REPORT TO CONGRESS - United States Patent and Trademark Office

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REPORT TO CONGRESS - United States Patent and Trademark Office

Transcript Of REPORT TO CONGRESS - United States Patent and Trademark Office

REPORT TO CONGRESS
Trademark Litigation Tactics and
Federal Government Services to Protect Trademarks and Prevent Counterfeiting
April 2011

S. 2968, Trademark Technical and Conforming Amendment Act of 2010 Public Law 111-146
SEC. 4. STUDY AND REPORT. (a) IN GENERAL.—Not later than 1 year after the date of enactment of this Act,
the Secretary of Commerce, in consultation with the Intellectual Property Enforcement Coordinator, shall study and report to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives on— (1) the extent to which small businesses may be harmed by litigation tactics by corporations attempting the purpose of which is* to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner; and (2) the best use of Federal Government services to protect trademarks and prevent counterfeiting. (b) RECOMMENDATIONS.—The study and report required under paragraph (1) shall also include any policy recommendations the Secretary of Commerce and the Intellectual Property Enforcement Coordinator deem appropriate.
* The language shown in bold italicized text was amended by S. 3689, "Copyright Cleanup, Clarification and Corrections Act of 2010" which was signed into law on December 9, 2010 as Public Law 111-295. Section 6(h) states: “TRADEMARK TECHNICAL AMENDMENTS ACT.—Section 4(a)(1) of Public Law 111–146 is amended by striking ‘‘by corporations attempting’’ and inserting ‘‘the purpose of which is.”

TABLE OF CONTENTS LETTER TO CONGRESS ............................................................................................................................. i I. INTRODUCTION ............................................................................................................................... 3

II. TRADEMARK ENFORCEMENT AND MARKETPLACE IMPACT ........................................................... 4

A. BACKGROUND ON TRADEMARK RIGHTS ........................................................................... 4

1. TRADEMARKS AND THEIR PURPOSE .................................................................................. 4

2. ALL TRADEMARKS ARE NOT CREATED EQUAL ................................................................ 5

B.

POLICING AND ENFORCING TRADEMARK RIGHTS............................................................. 6

1. DETECTING POTENTIAL VIOLATIONS ................................................................................ 7

2. EVALUATING POTENTIAL VIOLATIONS ............................................................................. 7

3. ADDITIONAL ENFORCEMENT CONSIDERATIONS ............................................................... 9

4. TYPICAL ENFORCEMENT MEASURES................................................................................. 9

A. CEASE-AND-DESIST LETTERS....................................................................................... 9

B. SETTLEMENT/LICENSE AGREEMENTS ........................................................................ 10

C. LITIGATION................................................................................................................. 11

(I) AVAILABLE REMEDIES AND DETERRENTS TO COERCIVE BEHAVIOR ................... 12

C. MARKETPLACE IMPACT ................................................................................................... 13

1. EVALUATING THE REASONABLENESS OF ENFORCEMENT EFFORTS: COERCIVE BEHAVIOR VS. DEFENSE OF A RIGHT............................................................................... 13

2. EXAMINING THE SCOPE OF THE ASSERTED PROBLEM..................................................... 15

3. SOLICITING PUBLIC COMMENT........................................................................................ 15

A. QUESTIONS POSED...................................................................................................... 16

B. COMMENTS RECEIVED ............................................................................................... 18

(I) CEASE-AND-DESIST LETTERS AND PRE-LITIGATION ISSUES ................................ 18

(II) ACTUAL LITIGATION ISSUES ................................................................................. 19

(III) HOW TACTICS IN IP CASES COMPARE TO OTHER TYPES OF CASES ..................... 19

(IV) SIZE AND RESOURCE IMBALANCES ....................................................................... 20

(V) SUGGESTIONS FOR USPTO OR TTAB ACTIONS ................................................... 20

(VI) SUGGESTIONS FOR THE COURTS ........................................................................... 21

(VII) SUGGESTIONS FOR OTHER FEDERAL AGENCIES, NON-FEDERAL ORGANIZATIONS, AND CONGRESS ........................................................................ 21

III. FEDERAL GOVERNMENT RESOURCES TO PROTECT INTELLECTUAL PROPERTY AND PREVENT COUNTERFEITING.......................................................................................................................... 22

A.

DEPARTMENT OF COMMERCE’S INTERNATIONAL TRADE ADMINISTRATION’S OFFICE

OF INTELLECTUAL PROPERTY (OIPR) ............................................................................. 23

B.

UNITED STATES PATENT AND TRADEMARK OFFICE ....................................................... 23

C.

DEPARTMENT OF COMMERCE’S COMMERCECONNECT................................................... 24

D. U.S. SMALL BUSINESS ADMINISTRATION ....................................................................... 24

E.

U.S. INTERNATIONAL TRADE COMMISSION .................................................................... 25

F.

NATIONAL INTELLECTUAL PROPERTY RIGHTS COORDINATION CENTER ....................... 25

IV. RECOMMENDATIONS .................................................................................................................... 26

A.

INTELLECTUAL PROPERTY RIGHTS COUNSELING FOR SMALL BUSINESSES.................... 26

B.

ENGAGE THE PRIVATE SECTOR ABOUT OFFERING CONTINUING LEGAL EDUCATION

PROGRAMS FOCUSED ON TRADEMARK POLICING MEASURES AND TACTICS ................. 27

C.

EDUCATE SMALL BUSINESSES ABOUT INTELLECTUAL PROPERTY RIGHTS AND

AVAILABLE PROTECTION AND ENFORCEMENT RESOURCES ........................................... 28

APPENDIX A: USG RESOURCE CONTACT INFORMATION SHEET

A

APPENDIX B: ACRONYMS .....................................................................................................................B

LETTER TO CONGRESS
The Department of Commerce is pleased to transmit this report on Trademark Litigation Tactics.
On March 17, 2010, President Obama signed S. 2968, Trademark Technical and Conforming Amendment Act of 2010, into law as Public Law 111-146. The new law tasked the Department of Commerce, in consultation with the Intellectual Property Enforcement Coordinator (IPEC), to study the extent to which small businesses may be harmed by abusive trademark enforcement
tactics. Working with the IPEC, we developed the enclosed report and recommendations.
In introducing the study, Vermont Senator Patrick Leahy said:
“I am concerned that large corporations are at times abusing the substantial rights Congress has granted them in their intellectual property to the detriment of small businesses. We saw a high-profile case like this in Vermont last year involving a spurious claim against Rock Art Brewery. When a corporation exaggerates the scope of its rights far beyond a reasonable interpretation in an attempt to bully a small business out of the market that is wrong.”
Trademarks add tremendous value to the U.S. economy. Nine of the top ten global brands in the world hail from the United States.1 Recognizing that a trademark is a property right that an owner has a duty to police, this report discusses trademark litigation tactics generally and the specific issue of whether, in otherwise rightfully policing marks, some trademark owners may undertake enforcement measures based on an unreasonable interpretation of the scope of their rights for the purpose of intimidating potential violators into compliance with the mark owner’s demands.
In connection with studying this specific issue, the Department of Commerce’s United States Patent and Trademark Office (USPTO) undertook significant outreach to stakeholders and small businesses, including a request for comments period that spanned more than four months. The 79 comments received reflected a diverse range of views, yet few explicitly addressed whether and to what extent trademark abuse is a significant problem.
Ultimately, because trademark enforcement is a private property rights litigation issue, if abusive tactics are a problem, such tactics may best be addressed by the existing safeguards in the litigation system in the U.S. and by private sector outreach, support, and education relating to these issues. However, to the extent small businesses are disproportionately adversely affected by such tactics because they lack the funds to hire counsel to defend against them, we believe the Federal Government can undertake the following actions:
1. Engage the private sector about providing free or low-cost legal advice to small businesses via pro bono programs and intellectual property rights clinics;
2. Engage the private sector about offering continuing legal education programs focused on trademark policing measures and tactics;
1 Interbrand, Best Global Brands 2010, (http://www.interbrand.com/en/best-global-brands/Best-GlobalBrands-2010.aspx).
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3. Enhance Federal agency educational outreach programs by identifying resources that enable small businesses to further their understanding of trademark rights, enforcement measures, and available resources for protecting and enforcing trademarks.
We look forward to continuing to work with Congress, Federal agencies, and all stakeholders, including small businesses, to improve the protection and enforcement of trademarks and other intellectual property.
Sincerely, Gary Locke Secretary of Commerce
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I.

Introduction

On March 17, 2010, President Obama signed S. 2968, Trademark Technical and Conforming Amendment Act of 2010, into law as Public Law 111-146. Included in the new law was the requirement for a study and report, due one year later, on the effect of abusive trademark litigation tactics on small businesses. The study and report was to be completed by the Department of Commerce (DOC), in consultation with the Intellectual Property Enforcement Coordinator (IPEC).

SEC. 4. STUDY AND REPORT. (a) IN GENERAL.—Not later than 1 year after the date of enactment of this Act, the Secretary of Commerce, in consultation with the Intellectual Property Enforcement Coordinator, shall study and report to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives on— (1) the extent to which small businesses may be harmed by litigation tactics by corporations attempting the purpose of which is2 to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner; and (2) the best use of Federal Government services to protect trademarks and prevent counterfeiting. (b) RECOMMENDATIONS.—The study and report required under paragraph (1) shall also include any policy recommendations the Secretary of Commerce and the Intellectual Property Enforcement Coordinator deem appropriate.

To address the study and report objectives, the DOC and the United States Patent and Trademark Office (USPTO) reviewed data and research materials regarding trademark litigation tactics, including tactics that may impact small businesses. In addition, USPTO requested feedback from U.S. trademark owners, practitioners, and others regarding their experiences with enforcement tactics, especially those involving an attempt to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner. The USPTO conducted outreach to small businesses via an intellectual property awareness campaign event, and also conducted outreach to industry via a large industry organization. Finally, USPTO consulted with its own private advisory board, the Trademark Public Advisory Committee.

Because evaluating whether trademark rights have been enforced beyond a reasonable scope requires an understanding of fundamental trademark law principles and enforcement strategies, this report begins by providing basic background information about trademark rights and the typical ways in which, and reasons why, those rights are enforced in the United States. Against this background, the report next addresses trademark enforcement tactics and in doing so summarizes comments received from U.S. trademark owners, practitioners, and others in response to questions posted on USPTO’s web site3 requesting feedback regarding their experiences with litigation tactics, especially those involving an attempt to enforce trademark

2 The language shown in bold italicized text was amended by S. 3689, "Copyright Cleanup, Clarification and Corrections Act of 2010" which was signed into law on December 9, 2010 as Public Law No. 111-295. Section 6(h) states: “TRADEMARK TECHNICAL AMENDMENTS ACT.—Section 4(a)(1) of Public Law 111–146 is amended by striking ‘‘by corporations attempting’’ and inserting ‘‘the purpose of which is.”
3 http://www.uspto.gov/trademarks/notices/litigation_tactics.jsp

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rights beyond a reasonable interpretation of the scope of the trademark owner’s rights. The topic of abusive trademark litigation tactics was also discussed at a public roundtable. Finally, the report provides an overview of the various Federal Government resources available to stakeholders to protect and enforce trademarks in the United States and the types of services the Government provides to help prevent counterfeiting in the United States.
II. Trademark Enforcement and Marketplace Impact4
Any discussion of trademark litigation tactics, and a study of their impact on small businesses, must begin with understanding what a trademark is, the scope of the right, and how the right is defended. Also, an examination of trademark litigation tactics must be made in the context of all litigation tactics, to determine if trademark litigation presents any unique or unusual issues.
A. Background on Trademark Rights
1. Trademarks and Their Purpose
The term “trademark”5 is defined broadly as including: “any word, name, symbol, or device, or any combination thereof—(1) used by a person…to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown.”6 In essence, a trademark is anything that functions as a source identifier to consumers.
Trademarks serve as indications of origin and quality. They represent the “goodwill” or reputation a business and its products and services enjoy with the public. Businesses rely on their marks to identify their products and services and distinguish them from those of their competitors. The public relies on marks to distinguish among competing producers and as guarantees of quality. As the Seventh Circuit has explained:
The fundamental purpose of a trademark is to reduce consumer search costs by providing a concise and unequivocal identifier of the particular source of particular goods. The consumer who knows at a glance whose brand he is being asked to buy knows whom to hold responsible if the brand disappoints and whose product to buy in the future if the brand pleases. This in turn gives producers an incentive to maintain high and uniform quality, since otherwise the investment in their trademark may be lost as customers turn away in disappointment from the brand. A successful brand, however, creates an incentive in unsuccessful competitors to pass off their inferior brand as the successful brand by adopting a confusingly similar trademark, in effect appropriating the goodwill
4 This section provides a general overview of basic trademark law principles. It is not intended to constitute legal advice. Interested parties should consult qualified legal counsel to obtain advice on a caseby-case basis.
5 The terms “trademark” or “mark” as used in this report refer generally to both trademarks and service marks. A trademark identifies the source of goods, while a service mark identifies the source of services. See 15 U.S.C. § 1127.
6 15 U.S.C. § 1127.
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created by the producer of the successful brand. The traditional and still central concern of trademark law is to provide remedies against this practice.7
Indeed, when Congress enacted the Lanham Act in 1946, 15 U.S.C. § 1051 et seq. (“Trademark Act”), it explained that the statute served dual purposes:
One is to protect the public so it may be confident that, in purchasing a product bearing a particular trade-mark which it favorably knows, it will get the product which it asks for and wants to get. Secondly, where the owner of a trade-mark has spent energy, time, and money in presenting to the public the product, he is protected in his investment from its misappropriation by pirates and cheats.8
Thus, the Trademark Act protects against use of marks that are likely to cause confusion, mistake, or to deceive consumers as to the source, sponsorship, or approval of goods or services.9 It also protects owners of famous marks against dilution through blurring or a tarnishing of their image even absent a likelihood of confusion.10
2. All Trademarks Are Not Created Equal
Trademarks are categorized along a spectrum of distinctiveness. On the one end are generic terms for the category of goods or services that can never be protected as trademarks. On the other end are fanciful or coined terms that are inherently the strongest kind of mark and generally afforded the broadest scope of protection.11 Placement on the distinctiveness spectrum determines eligibility for and affects the scope of trademark protection.12 Marks that are categorized on the inherently distinctive side of the spectrum -- fanciful/coined, arbitrary, suggestive -- are immediately protectable, while those falling into the merely descriptive category are non-distinctive and unprotectable unless they acquire secondary meaning.
In general, the more distinctive a mark is, the stronger it is and the greater the scope of protection the mark will receive in court against uses of the same or similar marks. Because all trademarks do not receive or deserve the same scope of protection, the type of mark a business selects will have a direct effect on its ability to protect the mark.
Trademark rights are not static, however. A mark’s distinctiveness and strength can change over time based on use of the mark by the owner and the perception of the mark by consumers. For
7 Ty Inc. v. Perryman, 306 F. 3d 509, 510 (7th Cir. 2002); see also 1 Anne Gilson LaLonde, GILSON ON TRADEMARKS (“Gilson”) § 1.03 (2010).
8 Senate Rep. No. 79-1333 at 3, 5 (1946).
9 15 U.S.C. §§ 1114, 1125(a).
10 15 U.S.C. § 1125(c).
11 See Abercrombie & Fitch Co. v. Hunting World, Inc.. 537 F.2d 4, 9 (2d Cir. 1976) (setting forth the classic formulation of: fanciful/coined – arbitrary – suggestive – descriptive - generic).
12 McGregor-Doniger Inc. v. Drizzle Inc., 599 F.2d 1126, 1131 (2d Cir. 1979) (“The strength or distinctiveness of a mark determines both the ease with which it may be established as a valid trademark and the degree of protection it will be afforded”).
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example, an inherently “weak” mark can become strong and receive a broader scope of protection due to commercial success and widespread use in commerce (e.g., increased channels of trade, wider geographic use, expansion of the brand to other goods and services).13 Conversely, if a trademark owner does not diligently police proper use of its mark (e.g., by competitors, the public, and the media), a term that was originally coined and thus inherently the strongest type of trademark, can become generic and fall into the public domain. The trademark landscape is littered with distinctive terms that were once registered as trademarks, but became generic, including “cellophane”14 for a transparent wrapping, “escalator”15 for moveable staircases, “trampoline”16 for a rebound tumbler, and “yo-yo”17 for a spinning toy on a string. Because trademarks rights may be lost or severely weakened if unauthorized third-party usage goes unchecked, enforcement efforts are essential to maintaining the rights.
B. Policing and Enforcing Trademark Rights
Trademark owners have a legal right and an affirmative obligation to protect their trademark assets from misuse.18 If the owner does not proactively police the relevant market and enforce its rights against violators, the strength of the mark, the owner’s ability to exclude others from using the same or similar marks in the marketplace, and the value of the asset all will diminish.19 Failure to take action may result in consumers being confused or deceived as to the source or sponsorship of goods or services, harm to the owner’s reputation, and lost sales. A trademark owner is not required to object to all unauthorized uses that might conflict, for not every thirdparty use poses the same risk of eroding distinctiveness in the marketplace.20 However, widespread unauthorized uses may cause the mark to lose its trademark significance altogether
13 See, e.g., E. Remy & Co., S.A. v. Shaw Ross Int’l Imports, Inc., 756 F.2d 1525, 1533 (11th Cir. 1985).
14 DuPont Cellophane Co., Inc. v. Waxed Products Co., Inc., 85 F.2d 75 (2d. Cir. 1936).
15 Haughton Elevator Co. v. Seeberger, 85 USPQ 80 (Comm. Pat. 1950).
16 Nissen Trampoline Co. v. American Trampoline Co., 193 F. Supp. 745 (S.D. Iowa 1961).
17 Donald F. Duncan, Inc. v. Royal Tops Mfg Co., Inc., 343 F.2d 655 (7th Cir. 1965).
18 See generally, 2 J. Thomas McCarthy, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 11:91 (4th ed. 2010) (“McCarthy”); see also 1 McCarthy § 2:15 (“A trademark is a kind of property, but a very delicate property right it is. Great care must be taken in the nature of its use, and in the manner in which it is assigned or licensed, lest the significance of the mark be lost.”)
19 See 2 McCarthy § 11:91 (“The only way a trademark owner can prevent the market from becoming crowded with similar marks is to undertake an assertive program of policing adjacent “territory” and suing those who edge to close.”); see also Morningside Group Ltd. v. Morningside Capital Group, L.L.C., 182 F.3d 133, 139 (2d Cir. 1999) (“[T]he successful policing of a mark adds to its strength to the extent that it prevents weakening of the mark's distinctiveness in the relevant market.”).
20 As the USPTO’s Trademark Trial and Appeal Board has observed: “[I]t is entirely reasonable for the [trademark owner] to object to the use of certain marks in use on some goods which it believes would conflict with the use of its marks . . . while not objecting to use of a similar mark on other goods which it does not believe would conflict with its own use.” Chicago Bears Football Club Inc. v. 12th Man/Tennesse LLC, 83 USPQ2d 1073, 1082 (TTAB 2007), quoting McDonald’s Corp. v. McKinley, 13 USPQ2d 1895, 1899-1900 (TTAB 1989).
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