This article was first published in the May 11, 2010 edition of The Legal Intelligencer Intellectual Property Supplement.
While conventional wisdom holds that a lawsuit is the best way to address actual trademark infringement, this is not necessarily true in every situation. Although trademark inter partes proceedings, such as oppositions and cancellations, are limited to resolving federal registration rights, the cost of initiating and maintaining such proceedings is usually significantly less than court-based litigation, and can serve as a cost-effective catalyst for a negotiation that can resolve all outstanding issues. Furthermore, inter partes proceedings may offer distinct advantages in certain situations, such as when trademark disputes involve multiple jurisdictions.
TYPES OF TRADEMARK INTER PARTES PROCEEDINGS
The two most frequently used inter partes proceedings in the United States Patent and Trademark Office (USPTO) are oppositions and cancellations. Anyone who believes they would be damaged by the registration of the mark can file a Notice of Opposition against a pending trademark application. The Notice of Opposition must be filed during an opposition period that initially lasts 30 days after publication of the subject application, but can be extended up to 90 days without consent of the applicant, or up to 120 days, with consent. Anyone who believes they are or will be damaged by a trademark registration can file a Petition to Cancel at any time after the registration is issued. A trademark cancellation proceeding is in some ways the closest analog to a patent reexamination proceeding, in that both of these USPTO inter partes proceedings permit a third party to challenge an issued grant of intellectual property rights using a forum other than the district courts.
A U.S. opposition or cancellation can be brought on any grounds available for refusing registration of a mark, including likelihood of confusion, dilution, mere descriptiveness, deceptive misdescriptiveness, disparagement, false suggestion of connection, and fraud on the USPTO, as well as issues arising after registration, such as an allegation that the mark has become generic or that the registrant has abandoned use. Marks that have achieved “incontestable” status after five years of continuous use following registration, however, may be canceled only on the limited grounds of fraud, prior right, genericness, or non-use. Most countries worldwide have proceedings similar to the U.S. opposition and cancellation proceedings.
Other inter partes proceedings include interferences and concurrent use proceedings. A trademark interference determines which of two or more parties have priority with respect to registration of a particular mark. Where it is clear that more than one trademark applicant and/or registrant have rights in distinct geographic regions, a concurrent use proceeding focuses on where each party has prior rights and how the rights can be divided in a way that will minimize consumer likelihood of confusion. Interferences and Concurrent Use proceedings are rarely initiated, and similar proceedings are not available in most foreign countries (typically because many countries grant trademark rights based on a first-to-register system, in contrast to the first-to-use system of the U.S.).
Trademark inter partes proceedings in the U.S. are decided by the Trademark Trial and Appeal Board (TTAB), which has the power to resolve such proceedings by canceling a registration or refusing to register a mark in whole or in part, modifying an application or registration by limiting the goods or services specified, refusing to register any or all of several interfering marks, or registering as many concurrent marks for which confusion is considered unlikely in light of conditions or limitations the TTAB imposes. U.S. inter partes proceedings generally follow the Federal Rules of Procedure, so discovery before the TTAB is comparable to that in the federal courts.
CONTRAST OF INTER PARTES PROCEEDINGS TO LITIGATION
While inter partes trademark proceedings affect the right to register a trademark, they do not directly impact the right to exclude others from using a mark. A senior mark owner seeking damages or an injunction against actual use by a junior mark user can only directly achieve those results by filing a lawsuit. If the junior mark user has not registered or filed an application, litigation is the only option. Unlike a successful patent re-exam, after which the owner of an invalidated patent no longer can exclude others from practicing the formerly-patented invention, a successful trademark cancellation merely removes a trademark from the federal register (or limits the scope of rights of a registration). Accordingly, even after cancellation of the registration, an accused infringer may face a lawsuit (and liability for damages) based upon the mark owner’s common law rights.
Sophisticated trademark owners generally seek registration to maximize their IP rights. The risk of losing or never getting a trademark registration may therefore be a very powerful tool in resolving a trademark dispute. Accordingly, a prejudicial ruling from the TTAB may convince an accused infringer to abandon actual use of the disputed mark and choose a new one. Furthermore, because intent-to-use applications publish before the applicant must actually use the mark, oppositions may be decided before any related use begins. A trademark applicant who has not yet built goodwill in a mark is far more likely to consider rebranding than one who has already launched a product bearing the mark.
With some notable exceptions, damage awards are rare in non-counterfeiting trademark litigation, and even when awarded, are typically not comparable to the amounts at issue in patent cases. The 2009 American Intellectual Property Law Association (AIPLA) Report of the Economic Survey indicates that the average cost of a trademark cancellation/opposition through completion is almost 70% less than the average cost of litigation when less than $1 million is at stake. The same survey shows that 25% of inter partes proceedings can be completed for $30K or less, versus a similar benchmark of $176K for litigation with less than $1 million at stake. As the amount at stake rises, the cost of the litigation increases.
Where two businesses are sophisticated enough to pursue trademark registration, and where monetary recovery is not the primary motivation, an inter partes proceeding provides a forum in which experts decide questions such as whether a junior mark creates a likelihood of confusion with or dilutes a senior mark. By contrast, court litigation may be decided by a judge and/or jury with minimal if any experience in deciding trademark cases.
Trademark disputes may often be more readily resolved via a business agreement than patent disputes. Unlike patent litigation, in which an accused infringer knows that a loss may keep it out of the relevant market until the patent monopoly expires, an accused infringer who loses a trademark litigation or inter partes proceeding can still compete with a functionally identical product or service sporting a different mark and/or trade dress. Meanwhile, every moment the trademark is in dispute, the accused infringer risks creating goodwill in a mark it ultimately may have to abandon, providing a strong business reason to determine early whether a trademark is worth the fight. Similarly, the applicant who has not yet actually used an opposed mark may decide that its investment is better directed toward adopting a new mark.
ADVANTAGES OF INTER PARTES PROCEEDINGS
Since both litigation and inter partes proceedings typically result in a negotiated settlement, and litigation is typically more expensive (with less upside for the plaintiff if successful), a trademark inter partes proceeding may be the best way to provoke a serious negotiation for resolving all aspects of a trademark dispute when actual use and registration are both at issue. If it later becomes clear that the inter partes proceeding will not resolve the entire dispute between the parties, then either party can typically initiate a lawsuit in federal court.
Trademarks, like their associated products, are often used worldwide, and therefore, trademark owners are likely to register the mark in countries where the associated goods and services have a substantial market. Unlike patents, which require novelty and non-obviousness worldwide to secure rights in any country, trademark rights may be acquired by different parties in different countries. Thus, a senior trademark owner in one country may be the junior user elsewhere in the world, meaning that a comprehensive negotiated settlement may be best for both parties. The universality and relative low cost of inter partes proceedings permits trademark battles to be fought and/or rights preserved on multiple fronts at the same time. Even if only registrations are directly at issue in such proceedings, once the parties start discussing settlement, all issues, including use, are typically on the table for resolution. Thus, inter partes proceedings can be used as leverage to preserve specific rights locally while resolving the big picture globally. By contrast, simultaneous court litigation in multiple jurisdictions may not only be more costly, but may also come with less flexibility regarding scheduling. Accordingly, inter partes proceedings have a distinct advantage for disputes not limited to one country or region.
In the U.S., trademark actions under the Lanham Act are generally limited to dealing with marks that create a likelihood of confusion, cause dilution, or constitute misrepresentation. Trademark oppositions and cancellations, however, permit an opposer or petitioner to proactively allege descriptiveness or genericness of an application or registration, rather than having to use the disputed mark, provoke an enforcement action or demand letter, and then litigate validity in a counterclaim or declaratory judgment action.
Sometimes, a trademark dispute can be very narrowly defined such that the parties can benefit from the ruling of a neutral decision maker relatively quickly. While expedited proceedings such as a TRO or preliminary injunction are available in the courts in rare circumstances, most trademark litigation takes time. By contrast, accelerated Case Resolution (ACR) procedures available in the US can greatly streamline the timing of Oppositions and Cancellations. Parties who need only limited discovery and are willing to stipulate to a number of facts can use ACR to accelerate the close of discovery and quickly move into Summary Judgment. For parties who want more time to resolve issues amicably, the TTAB permits suspensions or extensions of time as long as the parties show continued progress toward settlement. Many foreign countries have similar flexibility or built-in delays to facilitate settlement discussions, such as the set “cooling off period” of 2 months, extendible by 22 months, in the European Union.
In summary, trademark inter partes proceedings provide flexibility, significantly lower cost, and great potential for resolving more than just registration issues. Consequently, court litigation may not always be the only or the best vehicle for resolving questions of trademark infringement, as parties can readily address actual use as part of a larger resolution prompted by one or more inter partes proceedings.