Troy & Schwartz Attorneys-At-Law

The Trademark Modernization Act of 2020 (“TMA”) was signed into law by President Trump on Dec. 27, 2020 as part of the COVID-19 relief and government funding package.  This article summarizes the several significant benefits provided to trademark owners under the TMA.

1. Presumption of Irreparable Harm to a Trademark Owner by an Infringer

The TMA makes it easier for a trademark owner to obtain injunctive relief against an infringer. Prior to the new law, trademark owners were required to prove that they will be “irreparably harmed” if the infringer is not enjoined from further use of the infringing mark.  Now, as long as the owner can demonstrate infringement, the owner will enjoy a legal presumption that the harm caused by continued infringement will be irreparable, thereby increasing the owner’s likelihood of obtaining injunctive relief.   Many times, an owner’s main goal is simply to stop the infringement through injunction rather than proceed with an expensive drawn-out trial.  The TMA should help facilitate this objective.

2. Trademark Applications Originating from Outside the United States

A couple of years ago the United States Patent & Trademark Office (“USPTO”) made it an administrative requirement that foreign trademark applicants must be represented by a U.S. licensed attorney. This was done to help reduce fraud on the USPTO by some foreign applicants whose applications too often indicated that they were actually using their marks in the United States, a requirement under U.S. law, when in fact they were not.

The TMA now tackles this on-going problem legislatively.  Due to on-going concern regarding the proliferation of applications and registrations (particularly emanating from China) for trademarks that are not actually in use in United States commerce, the TMA also calls for the USPTO to implement new procedures that will allow third parties to more readily challenge pending applications and issued registrations that may be suspect.  Under current practice, challenges to pending applications are limited in scope, and challenges to registrations require costly cancellation proceedings.  The commentator has successfully represented clients in cancellation proceedings before the Trademark Trial and Appeal Board which generally involve adherence to the Federal Rules of Civil Procedure.   And yes, these proceedings can take a while to complete.

A potential bona fide trademark applicant may find that a third party has a registered mark that will likely prevent registration of the applicant’s mark on likelihood of confusion grounds.  The applicant could attempt to obtain cancellation of the registered mark, but again such a proceeding can be costly and take a long time.  The TMA provides streamlined procedure for challenging issued registrations.

The TMA also calls for a broadening of the scope of evidence that a third party may submit for consideration by the examining attorney during examination of another pending application (including evidence of non-use).  Both changes will help clear the way for legitimate trademark users to obtain registration of their marks.

Finally, the TMA requires the Government Accountability Office to conduct a study regarding the problem of false and inaccurate claims of use in trademark applications and registrations, and to report to Congress recommendations based on the results of the study as to any changes to trademark law that will improve the accuracy of the Trademark Register or reduce inaccurate or false claims of use.

3. Take-Home Points

• Foreign trademark applicants need to understand that the U.S.’s requirement for bona fide trademark use within the U.S. is a requirement for both obtaining registration of the mark and maintaining registration of the mark. Any foreign trademark applicant should utilize the services of a U.S. trademark attorney who will presumably require proof of usage in the U.S. as part of the documentation provided to the USPTO.
• Thanks to the TMA, trademark applicants now have more options to contest suspect registrations. This can be particularly beneficial to smaller business owners by reducing the overall costs involved.
• Thanks to the TMA, registered trademark owners need not prove irreparable harm to obtain an injunction providing the other elements are met. Again, this can be particularly beneficial to smaller business owners by reducing the overall costs involved.

Questions About Trademark Matters?

Contact Susan Troy at 305-279-4740 for legal matters involving trademark applications and trademark infringement.  We are here to serve you and answer your questions related to intellectual property & business law.  See her reviews at www.avvo.com where she has received Client’s Choice Badges for both 2019 and 2020.  She is also a registered patent attorney.

WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  IF YOU ARE CONTEMPLATING ANY ACTION THAT MAY HAVE LEGAL CONSEQUENCES, CONSULT WITH AN ATTORNEY.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

Picking a company name that meets the above criteria is often easier said than done.   The last thing a new company needs is a legal dispute involving the alleged infringement of someone else’s trademark.  Anybody who has been involved in a lawsuit understands that they are costly, stressful, and can take on a life of their own.  A registered trademark owner may of course give you the chance to comply with an initial cease and desist letter.  However, your compliance will generally require you to stop using the mark, transfer any domain name rights, etc.  The upshot?  You’ll have to start over in branding your business.

Here are some tips on getting your company off and running with a viable name.

1. Do a Google search on the name to see what other companies may already using the same or a similar name.
2. Do a search of your state’s corporate or limited liability company records in the states where the company will do business to see if anyone is using the same or similar name. Also check the state’s registered trademark records since some companies do obtain state-registered marks.  For Florida, this information can be found here.
3. Do a search of the U.S. Patent & Trademark Office (USPTO) for federal trademark registrations of your proposed name. Do not think that merely changing a letter in your proposed name or reversing the order words in a multi-word work will save you from a legal dispute with the owner of the registered mark.  Additionally, if you plan to file a trademark registration application for your company name with the USPTO, you should select a name that has a solid chance of meeting the USPTO’s trademark registration requirements.  This means that your mark must not be confusedly similar to a registered mark.
4. Do a search of domain name registrar websites such as GoDaddy.com to see if the domain name you want is available. Not only are domain names a necessity in today’s e-commerce world, but domain names also may have associated trademark rights.  Therefore, a minor change in the registered domain name, e.g., by registering the plural form (sABC) of the registered domain name (ABC) could result in a trademark dispute.
5. The best company name is one that is distinctive and memorable for both branding purposes and obtaining valuable registered trademark rights.
6. Come up with at least three names you like and get the reactions of trusted individuals.
7. If you plan to have a logo designed, ensure that there is a contract in place assigning all of the creator’s intellectual property rights to your company.
8. If you are a non-US company planning to expand into the United States, note that US trademark law will apply to you.
9. Watch out for cultural implications involving your mark if you plan to register it in other countries.
10. Consider having an intellectual property law attorney do a professional trademark search.

We are proud of the legal services we provide to our business and entrepreneurial clients on all matters related to trademark law.  Contact us at 305-279-4740 to discuss your questions on trademark law matters.   Doing things right the first time in selecting a company name and building your brand could save you some real headaches and a lot of money down the road.  

Troy & Schwartz, LLC

Attorneys-at-Law

Miami, Florida

Where Legal Meets Entrepreneurship™

This blog is for informational purposes only and does not constitute legal advice.

 Posted by Susan Dierenfeldt-Troy, Esq.

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

Have a question on specimens for your filed trademark application after reading this blog? We can help ensure the specimens you file will meet the USPTO’s requirements so that your registration will actually issue if the other requirements are met. Our trademark law legal services include: prosecuting trademark applications;  representing clients before the Trademark Trial and Appeal Board; and representing clients in trademark infringement lawsuits.

 Call us at 305-279-4740 (Miami, Florida) for a complimentary consultation.

So your proposed trademark has met the USPTO’s two threshold requirements for registration:  1) there is no likelihood of confusion with existing registered marks; and 2) the mark is not merely descriptive or generic.  Nevertheless, the examining attorney has refused registration because the applicant’s provided specimens, required for demonstrating usage of the mark in commerce, do not meet the USPTO’s requirements.   This commentator has previously blogged on this topic and is doing so again because there seems to be a lot of confusion over the importance of specimens to the trademark registration process.

Indeed, as a trademark attorney, I have found that specimens are often the most misunderstood requirement for obtaining a registered trademark.  That’s why our firm’s trademark legal services involve advising clients about specimen requirements from the get go.  At times, we have advised clients to modify their specimens before we submit them to the USPTO in a 1A application.  For intent-to-use applications where specimens are not filed with the application but will be required if the mark receives a Notice of Allowance (a preliminary approval of a pending specimen) we work with clients to ensure that they will have suitable specimens commensurate with USPTO requirements for “goods” marks and “services” marks when the Statement of Use is filed.  This may include reviewing the Client’s website and recommending layout changes so “specimen” screen shots will meet the USPTO’s specimen requirements.  Additionally, we ensure that all submitted specimens clearly identify the applicant as the provider of the goods/services, another essential specimen requirement.

The specimen requirement is no joke.  Between Sept. 17 and Sept. 23, 2020, the Trademark Trial and Appeal Board (“Board”) affirmed the decisions by three USPTO examining attorneys who had all refused registration on unacceptable specimen grounds for three different trademarks.  All three applicants ended up spending a lot on legal fees only to be denied registration of their marks upon appeal.  The following summarizes the three decisions and the commentator’s practice tips.

The case: In re Iguana Yachts.    Here the mark was a “goods” mark with following description: “Boats; amphibious vehicles; professional boats, and professional amphibious vehicles in the fields of security, military rescue, and transport of goods and people.”  The submitted specimens comprised a banner, a business card, and a website extract with a “custom build quote form.”   The Board concluded that there was no evidence that the banner or business card were displayed or distributed at tradeshow, i.e. the specimens were not actually used in interstate commerce as point-of-sale displays.  Likewise, there was no evidence as to how the quote form was used to actually place orders on the website for the specified goods.  In essence, the provided specimen were mere advertisements.  Advertisements may be suitable for service marks but are never suitable for goods marks.

Practice Tip.   Ensure that a specimen submitted for a good(s) is not mere advertising.  If the specimen represents a point-of-sale display, a customer must have either the ability to buy the good right there or to be able to place an order for the good associated with the mark.  That is, the specimen must show how the mark is being used in interstate commerce by the applicant.  The mark must also be displayed prominently to ensure that a potential customer identifies the mark with the good.   Here, perhaps the website could have been easily amended to provide for a website-related point of sale display before the specimen was ever submitted to the USPTO.   All specimens must also specify the applicant as the provider of the goods/services.  This requirement is in keeping the trademark law’s focus on the consumer – the consumer has the right to know who is providing the good/service under the mark.

The case:  In re Charlie’s EnterprisesEnergy, LLC.     Here the slogan mark was for food goods:  “Peas, fresh; Vegetables, fresh.”  The specimen consisted of “[a] picture of the proposed slogan in use on a semi-trailer wrap.”  Additionally, the mark presented in the application did not match the display on the truck.   The applicant argued that the wrap was a form of packaging.   Indeed, packaging can serve as a goods specimen as long as it shows the mark AND the source of the goods, generally the manufacturer or distributor.  Here the Board held that a trailer wrap is not a common packaging for vegetables even though a trailer wrap may be a common way of displaying the mark associated with bulk goods (such as lumber).

Practice Tip.  Ensure that the submitted specimen is the type commonly used for the particular good.  Additionally, ensure that the specimen’s mark and the mark shown in the application are equivalent.  All specimens must also show the source of the goods as the following decision again demonstrates.   Perhaps this registration could have been saved if the trailer wrap had at least showed the applied-for mark in its entirety.  However, if the goods being transported were sealed in packages for sale at, e.g., a grocery store, a photo showing the packaging with the required info would likely have been accepted.

The case: In re Systemax, Inc.    This case involved the situation where the specimens submitted for a service mark application failed to show an association between the mark and the application’s recited services. The specified services were for “holding company service, namely, providing business management, business administration, and human resource management services to subsidiaries and affiliates.”  The applicant submitted copies of annual reports and website screen shots which failed to show an association between the mark and the recited holding company services.   As such, the Board agreed with the examining attorney and the mark was not registered.  This commentator notes that any website screen shot being submitted as a service mark specimen should clearly show the mark on each and every page where a description of the service is presented.  Additionally, the applicant, as the service provider, should be readily discernable.  Annual reports, invoices, business plans, and the like are not specimens for trademark registration services.

Practice Tip.  This case is a perfect example of how any thorough trademark attorney will first carefully review the applicant’s website before submitting any screenshots as specimens.  If deficiencies are found, the attorney should advise the client to amend the layout of the website and/or the content before screen shots are submitted as specimens.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

May you and your loved ones stay safe & be well during these challenging times.

© 2020 by Troy & Schwartz, LLC

Posted by Susan Dierenfeldt-Troy, Esq.

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

Intellectual property assets may comprise as much as 70% of an average company’s value according to the Harvard Business Review.  Not surprisingly, businesses large and small are concerned about: 1) protecting their intellectual property from theft or infringement and potential creditors; and 2) reducing their income taxes as part of an overall IP asset management strategy.  Intellectual property holding companies (IPHCs) became a popular means through which companies sought to protect their IP assets and reduce taxes by establishing a wholly-owned subsidiary whose purpose was only to control and own IP assets such as patents, copyrights, trademarks, trade secrets, and other proprietary information in the 1990s.

The IPHC, established by the parent company, does not itself use the IP it owns (e.g., by manufacturing and distributing a patented product).   Instead, the holding company licenses its IP rights to affiliated operating companies that handle the day-to-day business activities but do not themselves own any of the IP assets.  The holding company as the licensor then receives royalties from its licensee(s).    For example, say ZYX, Inc. owns a U.S. patent for a product it manufactures and sells under a registered trademark.  It has decided to form a Delaware IPHC, CBA, Inc., for holding its patent and registered trademark.  CBA, Inc., now as the IPHC, licenses the patent and registered trademark to ZYC, Inc. in return for a two percent royalty on the patented and trademarked product’s sales.  For states such as Delaware which does not charge income tax on royalties, the tax savings can be substantial. Additionally, ZYX, Inc. can likely take the royalty payment as a tax expense write-off.

States eventually figured out that holding companies were costing them a lot of money and the majority of them have enacted different types of reporting requirements for IPHCs to recover tax monies:  a) mandatory combined reporting (requiring companies to file a single comprehensive tax return for all of their subsidiaries when they calculate their taxes); b) add back statues (requires companies to add back any tax deductions they have taken for royalties paid to their IPHC); and c) the economic nexus approach wherein courts are tasked with finding if an economic nexis (a/k/a/ the Geoffrey rule after a 1993 South Carolina case involving Geoffrey, Inc. as the IHPC for the Toys “R” Us trade name) exists.  As such, IPHCs are not used as much as they were over a decade as a tax “shelter.”  Delaware, however, still continues to be an IPHC tax haven.

What about Florida?  Florida does have a corporate income tax but remains one of a handful of “corporate income” tax states that hasn’t adopted an add-back or combined reporting statute to try and reclaim lost tax revenue attributable to Florida IPHCs.  Furthermore, Florida IPHC law is complicated by the fact that only mining companies, by statute, must count royalties when calculating their income taxes.  For an excellent discussion on the politics surrounding the issue of Florida IPHC taxation see Florida Tax Laws and Intellectual Property by Jason Garcia, Florida Trend Magazine.

Despite the fewer taxation benefits now afforded by most states to IPHCs, IPHCs can still offer IP asset-protection benefits, for example by allowing a company to quarantine its intellectual property from claims brought against the operating companies.  For instance, in the event the affiliated operating company is sued, the separation of IP assets from the affiliate to an IPHC may well protect that property from potential judgments in a lawsuit.

Any business entity, including an IPHC should be structured in a manner that best fits the business model.  All business entities, whether a C-Corp, S-Corp, or Limited Liability Company have their own considerations which should be discussed with in attorney knowledgeable in IP asset protection. Any such IP transfer needs to be in writing and is generally executed as an assignment of rights document.  The assignment of any issued patent and registered trademarks and copyrights should be recorded with the United States Patent and Trademark Office and/or the U.S. Copyright Office.

Anybody considering forming an IPHC should of course understand the taxation requirements of the state where the IPHC entity will be formed.  Additionally, any IPHC owner needs to understand that infringement actions involving the IP owned by an IPHC may result in unintended consequences for the unwary.  For example, whether or not a plaintiff has standing to sue is a threshold question in any lawsuit.  For a patent infringement action, only patent owners or exclusive licensees have standing to sue for infringement.  A typical exclusive licensing agreement may not be “exclusive” for patent infringement purposes. That is, absent a provision within the exclusive licensing agreement that the patent licensee has the right to sue, the exclusive licensee may be found to have no independent right to sue.

Why is this important to an IPHC?  Because the IPHC may be able to obtain an injunction as the patent owner, but will be limited in its ability to seek lost profits as damages.   For example, a patent-holding IPHC normally does not manufacture or sell a product itself.  The IPHC thus suffers no lost profits damages as a result of any infringement of its patent and any recovery will likely be limited to reasonable royalty damages which are generally substantially lower than lost profits.  Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 1553 (Fed. Cir. 1995).

As for non-exclusive patent licenses, the IPHC cannot claim lost profits and will be limited to an award of reasonable royalty damages.  However, non-exclusive patent licenses may provide the IPHC with additional opportunities to exploit its IP beyond just one licensee.

In the context of trademark rights, the IPHC holding company must have sufficient quality control over the goods/services provided under the licensed trademarks.  Failure to exercise sufficient quality control may create what is known as “naked licensing”, resulting in potential cancellation of the registered marks.  Click here for a previous blog on the ramifications of naked licensing.

Take Home Points:

1. Before setting up an IPHC, understand the tax laws of the proposed entity-formation state by consulting with a knowledgeable CPA or tax attorney.
2. Before setting up an IPHC, determine the best type of business entity by consulting with a knowledgeable IP asset protection attorney.
3. Ensure that the assignment of IP assets to the IPHC is done via a formal assignment agreement.
4. Ensure that an exclusive patent licensing agreement includes appropriate provisions giving the exclusive licensee the right to sue for patent infringement. Utilize the services of a knowledgeable IP licensing attorney.
5. For trademark licensing, ensure that the licensing agreement includes appropriate provisions allowing the IPHC to monitor the quality and goodwill of the licensed marks. As with patent-licensing agreements, utilize the services of a knowledgeable IP licensing attorney.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

Call us for a complimentary consultation on IPHCs or IP-licensing or any of your IP legal needs at 305-279-4740.

May you and your loved ones stay safe & be well during these challenging times.

© 2020 by Troy & Schwartz, LLC

Domain names can be extremely valuable business assets in today’s Internet-connected business world.   During the last two months, we have been contacted by two small businesses which have both encountered the unpleasant surprise of learning that they no longer have control of their domain names.  This blog discusses the steps that every business owner should proactively take to ensure their business is indeed in “charge” of their domain name(s) throughout the company’s existence, until the business no longer wishes to have an Internet presence under the registered domain name, or until the domain name is sold as an asset, e.g., in a business asset sale and transferred to the new owner pursuant to the Registrar’s domain transfer process.

A.    Domain Name Registration by Employees

An employee (“the Registrant”) registered the domain name for her company’s new website through www.godaddy.com (the “Registrar”) in her own name.  Her personal information and not the company’s is listed on the account’s contact details, payment details, and domain name registration details.  Under this scenario, there is no proof that her company has any right to it (aside from the domain itself as a potential trademark).  As the Registrant, she has administrative control over the company’s domain name.  Consider the following scenarios:

1. Her employment is later terminated during a round of layoffs. Feeling her severance package is unfair, she disables the domain name in hopes that the company will pay her for the rights to its domain name.   The company sues the employee for conversion and trademark infringement; or
2. She becomes ill and needs to take an extended leave-of-absence.  During her absence, she misses annually-sent e-mail notification from the Registrar reminding her that the domain name must renewed.  The domain name is not renewed and becomes available for purchase.    The company’s website and associated email addresses are subsequently disabled.

B.  Won’t the Registrar Just Grant Access to the Domain Name or Give the Company a Chance to Renew the Registration of an Expired Domain Name?

Much easier said than done.  Registrars generally require considerable proof before they will allow anyone but the original Registrant to access the domain.  They are not in the process of sorting out domain name disputes and will generally recommend that the parties seek legal advice, work it out among themselves, or use the Uniform Domain Resolution Process (UDRP), an alternative dispute resolution process which every Registrant must agree to as part of the domain registration process.  Scenario B is not a dispute per se but unfortunately can have serious legal complications unless the company is quickly able to secure the domain name rights by repurchasing the name.

C.  What Should a Company Do to Prevent Either of the Above Scenarios from Occurring?

1. Provide clear instructions in the writing to the employee that the organization’s name and contact information are to be listed on the account as the Registrant and not just her name personally.
2. Maintain a copy of the domain name registration confirmation from the Registrar with the company’s business records.
3. Ensure that the email address to access the company’s account is accessible by more than one person at the company rather than one specific person. A departmental or generic, non-person-specific e-mail address is preferable, e.g., [email protected] or [email protected] rather than [email protected].

D.  Website Developer Registration of the Domain Name

Website developers will often register the domain names for the websites they are developing.  Here, it is important to ensure that the website developer uses your company’s contact information as the account contact information.  Remember that the “contact” details help establish true ownership.  The website developer may be listed as the technical contact for the domain name, but that’s as far as it should go to ensure that your company will have primary account access and thereby be able to have a proof of ownership if it ever becomes an issue.

E.   A Final Suggestion

If the Registrar allows the inclusion of multiple e-mail addresses for account login. contact/notification and domain name registration contact, consider including an address not associated with the domain name.  Should your domain go down, e g., if the domain name expires, not only will the website no longer be accessible but no emails associated with that domain name will be received.  A backup e-mail using another domain or free account like G mail may still allow correspondence with clients until other steps can be taken to protect to address the issue.

If you have any questions about protecting your domain name or believe your situation may merit a UDRP proceeding, contact us at 305-279-4740 or complete the “Do I have a case” option at the website.

WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  IF YOU ARE CONTEMPLATING ANY ACTION THAT MAY HAVE LEGAL CONSEQUENCES, CONSULT WITH AN ATTORNEY.

©2020

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740