November 07, 2017 Top Story

New Test Replaces "First Use" in Trademark Disputes

Business realities—not first use—will determine the owners of unregistered trademarks

Kristen L. Burge

The United States Court of Appeals for the Third Circuit has rejected the traditional "first use" standard and replaced it with a new test for determining the outcome of certain trademark disputes. The appellate court adopted the test set forth in McCarthy on Trademarks and Unfair Competition, which considers the realities of business relationships, will determine ownership of a disputed trademark as between a manufacturer and a distributor. The distributer may acquire ownership only by demonstrating that the "McCarthy test" factors weigh in its favor, and the first use of an unregistered mark is not determinative.

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District Court Uses First-Use Test to Resolve Ownership

In Covertech Fabricating, Inc. v. TVM Building Products, Inc., the district court determined trademark ownership in favor of the manufacturer based on its first use of the mark. Covertech Fabricating, Inc., a Canadian manufacturer, produced protective packaging and reflective insulation materials. In 1998, TVM Building Products, Inc., a U.S. distributor of specialty building products, entered into an exclusive distribution agreement with Covertech. Under that agreement, TVM was responsible for marketing, sales, customer service, and technical support for Covertech products sold in the U.S.

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