Disclaim Now, or Disclaim Later?

The owner of a federally-registered trademark is presumed to be the exclusive, nationwide user of the mark in connection with the goods or services listed in the registration.

However, that presumption does not usually extend to generic or descriptive elements of a mark, apart from the mark as a whole. That means the owner of SEATTLE’S BEST COFFEE, for example, doesn’t get exclusive rights to the word “coffee.” Registration or no registration, it can’t object to other companies using that term as part of their trademarks.

The U.S. Patent and Trademark Office gives this common-sense principle teeth by requiring applicants for federal registration to “disclaim” exclusive rights in descriptive and generic elements. The language it requires applicants to adopt is that “No claim is made to the exclusive right to use ‘[the generic or descriptive element(s)]’ apart from the mark as shown.” This language means that apart from the mark as a whole, the owner acknowledges it can’t stop other trademark owners from using those generic or descriptive elements.

There is no question disclaimers are appropriate. Without them, trademark owners might mistakenly attempt to assert rights they don’t have. The question is when to agree to them. Often, the best strategy is to wait until the PTO’s examining attorney requires a disclaimer only after lodging an objection. This makes sense for several reasons.

First, the objection may never come. Why disclaim part of a trademark when filing an application, if there is chance the PTO may not object? Indeed, the PTO might view individual word elements as being part of “unitary” trademark — a trademark whose elements take on a different meaning when viewed as a whole. By waiting, an applicant can ensure that it only disclaims the minimum amount of its mark — if any — needed to obtain registration. 

Second, a disclaimer could be viewed as an admission. A trademark owner’s voluntary relinquishment of exclusive rights to elements of its mark could come back to haunt the owner if it seeks to enforce such rights later in court. If an owner has already publicly agreed it doesn’t own exclusive rights in an application for federal registration, it won’t take long for the allegedly infringing party to point that fact out to the court.

Third, the owner of an intent-to-use application might want extra time to go to market. If the PTO objects on the basis of a needed disclaimer, the owner gets six months to respond. That’s six months of extra time the owner can get for free, without having to pay $150 per class to extend the deadline for filing its proof of use. Free time can be good!

Overall, there’s usually little advantage to agreeing to a disclaimer as part of the application. Disclaiming later might not be better than disclaiming early, but disclaiming early easily could be worse than disclaiming later.

Taking the Mystery out of Trademark Use

Before a trademark can be registered, it has to be used.

There’s one exception to that — if a mark is registered in a foreign country, it can be registered in the States without having been used here. But even then, the registration eventually will cancelled if the owner deosn’t prove the mark has been used.

So what constitutes use?

Trademarks are brands. They tell consumers where the branded good or service comes from. Trademark use, therefore, means the selling or distribution of goods or services to consumers that carry a brand. For goods, that means affixing the mark to the good itself or placing it on product packaging. Services are intangible, so it’s not possible for owners to physically affix a brand to the thing they’re selling. Use of a trademark for services (technically, a “service” mark) is the next best thing — display of the mark at the point of purchase, such as on a sign in a brick-and-mortar store, and on a website where the services are offered if the owner is a web-based company. Letterhead and business cards don’t constitute trademark use, because those items refer only to the company, rather than signaling that a good or service comes from the company.

Trademark owners are often unsure what the U.S. Patent and Trademark Office (PTO) requires to support a trademark registration. There’s no mystery. What’s described above is what the PTO needs.

To register a mark with the PTO, the use also has to be interstate. That means in a sale or offering to an out-of-state or foreign purchaser. Localized use, such as sales only within a single city, usually does not constitute interstate commerce and, therefore, such use cannot support a federal registration.

Finally, use needs to be “lawful.” That means the good or service being distributed or sold with the mark can’t be illegal. This requirement has become more important recently with the legalization of medical and recreational marijuana by some states, including the State of Washington. Even if a mark would otherwise qualify for protection, it can’t be registered (or enforced) if its use is not lawful.

Trademark use is about putting the mark in front of actual customers — telling them the good or service comes from the owner. It takes the mark out of the abstract, and puts it into commerce.

Decision on Redskins Trademark Proper but Mostly Symbollic

No question, the PTO got it right.

The PTO’s administrative law branch, the U.S. Trademark Trial and Appeal Board, finally decided the REDSKINS trademark is too offensive to continue to justify the expanded rights that stem from federal registration. So it canceled the team’s six registrations on the ground the mark is “immoral or scandalous.”

The mark has been so offensive to Native Americans for so long, it’s a shame it took the government this long to strip the mark of the additional rights it had granted.

However, its doing so in no way means the team has to stop using the mark or that others can sell merchandise bearing the trademark without liability. Both of those things were widely reported, but they’re wrong. Unless and until a court makes the same determination the TTAB made, the Washington Redskins can continue to enforce their common law rights in their mark — rights that date back decades. Hopefully someday soon a court will decide as the TTAB did, but it is not obligated to do so. Unlike other federal agency decisions, U.S. courts do not defer to PTO decisions.

For that reason, the TTAB’s decision is mostly symbollic. Since we recognize common law trademark rights in the United States — rights that automatically arise through trademark use — cancellation of the team’s registrations doesn’t cancel the mark itself.

KIRO interviewed me about this issue on the radio. Text of the story is viewable here. Unlike other news coverage, KIRO didn’t overstate the decision’s limited implications.

Washington's Bill to Tax Marijuana Trademarks is a Bad Idea

During Washington’s last legislative session, Olympia considered taxing marijuana trademarks.

It’s a bad idea.

But first, a little background on the bill.

If passed, House Bill 1976, would have levied a “tax of three dollars and sixty cents per thousand dollars of assessed value upon the assessed valuation of all trademarks, trade names, brand names, patents, and copyrights that are related to marijuana.” Revenue collected from the tax would go into the state’s Life Sciences Discovery Fund and be earmarked for marijuana farming research.

Rep. Jeff Morris (D - Mt. Vernon) introduced the bill, which was referred to the House finance committee. No further action was taken on the bill before the legislative session ended.

The bill states it was intended “to enable Washington to capitalize on its unique position” of being the only other state besides Colorado to legalize recreational marijuana. Presumably, the idea is for the state to skim a little off the top from those competing in our legal marijuana industry.

Like I said, it’s a bad idea. Here’s four reasons why. (Believe me, there are more, but I’m trying to be brief.)

First, Washington already has a tax on trademarks. It’s called a filing fee. Every trademark owner wishing to register its mark with the state must pay the state $55 per mark — plus another $50 if the owner wants the state to expedite the processing of its application. The proposed new tax on trademarks would add to this existing fee structure, which is nothing more than a tax.

Second, doesn’t the state want to encourage businesses to protect their intellectual property, as well as to compete in our legal marijuana industry? Voters have already made the policy judgment of wanting to create that industry. One would think the state would seek to benefit from the economic boost the new industry should create, along with the attendant sales and other taxes the state should expect to collect as a result. Singling out for an additional tax those who seek to maximize the value of their intellectual property in a particular industry seems counterproductive and strange.

Third, the bill says nothing about how the tax would be calculated. Exactly who is supposed to assess the value of the trademarks, trade names, and other intellectual property that’s to be taxed? The bill doesn’t say. That’s a critical omission.

Finally — and for this blog, most importantly — the bill seems to misunderstand the purpose and value of trademarks. Trademarks indicate who makes the good or service sold with the brand. A trademark that’s never been used in an industry that does not yet exist has no value at all. A trademark becomes valuable only when a seller earns a good reputation. Therefore, the tax would target the companies with the best reputation — the responsible ones that have provided good, consistent quality, and who treat their customers right. Burdening the best corporate citizens with a tax aimed specifically at them would not seem to encourage the type of behavior this state should want.

Let’s hope the bill stays where it is — just one legislator’s bad idea — and never becomes law.

Help Trademarks Serve Their Purpose by Adopting Memorable Marks

Unusual — even risqué — brands are memorable, which can pay dividends.

That’s the upshot of a recent New York Times article.

For example, David Hall was running a small construction company when he decided to phase out the scaffolding part of his business. As a joke, for one last job, he put up a banner that identified his company as the “Mammoth Erection” company. 

His phone hasn’t stopped ringing since.

That isn’t a surprise to trademark lawyers. A trademark tells consumers where the good or service comes from. The whole idea is if a customer likes what you’re selling, all they have to do is look for your trademark (such as your name, logo, or tag line) to buy from you again. And if your trademark is forgettable, that’s hard for the customer to do.

I’m not a suggesting being cute (or shocking) just for the sake of being cute (or shocking). But as long as you’re being smart about selecting a trademark, it makes sense to start investing in one that will help your company stand out from the crowd.

Wines are a classic example. Stores are filled with bottles of CHATEAU this and RIDGE that. Forgettable. But not MAD HOUSEWIFE, MONOGAMY, or FAT BASTARD. They may not be the best wines around, but the playfulness and originality their names convey suggest they’re not the worst out there, either. They certainly stand out from the boring names their competitors use.

This is a more branding than law, but producers can help trademarks serve their purpose by selecting marks that stand out.

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