By Cynthia Clarke Weber

The Trademark Law Revision Act of 1988¹ dramatically changed U.S. trademark law by at long last permitting U.S. nationals to establish trademark rights without first using a mark. Prior to November 16, 1989, the effective date of the Act, the only way a U.S. national could establish U.S. trademark rights was by actually using his mark on goods or services distributed or rendered to others in commerce regulated by Congress. A U.S. national could not file an application to register a mark in the U.S. Patent and Trademark Office until he had made a sale or shipment of goods bearing the mark in interstate commerce.

The United States was one of the only countries in the world to require use as a prerequisite to acquisition of rights. With very few exceptions, in other countries rights are acquired by simply filing an application to register a mark. The first to file, regardless of nationality, is usually the owner of the mark. Use may be required in order to maintain a registration or to protect it from cancellation, but not to establish trademark rights.

Prior to November 16, 1989, foreign nationals had an advantage over U.S. nationals: a foreign entity was (and is) permitted to file in the U.S. based on a foreign application or registration and obtain a U.S. registration without ever having used the mark anywhere in the world. While actual use of a mark in commerce was (and is) eventually necessary to maintain a U.S. registration, use was not required to establish a "constructive" date of first use for priority purposes. Since priority in time is the deciding factor in a dispute between two parties who want the same mark, the ability to establish a priority date without use gave foreign applicants a considerable advantage over U.S. nationals.

The actual use requirement was burdensome and impractical. There are very few businesses today who are able to select a trademark and immediately use it, thereby establishing rights in the chosen mark. The type of use necessary to establish trademark rights must be public use which would cause relevant consumers to associate the mark with a particular source of trademarked goods. Use in contracts or internal memoranda, for example, does not usually establish trademark rights for priority purposes.

In most business situations, there is a period of time between selection of the mark and use sufficient to establish rights for priority purposes. During that time period, financial and other commitments must be made to the mark in terms of advertising, labels, packaging and the like. A prospective hotel chain, for example, might select a mark, commit to signs, menus, future advertising, towel monograms, etc. over the course of a year without actually being able to open a hotel and establish any rights in the mark. As another example, pharmaceutical companies must not only obtain Food and Drug Administration (FDA) approval before they can manufacture or sell a pharmaceutical product, but the FDA must also approve the trademark to be used on the product. Commercial use of a mark may not occur until years after a mark is selected and the company has committed to it. Under the old law, in either of these situations the premarket efforts involving the chosen mark could be for naught if a competitor reached the market first under the same or a confusingly similar mark.

To remedy this dilemma, companies often resorted to making a single "token" use of a mark in order to provide a basis for filing an application and obtaining a federal registration. Pharmaceutical companies, for example, might make a legal shipment under the mark to an outside investigative laboratory, thereby making a use", apply to register the mark in the U.S. Patent and Trademark Office (PTO), and obtain a federal registration prior to obtaining FDA approval and actually entering the market under the mark. This practice occurred in all fields, resulting in trademark registrations of dubious validity. The alternative to token use was to risk losing a mark to a prior user. If a mark was preempted the pre-market investment in the mark would be lost, and the process of selecting another mark could delay getting a product to market.

This difficult situation was remedied by the Trademark Law Revision Act of 1988. A new provision in the Lanham Act, Section 1(b) (15 U.S.C.§1051(b)), permits U.S. nationals and others to file a trademark or service mark application based on a "bona fide" intent to use a mark:

(15 U.S.C.§1051(b))

The primary beneficiaries of this provision are U.S. nationals, who can now establish trademark rights for priority purposes before they actually use a mark. Now the hotel chain or the pharmaceutical company can file an intent to use (ITU) application as soon as the mark has been selected without the charade of token use. Allowing ITU applications permits applicants to in effect reserve a trademark while they prepare to go to market.

The phrase "bona fide intention...to use" was not previously in the Lanham Act. It was included primarily to prevent the token use practice necessitated by the use requirements of the old Lanham Act. Congress similarly amended the definition of "use in commerce" to mean: "bona fide use in the ordinary course of trade, and not made merely to reserve a right in the mark." (15 U.S.C.§1127) Trademark practitioners are awaiting judicial interpretation of these new provisions with interest.

An ITU application is examined by the Examining Attorney corps of the PTO just like a use-based application. If allowed, an ITU mark is published in the weekly Official Gazette for opposition by anyone who believes he would be "damaged" by registration of the mark, just like a mark applied for on the basis of use. After the application clears the opposition period, the procedure for ITU applications varies from the norm. A use-based application is sent to the Registration Branch of the PTO and the registration subsequently issues. An ITU application, on the other hand, is not permitted to mature into a registration until the applicant has actually used the mark in commerce on or in connection with the goods or services covered in the application and submitted an acceptable verified statement to this effect with specimens evidencing such use to the PTO. Consequently, the PTO issues a "notice of allowance" after an ITU application has cleared the opposition period. The applicant is given six months from the date of the notice of allowance to submit a verified Statement of Use of the mark on the goods or services in the application, together with three specimens showing the mark as used and a PTO fee of $100.00 per class. The Statement of Use is examined by the Examining-Attorney corps. If it is found wanting, it will be rejected. An applicant is allowed an opportunity to correct a rejected Statement of Use, and has recourse to the Trademark Trial and Appeal Board if necessary by way of an ex parte appeal.

One six month extension of time to file a Statement of Use is available upon payment of a $100.00 PTO fee per class, a written request for an extension and a verified statement by the applicant that he has a continued bona fide intent to use the mark in commerce, specifically identifying the goods or services in connection with which he has such bona fide intent.

Subsequent six month extensions of time are available upon the same submission with a showing of "good cause" as to why use has not commenced, e.g., the applicant is awaiting FDA approval.

The maximum amount of time allowed an ITU applicant to make use of the mark is three years from the date of the notice of allowance. Thus an ITU applicant could have three years plus the time which elapses between filing the application and issuance of the notice of allowance (prosecution and opposition periods) in which to actually make use of his mark.

It is also permissible to amend an ITU application to a use-based application prior to "approval" of the application, which precedes publication for opposition. If an Amendment to Allege Use is accepted prior to approval, the application will be sent to the Registration Branch after clearance of the opposition period.

If a Statement of Use is not filed and accepted within three years from the notice of allowance, the application will be deemed abandoned and the ITU filing date will mean nothing. If, however, an acceptable statement or amendment of use is filed, and the registration issues, the ITU filing date will be considered the registrant's nationwide constructive first use date for priority purposes, even though he did not make actual use until years after the filing date. This very important substantive provision appears in§7(c) of the new Act, which states that:

15 U.S.C.§1057(c).

This means that the filing date of a principal register application is now of paramount importance because it establishes substantive trademark rights. It is important to note, however, that this priority date will not vest until the registration is actually issued, which in turn means the mark has actually been used in commerce.

There are two situations where an ITU filing date will not establish priority: (1) a person who actually uses a mark before the ITU filing date will still have priority, although the ultimate result may be concurrent use registrations if the first use is geographically limited prior to the ITU filing date; and (2) an ITU application will not take precedence over a§44d application filed after the ITU application by a foreign entity who is entitled to rely on an earlier foreign filing date in the U.S. under international conventions.

There are many points to remember about the new intent to use practice. For example, an application to register a mark on the Supplemental Register may not be based on intent to use (15 U.S.C.§1094). An intent to use application may not be assigned until a verified statement or amendment of use has been filed except under limited circumstances. (15 U.S.C.§1060). Applications to register trademarks, service marks, certification marks, collective membership marks and collective marks on the Principal Register may all be based on intent to use.

The PTO has enacted extensive new regulations to cover the new provisions and procedures engendered by permitting ITU applications. From a private practitioner's viewpoint, the new procedures seem to be working smoothly. Businesses are taking advantage of the ITU provisions. The PTO reports a 50% increase in application filings in 1990 over 1989. According to the PTO, almost half of the applications filed since November 16, 1989, have claimed intent to use.

The Trademark Trial and Appeal Board (TTAB) has jurisdiction over ex parte appeals by applicants from unfavorable decisions at the examining level in the PTO. It will be possible to appeal a refusal to accept an Amendment to Allege Use or Statement of Use or a refusal to accept a request for an extension of time. Since the first notices of allowance were not sent out until June of 1990, there has not yet been an opportunity for the TTAB to issue any decisions in such appeals. There will undoubtedly be many such decisions over the next few years.

The procedural aspects of ITU practice will be interpreted primarily by the TTAB, although U.S. district courts will undoubtedly face procedural issues as well when they are raised in infringement actions or appeals from TTAB decisions.

Both the TTAB and the federal courts will inevitably be called upon to decide what constitutes a "bona fide intention to use" a mark and to apply the new definition of "use in commerce" to specific facts. These issues are expected to arise primarily where the validity of a registration resulting from an ITU application is challenged on grounds that the registrant did not have a "bona fide" intent to use the mark at the time he filed the ITU application and/or did not make a valid "use in commerce". If a registration were invalidated on those grounds, the registrant would be left with his actual first use date for priority purposes rather than his ITU filing date. This could make the critical difference in many cases, given the importance of chronological priority in trademark disputes.

There are many situations where the courts will be required to furnish guidance. One such scenario is where a company is considering several marks for the same product. It may wish to establish rights in all of the candidates pending the outcome of test marketing, for example. If it files ten applications with the intent only to use one of those marks, was there a "bona fide intent" to use any one of the marks at the time of filing? Would the answer be different if the company applied to register only three marks under consideration? As another example, a company may select a particular mark to use on blouses and file an intent to use application for "clothing". It may later decide to use the mark on jackets rather than blouses. Was there a bona fide intent with respect to jackets at the time the application was filed? A great deal of litigation over the meaning of "bona fide intent" in these and other situations is expected.

Another interesting problem is that faced by an ITU applicant who has not yet actually used his mark, but whose mark is being infringed. Without a registration or common law rights arising from use, he cannot sue for infringement. Once the ITU applicant uses his mark and his registration issues, he will be entitled to an injunction. However, during the interim the infringer will have been using the mark and could possibly destroy its value while the ITU applicant awaits issuance of his registration. No one has yet offered a definitive solution to this problem, although creative litigation under the unfair competition provision of The Lanham Act has been suggested. Judicial decisions in this area will be interesting.

As a practical matter, the situation is much improved for U.S. applicants under the intent to use provisions of the new Act, as they can now establish rights and determine whether a mark is registrable without having to invest in or commit to a mark.

For foreign applicants the situation is also improved. Foreign applicants may also take advantage of the ITU provisions of the Act. Thus they now have four bases upon which to file a U.S. application instead of three: (1) Use in commerce with or in the U.S. ('1a); (2) ITU ('1b); (3) foreign application, claiming priority (§44d), and (4) foreign registration (§44e). (15 U.S.C.§§1051(a)(b); 1126d,e).

Foreign applicants are now required to state that they too have a bona fide intent to use a mark in commerce at the time they file a U.S. application, whether it is an ITU application or one based on a foreign application or registration. If the application is based solely on intent to use, use in commerce is required before the registration will be issued to the foreign applicant, just as for U.S. applicants. However, for applications based solely on Section 44 of The Lanham Act, use is not required in spite of the fact that the foreign applicant must place a statement of bona fide intent to use the mark in its application. Thus foreign applicants filing under Sections 44d or 44e are in essentially the same position they were in prior to November 16, 1989. A foreign applicant may also file based on both intent to use and a foreign application or registration, and later drop one of those bases if the other appears more likely to succeed at the time. However, although foreign applicants continue to have an advantage over U.S. applicants, the gap has been greatly narrowed.

The introduction of intent to use, and all it involves, was by far the most profound change effected by the Trademark Law Revision Act of 1988, but there were other amendments to The Lanham Act as well.

The life of a trademark registration has been reduced from 20 years to 10 years. While trademark rights may endure indefinitely and a registration may be renewed indefinitely, renewals must now be filed every 10 years instead of every 20. This should have the desirable effect of clearing the register of registrations for marks no longer in use. The ten year term applies to all registrations and renewals issued on or after November 16, 1989. (15 U.S.C.§§1058, 1059).

The Section 8 Declaration required to keep a registration alive remains due between the 5th and 6th year after the registration issues, but its requirements are now more stringent. (15 U.S.C.§1058) The Section 15 Declaration, by virtue of which a registration may achieve incontestable status, may be filed after any post-registration five year period of continued use, as before. (15 U.S.C.§1065)

The TTAB has been given new and broad flexibility in opposition and cancellation proceedings. Section 18 now permits the Board to correct ownership problems and amend the identification of goods or services in applications or registrations involved in inter partes disputes. (15 U.S.C.§1068) This will permit the Board to make decisions based on the real world facts of the cases before them. Under the old practice, the Board was bound to interpret a broad description, such as "computer programs" to cover all computer programs, even though in fact the registrant's programs were for use with chemical blood analyzers in hospitals and the applicant's programs were actually used with video games. The Board could now limit an overly broad registration to the area of actual use, and permit both parties narrow registrations. This is a great improvement in opposition and cancellation proceedings, which involve a party's right to register a mark, not its right to use the mark. Sometimes a registration proceeding can be resolved by a change in the identification of goods in an application or registration. There have been a few TTAB decisions under this section of the Trademark Law Revision Act. In one of these, Alberto-Culver Co. v. F.D.C. Wholesale Corp., ___ USPQ 2d ____, Opp.No. 68,236 (TTAB July 9, 1990) the Board stated that it will not narrow or limit goods or services in an existing registration unless the party seeking the restriction establishes by a "proper evidentiary showing" that the restriction is necessary to "represent fairly" the nature of the goods in the registration" vis-a-vis the goods of others in the marketplace." (Slip op. p 24). No doubt future Board decisions will set additional standards and requirements for restricting goods and services identifications.

Section 32(1) of the Lanham Act (15 U.SC§1114 (1)) provides a cause of action for infringement of a federally registered mark. Section 43a of The Lanham Act (15 U.S.C.§1125a) covers many other forms of unfair competition by virtue of expansive judicial interpretation of this statute.

To one who has standing, Section 43a provides a cause of action for infringement of unregistered trademarks, for trade dress and trade name infringement, for expressly or implicitly misleading, confusing or deceptive claims in comparative advertising, for materially false advertising claims about a defendant's own product and a host of other "unfair" commercial activities. One activity Section 43a did not cover prior to November 16, 1989 was a false claim about the plaintiff's product by the defendant outside the comparative advertising context. This was left to state libel and disparagement laws.

The Trademark Law Revision Act of 1988 amended Section 43a to specifically cover misrepresentations about the nature, characteristics, qualities, or geographic origin of the goods, services or commercial activities of the defendant or another. (15 U.S.C.§1125(a)(2)). This new subsection of Section 43a is expressly limited to "commercial advertising and promotion." (15 U.S.C.§1125(a)(2))

Other amendments to The Lanham Act make it clear that all of the remedies available for infringement of a registered trademark are now available in a Section 43a case, thus conforming the statute to the case law.

The amendments mentioned above are the highlights of the Trademark Law Revision Act of 1988. There were other amendments affecting more detailed aspects of trademark practice which are beyond the scope of this article.

Two important proposed provisions which were omitted from the Trademark Law Revision Act of 1988 were those relating to dilution of famous marks and security interests in trademarks and trademark registrations. The omissions are unfortunate. Dilution is currently covered by state statutes, and only one half the states have antidilution statutes. Uniformity and nationwide coverage are needed. Using trademarks and trademark registrations as collateral is an increasingly popular practice. While the USPTO routinely records security agreements, it does not examine them substantively. Security documents may be worded disastrously from a trademark point of view. Answers to questions about perfecting security interests and the like are unclear. Federal legislation would be of great assistance.

Despite these omissions, the changes effected by the Trademark Law Revision Act of 1988 are great improvements to U.S. trademark law, bringing the U.S. closer to trademark practice in the rest of the world. Judicial decisions interpreting the Act will make interesting new law over the next few years. We in the trademark field are looking forward to them.

© 1990 Cynthia Clarke Weber