Client Alert: Resolve to Audit Your Trademarks in 2020

   By: Valerie Brennan

The start of the year is an excellent time to take stock of your trademark portfolio through an (internal or external) audit – a quick check that your brands as protected match your use.

What is a trademark audit?

A trademark audit is a review of a brand portfolio, including both registered and “common law” (unregistered) marks, with the ultimate goal of understanding how each fits into its marketing and brand strategy.  Because brand strategy, marketing objectives, and business models change over time, brand owners should reexamine their trademark portfolios on a regular basis to ensure that their protection strategy is in line with their goals.

How do you begin?

Start by reviewing your “docket” — the list of all trade names, trademarks, and service marks, whether registered or common law, that you own and information relevant to each mark, such as date of first use and scope of use — or by creating such a list.  Dockets often are limited to registered marks or pending applications, but it is wise to include common law marks as well because trademark rights in the U.S. and many other jurisdictions are created by use not registration.  Thus, a brand owner might have strong marks that are unregistered. You will be able to make registration decisions more easily if you know when and how such rights were established.

This is also an ideal time to review the internal procedures in place for selecting, clearing, and protecting marks.  Well-documented procedures will ease any audit process.

What’s the next step?

In cooperation with the appropriate business contacts, review each mark to determine whether (and how) it is in use, how the brand relates to your goals, and the overall importance of the brand to you.  This is a good time to fill in missing information regarding a mark, such as first use dates and scope of use.  Such a review should include:

  • the products and services in connection with, and regions and countries in, which each mark is used
  • whether you use the mark (in the form registered, if applicable) and for how long you intend to continue using it (keeping in mind that in many countries a trademark registration for an unused mark is vulnerable to cancellation)
  • the expenditures for advertising and promotion of goods or services under each brand
  • the revenue generated by goods or services offered under each mark, both total and broken down by country and region, if possible
  • whether the brand is licensed to others
  • the likelihood that it will be infringed upon (this often depends on the type of product and whether there have been infringements in the past) or if other threats to the mark are likely (such as claims of “genericide” or that the mark has become the generic term for the product).

Take this opportunity to compare the actual use information with the registered mark information to see whether there are any significant uses that are not covered by registrations.  For those expansions and each common law or unregistered mark, it is helpful to consider registered marks that could block an application for the mark if one were filed and whether there are any time pressures related to those registrations (such as registrations that will shortly become incontestable and potentially block registration long term).  In the U.S., brand managers with a basic understanding of the likelihood of confusion factors can search using the search engine on www.uspto.gov.

Keep good records

Use and strength information that is gathered during an audit can be useful in establishing rights if the mark needs to be enforced or defended.  It tends to be most cost effective to develop a picture of the strength of a brand – the breadth of its public recognition — as that strength develops, rather than attempting to recreate the information after an issue has arisen, when time is short and outside counsel has become involved. Marketing, with guidance from legal, can maintain files on each mark so that demonstrative uses are collected at the time, simplifying the process of responding to office actions, making maintenance filings, defending against audits and non-use claims, and demonstrating the strength of a mark when necessary.  Moreover, if a brand owner who has failed to maintain such files undergoes staff reductions, important historical information may be lost forever. It is helpful at this stage to ensure that marketing, other business areas and the legal team are on the same page with respect to brand strategy and that communication is flowing freely.  Key indications that better training and communication is in order are if intent to use applications commonly are abandoned because the eventual use does not match the application filed initially or if a brand change has been implemented without prior thought given to impact on a trademark portfolio or to the cost of protecting the new brand.

How do you determine which marks are most important to your business?

Once the information discussed above is obtained, the brand owner is in a position to analyze which marks are most important to its business, and, if it uses or licenses its marks internationally, which countries are most important to its business.  For international rights, one should consider the revenue generated by sales or licensing in each country, but also whether the company intends to expand its operations in each country or into new countries.  Keep in mind that in some countries rights are acquired by registration not use (“first-to-file” countries), unlike the United States’ first-to-use rather than registration model, imposing greater importance on timely registration in the first-to-file countries.

One approach is to create a tiered system for marks, with the most important marks at the top and then descending into marks of lesser importance.  Brand owners with marks in multiple countries expand the tiers into a grid, with marks on one axis, and countries on the other, with the most important marks and countries falling into one quadrant (perhaps broken into further graduated tiers) and the least important in another, with the other two quadrants containing marks of high importance and countries of low importance, and vice versa.  (Of course, it is possible that a mark may be important in one country and not in another.)

You can make a similar grid for domain names (or social media identifiers) that relate to each mark using mark variants on one axis and top-level domains (instead of countries) on the other. With a grid system in place, you can make broad decisions based on the quadrants.

Once an internal audit is complete, how do you use the results?

You can use the results of the audit to create a protection strategy to simplify decision regarding distribution of resources based on the newly identified priorities and brand values.  For instance, a brand owner might determine that, based on the value of the marks, it will seek registration of marks only in the highest quadrants and perhaps only in the most important countries.

The implementation plan for that strategy can include applying to register unregistered marks that the audit discloses have become significant, drafting formal trademark licenses if only oral or implied licenses exist, cancelling trademark agreements covering marks that the entity no longer uses, if possible, selling off brands that are no longer useful, and attempting to purchase desired domain names. It could decide to seek registration but to abandon applications for lower priority marks if the Trademark Office issues an office action that is particularly difficult to overcome or if they are opposed.  A secondary strategy could be to add a house mark, if possible, to marks refused on the basis of confusion with a prior registration.  If funds do not allow for comprehensive registration (for all classes in which mark will be used), consider filing only in the main class so that those searching the Trademark Office database will have a better chance of finding your mark and be deterred from choosing it.  For registered marks that are to be maintained, the brand owner should ensure that the ownership information is up to date in the records of the relevant Trademark Office(s), and update those records if necessary.  This step avoids potentially expensive refusals if the chain of title becomes clouded or outdated and inaccurate filings are made inadvertently as a result.

Something is Better than Nothing

Audits can be cursory or in-depth.  Understanding the need for an audit is an excellent first step – which you’ve already accomplished!