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September 22, 2021 Feature

The Growing Threat of Trademark Scams

Erik M. Pelton and Olivia M. Muller

©2021. Published in Landslide, Vol. 14, No. 1, September/October 2021, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

In February 2021, Pakistani authorities made arrests in what was described as the “biggest money laundering case” in its history. The scheme was highly sophisticated and involved targeting, in large part, individuals and companies that owned or were attempting to obtain registered trademarks at the United States Patent and Trademark Office (USPTO). The perpetrators used over 200 domain names for the purposes of fleecing people out of their money. They created multiple websites that were meant to trick people into thinking they were associated with the USPTO or had the ability to assist the user in filing a trademark application in the United States. The websites featured names such as “Trademark Inc.,” “Trademark Funnel,” and even “USPTO Trademarks,” which also had its own Facebook and LinkedIn pages. Individuals using the trademark sites would pay a small fee for what they believed to be a legitimate trademark application, and then, in some cases, they would be provided with a false “trademark certificate.” In others, they would lose their money, never to hear from the entities again.1

Figures 1—5 referenced in this article are available as a PDF download. Click or tap the link to begin your download. A new window/tab will open for the PDF. 

As this deception illustrates, and as many trademark owners and attorneys have experienced, trademark scams that were already prevalent are on the rise and even taking new forms. Such scams can potentially cause businesses to waste thousands of dollars, which can be financially fatal for smaller operations. They also result in countless inquiries from befuddled clients that consume trademark counsel’s valuable time.

Despite the prevalence of these fraudsters, and some efforts by the USPTO, it appears that the number and scope of scams is only growing.2 Although the USPTO has frequently noted that it is aware of the magnitude and seriousness of this issue, and that it is undertaking efforts to combat the scams, it is clear that more could and should be done. The continued growth in deceptive communications derived from publicly available USPTO data could erode trust in the overall trademark system, and it is therefore imperative that the government take action to increase the warnings as well as the actions to stop or limit the scammers.

What Are the Various Types of Trademark Scams?

A scam is defined by Merriam-Webster as “a fraudulent or deceptive act or operation.”3 Unfortunately, trademark owners and attorneys are very familiar with deceptive acts that target them based on publicly available contact information in the USPTO’s records.

There are two main types of deceptive communications sent to owners regarding their trademarks: (1) solicitations for “directories” or publications in which a trademark owner can pay to have their mark listed, and (2) warnings about registration renewals featuring incorrect maintenance deadlines and unclear details regarding the nature of the services offered.

Even to the most trained eye, some of these communications can appear official. They are often sent by entities with names such as “United States Trademark Registration Office,” “Patent&Trademark Bureau” (see fig. 1), “Patent & Trademark Resource Center,” “Patent and Trademark Office” (see fig. 2), and “Worldwide-Trademarks” and official-sounding acronyms like “WTMR” (see fig. 3) and “WTP” (see fig. 4). Some even use logos and colors that are strikingly similar to that of the USPTO (see fig. 5). The letters or emails feature information—taken from the USPTO public records—that would be typically included in official USPTO communications. This usually includes the mark wording or image, the goods and services sold under the mark, and the serial or registration number, along with references to the statutes or other items that provide the false impression of an official communication. In short, although they may contain fine print in a minuscule font, there are no obvious signs that the entity sending the letter or email is not the United States Patent and Trademark Office.

Based on our recent Freedom of Information Act (FOIA) request, the Federal Trade Commission (FTC) collected at least 200 official complaints between March 2020 and March 2021 from individuals and companies who received communications from entities falsely claiming to be the USPTO. The complainants come from all over the United States, as well as from foreign companies that do business in the United States. In a typical scam letter, the trademark owner is invited to pay the company a significant fee for “publication” of the mark in a seemingly fictitious compendium but not something so large as to render the amount automatically suspicious to an unknowing recipient.

Unfortunately, there is no way of knowing how many may have been duped by the misleading communications, but it is quite possible that thousands are being scammed each year. In February 2020, an individual was charged in South Carolina with running a successful USPTO mail fraud scheme that netted more than $1.2 million.4 The complaint details that the perpetrator, Viktors Suhorukovs, identified his company as the “Patent and Trademark Office” and sent out false renewal invoices to trademark registrants, indicating that renewal fees were $925. Prosecutors believe that Suhorukovs amassed his profits through hundreds of these smaller payments.

The harms of these scams go further than just wasted money. Trademark counsel frequently must spend time and resources dealing with confused clients and educating them about what to look for regarding official USPTO communications. There is also a significant risk that the victims of the scams are disproportionately pro se applicants or small businesses, as they are the ones least likely to be familiar with the process and the USPTO.

Of note, in addition to the scams targeted at consumers, recently many trademark lawyers have received scam solicitations. Ever since the USPTO instituted its domestic council rule last year—which requires that applicants outside the United States have counsel licensed in the United States—attorneys who regularly submit filings to the USPTO have received inquiries asking for the attorney’s bar information in exchange for money. In addition, several attorneys have apparently been the victim of unauthorized use of their name and bar details in USPTO filings. Because the scammers are constantly changing tactics, names, and addresses, all trademark holders and their counsel are advised to remain vigilant.

Steps Taken by the USPTO and WIPO to Thwart Scammers

The USPTO acknowledges that scams targeting its users are on the rise and that it has a team of staff working on the issues.5 So far, the USPTO has mainly taken an education-based route to solving the scam issue.6 The official website features warnings about “misleading offers or notices,”7 and in recent years, the USPTO began sending out warnings alongside application filing receipts and newly issued registration certificates. The USPTO website features a list of entities that send out scam letters or communications. As of print time, the list consists of 55 entities within the United States and 25 entities based outside of it.8 The USPTO has begun discussing the topic with bar groups as well as brand owners and has created an email inbox specifically related to complaints ([email protected]). The USPTO has also created videos on the topics and presented about scams at events such as the Trademark Expo.

In 2012, the USPTO sent a cease and desist letter to an entity that had been sending out misleading notices—however, it is unclear if there was any response or follow-up, and it does not appear that any similar attempts have been made in recent years. The USPTO has also put several examiners “on detail” with the Department of Justice (DOJ) to aid in the investigation of scammers; but other than the 2020 charges in South Carolina discussed above, there have been no publicized results of these efforts.

The World Intellectual Property Organization (WIPO) has also taken notice of these scams and provided warnings on its own website,9 but, like the USPTO, it also has limited enforcement power.

Though there have been repeated promises of improvement on the part of the USPTO and various agencies, much of the responsibility has fallen on individual firms to protect their own interests as well as those of their trademark clients. For example, in 2012, the New York–based firm Leason Ellis sued a scammer called “USA Trademark Enterprises,” a purveyor of a useless trademark catalog. The firm obtained a favorable judgment, which awarded it a $10,000 payment and forced the defendants to refrain from doing business within the field of trademarks in the future. In 2013, Leason Ellis instituted another civil case against “Patent & Trademark Agency, LLC,” which promised to file “renewals,” after some of its clients fell victim to the scam. The defendants in that case also agreed to a consent judgment, and their trademark business was effectively shut down.10

While these were successful results, there has not been another suit instituted by a law firm against scammers as of print time. This is likely, in part, because the exercise may seem futile: when a scammer is found liable in a civil matter, given the absence of criminal prosecutions, there is little incentive to stop them from beginning again using a different name and location. Furthermore, for a firm to undertake such litigation may take a large amount of time with the potential for very little in recoverable funds, particularly if the money has already been laundered or the entity is outside the reach of the United States judicial system.

As the scams have seemingly grown in number in the last few years, little has been done by the federal government to stop them in any meaningful way. The educational efforts by the USPTO are laudable, but they are clearly ineffective in stemming the tide of scammers. It is evidently a simple and lucrative business—if the scams were not hugely profitable, they would be unlikely to be continuing to proliferate. In 2017, the USPTO held a roundtable on “Fraudulent Solicitations to Trademark Owners,”11 and in recent meetings, it has indicated that there is a task force working on the subject. However, as of this publication, there have been no requests for comments, public meetings, or other known activities of this committee.

Room for Improvement

While it can be notoriously difficult to prosecute scammers, as they tend to merely dissolve and re-form as another entity ready to continue their work, there are several suggestions the authors have to improve the efforts to crack down on the damage the scams cause. Even if the USPTO cannot criminally prosecute bad actors, there are certainly more things that it can do to help lessen the damage caused by them. While the USPTO currently directs those who receive these fraudulent communications to report them to the FTC,12 the USPTO could form its own subcommittee to work with the FTC, Small Business Administration (SBA), DOJ, United States Postal Inspection Service, and other federal agencies to ensure they are engaging in a comprehensive prohibitive approach. Making the FTC reporting process simpler by having a template for reporting trademark scams would also be helpful; the current tool for reporting to the FTC is rather cumbersome and provides no way to send a photo or scan of the offending document. Although the FTC has received many complaints, the results of our FOIA request earlier this year appear to indicate that the agency tasked with fighting scammers is not in the process of any action or investigation related to trademark fraudsters, and that there is little or no ongoing coordination with the USPTO.

The USPTO has stated that it believes it does not have “the legal authority to stop private companies from sending trademark-related offers and notices” or to sue scammers for claims under the Lanham Act, including trademark infringement of an unregistered trademark, when they use names that are clearly intended to deceive consumers.13 However, it is unclear what the basis for the USPTO’s position is.14 In our view, there is no binding precedent that precludes the USPTO from enforcing misuse of its name and insignia under a section 43(a) false designation claim. In fact, in 2012, the USPTO sent a cease and desist letter to the scam “United States Trademark Registration Office,” asserting a claim under section 43(a).15

In our view, the USPTO has an obligation to take more steps to combat these scammers not only because they are using data from the USPTO’s records but also because the USPTO is the very agency responsible for helping to guard intellectual property assets and for providing training and education, with a mission “to foster respect for IP and encourage the development of strong IP enforcement regimes by U.S. trading partners.”16 The USPTO could spread its warning messages regarding scammers more widely by working with the SBA, as well as local chambers of commerce, to issue more prevalent and obvious warnings, particularly those aimed at small business owners and pro se applicants, or at businesses that unwittingly aid these scammers.17 The current warnings are often listed among the vast boilerplate language found on uspto.gov and in trademark filing receipts. We also encourage the USPTO to work with legislators in congressional oversight committees to investigate this issue and use any powers available to assist. Outreach from the USPTO to banks, landlords, web hosts, and others that unwittingly facilitate the scam activities could also help impede the offenders.

Conclusion

While the USPTO has made efforts to increase notice to the public regarding trademark scams in recent years, the scammers have not been thwarted. In fact, it appears that despite the efforts and a global pandemic, the scams are more active than ever and taking new forms to go along with the tried-and-true ones. It would be worrisome enough for such scams to target users of any government agency; the fact that they are targeting the very agency tasked with “the promotion and protection of commerce and trade by the registration of trademarks”18 is even more troubling.

The USPTO’s current educational efforts are clearly not sufficient to address the root of the problem, and in recent years very few of the bad actors perpetrating these scams have faced any legal consequences. These scammers have done real damage to both trademark owner pocketbooks and the reputation of the United States trademark infrastructure. In order for the USPTO to protect its users and ensure trust in the benefits of filing publicly available trademark records, the USPTO and other agencies are implored to engage in more open and aggressive tactics toward these scammers.

Endnotes

1. Tim Lince, USPTO Users Targeted in Massive Fraud and Money Laundering Case in Pakistan, World Trademark Rev. (Feb. 23, 2021), https://www.worldtrademarkreview.com/governmentpolicy/uspto-users-targeted-in-massive-fraud-and-money-laundering-case-in-pakistan.

2. Trademark practitioners have repeatedly warned both their clients and the USPTO about the prevalence and threat of such scams, to little avail. The authors’ firm even submitted a FOIA request to the FTC to gain more information regarding the extent of the FTC effort to combat improper solicitations.

3. Scam, Merriam-Webster, https://www.merriam-webster.com/dictionary/scam (last visited Aug. 23, 2021).

4. United States v. Suhorukovs, No. 6:20-mj-00022 (D.S.C. filed Feb. 10, 2020).

5. David Gooder, Comm’r for Trademarks, Remarks at the Trademark Public Advisory Committee (TPAC) Public Meeting 77, 80–81 (Mar. 12, 2021), https://www.uspto.gov/sites/default/files/documents/TPAC_Transcript_20210312.pdf.

6. Id. at 83 (“The biggest area that [we’re] trying to develop even more is education and outreach.”).

7. Caution: Scam Alert, U.S. Pat. & Trademark Off., https://www.uspto.gov/trademarks/protect/caution-misleading-notices (last modified June 28, 2021).

8. Id.

9. WARNING: Trademark Misleading Notices, World Intell. Prop. Org., https://www.wipo.int/madrid/en/fees/invoices.html (last visited Aug. 23, 2021).

10. Peter S. Sloane, Trademark Scams: It’s Time for PTO Action, 21 Westlaw J.: Intell. Prop., no. 21, Feb. 4, 2015, https://leasonellis.com/trademark-scams-its-time-for-pto-action.

11. Fraudulent Solicitations to Trademark Owners, U.S. Pat. & Trademark Off. (July 26, 2017), https://www.uspto.gov/learning-and-resources/ip-policy/fraudulent-solicitations-trademark-owners.

12. See ReportFraud.ftc.gov, https://reportfraud.ftc.gov (last visited Aug. 23, 2021).

13. Caution: Scam Alert, supra note 7.

14. Perhaps it is relying on a theory that the unregistered mark provision in Lanham Act section 43(a) imports limitations from section 2(b). See, e.g., 15 U.S.C. § 1052(b) (registration bar for insignia of the United States); see also Renna v. County of Union, N.J., No. 2:11-3328, 2014 WL 2435775 (D.N.J. May 29, 2014) (importing section 2(b) bar into section 43(a) unregistered mark protection). But see In re City of Houston, 731 F.3d 1327, 1331 (Fed. Cir. 2013) (noting that city insignia might be protected under other provisions of the Lanham Act despite being unregistrable under section 2(b)).

15. Letter from Raymond T. Chen, Deputy Gen. Couns. for Intell. Prop. L. & Solic., U.S. Pat. & Trademark Off., to Hakob Manukyan, U.S. Trademark Registration Off. (Mar. 8, 2012), https://t.co/e9R02xQs3X?amp=1.

16. About Us, U.S. Pat. & Trademark Off., https://www.uspto.gov/about-us (last modified Feb. 9, 2021).

17. For example, our firm has contacted multiple landlords who were unknowingly providing office space or mail services to scam operators. We were shocked to learn from the landlords that they had not been contacted by the USPTO or any other agencies for assistance dealing with the fraudsters. The landlords were happy to assist by terminating their agreements with the scammers immediately.

18. U.S. Pat. & Trademark Off., 2018–2022 Strategic Plan 1 (2018), https://www.uspto.gov/sites/default/files/documents/USPTO_2018-2022_Strategic_Plan.pdf.

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Erik M. Pelton has been working to help thousands of small businesses build and protect strong brands since 1999. He founded the firm Erik M. Pelton & Associates, PLLC, of Falls Church, Virginia, in 1999.

Olivia M. Muller is a trademark and copyright associate at Erik M. Pelton & Associates, PLLC.