Tag: Trademarks

Who Owns the IP for Things a Vendor Creates?

Post author By Austen Zuege

Introduction — Why This Matters

Businesses often hire vendors to develop things for them, perhaps due to a lack of expertise in some particular area or just a lack of capacity. The vendor might be another firm, an individual independent freelancer, a temporary contractor working on-site, or some other type of consultant. This is often referred to as outsourcing. But who owns the intellectual property (IP) for things the vendor creates? This question should be asked at the beginning of a vendor relationship. Ideally, it should be answered before hiring the vendor.

All too often businesses ignore ownership of IP rights until there is infringement or a big business deal long after the vendor was hired. But cutting corners or forgetting to put IP ownership in writing at the beginning of a vendor relationship can potentially have huge (if avoidable) consequences later on. Businesses do come to regret such oversights later on. For instance, when selling a business, a prospective buyer might raise questions about lack of IP ownership due to vendor or outside contractor involvement, which might present barriers to completing the sale or might lower the purchase price. Or, when there is infringement, a business lacking ownership will not have standing to sue the infringer while the vendor (who still owns the IP) may be unconcerned and disinterested.

A common mistake is to wrongly assume that merely paying a vendor automatically transfers IP ownership or that receiving physical copies (even the sole original) transfers IP ownership. In the absence of something in writing, the vendor most likely retains any patent or copyright ownership interests. Vendors, for their part, may also be ignorant or misinformed about IP rights. Anyone hiring a vendor should not assume that the vendor understands potential IP issues or that the vendor’s standard agreement (sometimes called a master services agreement) will adequately or satisfactorily address and allocate IP ownership.

Type of IP	Default Owner (Subject to Exceptions)
Patents	Inventor(s)
Copyrights	Author(s)
Trademarks	User of mark (to designate source)
Trade Secrets	Rightful owner

Table Summarizing Who Typically Owns IP Initially (In the Absence of an Agreement or Local Law to the Contrary)

Seeking to obtain IP rights from a vendor after the end of the relationship can be difficult. You may find yourself without leverage to insist upon vendor cooperation or the vendor may no longer exist (or be deceased). And vendors may opportunistically seek windfalls to assign over IP rights after-the-fact. In worst-case scenarios, the vendor may own the IP and be able to freely commercialize it to your disadvantage, as well as to potentially block further independent development by you.

From the vendor’s perspective, an assignment of IP rights might be undesirable. But this is a question of leverage (bargaining power) and whether the vendor is willing and able to turn down potential new work. Though a suitable compromise may be to provide a license-back to a vendor, allowing certain uses by the vendor while still transferring IP ownership to the vendor’s client. An example is a portfolio license allowing the vendor to show examples of past work to potential clients. What makes sense in any particular situation will vary, of course.

Patents and Copyrights

For patents and copyrights, the general rule in the United States is that whoever creates the IP is the owner. In the absence of a written agreement to the contrary, this means that a vendor will generally own any patent rights or copyrights stemming from the vendor’s own efforts by default, even if the customer paid the vendor for it. But there are exceptions. And it is possible to agree in advance who will own the IP — that generally needs to be in writing.

“For patents and copyrights, the general rule in the United States is that whoever creates the IP is the owner.”

By statute, transfer of ownership of patents (or a patentable invention) and copyrights must be in writing — though copyright law allows the copyright owner’s duly authorized agent to sign an assignment. Any written document, including purely electronic materials, could include or constitute an assignment if it shows intent to presently transfer ownership rights. The written document should use words like “assigns”, “hereby assigns”, “hereby conveys, transfers, and assigns”, etc. to create a present transfer of ownership. Oral assurances will not transfer ownership of an invention (patent) or copyright; although limited implied non-exclusive licenses or equitable rights (e.g., shop rights) might still arise without being in writing.

Agreements that constitute merely an obligation to assign — typically phrased in the future tense such as with “will own” or “shall assign” language — do not effectuate an assignment of IP. Rather, obligations to assign require later execution of a separate written assignment. But ambiguous language relating to possible future agreements (such as “shall be owned as agreed upon”) may not even create an obligation to assign.

Some jurisdictions have different default rules about IP ownership. At least one U.S. state, Nevada, may vest initial ownership of patent rights with the inventor’s employer rather than the inventor by statute. Under common law, a “hired to invent” doctrine may affect patent ownership too, in limited scenarios. Some other countries also have laws that place ownership of an invention in the hands of the employer rather than the inventor. Though sometimes these laws establish only an obligation to assign. It is important to consider the location of the vendor, the location(s) of the individuals involved, and the location(s) were relevant activities took place to determine which jurisdiction’s laws will apply.

Joint development may also result in joint ownership. If the vendor and your business collaborate to jointly develop IP, by default they are each the owner of an equal and undivided interest in the entire IP right(s). Under the patent laws, in the absence of an agreement, co-owners can each independently exploit the invention without an accounting to the other (though all co-owners must join a lawsuit to have standing to sue an accused infringer). Under copyright case law, an accounting is due to the other co-owner(s) for profits arising from the jointly-owned work to prevent unjust enrichment. Joint development agreements or the like can set forth various ownership rights in advance and can also govern the handling of relevant pre-existing “background” IP.

All the above concerns also apply to vendors themselves. For patents, an invention by a vendor’s employee is generally not automatically owned by the vendor. And if a vendor retains a subcontractor or non-employee then copyright ownership would likely initially vest in the subcontractor/non-employee creating a given work in the absence of an assignment or valid work made for hire agreement. Therefore, in the absence of a warranty relating to the vendor’s ownership of IP and/or a no-subcontracting contractual provision, or intimate knowledge of the circumstances involved in the creation of the IP, there is no assurance that an assignment from the vendor (alone) will transfer all IP ownership to you.

“Work Made for Hire”

An important potential exception to initial ownership under U.S. copyright law involves oft-misunderstood “work made for hire” statutory provisions. There are two, and only two, ways to qualify something as a work made for hire under current law. First, a copyrightable work prepared by an employee within the scope of his or her employment is deemed authored by and thus automatically owned from the outset by the employer. But vendors and even “internal” independent contractors do not fall within that definition.

Second, parties without an employee/employer relationship can also agree in writing that a work will be a “work made for hire” but only for nine categories of uses of works enumerated in 17 U.S.C. § 101, which may not apply—parties cannot contractually expand those statutory categories.

A “work made for hire” is-
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use [i] as a contribution to a collective work, [ii] as a part of a motion picture or other audiovisual work, [iii] as a translation, [iv] as a supplementary work [see definition below], [v] as a compilation, [vi] as an instructional text, [vii] as a test, [viii] as answer material for a test, or [ix] as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.
Definition of copyright “work made for hire” from 17 U.S.C. § 101

The “work made for hire” doctrine is frequently misunderstood. In practice, it might even be single the most misapplied and confusing provision in all IP law. Simply because you pay someone to make or provide something copyrightable is not enough. And even having a contract that purports to establish something a work made for hire may not actually achieve that goal. It is fairly common for contracts to include language about work made for hire that does not apply and has no legal effect. Only things that meet the statutory definition of “work made for hire” are legally effective.

Because the statute defines categories of possible works made for hire by a somewhat arbitrary and limited list, which is based on “use” rather than the inherent characteristics of the work, it may be difficult to know upfront if something will qualify with certainty. For instance, if a vendor is specially commissioned to write some text, that text could qualify as a work made for hire if commissioned for use as an “instructional text” but the identical text would not if instead commissioned for use in a novel or on an advertising billboard. Moreover, whether vendor-created software source code qualifies as “a contribution to a collective work” and/or “a compilation”, and was intended to be used in that manner, may be far from clear, particularly before any work begins. And agreements, on their face, may not clarify these crucial facts.

A work made for hire not only affects who owns the work but also who is considered the author. This can potentially be significant for copyright termination rights. The persons(s) who actually prepare a work made for hire have no termination rights, whereas person(s) who assign rights to a work can potentially invoke terminate prior assignment transfers (or licenses) decades later.

For older works, created before the 1976 Copyright Act, a much different “instance and expense” test was applied to determine who is the copyright owner. Under that older test, which is inapplicable to recently-created works but can still apply to old works, the commissioning or hiring party may be treated as an “employer” and thus the “author” and copyright owner for things a vendor or outside contractor creates—regardless of the type of intended use of the work.

Trade Secrets

The rightful owner of trade secret rights will be the party that develops the trade secret information, by default. This means technical know-how, etc. developed independently by a vendor will normally belong to the vendor. It may be unclear whether relevant trade secrets were part of “background” IP that pre-dated a relationship with the vendor or not, which can potentially become a point of dispute later on. But a written agreement can be used to establish intended trade secret ownership from the outset.

On the other hand, confidential information developed by a vendor might lose trade secret status if shared with a client business (or others) without reasonable measures to maintain secrecy. This might limit or prevent a vendor from attempting to assert trade secret rights against its client and/or its client’s customers, particularly if there was no non-disclosure agreement (NDA) or other enforceable contract term.

Trademarks

U.S. trademark rights accrue to the party actually using a mark in connection with commercial activity to designate the source of goods and/or services. For instance, a marketing firm creating a brand strategy and identifying a proposed mark for a client would not obtain U.S. trademark rights because only the client business would use (or intend to use) the resultant mark in commerce. But many other countries have first-to-register systems, which might allow a vendor to register your mark. Ownership of non-trademark rights, such as copyright, in graphical logos intended to be used as trademarks might be a little more complicated and might raise other issues too, including a potential divergence in who owns the copyright and trademark rights.

Austen Zuege is an attorney at law and registered U.S. patent attorney in Minneapolis whose practice encompasses patents, trademarks, copyrights, domain name cybersquatting, IP agreements and licensing, freedom-to-operate studies, client counseling, and IP litigation. If you have patent, trademark, or other IP issues, he can help.

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Tags Ownership, Patents, Trade Secrets, Trademarks, Work Made for Hire

Q&A Trademarks

What is an Acceptable Trademark Specimen?

Post author By Austen Zuege

Federal trademark rights in the United States are based on use in commerce. A specimen is evidence of actual, real-world use of a trademark (or service mark), such as a photo of a product bearing the mark. It is evidence of what consumers encounter when considering whether to purchase the branded goods or services. The U.S. Patent & Trademark Office (USPTO) generally requires specimens both to initially obtain a registration and to maintain an existing registration to keep it active. The Trademark Office will scrutinize a specimen to ensure that it is acceptable under current guidelines. So you need the right specimen(s). A knowledgeable trademark attorney can help identify suitable specimens.

General Requirements for Specimens

There are some general requirements that apply to all specimens. What all the requirements have in common is that they look at the branding a U.S. consumer is presented with when considering purchasing the goods or services. These considerations take into account industry norms.

First, an acceptable specimen must show the mark used in a way that consumers would perceive it as a source indicator—something that allows consumers to identify and distinguish goods or services emanating from different manufacturers, sellers, or producers. In that sense it must function as a mark.

One consideration is whether usage of the mark is prominent enough. If the mark is used only in passing or is difficult to identify amidst other things then the specimen is probably not acceptable. There must also be a direct association between the mark and the identified goods or services. A label or tag unattached to anything that shows only the mark but no other information fails to make that association.

Another consideration is proper usage. A term used generically or merely to provide information about the goods or services, or a graphic used merely for ornamentation or decoration, is not functioning as a mark.

graphic of example acceptable and unacceptable specimens on shirts — Examples of acceptable (left) and unacceptable (right) mark usage for shirts

In the graphic above, the specimen on the left represents a hypothetical photo of a shirt with an attached tag bearing the EXAMPLE mark. This would be an acceptable specimen of use of the EXAMPLE mark because the goods (a shirt) is visible, and a tag bearing the mark is attached inside the shirt at the collar in a customary way. This same specimen would not be acceptable to show use of “large” or “100% Cotton” as marks, however, because those are merely pieces of information about the size and materials of the shirt itself, in a generic sense. The specimen on the right is usually unacceptable because it shows ornamental (or aesthetically functional) use of the word “Example” rather than use as a mark. Acceptability depends on context.

It is necessary for a specimen to show a real use. A specimen cannot be a mock-up, printer’s proof, digitally altered/fabricated image, rendering of intended packaging, or draft of a website that shows how a mark might appear. Similarly, a copy or reproduction of a drawing of the mark in isolation (for instance, a logo alone), and not actually applied to commercial goods or service advertisements, is insufficient. A specimen must provide enough context for someone to understand how it specifically shows usage with the relevant goods/services. In general, you can think of a specimen as representative evidence of actual use that is already occurring. But anything that only portrays planned, hypothetical, or theoretical use is not acceptable as a specimen.

photo of pill bottle with digitally altered label text — Unacceptable digitally altered specimen

The example above shows a photo of a pill bottle with a label that has been digitally altered to add the EXAMPLE mark. The digital alternation of the photo is clear because the text does not wrap around the bottle like the rest of the label. There is also no other information or decoration on the label that would normally appear on a commercial product like this, such as to convey the number of pills contained or the net weight of the contents. The digitally altered image above would not be acceptable as a specimen of use.

Specimens must also correspond to usage with the particular goods and services identified in an application or registration. Usage with one good or service will not suffice to show usage with an entirely different good or service. If there are multiple classes of goods or services at issue, then multiple specimens are usually required.

The date a specimen was captured matters. For new trademark applications, a specimen should be recent. Specimens used to maintain existing registrations must be current, meaning the specimen must be from the window of time in which proof of current use can be submitted. Whenever a web page screenshot or printout is used as a specimen, the date and URL must be included. Ideally screenshots and printouts should be captured in a way that automatically includes that information.

A specimen must also show the same mark identified in the application or registration. Sometimes marks change over time. Such changes, if material, can mean the old mark is no longer being used. A common problem involves redesigning or refreshing a graphical logo to look more modern, which may affect the ability to maintain an existing registration. Changes to colors and graphical elements of a logo may mean you are using a new and different mark, even if the same words appear in both versions. Inconsistent spelling or wording of a mark may also make a specimen unacceptable.

But the particular sorts of evidence acceptable as specimens will depend on whether it is for a trademark (for goods) or a service mark (for services). Those different goods/services requirements are taken up below.

If a specimen is defective, there may be opportunities to submit a substitute. But failure to submit a proper specimen from the start might lead to loss of priority if a suitable substitute specimen (gathered on or before the date the trademark application was filed) is not available.

Specimen for Goods (Trademarks)

A typical form of an acceptable trademark specimen for goods is a photograph of a product bearing the trademark on an attached label or tag. A photo of the trademark stamped or imprinted on products themselves or on their packaging or container is also common and acceptable. But a package insert bearing the mark that is not visible to customers (unlike a conventional label or tag) is generally not acceptable.

Acceptable as Specimen for Goods	Unacceptable as Specimen for Goods
Photo of mark on product itself or attached tag/label	Mock-ups/digital renderings/altered images
Photo of mark on product packaging/container	Package insert not visible at time of purchase
Printout or screenshot of an e-commerce web page where the product can be purchased (for example, showing “Add to cart” or cart/bag icon)	Web page, brochure, or catalog with no way to purchase product
Copy from catalog page where ordering information is provided (for example, “Call this number to place an order”)	Copy of magazine advertisement
Screen shot of web page for downloading installable software	Receipt or invoice confirming prior purchase
Installable software in-app screen capture	Business card

Table of examples of acceptable and unacceptable trademark specimens for goods

A display associated with the goods might be acceptable. Examples of displays include in-store displays, catalogs, and web pages. But to be acceptable a display specimen must show use of the mark (a) directly associated with the goods and (b) that display usage must be at the point-of-sale.

Display specimens often raise acceptability problems. The USPTO looks at “point-of-sale” rather strictly by analyzing whether and how ordering information is provided. Web pages, in particular, sometimes fail to meet all the requirements. Acceptability can sometimes hinge on web page layout.

Typical e-commerce “shopping cart” and “shopping bag” buttons and icons shown near the goods meet point-of-sale requirements. But “contact us for more information” or “where to buy” links are insufficient because they put an extra step between the online display and the ability to purchase the goods. Telephone numbers and email addresses may be sufficient if accompanied by special instructions for placing or accepting orders, such as “call now to buy” or “e-mail your order.” But the mere presence of a phone number or email address is often not sufficient.

For downloadable or installable computer software, an acceptable specimen can be an in-app screen shot showing the trademark. Alternatively, a web page screen shot can be used but only if (a) it creates an association between the trademark and the software and (b) provides sufficient information to enable the user to download or purchase the software from the website—like the point-of-sale display requirements discussed above. Another important distinction here is that cloud computing systems (SaaS, PaaS) used on a temporary basis but not downloaded or installed by a consumer are treated as services rather than goods for trademark purposes.

Various non-traditional trademarks (sounds, scents, etc.) have different specimen requirements. But those sorts of trademarks are rather uncommon.

When it comes to goods, however, mere advertising is generally not acceptable as a specimen. This is probably the most frequent area of misunderstanding. Mere advertising typically does not occur at the point-of-sale for goods. Though there are exceptions, such as an ad that includes purchase instructions, like a TV infomercial. But usually a copy of something in a magazine or online that merely merely tells prospective purchasers about the goods or promotes the goods won’t be accepted as a specimen of use for goods—even though advertising is accepted as specimens for services.

The USPTO provides some examples of acceptable and unacceptable specimens for goods.

Specimen for Services (Service Marks)

A service mark specimen must show the mark as actually used in the sale of the services. But a wider range of specimens are accepted for services than for goods. Acceptable specimens show use in the performance or rendering of the services or in the advertising of the services. A typical form of an acceptable service mark specimen is a web site printout or screen capture that shows the mark in direct association with a description of the services as part of an online advertisement.

Acceptable as Specimen for Services	Unacceptable as Specimen for Services
Screen shot of web page mentioning services	Screen shot of web page that does not mention the services
Copy of magazine ad or brochure mentioning services	Copy of magazine ad or brochure that does not mention the services
Sign-in screen capture for online, cloud-based software platform (SaaS/PaaS)	Screen capture of online software not showing the mark
In-app screen capture showing use of non-downloadable software	Screen shot of web page to download installable software
Copy of business card or letterhead referencing services	Copy of business card that does not mention the services
Photo of service vehicle bearing the mark	Photo of service vehicle not showing the mark
Invoice with service details	Blank form for invoice or receipt that does not describe the services

Table of examples of acceptable and unacceptable service mark specimens for services

Even though a broader range of specimens can be used for service marks for services than for trademarks on goods, not anything will suffice. The USPTO provides a number of helpful examples of acceptable and unacceptable service mark specimens.

Common reasons a service mark specimen might be insufficient include a failure to function as mark or an insufficient identification of the applied-for or registered services (in direct association with the mark). For instance, if an application identifies services that are not clearly identified in the specimen it will not be accepted—even if that same specimen might be acceptable for different (but not applied-for) services. And web site screenshots showing vague descriptions of services might not support an application for services identified in a more specific way. For example, a web site saying “we deliver a variety of customer solutions” would not be sufficient for an application identifying “computer programming services.”

annotated web site screenshot specimen — Example service mark specimen for web site

In the example above, a web page screenshot of blueovergray.com would be an acceptable specimen for services identified as “providing a web site featuring legal information.”

Another important requirement is that the URL and date of capture must be provided for web site printout and screenshot specimens. The USPTO’s “TEAS” online system allows the URL and date of capture to be manually entered for a specimen. But ideally a web site specimen should be captured in such a way that the URL and date are directly embedded in the capture or printout. The example above shows the URL and date of capture embedded in the specimen.

State Trademark Specimens

Individual U.S. states also permit trademark registrations. The specific requirements vary by state. Though specimens are usually required. The criteria for determining what is an acceptable will depend on state law. But the guidelines discussed above for federal trademark registration still represent a good starting point when thinking about such things. Though, as you might expect, specimens for a state registration typically must show usage of a mark in that particular state.

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Tags Specimens, Trademark Prosecution, Trademark Renewal, Trademarks

Q&A Trademarks

Why Are There Trademarks?

Post author By Austen Zuege

Trademark Law Is Directed Against Forms of Unfair Competition

Trademark law is part of unfair competition law. It generally prohibits uses of trademarks (or service marks), trade names, and trade dress that are likely to cause confusion about the source of a product or service. Trademark infringement law traditionally protects consumers from being misled by the use of infringing marks. It is the source-distinguishing ability of a mark that permits it to serve that basic purpose.

We say that marks must be sufficiently “distinctive” to be able to serve as a protectable mark. Generic, merely descriptive, and functional things do not serve a source-identifying function and therefore are not protected by trademark law. For instance, trademark law does not allow someone to obtain a complete monopoly on use of a descriptive term simply by grabbing it first. Terms that are or that become generic are also not protectable. And functional features of goods are distinguished from things that identify their source.

In the U.S., trademark registration is optional—though it provides many benefits for the owner. Trademark laws generally apply even to use of unregistered marks. Rights in unregistered marks are referred to as “common law” rights.

There are both federal and state trademark laws in the United States. Federal or state trademark laws, or both, can apply in a given situation. Though usually federal law is the most important to consider; state laws tend to be similar but are geographically limited. Also, most countries have some form of trademark law, though these laws can differ considerably.

Long ago trademark rights were more limited to counterfeiting and palming-off situations. There has since been an expansion of trademark rights and unfair competition law through modern history. Things like “dilution” are are now addressed too. But these expansions have raised concerns, as have even the pre-modern policy foundations. Like a lot of things, judgments about what is fair or unfair competition tend to be subject to political disagreement. Of course, whether competition should be encouraged or discouraged is itself a normative policy position too.

Justification for trademark law on consumer protection grounds sometimes seems like a “Trojan horse”. Consistent with observations about early Twentieth Century U.S. law concerning business activity in general, trademark law seems to persist because of its ability to shield established firms from new-entrant rivals. In this sense, it fosters a polarization between a small number of highly-profitable firms and a large number of lower-profit firms. The ability of some firms to reap exclusive financial rewards that arise only because trademark laws exist has been partly acknowledged by courts. That those aspects can overshadow purported consumer protection benefits is not as frequently acknowledged, however.

Additionally, trademarks are sometimes said to protect “goodwill”. But is this goodwill held by the consumers in whose minds it arises, or is it some kind of customer loyalty built-up and cultivated around a mark that is the property of the business asserting trademark ownership? In other words, is it customers’ goodwill or the producer’s/supplier’s goodwill? U.S. courts have tended to adopt the latter view through the Twentieth Century. But such a policy has a character of colonization or propertization of the beliefs and views of the public. So this is yet another area where the policies behind trademark law are sometimes criticized.

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Tags Policy, Trademarks

Q&A Trademarks

What is the Source of Federal Authority for Trademark Law?

Post author By Austen Zuege

U.S. federal trademark laws are enacted under the “Commerce Clause” of the Constitution. This is different from patent and copyright laws, which are expressly constitutionally authorized. Trademark law doesn’t have any special constitutional authorization. And the Tenth Amendment says that powers not delegated to the federal government by the Constitution are reserved to the States (or to the people). So, in order to be constitutional, federal trademark law has to be tied to certain types of commerce that the federal government has authority to regulate under the Commerce Clause. Lawyers learn about the Commerce Clause in law school. But it isn’t something that comes up in typical history courses in schools.

In brief, the U.S. federal government didn’t do a whole lot before the Civil War. It focused mostly on foreign policy. But during the post-Civil War “reconstruction” period it started to take on new and expanded roles that hadn’t been meaningfully considered before. Reconstruction provoked deep political debates that were not fully settled by the war. President Lincoln’s assassination added to this post-war tumult. Some constitutional amendments were passed but various proposals failed. Supporters of “lost cause of the confederacy” mythology advocated for “states rights” to try to block federal initiatives and undo advancements of the Civil War.

As time went on, court rulings limited federal powers—and even reconstruction era constitutional amendments—culminating in the so-called Lochner Era. Nearly any regulation of business was struck down. But then the Great Depression and the New Deal Era changed political alignments and an expansive view of the Commerce Clause took hold—for a time at least. Courts started to uphold new and unprecedented federal government laws and initiatives.

The federal trademark laws still in effect today were originally set forth in the Lanham Act. Congress passed the Lanham Act in 1946, during the New Deal Era. Aside from trademark provisions, it also addressed things like public funding of child day care (if only for a short period of time). But the Lanham Act still rests on the Commerce Clause, meaning it can only extend to commerce that may lawfully be regulated by Congress. Such constitutional limits to trademarks are not exactly by design. But in the absence of a constitutional amendment, any federal trademark laws must be limited to what the Commerce Clause permits.

Courts have not sustained any constitutional challenges to federal trademark authority under the Lanham Act as a whole, to date, having struck down only isolated aspects. Though courts have offered shifting justifications for aspects of trademark law. And interpretations of the law have altered and expanded its scope in ways that generally reflect post-New Deal political alignments. The Lanham Act has also been amended in various ways by Congress since its original enactment.

Have an invention you would like to patent? Have a brand you would like to register as a trademark? Concerned about infringing someone else’s intellectual property? Is someone else infringing your IP? Need representation in an IP dispute? Austen is a patent attorney / trademark attorney who can help. These and other IP issues are his area of expertise. Contact Austen today to discuss.

Tags History, Trademarks

Q&A Trademarks

What Is Use in Commerce?

Post author By Austen Zuege

Use in commerce in U.S. trademark law boils down to two distinct requirements: (a) bona fide use in (b) federally-regulated commerce. Both must be satisfied to have federal rights in a trademark (or service mark).

Bona Fide Use

The first requirement pertains to what sort of use makes a mark eligible for federal trademark protection. The U.S. Patent & Trademark Office (USPTO) scrutinizes evidence of use by requiring “specimens”. U.S. trademark laws—which were amended in 1988 to be stricter about this point—say there must be “use in commerce”, which is a term given a special legal meaning.

“Use in commerce” means the “bona fide [that is, good faith] use of a mark in the ordinary course of trade and not made merely to reserve a right in a mark.” The way this applies to marks on goods versus services varies somewhat. And what is considered the “ordinary course of trade” will vary by industry. But the main point is that federal trademark rights require a connection to actual real-world use. Token uses, sham uses, or purely internal uses are not bona fide uses. So what sorts of uses are sufficient?

Use in commerce on goods occurs when two conditions are met. First, a mark must be placed on the goods or their containers, or on attached tags or labels, or displays associated with the goods. If the nature of the goods makes those kinds of placements impracticable, then use of the mark on documents associated with the goods or their sale qualify. Second, use in commerce on goods requires that the goods (bearing the mark) be sold or transported in “commerce”.

Use in commerce for services occurs when a mark is used or displayed in the sale or advertising of services and the services are rendered in “commerce”, or the services are rendered in more than one state or in the United States and a foreign country.

Note that these definitions for the first requirement are explicitly tied to the second requirement about federally-regulated “commerce”. But otherwise this first requirement can be summarized by saying that you have to actually be using a given mark directly in connection with meaningful commercial offerings of goods or services.

Federally-Regulated Commerce

The second requirement ensures that trademark rights fall with a type of commerce that can be federally regulated. In other words, federal trademark law is limited to certain types of commerce that the federal government is able to regulate as opposed to individual states (find out about the historical background of that requirement here). So in federal trademark law, “commerce” means only commerce that is interstate, territorial (in or with a U.S. territory), or between the United States and a foreign country or tribe. Activities that occur only within a single state on a localized basis often don’t meet that requirement.

Offering services via the Internet is considered use in “commerce”, because the Internet utilizes interstate communications networks. Services such as restaurant and hotel services are considered to be rendered in “commerce”—though courts have been inconsistent on this point historically. Also, intrastate use of a mark may qualify if of a type that would, taken in the aggregate, have a direct effect on interstate commerce. But goods or services offered only locally, entirely within one state, without a significant effect on interstate commerce, would not qualify for federal trademark protection.

Foreign trademark applicants can obtain a U.S. registration without first establishing use. This gives foreign trademark applicants more leeway than domestic U.S. applicants. This is partly because of international treaties the U.S. federal government has signed. But it is also because the federal government has special authority over foreign commerce. However, even foreign registrants must eventually establish use in commerce in or with the U.S. to maintain a federal registration.

The USPTO does not scrutinize the type of commerce when examining trademark applications. Instead, the USPTO presumes that use of a mark is of a type that is federally regulated unless there happens to be evidence to the contrary. It is the responsibility of the applicant and the applicant’s attorney to determine whether an assertion of use in commerce is supported by the relevant facts. So a failure of a use to be in federally-regulated “commerce” generally only comes up if a registration or application is later challenged on those grounds by someone in an opposition, cancellation, or court proceeding.

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Tags Trademark Prosecution, Trademark Renewal, Trademarks

Q&A Trademarks

What is Likelihood of Confusion?

Post author By Austen Zuege

Overview

Under U.S. federal trademark law, a trademark registration can be refused or trademark infringement found if there is a likelihood of confusion. The “likelihood of confusion” standard covers more than identical uses, intentional copying, counterfeiting, and knock-offs. It is ultimately a question of determining what ordinary consumers understand and what would confuse them. Trademarks (and service marks) are intended to avoid consumer confusion about the source of commercially available goods and services. So these issues go to heart of trademark law.

Likelihood of confusion is a multi-factor analysis. There are a number of different facts that are taken into account in order to draw a legal conclusion about the likelihood an appreciable number of consumers would be confused. Each individual factor can point toward or away from confusion, or be neutral. Different factors can carry different weight in the overall analysis depending on the circumstances.

Keep in mind, however, that the likelihood of confusion analysis is about whether an appreciable number of ordinary consumers is likely to be confused. That a few undiscerning or careless prospective purchasers might occasionally be confused is not enough. There is generally no obligation under trademark laws to protect negligent, indifferent, inattentive, or careless purchasers from confusion or to make the market foolproof. The owner of a trademark is not entitled to a guarantee against confusion in the minds of careless and indifferent buyers. Even evidence of actual confusion among a few customers may be de minimis and not conclusive of likelihood of confusion.

A reliable consumer opinion survey is highly informative about likelihood of confusion. Actually, it is usually the best kind of evidence. But surveys are complicated and costly. The practical difficulty is to make a judgment about the likelihood of confusion without having survey results available.

A useful exercise is to try to envision a hypothetical consumer survey. This can help you be more objective and avoid looking at likelihood of confusion in too self-serving a way. Splitting hairs about insignificant differences is a common mistake. Thinking that established rights extend to any and all goods and services (that is, thinking that similar marks can never coexist) is also a common mistake. But turning to the idea of a hypothetical survey of ordinary consumers might help avoid those biases. Because, in the end, the likelihood of confusion question is about ordinary consumers’ perspectives not your own.

The specific list of factors considered is phrased in different ways by various courts and the U.S. Patent & Trademark Office (USPTO)—as discussed further below. But under the any formulation of likelihood of confusion factors, the overall analysis is similar. The marks do not have to be identical. Similarly, the respective goods/services do not have to be identical. It is sufficient that they are related in such a manner that an appreciable number of ordinary purchasers are likely to assume—mistakenly—that they originate from a common source.

Registrations at the USPTO

In the USPTO, six so-called DuPont factors are used for the likelihood of confusion analysis. These DuPont factors can be used to refuse registration because there is a prior conflicting registration. They can also be used in deciding oppositions to applications and attempts to cancel an existing registration based on prior use of a mark. Two DuPont factors are always considered:

similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation, and commercial impression
relatedness of the goods or services as described in the application and prior application(s)/registration(s)

Four additional DuPont factors might also be considered, though there may not be any evidence available to allow consideration of these other factors:

similarity or dissimilarity of established, likely-to-continue trade channels (that is, actual sales methods used)
conditions under which and buyers to whom sales are made (for instance, “impulse” vs. careful, sophisticated purchasing)
number and nature of similar marks in use on similar goods or services
existence of a valid consent agreement between the applicant and the owner of the previously registered mark

The six factors listed above are actually a condensed list of the ones that are most commonly relevant in the examination of new applications. The DuPont case actually set forth a total of thirteen factors. Though the other factors omitted from the condensed list above rarely come up except for certain contentious cancellation or opposition proceedings where an opposing party is involved, and even then may not be as significant as other factors.

The weight given to any of these individual factors can vary. There is no precise mathematical formula for how they are applied to reach a conclusion. Though the comparison always involves the specific mark and the specific goods or services identified in the application or registration in question. Actual uses of the mark in the marketplace that are not identified in the application or registration at hand are generally irrelevant—the USPTO only decides what can or cannot be registered. Questions about infringement are dealt with by courts instead.

The USPTO provides some useful hypothetical examples of likelihood of confusion comparisons.

Disputes in Court

Courts decide infringement allegations as well as issues about the validity of trademark rights. But there are slightly different formulations of the likelihood of confusion factors applied in courts from different parts of the country. So the applicable factors will depend on which “circuit” handles a given case.

For instance, in the 8th Circuit—whose jurisdiction covers the states of Minnesota, Iowa, Missouri, Arkansas, Nebraska, South Dakota, and North Dakota—six so-called SquirtCo factors are used to assess likelihood of confusion:

the strength of the owner’s mark
the similarity between the owner’s mark and the alleged infringer’s mark, based on an examination of the marks as a whole
competitive proximity (the degree to which the products compete with each other, though infringement may be found in the absence of direct competition)
the alleged infringer’s intent to “pass off” its goods as those of the trademark owner raises an inference of likelihood of confusion, but intent is not an element of a claim for trademark infringement
incidents of actual confusion (if any; not required to establish likelihood of confusion; requires more than isolated incidents of inattentiveness; its presence is also not conclusive of likelihood of confusion)
the type of product, its costs and conditions of purchase

The weight given to any of the factors for likelihood of confusion can vary. And there is no mathematical formula for applying them. Depending on the evidence available, some factors may be more important than others.

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Tags Litigation, Trademark Infringement, Trademark Prosecution, Trademarks