Will the Trailblazer Benefit from Residual Goodwill in the U.S.?

Chevy license plate residual goodwill for trailblazer"

The Chevy Trailblazer is making its comeback to the United States after a ten-year hiatus. Chevy stopped production of the SUV in the U.S. in 2009, but did that effectively stop its trademark rights in the TRAILBLAZER mark as well? Likely not if Chevy can benefit from the concept of residual goodwill (also known as lingering goodwill).

The United States Patent and Trademark Office has a policy that absent an extraordinary situation, everything filed with the Trademark Office will remain public. This includes any pending applications or registrations that subsequently are abandoned. When an application or registration is abandoned, the record is marked “dead” in the Trademark Office’s database.

The legal precedent is legion that “dead” registrations cannot prevent the registration of a subsequent mark. Nevertheless, some trademark searchers argue that reviewing “dead” records is time well spent because abandoning a registration is not tantamount to abandoning all trademark rights and because of the concept of residual goodwill.

Residual goodwill occurs after a trademark owner has permanently discontinued use of a trademark or service mark (i.e., abandoned the mark), but there remains some minimal use of the mark in connection with selling off inventory, for example, or in connection with related goods or services. This argument generally only succeeds when additional factors favor a finding of non-abandonment, for example, where there has been a continued presence of branded products in the marketplace or the manufacture and sale of replacement parts.

It seems pretty clear that General Motors permanently discontinued use of the TRAILBLAZER mark for vehicles when it decided to end production. However, General Motors was smart when it prepared its trademark application for the TRAILBLAZER mark back in 1997. The description of goods in the TRAILBLAZER application read “motor vehicles, namely, sport utility vehicles, engines thereof and structural parts therefor.” According to the General Motors Parts Store website, parts for the Trailblazer continued to be available after production of the SUV stopped. General Motors next renewal deadline is July 1, 2019, so we will see what General Motors renews.

Abusive Trademark Applications Muddy the USPTO Database

Andrei lancu – the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office – recently testified before a Congressional oversight committee that he could use help tackling the problem of abusive trademark applications. From 2013 to 2018, the USPTO reported an 1100% increase in trademark applications from China. The problem, however, with foreign applications is not just with China.

The problem with foreign applications stems from the fact that trademark applications in a foreign applicant’s native country are filed differently than in the U.S. Most countries do not require proof of use before issuing a registration, and some countries will let the applicant apply for every good or service in a particular International Class even if the applied-for mark will not be used with the vast majority of those goods or services.

Given the foreign applicant’s experience in their native country, the problem in the U.S. becomes obvious. Foreign applicant’s file U.S. trademark applications like they file trademark applications in their native country. The USPTO does not currently require a U.S. licensed attorney to file the applications for the foreign applicant. Accordingly, U.S. trademark applications filed by foreign applicants contain broad descriptions of goods that will never be used with the mark.

These foreign applications can cause all sorts of havoc for trademark searchers because of the Trademark Office’s presumptions. When goods or services descriptions are unrestricted the Trademark Office assumes the description covers all goods of a similar nature, travel in all channels of trade, and appeal to all classes of consumers. When a trademark searcher encounters a broad description with a similar mark, you have to assume it could be cited against the registration of your proposed mark. Then you are left with deciding how to respond to the issue. In the case of a foreign applicant, the likely response is a petition to cancel either on the ground of fraud or void ab initio.

Trademark owners should not have to incur this expense. Foreign applicant’s should ensure their applications comply with U.S. filing requirements. Director lancu testified that the agency has ramped up training for trademark examiners to them help spot troublesome applications, escalated a process to cancel fraudulent marks, and started piloting software that can help detect images in applications that have been tampered with on Photoshop. The agency is also considering requiring all foreign applicants to be represented by a licensed U.S. attorney.

Brand Name for Hemp Products May Be Protected

"product packaging of Hemp brand name supplement"

The United States Patent and Trademark Office recently announced that it will accept trademark applications for hemp-based products. This is a departure from last year when we discussed strategies for brand name owners to secure some trademark protection for any cannabis-based product. Last year, all products containing any part of the cannabis plant were illegal under federal because marijuana was on the federal list of controlled substances.

The 2018 Farm Bill changed the definition of marijuana to exclude hemp. Many people may not know that hemp and marijuana are different. While both plants contain cannabinoids, hemp contains a very low concentration of THC (0.3% or less) whereas marijuana contains concentrations of THC ranging from 15% – 40%. THC is the cannabinoid that induces psychoactive effects and gives the sensation of the user getting “high.”

But before every hemp producer gets too excited about this recent development and rushes to the Trademark Office to register all their brand names, a word to the wise. Make sure you can substantiate that your product satisfies the definition of hemp. In other words, your products contain no more than 0.3% of THC.

With marijuana still on the federal list of controlled substances, it is highly likely that that the Trademark Office will want to ensure that the marks being registered are used with hemp, not marijuana-based products. The Trademark Office will pursue this inquiry by issuing a Request for Information.

The examining attorney may ask questions designed to obtain specific information that is factual in nature from the applicant. The examining attorney may also request literature, exhibits, affidavits or declarations, and general information concerning circumstances surrounding the mark, as well as, if applicable, its use or intended use.  Requests for information that is not public knowledge, but is within the knowledge of the applicant or available to the applicant, are particularly appropriate.  

A trademark applicant has a duty to participate in the examination process by responding directly and completely to each request for information. Failing to respond or to properly respond can result in the abandonment of the application to register the brand name.

No Brand Extension When Giving Branded Clothing to Employees

"brand clothing polo shirt"

Companies give branded clothing items to their employees to wear during the performance of their job. Make the branded clothing stylish enough and the employee may just wear it out socially as well. Brand extensions are helpful to increasing the conceptual strength of the mark, so being able to extend a brand to clothing or anything else can be a positive thing. Unfortunately, giving branded clothing to employees will likely not extend your brand to clothing because it likely does not qualify as transport in actual trade.

Trademark rights are based on use of the mark in commerce, and for use to be sufficient to establish trademark rights it must: (1) be a bona fide use in the ordinary course of trade; and (2) not be merely for the purpose of reserving rights in a mark. The use must a genuine commercial use as opposed to use solely for the purpose of establishing trademark rights. Accordingly, whether use is genuine is based on what is a typical commercial use within the relevant industry.

Commercial use does not mean that a sale must occur. A mark is used in commerce in connection with goods when the goods are sold or transported in commerce. For a sale or transport to qualify as use in commerce it must be: (1) in actual trade; and (2) lawful. And in the case of transport as the basis, the use must also be: (a) of a finished product; and (b) open and public to actual consumers of the goods.

Transport of a good in actual trade means the good must benefit and have independent value to others, and cannot be an item that is transported incidentally in connection with other primary goods and services. Goods that are incidental to other primary goods and services: (1) are useful only in connection with a primary good or service; (2) are inextricably tied to a primary good or service; and (3) lack independent value.

Branded clothing given to employees is connected to the primary purpose of the business. It is incidental to the primary purpose of the business. Generally, the branded clothing is useful only in the performance of the employee’s job. And, generally, it lacks independent value. Branded clothing given to employees functions more like advertising or promotional material, which is insufficient to establish trademark rights for goods.

Petition Started Over Disney’s HAKUNA MATATA Trademark

"Disney Hakuna Matata t-shirt"

Using a foreign word in the United States as a trademark is a common naming practice. Sometimes, the foreign word possesses a cache that its English counterpart does not. Depending on the word, this practice can have some negative consequences.

In August of 2018, we saw the outrage from Hawaii when a Chicago-based restaurant chain tried to tell a single location Hawaiian restaurant it could not use the word ALOHA as part of its business name. And as 2018 was drawing to a close, we saw the same outrage against Disney manifested in a petition posted on the Change.org website. The petition was started by Shelton Mpala and has 178,813 supporters.

The problem, as Shelton Mpala sees it, is that “Hakuna Matata” is a Swahili phrase that translates to “no trouble” in English. It is a word that has been used by most Kiswahili-speaking countries and Disney’s trademarking the word is stealing a portion of African culture.

Disney has trademarked the phrase HAKUNA MATATA for t-shirts. But Healthy Pride Supplements has trademarked the same phrase for “multi-vitamin preparations; vitamin supplements; dietary and nutritional supplements” and another company has trademarked the phrase for wedding planning.

Trademarking a foreign word does not mean the word cannot be used in any context or any purpose. What it means is that in a commercial context on certain goods and services, prospective purchasers have the right not to be confused between the goods or services being offered in the marketplace. After all, trademark law is a consumer protection law.

In the case of Disney, that does not even mean that HAKUNA MATATA can never be used on a t-shirt by anyone. A purely ornamental as opposed to a trademark use of the phrase HAKUNA MATATA is allowed despite Disney’s trademark rights.

Nevertheless, while the Chicago-based restaurant may have had a better argument regarding the use of ALOHA by another restaurant, companies choosing to adopt foreign words as their trademark in the United States need to consider the non-trademark backlash that may result because of the general misunderstanding of trademark rights.

KFC’s Unique Brand Extension: a Fire Log

"KFC brand extension into a fire log"

Kentucky Fried Chicken a/k/a KFC took its brand to a whole new level with the KFC fire log. Now, you can have the smell of KFC’s fried chicken not just at dinner time, but all day long. At least you could have had that smell if you were lucky enough to get your hands on one. Apparently, the KFC fire log sold out in hours.

KFC’s decision to launch a fire log under its well-known KFC brand is a bold, but helpful brand extension. It is helpful because brand extensions increase the strength of the mark. The more opportunities consumers have to encounter a mark, the more likely they are to associate the mark with a single source.

It is also a common misconception that a trademark must be used at all times otherwise the trademark rights are abandoned. A trademark must be continuously used, but that use needs to be consistent with the nature of the goods or services being offered for sale. In this case, KFC is offering the logs for a limited time. So long as KFC repeats this activity in 2019, it will be able to maintain its trademarks rights for KFC in a fire log.

Another good example of this are businesses at county or state fairs. There are several businesses that exist solely to sell their goods for a limited time during a state or county fair. But they do this every year and don’t lose their trademark rights when the fair closes for the year.

What is also interesting about the article is KFC’s statement that “[t]he smell of the Colonel’s Original Recipe fried chicken is unmistakable.” This statement suggests a non-traditional trademark in the form of a smell. The definition of a trademark in the Trademark Act is extremely. It says that anything can function as a trademark provided it is capable of distinguishing and indicating the source of goods or services. If the smell of the Colonel’s fried chicken is unmistakable, then pursuing non-traditional trademark protection may be worth considering. These types of trademarks generally require more effort to protect, but they are a great addition to any trademark portfolio.

Study Shows Correlation Between A Trademark Filing And Growth

"working paper title about the benefits of a trademark filing"

When dealing with intangible property, it is often hard for a business owner to understand why money should be spent on, for example, a trademark filing. Obtaining a trademark registration can be expensive depending on the path the business owner chooses when starting the trademark registration journey. And the effects of that decision to make a trademark filing may go unnoticed or the positive effects of that decision may be misattributed to something else in the business.

A working paper titled An Anatomy of U.S. Firms Seeking Trademark Registration was recently published by the National Bureau of Economic Research, and it may provide the clarity and understanding business owners need to see that a trademark filing makes a business money. The working paper was also released in perfect timing with the U.S. Senate’s Resolution to Increase Trademark Protection Awareness.

The study created a new dataset by combining the USPTO trademark filing data with firm characteristics, performance, and dynamics in the United States as reported by the U.S. Census Bureau. The paper then provided a first look at the connection between a trademark filing and the broader measures of firm outcomes.

The study found that a trademark filing is highly correlated with the ultimate success of an early entrepreneurship activity including employment and revenue growth. Firms that do not apply for a trademark registration in their initial years are unlikely to do so unless they experience employment growth. However, difference-in-differences analysis suggests sizable treatment effects, with firms making a trademark filing having substantially higher employment and greater revenue in the period following the first trademark filing.

Hopefully, this paper will be peer-reviewed and ultimately validated because, if accurate, it provides businesses with the most valuable justification for protecting a trademark: namely, that it likely will make you money.  More businesses need to recognize the importance of filing trademark applications and the data suggests that too few businesses understand this. According to the Kauffman Startup Index in 2017 there were about 540,000 new business owners each month during the year. That means for the entire year there were about 6.5 million new business owners in 2017. However, through the third quarter of 2018, there are only 480,111 new trademark applications that have been filed in 2018.

Every business, whether a startup or established enterprise, should pursue trademark protection for not only its business name, but also the names of its goods or services. But if you are going to spend the money to protect your brand, you might as well do it wisely. Engage a naming firm to help with the design of a new name and conduct a trademark search to make sure the name is available.

Trademark Licenses In Bankruptcy May Be Changing

"Bankruptcy petition may be changing for a trademark license"

When a trademark owner licenses its rights to another then subsequently files for bankruptcy, the bankruptcy trustee has the option to reject the trademark license. To reject, rather than assume, the trademark license means to terminate the license agreement. In this situation, the trademark licensee has no option to continue using the trademark. The trademark license is simply terminated. Generally, trademark licenses are rejected by a bankruptcy trustee when the agreement stands in the way of a restructuring.

This treatment of trademarks in the Bankruptcy Code is different from the other forms of intellectual property. When copyrights, patents, and trade secrets are involved, while the bankruptcy trustee can reject the license agreement, the licensee can elect to continue to use the intellectual property provide the royalty payments and other obligations under the license are followed.

For some Courts, this different treatment of intellectual property rights was wrong, so they treated trademarks like the other forms of intellectual property under the Bankruptcy Code. For other Courts, the language in the Bankruptcy Code was clear and Congress by its words decided to treat trademarks differently from the other forms of intellectual property. Mission Product Holdings, Inc. recently filed a Petition for a Writ of Certiorari in the Supreme Court of the United States to resolve the split among the Courts.

The International Trademark Association filed an Amicus Curiae (i.e., Friend of the Court) brief in favor of the U.S. Supreme Court taking the case. According to INTA, allowing trademark licenses to survive bankruptcy will result in a stronger trademark system that will increase the royalties trademark licensees are willing to pay.

There is no question that it is the trademark licensor’s obligation to ensure a certain level of quality in the licensed goods or services is maintained. In some cases, a trademark licensor can satisfy this obligation by relying on its relationship with the licensee. But the types of relationships that allows for this quality control delegation are few in number. If a trademark licensor fails to engage in actual quality control, the result can be an abandonment of all trademark rights.

The difficult question is whether a debtor trademark licensor should be obligated to incur the expense of engaging in quality control if the trademark licensee wants to continue using the trademark. If the Supreme Court takes the case and decides that trademarks should be treated like other intellectual property, then it may make sense to negotiate in any trademark licenses that the licensee must pay the costs for the debtor trademark licensor to exercise it quality control obligations in addition to any royalties owed.

Multiple Colors Not An Inherently Distinctive Trademark

"Forney Mig Wire multiple color product packaging not an inherently distinctive trademark"

Oberlo blogged about the Color Psychology, which is the important role color plays in how consumers perceive a brand. According the post, color affects our day-to-day decisions including what items to buy. The Drum also wrote about blue being the dominant color used by global industries. Because of its importance in the purchasing decision, more companies should consider protecting colors as trademarks. However, not as many as you think attempt to do this because obtaining a trademark registration for a color – as a non-traditional trademark – can require some effort.

Recently, the Trademark Trial and Appeal Board addressed, for the first time, whether multiple colors applied to product packaging can be an inherently distinctive trademark or if the colors must acquire distinctiveness. Forney Industries, Inc. – manufacturer of welding and abrasives tools, equipment, and accessories – applied to register the colors black, yellow, and red applied to packaging for a variety of welding and abrasives goods. The Trademark Office refused registration of Forney’s mark on the ground that the multiple colors is not an inherently distinctive trademark.

Color applied to product packaging is treated the same as color applied to a product and because color applied to a product can never be an inherently distinctive trademark, color applied to product packaging can never be an inherently distinctive trademark. This does not mean that color can never function as a trademark for a product or its packaging, but that color must acquire distinctiveness. It is not immediately protectable as a trademark. And there is no meaningful distinction between a single color or multiple colors when applying this principle.

This case involved color in the abstract. If Forney had applied the multiple colors applied to well-defined shape, pattern, other distinctive design, then the color applies to that extra matter could be inherently distinctive. But since Forney did not argue in the alternative that its multiple color mark had acquired distinctiveness, the Board affirmed the refusal to register Forney’s multiple color mark.

Trademark Office Continues Fight Over FUCT Mark

"FUCT logo on a hat is scandalous according to the Trademark Office"

The United States Trademark Office is fighting for its decision to refuse registration of the mark FUCT for “Athletic apparel, namely, shirts, pants, jackets, footwear, hats and caps; Children’s and infant’s apparel, namely, jumpers, overall sleepwear, pajamas, rompers and one-piece garments” on the ground that the mark is vulgar; thus, scandalous. Recently, the USPTO filed a Petition for Writ of Certiorari with the United States Supreme Court asking that it review the decision of the United States Court of Appeals for the Federal Circuit that held registration refusals on the ground of scandalousness violates the free speech right of the First Amendment to the U.S. Constitution.

We previously discussed the timing of the recent decisions involving Section 2(a) of the Trademark Act and the impact Federal Circuit’s decision would have on trademark searching if the decision stands. And the reason we discussed in that prior post is the argument the Trademark Office is making in its Petition to the Supreme Court. Section 2(a) will not prevent trademark owners from using immoral or scandalous terms as trademarks, it will simply prevent the trademark owner from receiving certain benefits from the Trademark Office that are afforded to registered trademarks.

When the In re Tam decision resulted in disparaging words no longer being off-limits for trademark registrations, we did not see a rash of new applications for disparaging marks. Similarly, it seems like the only person who took advantage of the Federal Circuit’s decision on immoral and scandalous terms was Erik Brunetti himself who filed five new trademark applications for or containing FUCT.

It is hard to imagine that the Supreme Court is going to make a meaningful distinction between disparaging terms and immoral or scandalous terms. Nevertheless, if the Trademark Office is successful, the concern about having to consider scandalous or immoral terms in a trademark search will remain.