False utility claims and counterfeit utility models have pestered the US Patent and Trademark Office (USPTO) and legitimate trademark owners for many years. The 2020 Brand Modernization Act (“TMA”) – part of the COVID-19 aid package signed by President Trump on December 27, 2020 – provides significant relief to brand owners’ efforts to combat this fraud. As mentioned in a separate post, this omnibus legislative package provides relief to copyright holders by establishing a small claims tribunal system for copyright infringement. On the trademark side, the legislation makes it easier for trademark registrants to obtain injunctive relief and offers new mechanisms for challenging trademark applications and registrations for reasons of non-use. These new procedures are intended to provide additional options for combating fraudulent trademark applications and registrations.
The text of the TMA (HR 6196) is available here and the main provisions are discussed below.
Restoring the presumption of irreparable damage
The TMA restores the presumption that a trademark owner will suffer irreparable damage if the trademark is infringed – which is a requirement for injunctions and other injunctive relief. Following the decision of the Supreme Court in 2006 patent proceedings, eBay v MercExchange, a division developed between the appellate courts, with many courts ruling that the presumption of irreparable damage was no longer valid. The TMA solves the problem by amending Section 34 of the Lanham Act (15 USC 1116) to add a rebuttable presumption of irreparable harm upon finding a violation or likely success in an injunction. The TMA thus restores an important protection for trademark owners who apply for an injunction to stop violations.
The TMA also codifies the PTO’s protest process by allowing third parties to submit evidence during the review of a pending trademark application before it is published for rejection. This gives trademark owners the opportunity to inform trademark examiners about why a pending trademark application conflicts with prior rights in an informal and non-contentious manner. As a side effect of this change, trademark monitoring services will become even more valuable as they will notify trademark owners of new, potentially conflicting trademark applications. The TMA instructs the USPTO director to establish procedures for this protest mechanism within one year.
New ways to challenge registrations for non-use in US commerce
A key difference between trademark registration systems in the United States and most other countries is that, with a few exceptions, the use of a trademark in U.S. commerce is required prior to U.S. trademark registration. An affidavit stating a specific date of first use and a specimen showing the use of the trademark on the goods or for the services must be submitted to the USPTO before a trademark registration is issued. False use claims and counterfeit utility models have created significant problems and frustrations for the USPTO and the rightful trademark owners. The cancellation and review procedures created by the TMA are designed to alleviate some of these problems.
Cancellation and review procedures
The TMA amends Lanham Act by adding new Sections 16A and 16B (15 USC 1066A and B) to give trademark owners two new ways to challenge existing trademark registrations for non-use. Under the new Section 16A, a third party can file a request for cancellation of a trademark registration on the grounds that the trademark was never used as required in U.S. commerce. A request for deletion must be submitted within 3 years of the registration being issued.
Under the new Section 16B, a third party can request a re-examination of a registration because the trademark was not used in U.S. commerce as required prior to the registration date. An application for re-examination must be submitted within 5 years of the registration being issued.
In a request for cancellation or re-examination, the challenger must submit that an appropriate investigation has been conducted and that the evidence presented shows that the mark was not used as required by U.S. law. The USPTO director will decide whether to initiate the ex parte process. When a proceeding is initiated, the registrant must provide evidence that the mark was used for the goods or services in question or that the non-use was legally excusable (e.g. under the Madrid Protocol or other contract) due to temporary mitigating situations).
Cancellation due to non-use
The TMA also amends Section 14 of the Lanham Act (15 USC 1064) to add non-use as a reason for cancellation: after 3 years from the date of issue, a registration may be canceled on the grounds that the trademark has never been used in U.S. trade for the subject of goods or services. This is another method of intercepting false claims about application use or statements of use. While the level of evidence may be difficult (“has never been used in US commerce”), it is a significant step, as previous no-use cases have often established whether the USPTO was deliberately defrauded – which was one represents a very high standard of evidence.
By providing new ex parte cancellation and review procedures, the TMA is offering trademark owners a new way of alerting the USPTO to fraudulent registrations and creating a level playing field. It is a welcome recognition of the problems caused by the multitude of false claims for trademark applications and registrations in the United States.