Trouble With Trademarks How ‘Betty’ Made Her Mark

Trademarks can include individually or in combination, words, names, symbols, and devices. A trademark can consist of an individual letter, or a group of letters that may or may not be a pronounceable word. Similarly, a single number or group of numbers can be registered as a trademark. Additionally, extended slogans, background designs, colors or groups of colors, trade dress, holograms, sounds, fragrances, or flavors may, in the appropriate circumstances, be registered as trademarks.

The Attorney’s Role
A business client will typically have created or is using a mark or several marks they have created for their imaging. Such imaging can be used for product packaging, the physical layout of a store, and marketing either through print or electronic media. As an example, consider prospective client “Betty Starz.” Betty designs and markets designer buckles of all types that can be used for belts, handbags, luggage, or any item that requires a buckle. Betty has opened up a small retail store and a website where a potential customer can view the designer buckles for sale and then order online. One of Betty’s most popular items is a buckle shaped as a star. Thus, she is calling her business “STARZBUCKLES.” She has enlisted the aid of an attorney to help her register as a trademark, an image she uses in her store and on her website. Betty’s favorite color is green and so her image is a green background with white lettering with the “ZB” in dark large type and illustrated as a buckle.

The first responsibility of the attorney is to advise Betty of the legal ramifications of the mark; i.e., whether the mark violates any of the provisions of the Lanham Act; whether the mark is available, and if so, the breadth of protection Betty could expect in using the mark for her business. The Lanham Act restricts what a trademark can be. A trademark cannot be generic to the goods identified by the trademark; for example, if Betty wanted to register “BUCKLES” to sell buckles, that mark, by itself, could not be registered. A trademark cannot be simply descriptive of the goods; thus “Designer Buckles” or even “Star Buckles” might not be registrable. A mark cannot be geographically descriptive; thus “NY Buckles” might not be registrable. A mark cannot be deceptively descriptive; thus Betty cannot register “Buckles Made of Gold” if the buckles were not actually made of gold. Additionally, a mark cannot use a name or symbol that is prohibited by statute, is immoral or scandalous, or disparages a person, place or belief.

Since Betty’s proposed trademark violates none of the Lanham restrictions, the attorney would next conduct a trademark search. Minimally, a search should consist of a review of the USPTO’s Trademark Electronic Search system (TESS),2 state databases, and a web search. For larger-budget clients, an attorney should enlist a professional trademark search firm. If the search did uncover another “STARZBUCKLES” in use, that would not necessarily mean Betty’s trademark could not be registered. In that instance, the USPTO would apply the concept of the public’s “likelihood of confusion”3 to decide if Betty’s mark should be registered. For example, a “STARZBUCKLES” trademark registered to a single site cocktail lounge in Dallas, Texas, and having distinctive lettering and coloring from Betty’s mark would be unlikely to cause any confusion to the public. However, if “STARZBUCKLES” is registered to an entity manufacturing and/or selling buckles, then Betty’s mark is likely to cause confusion, even if the lettering and coloring is distinctive from the other entity’s mark.

The attorney would next begin the registration process by drafting and submitting a trademark application to the USPTO. There are multiple purposes or bases for registering a trademark and the base must be described as part of the application. The trademark application process and its prosecution through the USPTO can be quite involved and the transactions between the attorney and USPTO will vary based upon the type of trademark being registered. This article will concentrate on Betty’s application which is being registered on the principal register for use in commerce. Betty’s registration of her trademark grants her a prima facie evidence of the validity of the mark, and her exclusive right to use the registered mark. The application will describe the composition of the mark and the composition will determine the breadth of protection offered to the trademark owner.

Tactically, the best trademark compositions are minimalist in content, i.e. the less elements shown in the registration, the greater the scope of protection for the trademark owner when the “likelihood of confusion” analysis is used in trademark litigation. For Betty, the greatest protection would be procured through two separate registrations; (1) a simple word mark of “STARZBUCKLES”; and (2) a design mark containing a background with the “STARZBUCKLES” lettering. This registration tactic of using separate registrations for a word mark and a design mark ordinarily used in composite will grant greater protection against another’s use of a mark substantially similar to either the design or word element of the composite mark.

The drafting and filing of a trademark application may at first seem to be a largely clerical undertaking, but in actuality, the process requires an attorney to carefully orchestrate a document package that adheres to the regulations established by the USPTO and protects the client’s interest. This article will not address the specific steps required to draft and file a trademark application but will advise the reader to access the USPTO website which not only provides detailed instructions and a video on preparing and filing an application, but also provides an online interactive “wizard” that generates an electronic application for submission.4 Instead, the remainder of the article will review some legal scenarios that could occur once Betty has registered her trademark and is using it for her business. The fact patterns, persons, and entities described in the following scenarios are fictional and are presented to the reader as examples of what the practice of trademark law entails.

Potential Litigation After The Trademark is Registered Scenario 1 – The Knockoff
Suppose Betty’s business becomes a big success, but the positive publicity encourages another entity to manufacture and market knockoff buckles under the “STARRZBUCKLES” name using a website containing an image very similar to Betty’s trademark. The Lanham Act contains the federal statutes governing trademark law in the United States. However, this act is not the exclusive law governing trademarks, since both common law and state statutes also control some aspects of trademark protection. For instance, New York State General Business Law § 368-d (also known as the Anti-Dilution statute) will grant injunctive relief in cases of infringement of either a registered mark or a non-registered mark. The term “dilution” as set forth in § 368-d refers to the concept that a name or mark can lose its ability to distinguish one source from another when there is an unauthorized use of the mark.5

Additionally, General Business Law § 133 permits a State Court possessing jurisdiction to issue an injunction to prevent an entity from adopting a name for advertising and trade purposes that would “deceive or mislead the public … as to the connection of such [entity] with any other [entity],” even without requiring proof that any person has been misled or deceived.

Trademark litigation can be quite costly and time consuming so the first step of an attorney is to fire off a cease and desist letter against the offending entity. However, if the offending behavior continues, then Betty can assert a claim under the Lanham Act for trademark infringement because she holds a valid trademark. It is worth noting that had Betty not registered her trademark, she could still assert a claim of false advertising under the Lanham Act because the statute will protect an unregistered mark in certain circumstances. Tactically it is a good practice to file both an infringement claim and a false advertising claim when the trademark is registered because a potential infringer may alter the image enough to beat an infringement claim but is still operating to mislead the public as to the good or service’s origin. The intent of this provision of the Lanham Act is to protect “commercial interests [that] have been harmed by a competitor’s false advertising, and [to secure] to the business community the advantages of reputation and goodwill by preventing their diversion from those who have created them to those who have not.”6 The primary test used by both the Courts and the USPTO to determine whether a party’s commercial interests have been harmed is whether there is “likelihood of confusion.”7 For example, the Second Circuit has identified eight (8) factors that were dispositive to a false advertising claim under 15 U.S.C.§ 1125(a). These factors (often called the Polaroid factors) are: (1) strength of the mark; (2) the degree of similarity between the two marks; (3) proximity of the products; (4) likelihood the senior user of the mark (or prior owner) will bridge the gap; (5) evidence of actual confusion; (6) evidence of bad faith in adopting the mark; (7) quality of the junior user’s mark and/or product; and (8) sophistication of the relevant consumer’s group (buyers).8

To assess the first factor, the strength of the mark, two aspects of the mark are examined: (1) the degree to which the mark is inherently distinctive; and (2) the degree to which it is distinctive in the marketplace.9

The pertinent inquiry regarding the second factor, the similarity of the marks, is the general impression conveyed to the purchasing public by the respective marks, and whether the similarity of the marks is likely to provoke confusion among potential customers.10 The examiner looks to “the nature of the products itself and the structure of the relevant market which include the class of customers to whom sold, the manner of advertisement and the channels to which the goods are sold.”11

The third factor, proximity of the products, concerns whether and to what extent, the two products compete with each other. The concern represented by this factor is whether it is likely that consumers will assume that the junior user’s product is associated with a product of the senior user.12 The examiner may consider whether the products or trade names differ in content, geographic distribution, market position, or audience appeal.13

The fourth factor, bridging the gap, looks to whether one user of the mark is likely to enter the market in which the other user is operating.14

The fifth factor, actual confusion, looks to whether any consumers have actually been confused by the two products. Where reverse confusion is alleged, it “is likely to cause consumers to believe erroneously that the goods marketed by the prior user are produced by the subsequent user.”15

The sixth factor, user’s bad faith, considers “whether defendants adopted its mark with the intention of capitalizing on the plaintiff’s reputation and good will and any confusion between [the products].”16 The seventh factor, quality, is an objective evaluation of the two products. The eighth factor, sophistication of the consumer, balances against a finding of likelihood of confusion of the relevant purchasers.17

Since no one of the Polaroid factors is dispositive and the list is not exhaustive, “the analysis of the factors is not a mechanical process.”18 An administrative or trial court hearing will evaluate each factor on the facts. Alternatively, Betty may file a claim in New York State Civil Court under General Business Law § 368-d which has a less stringent standard to sustain a charge of false advertising, than what is required through the Federal Trademark laws. In addition, under Section 133 of the General Business Law, a State Court possessing jurisdiction is permitted to issue an injunction to prevent an entity from adopting a name for advertising and trade purposes that would “deceive or mislead the public”, even without requiring proof that any person has in fact been misled or deceived. Obviously, the New York court would require personal jurisdiction over the entity, if Betty wished to pursue this remedy.

Scenario 2 – The Predecessor
Retired citizen Sally Starz (no relation to Betty) is reading a product brochure and comes across an advertisement for “STARZBUCKLES.” It just so happens Sally was also a designer of buckles and once had a business she operated out of her home where she sold her buckles. Her late husband was an attorney and he registered the name “STARZBUCKLES” on his wife’s behalf back in 1963. Sally retired in 1990 and no longer is in the buckle business, but she is so incensed that someone else is using her name, she decides through her daughter Sara (who followed in her father’s footsteps and became an attorney) to file a claim of infringement against Betty under the Lanham Act. One defense against claims asserted under the Lanham Act is that the trademark has been abandoned. A trademark is deemed abandoned, and thus no longer valid, “[w]hen its use has been discontinued with intent not to resume such use.”19 “[A] defendant who successfully shows that a trademark plaintiff has abandoned a mark is free to use the mark without liability to the plaintiff.”20 “Trademark ownership is always appurtenant to commercial activity. Thus, actual and continuous use is required to acquire and retain a protectable interest in the mark. … Abandonment is trademark law’s way of recognizing that trademark rights flow from use.”21

A defendant must establish two elements in to show a plaintiff has abandoned the trademark: (1) the plaintiff has ceased using the mark in dispute and (2) he has done so with the intent not to resume its use.22 For the purposes of abandonment, the Lanham Act defines use as “the bona fide use of such mark made in the ordinary course of trade, and not merely to reserve a right in a mark.”23 Such intent to resume cannot be indefinite; rather there must be intent “to resume use within the reasonable foreseeable future.”24 Under the Act, nonuse for three (3) consecutive years shall be prima facie evidence of abandonment.25 Nonuse for three (3) consecutive years creates a “rebuttable presumption of intent not to resume use.”26 Abandonment is a factual issue within the domain of a district court and evidence can be provided to rebut the presumption of abandonment.27

Sally would most likely not prevail against Betty because under these facts Sally had abandoned her trademark. This scenario shows that trademarks are not owned by a registrant forever.

Scenario 3 – The Goliath
Betty “hypothetically” receives a “cease and desist” letter from Starbucks Coffee Company28 demanding Betty cease using the “STARZBUCKLES” name and image because the trademark using the name in white letters over a green background infringed on Starbucks’ trademark whose composite consists of “STARBUCKS” in white letters over a green background. Betty, who is an avid Dunkin Donuts coffee drinker, believes that there is no validity to Starbucks’ allegation of infringement.

Most federal courts consider the core element of trademark infringement to be whether a reasonably prudent consumer is likely to be confused to an origin of a good or service bearing one of the marks.29 If likelihood of confusion between the marks is found, irreparable injury to the plaintiff may be presumed. The Lanham Act expressly provides federal courts may cancel the registration of any federal registered trademark.30 To prevail in a claim for cancellation, a plaintiff must show (1) it has standing to bring a cancellation claim, and (2) there are valid grounds for why the registration should not continue to be registered. Cancellation of a registration for a trademark is also appropriate if a registered trademark is likely to dilute a famous and distinctive mark.31 Betty’s attorney would want to review a case out of the southern district of New York, Citigroup Inc. v. City Holding Co.32 In this case, Citigroup Inc., holding trademarks using the term “CITI,” alleged trademark infringement and dilution against City Holding Company, using trademarks with the term “CITY.” Citigroup Inc. is an international bank and had registered the trademarks prior to City Holding Company, a community bank located in the state of West Virginia. Citigroup argued since both entities were in the financial services sector, City Holding’s federally registered marks should be cancelled because the City Holding’s marks created likelihood of confusion and would likely create dilution of the “CITI” marks. The court used the Polaroid factors (described previously in the Scenario 1 section of this article) and found there would not be a likelihood of confusion. Among the reasons was Citigroup emphasized the “CITI” portion of the mark, while City Holding’s used “CITY” which the court said was a commonly use prefix for a financial services corporation to use. The court observed Citigroup and its many subdivisions that bear the famous “CITI” prefix have co-existed with many “CITY” entities for years in virtually every jurisdiction. Additionally the court noted even though the prefixes of the marks sound the same, in appearance the marks are significantly different. Finally, Citigroup did not offer any supporting evidence that consumers were confused when presented Citigroup’s marks verses City Holding’s marks.

Citigroup also argued using the “family of marks doctrine”33 that the existence of the City Holding’s mark diluted Citigroup’s family of marks and created a likelihood of confusion even though City Holding’s mark is not significantly close to any one Citigroup mark. An example of the applicability of this argument is McDonald’s successful blocking of the trademark registrations of “McPretzel,”34 “McDental”35 and “McClaim,”36 even though McDonalds was not using those marks. The “family of marks doctrine” argues a distinguishing element of a strong and distinctive trademark is recognized by consumers as an identifiable trademark in and of itself, when the element appears in a composite, such that it will cause confusion when used in a different entity’s trademark. The court rejected Citigroup’s application of the “family of marks doctrine” against City Holdings because no evidence could be shown that consumers identified businesses using “CITY” in a surname with the Citigroup brand.

Concerning Betty’s situation with Starbucks Coffee Company, Starbucks could argue that even though they sell completely different products, Betty’s trademark introduces a likelihood of confusion because its green background and white lettering is significantly similar to Starbuck’s distinctive trademark. Additionally, the word mark “STARZBUCKLES” encompasses all of the letters of “STARBUCKS” word mark, thus Starbucks may argue the family of marks doctrine against Betty’s trademark. Betty’s defense would be that so long as she is not serving coffee to her clients who are waiting for buckles, a consumer most likely would not be confused to think “STARZBUCKLES” and “STARBUCKS” were the same entity.

Would Starbucks prevail in an action against Betty? Should Betty’s attorney advise her to modify her trademark or should she fight the goliath? Much depends upon the tenacity and budget of a small business client verses the willingness of a larger business to spend billing hours to eliminate the “offending” mark.

Finale – A New Issue in Trademark Law
Betty is using Twitter to communicate items of interest to her customers such as sales events and announcements of new designs. She uses the Twitter hash tag #bbuckles and has asked her attorney if she can register it so no one else can use the hash tag.

Currently, Twitter hash tags are not protectable as trademarks but that may change. Recently, rap artist Chris Webby and the organization that manages the “Webby Awards” had a dispute over the use of the hash tag #Webby, when the rap artist sent a cease and desist letter to the organization.37 As of this article’s publication, no litigation has ensued, but there is growing concern over trademark use and infringement in social media. The emerging technology is creating new intellectual property issues that will need to be addressed by attorneys practicing in this area, and it will be important to stay informed as the law evolves to meet the needs of the changing business environment.