. A bit of a misnomer, “secondary meaning” occurs when the primary significance of the product feature is its association with the brand owner. Section 2(f) of the Trademark Act, 15 U.S.C. 1052(f), permits the registration of a mark “which has become distinctive of the applicant’s goods in commerce,” and provides that the USPTO may accept as prima facie proof of distinctiveness “substantially exclusive and continuous use” of the mark during the five years prior to “the date on which the claim of distinctiveness is made.”

In practice, however, the degree of proof of distinctiveness required by the USPTO will depend upon the particular product configuration. The umbrella-shaped chocolate mentioned above was accepted for registration without the submission of any proof of distinctiveness. But generally speaking, such proof will include declarations showing that the product has been in the marketplace for at least five years; the feature for which registration is sought has been promoted as the applicant’s trademark (as shown by the nature and extent of the applicant’s advertising); and the geographic distribution of the product has been widespread. The USPTO may also require declarations from distributors, shop owners and/or customers who claim to recognize the product feature as originating with the applicant.

A brand owner who can show that the feature for which it seeks registration has acquired distinctiveness may still need to defend against a claim that the mark is “functional.” There are two types of functionality: utilitarian and aesthetic. A product feature is said to have utilitarian functionality when the feature is essential to the use or purpose of the product, is dictated by the functions to be performed, or has a direct bearing on the product’s cost or quality. A
leather strap on a handbag is an example of utilitarian functionality: no brand owner could prevent another from using a leather strap. However, the particular way that the strap is attached to the bag, if non-essential, is capable of acquiring distinctiveness by identifying the brand owner as the bag’s source.

Brand owners who advertise a product feature as making their product more effective or superior to competing products are unlikely to overcome this hurdle. Bose, the company that manufactures “901” speakers, was denied registration of the unique shape of its cabinets despite the fact that it had clearly acquired distinctiveness among consumers in the 27 years that the speakers had been on the market. In upholding the Examining Attorney’s refusal to register, the TTAB found that Bose’s two expired utility patents “repeatedly disclose the utilitarian advantages of this particular configuration” and that its advertisements “tout the utilitarian advantages of the product design.” Aesthetic functionality is more difficult to parse. In general terms, a feature is aesthetically functional if the brand owner’s right of exclusive use would put competitors at a significant non-reputational disadvantage. In other words, trademark protection does not extend to ornamental features of a product that would significantly limit the range of competitive designs available. At the same time, however, “competitors are not guaranteed the greatest range for their creations, but only the ability to compete ‘fairly’ within a given market.” Consequently, the test for aesthetic functionality is both fact-specific and subjective.

In 2013, the TTAB refused registration by Florists’ Transworld Delivery of the color black as applied to packaging for flowers. Colors, the TTAB found, serve an aesthetic function because they carry particular meanings when it comes to flowers. The color black may convey elegance or may be used “on somber occasions, such as the context of death” and there is thus a “competitive need” to use the color black to communicate the appropriate or desired message from the purchaser to the recipient of flowers.

A case in point

When Bottega Veneta (BV) sought US registration of its well-known leather weave in 2007, it must have been confident that its application would sail through the USPTO. BV had been using the intrecciato weave (the term used by the company in its advertising) since 1975. It appeared on over 80% of BV’s leather goods. Sales in the six years prior to the application were US $275 million. Advertising expenditures in the same period totaled US $18 million and many advertisements publicized the uniqueness of the design. Fashion reviewers referred to the intrecciato as BV’s “signature.” In addition, companies selling imitations or near-imitations made reference to BV – a de facto recognition that the weave is a source identifier. As one seller wrote:

Don’t let the woven leather fool you — this is not a Bottega Veneta bag … To the ladies and gentlemen who buy the intrecciato Bottega Veneta bags … everyone knows you’re spending the dough because the intrecciato is “exclusive” at the moment.

Despite the fact that the intrecciato had become distinctive, the mark would not be published for opposition until December 2013. BV’s application and the Office Actions that followed provide a textbook case of what not to do when filing an application to register a product feature and what can go wrong.

BV’s application was filed under Section 44(e) of the Lanham Act, which permits registration under the Paris Convention based on a prior foreign registration, in this case, in Italy. While a 44(e) registration normally grants the applicant certain advantages, BV still had to satisfy the requirements of Section 2(f) that its mark was both distinctive and non-functional.

BV started out on the wrong footing. First, it failed to provide an adequate description of the goods in Class 18. Instead, it recited nearly the entire description of products in the Italian registration (consisting of the full Nice classification heading), thus running afoul of basic USPTO procedure which requires applicants to list in ordinary commercial terms only those goods or services for which the applicant actually uses or has a bona fide intent to use the mark. Second, the description of the mark was inadequate because it failed to describe the mark accurately. The application’s description read: “The mark consists of Interlaced woven strips of leather arranged in a distinctive repeating pattern that is used over all or substantially all of the goods.”

It was this overbroad description, potentially encompassing a wide range of designs of interwoven strips of leather, which led the Examining Attorney to look at BV’s weave generically rather than focusing on the specific nature of the intrecciato and how it differed from the weaves of nearly all of BV’s competitors. His objections to registration set out in five Office Actions attacked BV on every technical and substantive ground available. He argued that the
intrecciato design lacked distinctiveness, could not function as a trademark because it was solely ornamental, and was functional from both a utilitarian and aesthetic perspective. Combing the internet, he found thousands of products with leather weave designs to support his contentions.

In the face of this opposition, BV began amending the description of the mark and the delineation of goods, and gathered evidence that the weave was non-functional and widely recognized as unique in the fashion world. BV easily demonstrated that the intrecciato wasn’t stronger than other weaves and that it provided no economic advantage to BV because it was actually more expensive. The Examining Attorney, however, was unmoved. A weave is a weave is a weave, he found, eventually issuing a Final Refusal.

When the matter reached the TTAB, BV was describing its mark narrowly and precisely: “a configuration of slim, uniformly-sized strips of leather, ranging from 8 to 12 millimeters in width, interlaced to form a repeating plain or basket weave pattern placed at a 45-degree angle over all or substantially all of the goods.” The TTAB criticized the Examining Attorney for failing to distinguish the intrecciato from other weaves: “After carefully reviewing all of the evidence showing weave designs on handbags, there are a very small number that can be considered to have the very same features as those described in applicant’s mark,” the TTAB observed.

By giving a “very narrow reading of the proposed mark,” the TTAB was able to find that the intrecciato was not aesthetically functional because BV’s competitors would be able to use any weave other than the specifically described BV configuration. As for manufacturers and sellers of similar bags uncovered by the Examining Attorney, the TTAB held that if they were not intentionally imitating the intrecciato because their bags have “the look of applicant’s bags” and “it is the association with applicant that consumers want to obtain,” then the best place for them to be heard would be in an opposition following publication of the mark. Following that decision, the mark was published. As of this writing, the mark has been opposed for footwear (Class 25) and BV filed a request to divide the application so that registration may issue for goods in Class 18.

Conclusion

The practitioner applying to register product configuration trademarks must be aware of the hurdles that clients may face and begin to address them in the initial trademark application. While it is always difficult to predict how an Examining Attorney will respond to an application, the client should be advised long in advance what evidence it may need to gather to demonstrate that its unique product configuration functions as a trademark and is registrable as one.

(Initially published in The Trademark Lawyer, March/April 2014. You can download the printed article here: 2014 Trademark Lawyer)

How can Gail Zappa Even Apply for a Trademark in “CAPTAIN BEEFHEART”?

Some of our readers have asked how Gail Zappa can even apply for a trademark of Don van Vliet’s moniker, CAPTAIN BEEFHEART, and want to know whether something can be done now to prevent the mark from registering.

The Trademark office (PTO) doesn’t require an applicant to show that s/he has the right to register the mark where the name/mark is not a living person. (In the case of a living person, the applicant needs written consent from that person consenting to registration.) Instead, the PTO relies on the applicant’s sworn declarations. Fraudulent or misleading claims are a basis to cancel a trademark registration.

Since the CAPTAIN BEEFHEART mark was already “published for opposition” on April 23rd and no one opposed it within the requisite 30-day period, there is little that can be done until the mark is registered. During the application process, “adversarial” arguments — for example, that the opposer has a signed contract from Don van Vliet that allows the opposer to use the name “Captain Beefheart” in perpetuity in connection with the sale and exploitation of Mr. van Vliet’s sound recordings — are ignored by the PTO and the Commissioner of Trademarks. What impedes registration are more technical matters related to trademarks: a likelihood of confusion between the applied-for mark and a prior federally registered trademark; a right of priority asserted by party who filed for the same or similar trademark after the applicant filed for it; pending litigation against the applicant for trademark infringement related to the applied-for mark; and claims that the applied-for mark is generic or merely descriptive of the goods and services for which trademark registration is sought.

Once the trademark is registered, however, it’s open season until the mark is incontestable, essentially 5 years after the registration issues.”. Affected parties — including the Estate of Don van Vliet, record companies and film companies that have produced Captain Beefheart sound and audiovisual recordings — should, if they have just cause, bring a cancellation action either in federal court or the Trademark Trial and Appeal Board (TTAB) as expeditiously as possible. The fact that no one opposed registration during the review period is not fatal to a later cancellation action by any means. (The lack of opposition only indicates that no one was watching the PTO publications, undoubtedly because no one expected that anyone would apply for a CAPTAIN BEEFHEART registration.) Affected parties may also contemplate putting Ms. Zappa on notice now that they will seek cancellation if she goes ahead with the registration. Whether the mark will be cancelled, of course, depends upon the extent and source of Ms. Zappa’s rights over the actual rights of those seeking cancellation and their legal and financial ability to assert those rights.

Can Gail Zappa Stop Anyone from Using the Name “Captain Beefheart”?

On June 18th, the United States Patent and Trademark Office (PTO) issued a “Notice of Allowance” to Gail Zappa, permitting her to file a statement of use within the next three years demonstrating that she is using CAPTAIN BEEFHEART as a trademark. It has been widely misreported in the music media that Gail Zappa already “trademarked” the name, but the Notice of Allowance only paves the way for registration, which may or may not happen down the road. Moreover, even if the Trademark Office registers the mark, she may not be entitled to it lawfully. Captain Beefheart, for the uninitiated, is the moniker used by composer, performer and artist Don van Vliet beginning in 1964, long before he ever met Frank or Gail Zappa. Mr. van Vliet died in 2010. [Correction: van Vliet knew Frank Zappa in High School. But he didn’t record for Zappa until long after he recorded for other record labels.]

Let’s take a look at what Gail Zappa did to get this far.

On August 3, 2012, Ms. Zappa filed a sworn Declaration with the PTO stating that

she believes she is entitled to use [CAPTAIN BEEFHEART] in commerce; to the best of her knowledge and belief, no other person, firm, corporation or association has the right to use said mark in commerce either in identical form or in such near resemblance thereto as may be likely, when applied to the goods or services of such other person, to cause confusion, or to cause mistake, or to deceive….

In other words, Ms. Zappa told the PTO that she is the only person with the right to use Mr. van Vliet’s moniker in commerce — to the exclusion of EMI, Virgin International, Buddha Records (acquired by Bertelsmann Music Group, which released a remastered Safe as Milk and The Mirror Man Sessions) and any other record company that recorded and released “Captain Beefheart” recordings. In fact, Ms. Zappa’s registration is not just for records, but identifies a wide range of products to which she intends to claim exclusive rights:

International Class 009

  • Audio and video recordings featuring music and concerts;
  • musical sound recordings;
  • musical video recordings;
  • phonograph records featuring music;
  • pre-recorded CDs, DVDs, audio tapes, video tapes, audio discs, video discs, audio cartridges, and video cartridges featuring music and concerts;
  • downloadable audio recordings, downloadable video recordings, and downloadable MP3 files all featuring music and concerts;
  • downloadable motion picture films, downloadable television shows and downloadable radio shows all featuring music and concerts;
  • downloadable multimedia files featuring music and concerts;
  • electronic publications, namely, books, magazines, manuals, journals, catalogs, brochures, newsletters, featuring music and concerts recorded on computer media;
  • interactive multimedia computer game programs;
  • music-composition software;
  • software for creating music;
  • software featuring musical sound recordings and musical video recordings;
  • multimedia software recorded on CD-ROM featuring music and concerts;
  • electronic game software;
  • downloadable ring tones for mobile phones;
  • downloadable graphics for mobile phones;
  • sunglasses.

Granted, Ms. Zappa’s application is an “intent to use” application — meaning that she hasn’t necessarily used CAPTAIN BEEFHEART as a “source identifier” (see below) on any of these products yet — but it’s hard to imagine that in the coming months she’ll be placing the mark on goods in all these categories. Nonetheless, she has 4 options:

(1) She can file a statement of use for the specified goods. If she goes this route, she must already have used the mark in commerce on all of them. Trademark Manual of Examining Procedure (TMEP) §1109.03. For instance, it’s not enough to release a CAPTAIN BEEFHEART DVD but not CAPTAIN BEEFHEART electronic game software or CAPTAIN BEEFHEART sunglasses. Registrants who try to fool the PTO by filing a statement of use without actually using the trademark for all the specified goods risk having their trademark canceled at a later date.

(2) She can ask the PTO for up to five additional 6-month extensions to file the statement of use in anticipation of releasing goods in all the specified categories;

(3) She can “divide” her application, allowing the trademark to be registered for the categories she’s actually using, while retaining an active intent-to-use application for the remaining goods; or

(4) She can allow the mark to be registered for the categories she’s actually using and relinquish the remaining categories.

There are a number of pitfalls to a broad trademark application of this type. Living performers who attempt to register their names as trademarks in Class 9 are generally surprised to find out that the PTO will reject their applications on the basis that the proposed mark only identifies a featured performer on a sound recording and doesn’t function as a trademark to identify and distinguish the applicant’s goods from those of others and to indicate the source of applicant’s goods.

Section 1202.09(a)(ii) (“Evidence that a Performer’s Name is a Source Identifier”) of the TMEP tells trademark examiners that

The use of the author’s or performer’s name on a series of works does not, in itself, establish that the name functions as a mark. The record must also show that the name serves as more than a designation of the writer or performer, i.e., that it also serves to identify the source of the series. See In re First Draft, 76 USPQ2d 1183, 1191 (TTAB 2005) (holding pseudonym FERN MICHAELS identified only the author and did not function as a mark to identify and distinguish a series of fictional books because the “evidence of promotion” was “indirect and rather scant,” despite applicant’s showing that the name had been used as an author’s name for 30 years; that 67 separate books had been published under the name, and approximately 6 million copies had been sold; that the book jackets listed the titles of other works by Fern Michaels and promoted her as a bestselling author; that the author had been inducted into the New Jersey Literary Hall of Fame; and that there was a www.fernmichaels.com website); In re Chicago Reader Inc., 12 USPQ2d 1079, 1080 (TTAB 1989) (holding CECIL ADAMS, used on the specimen as a byline and as part of the author’s address appearing at the end of a column, merely identifies the author and does not function as a trademark for a newspaper column).

The PTO will make an exception, however, where the performer’s name is used on a series of sound recordings and where the applicant states (truthfully) that s/he controls the quality of the recordings and the use of the name, such that the name has come to represent an assurance of quality to the public. TMEP §1202.09(a)-(a)(ii), (a)(ii)(B); see In re Polar Music, 714 F.2d at 1572, 221 USPQ at 318; In re First Draft, 76 USPQ2d at 1189-90.

This would seem difficult, if not impossible, to demonstrate in the case of an artist like Captain Beefheart, who recorded for various record labels both before and after he met the Zappas. Without exception, recording agreements grant the labels the right to use a performer’s name, real and fictitious, for as long as their rights last (and generally in perpetuity). Thus, if called to account, Ms. Zappa may not be able to show her entitlement to exclusive use of the Captain Beefheart name. It would be interesting to know whether Ms. Zappa has purchased all extant Captain Beefheart recordings, or acquired posthumous rights of publicity for Mr. van Vliet under Cal. Civ Code § 3344.1. That right lasts for 70 years after death and is freely transferable, licensable, or descendible. Although federal trademark law supersedes state law, it only does so if there is a legitimate claim to a federal trademark in the first place. Unfortunately, the PTO is not obliged to ask these questions or investigate the veracity of any statements made by Ms. Zappa in her application, but may simply rely on the fact that her declarations are made under penalty of fine or imprisonment.

Finally, even if Ms. Zappa obtains a registration on any of the goods specified in her application, she may not be able to enforce those rights against prior users, particularly those who acquired rights to use Mr. Van Vliet’s moniker in connection with sound and audiovisual recordings. Ms. Zappa’s claim over the CAPTAIN BEEFHEART trademark, even if it registers, is far from assured.

Trademark Holding Companies: Speculative Benefits, Certain Pitfalls

From time to time clients ask us whether they should “protect” their trademarks from their company’s liabilities by setting up a separate trademark holding company. Often they have heard about tax savings or read something online suggesting that any company with substantial trademark assets to protect ought to be segregating them into a separate corporate entity. Except in exceptional circumstances, however, the trademark holding company is a bad idea.

Trademark holding companies were originally devised by lawyers as tax-saving devices — specifically to reduce an operating company’s corporate franchise tax liabilities in the state or states of operation. (Corporate franchise taxes are the taxes a corporation pays to a state for the privilege of doing business there.) Theoretically, the savings could be substantial. The holding company is typically set up in Delaware or Nevada, where there is no corporate income tax on intangibles (like trademarks). The parent company transfers its trademarks to the holding company, which then licenses them back in return for a royalty. The royalty is then treated as an expense to the operating company and tax-free income for the holding company. This sleight of hand may still work in some jurisdictions, but in many places, the courts have already caught on.

No Tax Savings in New York.

Under New York law, trademark holding companies have been consistently disregarded as a means of reducing taxes. The lead case regarding tax liability is Sherwin-Williams Co. v. Tax Appeals Tribunal, 2004 NY Slip Op 07737 [12 AD3d 112] October 28, 2004. There, the New York Court of Appeals (New York State’s highest court) upheld a determination that Sherwin-Williams (an Ohio corporation) was required to report the income earned by its trademark holding company (a Delaware corporation) formed for the purpose of holding some 500 Sherwin-Williams domestic trademarks. The establishment of the holding company and the licenses back to the parent company, the court said, lacked any valid business purpose apart from tax avoidance.

Sherwin-Williams argued that it formed the holding company to: (1) improve quality control oversight with regard to its many licensees and franchisees; (2) enhance its ability to enter into third-party licensing arrangements at advantageous royalty rates; (3) insulate its  trademarks from the parent company’s liabilities; and (4) have flexibility in preventing a hostile takeover. To accomplish those purposes, the holding company established separate office space in Delaware and named as President an individual who had no previous association with the parent company. The tax tribunal and New York courts found these reasons unpersuasive. Not only did the parent company call the shots on management of the trademarks, but the President of the trademark holding company was a person who had no prior experience as a trademark manager. Thus the deduction for royalties that Sherwin-Williams’ operating company paid to its subsidiary holding company was disallowed and the combined income of both entities — the operating company and the holding company — was found subject to New York state corporate franchise tax.

The Sherwin-Williams case is only the most recent New York case to reach this conclusion regarding the reduction of tax liability via trademark holding companies. How would Sherwin-Williams have fared in a lawsuit in which it was sued for trademark infringement or in which the operating company was sued for breach of contact by a licensee or by a consumer for product liability?

Limitations on Liability.

Sherwin-Williams argued to the New York courts that it formed its trademark holding company in part to “insulate the trademarks from the parent’s liabilities,” but the court found ample reason to find the two companies were simply alter egos — at least from the standpoint of tax liability – including the fact that control over the quality of the Sherwin-Williams’ goods came from the parent company, rather than its subsidiary. That finding would not bode well for other types of claims. Automobile Insurance Co. of Hartford v. Murray, Inc., 04-CV-770A (LGF), a 2008 decision from the U.S. District Court, Western District of New York, bears this out. In that case, a lawnmower manufacturer that was sued for product liability attempted to defend itself on the basis that its trademark holding company was the actual owner and licensor of the trademark and therefore the wrong party had been sued. The court examined the organization and function of the holding company, however, and determined that it was formed “with no other business purpose … except to hold and license” the operating company’s trademarks. Consequently, the operating company was found to be the “de facto” or “actual” licensor.

Indeed, in most situations it is doubtful that a trademark holding company would be effective at protecting anything. The operating company/”licensee” will not be able to insulate itself from trademark infringement claims of its subsidiary holding company / “licensor.” Any such lawsuit would almost of necessity be brought against both companies, since both would have played a part in the alleged infringement. Nor is the trademark holding company/”licensor” likely to get away with pointing to its “licensee” (which is usually the licensor’s parent company!) as the sole party liable for breaches of contract or product liability. As one of the leading experts on trademark law has said, “in general, it is accurate to conclude that there is a very substantial risk that a trademark licensor … will be held liable for the torts of licensees…” McCarthy § 18:74 under the theory that the the licensee is a related company. This is especially true where the two companies share board members, management and/or office space. Notwithstanding Murray, where only the operating company was sued, it is the customary practice for attorneys when filing suit to include as many different entities and individuals as could be liable or capable of paying a judgment. In short, whether the claim is asserted against the operating company or its holding company, piercing the corporate veil would not be difficult.

The only possible protection that a holding company might afford to the trademark is an instance in which the operating company is sued for reasons unrelated to its licensing and business activities — for example, if the operating company defaulted on a mortgage or lease, or was sued for some kind of tortious (non-product-related) conduct — but even there, if the operating company’s assets were insufficient to satisfy the judgment, the trademarks might still be reachable as assets of the operating company.

Legal Pitfalls of Licensing through Trademark Holding Companies

In deciding whether to pierce the corporate veil of a trademark holding company, the courts will consider a number of factors, including whether the two companies have common directors or officers; whether the parent corporation owns all or most of the stock in the subsidiary; whether the parent finances the subsidiary; whether the subsidiary has any business with any entities other than the parent; whether the subsidiary has any assets other than those conveyed to it by the parent; and whether employees, officers and directors of the parent (and not the holding company) are the ones controlling the quality of the goods sold under the marks owned by the holding company. In principal, setting up a holding company is easy. But forming and operating one that will be recognized by the courts as an independent entity is time-consuming and expensive. And there is no bulletproof formula for success. In the cases cited above, the holding companies had different management, their own offices, and multiple licensees (i.e., various sources of income), but still failed in their purported objectives. A trademark holding company owned by a parent operating company is by its very nature suspect, but an “independent” holding company owned personally by the owners of a parent operating company is no better. In addition to these problems, there is the legal risk that a trademark holding company just might put a company’s trademarks at risk.

Although trademark holding companies are common, not only have they not been fully endorsed by the courts, but they have also caused damage to trademark owners. Not long ago, one of our clients sued two trademark infringers. The client’s trademarks are owned by a holding company (established by predecessor counsel, not us). One of the defenses mounted by the other side in a countersuit for invalidity is that the licensor holding company doesn’t exercise sufficient control over its licensees. Rather, they argued, control is exercised by the holding company’s parent corporation and the holding company has therefore made a “naked license.” The remedy for a naked license is for the court to declare that the trademark in question was abandoned by the trademark owner. In CNA Financial Corp. v. Brown, 922 F. Supp. 567 (M.D. Fla. 1996), reconsideration den. by 930 F. Supp. 1502 (M.D. Fla. 1996), aff’d, 162 F.3d 1334 (11th Cir. 1998), a court did just that. CNA lost its trademark because the court found that it did not actually control the quality of the services offered by its licensees, but only controlled how the marks themselves were used. (The issue in our client’s case was never addressed by the court, as the case was subsequently settled in our client’s favor.)

This is not the only risk. A holding by a court that an operating company is the de facto or actual licensor of the trademark, as in the Murray case cited above, opens the door to the corollary conclusion that the holding company’s trademark applications and maintenance filings in the PTO were fraudulent, since the holding company may not be the true owner of the trademark. That would be an additional ground for cancellation of trademark registration.

There are still other complications, including how a court or the PTO will view a transfer of a trademark to a holding company, without a transfer of the accompanying “goodwill.” Under U.S. law, trademarks cannot be assigned “in gross” but must be assigned together with the business (i.e., the goods and services) represented by the trademarks. In other words, because the “goodwill” is created by the business, a trademark cannot exist independently of it. A transfer of a trademark to a holding company may thus be considered an assignment in gross, which is voidable and subjects the trademark to cancellation. Indeed, if the holding company does no business other than licensing, it may be very difficult to claim that any goodwill at all is associated with the legal owner of the mark.

These latter issues have not been directly addressed either by the courts or the PTO. However, the risk of losing one’s trademarks by transferring them to a U.S. holding company, when weighed against some very speculative benefits, hardly seems worth it.

(In a future posting, I will deal with a slightly different scenario: where the trademark holding company is located outside the United States.)

New Top Level Domains: Implications for Trademark Owners

ICANN (the Internet Corporation for Assigned Names and Numbers has announced that it will accept applications for new general Top Level Domain names (gTLDs) from January 11, 2012 through April 11, 2012. Now, in addition to .com, .net. .org and .xxx, new domain names may be established for brands (e.g., .nike), product categories (e.g., .skincare or .computers), geographic locations (e.g., .newyorkers), media (e.g., .music) or anything else an applicant might think of.

Becoming a Top Level Domain Owner

During the first application period, ICANN will accept only 500 applications, while subsequent periods (yet to be established) will be limited to 400 applications. Overall, ICANN has ruled that no more than 1000 new gTLDs may be established per year.

The bar to entry, however, is high.

First, becoming a general Top Level Domain means having the business structure and technical capability for being a registry — that is, a company which (a) establishes policies for domain name allocation, (b) maintains a database of all the domain names registered in the new top-level domain, and (c) generates the zone files necessary to convert second-level domain names to IP addresses. (A relatively simple definition of domain name registry is available here. A second-level domain is the one immediately preceding the final dot. Thus, in “www.webtm.com,” the gTLD is “.com” and the second-level domain is “webtm”.) This won’t be something that companies can simply subcontract. Owners of the new gTLDs will be required to play an active role in managing the website addresses under its domain.

Second, becoming a Top Level Domain is expensive, time-consuming and complicated. The initial application fee is US$185,000 and further fees may be imposed during the application process as determined by ICANN. (For instance, disputes may arise between applicants who attempt to register two strings that ICANN determines are “confusingly simliar” and resolution of such disputes costs money.) Among other requirements, applicants will have to submit audited financial statements and principals will be subject to background screening to confirm eligibility based on “(1) General business diligence and criminal history; and (2) History of cybersquatting behavior.” The criteria used for criminal history evaluation are the same ones used in the banking and finance industry. Following acceptance, new TLD owners will have to sign the “New gTLD Agreement” with ICANN. They will also have to pay a fixed fee of US$6,250 per calendar quarter and transaction fees of twenty-five cents per domain names registered over 50,000.

Meeting the Concerns of Trademark Owners

ICANN estimates that the first gTLDs will come online in 2013. This raises particular concerns for trademark holders, insofar as it potentially opens new doors for cybersquatters and increases the possibility for some trademark owners, for example those whose marks are registered in a single territory, to be pre-empted by a foreign competitor using the same name. Ostensibly, applicants seeking to register gTLDs for actual registered trademarks will not be able to do so without ownership or license from the trademark owners. However, if a trademark owner does not apply for domain name protection in the first round and some applicant obtains a gTLD which is deemed to be “confusingly similar” to the registered mark, the owner of the registered mark may be prevented from later establishing a gTDL using its brand name. The problem is perhaps even more serious for trademarks with limited scopes. For example, the word “Delta” is used a trademark by many companies to designate different types of goods and services. Registration of .delta by any one of them would preclude all others from registering under that trademark.

In the hopes of minimizing the risks faced by trademark owners, ICANN plans to implement objection procedures to give trademark owners an opportunity to object to new gTLDs which are the same or confusingly simlar to the objector’s registered trademark. After the first application period closes in April 2012, ICANN will verify all applications for completeness and will release on its website the list of strings, applicant names, and other application data. At that point it will be up to trademark owners to file a “Legal Rights Objection” with the Arbitration and Mediation Center of the World Intellectual Property Organization (WIPO), a proceeding which will cost up to several thousand dollars in filing fees alone.

Preventing trademark misappropriation in second-level domain registrations inside a gTLD will be somewhat simpler, at least in the initial 60-day “sunrise” period of a new gTLD. When a new gTLDs is launched, it will be required, during that sunrise period, to search the Trademark Clearinghouse being set up by ICANN and if an intended website name matches an entry in the Clearinghouse, send a notice to both the intended website owner and the trademark holder. In addition, the new gTLD will be required to offer dispute resolution for owners of registered trademarks who object to the intended name. (The burden on the new gTLD may be substantial. In the first fifteen minutes of the “.co” gTLD, there were 100,000 applications for new websites.)

A note on the Trademark Clearinghouse: As of this date, ICANN has still not determined who the Trademark Clearinghouse service provider will be or how information will be registered with the Clearinghouse, but at the Trademark Clearinghouse Implementation-Planning Workshop held in Singapore on June 22, 2011, various participants believed that trademark information should be provided by individual trademark owners rather than obtained from national trademark registries, like the Patent & Trademark Office. For more details on these procedures, still in the planning stages, see, the “Module 3 – Objection Procedures” and “Trademark Clearinghouse” in the current version of the Applicant guidebook available here.

Netherlands Antilles Dissolved

On October 10, 2010, the Netherlands Antilles ceased to exist as a political entity. Of the five Caribbean islands that formed the Netherlands Antilles, Curaçao and Saint Maarten have become autonomous states within the Kingdom of the Netherlands. The islands of Bonaire, Saint Eustatius and Saba are now part of the Netherlands as special municipalities (the BES Countries).

Benelux Trademark Law will not be in force in the BES Countries. A new Trademark Law for the BES countries has been approved and the Benelux Office for Intellectual Property, has been appointed to manage the Trademark Register for the these countries. We await further information as to the processing of trademark applications.

Owners of Netherland Antillean trademark registrations have one year to file maintenance applications (i.e.: until October 10, 2011) for the BES Countries.

At present, International trademark registrations are not affected by this change as it is anticipated that the current international trademark rights in the Netherlands Antilles will be converted into national registrations for the BES Countries, Curaçao and St. Maarten.

Curaçao and St Maarten will also have their own Trademark Law and maintain their own Trademark Registers. The present timetable is unknown, but we shall provide updates as they are available.

The new country of Curaçao is known as Korsou in Papiamentu. St Maarten shares an island with the French oversees territory of St. Martin.

Aruba, which left the Netherlands Antilles in 1986, remains independent and continues as an autonomous state within the Kingdom of the Netherlands.