Verna Law Trademark Law FAQ

What is a Trademark?

A trademark is any brand name, logo, slogan, or other item that relates to the source of goods and services and the quality of those goods and services.

Trademark law is a form of consumer protection.

One company puts its mark on its goods or services in order to show its quality of its goods or services and in order to show the source of those goods or services.

What is a Fanciful Trademark?

A fanciful is the strongest trademark. The mark has no relation to the product. “Kodak” is the best example because the word was created for use as a trademark.

What is an Arbitrary Trademark?

An arbitrary trademark is a mark that is a word (or phrase) that already exists, so it is chosen for no particular reason. Think of “McDonald’s” in fast food or “Target” in retail stores.

What is a Suggestive Trademark?

A suggestive trademark suggests a quality of the product. Think of “Burger King” in this category. The mark makes you think of those burgers as being the king – or the best – in the burger industry.

What is a Descriptive Trademark?

A descriptive mark describes the product. This is a weak trademark that requires “secondary meaning” in order to gain trademark protection. Usually, it must be proven that the public can identify the product comes from one producer.

What is an Example of a Descriptive Trademark?

A descriptive trademark is a mark that describes the product.  For example, FOOD PSYCH describes the topics involved in a podcast featuring lectures and classes on health and nutrition.  FOOD describes the nutrition.  PSYCH describes the health aspect of the mark.

How can Someone Register a Descriptive Trademark?

This requires showing the US Patent and Trademark Office that the mark has “secondary meaning” in order to gain trademark protection.

In the FOOD PSYCH example, the applicant showed that there were over 500,000 downloads of the podcast, showing that consumers related FOOD PSYCH to the applicant’s trademark, and not for the goods/services that the trademark represents.

What is a Generic Trademark?

Generic “marks” are common, every-day terms. These terms include apple, computer, mouse, desk, chair, pencil.

Trademarks, however, can become generic.

Bayer Co. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921) “The crux of this controversy, however, lies not in the use of the word to these buyers, but to the general consuming public, composed of all sorts of buyers from those somewhat acquainted with pharmaceutical terms to those who knew nothing of them.”

Would Xerox now be considered a generic trademark (or Band-Aid)?

Probably not.  Do you remember the ad campaign that said “You can’t xerox a xerox on a xerox”? 

Many trademark experts believe that Xerox probably came to the edge of genericization, but was able to retrieve its trademark rights by reminding people how to properly use its trademark in a highly popular advertising campaign. (I.e. not as a verb.)

Examples of generic terms include “Ale House” for an establishment that sells food and beer, see Ale House Mgmt., Inc. v. Raleigh Ale House, Inc., 205 F.3d 137, 140–41 (4th Cir.2000), “Cellular Sales” for the sale of cellular telephones, see Cellular Sales, Inc. v. Mackay, 942 F.2d 483, 486 (8th Cir.1991), “Light Beer” for beer that is light in body and taste, see Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75, 80 (7th Cir.1977), “Screenwipe” for a cloth used for cleaning computer and television screens, see In re Gould Paper Corp., 834 F.2d 1017, 1018–19 (Fed.Cir.1987), and “The Arabic Channel” for an Arabic language television channel. See GMT Prods., 816 F.Supp. at 207; see also 2 McCarthy § 12:18.

Generic terms are never accorded trademark status, because to do so would grant a first-user a monopoly over common descriptive words that merely identify goods and services, depriving competitors of the opportunity to refer to their own goods and services as what they are. See PaperCutter, Inc. v. Fay’s Drug Co., 900 F.2d 558, 562 (2d Cir.1990) (“[C]onventional wisdom holds that generic terms … are so useful to businesses selling the same product that no amount of money poured into promoting customers’ association of generic terms with a particular source can justify ‘depriving competing manufacturers of the product of the right to call an article by its name.’ ”) (quoting Abercrombie & Fitch, 537 F.2d at 9); CES Publ’g Corp. v. St. Regis Publ’ns, 531 F.2d 11, 13 (2d Cir.1975). “This rule [also] protects the interest of the consuming public in understanding the nature of goods offered for sale….” Otokoyama Co. Ltd. v. Wine of Japan Import, Inc., 175 F.3d 266, 270 (2d Cir.1999).

How does a Trademark Become Generic?

A trademark is so famous that it just becomes a part of the lexicon.  The trademark may turn into a verb.  Do you remember the ad campaign that said “You can’t xerox a xerox on a xerox”?  This campaign was created in order to save a trademark from becoming generic. 

Procedurally, the trademark owner would file a lawsuit claiming that a defendant infringed the trademark by using it in an advertisement or in another improper use.  During the lawsuit, the defendant claims that the use is not infringement because the term is generic and would have to show that the mark has become generic.

The test for genericness is based upon “the primary significance of the [ ] mark to the relevant public.” Trademark Clarification Act of 1984, Pub.L. No. 98–620 (codified at 15 U.S.C. § 1064). The “primary significance test” asks whether the consuming public understands and commonly uses the term to denote a particular source or origin of a product, even if that source is unknown (in which case the mark is descriptive), as opposed to the nature or class of the product (in which case the mark is generic). See Kellogg Co. v. Nat’l Biscuit Co., 305 U.S. 111, 113, 59 S.Ct. 109, 83 L.Ed. 73 (1938) (under the “primary significance test,” a plaintiff seeking to establish a valid trademark “must show that the primary significance of the term in the minds of the consuming public is not the product but the producer.”); Genesee Brewing, 124 F.3d at 144; Horizon Mills, 161 F.Supp.2d at 212–13.

A mark’s common usage and understanding by the relevant public may be discerned from “any competent source,” In re Merrill Lynch, 828 F.2d 1567, 1570 (Fed.Cir.1987), including consumer surveys, testimony of consumers or trade professionals, dictionary definitions, uncontested usage of the mark by competitors to describe their products, generic usage in newspaper and magazine articles, and generic usage by the proponent of the trademark. See id.; Harley Davidson, Inc. v. Grottanelli, 164 F.3d 806, 810–11 (2d Cir.1999); Murphy Door Bed Co. v. Interior Sleep Sys., Inc., 874 F.2d 95, 101 (2d Cir.1989); Brandwynne, 74 F.Supp.2d at 381–82. No single factor is dispositive. See Horizon Mills, 161 F.Supp.2d at 214 (citing Murphy Door Bed, 874 F.2d at 101).

Why do I need to Register a Trademark?

A registered trademark confers a bundle of exclusive rights upon the registered owner, including the right to exclusive use of the mark in relation to the products or services for which it is registered.

For example, without the registration, a plaintiff is unable to claim trademark infringement under the Lanham Act. Therefore, the ability to enforce in Federal Courts is paramount to the trademark registration.

Also, a common-law (unregistered) trademark is not vetted or reviewed and there could be geographic or goods/services issues.

What Trademarks can Someone Register?

Any “trademark by which the goods of the applicant may be distinguished from the goods of others” may be registered. 15 U.S.C. §1052.

In other words, if your trademark or your goods or services are different from others in the register at the United States Patent and Trademark Office, your trademark can be registered.

When you Register a Trademark for your Business Name, are all Associated Logos Automatically Included? Or Do you Have to Register Logos Separately?

If you are filing a plain-text trademark application in the United States Patent and Trademark Office, you should understand that the only protection is for the text of the trademark. Designs and logos are not protected under a plain-text filing. However, with a plain-text filing, the trademark owner can take the text and design it in any way the trademark owner wants.

Can Trademark Law Protect Quotes, Taglines, Catchphrases, Marketing Phrases, and Business Slogans?

That is the traditional purview of trademark law. But trademark law has even protected the shape of products, colors, and sometimes sounds. All quotes, tag lines, catchphrases, marketing phrases, and business slogans, shapes, colors, and sounds must be related to products, goods, or the marketing of services.

If a business owner had a company name for a few years and hadn’t registered it as a trademark, can someone else register the name for their claim or use? What can the owner do if this occurs?

Trademark registration is a first-to-register system. In other words, a trademark owner must register first in order to assert federally protected trademark rights. If a trademark owner is second to file with the USPTO, but has been using a similar trademark for longer than a junior trademark owner, then the senior owner may be able to file to cancel another mark in the Trademark Trial and Appeal Board.

Going to the USPTO and filing your trademark as early as possible is always the best remedy for this problem.

What are Common Law Rights? What Protections do They Offer?

Trademark rights arise in the United States from the actual use of the mark. Thus, if a product is sold under a brand name, common law trademark rights have been created. This is especially true once consumers view the brand name as an indicator the product’s source.

The term “common law” indicates that the trademark rights that are developed through use are not governed by statute. Instead, common law trademark rights have been developed under a judicially created scheme of rights governed by state law.

Common law trademark rights are limited to the geographic area in which the mark is used. Thus, if a coffee blend is sold under the name BIG BANG in California only, the trademark rights to that name exist only in California. If another coffee retailer begins to market a different blend in New York under the same name (assuming they had no knowledge of the California company), then there would be no trademark infringement.

However, if the New York company attempted to sell their coffee blend nation-wide, they would discover that the California company’s common law rights to the mark would prevent them from entering the California market.

Once a Trademark is Approved, does That Mean you can use the Letters “TM” in all Logos/Branding? What are the Guidelines?

The TM symbol is meant to provide notice to the public that a trademark owner claims a trademark right in the term or design. To clarify, this right can be associated with a trademark claim under a common law right, a state registration, or a federal registration. Therefore, you are not required to have completed a state or federal filing to use the TM symbol.

A trademark that is federally registered is often identified with the “R” (within a circle) symbol, or registered mark: ®. The R-in-a-circle symbol can only be used in connection with an active federally registered trademark.

What is a Trademark License Agreement?

A trademark license agreement is the legal document (contract) that governs the relationship between the party producing/selling products that bear the trademark owner’s trademarks/logos (licensee) and the party that owns the trademark (licensor). A trademark license must be in place before any licensed products are manufactured; sold or marketed.

What is a Trademark Licensee?

A licensee is a person or an organization that has been granted the legal right by a trademark owner (who is called a licensor), under a trademark license agreement, to use the trademark owner’s trademarks.

Why Should a Trademark Owner Care who Uses the Trademark Owner’s Trademarks?

The trademark owner must control and monitor the use of its trademarks or risk losing the right to use them as unique identifiers of Northern Arizona University. the trademark owner has a compelling interest in controlling the use of its trademarks for other reasons as well. These include, but are not limited to:

1) Protecting the trademark owner’s name and ensuring that its use, across all units of the trademark owner, is compatible with the trademark owner’s goodwill and reputation;

2) Ensuring that any products or services bearing the trademark owner’s trademarks are of high quality and are used tastefully and only in connection with products and services with which the trademark owner has chosen to be identified;

3) Preventing misleading or inaccurate portrayals of the trademark owner’s relationship to others or to activities, and preventing others from taking advantage of the goodwill the owner has developed and which is symbolized by its trademarks;

4) Ensuring products and services bearing the trademark owner’s trademarks protect the integrity and reputation of the institution, maintain and build upon the goodwill of the owner, and promote support for and increase awareness of the owner, its mission and goals.

What Provisions Should be Included in a Trademark License?

Your trademark license agreement should be written, include negotiated terms and provisions, and be signed by all parties. To be valid, your agreement must address and include each of the following provisions:

1) Parties: identification of the licensor and licensee (full, legal names);
2) Identification of the trademark: the trademark(s) covered by the agreement;
3) Approved uses: the specific products or services for which it can be used;
4) Geography: the geographic area(s) where the licensee can offer, use, and distribute related products or services;
5) Quality control: quality standards the licensee must adhere to when using the trademark(s), which are in place so the licensee does not damage the licensor’s reputation

What are Additional Provisions for Trademark License Agreements?

Trademark license agreements often include additional requirements. These include the following:

1) Approval of promotional materials: some licensors demand the right to approve any marketing or promotional materials using or related to the licensed trademark.
2) Exclusivity: an exclusive agreement means the licensee is the only business allowed to use the mark in the covered geographical area. A nonexclusive trademark license agreement is one where the licensor reserves the right to enter into similar engagements with other companies who will also have similar rights in the same geographic area.
3) Duration: the agreement should also address how long the licensee may use it, including whether and how they can renew it.
4) Compensation: payment under trademark license agreements is typically structured as lump-sum fees or ongoing royalty payments. The contract should specify the amount of the one-time payment or calculations for royalty payments and when the licensee must pay the licensor.
5) Consequences for breach of agreement: these documents should also address what happens when one of the parties breaches their duties.

How are Royalties Calculated?

The way a royalty is calculated depends on the license agreement relating to the intangible in question. Usually, it is calculated as a royalty percentage – a portion of the gross or net revenue gained through the exploitation of the licensor’s trademark. It can also be expressed as a fixed value. In this case, a sum will be decided on at the start of the agreement and will not change throughout the term of the licensing contract. There are benefits to both methods, with the selected royalty one depending on the organization in question and the preferences of the individual licensor.

What is a Royalty Percentage?

Agreeing on a royalty percentage is the most common approach when it comes to contracts and license agreements between the licensee and licensor. This method tends to be more financially convenient for the licensee as the amount they pay reflects their current business situation. For example, if the licensed trademark is not yet particularly profitable, then the licensee will only have a small royalty payment to organize. Once the trademark starts to generate increased revenue, the royalty payment will increase proportionally, so the licensee is in a position to pay it. A royalty percentage is also generally more lucrative for the licensor, as it means that they get a greater return on investment in the long term as the licensee’s business grows.

What is a Fixed-Value Royalty Payment?

A fixed-value royalty stays the same for the duration of the license contract, regardless of whether the revenue generated by the trademark increases or decreases. A fixed value royalty fee means that, if the trademark performs well and achieves quick and substantial rates of growth and profit, the licensee’s royalty payment will seem relatively low in the long term. However, if the organization’s profits relating to the trademark do not increase significantly, the fixed value may not be advantageous. While the licensor’s return will not increase, a fixed value royalty does ensure a set amount of trademark-related income, which can be considered financially beneficial.

What Happens if the Licensor goes Bankrupt?

Chapter 11 of the Bankruptcy Code allows financially troubled companies to seek protection from their creditors, reorganize their debts, and then, hopefully, to continue their business. Among other things, the Bankruptcy Code allows the bankruptcy trustee to “reject” any of the debtor’s “executory contracts” (those are contracts for which “performance remains due to some extent on both sides”). See 11 U.S.C. § 365.  The Bankruptcy Code specifically defines a “rejection” of a contract to be a breach of the contract, not an invalidation. In other words, the contract continues, only now just on the side of the non-bankrupt party. The rights and obligations of the other party under the contract continue, the other party becomes an unsecured creditor, and the debtor or bankruptcy estate may be liable to the other party for any damages caused by the breach, assuming there are any funds to pay them.
The licensor can not rescind in bankruptcy the trademark license it had previously granted. Specifically, the Supreme Court has held that rejection of a contract—any contract—in bankruptcy operates not as a rescission, but as a breach.  Because “breach” is not a “specialized bankruptcy term,” the traditional rule is that the injured party retains the rights it has received under the agreement.
This means that a licensee can continue to use the trademark under the terms of the license agreement, even if the licensor may have some issues in governing quality control because of cash flow issues in bankruptcy.

What are some Terms to Govern Licensor Bankruptcy?

One set of terms that should be incorporated deal with ensuring that the trademark rights are maintained:

1) If the licensor becomes financially insolvent (or the trustee rejects the license), then the licensor should be required to provide a written commitment, within a given period of time (e.g., 60 days), to either continue maintaining quality control (including with other licensees, if any), or agree to assign the trademark (and any registrations) to the licensee.

2) With respect to renewal of registrations, a license might provide that if the licensor cannot commit to doing so, the licensor would appoint the licensee as its agent to file renewals with the Trademark Office and fees incurred deducted from any royalties due.

What are Some Terms to Govern Licensee Bankruptcy?

What if the licensee seeks bankruptcy protection, and then the trustee rejects the contract?

The key part of the Bankruptcy Code is that a rejection is merely a breach, not a rescission, of the contract, and hence the contract and contractual rights remain.

The licensee could continue using the trademark and avoid either cooperating in quality control efforts or paying royalties. This would create an untenable situation where not only is the licensed trademark in jeopardy (from lack of quality control and loss of federal registration), but the licensee may avoid paying royalties.

This situation can also be dealt with by terms in the license:
If the licensee becomes financial insolvent (or the trustee rejects the license), then either the licensor has the option to terminate the license, or the licensee must provide a written commitment within a given period of time (e.g., 60 days) to continue to cooperate in quality control and pay royalties. The failure by the licensee to provide the written commitment (or the failure by the licensee to actually follow through with the quality-control and payment-of-royalties commitments) would be a breach that would terminate the license.

Do you have any trademark law questions? Contact us!

Verna Law, P.C.

80 Theodore Fremd Ave.

Rye, NY 10580