Saturday, June 25, 2022

Trademark Scholars’ Roundtable Session 3: Abandonment of Trademark Rights

Introduction:   Robert Burrell

Australia/NZ is probably unusual b/c abandonment plays 3 distinct roles: (1) not a purely rhetorical device. 1863 case: from the moment you first use a TM, you have a property right—no goodwill, no reputation required. There was a brief period where that just gave you a right to stop others registering; after that, UK abandoned that principle but Australia didn’t. First user can oppose/expunge if first in marketplace.  No right to injunction or damages, just keep off register in double identity cases. No age limit on the use. No statutory nonuse periods. The sole exception to that is abandonment. NZ has adopted broad concept of constructive abandonment, but may be moving away (most has been at the TM office).

(2) Goodwill can in theory be abandoned. UK cases: Discussions of abandonment/intent to abandon have taken a strange direction in that we know for certain that intent is not a necessary condition. Goodwill is perishable; if you leave it neglected long enough it can dissipate throgh neglect. What we don’t know is whether intent is a sufficient condition. No one cares in Australia b/c of statutory consumer protection regime that offers protection for registered and unregistered marks when you have a reputation. It’s clearly not a proprietary interest and clearly not subject to abandonment, so you don’t worry about intent.

(3) Discretion that courts have to preserve an unused mark on the register. Open to the TM owner sob story. Old UK case, Hermes TM: take into account whether the TM has been abandoned.

Jake Linford

Prefers forfeiture, b/c it’s not just nonuse but naked licensing and alteration. Abandoning goodwill is easier in the US than Australia but not easy. Courts don’t like [noncriminal] forfeitures in TM and elsewhere. When there’s use that creates consumer perception you have a TM, and if you lose one of those things does the TM still exist? Residual goodwill: he thinks that’s enough as he has written. Given three constituencies—incumbent mark owners, new entrants who need space to compete, and consumers—if properly cabined, goodwill should be recognized if consumers are still investing a term with source significance.

How much harm does naked licensing actually cause consumers? TM law has relaxed its rules in a modern economy. Looking for relationship w/licensee: are you doing the monitoring we expect? If so no forfeiture. If not then you are ok if you have a special relationship.

Transfer in gross/Buying TMs: powdered energy drink w/caffeine isn’t similar enough to a drink w/no similar ingredients but caffeine. This seems like the right question to him.

“Generislide”: mark becomes generic. He’s willing to give rights to a born generic term that gains secondary meaning—changes in secondary meaning should count in both directions.

Actual abandoned business/retro branding: Macy’s is still selling t-shirts for all the old stores it bought up and rebranded. And courts let them. [Court doesn’t ask whether the t-shirts have any continuity w/the old brand or anything like that.]

You could impose a materiality test—is there really still goodwill that consumers care about?

Discussant:      Jeremy Sheff

There’s no abandonment through continuity of use in a way that fails Linford’s test for continuity of goodwill—you can change your product/service and not abandon as long as you are a going concern. If we were consistent about why we care about abandonment, we should be policing for that kind of conduct which creates the same harm/exploitation of consumers that Linford says we should care about. Thinking about that inconsistency can explain what it is we really care about. Derek Parfitt’s Reasons and Persons thinks very deeply about what it means to be the same person over time. Firms are not people and raise different concerns, but his conclusion is that the question of identity is an empty question. Whether Sheff is the same person today that he was 20 years ago is not a useful question for how we should think about our actions and our future selves. What matters is a kind of psychological connection between those selves.

W/r/t abandonment in TMs and why you can’t abandon through bad use, there must be something about what we think the role of firms is in our lives and how they communicate with us. Something to do with whether consumers will blame the right person if they’re unhappy. TMs are really assurances/promises.

Linford: change in the mark can abandon former goodwill. Shahar Dilbary has a paper saying we should penalize mark owners for changing goods/services, but that didn’t happen. Posner said some similar things.

Dinwoodie: what is the general common law of abandonment in Australia?

Burrell: usually intent is required—leaving hay on a farm, you still have to demonstrate intent to abandon plus divesting of possession before the landowner can claim it as abandoned. Intangible property—that reduces to (omission +) intent.

Mike Grynberg: Residual goodwill and consumer deception: the predominant concern is: people who really like X and are happy to see its return but are deceived about its quality. But maybe brands are usually more mundane. Mentally available and familiar, but not necessarily brand loyal. If that’s true, does the residual goodwill story still matter? Is the game worth the candle of testing materiality?

Linford: then we also don’t need naked licensing and assignment in gross as doctrines either. In a strong form, we wouldn’t care about passing off either. Extreme form: no need for TM. If we take naked licensing/assignment in gross seriously, it ought to be grounded in consumer perception.

RT: I will never criticize a materiality test.

Standing: Right now the test is inconsistent—the real harm happens to other people in the market, not the abandoner. Consumers don’t have a claim. This prioritizes property over people.

[born generic: saying that linguistic change happens in both directions ignores the role of actors with agency knowing the legal regime and manipulating it, not just letting linguistics happen. A regime that works fine as long as people aren’t optimizing based on the regime’s rule can become dysfunctional if people start gaming the rule. That terrible crab house that keeps suing people arguing that it’s not generic any more is telling you what that system looks like. And if you sue individual restaurants you’ll win a lot of your cases regardless of merits.
Macy’s case: notable to me that court didn’t ask about sales under the name, also of course the t-shirts have nothing to do with what the stores were actually known for.

[Naked licensing: not usually a situation where we say this is “not a TM” but rather this is “not a TM owner.” The consumer protection concerns are very different in the two situations. I want to talk about the example of licensee estoppel. Who’s really in charge of the meaning? Is there a way to create consistent treatment of licensor behavior if we say consumer perception must control? Saying that naked licensing is about consumer perception is unlikely to help because consumers are extremely unlikely to give any thought to the Q who controls the quality of this store, except perhaps when they assume a national franchisor where there is a lot of secondary meaning—they’d need so much information, both legal and factual, to answer the question that it’s probably not worth asking.

One harm that naked licensing—or even non naked licensing in unrelated goods/promotional goods categories—does to consumers is products liability. The mark draws them in but the TM owner is not responsible for the harm done thereby.

McKenna: passing off used to say: if you’re not trying to serve people any more under the mark, then you aren’t suffering any harm. Incoherence across TM about why we would care whether consumers are able to attach a particular mark to a particular entity. In infringement, we assume that if you can’t do that, then harm to consumers follows. If that’s true, then naked licensing should be super-strong rule. And we wouldn’t care about residual goodwill b/c the entity isn’t exercising control—consumers are wrong about that. TM owners get to pick whichever characterization suits their interest at the moment. Naked licensing: right now it’s very hard to nakedly license if you wrote it into the contract, but why isn’t the rule very strong requiring serious quality control?

Jeanne Fromer: lack of symmetry b/t incumbents and other participants. One of our side findings on TM depletion is that incumbents can keep registering the same mark in other spaces that other people are having problems registering. We’re seeing the same thing here—a business that’s already operating can more easily assign in another space. TM feels very propertized here rather than based on use.

Robert Burrell: heritage brand cases in Australia, some of which produce really undesirable results. Beer company suppressed company that had actually got the old recipes and wanted to produce the old beers. Now they’ve learned their lesson and make 100 bottles under the old brand each year which is really just Foster’s under different labels.

Linford: maybe we should have an auction for the rights.

Gangjee: maybe it should be deceptive to put Foster’s in the heritage bottles.

Ansgar Ohly: Asymmetry: result of using lower quality ingredients in an old brand w/out these shenanigans.

Jennifer Davis: market for brands is huge and ongoing. Private equity firms buy businesses b/c of the brand, sack the workforce, find cheaper ways of making things, and that’s what PE is all about.  Apple can outsource all its manufacturing to China—is that abandonment? Nike does the same thing—we market Nike shoes, we don’t make Nike shoes. A lot of what we’re saying is about closing the barn door when the horses are gone. It’s a new age. Distinguish what a brand does from what a TM does.

Gangjee: can anyone raise rule (1) from Burrell’s account in Australia?

Burrell: Yes! You only need to demonstrate that the applicant/registrant is not the proprietor of the first use. Even if it’s in the same corporate group, you lose if the first owner was A and you’re C.

Dinwoodie: if TM is really a Q of industrial policy/organization of firms, then it is not clear how consumer perception matches up to that. Other common law countries have been allowing more naked licensing. [Burrell says Australia has snapped back towards the American rule.]

McKenna: we assume it’s inherently problematic for consumers to make associations in the infringement context, and those assumptions just disappear in the product liability context.

Lisa Ramsey: genericide v. abandonment. People say “we have to enforce aggressively or else we could lose the mark.” One thing this means is that, for good or ill, TM owners demand C&D rather than licensing fee (as with ©).

Ornamentality as non-TM use/nonuse. If it’s on front of T-shirt, does it really have source significance?

Linford: Consumers should be able to sue under the Lanham Act! Any one consumer might not be speaking for all consumers, but that’s not special. FTC lacks resources. More pressure on the system would be helpful. He doesn’t want to get rid of naked licensing but wants to shift to more consumer oriented view.

Firms do need to change from time to time. Coke no longer has cocaine.

Gaming is an issue, but not every business can make fetch happen. [But you don’t need to make fetch happen, you need to sue.] Two Pesos had an important insight: a system that relies on secondary meaning favors bigness, and that’s a problem of its own.

Mid-Point Discussant: Ansgar Ohly

In EU, abandonment is not a big concept. Not a use-based system, which makes it more property-like/abandonment plays less of a role. You can surrender a TM, and there’s also the possibility of revocation for nonuse and genericide and in the case it becomes likely to mislead the public. Parallel questions of residual goodwill are discussed in unfair competition law, where there are huge within-EU differences.

Revocation after 5 years without source-indicating use. There is a lower instance German case where someone registered BEATLES and used it on T-shirts and mugs; revoked for non-TM use/not a source indicating use. Also a lot of discussion of territorial scope of use for EUTMs. Is use w/in one country sufficient? The trend in the ECJ case law: borders don’t matter; if territorial market is big enough, it can suffice even without crossing borders. Use of TM in different form: directive/regulations say it’s still use where the distinctive character is not changed. All of this is much less relevant in practice than it is in the US. UK IPO study: cluttering and nonuse of TMs in Europe—found lots of deadwood on EU and UK register, much worse on the former. Usually, the catalogs of goods and services are much broader than they are in the US. Nonuse is not as strictly enforced in the EU as it would be in the UK. UK IPO envies the US a bit. Loss of UK views in EU has decreased diversity of interest groups; destroyed equilibrium b/t rights-skeptical UK approach and maximalist French approach.

Assignment/licensing/quality control: Less along these lines too. There is an ECJ case, Elizabeth Emanuel, who left her company and the co kept using her name. Was this misleading? EU says no problem b/c she transferred all her rights. Older German cases allowed licensing contracts to be voided if there wasn’t quality control, but those cases seem to have been replaced. Consumer deception is an issue under unfair competition, but only then.

Residual goodwill: not a use based system so that doesn’t play a role. Unfair competition/passing off might care—in Germany, there is a possibility of passing off where abandonment doesn’t play a role if consumers still remember the TM and link it to goodwill.

Case study: supervised a thesis on “socialist brands” in Communist countries. Some companies are trying to revive them. Why is it misappropriation? There are some cultural heritage protections, and his student argued that there should be a state authority superintending these brands. Ohly is a little skeptical, but links to questions about whether there ought to be controls over use of abandoned brands. The products today are not the same as the old ones—they’re better! And everyone in Poland knows that the state owned companies collapsed, so there’s less of an issue of consumer protection.

Fromer: In the US, relative examination matters—an abandoned registered mark will still block other registrations. In the EU it won’t, and no one will oppose, and that matters to how much crowding there is. People are comfortable coexisting, and there are a lot of secret agreements; France is the only EU country that makes people register and publish coexistence agreements. There could be a ton of “dark matter” naked licensing as long as a third party is not pushing on opposing or exposing this. It’s not registration-based v use-based but choices made about coexistence agreements, not doing relative examination, and using unfair competition as a backstop that conceals all the policy choices in the EU.

Gangjee: The searching agencies may also matter here: if you get a search result that is scary you may back off.

Fromer: never had a sense that anyone backs off.

Burrell: you search the owner company, and find that it doesn’t exist anymore and go forward.

Gangjee: depends on the entity.

Burrell: SMEs don’t use search companies like that. Once you get down to a list of 3 options you will investigate.

RT: product liability?

Gangjee: TM use is part of the multifactor analysis of who is liable under UK law.

McKenna: what is the dormant goodwill of a socialist brand? Nostalgia is not goodwill in TM’s meaning. Identity as a source is goodwill. We frequently accept in casual conversation that if a mark refers to something that I recognize, that’s a TM value. But that’s steps removed from actual goodwill.

Ohly: TM v. brand—feeling nostalgic is brand value, maybe.

McKenna: especially if you know the companies don’t exist anymore, it’s just a cultural artifact.

Sheff: labor of creation of value leads to feeling that there should be control over value.

Ramsey: like trying to get rights in a famous work of art. The options should be that everyone can use it or only one can.

McKenna: but Disney builds an empire on Grimm Brothers stories. We only notice these claims in certain circumstances.

Ohly: w/socialist businesses, it’s not just on a T-shirt; people are trying to create the products, and so you need a TM.

Linford: if it really is nostalgia, then we should treat it like Black Lives Matter—anyone can use it. But if the argument is just that consumers built the brand value with the TM owner, I would be cautious.

At the registration stage, doctrine does seem to care whether you’re lying to consumers (misdescriptiveness, deceptiveness, false association). Could we do anything for consumers later?

Burrell: one complexity of EU system is that it covers countries with very different histories. Debate over Stalin vodka is funny in England, not funny in Poland. Australia has an embarrassing protection for a specific football player. But take care about cultural heritage, which is really important in some jurisdictions.

McKenna: distinct from other TM questions.

Grynberg: but could be put in same box as Black Lives Matter—related to TM function/failure to function.

Dogan: concept of public domain: you have to base that on failure to function/expressive meaning is so important that you don’t think anyone can or should be allowed to try to develop secondary meaning in it.

RT: just want to note Dogan’s standard move here of uniting descriptive and normative—completely normal in TM but worth distinguishing b/c they have different foundations and overlapping but distinct justifications—the descriptive gives heavy weight to error costs. [Lots of discussion here: my take: if your justification for having an essentially unmeetable standard of proof is fundamentally normative then you should know why and be willing to talk about it. But also I think that the fact that people don’t in fact seem to overcome F2F refusals with evidence of secondary meaning is evidence that holding them to a high standard of proof is useful and suggests the underlying intuition about likelihood/empirics is correct. Others disagree with me about the importance of textualism/whether textualism leaves room for making these normative decisions, including the statutory language “capable of distinguishing” which is not subject to the “unless” conditions of the rest of §2. Also, I think “protecting the system against gaming” is a good and useful normative rule that you can definitely adopt.]

Ohly, in response to Q: consumer protection largely enforced by competition authorities.

McKenna: it was courts & PTO that created the rule, only later enacted into the statute, that functionality trumped secondary meaning. The statute has always recognized what courts have been doing so we shouldn’t be overly reliant on what the statute currently says.

Gangjee: Norm of protecting the system emerging in the caselaw now in bad faith. People who would file a fresh application every 5 years. The system is premised on source identification; if you’re just doing that to avoid use then that’s bad faith.

Burrell: if they file again next week, can/will the examiner acknowledge that? Will the examiner even know? How do you feed that back into the system?

Gangjee: the pattern was bad faith. But would require opposition to pick that up.

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