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December 2024/January 2025: IP Portfolio Management

Claiming Priority to Submarine Trademark Applications—A Curious Little Loophole

Pamela S Chestek

Summary

  • Lanham Act section 44 was designed to allow foreign trademark owners from countries party to international trademark conventions to apply for U.S. trademark registration based on their home country registrations.
  • Subsections 44(d) and (i) allow U.S. companies to claim priority from foreign applications, granting them the same benefits as foreign applicants based on reciprocal rights with other countries.
  • U.S. applicants can protect products under development by filing in nonpublic foreign trademark registers or through subsidiaries, minimizing early exposure and ensuring a strategic product launch.
  • U.S. applicants must prove use for trademark registration, even under section 44, because foreign registration requirements are more restrictive.
Claiming Priority to Submarine Trademark Applications—A Curious Little Loophole
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Section 44 of the Lanham Act, titled “International Conventions,” enacts the United States’ obligations under various trademark treaties. This section is meant for the benefit of foreign applicants for U.S. trademarks—an applicant who is a U.S. resident or citizen has no need for this section. However, it is exploited by U.S. companies that file trademark applications for product names in jurisdictions without public trademark registers, allowing them to keep a name hidden from public view before product launch, dubbed “submarine” trademarks.

How are U.S. companies able to use a statutory section designed for foreign applicants for their own benefit? This loophole for U.S. applicants is the result of an interesting choice in the drafting of the original Paris Convention and an even more interesting choice in the drafting of the 1946 Lanham Act.

Original Purpose of Section 44

Section 44 provides two main benefits to foreign applicants. Subsection (d) states that the effective filing date of their U.S. application will be the filing date of their foreign application (provided that their U.S. application was filed within six months of the filing date of their foreign application). Subsection (e) says that their basis for registration in the United States will not be use of the mark in U.S. commerce but ownership of a trademark registration from another country. The foreign applicant therefore escapes the requirement of all U.S. applicants to prove use of its trademark in the United States before a registration will be granted.

However, the Trademark Manual of Examining Procedure (TMEP) has this curious piece of advice for U.S. applicants:

An applicant domiciled in the United States may claim priority under § 44(d) based on ownership of an application in a treaty country other than the United States, even if the other country is not the applicant’s country of origin. See In re ETA Sys. Inc., 2 USPQ2d 1367 (TTAB 1987); In re Int’l Barrier Corp., 231 USPQ 310 (TTAB 1986); TMEP § 1002.02.

In other words, a U.S. applicant can file an application in another country and use the foreign application to claim priority in the United States. How is that?

Enactment of Section 44

First adopted in 1883, the Paris Convention for the Protection of Industrial Property is a multilateral treaty that grants member countries reciprocal rights for the protection of their patents, industrial designs, and trademarks in other member countries. The United States became the 13th member in 1887, before the United States had any constitutional trademark law for its own citizens. In fact, the first constitutional trademark act, the Act of 1881, was only for the benefit of those in foreign trade, either U.S. companies trading with foreign countries or vice versa. The first U.S. trademark act for the purpose of domestic registration wasn’t until 1905.

The concept of priority was originally described this way in the 1883 treaty:

Any one who shall have regularly deposited an application for . . . a trade or commercial mark, in one of the contracting States, shall enjoy for the purpose of making the deposit in the other States, and under reserve of the rights of third parties, a right of priority during the periods herein determined.

More than 50 years later, when the Lanham Act was passed, the convention language had changed but the concept was the same:

Any person who has duly applied for a . . . trade mark in one of the countries of the Union, or his legal representative or assignee, shall enjoy for the purposes of registration in other countries a right of priority during the periods hereinafter stated.

The priority concept was then transposed to the 1946 version of the Lanham Act this way:

An application for registration of a mark under sections 1, 2, 3, 4, or 23 of this Act filed by a person described in paragraph (b) of this section who has previously duly filed an application for registration of the same mark in one of the countries described in paragraph (b) shall be accorded the same force and effect as would be accorded to the same application if filed in the United States on the same date on which the application was first filed in such foreign country[.]

Today, this language is largely unchanged.

The Loophole

The curiosity of section 44 is that it doesn’t say that the foreign application upon which priority is based has to be from the home country of the applicant. Rather, the application can be filed in any country that is a member of the Paris Convention or the various other countries with treaties with the United States—“in one of the countries”—regardless of whether the applicant is located there or even whether it is doing any business there.

The second curiosity is a single sentence subsection at the end of section 44, subsection (i): “Citizens or residents of the United States shall have the same benefits as are granted by this section to persons described in paragraph (b) hereof.” In other words, U.S. citizens or residents are afforded the same benefits afforded to foreign applicants under the various treaties. Subsection (i) is not derived from or required by any treaty, but congressional hearings for an earlier draft of the Lanham Act explain why it was added:

Mr. LANHAM. Title IX has to do with the International Convention, and that is all included within one section, so we will consider that title in its entirety. Are there any suggestions with reference to title IX?

Mr. ROGERS. If I might explain, Mr. Chairman, that section was drafted by Mr. Deaner, who was the American representative at the last convention revision.

Mr. LANHAM. I recall he was before us last year.

Mr. ROGERS. He was before you last year, and he apologized for not being present this year, but he is engaged in the trial of a case. Also, Dr. Ladas, a research fellow at Harvard and now practicing in New York, who has written an internationally authoritative book on this subject; and they assure me that everything that we are obligated to do in our International Convention is included in this title. I think however that I will call the attention of the committee to one thing. That is paragraph (h) on page 29, beginning at line 7:

Citizens or residents of the United States shall have the same benefits as are granted by this section to persons described in paragraph (a) hereof.

We have the curious anomaly of this Government giving by treaty and by law with respect to trade-marks and unfair competition to nationals of foreign governments greater rights than it gives to its own citizens. I am simply calling attention to that fact. This is an attempt to put the citizen on an equality with the foreigner instead of just the reverse, which is usually the case.

Mr. LANHAM. I dare say we will find no objection to that.

The interaction of section 44(d) and 44(i) is the reason that U.S. companies can claim priority based on applications they have filed in foreign countries. Section 44(i) says that U.S. citizens get the same benefits as foreign applicants, and section 44(d) doesn’t require that an application be from the applicant’s own country of origin: It can be from any country to which the United States extends reciprocal rights. As explained by the Trademark Trial and Appeal Board in granting priority to a U.S. applicant:

There is no question that, in enacting Section 44(i), the Congress of the United States intended precisely what is expressed by the clear language of that subsection, namely, in the context of the facts of the instant case, that appellant, as a citizen and resident of the United States, is entitled to the same benefits as those accorded by Section 44 to “persons described in [Section 44(b)],” i.e., persons (including legal entities) whose countries of origin are countries bound to a relevant treaty (or equivalent relationship by reciprocal law) with the United States. Consistent with that premise, the broadsweeping analysis supporting the Examining Attorney’s refusal of registration that a U.S. company cannot proceed under Section 44 but must proceed under Section 1 of the Trademark Act would effectively read Section 44(i) out of the Act as far as the benefits of Section 44(c), (d) and (e) are concerned. We have been unable to find any basis in the legislative history of the Lanham Act for any such limitation; neither do we have the power to impose such limitations sua sponte.

Combine the U.S. applicant’s opportunity to claim priority to applications in foreign countries with the ability to file an application in a country that doesn’t make its trademark register public, and U.S. companies can keep products still under development from prying eyes. The ability to file earlier with a lower risk of discovery, sometimes combined with filing in the name of an unknown, newly created subsidiary, provides greater assurances that the product will make the desired splash when launched.

Section 44(e) as a Basis for Registration

It is unlikely that the U.S. applicant will be able to ultimately register its trademark without having to prove use. It will, instead, still need to go through the proof-of-use exercise that all U.S. applicants have to go through. But if section 44(i) was meant to put U.S. applicants on equal footing with foreign applicants, why do U.S. applicants still have to prove use?

The reason is that the Paris Convention, and therefore section 44, are more restrictive about what foreign registration may be used as a basis for registration than the one used for claiming priority. According to the Paris Convention (London text): “Every trade mark duly registered in the country of origin shall be admitted for registration and protected in the form originally registered in the other countries of the Union under the reservations indicated below.” And as originally implemented in U.S. law: “A mark duly registered in the country of origin of the foreign applicant may be registered on the principal register if eligible, otherwise on the supplemental register herein provided.”

Note that the trademark must be registered not in any treaty country but in “the country of origin” of the foreign applicant. The “country of origin” is defined as the country in which the applicant has a bona fide and effective industrial or commercial establishment, or if there is no such establishment, in the country in which the applicant is domiciled, or, if not domiciled in a treaty country, the country of the applicant’s nationality.

All applicants, domestic and foreign, must still meet some statutory basis for registration, either section 1, 44, or 66. A section 66 “Madrid Protocol” application for a U.S. registration is filed through the World Intellectual Property Organization (WIPO), not directly at the U.S. Patent and Trademark Office. This leaves the direct-filing applicant two bases, section 1 and section 44. Section 1 requires proving use, section 44 does not.

In theory, by application of section 44(i), both of the bases are available to U.S. and foreign applicants equally. However, it is unlikely that the U.S. applicant will be able to satisfy the requirements of section 44(e) with its submarine applications. It is possible for an applicant to have more than one country where it has a bona fide and effective industrial or commercial establishment. The U.S. applicant is therefore not disadvantaged; it could, in theory, be headquartered in the United States and have a bona fide and effective industrial or commercial establishment in a different country. If it relies on an application from that country, it would not have to prove use under section 1 but could register under section 44(e).

But it’s unlikely that a U.S. company will have a bona fide and effective industrial or commercial establishment in one of the countries used for filing a submarine application. Typically, a multinational company will have different corporate family members in different countries, not have its U.S. entity establish a direct legal presence in a foreign country. Having a subsidiary in the country of registration, rather than the company itself, will not be considered a bona fide and effective commercial establishment. Additionally, the countries used for these applications—such as Jamaica, Tonga, and Trinidad and Tobago—are small markets that a U.S. company is unlikely to support by having a local office. The reason for filing in a remote jurisdiction is to hide the name of a heavy-resourced, significant new product, so perfecting the section 1 basis for registration through use of the mark in the U.S. can be easily done. So, while the U.S. applicant has the same options as the foreign applicant, the U.S. applicant isn’t likely to be able to, or have a need to, take advantage of the section 44(e) option.

And thus, the “Dynamic Island” iPhone feature was kept a secret until launch.

©2024. Published in Landslide, Vol. 17, No. 2, December 2024/January 2025, 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.

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