Acquiring Trademark Rights

Terms:


Bona Fide:
The literal Latin translation for this is “good faith,” but this term is not interchangeable with “good faith” as used in the law. Instead, bona fide is used to indicate that something is “genuine” or “real.”

Adoption & Use of a Mark

Recall that copyright ownership begins with the creation of an original work. Trademark works a bit differently. Simply coming up with a business name, a snazzy logo, or a catchy phrase is inadequate to establish trademarks rights.

EXAMPLE: Henry, a professional plumber, wants to leave his job and start his own business. He has come up with the name “Henry’s Hot & Cold Co.” and designs a logo where the “H” in his name is formed by pipes. So long as the name and logo only sit on paper in his desk at home, he has no trademark rights in either (although he does have rights in copyright).

In order to establish trademark ownership, one must make bona fide use of the mark in commerce. §1127 defines “use in commerce,” and requires (roughly):

    1. For goods,

  • The mark must be placed on the goods, or their containers, tags or labels.
  • The goods must be sold or transported in commerce.

    2. For services,

  • The mark must be displayed in the sale or advertising of the services.
  • The services must be rendered in commerce, or rendered in more than one state.

In Procter & Gamble Co. v. Johnson & Johnson, Inc., 485 F. Supp. 1185 (S.D.N.Y. 1979), Proctor & Gamble (P&G) sued, claiming that Johnson & Johnson infringed on their marks. P&G had a “minor brands program” which had made use of the marks in question for about 10 to 15 years. See P&G at 1190. The court found that P&G’s attempt to warehouse marks by such minimal use failed to meet the standard required for ownership of those marks.

EXAMPLE: Henry isn’t quite sure about the name and logo he has selected for his company. He therefore comes up with 3 alternatives. For each potential name and logo, he makes a flyer and hangs the flyers at local supermarkets. Although he never leaves his employer to start his business, he keeps hanging the flyers for several years. This is likely inadequate to secure any rights in the marks.

Of course, there is some room for research and development. A mark can be warehoused for a short time, if there is a reasonably well-formulated plan to use the mark on particular products (or services) and develop them, especially if the artificial maintenance doesn’t last long. If the warehousing is done with an anti-competitive intent, however, that will also be considered by the court. See P&G.

EXAMPLE: Henry is quite certain about using the name “Henry’s Hot & Cold Co.” for his new plumbing company. However, he is unable to start up in earnest until he has enough money for a van and a full set of tools (currently, his employer provides these). He has discussed the matter with his wife and a mortgage broker, and they intend to put a second mortgage on their home in order to finance the business. The planned closing date for the mortgage is 2 months from now, since the bank needs time to appraise the property and the closer’s schedule is quite full. Between now and then, minimal use is likely enough to preserve Henry’s rights in the mark. This token use could be sufficient.

For an interesting case on the issue of commerce, you might also read Larry Harmon Pictures Corp. v. Williams Restaurant Corp., 929 F.2d 662 (1991) (Fed. Cir.) where Harmon, better known as Bozo the Clown, sued claiming that “BOZO’s” restaurant could not be registered because it failed to meet the §1127 requirement that services be rendered in more than one state. The restaurant won, and the clown lost, in part because the services were rendered to customers who traveled across state lines to frequent the establishment.

Ownership of a Mark & Priority

So nobody has the rights to a mark until it is used in commerce as defined by §1127. But what happens when two separate entities use similar marks in commerce? Who owns the mark then?

As a general rule, the first to use the mark will be the “senior” user with the right to enjoin use by the “junior” user. This, however, brings us right back to the issue of what constitutes a use in commerce…as not just any use will do to establish priority.

EXAMPLE: On January 15, 2006, Henry begins using the name “Henry’s Hot & Cold Co.” in association with his plumbing service in Boston, Massachusetts.  On March 1, another Henry starts using the same name in nearby Milton, Massachusetts. The first user of the service mark may be able to prevent any and all future users from using a similar mark.

Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260 (5th Cir. 1975) involves the use of identical trademarks (“Time Out”) for men’s clothing. The main question in the case was which manufacturer owns the mark by virtue of first use. Blue Bell took pants which already bore a different mark and placed the “Time Out” mark on them. According to the court, new Time Out tags “of varying sizes and colors, were randomly attached to the left hip pocket button of slacks and the left hip pocket of jeans.” Blue Bell at 1263. This, the court found, was insufficient, as a new mark must be affixed to the goods intended to be sold with that mark, not just any goods.  This use by Blue Bell, therefore, was insufficient to establish priority. Quoting an 1877 case, the court noted that “The exclusive right to a trademark belongs to one who first uses it in connection with specified goods.” Blue Bell at 1265 (emphasis added) (citations omitted).

Farah’s initial use of their similar mark, however, was also insufficient to establish priority. Rather than use the mark in commerce, Farah took a dozen pair of pants bearing the mark and shipped them to its distributors. Because this was an “internal” sale, it did not rise to §1127 standards. In finding than an internal sale was inadequate, the court relied on caselaw holding that internal shipments in general would not suffice:

"Secret, undisclosed internal shipments are generally inadequate to support the denomination "use." Trademark claims based upon shipments from a producer's plant to its sales office, and vice versa, have often been disallowed." -Blue Bell at 1265 (citations omitted).

Ultimately, a later use by Farah allowed them to establish priority and therefore ownership of the mark. But it is interesting that both companies failed to make proper “use in commerce” of the marks on their first attempts.

In a somewhat different case, Pactel Teletrac v. T.A.B. Systems, 32 U.S.P.Q. 2d 1668 (T.T.A.B. 1994), a viable business entity was engaged in ongoing advertising and other promotional activities in preparation for the launch of its commercial services. The pre-service promotions in which the service mark was used were considered in establishing the date of first use even though at the start of the promotion the service wasn’t commercially available.

One final note: in addition to the issues discussed here, concurrent use of the same mark by different parties in different areas can cause trouble. Two good cases which discuss this are Thrift Rent-A-Car System v. Thrift Cars, Inc., 831 F.2d 1177 (1st Cir. 1987) and Dawn Donut Co. v. Hart’s Food Stores, Inc. 267 F.2d 358 (2d Cir. 1959).  If this happens, each party may have rights to use the same mark in specified geographical areas, and cannot use the mark in an area the other has a right to use it.

Intent to Use §1051(b)

There is a problem with the token use of marks as seen in the example of Henry’s business labeled #3 above. The problem is that in order to help Henry establish trademark ownership, earlier courts have created a legal fiction. In most other countries, token use will not suffice to establish mark ownership, even when there is a real, short-term plan to get the business started (see discussion on Proctor & Gamble above). In 1989, the days of token use ended, and the “intent-to-use” provision was passed.

Although we will not start our discussion of registered trademarks until the next section of this chapter, it is appropriate here to discuss §1051(b)(1) which allows a party to request registration of a trademark when there is a

bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce….”

The remainder of §1051(b) sets out various substantive and technical requirements of the request, but the most important words here are “bona fide intention.”

EXAMPLE: Having read ahead to Subchapter 3 of this Chapter, Henry knows there are distinct advantages to registering his mark. Because he is still waiting to close on the second mortgage, he can use §1051(b) to request registration even though he hasn’t yet started to provide his services to anyone (as he still lacks a van and tools). By doing this, Henry can avoid making trips to the supermarket to hang his flyers; not only does he not need to provide his services, but he doesn’t even need to start using the mark yet! All as allowed by §1051(b).

Under §1051(d) Henry will have to file a statement of actual use (of the mark) within 6 months, but this period can be extended to as long as 2 years. Also, you should note that an intent-to-use application cannot be assigned to another party (a statement of use must be filed before the mark can be conveyed).

EXAMPLE: After filing his intent-to-use application, Henry tells a friend all about the business idea. His friend likes the name so much that he decides he’d like to start a plumbing business using Henry’s mark, despite being named Alfred. Alfred offers to buy Henry’s mark for $10,000. Unfortunately, until Henry uses the mark in commerce and files a statement of use, he cannot sell it to Alfred or to anyone else.

Note that once rights in a mark are established those rights can be sold, licensed, or otherwise transferred in a number of different ways.