COMMON LAW RIGHTS IN A TRADEMARK USED IN COMMERCE

In a prior blog post, I explained that the United States Patent and Trademark Office (USPTO) registers proper trademarks and service marks, but it does not issue them as it issues patents.  However, even if a company does not apply to register a mark, it will generally have common law rights in a proper mark used in commerce.  The common law rights are less extensive and less clearly articulated in case law than those for registered marks.

Benefits and Presumptions Acquired by Registration

As discussed in my prior post, registration on the Principal Register of the USPTO affords the registrant certain benefits in disputes with other entities, including  (1) a statutory presumption that (a) the mark is valid, (b) the registrant is the owner of the mark, and (c) the registrant has the exclusive right to use the registered mark; (2) constructive notice of a claim of ownership, eliminating any justification or defense of good faith adoption and use made by a third party after the registration date; (3) nationwide priority based on the filing date.  None of these benefits accrues to the user of an unregistered mark, who in an enforcement action has the burden of proof on issues of validity, ownership and right to exclude.

The owner of a registered mark also has the right to file a trademark infringement lawsuit in federal court and to obtain monetary remedies, including infringer’s profits, damages, costs, and, in some cases, treble damages and attorneys’ fees.  Instead, the owner of an unregistered mark must sue for infringement under state common law, which might not afford the recovery rights offered under the federal Lanham Act.

Common Law Rights in Unregistered Marks

However, a longstanding common law rule is that the first party to use a designation as a trademark acquires intellectual property rights in that designation, irrespective of registration.[1]  But, both before and after the Lanham Act creating federal registration of trademarks, courts have recognized valid concurrent use of the same unregistered trademark by different entities. A key to understanding concurrent use is the nature of the territorial limits of common-law marks.

There are two basic principles established in the common law. First, the scope of protection for common-law marks is limited to the geographic area where the mark is both known and recognizable by an articulable segment of possible customers.[2] The scope of protection is limited to (1) the zone of actual goodwill (usually encompassing sales, advertising and reputation) and (2) the zone of natural expansion.[3]  

The zone of actual goodwill is usually split into (1) the zone of actual market penetration and (2) the zone of reputation. The zone of actual market penetration is where products have been sold, but there generally must be more than a de minimis amount of sales. The U.S. Court of Appeals for the Third Circuit has articulated a multi-factor test for actual market penetration including (1) amount of sales using the mark; (2) positive and negative growth trends in the area; (3) number of purchasing consumers compared with total number of possible consumers; (4) amount of advertising; and (5) trademark owner’s market share;[4] and other courts use similar tests. The zone of reputation is tested by goodwill created through media, including Internet, advertising and word of mouth.[5] The zone of natural expansion covers areas untouched by the trademark owner. Courts have differing tests but they all require that the owner’s development efforts must be articulable and concrete.[6] 

Second, a senior user with nationwide common-law rights may not preclude a junior user who adopted the mark in good faith and without knowledge of the senior user in a geographically remote territory where the junior user was the first to adopt the mark.[7]

Thus, both senior and junior user of an unregistered mark have common law rights, but neither enjoys the benefits or presumptions that come with registration of the mark.

The Role of the Internet

The advent of the Internet has created new issues, which have not yet been resolved fully by the courts. Thus, the role of the Internet in establishing common-law trademark rights is still in legal flux. According to one commentator, U.S. trademark law has “neither clearly articulated the scope of protection for common-law trademarks used online nor provided sufficient guidance for companies that find themselves in legal conflicts over the use of such trademarks.”[8] However, the courts have tried to apply pre-Internet principles regarding concurrent use, as explained above.

It is clear that merely establishing a website featuring a trademark does not establish common-law rights in that trademark.[9] As indicated above, a website may be one factor used to prove a zone of reputation, but to establish common-law rights, advertising (or sales) in a particular jurisdiction is required rather than just a website that can be accessed there. To establish “use” through advertising, via the Internet or otherwise, the use “must be open and notorious and of such a nature and extent that the mark has become popularized in the public mind with the product or service’s provider.”[10] But common-law rights may be established even if there is neither “deep market penetration” nor “widespread recognition.”[11] Use needs to be “consistent and continuous.”[12]

There is also an unresolved legal issue regarding concurrent use of Internet websites by senior and junior users of a mark. At least two courts have protected the use of the Internet by junior users of a mark having geographically limited common-law rights[13], while the Fourth Circuit has noted in dictum that it could not image a situation in which such concurrent users of a common-law mark can simultaneously exist on the Internet.[14]

Conclusion

While unregistered marks are afforded some protection for both senior and junior users under common law, the protection is more limited and less clearly articulated in case law than for registered marks.  A word to the wise: if you are considering branding your goods or services with trademarks or service marks, you would be better served by applying to the USPTO for registration, rather than relying on common law protections.

Toikka Law Group is ready to assist you with advice and filing for registrations.

© 2017 Richard S. Toikka.  All rights reserved.

 

[1] See Shontavia Johnson, “Trademark Territoriality in Cyberspace: an Internet Framework for Common-Law Trademarks,” in 29(2) BERKELEY TECH. L. J. 1253 (2015), at 1258 & n.14; In re Trademark Cases, 100 U.S. 82, 94 (1879).

[2] Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415-16 (1916).

[3] See Johnson, supra note 1, at 1259.

[4] Charles Jacquin Et Cie, Inc. v. Destileria Serrales, Inc., 921 F.2d 467, 473-74 (3d Cir. 1990).

[5] See, e.g., Hanover, 240 U.S. at 415-16.

[6] See, e.g., Tally-Ho, Inc. v. Coast Cmty Coll. Dist., 889 F.2d 1018, 1028 (1st Cir. 1989) (internal citations omitted).

[7] United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918).

[8] See Johnson, supra note 1, at 1255.

[9] See 5 J. Thomas McCarthy, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION, § 26:30.50 (4th Ed. 2000) (“[k]nowledge among persons in the territories in issue must be proven by evidence, not assumed just because the Internet is national and global,” Just “because a Web site featuring a trademark can theoretically be accessed on computers from Florida to Alaska … does not mean that the trademark is known and established in those locations.”

[10] Dudley v. Healthsource Chiropractic, Inc., 883 F. Supp. 377, 390 (W.D.N.Y. 2012), citing Am. Express Co. v. Goetz, 515 F.3d 156, 161-62 (2d Cir. 2008).

[11] Circuit City Stores, Inc. v. CarMax, Inc., 165 F.3d 1047, 1055 (6th Cir. 1999).

[12] Id.

[13] Allard Enterprises, Inc. v. Advanced Programming Resources, Inc., 249 F.3d 564, 575 (6th Cir. 2001); Dudley, 883 F. Supp. at 394.

[14] Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214, 234 n.9 (4th Cir. 2002).