Prior User vs. Federal Registrant: Whose Mark Is It, Anyway?
By Keith A. Barritt
It is commonly assumed that once a federal trademark registration is obtained it confers the exclusive right to use the mark on particular goods or services and can readily prevent use by any other party. Indeed, the Trademark Act appears to say precisely that. However, trademark law is not quite so easy, and in fact having a trademark registration - even a valid and "incontestable" one - does not guarantee the exclusive right to use the mark in all circumstances.
Unlike many countries, the United States confers trademark rights by use of the mark. At the outset, trademark "registration" is little more than a formal acknowledgement of rights already in existence. This contrasts sharply with patents, which actually grant substantive rights the patentee otherwise would never have.
There are many benefits to federally registering a trademark, one of the most important being that it empowers the Patent and Trademark Office ("PTO") to police the mark by rejecting subsequent applications to register marks that conflict with the registered mark. Registration also affords the mark certain evidentiary presumptions of validity, confers constructive use of the mark as of the application's filing date, and creates nationwide constructive notice of registration (thereby preventing subsequent "innocent" adoption of the registered mark). Ownership of a registration, however, does not by itself answer the question of who has the right to use the mark.
Who is a Prior User?
Under common law, trademark rights within a certain territory are based on priority of use of a mark within that territory. Sometimes a federal registrant is not the first user of a mark in a territory, and that an unregistered prior user may have superior rights, at least in that territory. Determining the rights of the parties in such situations requires a careful evaluation of often complex facts and always complex law.
Under Section 7(c) of the Trademark Act, the date of filing an application, whether based on actual use or intent to use, establishes a registrant's date of "constructive use," establishing nationwide priority except against a person who began use (or applied for and ultimately obtained registration) of the mark prior to that date. Thus, a "prior user" is a party who began use somewhere or applied for the mark prior to the registrant's application date. Section 22 of the Act provides that the registration itself creates "constructive notice" of the registrant's claim of ownership of the mark, thereby precluding anyone else (including a prior user) from claiming good faith, innocent use or expanded use of the same mark after the date of registration, regardless of where the registrant actually uses the mark. These two and other sections of the Trademark Act dictate the scope of a prior user's rights in a mark registered by another party.
Prior User vs. Junior User with a "Contestable" Registration
A registration less than five years old is not eligible for "incontestable" status, but is prima facie evidence of the registrant's exclusive right to use the mark for the goods or services for which it is registered. Courts differ on the effect of the presumption on the burden of going forward with the evidence and on the burden of proof.
A prior user can defeat the presumption, however, for any territory in which it can show that it (1) used the mark prior to the registrant's date of filing and (2) acquired common law rights as a result of its use of the mark prior to the registrant's use in that territory. Some decisions recognize that the preempted territory also includes the prior user's "zone of natural expansion." Because registration acts as nationwide constructive notice of use of the mark under Section 22, the prior user can establish rights only in those territories in which it was operating prior to the registration date.
Notably, the prior user's territory is not frozen as of the earlier "constructive use" date of the filing of the application under Section 7(c), which by its terms does not establish automatic nationwide priority against a party who began use (or applied for a registration) of the mark prior to the registrant's application date. If the prior user's priority is based on the fact that it applied for a registration of the mark prior to the registrant's application date, the prior user is entitled to nationwide priority (assuming it is otherwise entitled to a registration).
In addition, regardless of the territorial scope of the prior user's rights, an unregistered prior user can oppose a junior user's application for registration and can petition to cancel a junior user's registration within five years of the date of registration. If such an opposition or petition is successful, and if the successful party has not filed an application to register its mark, the parties' respective rights will be based solely on their common law rights, based on the priority in which they established their use of the mark in specific territories.
Prior User vs. Junior User with an "Incontestable" Registration
A registration becomes "incontestable" if, after the fifth year of registration, the registrant files an affidavit avowing that there have been no adverse decisions regarding the registrant's right to use the mark, that no such proceedings are pending, and that the mark has been in continuous use for five consecutive years. Filing the affidavit of incontestability increases the evidentiary value of the registration from a prima facie presumption of the registrant's exclusive right to use the mark to "conclusive evidence" of such a right.
Despite the elevated status of an incontestable registration, under Section 15 of the Trademark Act incontestability itself is expressly subject to any prior user's common law rights that existed at the time of registration in any particular territory based on use that continues to the present. Thus, even an incontestable registration cannot be used as a sword to smite all other users of the mark - nor as a shield to protect the registrant's own right to use the mark in all territories.
In order to establish its defense under Section 15 to a charge of infringement brought by the owner of an incontestable registration, the prior user must prove the territory in which it has continued to use the mark without significant interruption since prior to the registrant's use in that territory. The prior user will con-
tinue to have rights superior to those of the registrant in that territory. However, under Section 15 and by virtue of the constructive notice of Section 22, the prior user can only establish rights in those territories in which it was actually operating prior to the registration date (possibly including the geographic "zone of natural expansion"), just as with contestable registrations. In other words, even an incontestable registration does not bestow the exclusive right to use the mark where a prior user has continued to use the mark and hence has established rights since prior to registration.
If a prior user sold goods bearing the mark in an area prior to use in that area by the owner of an incontestable registration and prior to the registration date, the prior user would have superior rights and could in fact block the registrant's use of the mark in that area. A prior user could even be the prior user nationwide, and thereby be entitled to block a registrant's use of
the mark throughout the entire country as happened in Cuban Cigar N.V. v. Upmann International, Inc.1 Recent cases have echoed this theme, further confirming that the owner of an "incontestable" registration is still subject to challenge by a prior user.2
The law thus allows the rather odd situation where the owner of a registration - even an incontestable registration - that is more than five years old and that therefore cannot be cancelled by a prior user under Section 14 of the Trademark Act can still be subject to an injunction by a prior user prohibiting use of the mark within the prior user's territory, which can extend nationwide. This is often overlooked in trademark analysis, as it is counterintuitive to the oft-expressed concept of incontestability as "quieting title" to the registration forevermore.3
Indeed, incontestability does not quiet title in the sense of quashing all claims of prior rights, but rather only quashes certain grounds for challenging the registration and strengthens the evidentiary status of the registrant's right to use the mark as against persons who are not prior users. Although some judicial decisions refer to incontestability as an impenetrable "shield" protecting the registration or the right to use the mark, the unmistakable lesson is that no mark is absolutely bullet-proof from challenges by prior users, even if the registration cannot be cancelled and even if it is "incontestable."
Prior User/Registrant vs. Junior User Who Began Use After Prior User but Before the Prior User Applied for the Registration: The Section 33(b)(5) Defense
This problem arises when A begins use of the mark in one area, then B begins use of the mark in a remote area in good faith, without knowledge of A's use. Both A and B would have common law rights to the mark in their respective territories. Then A applies for and obtains a federal registration. Under Section 33(b)(5) of the Trademark Act, B retains rights in the territory in which it was the prior user up to A's application date (the date of constructive use under Section 7(c) of the Act), if that date is on or after November 16, 1989.4
This situation differs from several discussed above because B's rights are frozen geographically upon the date A files his application. If B had been the first to use the mark anywhere, the territory in which it could establish common law priority would be frozen as of A's registration date.
Section 33(b) is commonly considered to list each possible "defense" against a plaintiff wielding a registration, but there seems to be no compelling reason why a prior user could not also challenge as a plaintiff the right of an owner of an incontestable registration on the same grounds. Indeed, Section 33(b) itself speaks of defenses "and defects." As the Cuban Cigar case cited above indicates, plaintiffs may challenge use of a mark by the owner of an incontestable registration, and there appears to be no reason why a plaintiff who began use after the registrant but before the registrant filed an application should not be able to take the initiative to show that a "defect" exists with the defendant's registration, at least with respect to the plaintiff as a prior user.
Although the Section 33(b)(5) defense appears to lie only against incontestable registrations, Section 33(a) specifically cross-references the defenses and defects of Section 33(b). Thus, Section 33(b)(5) is available against any registrant, not merely against owners of incontestable registrations.
Concurrent Use Proceedings
A junior user with prior rights in a particular territory has no standing to oppose or cancel a prior user's registration. Other than through a court decree, the only way such a junior user can obtain a formal recognition of its rights is by registering its mark by means of a concurrent use proceeding, initiated by the filing of an application for registration on the Principal Register requesting limited territorial rights. Concurrent registrations will state the conditions and limitations as to the mode or place of use of the mark or as to the goods with which the mark is used. A concurrent registration will not be issued if confusion, mistake, or deception is likely to result.
The applicant for a concurrent registration must state the geographic and temporal extent of concurrent use of the mark by both itself and others. If it appears the applicant's mark is registrable, and the mark is not successfully opposed after publication, the PTO will send notices of the application to all parties named in the application, who have forty days to respond.
In general, the prior user will be entitled to all the territory in which the junior user fails to establish its own priority, unless the parties otherwise agree (though such agreements are not binding on the PTO). However, where the junior user already has a registration and the prior user files for a concurrent registration, the junior user may be granted the territory in which neither party has established use. There is no magic formula; rather, the PTO will attempt to balance the equities involved, giving great weight to any agreements reached by the parties. Even a prior user who is also the first to file an application may find that it receives a concurrent registration limited to the territory of its actual use only.5
While owning a trademark registration provides many significant benefits, registration by itself does not conclusively establish the owner's exclusive right to use the mark. Prior users have significant protection under the Trademark Act, and those rights should not be overlooked in any trademark dispute.
Further, "incontestability", an unfortunate (even Orwellian) statutory misnomer, does not automatically prevent a prior user from challenging use of the mark. Although a registration more than five years old cannot be cancelled based on prior use, regardless of the filing of the formal affidavit of incontestability, use of the mark itself can still be enjoined.
By Keith A. Barritt
1 In Cuban Cigar Brands N.V. v. Upmann International, Inc., 199 USPQ 193 (S.D.N.Y. 1978), aff'd. w/o opinion, 607 F.2d 995 (2d Cir. 1979), a nationwide prior user was granted an injunction blocking the owner of an incontestable registration from using the mark anywhere in the United States.
2 Baron Philippe de Rothschild v. Paramount Distillers, Inc., 923 F. Supp. 433, 438 (S.D.N.Y. 1996) states that "[e]ven assuming that the...defendants' mark is incontestable...it would not be incontestable against a senior user"; DeRosier v. 5931 Business Trust, 870 F. Supp. 941, 948 (D. Minn. 1994) notes that "[w]hile Defendants' use of their properly registered service mark is otherwise 'incontestable'...that use must bow, within a circumscribed geographic area, to a prior user's adoption of the same or a confusingly similar service mark."
3See, e.g., Park 'N Fly v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S.Ct. 658 (1985).
4 If A's registration was applied for prior to November 16, 1989, B's territory is frozen as of the date of registration, and if A's registration was granted prior to the Trademark Act of 1946, B's territory is frozen as of the date of post-1946 publication of the mark.
5 That happened in Noah's, Inc., v. Nark, Inc., 222 USPQ 697 (E.D. Mo. 1983), aff'd, 728 F.2d 410 (8th Cir. 1984), in which a junior user whose use began prior to the prior user's application date sought to expand its business nationwide while the prior user appeared content to limit its operations within the state of Iowa.