Understanding what constitutes use of a mark is therefore critical to obtaining and protecting trademark rights.
By Keith A. Barritt
Trademark rights arise in the United States from use of a mark. At common law, the only way to obtain rights in a mark is through actual use. The U.S. Patent and Trademark Office (“PTO”) generally requires evidence of such use before a mark can be federally registered. Understanding what constitutes use of a mark is therefore critical to obtaining and protecting trademark rights.
“Use” needed to establish trademark rights
Prior to 1989, use of a mark was required for U.S. applicants to file for federal trademark registrations. A use-based application filed prior to actual use was void ab initio (as it is today). Since 1989, applicants have been able to file based on a bona fide intent to use a mark, but an “ITU” applicant must use the mark before a registration will be issued.1 Only a foreign applicant relying solely on a foreign trademark registration as the basis for U.S. registration is excused from demonstrating actual use prior to registration; after registration, however, a mark registered on that basis must be used within three years or, like any other registered mark, it will be presumed abandoned. Abandonment can never be cured by a resumption or commencement of use, although such a resumption or commencement starts common law rights running anew. Each registrant must also file with the PTO between the fifth and sixth anniversaries of the registration an affidavit that the mark is in use in U.S. commerce (or explain the circumstances justifying non-use), or else the registration will be cancelled automatically. Evidence of use must also be filed at every ten year renewal of the registration. Even an “incontestable” registration might be attacked based on fraud in the allegations of use or abandonment if use has been too scant.
Use may be by a company “related” to the applicant, such as a licensee, but may also be by a jobber, distributor, or dealer of applicant’s goods. Evidence of use submitted to the PTO must conform to certain requirements, which differ depending on whether the mark is used for goods or services, or as a certification or collective mark. The question most often asked, however, is how much use is enough to secure trademark rights in the United States.
“Token use” prior to 1989
Under the law prior to 1989, the PTO often accepted “token use” of a mark as adequate to support the filing of an application for a federal trademark registration. As long as the use was a bona fide commercial transaction and was accompanied by an intent to continue to use the mark, very small shipments could qualify as acceptable uses of a mark, even if deliberately made for federal registration purposes. The paradigm token use case involved Fort Howard Paper Company’s shipment of six boxes of various paper goods expressly to establish a basis for filing a trademark application. That shipment, accompanied by an intent to continue using the mark, sufficed, even though there were no further shipments for some 18 months. In other cases, the sale of a single maternity jumper, and the sale of 18 bottles of salad dressing, both accompanied by intent to continue using the marks at issue, were deemed sufficient.
“Use” after 1989
The Trademark Act now defines “use in commerce” as “the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.” Plainly, mere token use made solely to reserve a right in a mark can no longer meet the statutory definition.
What qualifies as “bona fide use in the ordinary course of trade” under current law is largely unexplored. Sales made in a good faith effort to develop a business probably will be sufficient. Thus, the law can be thought of allowing “bona fide use of a mark in the ordinary course of a good faith effort to establish a trade.” In such a case, it may be important to document efforts over time to develop the business, to minimize doubt regarding the “bona fides” of the early use of the mark.
One approach to determining what constitutes an acceptable first use is to consider what does not constitute acceptable use. In addition to token use made merely to reserve rights in a mark, it is also clear that mere “sham” transactions are not acceptable either (nor were they prior to 1989). Cases involving such “sham” transactions include:
a single shipment of one jar of salt from one corporate officer to another for no charge;
sale for $2.50 of 12 bank book holders, followed by instructions not to offer them to prospective customers;
sale of a few dollars’ worth of women’s sportswear to a cooperating company which immediately returned the goods to the seller;
“sweetheart” shipment of six cans of grapefruit juice to a one-third shareholder of the shipper at no apparent charge;
shipment of adhesive fingerprint seals to a personal friend (who was not engaged in any relevant business) to use “as he saw fit”; and
a single unsolicited shipment of automotive goods to one’s spouse, who never took possession of the goods.
Even bona fide commercial transactions, if they are too sporadic, casual, or nominal, may not qualify as sales “in the ordinary course of trade.” In a case involving Proctor & Gamble’s strategy to keep alive scores of “minor brands,” the court found P&G had no rights in certain marks, although it annually shipped fifty cases of each product to normal customers for $2 per case (regardless of the product shipped), but did not monitor what became of the goods at the retail level nor promote awareness of the minor brands either inside or outside of the company. Furthermore, the trademarked products were simply other P&G products that had been relabelled, and if P&G did not produce the product in question, it simply relabelled those of a competitor. Based on these factors, the court found that P&G’s minimal use of the marks was not a bona fide attempt to establish an ongoing trade using the marks. Although decided prior to 1989, the P&G case provides good precedent for activity that would not be deemed to be “bona fide use in the normal course of trade” under the post-1989 definition of “use,” which all agree raised the standard of acceptable “use.”
Other examples of such sporadic, casual, or de minimis uses not giving rise to trademark rights include:
sale of a single jar of cold cream for $1.27 over a four year period where there were no definite plans for what goods the mark would be applied to;
monthly shipments to wholesalers over a two year period of acne medicine for less than $1.00, without any evidence that the goods reached consumers;
a single sale of china for $1300 without any subsequent commercial activity for seven years;
sale of 89 jars of perfume over a 20 year period at an alleged profit of only $100, using the mark of a potential foreign competitor; and
use of a mark on shoes manufactured by a competitor, where the alleged mark owner did not manufacture any shoes itself and averred only negligible sales, without credible evidence that the sales were in interstate commerce.
Purely intra-corporate transactions have been characterized as “secret” or otherwise non-public uses, and do not suffice to support trademark registration. On the other hand, shipping goods to a sales representative who distributed them as free samples to potential customers was deemed to be a legitimate use made with an intent to establish an ongoing business. Use of a mark on promotional material (e.g., t-shirts, pens, or calendars) for advertising other goods and services will usually suffice as use of the mark on the promotional material, provided it has some utilitarian function other than as advertising. However, use of ROMULANS on an alleged connect-the-dot “game” that was in reality no more than a flier advertising a band, and was not part of an effort to establish a business in games, was insufficient use of the mark for games.
Clinical testing of drugs or medical devices qualify as a sufficient use. Test marketing of product prototypes still under development, such as beta testing of computer hardware or software, may also be sufficient to support registration. However, test marketing must involve the mark as used with the actual goods, and not only a vague concept of what the final goods will be. Shipment of a marked product for a customer’s reaction to a potential, not yet formally adopted mark is not sufficient.
Furthermore, as the legislative history of the 1989 changes to the Trademark Act makes clear, what constitutes the “ordinary course of trade” will depend on the particular industry involved. While a few sales of expensive equipment might be acceptable for one industry, the same number of sales of inexpensive items might not rise to a bona fide use in the “ordinary course of trade” in another industry. Thus, the lawyer’s skill at defining the mark owner’s industry may be critical to convincing the PTO or a court that a particular use is sufficient.
10 warning signs that “use” of a mark is inadequate
Based on these precedents, the following factors will weigh against a use being considered “bona fide use in the ordinary course of trade” under the Act:
(1) single or very infrequent shipments of goods that are normally sold in larger quantities in the particular industry;
(2) “sales” to friends or family;
(3) lack of concern for whether the purchasing public ever has an opportunity to buy the product;
(4) the purported mark owner was not already established in the trade;
(5) the purported mark owner did not engage in any promotional activities for the goods or services for which the mark was used;
(6) the purported mark owner simply relabelled its own products or those of others;
(7) the first use of the mark was followed by an abnormally long hiatus (test marketing is acceptable, provided it is done in the “ordinary course of trade” for the particular industry);
(8) the purported mark owner did not know the precise product for which the mark would be used, or had only vague ideas for product development; (9) the purported mark owner was merely trying to “occupy the field” and inhibit competition, rather than establish a legitimate trade under the mark; and
(10) the labels used to apply the mark to a product were handmade or otherwise not of a normal commercial character.
The “in commerce” requirement
Use of the mark must be “in commerce,” which includes all commerce that can be regulated by Congress. This includes not only interstate and foreign commerce, but also commerce within the District of Columbia and with Indian tribes. The concept of use “in commerce” has expanded over time, and now encompasses the sale or transportation of goods or services that affect commerce. Services will usually be deemed “in commerce” if they are offered to customers who travel across state lines. Use of a mark in advertising in the United States for services available only outside of the United States (such as restaurant services available only in Italy) will not suffice to establish use of the mark “in commerce.”
Goods will usually be deemed to be “in commerce” if they are shipped over state lines at the mark owner’s instructions or with his foreknowledge in furtherance of a sale. Use in commerce may also occur when goods are shipped interstate in furtherance of a potential sale, such as for display at a trade show. By contrast, where the mark owner does not know or care whether the purchaser himself takes the goods over a state line, such movement is generally not regarded as “in commerce.” Thus, there may be some situations where the mark owner may wish to ship the goods to a customer to ensure that proper use in commerce occurs.
Abandonment due to non-use of a mark
The Trademark Act defines “abandonment” as the cessation of use “with intent not to resume such use.” As with use necessary to register a trademark, the Act specifically states that use in this context means “bona fide use in the ordinary course of trade, and not made merely to reserve a right in the mark.” Such use must be in U.S. commerce, so use overseas alone is not sufficient to avoid abandonment. However, export from the U.S. of a commercial quantity of goods bearing the mark is use of the mark “in commerce,” and has been upheld as sufficient to defeat a charge of abandonment.
As with other areas of the law, determining a trademark owner’s intent not to resume use may be based on objective factors. In general, courts are reluctant to find abandonment, since it results in complete forfeiture of rights in the mark, and the majority rule requires proof of abandonment by “clear and convincing” evidence (although proceedings before the PTO only require the lesser “preponderance” of the evidence). The Act provides that non-use for three consecutive years is prima facie evidence of abandonment, which must be rebutted by the trademark owner. Limited, temporary non-use is generally tolerated by the law.
As stated by the D.C. Circuit, mere cessation of use does not result in “a trademark roll[ing] free, like a fumbled football, so that it may be pounced on by any alert opponent.”
Even long periods of non-use might not result in abandonment, due to the circumstances of the particular case. A trademark owner might overcome the appearance of abandonment of his mark and still retain rights, based on either a legitimate excuse justifying non-use of the mark, or continued public recognition of the goodwill embodied by the mark.
Excuses possibly justifying non-use of a mark
Some of the excuses that have been held to justify non-use of a mark include:
negligence of an employee in failing to affix the mark to a product;
failure to sell a very expensive product in a limited market, despite marketing efforts; and
bankruptcy or other financial difficulties.
Non-use can also result from forces that are more or less beyond the control of the trademark owner, and longer periods of non-use caused by outside forces will generally be permitted. Some such causes include:
war (e.g., French champagne not available in U.S. market during World War II);
government action (e.g., prohibition during the 1920’s or confiscation of a business by the Cuban government);
prolonged labor strike (coupled with efforts to maintain manufacturing facility and refusal to consider offers to purchase the mark); and
(presumably temporary) unprofitability of sales.
Continued public recognition of a mark
A few cases, often involving durable products like automobiles, have held that a trademark owner retains rights in the mark, even if no goods have been sold for several years. For example, where no Ferrari DAYTONA SPYDER automobiles were manufactured for thirteen years, with no plans to resume making such cars again, the court nonetheless found that the distinctive trade dress in the shape of the car was not abandoned for two reasons. First, Ferrari continued to supply parts and service to the cars. Second, the DAYTONA SPYDER design was deemed strongly and positively associated with Ferrari. Thus, in certain cases the existence of strong “residual goodwill” can apparently serve as a basis for finding that no abandonment has occurred.
Use is the lifeblood of a trademark. Marks need use to be born and to mature into federal registrations. Without it, marks wither and die. Understanding what it means to use a mark is therefore imperative to ensuring that trademark rights are properly acquired and maintained. Failure to secure such rights through inadvertence or unfamiliarity with the law can be devastating, particularly if a rival is able to establish prior and continuing use of “your” mark.