Trademark Modernization Act News Alert

by Valerie Brennan and Benjamin Reed 

The Trademark Modernization Act of 2020 was included in the bipartisan 2020 coronavirus stimulus bill that passed on December 22, 2020, and was signed into law yesterday.

The TM Act of 2020 will bring three important changes to trademark law (the Lanham Act, 15 U.S.C. §§ 1051 et seq.) of significance to brand owners.

First, the new law will introduce a rebuttable presumption of irreparable harm.  A brand owner seeking an injunction (a preliminary injunction, temporary restraining order or permanent injunction) no longer needs to establish irreparable harm through concrete evidence if the brand owner is able to prove likelihood of success on the merits (i.e., likelihood of confusion) on its claim of trademark infringement.  This presumption is viewed as a restoration of what was understood to be the law prior to the U.S. Supreme Court’s 2006 decision in eBay v. MercExchange, LLC, 547 U.S. 388 (2006).  That decision held that parties seeking to enjoin patent infringement had to prove irreparable harm rather than rely on a presumption of harm arising from proof of likely success on the claimed infringement.  The eBay decision resulted in a Circuit split over whether a party seeking to enjoin trademark infringement was also required to present actual proof of harm arising out of the alleged infringement, as opposed to courts presuming that a brand owner would be irreparably harmed if the brand owner established that there was a likelihood of confusion with, and therefore infringement of its mark.  The change has widespread support, including from the International Trademark Association.

The next two changes are designed to address the unfortunately widespread fraudulent trademark filings (demonstrated to be particularly prevalent in filings from China) where a claim of use or bona fide intent to use is made that is either entirely false or broader in scope than the actual use.  These new procedures are added to several other recent changes by the U.S. Patent & Trademark Office (USPTO) designed to address fraud – adding the “check boxes” for factual declarations to filings, the USPTO post-registration audit procedure, a pilot program for protesting doctored specimens, and requiring non-U.S. filers to have U.S. counsel.

Second, the new law allows two kinds of ex parte (third party) challenges to registrations as part of the USPTO petition processes.

  • Expungement – New Section 16A of the Lanham Act will allow for ex parte expungement of a registration that has never been used in commerce. The petition must be filed within three years of registration. A mark never having been used in the U.S. has also been added as a ground for cancellation of a registration under the existing cancellation process (as an amendment to Section 14). This new 16A proceeding applies to registrations based on foreign registrations, but non-use may be excused in certain circumstances.
  • Reexamination – New Section 16B allows for ex parte reexamination of a registration if the mark was not in use in the U.S. at the time when the application was filed or of the first claimed use. The petition must be filed within five years of registration. This new 16B proceeding does not apply to registrations based on foreign registrations.

The changes do not alter the standards for what constitutes “use in commerce,” the changes merely make it easier to show that the requisite use has not occurred.  These new proceedings become effective 27 December 2021.

Third, the new law makes changes in trademark prosecution procedures:

  • Third-party evidence. This change formalizes the existing process that allows third parties to submit evidence identifying grounds for refusal of the application (as possible currently under the letter of protest procedure). (Note: The USPTO had already codified the procedure, effective 2 January 2021.)
  • Office Action Response times. The USPTO will have the authority to shorten the now six-month time period that applicants have to respond to an Office Action, down to as short as 60 days.  Shorter response periods tend to weed out fraudulent applications.

What does this mean to you?

Clearing. Part of the clearance process for a new mark can now include consideration of challenging applications and registrations that seem fraudulent. While seeking cancellation has always been an option, the new processes are more streamlined and thus are likely to be less costly.

Filing. Any U.S. filing, whether direct filings based on a foreign registration or extensions to the U.S. through the Madrid Protocol, should be carefully crafted and limited in scope, so as not to include any products or services for which the bona fide intent to use standard is not met.  A broad application with a long litany of goods and services is more likely to be challenged (whether by third parties or the USPTO) using these new, easier mechanisms.

Watching. To be in a position to avail yourself of the new prosecution challenge processes, it will be more important to have a trademark watch service on your marks that covers new application filings, not just published applications (which would alert you but too late to submit third party evidence).

Enforcing. The presumption of irreparable harm will aid brand owners in enjoining trademark infringement, particularly franchisors seeking preliminary injunctions against holdover franchisees, without having to establish harm that is inevitable but may be difficult to prove at early stages of litigation.

Please let us know if you have any questions or would like assistance in considering how these changes might affect your trademark portfolio.