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Tuesday, July 22, 2014

Common Law Trademarks or USEMARKS (TM).

By Duane J. Higgins, ceo,

Federal registration is not required to establish rights in a trademark.  Common law rights arise from actual use of a mark and may allow the common law user to successfully challenge a registration or application. (from USPTO.GOV website.)

According to

The symbols ®, TM and SM provide notice to the world that you are claiming trademark rights in any mark using these symbols. You may use the TM on marks identifying goods, and the SM on marks identifying services. You need not have a federal or state registration to use the TM or SM symbols

From The National Technology Assistance Project.

Common Law Trademarks (and its Case Law)

A legal aid organization may be entitled to common-law protection even if it has not registered a federal trademark. Common-law trademark claims apply similar principles and case law to the Lanham Act, so that state and federal courts often rely upon each other’s cases, providing a “common reservoir” of trademark precedent.

Common law protection, however, is often limited to the geographic area in which the mark is used, and the plaintiff in a common law protection suit must prove it is entitled to exclusive use of its trademark. Unregistered common-law marks are protected locally even if someone later federally registers the mark.

According to case law:
  • A party may obtain a common-law trademark or service mark on any terms it uses in commerce, though absent federal registration, common-law status generally limits its protection the geographic area in which the term was used. Accordingly, to bring a claim under the Lanham Act, federal registration is not required, “but the scope of any common law rights vindicated would be limited to areas where the mark is in use.”
Common Law Trademark Basics:
Priority of Use and Distinctiveness are Key
Common Law Rights Are Two Giant Steps Below Federal Principal Registration Rights
United States trademark rights are acquired by, and dependent upon, priority of use and distinctiveness. Distinctiveness arises from the uniqueness of the choices of the word(s), term, name, symbol, or device, or any combination of these that are used to identify goods or services that a trademark owner has an exclusive right to claim for their own. Registration on the Principal Register goes beyond the rights earned under common law.

Federal Registration Expands the Reach of a Trademark
[T]he scope of federal trademark protection differs significantly from the scope of common law protection: Congress expanded the common law ... by granting an exclusive right in commerce to federal registrants in areas where there has been no offsetting use of the mark.... Congress intended the Lanham Act to afford nation-wide protection to federally-registered marks, and that once the certificate has issued, no person can acquire any additional rights superior to those obtained by the federal registrant. . .    Registration of a trademark, in addition to serving the interests of the registrant by providing constructive notice, serves the interests of other participants in the market place. Entrepreneurs, for example, who plan to promote and to sell a new product under a fanciful mark, should be able to rely on a search of the trademark registry and their own knowledge of whether the mark has been used so that what may be substantial expenditures of money promoting the mark will not be wasted. Consumers are also benefitted by the registration of national trademarks, because such registration helps to prevent confusion about the source of products sold under a trademark and to instill in consumers the confidence that inferior goods are not being passed off by use of a familiar trademark. In short, therefore, the benefits of prior registration under the Lanham Act are justified in light of the order such registration brings to the market place.
Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383 (C.A.3 (N.J.), 1985).

Priority or First to Use
The ‘First to Use’ a trademark (the use that has priority) acquires rights in that mark if the mark is inherently strong and if the trademark follows other common law principals. Inherent strength is not something that is automatically present in common words, phrases or designs. If  your trademark is made up of the KEY WORDS that describe your product, components, customers, uses or other words or phrases that you would type into a search engine box, your trademark may not be a trademark at all but just a collection of words or perhaps a trade name. A trademark that is made up entirely of descriptive words may not acquire any common law rights because one user cannot take those words out of circulation for other people to use to describe the same products or services and cannot claim them for exclusive use.

Potential trademarks and parts of potential trademarks that are not inherently distinctive, such as those that only contain words or designs that describe the product or service being sold or those who would use the product or service (also called merely descriptive trademarks), are not given strong legal rights when first used but may acquire legal rights over time or with lots of advertising or use.  If the potential trademark or part of the potential trademark is generic, meaning that it identifies the class of products or services, the generic terms have no trademark rights and cannot acquire legal rights over time.

The date when a business obtains common law rights in a trademark (sometimes know as “trade identity rights’) depends on the distinctiveness of the mark. “A business will obtain rights in the mark upon first use only if the mark is inherently distinctive. If the mark is not inherently distinctive, a business may obtain ownership rights in the mark when the mark attains a secondary meaning.”  Coach House Restaurant, Inc. v. Coach and Six Restaurants, Inc., 934 F.2d at 1559 (C.A.11 (Ga.), 1991). Even if someone uses something as a trademark, “if it is not distinctive, the user does not have a trademark because he has no existing trademark rights.” Otto Roth & Company, Inc. v. Universal Foods Corporation, 640 F.2d 1317 (Fed. Cir. 1981).

Where Do Common Law Trademark Rights Apply?
Common law trademark rights (where defined by state law, local law, case law or federal unfair competition laws) exist where trade has taken place that qualifies as trademark use (or trade name use or service mark use) which traditionally used to be in the isolated local geographic areas where the trade actually took place or where the MARK was actually used. When someone from one state can order from someone in another state on a worldwide web and that product is shipped on a interstate freeway to another state or the service is provided in another state, the idea of local trade is questionable. One state’s law has these definitions:

MARK. Any trade name, trademark, or service mark entitled to registration under this article whether registered or not.
USED. A mark shall be deemed to be used in this state:
a. On goods or their containers or the displays associated therewith or on the tags or labels affixed thereto when such goods are sold or otherwise distributed in the state;
b. In connection with services when it is used or displayed in the sale or advertising of services and the services are rendered in this state; and
c. In connection with a business when it identifies the business to persons in this state.

Does local even exist anymore? Use of internet web sites for selling throughout the U.S. may change the scope of where common law rights exist and how they can be protected and enforced. Sometimes this means you can get a cease and desist letter at your small business in a small town on the East Coast from a big city West Coast business for using a confusingly similar trademark on the internet to promote a local business. Success can bring its own problems.

It’s all about goodwill, the more successful that a trademark is for helping consumers to make a positive connection between a product or service and who provides it, the more likely it is that someone will try to compete by taking the trademark or something similar (may be OK) or confusingly similar (may be infringement) to use it for themselves. Some businesses may do it intentionally: Why take the time to build goodwill when you can use a name that is already associated with goodwill? Some businesses may do it unintentionally: Why should I verify that I have a right to use a name when I like the name and it costs money to verify that it is not being used already and I Googled it and nothing came up?

Common law rights can be used to stop someone else’s use. A common law mark may be able to successfully oppose a confusingly similar federal registration or cancel a federally registered trademark if the trademark compete in the same or similar products or services in the same geographical area if the alleged common law trademark owner can show prior use (or senior use) of the mark. The Lanham Act provides that a registered mark, even if it has become incontestable, still may be challenged "to the extent, if any, to which the use of a mark registered on the principal register infringes a valid right acquired under the law of any State or Territory by use of a mark or trade name continuing from a date prior to the date of registration under this chapter of such registered mark." 15 U.S.C. 1065 as quoted in Advance Stores Co. Inc. v. Refinishing Spec. Inc., 188 F.3d at 411 (6th Cir., 1999). A challenge to a registered mark by an unregistered mark could be in a USPTO opposition or cancellation or in a state or federal court.

Why not just stick with common law rights? Enforcement can be difficult from both sides. Trying to enforce a common law right may mean one do over after another. Stopping one person from using your name may cost more than a federal registration would have cost in the first place and when you are done stopping the first person you still just have a common law right that you are going to have to keep enforcing on a piecemeal basis. If this first use by someone else is a federal registration of the mark by a junior user, the junior user will have a much easier time stopping you than you will have in stopping them. (Federal registrations have presumptive rights.) Many third parties such as Facebook, Twitter, domain name registrars, web site hosts, and others have policies that protect federal registrations. Someone else who registers your common law name will have presumptive rights in that mark and trying to stop them can be very difficult and expensive and the cause of a lot of heart ache and distress.

Common law trademarks do not enjoy the advantages of federal registration (see below) which include being protected more thoroughly from infringement and counterfeiting trademarks. Can’t get federal registration? Marks that do not qualify for federal registration may not qualify for common law protection for the same reasons: federal laws are based on the same or similar common law principles. Likewise, having a federal registration does not protect a business from being challenged by a senior user of a common law trademark. USPTO trademark examiners do not examine potential trademarks for potential infringement by state or common law marks. The USPTO only looks at other USPTO federal registrations for potentially conflicting marks.

Unregistered Trademarks
Unregistered trademarks are protected by law under more than just common law (case law) because various state statutes and federal statutes have adopted (codified) the concepts and terminology that were developed in case law. One applicable federal law for unregistered trademarks is 15 USC § 1125(a) of the Lanham Act: False designations of origin, false descriptions, and dilution forbidden (a) Civil action:
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities;
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

Claims for trademark infringement for unregistered marks require findings that the unregistered marks owned by plaintiff are either inherently distinctive [rather than descriptive] or have acquired a secondary meaning and are likely to be confused with defendants' marks by members of the relevant public. Duncan Mcintosh Co. v. Newport Dunes Marina LLC, 324 F.Supp.2d 1083-1084 (C.D. Cal., 2004) quoting Int'l Jensen, 4 F.3d at 823; Vision Sports, 888 F.2d at 613; California Cooler, Inc. v. Loretto Winery, Ltd., 774 F.2d 1451, 1455 (9th Cir.1985). Without inherent distinctiveness or acquired distinctiveness through secondary meaning, an alleged common law trademark is not protected by common law. The same lack of common law protection holds true for trademarks that are geographically descriptive or geographically misdescriptive that have not acquired distinctiveness.

In addition, an unregistered mark must actually have been used as a trademark to be protected under trademark law. "[A] plaintiff must show that it has actually used the designation at issue as a trademark"; thus the designation or phrase must be used to "perform[] the trademark function of identifying the source of the merchandise to the customers." Microstrategy Incorp. v. Motorola, 245 F.3d at 341 (4th Cir., 2001) quoting Rock & Roll Hall of Fame v. Gentile Prods., 134 F.3d 749, 753 (6th Cir. 1998). See valid manner examples below or the web site Function As a for examples on how a trademark should function.

Geographic Rights for Unregistered Marks are Limited
A common law mark (unregistered mark) has geographically limited rights (prior use) against a subsequent user under the Tea Rose/Rectanus doctrine -- the first user of a common law trademark may not oust a later user's good faith use of an infringing mark in a market where the first user's products or services are not sold. Nat'l Ass'n Healthcare Comm. v. Cent. Arkansas Agency, 257 F.3d at 735 (8th Cir., 2001) quoting United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 100-01 (1918); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415 (1916).
This prior use right may be enforced through an opposition or cancellation proceeding. See Published for Opposition see also Opposition Steps/Cancellation Steps for more information.


Executive summary:
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 BitLaw discussion of common law trademarks is divided as follows:

Common law trademarks versus federal registration:
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. Federal registration, a system created by federal statute, is not required to establish common law rights in a mark, nor is it required to begin use of a mark. However, federal registration, if available, is almost always recommended and gives a trademark owner substantial additional rights not available under common law. See the BitLaw discussion of federal registration for more information.

Geographic limitation of common law marks:
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 BLASTER 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.

Effect of common law marks on trademark searches:
Since no registration is required in order to establish common law rights to a trademark, it can be difficult to discover whether anyone has trademark rights in a particular mark. This is the legal background for the difficulties and expenses involved in trademark clearance searches. If registration were required for trademark rights, clearance searches would only need to examine trademark registers. Under U.S. law, however, an attempt must be made to discover these common law rights.