Would you want another business to “freeload” off of your business’ goodwill? If your business does not protect its trademarks and service marks, that is exactly what can happen. If another business wants to use your business’ mark, it can petition a court to determine that your business has abandoned its mark. Likewise, another business can claim that you have abandoned your mark as a complete defense to trademark infringement. If a court determines your business’ mark to be abandoned, anyone can use it – even in connection with the same goods or services in which your business deals.
Federal law, specifically the Lanham Act, governs the law of trademarks and service marks, and it requires a business to actually use in commerce its registered marks in order to keep them protected. Under the Lanham Act, “use” has a specialized meaning: businesses must engage in bona fide use of a mark in the ordinary course of trade, and not use which is made merely to reserve a right in a mark. 15 U.S.C. §1127. Therefore, businesses making merely token use of their mark, or making promotional use of their mark on goods in a different course of trade do not meet the requirement of “use in commerce.” Imperial Tobacco, Ltd. v. Philip Morris, Inc. (1990) 899 F.2d 1575, 1582-83. Under 15 USC §1127, a trademark abandonment is “[w]hen [a trademark’s] use has been discontinued with intent not to resume such use.” There is a presumption of abandonment where there has been nonuse for three consecutive years. “Once the presumption is triggered, the legal owner of the mark has the burden of producing evidence of either actual use during the relevant period or intent to resume use.” Emergency One, Inc. v. American FireEagle Ltd., 228 F.3d 531, 536 (4th Cir. 2000). To prove trademark abandonment as a defense to a claim of trademark infringement, a defendant must show that there was: “(1) discontinuance of trademark use and (2) intent not to resume such use.” Electro Source, LLC v. Brandess-Kalt-Aetna Grp., Inc., 458 F.3d 931, 935 (9th Cir. 2006). Even a “single instance of use is sufficient against a claim of abandonment of a mark if such use is made in good faith.” Carter-Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 804 (9th Cir. 1970). This tells us that all bona fide uses in the ordinary course of business must cease before a mark is deemed abandoned. However, an intent to resume use must be made in the reasonably foreseeable future if a trademark owner has an intent to resume use of the mark.
If you have any questions about your trademark or the possibility your trademark is abandoned, please contact us for more information.
According to 15 U.S.C. 1127, a trademark is considered abandoned if “its use has been discontinued with intent not to resume such use.” The intent not to resume may be inferred from circumstances. Trademark abandonment, therefore, requires two elements:
1. nonuse; and
2. intent not to resume use.
Here are some of the ways that a trademark owner can show intent to reuse a trademark:
- a showing that the trademark owner has sought regulatory approval for the goods and use cannot begin until the same is granted;
- a showing of the distributors approached for the goods;
- a showing of any purchased advertising for the goods that features the trademark;
- a production internal “story boards” or presentations referring to goods bearing the trademark; or
- a showing of an outside licensing agency that has been obtained.
The abandonment doctrine derives from the well-established principle that trademark rights are acquired and maintained through use of a particular mark. There is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed. This is true even of marks that have been registered with the Patent and Trademark Office. Although a mark’s registration is a predicate to its protection under section 32(1)(a) of the Lanham Act, the underlying right depends not on registration but rather on use.” Indeed, one of the fundamental premises underlying the registration provisions in the Lanham Act is that trademark rights flow from priority and that priority is acquired through use. Registration of mark shall constitute constructive use of the mark, conferring a right of priority, nationwide in effect … against any other person except for a person whose mark has not been abandoned and who, prior to such filing, has used the mark. Thus, so long as a person is the first to use a particular mark to identify his goods or services in a given market, and so long as that owner continues to make use of the mark, he is entitled to prevent others from using the mark to describe their own goods in that market. It is axiomatic in trademark law that the standard test of ownership is priority of use.
Is there a presumption of abandonment?
Nonuse of a mark for three consecutive years creates a legal presumption that the mark has been abandoned. Legal presumptions relate to burdens of proof. Therefore, if a presumption of abandonment has been established, the burden shifts to the trademark owner to show that the mark has been in use during the time period or that the owner has an intent to resume use.
For example, a trademark owner may try to provide evidence of special circumstances to show that nonuse of the mark was temporal, such as medical issues or supply chain usses, and that the owner has the intention to resume usage. An owner could also provide examples of limited use or other commercial efforts to show intent to resume use of the mark in the reasonably foreseeable future.
According to the Court of Appeals for the Second Circuit, in order to defeat an abandonment charge, a mark holder must have formulated an intent to resume use of its mark during the three-year period of nonuse that triggers the statutory presumption of abandonment. TC Ltd. v. Punchgini, Inc., 482 F.3d 135, 149 n.9, 82 U.S.P.Q.2d 1414 (2d Cir. 2007). Self-serving and conclusory statements of an intent to resume use or possible use in the future are given little weight. Furthermore, sporadic or token use of a mark is not sufficient to overcome a showing of abandonment. Changes in the form of the mark also can constitute trademark abandonment. And finally, statements of a name change and an intent not to resume use as a result of that change may establish abandonment of a mark.
An example: Crash Dummies trademark Here’s a case to use an example: Crash Dummy Movie, LLC v. Mattel, Inc., 601 F.3d 1387 (Fed. Cir. 2010). Mattel owned a trademark registration on CRASH DUMMIES for toys, which Mattel acquired when Mattel acquired Tyco in 1997. In December of 2000, the USPTO cancelled Mattel’s registration on CRASH DUMMIES because Mattel did not file the required trademark renewal documents and fees. On March 31, 2003, The Crash Dummy Movie, LLC (“CDM”) filed an intent-to-use trademark application on CRASH DUMMIES for games and playthings. Mattel filed an opposition against the CDM’s trademark application based on Mattel’s common law rights in the mark CRASH DUMMIES. CDM claimed that Mattel abandoned its trademark rights in the mark. The Court stated, “Although Mattel later allowed its trademark registrations to lapse, cancellation of a trademark registration does not necessarily translate into abandonment of common law trademark rights.” The actual use in commerce mattered in this case – Mattel was using the mark, so it still had rights in the mark.
Licensing and Abandonment
It is imperative that licensors have controls about the quality of products that the licensor allows its trademark to be on. This is because the licensor may accidentally abandon the trademark otherwise.
“To establish the defense of abandonment, it is necessary to show either the owner’s intent to abandon the mark, or a course of conduct on the part of the owner causing the mark to become generic or lose its significance as a mark.” Hermes Int’l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 110 (2d Cir. 2000) (citing Defiance Button Machine Co. v. C & C Metal Products Corp., 759 F.2d 1053, 1059 (2d Cir. 1985), cert. denied, 474 U.S. 844 (1985)). “Where a licensor retains no control over the nature or quality of goods or services provided in connection with the mark … such naked licensing will result in abandonment.” Patsy’s Italian Rest., Inc. v. Banas, 508 F. Supp. 2d 194, 212 (S.D.N.Y. 2007) (citing Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2d Cir. 1959)). The central question is whether “the licensees’ operations are policed adequately to guarantee the quality of products sold [or the services promised] under the mark.” General Motors Corp. v. Gibson Chem. & Oil Corp., 786 F.2d 105, 110 (2d Cir. 1986). Abandonment of a mark “constitutes a forfeiture of a property right,” so it “must be proven by clear and convincing evidence.” Empresa Cubana Del Tabaco v. Culbro Corp., 213 F.R.D. 151, 156 (S.D.N.Y. 2003); see also Warner Bros., Inc. v. Gay Toys, Inc., 724 F.2d 327, 334 (2d Cir. 1983) (holding that the movant must meet a “high burden of proof” to prove abandonment through failure to police).
Trademark abandonment essentially is considered a forfeiture of rights and must be proved by clear and convincing evidence. Even when a brand owner no longer uses a mark, that mark is not necessarily abandoned through that nonuse. There must be a corresponding intent not to resume use of a mark. Moreover, abandonment has not been found where there remains public recognition of a mark. Even nonuse may be justified or considered excusable in certain situations. Examples of justified nonuse can stem from nonuse beyond a brand owner’s control and caused by outside forces, such as government action, intervention or labor strikes. Excusable nonuse also can be found when bankruptcy proceedings have been instituted, financial difficulty arises or where there has been a temporary unprofitability of sales. There are a few takeaways here. The first is simple: never assume that your competitor has abandoned their trademark unless you have done your due diligence and have established beyond any doubt that they are no longer using the mark – and even then, proceed with extreme caution. The second is that before resuming use of a mark, consider the length of time that mark has been out of use and investigate whether there has been any intervening, new use of that mark by a third party. The third thought is that before discontinuing any use of a mark, assess the current and prospective value that mark has to a company. If a mark has continued value, trademark owners are advised to continue using that mark and avoiding statements that they no longer will use such a mark.