IP Law Daily New legislation targets fraudulent trademark applications
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Thursday, March 12, 2020

New legislation targets fraudulent trademark applications

By Cheryl Beise, J.D.

Bipartisan House and Senate lawmakers introduce measure to combat influx of fraudulent trademark applications from China.

Congressman Hank Johnson (D-Ga.) and Senator Thom Tillis (R-N.C.) have introduced bipartisan legislation to give the U.S. Patent and Trademark Office tools to address recent increases in fraudulent trademark filings. The Trademark Modernization (TM) Act of 2020 (H.R. 6196 and S. 3449) would create expedited ex parte trademark cancellation procedures and codify the presumption of harm for trademark violations. "In particular, the bill provides options to combat an influx of trademark applications from China that rely on doctored photographs to procure trademark registrations," according to a March 11 news release.

The TM Act would amend the Lanham Act to:

  1. Create new procedures at the USPTO to address false and inaccurate use claims in trademark applications and registrations by providing expedited procedures to cancel trademark registrations for marks that have not been used: ex parte expungement for marks never used in U.S. Commerce and ex parte reexamination of trademark registrations covering marks for which improper use claims were made during the examination process before registration.
  2. Codify additional trademark examination procedures to give the U.S. Patent and Trademark Office flexibility and additional authority to gather evidence during examination. For example, the law would provide a process for third-parties to submit relevant evidence during examination, including that the mark has not been used in commerce. Current law provides that a third party can only request cancellation of a trademark registration through an inter partes procedure before the Trademark Trial and Appeal Board or in a lawsuit in district court. The USPTO also would have greater flexibility in setting times for response to office actions issued during examination. Currently, the statute requires that the USPTO allow six months to respond. The new provision would allow the office to set response periods, by regulation, for a time period between 60 days and six months, with the option for an applicant to request extensions to a full six-month period.
  3. Clarify that a rebuttable presumption of irreparable harm exists for trademark violations, given the consumer protection concerns that would occur otherwise. Following the Supreme Court’s ruling in a patent infringement lawsuit holding that irreparable harm could not be presumed in that context, eBay, Inc. v. MercExchange LLC, 547 U.S. 388 (2006), a circuit split has developed as to whether irreparable harm can be presumed when a trademark violation has been proven.

"Trademarks contribute significant value to the U.S. economy," said Congressman Johnson. "It’s important that false and fraudulent statements made in trademark applications not serve to block legitimate market entrants—particularly small businesses—seeking trademark registrations. The Trademark Modernization Act gives the Patent and Trademark office important tools to address and combat these fraudulent practices, and to protect good-faith actors in the trademark system."

"The United States trademark system is long-overdue for an update to ensure it protects American consumers and brand owners," said Senator Tillis. "I am proud to introduce this much needed update with Senator Coons and Representatives Nadler, Collins, Roby and Johnson, and I will work to build bipartisan support so we can combat fraudulent trademark registrations coming from China to move our trademark system into the 21st century."

"Consumers rely on trademarks to purchase products and services from sources they trust," said Sen. Coons. "I am concerned that the recent flood of fraudulent trademark filings, many of which originate in China, have frustrated legitimate branding efforts by U.S. companies. Meanwhile, owners of trademarks for authentic products face unreasonable hurdles when trying to block the use of confusingly similar marks that would mislead the public – including dangerous counterfeit products from China."

In support of the TM Act, the lawmakers included letters from three witnesses who testified last December at a hearing on fraudulent trademarks held by the Senate Judiciary Committee’s Intellectual Property Subcommittee. Senator Tillis chairs that subcommittee.

Stephen Lee, Chief Intellectual Property Counsel for Target, expressed concern about fraudulent trademarks flooding the U.S. Register. "When the USPTO approves a fraudulent trademark application, it can effectively block our legitimate efforts to trademark our owned brands," Lee said. "The bill provides several different avenues for a third party, typically a trademark brandholder, to object and offer evidence regarding registrations and pending applications."

New York University School of Law Professors Barton Beebe and Jeanne Fromer, who have sounded the alarm on "trademark depletion," support the bill. Beebe and Fromer have empirically studied both trademark depletion and the submission of fake trademark specimens to the USPTO by entities based in China. "The problem of trademark depletion has been exacerbated in recent years by a surge of fraudulent applications originating from China. We have reported that a substantial proportion of applications originating in China include fraudulent specimens of use," the professors said. They estimate that two-thirds of use-based applications originating in China in 2017 in the apparel goods class included fraudulent specimens of use.

Thomas Williams, a Supervising Attorney with the Start-Up Ventures Clinic at Duke School of Law, said in support of the bill: "Creating opportunities for the voices of small businesses to be heard in these processes, as they seek to protect their brands, services and products, is critical to maintaining and extending the role of small entrepreneurs in our communities and the larger economy."

MainStory: TopStory Trademark FedTracker IP GCNNews

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