Loss of Trademark Rights Section 1064(3)

The focus in Chapter 4 was on the creation and acquisition of trademark rights. In this chapter we move on to the various problems which can arise once a trademark exists, as well as the way in which rights in marks can be conveyed. Loss of rights in a mark is just one of the issues which a mark owner, and its legal team, must be aware of.

Loss of Rights Due to Genericism

We have already seen in the previous chapter how the mark “Aspirin” became generic, and the Bayer case is not an isolated incident. One detail left out of our earlier discussion of Bayer was that the court found the name “Aspirin” had become generic among consumers, but not among retailers, and the defendant was therefore not allowed to use the mark with retailers or manufacturers. Bayer Co. v. United Drug Co., 272 F. 505, 510 (S.D.N.Y. 1921). See also, Magic Wand, Inc., v. RDB, Inc. 940 F.2d 638 (1991).

An excellent discussion of how a mark becomes generic, and some of the steps one can take to try to “rescue” that mark, can be found in King-Seeley Thermos Co. v. Aladdin Industries, Inc., 321 F.2d 577 (2d Cir. 1963) (note that the conflict between these parties did not end with this case). It is also an excellent example of how marketing can backfire. The court makes mention of the plaintiff’s marketing campaign between 1907–1923, and its (failed) attempts to police the use of their mark beginning as early as 1923. In the mid-fifties, the company changed its name and increased its policing activities. But ultimately, it was not for lack of effort that the term became generic.

One important lesson from the Thermos case is that the trademark holder’s effort to prevent genericism of a mark is not relevant. The court, at 579, wrote the following:

We are not convinced that the trademark's loss of distinctiveness was the result of some failure on plaintiff's part. Substantial efforts to preserve the trademark significance …. [T]here was little they could do to prevent the public from using 'thermos' in a generic rather than a trademark sense. And whether the appropriation by the public was due to highly successful educational and advertising campaigns or to lack of diligence in policing or not is of no consequence; the fact is that the word 'thermos' had entered the public domain beyond recall.

The rules from these cases eventually found their way into §1064, and Anti-Monopoly, Inc. v. General Mills Fund Group, 684 F.2d 1316 (9th Cir. 1982) does an excellent job of covering the way in which various surveys are used in these cases. In cases where a party argues that a mark has become generic, the essential question is one of fact, not of law: Does the mark signify a source of goods in the minds of the public (or other relevant group)? If the answer is “No,” then the mark has become generic and may be used by others.

EXAMPLE: Jeb & Terry’s Ice Cream Company had developed a new frozen treat they call “Ice Glace.” Between 1989 and 1999 they spend over $50 million marketing this new frozen delicacy to Americans. In 1995, the first competitor enters the market, and by 1999, a number of ice cream companies are making products similar to “Ice Glace.” Restaurants begin offered “Ice Glace” on their dessert menu, even though they serve several different brands of the treat. Supermarkets begin dedicating sections of their freezers to the product, referring to this as the “Ice Glace Section.” Between 1999 and 2004, Jeb & Terry’s spends in excess of $100 million for marketing, two-thirds of it aimed at saving their mark. Despite their efforts, a court could find that by 2004 the term became generic and the originators could not prevent others from using the term “Ice Glace.”

The Anti-Monopoly case should be the first place you look to get a general understanding of the variety of surveys available and how they can be used. Four different surveys were considered by the court in that case, and while not all of them are necessary in every case, and while there may be other surveys useful in other cases, the 9th Circuit’s analysis is an excellent jumping off point for research. Again, the most important thing to keep in mind for our purposes is that this inquiry is a factual one, and no matter how careful a company is to preserve their mark, once it becomes generic in the minds of others, the rights in the mark are lost.

Loss of Rights Due to Abandonment

We learned from the Thermos case that ultimately, no amount of effort can prevent a mark from becoming generic. Of course, that doesn’t mean that mark owners might as well sit idly and ignore their marks. Attempts to rescue marks from becoming generic can succeed (as in the case of Xerox®, and others). Furthermore, a failure to use a mark will result in abandonment, which under §1064(3) is another way to lose rights in a mark.

Even without becoming generic, a mark can lose its significance through non-use. Abandonment is defined in §1127 as when a mark’s

use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment. "Use" of a mark means the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.

Abandonment, like genericism, is a factual issue (although surveys, obviously, are not necessary here). Also, as with genericism, it is an affirmative defense which must be pled by the party accused of infringement.

Abandonment is not necessarily permanent; a trademark owner can revive the mark. Similarly, another user can come along and gain rights in the abandoned mark, thereby excluding the original owner from its use.

EXAMPLE: Mooncorp is a small shoe store in Prairiland owned by Bill, who registered the mark in 1997. In 1999, Bill closes the shop, moves to New York and becomes a stockbroker. In 2001, Frank opens a new shop in Prairiland called Mooncorp. He has a fancy sign made for the store, prints expensive advertising material, and his business starts to grow. In 2002, Bill realizes he will never make it on Wall Street and decides to move back to Prairiland and re-open his shop. Because the mark was abandoned, Frank was free to use it. Further, Bill cannot now use the mark without infringing on Frank’s right to the name. See Conwood Corp. v. Loew’s Theatres, Inc., 173 U.S.P.Q. (BNA) 829 (TMTAB 1972).

 In Silverman v. CBS, Inc., 870 F.2d 40 (2d Cir. 1989), the “Amos ‘n’ Andy” characters were at issue, and the two elements of abandonment were met. First, there was actual nonuse of the marks. Second, there was no intent to use the marks in the foreseeable future. The goal of keeping the marks to oneself is not considered a use, nor is suing potential infringers. Even the sporadic licensing of the marks for non-commercial use was insufficient to maintain ownership. In short, the totality of the circumstances must be weighed, and here they leaned toward abandonment.

Loss of Rights Due to Naked Licensing or Failure to Police

“Naked licensing” is the term used when a mark owner licenses the use of a mark without maintaining any control over its use. Trademark law

“places an affirmative duty upon a licensor of a registered trademark to take reasonable measures to detect and prevent misleading uses of his mark by his licensees or suffer cancellation of his federal registration”  - Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 366 (2d Cir. 1959).

By granting someone the right to use a mark and then failing to control their use of the mark, one will essentially be abandoning the mark and risk losing the exclusive right to use the mark.

EXAMPLE: Bill grants Frank a license to use the mark “Mooncorp” is association with Frank’s new shoe wholesaling business. A month after being granted the license, Frank decides to change the way he does business. Rather than wholesaling the quality shoes he has manufactured in the past, Frank realizes he can make more money with less effort if he imports cheap foreign-made shoes, affixes the Mooncorp label, and sells those to shoe stores. If the license included no provisions for quality control, or if Bill fails to reasonably inspect the quality of the merchandise bearing his mark, a court might find that the naked license results in abandonment. See Poole v. Kit Mfg. Co., 184 U.S.P.Q. 302 (N.D. Texas 1974); Engineered Mechanical Services, Inc. v. Applied Mechanical Technology, Inc., 584 F. Supp. 1149 (1984). 

One apparent exception to the need to control the use of a licensed mark came in University Bookstore v. Board of Regents, 1994 TTAB LEXIS 8 (1994), as discussed in Ginsburg, et al. at 411. There, the court found that the mark “Wisconsin Badgers” was not abandoned, despite 200-plus years of uncontrolled other users as “royalty-free, nonexclusive, implied licenses.” The court here comes close to using an industry standard test here; no other colleges were enforcing their marks. This is no longer the case with trademarks belonging to colleges – the rights are enforced today by most schools. Because it is unlikely that there remains any industry today wherein the norm is to allow free use of their marks, we are unlikely to see another case like this anytime soon.

In addition to naked licensing, the failure to police the use of a mark by unauthorized users can result in a court ruling of abandonment. When Anheuser-Busch failed to protest to DuBois Brewing Company’s use of “Budweiser” for an extended period of time (1905–1940), the court ultimately found that the junior user could not be prevented from using the term in connection with their beer. Anheuser-Busch, Inc. v. Du Bois Brewing Co., 175 F.2d 370 (3rd Cir. 1949). Although the defendant is no longer in business (perhaps bought out by the plaintiff?), a mark which is very valuable today was at one point available for use by a competitor of Anheuser-Busch.

As with the technical filing and renewal requirements under §§1058–1059, the use of a mark by unauthorized parties requires careful attention. Although it is impossible to do a perfect job of it, some regular policing is required to avoid abandonment of a mark. In addition to more traditional research, regular Internet searches for a mark should be conducted.