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PTO Report Questions Whether a Problem Exists with Trademark Bullying

The U.S. Patent and Trademark Office has completed its study on trademark bullies (previous STL posts here and here).

The study was ordered by Congress at the behest of Sen. Patrick Leahy (D-VT), who folks may remember was unhappy when his constituent, the Rock Art Brewery, was pressured by Hansen Beverage Co. over the brewery’s use of VERMONSTER in connection with beer and Hansen’s use of MONSTER in connection with energy drinks.

Last year’s Trademark Technical and Confirming Amendment Act of 2010 gave the PTO a year to study the phenomenon of “trademark bullying” and to propose a solution.

The PTO responded in part by concluding there might not be a problem with trademark bullies after all.

The report states: “After careful review of the available information regarding trademark litigation tactics and comments received from concerned intellectual property stakeholders, it is unclear whether small businesses are disproportionately harmed by enforcement tactics that are based on an unreasonable interpretation of the scope of an owner’s rights.”

I’ve been on the receiving end of over-reaching enforcement. In some cases, my client had no rational choice but to back down. It just wasn’t worth it to prove they were right and the bully was wrong. The problem is real.

To the extent the PTO recognized the existence of a problem, it curiously found the current system provides the remedy: ”[B]ecause trademark enforcement is a private property rights litigation issue, if abusive tactics are a problem, such tactics may be addressed by the existing safeguards in the litigation system in the U.S. and by private sector outreach, support, and education relating to these issues.”

I’m not sure that conclusion logically follows from the premise.

Nonetheless, the PTO goes on to say: “However, to the extent small businesses are disproportionately adversely affected by such tactics because they lack the funds to hire counsel to defend against them, we believe the Federal Government can undertake the following actions:

  1. Engage the private sector about providing fee or low-cost legal advice to small businesses via pro bono programs and intellectual property rights clinics;
  2. Engage the private sector about offering continuing legal education programs focused on trademark policing measures and tactics;
  3. Enhance Federal agency educational outreach programs by identifying resources that enable small businesses to further their understanding of trademark rights, enforcement measures, and available resources for protecting and enforcing trademarks.”

These suggestions are fine, but what about addressing the problem through the market? I can’t say with certainty it would solve the problem, but what I think is needed is serious study about whether the Lanham Act should make an award of attorney’s fees to the prevailing party routine, rather than limiting an award to “exceptional” cases.

The PTO’s report discusses attorney’s fees in passing, but says the current possibility of a fees award already deters abuse: “[A]ttorneys’ fees appear to be a deterrent to trademark litigation abuse because trademark owners know that a successful defendant may recover legal fees where the plaintiff’s allegations of trademark infringement are so baseless as to be frivolous.”

What I think is baseless is this assertion. Again, the Lanham Act only authorizes courts to award fees in “exceptional,” i.e., rare, circumstances. If the fear of a fees award serves as an effective deterrent, why is it in some trademark owners’ interest to bully other trademark owners, and why is it in some trademark owners’ interest to back down when faced with bullying?  

As the PTO recognized, the difficulty for small businesses is they can’t afford to push back against abusive trademark enforcement. Given that, wouldn’t punishing a losing trademark infringement plaintiff by requiring it to pay the successful defendant’s attorney’s fees deter over-reaching? Isn’t that what needs to be considered?

Now, I recognize that the chance of a massive fees award — no matter how remote — could deter a small business from enforcing legitimate trademark rights against a well-funded infringer. But on balance, I think making fees awards routine rather than rare would go a long way toward solving the trademark bulling problem.

And it is a problem.

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