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PTO Outlines New Process to Impose Sanctions for Improper Trademark Practices

As part of its initiative to “protect the integrity of the U.S. trademark register,” the US Patent and Trademark Office (PTO) issued a Federal Register notice outlining a new administrative process to address fraudulent or improper trademark submissions.

Under this new process, the commissioner for trademarks can investigate and sanction actions that appear to violate the Trademark Rules of Practice or the PTO website terms of use. The commissioner may initiate an investigation based on information received from examining attorneys or data analytics personnel or via external sources such as letters of protest, the tmscams@uspto.gov mailbox, law enforcement and media reports.

Applications will be removed from examination pending an investigation, and a suspension letter will be issued. All documents associated with this process will be posted in the electronic record, which is available to the public via the Trademark Status and Document Retrieval (TSDR) database.

If the investigation does not result in an administrative order, the application will be removed from suspension and assigned (or reassigned) to the examining attorney for consideration. If, however, the PTO identifies conduct that suggests a potential violation of the PTO rules or the PTO website terms of use, it will issue an order to show cause why sanctions should not be imposed on the relevant parties (e.g., applicants, registrants or any involved third parties). The order will set a response deadline and identify the violation, the relevant application(s) and/or registration(s) and the proposed sanction. Appropriate sanctions may include, for example, terminating the relevant application(s), striking a submission, prohibiting a party from appearing before the PTO in trademark matters or deactivating certain USPTO.gov accounts.

If the PTO issues a sanction order terminating a pending application, the TSDR records will reflect that order in the application prosecution history. Where the order includes the sanction of termination involving a registration that issued before the administrative process was initiated, the PTO will not terminate the registration, but the online TSDR records will be updated to note that the registration was subject to sanctions and such entries may affect the validity of that registration.

The notice also states that “additional actions” may be taken if a sanctioned actor repeatedly violates the PTO rules or the PTO website terms of use.

Comments on the notice are due by January 20, 2022.

Practice Note: This is just one of the many ways the PTO is trying to address fraudulent filings. The PTO recently issued sanctions where it found evidence of fraudulent applications and violations of the PTO Rules of Professional Conduct.




Change the Look of the Room: Appeal Transferred to Federal Circuit

The US Court of Appeals for the Second Circuit transferred an appeal of a preliminary injunction enjoining alleged copyright and trademark infringement to the US Court of Appeals for the Federal Circuit because the operative complaint included six counts of patent infringement and thus arose under patent law. Hudson Furniture, Inc. et al. v. Lighting Design Wholesalers Inc., Case No. 20-3299 (2d Cir. Dec. 21, 2021) (Livingston, CJ; Kearse, Lee, JJ.) (per curiam).

Hudson filed a complaint against Lighting Design alleging patent, trademark and copyright infringement. The district court granted Hudson’s preliminary injunction and enjoined Lighting Design from alleged infringement of Hudson’s copyrights and trademarks. The district court also denied Lighting Design’s motion to dismiss for lack of personal jurisdiction and its motion for reconsideration permitting alternative service of process. Lighting Design appealed the rulings to the Second Circuit.

Hudson asked the Second Circuit to dismiss the appeal, arguing that the appeal arose from a complaint involving patent law claims and thus fell under the exclusive jurisdiction of the Federal Circuit. Under 28 U.S.C. §§ 1292 and 1295, the Federal Circuit has exclusive jurisdiction over interlocutory appeals involving any action that arises under any act of US Congress relating to patents. An action arises under patent law when a well-pleaded complaint establishes that (1) federal law creates the cause of action or (2) the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law.

The Second Circuit agreed that exclusive jurisdiction rested with the Federal Circuit, explaining that the operative complaint included six counts of patent infringement, and the appeal concerned the district court’s ruling on a motion for injunctive relief involving patent law and non-patent law claims. The Court rejected Lighting Design’s argument that patent law did not constitute a substantial part of the overall success of the case since Hudson failed to secure preliminary injunctive related to the patent law claims. The Court explained that Lighting Design’s argument focused on only the second basis for Federal Circuit jurisdiction (whether the right to relief depends on a “substantial question” related to patent law). The Court found that even if it accepted Lighting Design’s argument, the fact that federal patent law created the cause of action was sufficient to establish Federal Circuit jurisdiction under the first basis of jurisdiction. While the Second Circuit agreed with Hudson, it declined to dismiss the appeal and instead opted to transfer the appeal to the Federal Circuit because the original appeal was timely filed in good faith and transferring the appeal was in the interest of justice.




PTO Will Transition to Electronic Issuance of Patents and Trademarks

The US Patent & Trademark Office (PTO) announced on December 10, 2021, that it intends to transition to electronic issuance of patents and trademarks in 2022. Under the current rule (37 C.F.R § 1.315), the PTO must deliver or mail a patent “upon issuance to the correspondence address of record.” The PTO will soon issue a notice of proposed rulemaking to seek public feedback on revising the rules of practice to issue patents electronically. Under the proposed changes, the PTO would no longer mail patents to the applicant. Instead, the PTO would issue patents electronically via the Patent Center and Patent Application Image Retrieval, from which the patents could be downloaded and printed.

While no changes to the trademark rules are necessary, the PTO will also issue a public request for comments on replacing paper registration certificates with digital versions.

The PTO believes that electronic issuance will reduce the time it takes for a patent or trademark to issue by about two weeks.

Once the transition is complete, applicants can still receive a paper copy of the issued patents and trademark registration certificates with an embossed gold seal and the director’s signature (i.e., a ribbon certificate) for a fee of $25 per copy.




PTO Publishes Regulations to Implement Trademark Modernization Act

The US Patent and Trademark Office (PTO) recently published its final rules implementing provisions of the Trademark Modernization Act of 2020 (TMA). Most changes are effective as of December 18, 2021, but certain changes (i.e., adjustments to the office action response period) won’t go into effect until December 1, 2022. The new regulations are summarized below.

Ex Parte Proceedings

The TMA created two new ex parte proceedings by which any third party (including the PTO director) can seek to challenge registrations for nonuse: Reexamination and expungement.

One of the TMA’s underlying legislative aims was to clean up the “clutter[ed]” register by removing registrations for marks not properly in use in commerce. These new proceedings offer efficient and less expensive alternatives to a cancellation proceeding before the Trademark Trial and Appeal Board (Board).

Reexamination

Any party (or the PTO director) can file a reexamination action to cancel some or all of the goods or services covered by a use-based registration if the trademark was not in use in commerce in connection with those goods or services before (1) the application filing date when the application was based on Section 1(a) (Use in Commerce), or (2) if the application was filed based on Section 1(b) (Intent to Use), the date the amendment to allege use was filed, or the deadline by which the applicant needed to file a statement of use, whichever is later. A reexamination proceeding must be initiated within the first five years of registration.

Expungement

Similarly, an expungement action can be brought by any party (including the PTO director) seeking to cancel some or all of the goods and/or services from a registration based on the registrant never having used the trademark in commerce in connection with the relevant goods/services. An expungement proceeding must be initiated between the third and 10th year of registration. However, until December 27, 2023, an expungement action can be requested for any registration that is at least three years old, regardless of how long it has been registered.

Requirements for Ex Parte Petitions

The final rules detail the requirements for a petition for expungement or reexamination:

  • A $400 fee
  • The US trademark registration number of the registration being challenged
  • The basis for the petition
  • The name and contact information of the petitioner
  • The name and contact information of the designated attorney, if any
  • A list of the goods and services that are subject to challenge
  • A verified statement of the facts, which should include details of the reasonable investigation of nonuse and a “concise factual statement of the relevant basis for the petition”
  • Copies of the supporting evidence with an itemized index.

A reasonable investigation of nonuse will vary depending on the nature of the goods and/or services but “should focus on the mark disclosed in the registration and the identified goods and/or services, keeping in mind their scope and applicable trade channels.” Also, “[a]s a general matter, a single search using an internet search engine likely would not be [...]

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Big Little Lies: Guidelines for Challenging Trademark Acquired Distinctiveness Claims

For the second time, the US Court of Appeals for the Federal Circuit examined the standard for demonstrating fraud in a party’s claim of a trademark’s acquired distinctiveness for purposes of registration under Section 2(f) of the Lanham Act. The Federal Circuit found that a party challenging an applicant’s Section 2(f) claim based on substantially exclusive use of that trademark does not need to establish secondary meaning in its own mark to undercut the applicant’s claim of substantially exclusive use. The Court also found that use of the mark by any party, regardless of its relationship to the challenger, may undercut a trademark applicant’s claim of substantially exclusive use. Galperti, Inc. v. Galperti S.R.L., Case No. 21-1011 (Fed. Cir. Nov. 12, 2021) (Taranto, J.)

Galperti S.R.L. (Galperti-Italy) filed a US trademark registration for the mark GALPERTI in 2008. In an effort to overcome the US Patent and Trademark Office’s (PTO) initial refusal to register the trademark as “primarily merely a surname” (and therefore not registrable unless the mark has become distinctive of the applicant’s goods in commerce), Galperti-Italy asserted acquired distinctiveness of the GALPERTI mark under Section 2(f) and stated that the mark had become distinctive of Galperti-Italy’s metal hardware goods through its substantially exclusive and continuous use in commerce for the five years prior to the trademark registration. In 2013, Galperti-USA, a US company unrelated to Galperti-Italy that operates in the similar business of metal flanges and related products, petitioned to cancel Galperti-Italy’s registration on various grounds, including fraud in Galperti-Italy’s claim of substantially exclusive use of the GALPERTI trademark during the years 2002 – 2007. Galperti-USA claimed that it and other third parties also used the mark during that time, undercutting Galperti-Italy’s “substantially exclusive use” claims.

The Trademark Trial and Appeal Board (Board) rejected Galperti-USA’s cancellation claims, including the fraud claim. Galperti-USA filed its first appeal, and the Federal Circuit vacated the Board’s determination that Galperti-USA failed to prove the falsity of Galperti-Italy’s Section 2(f) claim. The Court remanded to the Board to assess whether the other uses of GALPERTI noted by Galperti-USA were significant or inconsequential, which would impact the proof of falsity of Galperti-Italy’s representations to the PTO. On remand, the Board again found that Galperti-USA failed to prove significant—rather than inconsequential—uses of GALPERTI between the years 2002 – 2007 so as to make Galperti-Italy’s representations of “substantially exclusive use” false. Galperti-USA filed its second appeal.

In this appeal, Galperti-USA challenged the Board’s conclusions that (1) Galperti-USA had to show that it acquired secondary meaning in its own GALPERTI trademark during the relevant time period, and (2) Galperti-USA could not undercut Galperti-Italy’s claims of substantially exclusive use with evidence of use by third parties with no privity to Galperti-USA. The Federal Circuit determined that both of the Board’s premises for its fraud analysis were incorrect as a matter of law, and it was therefore unclear whether the Board’s determination was affected by these errors. Taking a closer look at the Board’s conclusions, the Court found that [...]

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Standing Challenge Brews Trouble in Trademark Dispute

Addressing for the first time Article III standing in a trademark case, the US Court of Appeals for the Federal Circuit held that hypothetical future injury is insufficient to establish standing to oppose a trademark application. Brooklyn Brewery Corp. v. Brooklyn Brew Shop, LLC, Case No. 20-2277 (Fed. Cir. Oct. 27, 2021) (Dyk, J.)

Brooklyn Brewery brews and sells craft beers. Brooklyn Brew Shop (BBS) sells beer-making kits and related accessories. Between 2011 and 2016, the Brewery and BBS collaborated on the sale of co-branded beer-making kits. In 2011, BBS obtained a trademark in its name for beer-making kits. In 2014, BBS filed an application to register a mark in its name for several Class 32 goods, including various types of beer and beer-making kits, as well as Class 5 “sanitizing preparations.”

In 2015, the Brewery petitioned for cancellation of BBS’s 2011 trademark registration and filed a notice of opposition to BBS’s 2014 trademark application. The Trademark Trial & Appeal Board (TTAB) denied the petition for cancellation and rejected the opposition. The Brewery appealed.

On appeal, the Federal Circuit first addressed whether the Brewery had standing to appeal the TTAB’s decision. The Court noted that while it “ha[d] not yet had occasion to address Article III standing in a trademark case,” a party appealing a TTAB decision must satisfy both statutory and Article III requirements. The Court held that the Brewery did not have Article III standing to appeal the TTAB’s decision dismissing the opposition with respect to the Class 5 sanitizing preparations because the Brewery did not make or sell sanitizing preparations. The Court found the possibility that the Brewery might someday expand its business to include the sale of sanitizing preparations was not enough to establish the injury-in-fact prong of the Article III standing test. However, the Court found that the Brewery’s past involvement in the sale of co-branded beer-making kits with BBS was sufficient to establish the Brewery’s standing to challenge BBS’s registration and application for Class 32 beer-making kits.

On the merits, the Federal Circuit affirmed the TTAB’s decision with respect to BBS’s 2011 trademark registration. The Court agreed with the TTAB that the Brewery failed to establish inevitable confusion as to the beer-making kits and failed to establish that BBS’s mark was merely descriptive. The Court vacated the TTAB’s decision with respect to the 2014 trademark application, finding that the TTAB erred by not considering whether BBS proved acquired distinctiveness of its application and remanded for further proceedings.

Practice Note: Before seeking review of a TTAB decision in federal court, a party should ensure that it has satisfied the three-part test for Article III standing.




US Lawyers Aiding Scam Trademark Applications May Face Sanctions

As reported by the US Patent & Trademark Office (PTO) this past summer, since mid-2020 trademark applications from US and foreign applicants have “surged to unprecedented levels.” In December 2020 alone, the PTO received 92,608 trademark applications, an increase of 172% over December 2019. Not only has this extraordinary volume of applications created a backlog and delay in the procedural review of new US trademark application filings, but the PTO is experiencing a notable increase in what it calls “suspicious submissions ranging from inaccurate to fraudulent.”

These illegitimate trademark filings harm the quality and integrity of the trademark register and have significant legal and financial impact on legitimate brand owners whose applications may be blocked by fraudulent filings for marks that are identical or similar to their real brands. Faced with a legal obligation to defend and enforce their trademarks, legitimate brand owners are forced to dispute such illegitimate filings with letters of protest, by filing oppositions or cancellation actions in the Trademark Trial & Appeal Board, and even by taking action in the federal courts. Such enforcement and defensive actions can clog up these forums and force brand owners to take on costs that would not otherwise be necessary, and which may distract from, or reduce the budget for, real trademark disputes.

The PTO outlined various strategies and tools to review, assess, challenge and combat suspicious and fraudulent filings, including aspects of the Trademark Modernization Act of 2020. In 2019, the PTO also implemented a rule requiring any overseas trademark applicant to file with a US lawyer. The requirement for a US lawyer appears to have resulted in many foreign applicants (primarily from China) making up fake names, addresses and bar credentials for the US lawyers named in their applications. Not all named US lawyers are fake, however, as the PTO’s investigations into certain lawyers lodging a high volume of trademark filings for Chinese-based applicants have revealed that some US-based lawyers may be taking on clients from China without conducting proper diligence as to the veracity of the client’s trademark application information. For example, the PTO’s investigation of some potentially illegitimate filings from applicants in China reveal doctored or disingenuous specimens of use, including e-commerce listings for products that may not actually exist or are no longer “in stock” (and likely never were “in stock”).

In September 2021, the PTO’s investigations into US lawyers with a high volume of filings for Chinese applicants resulted in two sanctions orders. The first was issued against a lawyer found to have filed thousands of applications for overseas parties deemed fraudulent by operating as a US-based agent for a centralized “filing gateway” platform located in India. The sanction order includes a 12-month probationary period and required ethics and trademarks classes. The second sanction against a US-based lawyer specifically noted that the lawyer did not do enough to properly review the applications that they signed on behalf of an applicant based in China. It has [...]

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Party May Not Veil EU Individual’s Information under GDPR at the TTAB

In a rare precedential opinion, the Trademark Trial & Appeal Board (TTAB, Board) ruled that the EU General Data Protection Regulation (GDPR) does not apply in Board proceedings. Chicago Mercantile Exchange, Inc. v. Intercontinental Exchange Holdings, Inc., Opposition Nos. 91235909; 91254514 (T.T.A.B. Sept. 27, 2021) (Faint, Interlocutory Attorney).

This was a consolidated proceeding between Chicago Mercantile Exchange and New York Mercantile Exchange (collectively, CME) and Intercontinental Exchange Holdings (ICE) and brought before the TTAB. CME sought to amend the Board’s standard protective order (SPO) to allow in-house access to information and materials designated by ICE as “Confidential – Attorney’s Eyes Only” and asked the TTAB to find that the EU GDPR does not apply in the proceedings.

The Board’s SPO is automatically imposed in all inter partes proceedings. In order for the Board to disturb their SPO, CME needed to show that protection of ICE’s trade secrets will impair CME’s prosecution of its claims. ICE asserted that CME failed to show good cause for modification of the SPO and the Board agreed. As an initial matter, CME failed to provide information sufficient for the Board to determine in-house counsel’s responsibilities, including whether those responsibilities included competitive decision-making such that disclosure to in-house counsel would competitively harm ICE. Secondly, CME failed to clearly demonstrate that there was a need for access to the highly sensitive competitive information to adequately prepare its case. Accordingly, the Board denied CME’s motion to amend the protective order.

CME next raised the issue of whether ICE may redact names, email addresses and other information from documents and electronically stored information (ESI) originating in the European Union prior to its production on the basis that the GDPR requires such redaction. CME argued that because ICE waited more than 18 months to assert this objection, the objection is waived, that CME will be severely prejudiced if ICE’s objection stands and that the GDPR does not apply in inter partes Board proceedings.

For background, the GDPR is an EU regulation made effective May 25, 2018, in order to protect the privacy and security of EU citizens’ personal data by limiting the transfer of such information among member states of the European Union, as well as between the European Union and other countries, including the United States. The broad definition given to “personal data” in the GDPR encompasses “any information relating to an identified or identifiable person.” However, this class of information (an individual’s name, position, job title and email address) is generally required to be produced in discovery pursuant to the Fed. R. Civ. Pro. 26(b)(1).

In this precedential decision, the Board, citing the 1987 Supreme Court case Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court, established that a foreign country’s law precluding disclosure of evidence in US courts and tribunals will generally not deprive those courts and tribunals of “the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.”. Additionally, the GDPR does not per [...]

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No Immunity: State Right of Publicity Law is § 230 “Law Pertaining to Intellectual Property”

The US Court of Appeals for the Third Circuit held that § 230 of the Communications Decency Act, 47 U.S.C. § 230(c), does not preclude claims based on state intellectual property laws, reversing in part a district court’s dismissal of a plaintiff’s state law claims for violation of her right of publicity. Hepp v. Facebook, Case Nos. 20-2725; – 2885 (3d Cir. Sept. 23, 2021) (Hardiman, J.) (Cowen, J., concurring in part and dissenting in part).

In 2018, Karen Hepp, a Philadelphia newscaster, discovered a photo of herself making its way around the internet. The picture, taken without Hepp’s knowledge or consent, depicts her smiling in a convenience store and was posted in two locations online. The first post was a Facebook advertisement promoting a dating service, which encouraged users to “meet and chat with single women near you.” The second post was to Imgur and was subsequently linked to a Reddit thread, where it spurred a flurry of indecent user commentary. Hepp sued Facebook, Imgur and Reddit for violations of Pennsylvania’s right of publicity statute. The district court dismissed Hepp’s claims with prejudice, holding that all three companies were entitled to immunity as internet service providers under § 230(c). Hepp appealed.

The Third Circuit found that the district court lacked personal jurisdiction over Imgur and Reddit on a “purposeful availment” minimum contacts basis and affirmed dismissal of the claims against those parties.

With respect to Facebook, the Third Circuit considered whether it was immune under § 230(c). Section 230 of the Communications Decency Act was intended to promote the internet, specifically by preserving “the vibrant and competitive free market …unfettered by Federal or State regulation.” Accordingly, § 230(c) provides Good Samaritan protection for internet service providers, encouraging them to host and moderate third-party content by immunizing them from some publisher liability regarding certain moderation decisions. However, pursuant to § 230(e)(2), such immunization does not “limit or expand any law pertaining to intellectual property.”

The first question addressed by the Third Circuit was whether § 230(e)(2) can apply to state law claims generally. The Court acknowledged that precious few cases interpreting § 230’s intellectual property provision exist, and that the existing cases present a clear split on whether § 230(e)(2) applies only to federal intellectual property claims. The Court, adhering to what it regarded as the most natural reading of § 230(e)(2), (i.e., that a state law can be a “law pertaining to intellectual property law”) determined that application of § 230(e)(2) was not limited to federal claims. The Court was not persuaded by Facebook’s policy arguments regarding a purported increase in uncertainty regarding the contours of § 230(c) immunity if state law intellectual property claims, which vary from state to state, were exempt from such immunity.

The second question the Third Circuit addressed was whether Hepp’s right of publicity claim arose from a “law pertaining to intellectual property.” In finding that it did, the Court relied on a survey of legal dictionaries and determined that the term “intellectual property” [...]

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TTAB Cancellation Proceedings Not Preclusive in District Court, Even Between Same Parties

Addressing the preclusive effect of judgments by tribunals with limited jurisdiction, the US Court of Appeals for the Third Circuit held that trademark cancellation proceedings before the Trademark Trial & Appeal Board (TTAB) do not have preclusive effect against trademark infringement lawsuits in federal district courts. Beasley v. Howard, Case No. 20-1119 (3d Cir. Sept. 17, 2021) (Chagares, J.)

In 1969, Beasley started a band named The Ebonys. In the mid-1990s, Howard joined the band, and in 1997, Beasley obtained a New Jersey state service mark for “The Ebonys.” Several years later, Beasley and Howard parted ways. In 2012, Howard registered “The Ebonys” as a federal trademark with the US Patent & Trademark Office (PTO).

In 2013, Beasley filed a petition with the TTAB to cancel Howard’s mark, arguing that Howard had defrauded the PTO. The TTAB rejected Beasley’s 2013 petition. In 2017, Beasley filed a second petition with the TTAB, again arguing that Howard had defrauded the PTO and for the first time arguing that Howard’s mark could be confused with Beasley’s separate “The Ebonys” mark. The TTAB rejected Beasley’s 2017 petition, this time on claim preclusion grounds, finding that Beasley should have asserted his likelihood-of-confusion claim in his 2013 petition. Beasley did not appeal either dismissal.

In 2019, Beasley initiated a lawsuit in federal district court, requesting that the court vacate Howard’s mark, award Beasley monetary damages and permit Beasley to register his own “The Ebonys” mark with the PTO. The district court dismissed Beasley’s complaint, finding that claim preclusion applied because the complaint turned on the same factual and legal arguments litigated in the 2017 petition, even though Beasley did not seek damages in the 2017 petition. Beasley appealed.

The Third Circuit reversed the dismissal, concluding that the TTAB’ s cancellation proceedings did not preclude Beasley from bringing his § 43(a) infringement claim in the district court. The Court noted that the TTAB has limited jurisdiction to determine the right to register a trademark and does not have authority to consider questions of infringement, unfair competition, injunctions or damages. It reasoned that because the TTAB does not have jurisdiction to award any remedy beyond cancellation of the mark, a broader § 43(a) cause of action for deceptive use in commerce, as alleged by Beasley, could not have been brought in a TTAB cancellation proceeding.

The Third Circuit also rejected Howard’s argument that Beasley should have brought trademark cancellation claims in the district court in the first instance, noting that even though a federal district court has authority to order a cancellation, a TTAB petition is the primary means of securing a cancellation, and that forcing Beasley to litigate in the district court in the first instance would “encourage[] litigants to sit on their claims and undermine[] the Lanham Act’s adjudicative mechanisms.”

Practice Note: In the Third Circuit, plaintiffs are encouraged to bring their trademark cancellation claims before the TTAB in the first instance, rather than waiting to bring their trademark cancellation and trademark infringement claims together before [...]

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