IP Law Daily Senate panel considers targeting fraudulent marks cluttering principal register
Wednesday, December 4, 2019

Senate panel considers targeting fraudulent marks cluttering principal register

By Cheryl Beise, J.D.

Witnesses urge lawmakers to amend Lanham Act to make it easier to detect and expunge fraudulent applications and registrations.

On December 3, 2019, the Senate Judiciary Committee’s Intellectual Property Subcommittee held a hearing on the increasing number of applications and registrations for fraudulent trademarks that are cluttering the trademark register and potentially depleting the pool of available marks. Five witnesses appeared at the hearing, titled "Fraudulent Trademarks: How They Undermine the Trademark System and Harm American Consumers and Businesses." While the USPTO has taken steps recently to improve the integrity of the trademark register—such as implanting a specimens pilot mailbox for third parties to report suspicious actors, instituting a post-registration audit program to remove unused marks, and requiring foreign filers to use U.S. counsel—the witnesses agreed that more must be done to protect legitimate trademarks and halt the influx of fraudulent applications and registrations, many of which originate in China.

Subcommittee chairman Thom Tillis (R-NC) solicited comments from the witnesses on the scope of the problem and possible legislative remedies. The chairman said that he hoped this hearing would be the first of several on this topic. Legislation is reportedly being considered in both chambers of Congress, but to date no bill has been introduced. The witnesses testifying at the hearing were:

Barton Beebe, who has conducted an empirical study on trademark fraud and depletion and has co-authored a Harvard Law Review article on the subject, indicated that nearly two-thirds of use-based applications for registration of marks originating from China for Class 25 goods include fraudulent specimens of use and nearly 40% of this applications proceeded to registration. To address this problem, Beebe suggested that instituting specialization of trademark examiners according to subject matter—similar to patent examiners—could help examiners better recognize and address indicia of fraud in the application process. He also suggested that any legislation should include an annual report to Congress regarding fraud on the principal register.

Douglas Rettew, as an intellectual property litigator, primarily advocated for the reinstitution of the rebuttable presumption of irreparable harm standard for issuance of preliminary injunctions. After the Supreme Court’s 2006 decision in eBay Inc., v. MercExchange, LLC, 547 U.S. 388 (2006)—holding that concrete harm must be alleged to obtain injunctions in patent cases—courts have struggled with whether the same standard should apply in Lanham Act cases. As a result, different standards have been adopted by various circuit courts, with the Ninth Circuit taken the hardest line. Rettew specifically proposed amending the Lanham Act to include the presumption of irreparable harm. Rettew explained that, unlike patent infringement, trademark infringement causes irreparable damage to business reputation and goodwill, as well as consumer confusion in the marketplace. The reestablishment of the presumption of harm in trademark cases would help brand owners police their marks through litigation where courts can restrain bad actors early in the process.

Megan Bannigan emphasized the necessity of an accurate trademark register. She described not only outright fraud, but also the problem caused by registrants obtaining protection for marks in classes of goods beyond actual use. One reason such abuses have proliferated is because legitimate business seeking cancellation of a mark must meet a very stringent standard (clear and convincing evidence that an applicant or registrant knowingly made a false, material misrepresentation with the intent to deceive the USPTO) to establish fraudulent procurement and overcome the presumption of validity attached to a registered mark. Bannington suggested that applicants should be required to submit a specimen for each good and service for which it is registered, not just one per class; foreign applicants should have to be represented by U.S. counsel; and a streamlined procedure should be implemented for third parties to seek expungement of marks that are not actually used on the goods and services identified in a registration.

Williams—who supervises the Start-Up Ventures Legal Clinic at the Duke University School of Law—said that it would be helpful for small businesses if the USPTO were to implement simplified ex parte procedures for third-parties to challenge the validity of registrations on an anonymous basis to avoid retribution from a large business owner or trademark troll. Williams also drew attention to the problem of Chinese applicants fraudulently using the credentials of U.S. attorneys.

Lee, who is leading an effort by Target Corporation to expand its brands—making it the leading trademark filer in the United States presently—has directly encountered problems with fraudulent and bad faith registrations blocking its ability to register new marks. Lee has compiled a list of attributes he describes as hallmarks of fraudulent registrations. Lee suggests that Congress should consider: modernizing the USPTO toolkit for reviewing fraudulent applications; shortening the time to respond in USPTO Office Actions, for example, from the current six months to 90 days to bring issues to resolution sooner; allowing third parties to object and offer evidence regarding pending applications; and requiring the USPTO to provide an annual report to Congress on fraudulent filings and decluttering efforts.

MainStory: TopStory Trademark USPTO

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