Scary Stories: Trademark Purgatory
First Use- versus -First to File
The United States is uniquely positioned when it comes to trademark law. Unlike many other countries or unions with a robust trademark system, we are a first to use country and not a first to file country. What does this mean? Well, say a started a clothing rental business for teens, tweens and in-betweens called, “Rent-A-Swag” in Pawnee, Indiana in 2015. It was a small business to start so you saw “no need” to file for a trademark application. Over the past few years, the business gained popularity because parents and teen boys liked that they could rent designer clothes for a fraction of the retail price. Fast forward to 2019 and you have hundreds of thousands of followers on social media, a celeb following, and there is talk of competitors opening other similar stores nearby. Congratulations! You are a household name and your hard work has paid off. So you decide to finally get your IP portfolio in order and file a 1A trademark application for the name RENT-A-SWAG. You’ve actually been using the exclusive user of that name for years and under US law, that means you have a right to claim that mark as your own. However, upon filing for that application you find out, you are not alone.
Just a few months ago, another entity owned by Dr. Saperstein (your best friend’s dad) filed a 1B trademark application for the same exact name, RENT-A-SWAG. At first you are nervous. Could Dr. Saperstein really take your brand name away from you? Your panic subsides after a minute because you realize, the US is a first to use country and Dr. Saperstein’s application is a 1B intent to use application. This means Dr. Saperstein is not currently using the RENT-A-SWAG name in connection with any goods or services in the marketplace. Thus, your actual use of the mark since 2015 trumps his intended / future use of the mark under US law. You thank your lucky stars you are in Pawnee and not Paris (or worse, Eagleton) because the EU is a first to file union. Thus, if you were in Paris, even though you invented the name RENT-A-SWAG and your spent years building a fantastic business, Dr. Saperstein would be successful in his attempts to register the RENT-A-SWAG brand name. Why? Because Dr. Saperstein filed an application for the name before you did. And in first to file countries, that’s all that matters- who filed first. Not who used it first. Not whose idea it was. Not who made the brand into a household name. Just who filed first. You sigh with relief because the US does not operate that way so you are totally safe…or are you?
First Use Flaws
Since actual use beats out intended use under US trademark law, your are stunned when you get notice from the USPTO one day that your application has been suspended due to a prior pending application. (Dr. Saperstein’s pending application to be exact.) You call a trademark attorney and they explain that while, yes, the US is a first to use country, there was nothing in the USPTO’s trademark system indicating that you were already using the mark in commerce…because you hadn’t filed an application at that point. And, because your employee and BFF, Jean-Ralphio, grossly overstated his SEO experience, the examiner’s cursory internet search for RENT-A-SWAG did not turn up your business. Thus, Dr. Saperstein’s application was approved by the examiner for publication.
When a trademark application is published, it provides all potential mark users notice that the USPTO is considering registering the cited mark. The USPTO gives any party who opposed the registration of that cited mark a 30 day window to come forward and file a notice of opposition. Since you were unaware of Dr. Saperstein’s application a few months ago, the 30 day opposition has ended. You missed your chance to file a notice of opposition the attorney explains. You protest that since the US is a first use country, there should be a way to fix this. After all, it hardly seems fair that you spent years building a brand and now someone else can profit off your hard work. Your lawyer explains that not all hope is lost. However, the attorney lets you know that fighting Dr. Saperstein for the RENT-A-SWAG name just got a lot harder because your application has now entered trademark purgatory.
Trademark purgatory is what happens when a person’s actual use application is held up and prevented from being registered due to another person’s intent to use application. After the opposition period has successfully ended for an applicant, the USPTO gives them six months to file a Statement of Use (SOU). A SOU is proof filed by the applicant that they are now using the mark they applied for in connection with goods or services for sale. In your situation, since Dr. Saperstein’s application was an intent to use application and because it successfully cleared the opposition period, Dr. Saperstein has six months to file proof with the USPTO that he’s using the RENT-A-SWAG name in commerce like he planned. It has almost been six months and you know that Dr. Saperstein is nowhere near ready to open his RENT-A-SWAG business. He hasn’t even found a location for the store yet so you get excited because there is no way he will meet the USPTO deadline to file a SOU. Thus, the mark will be yours…or so you think.
Your attorney explains that if Dr. Saperstein is not using the RENT-A-SWAG name in commerce yet, he can file for an extension for his SOU deadline. Each extension, usually approved by the USPTO, gives Dr. Saperstein another six months to file a SOU. And if he is not using the name at the end of that extension period, he can file for an additional six month extension. This can go on for a period of years before Dr. Saperstein uses up all of his possible extension periods.
So what does this mean for your application? Well, the attorney explains, it sits in queue…for the entire length of time Dr. Saperstein’s application is pending. If Dr. Saperstein takes all of his extensions, that means your application is just pending and waiting…for years. You are not in control of your mark any more. The only thing you can do at this point is wait until either Dr. Saperstein:
registers the mark with the USPTO so you can file a cancellation action;
takes years to use up all of his extensions and the USPTO dismisses his pending application; or
abandons the application.
Thus, even though your actual use of the mark pre-dates Dr. Saperstein’s intended use of the mark - you are stuck in a holding pattern until he makes (or fails to make) a move. Understandably, you are frustrated. The potential length of time it could take to resolve this issue is protracted, expensive and worst of all…totally out of your hands. Even filing a cancellation action is an expensive process. So your attempt to save less than about $2,000 when opening your business has now cost you at least $4,000 plus years of stress and feelings of helplessness. You could re-brand entirely but that’s also costly as it means new creative, marketing, packaging, social media etc. Also, you will have to re-build your brand’s goodwill from the ground up again. Not to mention the additional $2,000 cost to file a trademark for the new brand because you are not going down this road again.
Moral of the Story
The best way to avoid trademark purgatory is to hire a trademark attorney to file your trademark application before you go public with the name. A Google search is not enough. A search of TESS is not enough. A URL search is not enough. A comprehensive search by a trademark legal professional who knows where to look and what to look for is your best bet when securing a name for your business. When you and your counsel feel good about the name chosen, then move forward to file a 1B application. By doing so you are now putting yourself and your brand first in line for that great mark. Anyone who applies after you will be held up by your pending application…and not the other way around. Thus, you are putting others on notice to not the use the mark you selected because you are planning on using it in the future. Also, you are avoiding the chance of being stuck in trademark purgatory again. Strategizing with proper trademark counsel before using a mark in commerce saves you untold amounts of time, energy, goodwill, money and most important of all, sanity.
This blog post is the first in a new series of “Scary Stories” debuting in October. Every Monday, Wednesday and Friday during the month Neon Esquire will highlight legal problems that actual businesses faced in 2019. Our goal is not to shame or embarrass those affected but rather to educate other brands about current legal battles so they can proactively prepare- and hopefully avoid- falling into similar situations.