How to Maintain Your Trademark Rights When Your Business is Closed
Trademark rights in the US are based on use of a mark not on registration. Failure to use your mark on a product or to offer a service to the public can result in an abandonment of your trademark rights and an inability to maintain an existing registration. Thus, in times such as these, when businesses have been shut down in whole or in part, companies should be aware of what they can do to ensure that their trademark rights are fully protected.
Section 45 of US Trademark Act defines when a trademark shall be deemed to be “abandoned.” One of the ways abandonment will occur is if use of the mark has been discontinued with no intent to resume use. Intent not to resume use may be inferred from circumstances, and nonuse for 3 consecutive years is prima facie evidence of abandonment. Under the trademark law, "use" of a mark means the bona fide use of a mark made in the ordinary course of trade, and not made merely to reserve a right in the mark. What constitutes "ordinary use" will depend upon the specific industry in which the mark is used.
The good news for trademark owners under the circumstances in which we all currently find ourselves is that most business closures are not voluntary. Therefore, although use of a company's trademark may be discontinued, it would probably be difficult to prove that discontinued use at this time is accompanied by no intent to resume use. However, the toll that this current pandemic is taking on businesses that have been forced to close cannot be underestimated, and businesses should make every effort to communicate to the public that business operations are expected to commence as soon as it is possible to do so. In addition, to the extent possible, trademark owners should try to make products and services available to the public through whatever means are currently allowed. For example, if products can be sold or distributed through online sales, this should be considered. If a company's regularly offered services cannot currently be provided to its customers, a trademark owner could provide, for example, relevant informational and educational services, an online blog, instructional tutorials or webinars, and similar offerings through its website. In this time of unprecedented forced business closures, it is critical to businesses of every type to be creative and find ways to survive and, in doing so, protect its valuable trademark assets.
For those trademark owners that must file a Section 8 Affidavit of Continued Use during the period in which there business operations are closed, it may be required that you demonstrate that non-use of your mark is due to "special circumstances." In order to do so, it is required that the maintenance documents filed with the Trademark Office set forth the date when use of the mark in commerce stopped, the approximate date when such use is expected to resume, and include facts to show that nonuse is due to special circumstances that excuse the nonuse and that nonuse is not due to an intention to abandon the mark. The purpose of this section of the Trademark Act is to remove from the register those registrations that have become deadwood, and it is not intended to cancel registrations because of a temporary interruption in the use of the mark due to circumstances beyond the control of the owner of the registration. However, merely stating that special circumstances exist and that there is no intention to abandon the mark will not satisfy the requirements of the statute. Sufficient facts must be set forth to demonstrate clearly that nonuse is due to some special circumstance beyond the owner’s control or was forced by outside causes. Examples of what may and may not be accepted as sufficient grounds to excuse nonuse are set forth in 37 C.F.R. §7.37:
Business Decision. Nonuse related to a business decision is not beyond the holder’s control and does not excuse nonuse.
Decreased Demand. Decreased demand for the product sold under the mark, resulting in its discontinuance for an indefinite period, does not excuse nonuse.
Trade Embargo or Other Circumstance Beyond Holder’s Control. Nonuse may be considered excusable where the holder of the registration is willing and able to continue use of the mark in commerce, but is unable to do so due to a trade embargo.
Sale of a Business. Temporary nonuse due to the sale of a business may be considered excusable.
Retooling. The mark might be out of use temporarily because of an interruption of production for retooling of a plant or equipment, with production possible again at a scheduled time. However, nonuse due to retooling is excusable only if the holder shows that the plant or equipment being retooled was essential to the production of the goods and that alternative equipment was unavailable on the market
Orders on Hand. If the product is of a type that cannot be produced quickly or in large numbers (e.g., airplanes), yet there are orders on hand and activity toward filling them, nonuse might be considered excusable.
Illness, Fire, and Other Catastrophes. Illness, fire, and other catastrophes may create situations of temporary nonuse, with the holder being able to outline arrangements and plans for resumption of use. Such nonuse is often excusable. However, a mere statement that the holder is ill and cannot conduct his or her business will not in itself excuse nonuse; the holder must show that the business is an operation that could not continue without his or her presence.
Negotiations with Distributors. A recitation of efforts to negotiate agreements that would allow for resumption of use of the mark, or a statement that samples of the goods have been shipped to potential distributors, may establish lack of intention to abandon the mark, but does not establish the existence of special circumstances that excuse the nonuse.
Use in Foreign Country. Use of the mark in a foreign country has no bearing on excusable nonuse of a mark in commerce that can be regulated by the United States Congress.
Use of Mark on Different Goods/Services. Use of the mark on goods/services other than those recited in the registration does not establish either special circumstances or lack of intention to abandon the mark.
Use of Mark in Another Form. Use of a mark as an essential part of a materially different composite mark does not excuse the failure to use the mark at issue
We are all in the midst of unprecedented and uncertain times, and with that comes the need to move forward in ways we previously could not have anticipated. Hopefully, this too shall pass, and we will all be stronger for it. In the interim, we must act accordingly until we can resume business as usual.