Avoiding Minefields Inherent in Buying Another's Trademark

FRIDAY, JUNE 30, 2006

SINCE 1888 OFFICIAL NEWSPAPER OF THE LOS ANGELES SUPERIOR COURT AND UNITED STATES SOUTHERN DISTRICT COURT Focus Avoiding Minefields Inherent in Buying Another’s Trademark

By Janene P. Bassett the application will not proceed to prove abandonment. Chance v. Pac-Tel registration until the mark is used in Teletrac Inc., 242 F.3d 1151 (9th Cir. 2001). btaining new trademark rights, commerce and evidence of that use has been If your company seeks to “buy” an whether through creation of a new submitted to the U.S. Patent and Trademark unregistered mark, investigate the use of Omark or assignment from another Office. 15 U.S.C. Section 1051(b). the mark over its life to determine whether entity, can be a great opportunity for your An intent-to-use application cannot be trademark rights in fact were created and company to expand its brands and grow a assigned to another entity unless the maintained. Without continuous and new business area. However, you should be applicant has provided that evidence of use significant use, there may be no trademark mindful of several important issues to avoid pitfalls. Buying another’s mark can be a Clearance searches can help minimize the risk of a minefield. When structuring an assignment charge of infringement and avoid unnecessary of trademarks or service marks, attorneys expenses associated with launching a brand that should keep in mind the following points and advice. later might prove to be problematic. Assignments require goodwill. If your company seeks to acquire another to the Trademark Office or the assignee is rights to assign, rendering any assignment entity’s trademarks through an assign- the successor of the assignor’s business. 15 worthless. ment, the goodwill associated with the U.S.C. Section 1060(a)(1). In fact, if your As part of the assignment of an mark must be transferred too. 15 U.S.C. company does get an assignment before unregistered mark, seek documentation Section,1060(a)(1). Simply stating in the evidence of use has been submitted, both from the assignor evidencing use of the mark assignment document that goodwill is the application and any resulting over time, and make the assignor obligated transferred is not enough. Glow Industries registration will be void. Clorox Co. v. to testify about such use if needed. Without Inc. v. Lopez, 273 F. Supp. 2d 1095 (C.D. Chemical Bank, 40 U.S.P.Q.2d (BNA) 1098 such evidence, it will be difficult to prove Cal. 2003). On the other hand, transfer of (T.T.A.B. 1996). that common-law rights were established. tangible assets is not required, although it Abandoned trademarks cannot be Assignments of registered trademarks certainly is helpful to show that goodwill assigned. This was made clear in Auburn must be in writing. Any assignment of a has been transferred. Farms Inc. v. McKee Foods Corp., 51 federally registered trademark must be in To determine whether goodwill has been U.S.P.Q.2d 1439 (T.T.A.B. 1999). Absent an writing and executed. 15 U.S.C. Section transferred, courts will evaluate whether an express abandonment or cancellation of the 1060(a)(3). In order to be recorded, the assignee’s use of a mark maintains sufficient registration, to establish that a federally assignment must be in English, or an continuity with the assignor’s prior use. In registered trademark has been abandoned, English translation must be provided. 37 making that determination, courts will the party trying to demonstrate abandon- Code of Federal Regulations Section 3.26. consider whether tangible assets were ment must prove nonuse of the mark Although written assignments are not transferred, whether technical information combined with an intent not to resume such required for common-law trademarks, a and know-how were transferred, the use. 15 U.S.C. Section 1127. written assignment is preferred for practical similarity of the products, continuity of Nonuse for three years is prima facie reasons. Speed Products Co. v. Tinnerman management and other facts. evidence of intent not to resume such use. Products Inc., 179 F.2d 778 (2nd Cir. 1949). Intent-to-use applications generally For unregistered marks, abandonment is Assignments should be recorded within cannot be assigned. If another entity seeks easier to establish because the mark owner three months. Assignments of federal to sell your company its federal intent-to- must show continuous and significant use trademarks should be recorded with the use trademark application, be careful. of the mark in interstate commerce in the Trademark Office. Recordation acts as Although the Lanham Act allows for United States in order to have existing prima facie evidence of execution of the applications to be filed based on a bona trademark rights, so the burden is on the assignment. 15 U.S.C. Section 1060(a)(3). fide intent to use the mark in commerce, mark owner rather than the party trying to If an assignment is recorded within three months of execution or before a subsequent opinion of counsel may be helpful to show service mark (that is, to provide a source- purchase, then recordation acts to void an that your company acted with good intent identifying function and to distinguish assignment to any subsequent purchaser for in selecting and adopting its mark. Intent goods/services from others’ goods/ consideration without notice. 15 U.S.C. is relevant to the “likelihood of confusion” services). Section 1060(a)(4). test for trademark infringement liability, as Potential junior users may be more likely Adopting a new mark creates a different well as to potential recovery of the to avoid your company’s mark if they see set of issues. Paying attention to these defendant’s profits and the plaintiffs’ that your company is claiming rights in the issues can help maximize the protection for attorney fees. mark. the new mark and guard against loss of your Consider seeking a trademark Where your company has a federal company’s investment in the mark. registration. Although a federal trademark registration, ® or “Registered in U.S. Patent Pick a distinctive mark. In selecting a registration is not required to protect a mark, and Trademark Office” or “Reg. U.S. Pat. & mark, it is important to adopt something it provides certain benefits, including prima Tm. Off.” should be used. 15 U.S.C. Section distinctive. The more distinctive a mark is, facie evidence of validity of the mark, 1111. the stronger its conceptual strength will be, validity of the registration, ownership of These symbols can be used only for which ultimately will impact the scope of the mark, constructive notice of the federally registered marks and only in protection for the mark. registrant’s claim of ownership and the connection with the goods or services cited Certain types of marks are inherently exclusive right to use the mark in commerce in the registration; simply filing a distinctive and strong: arbitrary marks on the cited goods/services, as well as the trademark application is not enough. (marks unrelated to the good/service); right to certain remedies. 15 U.S.C. Although use of the ® symbol (or its fanciful marks (the mark is a made-up word); Sections 1057(b), 1072, 1115(a), 1117. If equivalents) is not required, failure to use and suggestive marks (some imagination your company is not yet ready to use the it with your registered mark will result in a or level of abstraction is required to reach a mark, you should consider filing an intent- loss of the ability to recover the defendant’s conclusion about the goods/services). to-use application, which reserves rights in profits or your damages in a trademark Descriptive marks (terms that describe the a registration for you while you make plans infringement case, unless you can show that nature, use or characteristics of goods/ to actually start using the mark in the defendant had actual notice of your services), on the other hand, are not commerce. 15 U.S.C. Section 1051(b). The registration. 15 U.S.C. Section 1111. Note inherently distinctive, are weak and require filing date of an intent-to-use application that improper use of registered trademark secondary meaning (the primary acts as a constructive first-use date, which symbols risks a potential finding of fraud significance of a mark to the public is to means that, upon registration, that on the Trademark Office that could result identify the source of the product rather application generally will confer priority in a cancellation of the registration, a claim than the product itself) to enforce the mark. over marks first used after your filing date. for false advertising, or a defense of unclean Generic terms (the common name for goods/ 15 U.S.C. Section 1057(c). Your company’s hands. services) are never entitled to trademark filing date can trump another entity’s later Use the mark properly. This goes for protection. actual first-use date, even though your print materials as well as material on the Conduct a clearance search, and company’s actual first use took place Internet and elsewhere. A mark should not consider getting an expert opinion. afterward. Note, however, that, except for be used as a noun or verb but rather should Parties creating a new mark should conduct certain foreign-based applications, until the be used as an adjective, that is, “ACME a clearance search to evaluate whether mark is actually used in commerce and widgets.” Also, the mark should not be used the mark may be used without undue risk evidence of that use is submitted to the in possessive form (“ACME’s widgets”). of infringement. Initial searches typically Trademark Office and a registration issues, Distinctive lettering is also helpful to involve searching publicly available the intent-to-use application confers no signify to the public and potential junior trademark databases, like the federal substantive trademark rights on you and no users that your company is using the government’s trademark database, constructive first-use date. 15 U.S.C. word(s) as a trademark. www.uspto.gov, and conducting investi- Sections 1051(a)-(d), 1057(c). Taking proper steps to obtain your gations using Internet search engines. Use trademark symbols. If you are company’s trademark rights can help avoid More extensive searches can be claiming trademark or service mark rights problems with development of your conducted through outside search firms in a mark, use the appropriate trademark company’s brand and enforcement of its specializing in trademark clearances, which, symbols to signify such a claim. Where your marks. It also will help protect your for a fee, will search massive databases they company has common-law rights or a company’s investment in the new marks. have collected. Clearance searches can help federal application has been filed but has minimize the risk of a charge of infringement not yet resulted in a registration, a and avoid unnecessary expenses associated superscript “TM” (for goods) or “SM” (for Janene P. Bassett, an associate in the with launching a brand that later might services) should be used next to the mark. entertainment, media and communications group and intellectual property group at prove to be problematic. This signifies to the public as well as to Sheppard, Mullin, Richter & Hampton, If your company is charged with potential junior users that your company focuses her practice on trademark and other trademark infringement, a favorable intends for the mark to act as a trademark or intellectual property litigation and counseling.