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IP Lawyers Praise Much of Draft Bill Targeting Bogus Trademarks

Dec. 3, 2019, 4:20 PM

A draft bill aimed at curbing phony trademark registrations is getting good reviews from intellectual property associations and trademark attorneys who have seen the proposal, although some worry that it may be too early to write some provisions into law.

House Judiciary intellectual property subcommittee chairman Hank Johnson (D-Ga.) is drafting legislation to cut through fraudulent registrations, many of them from China, that limit the marks available to business owners. The measure would help the U.S. Patent and Trademark Office more efficiently block fraudulent marks and create a fast track for canceling them. It also would make it easier to get a preliminary injunction during trademark litigation by entrenching a presumption of irreparable harm.

Legal groups, including the American Bar Association and the American Intellectual Property Law Association, said they’ve weighed in on Johnson’s draft. The irreparable harm proposal has broad support, as do parts of the multi-faceted approach to reducing trademark clutter, intellectual property attorneys who have reviewed the draft text say.

Some attorneys warn other elements could be weaponized against legitimate businesses if hastily implemented, such as a new path to quickly cancel trademarks that have never been used. The extreme scope of the draft legislation also may be unnecessary in light of recent steps the U.S. Patent and Trademark Office has taken to tackle the problem, according to International Trademark Association representative Peter M. Brody, an intellectual property attorney at Ropes & Gray LLP who has reviewed the draft measure.

“There is frustration with so-called deadwood on the registry because it does interfere with the process of clearing and obtaining new marks. But practitioners think with some relatively minor tweaks that problem can be addressed,” Brody said, echoing others’ concerns. “The draft legislation was written very recently, with little time for organizations to consider it. It seems to be moving on a very fast track.”

House Judiciary Committee staff sent around the most recent draft of the legislation Nov. 25, with a request for comments on the updates by Dec. 2, according to several sources who received it. Johnson said in a statement that the bill he hopes to introduce “soon” is the product of “extensive outreach” to stakeholders since a July hearing on the topic.

“That being said, I expect that further refinements will still happen as the bill moves forward in the legislative process,” Johnson said in the statement.

Cleaning House

New York University law professors Jeanne Fromer and Barton Beebe, who testified in July and have reviewed the draft text, say that while it’s impossible to run out of trademarks, “competitively effective” marks can be exhausted, especially in crowded categories such as clothes, beverages and software.

Fromer and Beebe have found that two-thirds of a sample of 2017 clothing trademark applications from China showed signs of fraud, such as sample images that appeared digitally altered or appeared elsewhere in reverse image searches. But two-thirds proceeded to publication and 40 percent were registered, they said.

Johnson’s draft bill would create accelerated processes for challengers to allege a mark was never used, or wasn’t used at the time of registration. The new fast-track systems would be an alternative to longer and more expensive cancellation proceedings.

The proposal “makes it very easy for legitimate businesses to show that ‘yes, we are using the mark,’” Fromer said, countering concerns that it could be used to cancel legitimate marks quickly if a business couldn’t immediately provide sufficient records.

But Brody and other trademark attorneys said some businesses may not have easily accessible records to prove use, especially if registration happened long ago. That would put them at a disadvantage in a proceeding in which parties have one chance to rebut allegations of non-use. Brody also said courts and the PTO “are not in total alignment” on what proves “use in commerce,” a standard required to establish a valid trademark.

Some of the provisions in the draft may be premature, especially because it’s too early to evaluate existing trademark office efforts, attorneys, including Brody, said. PTO director Andrei Iancu has said a new rule requiring foreign applicants to use a U.S. attorney has already reduced foreign applications. Its unclear how much impact that and other initiatives will have, the attorneys said.

Johnson said that rule does nothing to address marks already registered, which only legislation creating new proceedings can realistically address in the near term.

“These registrations will otherwise sit on the register and block new entrants for years, and I’m particularly concerned that this will disproportionately hurt small businesses seeking to register trademarks for the first time,” he said in the statement.

More Agreement

Other draft legislative ideas have broader support, intellectual property attorney Jennifer Fraser of Dykema Gossett PLLC said. One would write into law an existing PTO process for allowing third parties to show trademark examiners evidence of non-use before registration.

Another would allow the trademark office to impose tighter response deadlines. Under current, decades-old law, the agency must allow six months for a response to any office action, such as a request for more information or an initial rejection. The IP section of the American Bar Association backed that change in a September letter to Johnson.

The irreparable harm provision, while having little to do with trademark clutter, also enjoys broad support among practitioners who have reviewed it. Some courts have extended a U.S. Supreme Court patent ruling that law prohibits a presumption of harm to trademark cases. Practitioners say trademark law is fundamentally different. Fraser, Brody and the ABA, among others, supported the change.

“I think that’s the most significant part for brand owners. I think everyone agrees that’s a positive change,” Fraser said.

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editors responsible for this story Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com