Author: Eric Waltmire

Eric Waltmire is a registered patent attorney at the Erickson Law Group, PC. He can be contacted at blog@waltmire.com.
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Trademarks Sound Similar: Responding to a Trademark Cease and Desist

TrademarkSimilar_CapitalCityBank_CitibankCapital City Bank filed a trademark application on its name “Capital City Bank” for banking services without a logo or special form claim. Citigroup filed an opposition based on its Citibank trademarks. Citibank presented evidence that the Citibank brand was one of the most valuable brands in the world. But, Citigroup lost.

When there was a clear over lap of “City Bank” and “CitiBank” between the marks, how could one of the most valuable brands loose?

The problem was that the court concluded that the marks were not similar for trademark infringement purposes.

Not similar? Not similar enough in Citigroup Inc. v. Capital City Bank Group, Inc., 637 F.3d 1344 (Fed. Cir. 2011).

Sometimes Slight Spelling Differences Matter, Many Times They Don’t

Many times slight spelling differences between marks do not avoid a conflict. However, here many third parties used “city” and “bank” for financial services. In another case, a court noted evidence of 20 other banks that used City and Bank. So, the Citigroup’s right to stop the use of phonically equivalent words was cut off by preexisting third party uses.

Also, Citigroup admitted in a Ohio trademark filing that “because `City’ is a commonly used prefix for financial services corporations, Citigroup and its many subdivisions that bear the famous CITI prefix have coexisted with many`City’ entities for years in virtually every jurisdiction.”

Not a good admission for Citigroup. You can’t, on one hand, say that the use of “city bank” in “Capital City Bank” is confusing while at the same time saying that you have long coexisted with other using “city” for financial services business.

Therefore in this case the “i” vs. the “y” spelling made a difference. Yet many times it will not. Like in the case where the refusal to register XCEED was upheld based on the phonically equivalent preexisting registered mark X-SEED used on the same goods. In re Viterra Inc., 671 F.3d 1358 (Fed. Cir. 2012).

Back to the Citigroup case, the phrase “Capital Bank” was found to be the dominate part of Capital City Bank’s mark given the weak nature of Citigroup’s mark.

Defending Against A Trademark Cease and Desist Letter

What can we learn from the Citigroup case? We learn that sometimes marks that at first glance appear to be similar, are not similar for trademark infringement purposes. If many third parties had not been using “city bank” for financial services, Citigroup might have prevailed.

When the overlapping terms between the marks are commonly used in the industry, the marks might not be found to be similar for trademark infringement purposes. When marks are considered dissimilar, you have a better chance of defending against a trademark infringement claim.

See other posts in this How to Respond to a Trademark Cease and Desist series:

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The Trademark is Descriptive: How to Respond to a Trademark Cease and Desist

Descriptive_Weak_TrademarkFrederic Towers began using the term “The Professional Portfolio System” in November 1982 for a computer-based portfolio valuation system.

Advent Software obtained a registration for the term “The Professional Portfolio” for computer programs used in the field of financial management. Advent first used the term in December 1983, more than one year after Towers’ first use.

Towers petitioned to cancel Advent’s trademark based on the similarities of the marks and the similarities of the goods, but lost.

Usually rights to use a mark go to the person or entity that first started using the mark in commerce. Here, Towers was first.

So why did he lose?

Because Towers’ mark was descriptive and therefore weak. This is the result in the case of Towers v. Advent Software, Inc., 913 F.2d 942 (Fed. Cir. 1990).

Descriptive Marks are Not Strong Initially

Not all trademarks are created with equal strength.

Descriptive marks are weak, at least initially. A mark is merely descriptive if it describes an ingredient, quality, characteristic, function, feature, purpose or use of the corresponding goods or services.

The court found that Tower’s mark was essentially the generic term “portfolio valuation system” with the addition of the word “professional.” The term “portfolio system” described what the Tower’s software was used for, e.g. to manage a portfolio. The absence of the term “valuation” from the mark did not prevent Tower’s mark from being descriptive.

And the word “professional” conveyed information immediately to the purchaser that the product possesses professional capabilities. Therefore, the mark described directly characteristics and features of the product.

The court found that Tower’s did not have superior rights in the mark even though Towers’ used his mark first.

Over time a trademark owner might be able to generate trademark rights in a descriptive mark, if the mark gains recognition (i.e. acquired distinctiveness or secondary meaning) with the purchasing public. But Towers did not show this.

Responding to a Cease and Desist: Your Mark Is Descriptive

Therefore, if a plaintiff demands you stop using your mark, and that plaintiff started using the mark before you, you might be able to defend by asserting that the plaintiff’s mark is descriptive and therefore weak.

Evaluating whether the mark is descriptive involves understanding the goods or services that the mark is used on, and comparing the elements of the mark to those goods or services to see if the elements of the mark describe an ingredient, quality, characteristic, function, feature, purpose or use of the corresponding goods or services.

It also involves determining how long the plaintiff has used its mark and whether the mark has gained recognition with the purchasing public as a source of the plaintiff’s goods/services.

See other posts in this How to Respond to a Trademark Cease and Desist series:

Photo credit to Elliott Brown under this creative commons license. The photo was modified from the original to crop in on “weak bridge.”

 

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The Trademark is Weak: How to Respond to Trademark Cease and Desist

Domino_v_DominosPizzaDomino is a trademark for and a brand of sugar. Sugar is a type of food. Domino’s Pizza is a trademark for a pizza restaurant chain. Pizza is a food.

Amstar, which owned the Domino sugar brand at the time, sued Domino’s Pizza alleging trademark infringement over the use of the term Dominos. But Amstar lost.

Why? Similarity of the marks and similarity of the goods is usually a good start to making a strong case of trademark infringement. Here, there was a similarity between the marks, e.g. “Domino.” And, there was arguably similarity between the goods, i.e. food.

Yet, Amster lost because, in part, the Domino mark was weak in relation to food generally.

Many Third-Party Uses for Similar Goods: Weak Trademark Rights

Why was the “Domino” mark weak? It was weak because many other companies used Domino on other types of food.

I previously discuss factors to consider for selecting a strong trademark. Another factor in trademark strength is whether many others are using the same or similar mark in the marketplace for the same or similar goods or services. When many third parties are using the mark on similar goods, that mark will be considered a weak mark. Weak marks are provided a narrow scope of protection.

In the case of Amstar Corp. v. Domino’s Pizza, Inc., 615 F.2d 252, 259 (5th Cir. 1980), Domino’s Pizza showed that there were 72 other trademark registrations of the term “Domino” at the U.S. Patent and Trademark Office. Some of those registrations involved foods, such as canned fruits, cheese, wheat flour, canned sardines, and candy. Domino’s Pizza also introduced evidence of 15 uses of marks that included “Dominos” in the marketplace by other companies, including uses related to food and grocery stores.

The court noted that “The greater the number of identical or more or less similar trade-marks already in use on different kinds of goods, the less is the likelihood of confusion….” The court also stated, “The third-party uses and registrations discussed above merely limit the protection to be accorded plaintiff’s mark outside the uses [sugar] to which plaintiff has already put its mark.”

Therefore Amstar’s trademark rights to Domino did not extend to any food but was confined to sugars. The court concluded limited strength and protection outside of its sugar goods was an important factor in determining that Domino’s Pizza’s use of the term “Domino” did not constitute trademark infringement.

Responding to Trademark Cease and Desist: Search for Third Party Uses

Therefore, when you are on the receiving side of a trademark cease and desist letter, you should be searching to see if there are other similar registered marks used for similar goods. You can do that by searching the USPTO trademark database. You should also search for third party uses in the marketplace of the same or similar marks for the same or similar goods. You can do that by any method of searching the market, e.g. search the internet.

The more third party uses the better. But, you don’t need to find 72 registrations, even a handful can be effective depending on the circumstance.

Finding that multiple third parties have registrations or uses in the marketplace for the same or similar mark with the same or similar goods, may be a basis to assert that the plaintiff’s trademark rights are weak. If the trademark rights are weak, it may be that the differences in the goods/services are sufficient to conclude there is no trademark infringement, as was the case for Domino’s Pizza.

See the prior posts in this series:

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Responding to Trademark Cease & Desist: Priority – The I Was First Defense

TrademarkPriorityDaniel Group obtained a federal registration on service mark “ServicePerformance.” But Daniel Group failed when it demanded and then sued claiming trademark infringement to stop Service Performance Group from using that name for similar services. Why did it fail?

Because the Daniel Group was not first to use the words “Service Performance” in business for its services. Service Performance Group began using its name 9 years before Daniel Group received its federal trademark registration.

Daniel Group did not have “priority of use.” So its trademark claim failed even though it had a federal registration and Service Performance Group did not (the space vs. no space between Service and Performance had no impact in this case).

A federal trademark registration is not bullet proof against prior users. This is the case of Daniel Group v. Serv. Performance Group, Inc., 753 F. Supp. 2d 541 (E.D. NC 2010). The court there stated the rule that it is not registration of the mark, but the “actually use of the designation as a mark that creates rights….Neither application for, nor registration of, a mark at the federal level wipes out the prior non registered, common law rights of others.” McCarthy on Trademarks 16:1 (citing Johnny Blastoff, Inc. v. Los Angeles Rams Football Co., 188 F.3d 427 (7th Cir. 1999)).

The “I Was First” Defense

If you receive a cease and desist letter claiming trademark infringement, one basis to defend is that you used the mark before the plaintiff used the mark.

Priority of use provides that the party that first starts using the mark usually wins. Priority can be established by actually use or by filing an intent-to-use trademark application (constructive use).

So if you started using the mark before the plaintiff, then the plaintiff may not have the right to stop you from continuing to use the mark in your geographic area.

However, if you have not applied to register your mark and the plaintiff has, the plaintiff may not stop you from using the mark in your geographic area, but your right to expand sales geographically may be limited.

Investigating Priority

How do you know what date Plaintiffs cease and desist letter may state the date that the Plaintiff first started using the mark? If the Plaintiff has a federal registration, the federal registration will provide a first use date. If the plaintiff’s federal registration resulted from an intent-to-use application you will look to see the filing date of the application as the constructive first use date.

You can also look for general evidence of use by date. For example, you can search the Internet Archive to see if the Plaintiff’s website on a certain date shows a use of the trademark. If the Plaintiff has a Facebook page, you can view the Facebook page to find posts having the mark and look to the date of the post (but the user can modify the date of a post).

The Plaintiff’s lack of priority of use, or “I started using the mark before you,” is one way to defend against claims of trademark infringement.

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Product Licensing Performance Guarantee: Make Sure Your License Has One

GuaranteeYou develop a useful product. Let’s say its a needle for performing biopsies. You file a patent application on your invention.

Then you approach a medical device company and enter into a license agreement where the company receives exclusive rights in the invention in exchange for a royalty on each product sold.

Years pass and the company still has not fully developed and marketed the invention. You sue the company for not doing enough to get your product to market. But you lose because the license agreement contained no performance guarantees requiring the company to meet minimum sales or use best efforts to make, market, and sell the product.

This is similar to what happened in the case of Beraha v. Baxter Health Care Corporation, 956 F. 2d 1436 (7th Cir. 1992).

Don’t Rely on Oral Assurance as a Substitute for a Performance Guarantee

The Beraha case demonstrates that one of the most important terms in licensing your invention or product is a performance guarantee. A performance guarantee protects you if the other party (the “licensee”) buries your invention or does not do enough to market or sell it.

In the Beraha case, Beraha originally proposed a license agreement that contained a guaranteed minimum annual royalty of $50,000 per year after the first year. However, Baxter responded with a proposal that eliminated the guaranteed minimum annual royalty and increased the royalty advance to offset the removal of the minimum guarantee.

At first Beraha refused to sign the revised proposal from Baxter because it did not contain a minimum guarantee or a best efforts clause. However, during a phone call with a Baxter Vice President and without committing to any specific level of effort, the VP said he would send Beraha a letter . On the basis of the assurance that a letter would be coming, Beraha signed the exclusive license with Baxter, which contained no performance  guarantees.

The letter Beraha later received said “…Although we work in an environment that is always subject to changing conditions, you can be assured that our present intent is to do our very best to make this project a success…” However, this letter had no effect on the license agreement that was already signed. This is due in part because the license had a merger clause. Most license agreements have a merger clause, which basically says that “no matter what I said before, the only terms that matter are the terms written in this license agreement.”

The court found that Beraha could not inject a best efforts clause into the agreement when it did not provide one and when the minimum sales provision was removed during negotiation.

The court left open a possibility that Beraha could recover if it could show that Baxter breached its obligation to act in good faith and fair dealing. But, there’s no surety that Beraha could recover under that theory because the court said, “the jury could find that Baxter did not breach the contract even if it exerted no efforts at all to develop the Beraha needle if Baxter can show that its decision to exert no effort was reasonable under the circumstances.”

You do not want this to happen to you. Therefore, your license agreements should have a performance guarantee. Performance guarantees come in several forms.

Minimum Sales Requirement

The best approach is to provide a clause that requires the other party (the licensee) to hit minimum sales in a defined period of time. For example, as in the first proposed agreement in the Beraha case, the minimum can be in the form of a guaranteed minimum annual royalty payment. This requires that no matter what the sales are during a given period, the other party must pay at least the minimum during that period. If the guarantee is $50,000 per year, then you are guaranteed at least that amount even if the unit sale royalties do not reach that amount.

Also you can provide the guarantee in units of product. So you can say that the annual minimum unit sales is 50,000 units. If the royalty rate is three percent of the net sale price, and you know the net sale price, then you can calculate the annual minimum in dollars.

Consequences if Minimums are not Met

What happens if the minimums are not met?

If the license provides that you are paid the minimum no matter what the sales are maybe you don’t care if target sales are not met. However, if you want to see your product succeed in the marketplace you might want to provide a provision that cuts off some or all of the licensee’s rights if the minimums are not met.

One example is a license that provides for termination if the minimums are not met for one or more periods. When the license terminates you can approach other companies to make and/or sell your product. Another option, is that an exclusive license can be converted to a non-exclusive license if the minimums are not met. This means that the first licensee can continue to mark and/ sell your product, but that you can go to other companies and have them make or sell your product as well. When the agreement is non-exclusive you can cut deals with multiple companies to sell your product.

Best Efforts

One alternative to defining the minimum dollars or units per period, is a license that provides this: “the licensee agrees to use its best commercial efforts to make, market and sell the product.” Sometimes “reasonable” is substituted for “best”. Regardless, see how wishy-washy that phrase is? What does “best/reasonable commercial efforts” mean? How will it be measured? A best efforts clause is an invitation for a dispute (e.g. a lawsuit) because it is uncertain what best commercial efforts means.

It is better to specify what activities are desired, such as minimum sales, a list of marketing activities, and/or other requirements.

Do not rely on oral assurances that the licensee will use their best efforts to make, market, and sell your invention or product. Put concrete numbers and activity requirements in a product or invention license.

Photo credit to John Walker under this creative commons license. The image above is cropped in from the original photo here.

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Statement of Use: Proving Use In an Intent-to-Use Trademark Application

Actual use of your trademark in commerce is a requirement to receive a federal trademark registration. When you file a section 1(a) use-based  application, you must provide a first use in commerce date and a specimen proving your use when the application is filed.

If you file your trademark application as a section 1(b) intent-to-use application, you do not provide the office with a first use date or a specimen because you have not started using your mark in commerce. However, the USPTO will not issue a registration until you provide the office with (1) the date your mark was first used in commerce for the good and/or services specified in the application and (2) a specimen proving your use. TMEP 902. You provide this information in a “Statement of Use.”

A Statement of Use is filed generally after the USPTO issues a notice of allowance indicating that your registration is ready to be granted. A notice of allowance is issued after the application is published for opposition and not successfully opposed. TMEP 1106.1.

A statement of use may be filed within six months of the notice of allowance. A certain number of additional six-month extensions of time can be obtained if additional time is necessary to use the mark for the goods/services and there is an ongoing intent to use the mark for the goods/services claimed in the application.

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Gov’t Says Prove It: Trademark Application Specimens

Proof_SpecimenProve it! The specimen requirement in a federal trademark application is the government’s way of saying “you said you are using the mark, now prove it.” The USPTO requires that you submit a specimen showing the mark as it is used on or with the goods or services at some point in the trademark application process. The specimen is simply an example of how the mark is used.

The specimen requirements for goods are different from the specimen requirements for services.

Goods

For goods, the specimen must show the mark on (1) the goods, (2) containers or the displays associated with the goods, or (3) the tags or labels affixed to the goods. Trademark Manual of Examining Procedure (TMEP) 904.03. Containers associated with the goods can be the retail packaging or shipping packaging showing the mark. Displays associated with the goods can include trade show displays or retail displays or the like. One way to obtain is specimen is to take a photo of the mark used in the manner just described.

If due to the nature of the goods placement in the manner just described is impracticable, then the specimen showing the mark on documents associated with the goods or their sale. One example of this is the sale of computer programs that are sold via electronic download. In that case, an acceptable specimen might be a printout of a display screen that creates an association between the mark and software and provides sufficient information to enable the user to download or purchase the software from the webpage having the mark. TMEP 904.03(i).

Advertising material is not generally acceptable as a specimen for goods. TMEP 904.04(b). So showing the mark used on a website having the goods, is not enough, unless in some cases, the website provides a manner were the user can purchase the goods via the webpage and the mark is associated with the goods on that webpage. TMEP 904.03(i).

Services

For services, advertising material that shows the mark and advertises the claimed services is an acceptable specimen. TMEP 1301.04. It is important that the specimen show the services listed in the trademark application. If all of the services listed in the application are not shown in one specimen, then multiple specimens can be used to show all the services. Examples of advertising include webpages, brochures, print advertising, etc. It is also acceptable to use materials showing the mark used or displayed as a service mark in the sale of the services, which includes use of the mark in the course of rendering or performing the services.

Specimen Agreeing with Mark as Filed

The specimen must show the mark as claimed in the mark section of the trademark application. If the application provides a special form mark, then the specimen must show the mark in substantially the same manner as provided in the image uploaded in special form mark section of the application. TMEP 807.12.

When is a Specimen Required?

A specimen is required at the time of filing for a section 1(a) use-based application. The specimen is required later at the time of filing a statement of use after the trademark application is allowed for a section 1(b) intent to use application.

This make sense because in a use-application you are saying that you are using the mark at the time the application is filed. Therefore you should be able to provide proof of use (e.g. the specimen) at the time of filing.

But for a section 1(b) intent to use application, you are saying that you are not using the mark now at the time of filing but intend to use it later. Therefore, when you later start using it, that is the time the government requires that you provide proof.

Photo credit to Frank Hebbert under this creative commons license. The photo shown here is changed to crop in tighter on “proof” than is provided in the original photo.

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Henry Ford: The Assembly Line, Entrepreneurship, and Bigotry

HenryFord_ThePeoplesTycoonNo successful boy ever saved any money . . . They spent it as fast as they could for things to improve themselves.
-Henry Ford

Henry Ford revolutionized manufacturing with the introduction of the assembly line. While many companies were selling expensive cars for the rich. Ford’s goal was to build a light weight affordable car for regular working people.

Since the assembly line might be the single most important invention in industrial history, I wanted to learn more about the man behind the company that put it to use and the circumstances around its invention. Steven Watts’ book The People’s Tycoon: Henry Ford and the American Century provides an interesting biography of Ford and history of his companies. Unfortunately, as explained below, the exact circumstances of the invention of the assembly line are not clear. But first….

Don’t be a Bigot

Ford revolutionized manufacturing not just in the automobile industry but across industries with the invention of the assembly line. I started reading this book with a desire to learn about Ford’s life and to write about the interesting entrepreneurship and business issues of Ford’s life.

But Ford espoused antisemitic bigotry and ignorance. As I wrote about the entrepreneurship and business issues, I kept thinking about how Ford’s antisemitism overshadowed all of his successes.

Watts’ has a chapter in the book entitled “Bigot,” which describes Ford’s anti-semitism. Among other instances, Ford owned a newspaper, the Independent, through which he waged a campaign against Jews. This eventually resulted in a libel suit being filed by Aaron Sapiro against Ford and the Independent in 1925. Rather an testify at trial, Ford shutdown the newspaper, publicly apologized, and paid a cash settlement.

But he continued to hold and privately express anti-Semitic views. When Ford was privately asked if the idle newspaper presses from the Independent should be sold, he is reported to have said, “I made a deal with these Jews and they haven’t lived up to their part of the agreement. I might have to go back back after the Jews again.”

Watts’ says, “…[Ford’s] mindless bigotry against Jews indelibly stained his reputation and raised questions about his moral and ideological character that would linger for the rest of his life.”

A stain that lingers after Ford is long dead. Rather than posting nothing about Ford, I think it is appropriate to lead off this post noting Ford’s bigotry. A bigotry that overshadows his business successes.

Invest in Yourself – The Gospel of Spending

Twenty years after Ford launched the car that made him famous, Ford started a controversy when he insisted that hard work was a good idea but thrift was fruitless. When asked about how to become successful in America, Ford said:

“No successful boy ever saved any money . . . They spent it as fast as they could for things to improve themselves.”

This was in contrast to the traditional advice at the time to work hard and save your money. Some denounced Ford’s “gospel of spending.” But according to Watt, the dissenters were overwhelmed by publications that supported Ford’s advice on spending, with one publication saying “He who nurses the nickels misses the knockouts.”

Ford followed his own advice while developing his first prototype automobile and while building his businesses. An employee of a tool company, said of Ford:

[he] would be in our place two or three times a week buying something that had to do with something he was making… Mr. Ford loved anything in the way of tools, any kind whatsoever. Anything new that came out in a tool, he wanted to see it…

As Ford was making his first automobile, the Quadricycle, his wife, Clara, was concerned about his purchases:

Clara Ford became concerned about the constant purchasing of materials. As Henry’s sister Margaret recalled, Clara ‘wondered many times if she would live to see the bank account restored.’

The key here is not just spending. But, the spending must a reasonable investment in yourself or your project.

Starting It On the Side

Countless inventors and company founders started their companies and invented their inventions while working a day job and then working on the side. Ford is no exception. Ford developed his first automobile while working as engineer at the Edison Illuminating Company. Ford eventually became Chief Engineer, which meant he was on call all day, but he had flexibility and free time to “tinker, to visit machines shops, to trade tips and shoptalk with mechanics, and to experiment with improving his little gasoline engine.” He also took a job teaching metal working class at the YMCA, which gave him access to the school shop to on work metal parts for this automobile. Ford said:

Every night and all of every Saturday night I worked on the new motor. I cannot say that it was hard work. No work with interest is ever hard.

Bouncing Back from Failure

Ford failed many times. But kept going. Ford spent $86,000 (more than $2 million in today’s dollars) developing and manufacturing a car at his first investor backed company, Henry Ford Company. But he failed to produce a working production vehicle. Many say this was due to the fact that he continually changed the design of the automobile and never stopped to commit to making a particular design. Only three months after forming the Henry Ford Company, Ford either resigned or was fired. That company was renamed Cadillac Automobile Company.

Ford resented control by his investors in the Henry Ford Company. Ford said “They were to stay by me to have the experimental work done…From here in, my shop is always going to be my shop…I’m not going to have a lot of rich people telling me what to do.” After gaining fame as a race car builder and driver, Ford would make another attempt at automobile manufacturing in the Ford Motor Company.

Knowing the Target Market

Ford famously wanted to build an inexpensive car for the masses. However, Alex Malcolmson, an investor in Ford Motor Company, wanted to make an expensive car for the wealthy with a higher profit margin. Many other car companies were making expensive cars.

For a time, Ford did reluctantly produced an expensive car. For example, before making the Model T, Ford made the Model N, which weighed 1,050 pounds and sold for $600, the model K weighed some eighteen hundred pounds and cost $2,800. Eventually Malcolmson was forced out of the Ford Motor Company and Ford was left to pursue an inexpensive car.

The implementation of the assembly line allowed Ford to sell the Model T for $500. Ford said, “There are a lot more poor people than wealthy people. We’ll just build one car for the poor people.”

Invention of the Assembly Line

The adoption of the assembly line may be the most revolutionary change in industrial history. The idea is that the work should be moved to the worker instead of the worker moving to the work.

Before the adoption of the assembly line the best time for assembling a car chassis at the Ford plant was 12 hours and 28 minutes. By 1914, the assembly line enable this to be accomplished in 1 hour and 33 minutes.

The exact details surrounding the invention and adoption of the assembly line are muddy and uncertain, at least according to the account in Watts book. There conflicting stories about the origins of the assembly line. Watts says:

Henry Ford’s own version of things changed. At one point, he declared that the inspiration came from observing the overhead trolley that Chicago packers used in dressing beef at the slaughterhouses. Another time, he claimed that he got the idea from observing a watch factory where parts sat on a moving belt and assemblers took them off as required.

Others offered different stories. William C. Klann, foreman of motor assembly at the Highland Park facility, asserted that the conveyors used to transport sand in the factory foundry inspired the idea of using a similar method in the assembly process.

Charles Sorensen, in a memoir written many years later, averred that as early as 1908 he and several subordinates had arranged stock parts sequentially on the floor of the old Piquette Avenue factory, put a tow rope onto a car chassis with wheels, and pulled it from pile to pile, attaching appropriate components one after another. “Over several weeks we developed it as well as we could,” Sorensen wrote. “Then we laid it away and put it on the shelf until we were ready to use it.”

Regarding the first use of the assembly line at Ford’s plant, Watts provides:

Evidence suggests that the first actual use of the assembly line came on April 1,1913, when workers in the flywheel-magneto department stood alongside a waist-high table with a smooth metal surface and were instructed by foremen to install one part and then slide the component along to the next worker, who would add something else.

This soon led to the idea of pulling the evolving component along at a set rate with a chain, a move that steadied the process by speeding up the slow workers and slowing down the speedy ones. By tweaking this system in various small ways over the next few months, Ford supervisors were able to cut the man-minutes required for assembling the flywheel magneto from twenty to five.

This quadrupling of productivity caught the attention of nearly all Ford production engineers, and they began to develop the technique in various areas.

The creation of the assembly line at Ford’s factory revolutionized manufacturing. However, Ford’s bigotry leaves a dark stain the part he played in this innovation.

 

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What does “Use in Commerce” mean in a Trademark Application?

UseInCommerceTrainWhat if your service business has a location only in one state? What if your business sells goods only in one state? Do such business have the opportunity to obtain a federal trademark application?

The owner of a barbershop attempted to register the name of the barbershop “Shear Perfection,” but the Trademark Trial and Appeals Board refused to register the mark. The Board said that the barbershop was a purely local business and the applicant did not show that it provided services “in commerce.” In re Conti, 220 USPQ 745 (TTAB 1983).

There is a limitation on the federal government’s power to register trademarks based on the Constitution, which can impact the contents of a trademark application. In order to determine the first use in commerce date for a trademark application, it needs to be determined whether the use is “in commerce.” The “in commerce” requirement can be a difficult requirement to apply correctly.

The “in commerce” requirement exist because the source of the federal government’s power to register trademarks comes from the Commerce Clause of the U.S. Constitution. The Commerce Clause in Article I, section 8 of the Constitution, provides “Congress shall have the power … To regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”

Many trademark resources don’t explain, or adequately explain, this “in commerce” requirement. The reason for this is that it is complicated and difficult to explain the boundaries of this constitutional requirement. So they just gloss over it. I won’t do that. I’ll attempt to explain it here. But, as I said, the “in commerce” requirement can be difficult to apply. In some cases it is easy and in some cases it is hard. If this is your first trademark application, or if you have not handled many trademark cases, or if you haven’t repeatedly referenced the leading trademark treatise, McCarthy on Trademarks, and the TMEP over the years, you might get it wrong. You might get it wrong in a manner that will never matter, or you might get it wrong in a manner that will result in your trademark application being refused or your trademark registration being canceled.

How could getting it wrong not matter? When the actual first use date is after the first used date claimed in the application (i.e. the claimed date is too early) but before the date of the filing of the application (for a section 1(a) use application) or filing of a statement of use (for a section 2(a) intent-to-use application), some courts and the TTAB have found the challenger failed to show the falsity was fraudulent. Health Net v. Mid-America Health Network, Inc., No. 93,163, 2000 TTAB LEXIS 40 (TTAB 2000), Travelodge Corp. v. Siragusa, 228 F. Supp. 238 (N.D. Ala. 1964); See McCarthy § 19:52. Therefore the challenge failed. Nonetheless, you don’t want to chance it. You don’t want to give any potential opponent a bone to chew on. You want to get the date right.

If the actual first used date is after the application is filed (for a section 1(a) use application) or after the filing of a statement of use (for a section 1(b) intent-to-use application), then the resulting registration can be lost.

Before continuing with this post, first read the prior post on the uses that qualify as a “first use” in commerce.

In Commerce

What does “in commerce” mean? Section 45 of the Trademark Act (Lanham Act), 15 U.S.C. §1127, defines “commerce” as “all commerce which may lawfully be regulated by Congress.” Section 901.03 of the Trademark Manual of Examining Procedure (TMEP) discusses the commerce that may be lawfully regulated by congress. Three types of commerce under the definition: (1) interstate, (2) territorial, and (3) between the US and a foreign country.

Territorial commerce is commerce within a territory of the United States (e.g., Guam, Puerto Rico, American Samoa, or the United States Virgin Islands) or between the United States and a territory of the United States.

Whether a use is a use in interstate commerce can be difficult to determine. As explained in my prior post, a mark is used in commerce with goods when:

  • (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce.

A mark is used in commerce with services when:

  • the 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 and the person rendering the services is engaged in commerce in connection with the services.

Interstate Use: Out-of-State Sale or Shipment

Looking at the “in commerce” portion of that requirement, the easiest and clearest case of a use in interstate commerce is a sale or shipment of the goods from one state to a customer in another state. This is a use in commerce because the goods have been sold or transported between states and Congress has the power to regulate commerce between states. Similarly, in the service context, the rendering of services from one state to a consumer in another state should be a use in commerce because the services are being rendered between states.

Intrastate Use (In-State): Directly Affecting Commerce

A purely intrastate (within one state) use does not qualify as a use in commerce. However, these purely intrastate situations are probably rare. Congressional power to regulate commerce has been interpreted broadly. The trademark rules provide “if intrastate use directly affects a type of commerce that Congress may regulate, this constitutes use in commerce within the meaning of [the Trademark] act.” TMEP 901.03. Here are some examples of in-state uses that qualified as a use in commerce:

Goods
The McCarthy trademark treatise, by J. Thomas McCarthy, provides regarding the scope of activities that affect commerce so as to qualify as a use in commerce: “If Congress has the power to control racial discrimination at local establishments [under the Civil Rights Act] that (1) serve interstate travelers or (2) sell products which come from out of state [which Congress does], then Congress has equal power to control and register marks used to identify the goods sold buy such establishments.” McCarthy on Trademarks § 19:123 (2014). Further, McCarthy notes that (1) Congress sought to give trademarks the greatest protection that can be given to them, and (2) that the U.S Supreme Court said the interstate commerce coverage of the Lanham Act has a “sweeping reach.” Id.

McCarthy concludes, “there appears to be no statutory or Constitutional barrier to holding that local sales are made ‘in commerce’ for trademark registration purposes if the sales are either made to interstate travelers or the sale involves purchase of parts, materials, or products from out of state.” Id.  This is McCarthy’s opinion. But a court and the Trademark Office are not required to agree with McCarthy’s opinion. Nonetheless, McCarthy’s position appears reasonable in light of the caselaw.

Services
The Larry Harmon Pictures Corp. case noted above held that the use in commerce requirement is satisfied by the service of out-of-state customers in a single-location restaurant.

In one Supreme Court case, the court found that the Commerce Clause permitted Congress to regulate (under the Civil Rights Act) a local restaurant that was not frequented by interstate travelers, where the restaurant received about $70,000 of food from out of state. In another case, the Court found that the activities of a private recreational club affected commerce merely by the rental of supplies from out of state, playing of photograph records from out of state, and servicing an unknown number of out-of-state customers.

McCarthy concludes that “If Congress has the power to control racial discrimination at local establishments which either (1) service interstate travelers or (2) use products, a substantial portion of which move in interstate commerce, then Congress has equal power to control and register marks used to identify the services rendered by such establishments.” McCarthy on Trademarks § 19:105 (2014). Again, this is McCarthy’s opinion and it appears reasonable.

When there’s no advertising out-of-state and no showing of out-of-state clients, it may be difficult to show a use in commerce for services. The In re Conti barbershop case, discussed at the beginning of this post, is an example where the applicant did not show out-of-state advertising and did not show out-of state clients.

It is possible that the outcome of the Conti case might have been different if the applicant showed some out-of-state advertising. In a different case, the Board found that a billiard hall was rendering services in commerce because, while it was operating only in one state, it advertised out-of-state in New York. United States Shoe Corp. v J. Riggs West Inc, 221 U.S.P.Q. 1020 (TTAB 1984).

Conclusion

If you are not making sales or shipments, or rendering services out-of-state, then you need to look closely at your in-state sales or services to be sure that they directly affect commerce.

Photo credit to Roy Luck under this creative commons license.

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When a First Use is Not a First Use in Commerce for a Trademark Application

First Use In Commerce USPTO TrademarkThe date that you first used your trademark could be, but probably is not, the correct date to use as the first use in commerce date in a federal trademark application. Why? Because in many cases the first use of the trademark was on a website or marketing material before an actual sale or shipment of the goods or rendering of the service.

First Use in Commerce

For each class of goods or services in a federal trademark, you must declare when you first used the mark in commerce for those goods or services. Use in commerce has a specific meaning under the law. It does not mean simply using the mark. The use must also be combined with a sale of goods or a rendering of the services.

Use with Goods

For goods, the law provides a mark is used in commerce when (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce. Therefore the mark must be used on or adjacent the goods as just described and the goods must be sold or transported in commerce.

For example, if you are selling food goods, it is not enough that the food goods were advertised. They must also be sold (or transported in commerce). If you first advertised the food goods with a flyer or on a website on January 1 and then made a first sale on January 5 of the food goods having the mark to an out-of-state customer, then the first use date for the application would be January 5. On January 5 the mark was used on the goods and the goods were sold. January 1 is not the first use date in commerce for the trademark application because the goods were not sold on or before that date. Advertising is not enough.

Use with Services

If you mark is used with services, the mark deemed to be used in commerce when the 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 and the person rendering the services is engaged in commerce in connection with the services. Therefore use requires (1) the mark to be used or displayed in the sale or advertising using the mark and (2) rendering the services.

For example, an architect launched a website on January 6, signed an engagement with a out-of-state client to provide architecture services on January 10, and delivered preliminary designs to the client on January 30. The use of the mark on the website on January 6 is not a use in commerce for federal trademark application purposes because services have not yet been rendered under the mark.

It is not clear if the activities on January 10 would qualify as having rendered services, because on that day only the engagement was signed and the facts do not indicate that any services were rendered on that date. On January 30 the services would likely be considered rendered because the architect delivered work product related to the services to the client on that date. Therefore, under these facts, January 30 would be the “at least as early as” use in commerce date.

There is some case law indicating that a use in commerce for services might occur before the date that services are actually rendered. However its usually best to take a conservative approach and specify a first use date when services have clearly been rendered for a customer.

What if in the above scenario, the architect met with the client on January 10 and during the consultation described the architectural options for the client’s project and suggested architectural changes to the client’s original plan. The suggested architectural changes are likely a rendering of architectural services, unless indicated otherwise by industry practice in the architectural field. Therefore, January 10 would be the “at least as early as” use in commerce date.


Preparing to Use and Advertising Alone is Not Use

Preparing to use and advertising without a sale of goods or rendering of services does not qualify as a use in commerce. In Aycock Engineering v. Airflite Inc. 530 F.3d 1350 (Fed.Cir. 2009), Aycock’s trademark registration on AIRFLITE was cancelled because Aycock had not rendered the services he claimed in the application before the application was filed. AIRFLITE was registered in 1974 for the services of “arranging for individual reservations for flights on airplanes.” The registration was renewed in 1994. In 2001 Airflite Inc. filed a petition to cancel the registration alleging that Aycock did not use the mark for the services before registration.

The court described Ancock’s plans: “Mr. Aycock did not plan on operating the chartered air taxi services himself. Instead, his goal was to develop a system where he would serve his customers by acting as the middleman, or ‘communication link,’ between the customer and one of the air taxi service operators he contracted with to provide flights on an individual seat basis.”

Aycock prepared for operations by: (1) obtained two toll-free telephone numbers that the public could use to make reservations; (2) inviting air taxi operators to join his operation with flyers providing information about the AIRFLITE service, and (3) entering contracts with some air taxi service operators were the operators agreed to participate in the AIRFLITE service and paid modest initiation fees to Mr. Aycock.

However, Aycock’s services never got off the ground. Aycock estimated that he would need 300 air service operators under contract to make his service work, but he only got 12 under contract at any one time. He never marketed AIRFLITE service to the general public and did not give the public the opportunity to use the toll free numbers to make reservation. He never arranged for a passenger to fly on a chartered flight.

The court found that Aycock never rendered services of arranging for individual reservations for flights on airplanes and therefore did not use the mark in commerce before the filing date of the application. As the original trademark application did not meet the requirements when it was filed, it was void and the registration was cancelled. The registration was cancelled in 2007 (by the Trademark Board) even though the registration was issued more than 30 years earlier in 1974.

At Least As Early As

Determining the proper at least as early as first use date is important, because declaring a first use date before the actual use can negatively impact your registration. Since the application provides “at least as early as” you can always prove up an earlier date during a dispute if needed. Therefore, when in doubt, error on the said of a later date verses an earlier date if you are uncertain if the earlier date qualifies. Or better yet, contact a trademark attorney for help.

Multiple Items in the Description

If you have multiple items listed in your description of goods/services in the same class, you should declare the date when all the goods/services listed in that class were rendered or sold. For example, say you declare the goods of t-shirts, shorts, and hats in class 25 in your application. You first sold a t-shirt having the mark on February 1, you first sold a pair of shorts having the mark on February 15, and you first sold hats having the mark on April 1. Then the first use date for all of these goods in class 25 would be the latest date of April 1. April 1 is the earliest date when on or before that date all of the listed goods in that class had been sold with the mark.

Save First Use Date Proof

The USTPO does not require that you submit proof showing the date of your first used in commerce. It does require a specimen showing the mark in use. But the specimen does not need to show the date of first use. For example, an invoice showing the date of first sale is not required by the USPTO. In many cases, the specimen (e.g. a photo of the goods having the mark, or advertising of the services) itself will not have a date of the corresponding sale of goods or rendering of services. However, you should keep a copy of such an invoice for your records. If another challenges the validity of your trademark application/registration by questioning your first use dates, having records showing the first use date will better position you to win that fight.

Providing an accurate first use date in commerce is important. In certain cases, providing an incorrect use in commerce date can result in the cancellation of the registration or denial of registration.

Photo credit to flickr user andrechinn under this creative commons license.