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Douglas G. Verge
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It's Monday Morning: Do You Know Where Your Trademarks Are? Guarding Against the Risk of Losing Rights in Your Trademarks

Tuesday, July 10, 2007

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Businesses often invest substantial money into development of their trademarks and service marks (referred to in this article simply as "marks"). Virtually every company recognizes the power of the brand. Effectively choosing and utilizing a brand can mean the difference between success or failure. However, finding the right brand is only part of the equation. Using the brand correctly is the other. Failure to use a mark properly can result in the unexpected loss of rights in the mark. This article will discuss some of the common problems related to trademark use and how they can be avoided.

1.    The Requirement that the Mark Be Used in Commerce

Although at first it might seem obvious, the fact is that a mark has no value if it is not used in connection with the goods or services it is supposed to represent. Under the law, a trademark has no value, indeed no existence, apart from the good will that is associated with it. You cannot own a trademark in a vacuum - you have to use it to accrue rights in it. Simply coming up with a clever term or slogan and keeping it in your pocket for a later date gives you no rights in the mark. If someone else comes along in the meantime and starts using the same mark, your rights in the mark could be lost (because those rights never arose in the first place). Remember, common law trademark rights are based on priority of use in the United States (although if you apply for a federal registration on an intent to use basis, upon registration your trademark rights will relate back to the date of filing - even though you did not put the mark into use until much later).

2.    The Requirement that the Use Be Continuous

Related to this notion that some actual use is required to maintain rights in the mark is the requirement that the mark must be used continuously once it is adopted, or rights in the mark could be lost. For example, let's say that you adopt a mark and use it in commerce for several years and then stop using that mark for a year and another party starts using the mark. In a dispute with the third party, will you be deemed to have lost your rights in the mark due to nonuse? Maybe - or maybe not. The reality is that the answer will most likely turn on your intention. Did you intend to abandon the mark, or was the cessation of use only temporary? What were the reasons that you stopped using the mark - were you actively retooling for a rejuvenated use, or did you just not feel like using the mark? The reasons for your non-use will have a direct impact on whether or not you lack of use will result in abandonment of your trademark rights.

Under the federal trademark law, lack of use of a mark for three consecutive years is prima facie evidence of the owner's abandonment of the mark. Keep in mind also that with respect to federal trademark registrations, in order to maintain rights in the mark, you will have to file periodic affidavits confirming your use of the mark in commerce in connection with the goods or services for which it is registered. If you are not using the mark, you cannot file the affidavit (unless you have a good excuse - that is, one that will be acceptable to the United States Patent and trademark Office).

3.    The Requirement of Consistent Use of the Mark

Not only must a mark be used continuously to maintain rights in it, the mark also must be used consistently. Once you start using a mark in your business, you begin to accrue common law rights in that mark. Often, though, the owner of a mark will decide after a period of time that it no longer likes the mark in its present format, and decides to change the mark in some way. When this change of heart (and use) happens, it might unknowingly result in loss of rights in the original mark, and therefore loss of priority rights dating back to the first use of the original mark. How might this arise? Here's a common example.

Let's say that on January 1, 2004 Mi Company begins using the mark Goody Goody Two Shoes in connection with the sale of shoes. After three years of using the mark, Mi Company decides that the mark is pretty goofy and on January 1, 2007 changes the mark to simply Goody Shoes and thereafter uses only the mark Goody Shoes. Has Mi Company lost its rights in the original mark, and its priority in the mark dating back to January 1, 2004? It most likely has lost its rights in the mark - here's why.

Under the law, priority rights in a mark are lost and the original mark is deemed abandoned if it is changed in a way that is deemed to be "material." For purposes of trademark law, a material change is one that results in the mark no longer making the same commercial impression on the public. The question has to be asked, then, whether the mark "Goody Shoes" makes the same commercial impression as Goody Goody Two Shoes. While reasonable minds could differ, the answer is most likely no - they do not make the same commercial impression on the consuming public. The first mark calls to mind a grade school taunt, whereas the second mark is more ambiguous and does not necessarily evoke any one particular impression. Accordingly, the owner's rights in the original mark would be deemed abandoned, and in a dispute with another over priority rights, the owner's priority in the new version would run from January 1, 2007.

4.    The Problem of When the Mark Becomes the Product

Another common mistake that owners of marks make is to refer to the product itself as the thing itself. For example, suppose you sell create and sell an unusual device for watering lawns and you give it the brand name "Watilda." Over time, your marketing people, engineers, indeed, maybe even the general public, start calling the thing itself a Watilda. If the mark becomes the common name for the thing itself, so that anyone's version or brand of this device is commonly referred to as a "Watilda," then you are in serious danger of losing your rights in the mark. Why? Because no one can obtain trademark rights in the common and ordinary name for something. You could never have a trademark in the term "BOOKS" for books. Anyone who sells books would have to be able to refer to them as books.

It is critical, then, to remember that a trademark always functions as an adjective - not as a verb or noun. So, it is a Watilda brand watering device, not a Watilda. It is Kleenex brand tissue, not a kleenex. You would conduct a Google search, not google something.

This same issue arises where the mark is also the name of the company. Let's say that the company name is Jonesboro, and the company services diesel engines. Assume that your marketing materials simply say, "Jonesboro is a leading provider of diesel engine repairs." Is this proper use of the term as a mark that will suffice to maintain rights in the mark as a brand? Most likely not. Here, the consumer is likely to see the term as the name of the company - that is, a "thing." And as we know, a "thing" cannot be a trademark. On the other hand, if the marketing materials said, "You can rely on JONESBORO diesel engine repair services," this usage most likely would suffice as appropriate use of the mark so as to maintain rights in the mark. To determine whether or not you are using the mark correctly, ask yourself if the use would make sense if you inserted the word "brand" after the term. If it does, the term is most likely being used as an adjective, and therefore correctly. Here, the word "brand" could easily fit right after the word JONESBORO (i.e., JONESBORO "brand" diesel engine repair services).

Proper use of trademarks is a sometimes tricky, and not always intuitive area. There are various other common problems that arise, not only with respect to how a mark is used, but also with respect to how trademark symbols are used. These common mistakes could result in serious, and possibly irreparable, consequences. Coverage of all of these areas is beyond the scope of this article. We are able, however, to provide comprehensive trademark use guidelines and advice that address the numerous issues.

This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.