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June 04, 2021 Articles

The Trademark Modernization Act: New Procedures and Rules That Will Benefit Trademark Owners

USPTO invites public comment on proposed rule changes that will create new procedures to challenge inaccurate claims of use.

By David T. Azrin

Recently enacted amendments to the federal Lanham Act trademark statute (the Trademark Modernization Act of 2020) create new procedures and rules that will benefit trademark owners. The new rules will do three things. First, they provide new mechanisms to challenge inaccurate claims of use, by establishing a new procedure for such challenges. Inaccurate claims of use make it more difficult for businesspeople launching a new business, product, or service to find a new brand name that is not already registered. Second, the new rules will give trademark examiners discretion to set shorter response deadlines to office actions. And, third, the new rules will give trademark owners who prevail in court proceedings more robust legal tools to stop infringing use.

The U.S. Patent and Trademark Office (USPTO) recently issued proposed rule changes to implement the new statute. The USPTO expects that, after it reviews public comments, it will draft a final rule that will go into effect by December 27, 2021, except as to the flexible response period provisions, which the USPTO expects to go into effect on June 27, 2022. Public comments on the proposed rule changes are due by July 19, 2021.

Creating New Procedures to Challenge Inaccurate Claims of Use

Any business person who has attempted to come up with a new name for a business, product, or service knows how difficult it can be to find a name that is unique and not already used and registered with the federal trademark office.

As of 2016, 23.5 percent of the most frequently used words in American English had already been claimed in trademark registrations as single-word marks, according to the congressional committee report on the Trademark Modernization Act of 2020. Also, research shows that there has been a significant increase in “fraudulent” applications in which the applicant has obtained a registration even though it might not actually be using the mark in all the categories claimed, according to the report. The result is that it is becoming increasingly difficult for businesses to come up with novel names.

Part of the problem stems from the fact that, in issuing trademark registrations, trademark office examiners must rely on the applicant’s information as to whether they are actually using a mark, based on the “specimens” or examples submitted by the applicant, which may be fraudulent.

Prior to the new law, there was no procedure for the trademark office to open an investigation into the basis for the registration after it was issued. No simple and easy way existed for a third party to bring an objection. Under the prior procedures, the only way for a third party to object to a registration was to bring a full-blown cancellation proceeding against the registrant, which can be very expensive and time-consuming.

The new law establishes a new procedure in which a third party, or the trademark office acting on its own, can initiate a proceeding by the trademark office itself to investigate the basis for a registration, referred to as ex parte reexamination or an ex parte expungement proceeding. The third party must submit some evidence (a “reasonable predicate”) that the registrant is not actually using the mark or never used the mark for particular categories.

The trademark office will then take over the process by requesting evidence from the registrant, which the trademark office will consider in deciding whether to cancel all or parts of the registration.

Giving Examiners the Power to Set Shorter Deadlines for Responding to Office Actions

The new law also gives trademark examiners the tools to set shorter deadlines for applicants to respond to office actions, thereby speeding up the processing of applications. Under the prior procedures, if an applicant filed a questionable application, the trademark office was required to give the applicant six months to respond. In the meantime, nobody else could file an application to register that mark due to the pending application.

The new law gives trademark office examiners the discretion to set shorter response times so that fraudulent or improper applications can be weeded out sooner.

Strengthening Prevailing Trademark Owners’ Ability to Obtain Injunctive Relief

The new law also strengthens the ability of prevailing trademark owners to get a court order to stop an infringing user.

Up until 2006, the federal courts uniformly held that if a trademark owner shows that another company’s use is likely to cause customer confusion, the trademark owner will have satisfied the critical element for obtaining an injunction; namely, “irreparable harm.”

In the past 10 years, some courts, relying on language in a 2006 U.S. Supreme Court patent decision, eBay, Inc. v. MercExchange LLC, have adopted a different rule, making it more difficult for a prevailing owner to obtain such an order.

For example, some courts have held that even if a trademark owner shows that the infringing company’s use of the mark is likely to cause customer confusion, this did not automatically mean the owner would suffer irreparable harm. Therefore, the trademark owner must make a separate showing that it is suffering “irreparable harm” by, for example, the lack of quality control over the infringing company’s use of the mark.

As a result, there have been a few court cases in the past 10 years in which, even though a trademark owner won a court ruling that another company’s use of the mark was likely to cause customer confusion, the trademark owner was not able to get a court order to stop the infringing use because the owner could not show specific “irreparable harm.”

The new law reestablishes the old rule that if an owner shows that another company’s use of the mark is likely to cause customer confusion, this automatically means it will suffer irreparable harm, entitling the owner to an injunction to stop the company’s infringing use, as long as the owner meets the other requirements for an injunction.

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David T. Azrin

Gallet Dreyer & Berkey, LLP

David T. Azrin is with Gallet Dreyer & Berkey, LLP, in New York, New York.

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