Parallel Imports « Trademark Law Litigation

March 3, 2009

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General Agreement on Tariffs and Trade (GATT) :

The GATT was originally created in 1946 to work out international agreements on world merchandise trade. Since then there have been several “rounds” of the GATT. While serious trademark discussions occurred in the Tokyo Round of the 70’s and again in the ’80s, it wasn’t until the Geneva Round in which TRIPs (Trade Related aspects of Intellectual Property) marked a true involvement of GATT into the area of intellectual property. The WTO (World Trade Organization) and the TRIPs Council monitor the implementation of TRIPs and its enforcement mechanisms. One of the specific changes to U.S. law arising out of GATT are the 1995 amendments to Lanham Act. Specifically section 2(a) was amended to include a prohibition against the registration of any geographical mark for wines or spirits not from the place indicated in the mark.

Generic marks :

These are words or symbols that describe the product or service itself as a category, rather than distinguish between competing versions of the product or service. For example, “shredded wheat” is a generic term that refers to the category of breakfast cereals that are composed of layers of crunchy wheat strips molded together into a pillow-type shape. This cereal may be manufactured by Kellogg’s, Post or others., and each manufacturer is free to use the term “shredded wheat” to advertise their version of the cereal. To prevent them from using “shredded wheat” would mean they could not equally compete with regard to this product. Thus, generic words are not protected as trademarks precisely because to do so would be akin to granting a monopoly in the product itself, not in a word or symbol.

Genericness as a defense :

Defendants can succeed with a genericness defense when the mark which has allegedly been infringed is a mark that describes the entire category or genus of product that the mark is supposed to distinguish, and thus cannot receive protection under the law. Generic marks are either generic from the outset, or become generic after they become part of the common descriptive name of a category or genus of products. Thus a mark that has been registered can loose its registration through a cancellation proceeding or by order of the court where the term has been shown to have become generic through use.

Genericide :

This occurs when a trademark starts out as distinctive or descriptive, but then though use becomes generic. This occurs when the mark becomes part of the common descriptive name of a category or genus of products. Genericide is more likely to happen to marks that are used improperly as nouns instead of adjectives, whether such usage is by the trademark owner or by others.

Geographically remote area :

An area in which a mark has no presence either through actual use, advertising or general reputation. As a general rule, a trademark owner has no rights in geographically remote areas, unless the mark is federally registered in which case the mark has nationwide priority, even if there is no presence in the mark for a given region. For unregistered marks, the doctrine of natural expansion provides another exception to the requirement that a trademark be used in a area in order for rights in it to exist.

Geographical terms, trademark protection of :

Geographical terms are those that convey to consumers a geographical connotation primarily or immediately , where such consumers are likely to believe that the underlying goods or services in fact come from that location. Such terms fall into three categories:

Primarily geographically descriptive;
Geographically deceptively misdescriptive; or
Geographically deceptive.

The first two are capable of protection if the owner can demonstrate they have acquired distinction through secondary meaning, while the latter of these, geographically deceptive marks are never capable of receiving protection. If the geographic mark is accurate, it is geographically descriptive. If not, then the mark is either geographically deceptively misdescriptive or geographically deceptive, depending on which test a court applies, and the facts of the situation.

A minority of courts look at the intent of the mark owner, while most courts look at whether or not consumers are likely to materially rely upon the misdescription. Thus a mark will be geographically deceptive if either the owner intended to to deceive the public about the origin of the product, or if consumers are likely to rely upon the misdescription in making their purchasing decisions. Finally, after the U.S. implementation of TRIPs, the Lanham Act. 2(a) has been amended to include a prohibition against the registration of any geographical mark for wines or spirits not from the place indicated in the mark.

Geographical territory :

The geographical territory is the territory in which one uses a mark. Use in a territory generally determines the extent of trademark rights granted to the user. The first to use a mark in one region has exclusive rights in the mark for that region, and a junior user of a mark in that region can be forced to cease using the mark there. However, the senior user cannot stop the junior user from using the mark in a different territory as long as the junior user is the first to use the mark in that particular territory. Two notable exceptions to this rule are nationwide priority which is only available to federally registered marks, and the doctrine of natural expansion, which is available to any mark owner.

Good faith defense :

When a defendant claims that use of plaintiff’s mark is defensible as a fair use, one deciding factor is whether or not the defendant was exercising good faith. Good faith means that the defendant did not use the mark in order to “cash in” on the plaintiffs hard work in generating goodwill with consumers. If it appears that defendant was justifiably using the mark in order to describe the underlying goods or services, then the defendant will likely be found to have had good faith in using the mark. Furthermore, since the plaintiff in a trademark lawsuit is often seeking injunctive relief, which is an equitable remedy requiring the balancing of harms, whether or not the defendant exercised good faith or bad faith can have a considerable impact on the court’s decision.

Goodwill :

An intangible reward for businesses once they generate “name recognition” and establish public confidence in their goods or services. When this happens, consumers want to return to that business for repeat purchases. Thus, as goodwill increases, so does demand, and the business can then raise its prices in accordance. Without trademarks, most businesses would be unable to establish goodwill because their customers would have no way of recognizing their products or services. Erosion of goodwill occurs when consumer confusion exists as to a product’s source. Thus, protection of goodwill is one of the primary purposes of trademark law, and is highly guarded.

Goodwill, assignment without :

Assignment or transfer of a trademark must occur in conjunction with the transfer of goodwill represented by that mark, or else the assignment is invalid. Furthermore, if assignment occurs without goodwill, the trademark is effectively abandoned Typically, it is the assignee’s rights in the mark that are abandoned, but sometimes it is the assignor that abandons its rights. The result of such an abandonment on the assignee is that the assignee cannot benefit from the early first use date of the assignor, and must instead go by the assignee’s date of first use in order to establish priority.

Grammatical rules when using marks :

Failure to use the proper grammatical rules when using a trademark may result in the mark becoming generic, and thereby loosing all its protection. Specifically, it is very important to always use the mark as if it were an adjective, and never use it as a noun. For example, do not allow marketing material to read, “Aurora is the best cat litter on the market.” Instead say, “Aurora brand cat litter is the best on the market,” or even “Aurora cat litter is the best….” This may seem a ridiculous distinction to some. However, the consequences for dismissing this advice are great. If your mark is challenged on the basis that it is generic, you will have a much harder time arguing that it is not generic when you have treated your mark as if it were a class of goods, rather than a single brand in a class of goods.”

Gray-market goods (Parallel Imports) :

These are goods that are manufactured abroad for sale in foreign countries and properly marked with trademarks registered in the United States. Later these goods are purchased and imported into the United States to compete with the United States trademark owner’s or licensee’s own products. There is considerable incentive to sell gray-market goods in the United States if the prices on goods sold abroad are substantially lower than those sold in the United States. The interesting dilemma created by gray-market goods is that there is ostensibly no trademark infringement since the mark does in fact represent the true source of the goods to which the mark is affixed. For this reason, Congress passed 19 U.S.C. § 1526 to address the problem by stopping such imports at the border, with a couple exceptions. If the foreign manufacturer who affixes the mark to the goods is a related company (i.e. subsidiary or brother -sister company) to the United States trademark owner, then 19 U.S.C. § 1526 will not prohibit the importation. The statute will also not prohibit the importation of goods that are purchased by an individual in a foreign country and brought into the United States for personal use and not for resale.

Grounds for cancellation :

Cancellation of a trademark registration can occur within the first five years of registration for any reason that the mark could have been precluded from registration in the first place. Specifically, that includes:

Likelihood of confusion with petitioner’s previously used or registered mark,
Fraud,
Descriptiveness,
Genericness,
Abandonment,
Misdescriptiveness and deceptiveness.

However, fair use, trademark misuse, unfair competition, or violation of anti-trust laws are generally not considered valid grounds for cancellation.
Five years after registration, and if incontestability status has been successfully obtained, the mark can no longer be canceled on the basis that the mark lacks distinctiveness or creates a likelihood of confusion with a prior-registered mark. However, the mark can still be canceled on the basis of:

(1) Genericness,

(2) Abandonment,

(3) Fraud,

(4) The mark is forbidden,

(5) The mark is an improperly used collective or certification mark,

(6) The mark disparages or falsely suggests a connection with persons, institutions, beliefs, or national symbols, or

(7) The mark is used to misrepresent the source of goods.

Since these latter two grounds (6 & 7) appear akin to likelihood of confusion, which is supposed to be ruled out as a ground for cancellation after the five year period, they have been the subject of criticism. In any event, if you are claiming cancellation on the basis of 6 or 7, you will inevitably need to prove something more than likelihood of confusion to succeed.

Grounds for dilution lawsuits :

In order to have a claim for federal trademark dilution, the mark in question must be famous, and use of the mark must either blur the mark’s product identification; or tarnish the affirmative associations conveyed by the mark. State dilution laws may have slightly different grounds, such a mark which is distinctive or well known, rather than one that is famous. Likelihood of confusion is not a required element of a federal dilution lawsuit.

Grounds for infringement lawsuits :

Grounds for trademark infringement lawsuits exist when there is use of another company’s trademark that is likely to cause an appreciable number of consumers to be confused about the source of the underlying goods or services. Such use must occur in the same geographic territory as the allegedly infringed mark being used. Click here for more information on confusingly similar marks.

Grounds for opposition :
The grounds for opposition can be as broad as “any person who believes that [they] would be damaged by the registration of a mark.” Despite this broad language, it is also true that the opposer must have a personal interest in the outcome beyond that of the general public, and generally involved with the goods or services that may be described by the alleged mark. Oppositions are most commonly filed when a mark is (1) likely to confuse consumers with respect to an existing mark, (2) descriptive, (3) generic, (4) misdescriptive, (5) deceptive, or (6) registered under fraud.

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Packaging, trademark protection of :

Protection is available for packaging as long as the elements claimed for trademark protection meet the requirements of a trademark. The elements that are protected may include the shape and color or overall coordination of these elements. However, only those elements that were designed specifically to promote the product are protected; not the functional features of packaging that have a utilitarian purpose.

Parallel Imports (Gray Market Goods) :

Goods that are not authorized for importation into the United States. These goods were legitimately sold outside the United States with the approval of the manufacturer, but were not supposed to be resold back into the United States. The importers of Gray Market Goods are attempting to benefit from the higher prices such goods command within the United States as compared to the country into which they were originally sold.

Paris Convention :

The International Convention for the Protection of Industrial Property. This treaty was originally signed in 1883 and grants, among other things, trademark rights based upon national treatment to all nationals whose countries signed onto the convention. A trademark registration in one’s home country sets the priority date for registrations made in all other member countries.

Patent and Trademark Office :

Otherwise known as the United States Patent and Trademark Office, or USPTO, this is the administrative body in the United States that oversees the registration and cancellation of trademarks on the Principal and Supplemental Register, as well as patents. Only attorneys can represent other parties before the USPTO, although individuals can represent their own companies. For trademark law, there is no special certification or license required for attorneys to practice before the USPTO. Trademark applications and all other correspondence should be addressed to “The Assistant Commissioner for Trademarks, 2900 Crystal Drive, Arlington, Virginia 22202-3513.” Initial trademark applications should be directed to “Box NEW APP / FEE,” while amendments to allege use should be directed to “Attn. AAU,” and statements alleging use or requests for an extension of time to file a statement of use should be directed to “Box ITU / FEE.”

Patent :

The exclusive right to use or sell an invention. The government, under the auspices of the U.S. Patent and Trademark Office, grants such rights only to new, useful and non-obvious ideas for machines, processes or certain designs. Drafting patent applications is an art that some say takes years to develop well. Depending on how the application is drafted a patent can offer very weak and narrow protection, or rather robust and strong protection. Although Pliam Law Group, PA does not practice in the area of patent law, we do strongly recommend the investment in a good patent attorney, and will gladly make recommendations on where to find a good patent attorney.
(More information at : http://www.epatent.biz )

Patent attorney :

It is not necessary to have a patent attorney doing trademark related work. A patent attorney is typically an attorney with an engineering or other scientific degree, and who is specially licensed to handle patent matters before the U.S. Patent and Trademark Office (USPTO). Except insofar as the USPTO governs trademark registrations, patents and trademark have virtually nothing in common, and thus there is no need to have a patent attorney for trademark work.

Personal names, trademark protection of :

Traditionally, courts have been reluctant proscribe the use of one’s own name in business even when another business exists by the same name. As such, courts would try to craft injunctions to be as narrow as possible to permit use of a personal name. More recently, courts have become increasingly insensitive to any prohibition on using one’s own name, where such use creates a likelihood of confusion for consumers. Thus, trademarks consisting of a person’s own last name (surname) are generally protected under trademark law once the mark has acquired secondary meaning. First names may not need to acquire secondary meaning, however they receive very weak protection generally.

Petitioner :

The party to a cancellation proceeding who seeks to cancel the Federal registration of a trademark held by the registrant in such an action.

Physical features, protection of :

Shapes or physical features of products or their containers may receive trademark protection if those features are distinctive and non-functional.

Plaintiff :

The party who brings a lawsuit. In a trademark suit, the plaintiff may be claiming trademark infringement and/or dilution, or may simply be requesting in a declaratory judgment action for the court to make a determination of which party has prior rights in a mark, or whether there even exists a valid conflict between two marks. Standing to sue in a trademark lawsuit exists once someone claims infringement and threatens to take some action either through the courts or the appropriate administrative body. If this happens, the party accused of infringing a trademark can become the plaintiff in a declaratory judgment action and thereby can often receive the advantage of a more convenient forum.

Plaintiff’s lost profits as damages :

The plaintiff’s lost profits may be awarded as damages in a trademark lawsuit, but monetary relief is generally reserved for cases of intentional infringement. To receive plaintiff’s lost sales as damages, the plaintiff must show that if it were not for the defendant’s infringing activities the plaintiff would have had a certain number of sales that were not in fact had. Proving this is often difficult since there may be a number of reasons besides defendant’s infringing use of the mark that could account for plaintiff’s lost sales. As such, a market survey may be necessary to prove such damages.

Prejudgment interest :

Interest awarded to a plaintiff in some jurisdictions for trademark infringement. Such interest may be calculated beginning from the date that infringement first began or the first date that plaintiff made a demand for settlement. When the ultimate damage award is large and the case protracted, prejudgment interest is not to be considered lightly.

Preliminary injunction (temporary injunction) :

An order from a court to prohibit or enforce certain conduct on a temporary basis until the court can make a determination based on all the facts and law of the case. The most common example of an injunction in trademark law is a court order to stop using a particular trademark. Since injunctive relief is an equitable remedy, the court will weigh the harm to defendant if the injunction is imposed against the harm to plaintiff if no injunction is ordered. The court will also require a bond to compensate the defendant in the event the injunction was wrongly ordered.

Presidents’ names, trademark protection for :

The Lanham Act specifically prohibits use of a President’s name as a trademark, if the President is alive, and has not given express written consent. If the President is deceased, but the President’s spouse is still alive, written consent must be obtained from the spouse before the President’s name may be used.

Prima facie evidence :

“Prima facie” is Latin for at first sight, or first appearance. Prima facie evidence is evidence that is sufficient on its face, and if not rebutted or contradicted will remain so.

Primarily geographically descriptive :

A term used in the manner of a trademark that conveys to the consumer a geographical connotation primarily or immediately. If the consumer is likely to believe that the underlying goods or services in fact come from that location, and that location is in fact the geographic origin of the underlying goods or services, then the mark is primarily geographically descriptive, and can be registered on the Supplemental Register, or on the Principal Register if the mark owner can demonstrate secondary meaning.

However, if the geographic term is not in fact the origin of the underlying goods or services, and the owner of the mark intended to deceive consumers with regard to geographic origin mark, or if the mark falsely induces purchasing decisions, then the mark may be geographically deceptive, and cannot be protected. A minority of courts look at the intent of the mark owner, while most courts look at whether or not consumers are likely to materially rely upon the misdescription. While proving intent with direct evidence is virtually impossible, courts may infer from the circumstances whether or not a person had bad intent. For this reason, it is probably a good idea to stay away from terms that falsely suggest qualities of a geographic region such as SWISS for watches not made in Switzerland, and WISCONSIN for Cheese not made in that state. Finally, after the U.S. implementation of TRIPs, the Lanham Act. 2(a) has been amended to include a prohibition against the registration of any geographical mark for wines or spirits not from the place indicated in the mark.

Principal Register

This is the primary registry of trademarks maintained by the U.S. Patent and Trademark Office (USPTO). In order to qualify for registration on the Principal Register, a trademark must be distinctive and currently in use. Trademarks that qualify for Principal Register registration receive the all the benefits of registration, whereas those registered on the Supplemental Register do not.

Priority date :

The date that determines who will prevail in a trademark infringement lawsuit. In the United States, the priority date is generally the date a trademark was first used. In most other countries, the priority date is based on whoever is first to file for a trademark registration.

Prior registration :

A trademark registration that was filed before another. In most countries other than the United States, the first to register a trademark as the right to exclude others from using that mark in a similar manner. While the United States generally grants priority based on use rather than registration, even in the United States rights outside of one’s area of use are granted on the basis of who is first to register (nationwide priority).

Prior rights :

Trademark rights owned by one party for a given mark prior, and which were established prior to the time a second party gains trademark rights in that same or a similar mark. In the U.S. the party who is the first to use a mark in commerce has the prior right to the mark, and as such can exclude all subsequent uses of the mark in the same geographic territory. However, in most other countries in the world, trademark rights are prioritized based on the first party to register a mark.

Prior use :

Use of a trademark that occurs before a confusingly similar use of that same mark. Such use by the second user infringes the first user’s trademark if the use by both parties is in the same geographic territory. In the United States, the first person to use a mark has prior rights, and may exclude all subsequent users of the mark in that territory.

Product design :

Product design consists of the variety of elements which constitute the configuration of the product. Product configurations are protected as long as they are distinctive, and operate like a trademark. However, only those elements that were designed specifically to promote the product are protected; not the functional features of trade dress that have a utilitarian purpose.

Protectability of a mark :

A mark is capable of being registered by the U.S. Patent and Trademark Office (USPTO) and protected in the courts as long as the mark (1) is not being used by someone else; (2) is not forbidden; (3) is distinctive; and (4) is being used in commerce to allow consumers to identify one brand, and distinguish it from others. If a mark is not distinctive, it may still be registered on the Supplemental Register, but it will not receive protection in the courts, nor will it receive the many benefits of a being on the Principal Register.

Protest letter :
A letter written to the U.S. Patent and Trademark Office (USPTO) in order to protest the registration of a mark.

Proof of Damages :

Proving damages is a necessary prerequisite of being awarded damages, yet doing so can be exceedingly difficult. If damages are awarded, they are typically measured by either the plaintiff’s lost profits, or defendant’s profits. In the case of plaintiff’s lost profits, proof issues are particularly tricky since many factors may result in a decline in plaintiff’s profits at any given time. A market survey may be useful here to demonstrate loss of reputation which can serve as circumstantial evidence of lost profits. When the award sought is defendant’s profits, all that plaintiff must prove is the amount of defendant’s gross sales. Then the burden shifts to the defendant to prove reasonable deductions from those sales.

Publication of trademark (Publication period) :

Once a mark has been approved by the Trademark Examining Attorney, the mark is published in the Official Gazette for 3 months. The purpose of publication is to notify existing mark owners of potentially infringing marks, and give them an opportunity to respond with a protest letter.

Punitive damages :

Punitive damages are those that a court can award as a punishment for wrongdoing aside from any actual damages suffered by the plaintiff from any such wrongdoing. Punitive damages are specifically prohibited under the Lanham Act. However, a court may award treble damages, prejudgment interest and costs in cases in which the court deems such an award as just, and as long as the award is not made for punitive reasons. Courts can also award reasonable attorneys’ fees in exceptional cases such as egregious intentional infringement.

Purchaser :

In trademark law, the person who ultimately buys a good or service associated with the use of a particular mark. Although consumer confusion is the test of whether or not a trademark has been infringed, such confusion need not be confusion of purchasers. Likely confusion of nonpurchasers qualifies as infringement as well. An example of nonpurchaser confusion is where a product bearing the infringing mark is likely to be seen by nonpurchasers, such as when it is engraved on the good itself. The actual purchaser may not be confused by the engraving if the packaging or store display may contain disclaimers. Nonetheless, if the nonpurchaser who has not had the benefit of seeing the disclaimer is likely to be confused, there trademark infringement exists.

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