Benjamin Franklin once said nothing is certain except death and taxes. He could have added one more: ''trademark abandonment,'' a common occurrence in which a company stops using a trademark without taking steps to retain legal ownership of the mark.
It is not unusual for a company to decide to phase out a strong trademark in lieu of a new mark, perhaps to tout some newfound advantages or to rebrand in response to consumers' evolving preferences. At the same time, however, the company might not want a competitor to begin using the recently phased-out trademark and profiting from the consumer goodwill associated with the older brand.
Under current U.S. trademark law, such a move would be legally permitted if the competitor could prove that the mark had been abandoned. So, if your company is considering no longer using a particular trademark, what can you do to keep the old trademark from falling into a competitor's hands?
This article recommends strategies for avoiding or delaying abandonment of a trademark after a name change, as well as for keeping third parties from adopting the mark if abandonment cannot be avoided.
Under the 1946 Lanham Act, trademark rights in the United States are acquired and preserved through use. As long as a trademark owner uses its mark, it may maintain rights in that mark. If it stops using the mark and intends not to resume, it abandons all rights in that mark.
The Lanham Act deems a mark to be abandoned after three years of nonuse if its owner shows no legitimate evidence of intent to resume use:
When a trademark is abandoned, it can generally be adopted by a new user on a first-come, first-served basis. However, if the owner abruptly discontinues use of the mark, as with a change of corporate name, the association of the mark with the original owner may continue for a significant period of time, as discussed by on Trademarks (2011).
When the trademark's goodwill has largely dissipated, a third party may adopt and use the mark freely.
As such, if a trademark owner does not use its trademark after a name change and has no intent to resume usage, the mark will eventually be deemed abandoned. The public will likely continue to associate the once highly used trademark with the trademark owner for a limited period of time and, if a third party should adopt the trademark before this association is dissipated, the company may be able to enforce the mark by arguing that the public will be deceived. However, absent extraordinary circumstances, it will be difficult for a trademark owner to rely on this residual goodwill to later enforce a mark that has not been in use in the previous three years.
Below are some steps that your company can take to avoid abandonment of the mark, or at least deter third parties from adopting the mark if abandonment cannot be avoided.
Continued Use
The only sure way for your company to maintain its trademark rights is to continue to sell goods under the mark after the name change, even if in a much more limited way than previously. To cite the Lanham Act, ''use'' of a mark means ''the bona fide use of such mark made in the ordinary course of trade, and not merely to reserve a right in a mark.''
In other words, the use has to be more than mere ''token'' use, a description that includes, for example, periodically distributing goods under the mark only as a means to reserve rights in that mark. A company cannot depend on token use to maintain legal rights in a trademark.
During the transition from use of an older mark to a new mark, a company may consider using the older trademark in connection with a limited portion of its services. However, this effort must also constitute more than mere token use.
Another way to maintain trademark rights in the older mark is by licensing the mark to a third party to keep it in active use. That said, evidence of the mere granting of a license without evidence of actual use by the licensee would not be enough to maintain trademark rights in the mark; the controlled licensee must use the mark. Moreover, the licensor company must maintain adequate control over the nature and quality of goods and services sold under the mark by the licensee to avoid abandonment through naked licensing of the mark.
'Formerly Know As'
Educating the public about your company's trademark transition may help defend your mark. For example, a company may use the word ''formerly'' in front of its old trademark for a period of time after the transition and create a history page on its website that makes reference to its longstanding history of use of the mark.
While this limited use will not be enough to maintain legal rights in the mark, it may lengthen the public's association of the older mark with your company and deter third parties from adopting the mark. If your company currently owns federal trademark registrations that incorporate the soon-to-be discontinued mark, file any maintenance documents that you can before you discontinue use of the mark. The registration will remain valid for several more years unless someone attempts to cancel it. Therefore, it may deter third parties from adopting the mark.
State Registration
Typically, companies do not file state trademark applications because they are enforceable only within one particular state, and companies prefer being able to enforce their marks throughout the United States. Moreover, federal registration offers a number of advantages over a state registration.
However, when anticipating the loss of a trademark, your company should consider filing state trademark registrations in the main states in which you sell the product. A state trademark registration will often be valid for several years, at which time it can be renewed upon a showing of use; the state is likely to have a lesser use standard than a federal registration.
Having state trademark registrations will not prevent the mark from being deemed abandoned if your company ceases all use of the mark; however, a state registration may deter third parties from adopting the mark. Another advantage is that state registrations are very inexpensive.
'Doing Business As'
If your company is considering abandoning a service mark, it may consider keeping that service mark as its corporate name and using the new mark as a d/b/a (''doing business as''), as opposed to simply changing the corporate name to the new mark. While using the old mark as a trade name alone will not provide any trademark rights in the name, it may deter third parties from adopting the mark.
Even if your company ceases use of its old mark, it should continue to maintain the domain name registrations related to that old mark to prevent third parties from registering for the domains. Moreover, it is a good business practice to forward these domains to the new mark's website after the transition, helping educate consumers as to the new name and ensuring that potential customers of your company are not misdirected.
In addition, a company should register for domains related to the soon-to-be phased-out mark to prevent third parties from doing so after the transition. Again, this tactic will make it more difficult for the newcomer to confuse consumers.
Summary
Unless your company continues to provide goods or services under the old mark, even in a highly limited way, your company's trademark rights will diminish entirely over a period of discontinuance. The strategies listed here will not prevent abandonment, but may delay it by lengthening the public's association between the mark and your company. In addition, these strategies may deter third parties from adopting the discontinued mark at least for a period of time.
This article is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Hofer Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Hofer Gilson & Lione lawyer.
