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ELECTRONIC NEWSLETTER


The Abelman Firm Intellectual Property Report

December 1, 2004

Volume 3, Issue 6

Topics

Calendar (See Below)

News

Trademarks and Unfair Competition

Copyright

Domain Names and Other Internet Matters

Discussions

Patent and Trademark History

Announcements

We are pleased to announce that the following attorneys have joined the Firm:

RICHARD L. CRISONA has become a partner in our litigation group;

NED W. BRANTHOVER, formerly a partner in the firm of Robin Blecker, has become a partner in our litigation group;

CONSTANCE GOLDEN, formerly counsel in the firm of Pennie & Edmonds, has become of counsel in our trademark group;

JERRY DAINOW, formerly of counsel at the firm of Amster Rothstein, has become of counsel in our patent group.

Calendar   top

Marie Anne Mastrovito and Anthony A. Coppola, Partners, Abelman, Frayne & Schwab

December 1 - 2 The Center for Negotiation Strategy Cutting Edge Negotiation Strategy for Lawyers Century City, CA
December 1-3 PLI Fundamental of Patent Prosecution Winter 2004: A Boot Camp for Claim and Amendment Writing; San Francisco, CA.
December 1 - 5 ICAAN Year-End Meeting. Cape Town, South Africa
December 2 - 3 INTA Europe 2004 and Beyond - New Frontiers and Opportunities, Prague, Czech Republic
December 6 IPO PTO Day; Washington, D.C.
December 7 IPO Appellate and Contested Case Practice in the New Millennium: Practicing Under the New Rules; Washington, D.C.
December 8 FCBA/LAIPLA Los Angeles Horizons Reception and Dinner for Practitioners and members of the Judiciary.
December 10 NYIPLA Luncheon: The Federal Circuit, Administrative Law and the Patent Office (Speaker, The Honorable Timothy Dyk); New York, NY
December 13 - 14 PLI Understanding the Intellectual Property License 2004 San Francisco, CA; Beverly Hills, CA (via videoconference); Costa Mesa (via videoconference), CA; San Diego (via videoconference), CA; Seattle, WA (via videoconference)

2005 Events:
January 17 - 28 INTA Counterfeiting/Gray Market Issues Roundtable; Various U.S. cities
January 26 - 29 AIPLA Mid-Winter Institute; Jacksonville, FL
January 31 IPO IPO/ACPC Reception; Aventura, FL
February 7 - 8 INTA Anticounterfeiting Forum; Washington, D.C.
February 9 - 11 LES 2005 Winter Meeting; Denver, CO
February 14 - 25 INTA Brand Protection, Branding Guidelines, Co-Branding, Using the Brand Correctly Roundtable; Various U.S. cities.
February 18 FCBA Horizons on the West Coast; Berkeley, CA
February 18 AIPLA Town Meetings on Patent Reform; San Jose, CA
February 24 - 25 PLI Navigating Trademark Practice Before the PTO 2005, From filing through TTAB Hearing; New York, NY
March 4 AIPLA Town Meetings on Patent Reform; Chicago, IL
March 6 - 8 Helsinki Symposium The Helsinki Symposium - The Enforcement of Intellectual Property Rights; Helsinki, Finland
March 7 - 8 PLI Advanced Licensing Agreements 2005; New York, NY
March 8 - 10 INTA Due Diligence Workshops; Chicago, IL; St. Louis, MO; Dallas, TX; Palo Alto, CA; Richmond, VA; New York, NY; Phoenix, AZ; Atlanta, GA
March 14 IPO IPO Spring Meeting; Washington, D.C.
March 14 - 15 PLI Handling Intellectual Property Issues in Business Transactions 2005; New York, NY
March 17 - 18 PLI Advanced Licensing Agreements 2005; San Francisco, CA
March 18 AIPLA Town Meetings on Patent Reform; Boston, MA
March 18 NYIPLA 83rd Annual Dinner in Honor of the Federal Judiciary; New York, NY
March 30 - April 1 PLI Counseling Clients in the Entertainment Industry 2005; TV, The Computer and Video Game Industry; Ethics and the Development of an Entertainment Law Practice; Film, Theater; Music Publishing, Sound Recordings (Combo Program) (may also be taken in segments); New York, NY
April 4 - 8 ICANN Annual Meeting, Mar del Plata, Argentina
April 6 - 8 ITMA London International Meeting, London, UK.
April 13 - 15 AIPLA Legal Secretaries and Administrators Conference; Alexandria, VA.
April 21 - 22 PLI Handling Intellectual Property Issues in Business Transactions 2005; Chicago, IL
April 25 IPO IPO Venture Summit; Silicon Valley, CA.
April 25 - 26 WIPO Conference on Dispute Resolution on International Science and Technology Collaboration; Geneva, Switzerland
April 25 - 26 WIPO Preparatory Meeting for the Diplomatic conference for the Adoption of a Revised Trademark Law Treaty; Geneva, Switzerland
April 29 - May 5 FICPI FICPI EXCO Meeting, Seoul, South Korea
May 2 - 3 PLI Handling Intellectual Property Issues in Business Transactions 2005; San Francisco, CA
May 4 - 6 LES Spring Meeting; Raleigh, NC
May 11 - 13 AIPLA Spring Meeting; Philadelphia, PA
May 14 - 18 INTAAnnual Meeting; San Diego, CA
May 23 - 24 PLIAdvanced Seminar on Copyright Law 2005; New York, NY
June 1 PLI Patents & High Technology Licensing 2005; New York, NY
June 2 - 3 LES Technology Transfer Seminar; Toronto, Canada
June 8 - 11 ECTA: 24TH Annual Conference; London, Great Britain.
June 12 - 15 LES International - LES International Conference; Munich, Germany.
June 9 AIPLA Town Meetings on Patent Reform; Washington, D.C.
June 9 - 10 AIPLA Advanced Patent Litigation Seminar; San Francisco, CA
June 9 - 10 AIPLA Advanced Patent Prosecution Seminar; San Francisco, CA
June 10 - 16 LES LESI Conference; Munich, Germany
June 12 - 15 LES International - LES International Conference; Munich, Germany
June 15 - 17 AIPLA/USPTO Legal Secretaries and Administrators Conference; Alexandria, VA
June 16 - 17 AIPLA Advanced Patent Litigation Seminar; Chicago, IL
June 16 - 17 AIPLA Advanced Patent Prosecution Seminar; Chicago, IL
June 22 - 24 PLI Fundamentals of Patent Prosecution 2005: A Boot Camp for Claim Drafting and Amendment Writing; New York, NY
June 23 - 24 AIPLA Advanced Patent Litigation Seminar; New York, NY
June 23 - 24 AIPLA Advanced Patent Prosecution Seminar; New York, NY
June 27 - 28 PLI Advanced Patent Prosecution Workshop 2005; Claim Drafting and Amendment Writing; San Francisco, CA
June 27 - 28 WIPO Workshop for Mediators in IP Disputes; Geneva, Switzerland
June 29 PLI Patents & High Technology Licensing 2005; San Francisco, CA
June 30 PLI Advanced Seminar on Trademark Law; New York, NY
June 30 - July 1 WIPO Advanced Workshop for Mediators in IP Disputes; Geneva, Switzerland
July 5 ITMA Summer Reception; London, England
July 11 - 15 ICANN Meeting; Luxembourg City, Luxembourg
July 17 - 23 LES PDS Fundamentals and PDS Intermediate; Chicago, IL
July 18 - 19 AIPLA Advanced PCT Seminar; Washington, D.C.
July 21 - 23 AIPLA Advanced PCT Seminar; Minneapolis, MN
July 25 - 26 AIPLA Advanced PCT Seminar; San Diego, CA
August 4 - 10 ABA -Annual Meeting, Chicago, IL
August 10 - 12 AIPLA Practical Patent Prosecution Training for New Lawyers Seminar; Alexandria, VA
September 11 - 13 IPO - IPO Annual Meeting; Seattle, WA
September 13 - 16 MARQUES - MARQUES Annual Conference, Prague, Czech Republic.
September 23 -29 AIPPI - Forum and Executive Committee Meetings; Berlin, Germany.
October 6 - 8 ECTA 50th Counsel Meeting; Rome, Italy
October 16 - 20 LES Annual Meeting; Phoenix, AZ
October 23 - 26 IPO International Judges Conference; Washington, D.C.
October 27 - 29 AIPLA Annual Meeting; Washington, D.C.
November 2 - 5 FICPI 9th Open Forum; Lisbon, Portugal

ABA - American Bar Association
AIPLA - American Intellectual Property Law Association
AIPPI - Association Internationale pour la Protection de la Propriete Intellectuelle
ECTA - European Communities Trade Mark Association
FICPI - Federation Internationale des Conseils en Propriete Industrielle
FCB A - Federal Circuit Bar Association
ICANN - Internet Corporation for Assigned Names and Numbers
INTA - International Trademark Association
IPO - Intellectual Property Owners Association
ITMA - Insititute of Trade Mark Attorneys (UK)
LES - Licensing Executives Society
LAIPLA - Los Angeles Intellectual Property Law Association
MARQUES - Association of European Trade Mark Owners
NYIPLA - New York Intellectual Property Law Association
PLI - Practicing Law Institute
WIPO - World Intellectual Property Organization

NEWS

Trademarks and Unfair Competition

Benelux: Opposition Procedure to Apply to Additional Classes    top

In our February 2004 Newsletter we reported that Benelux was phasing in an opposition procedure. At the time of that report, the opposition procedure was applicable to applications filed on or after January 1, 2004 covering Classes 2, 20, or 27.

Effective January 1, 2005, Benelux is expanding the opposition procedure to include applications filed on or after January 1, 2005 which cover Classes 6, 8, 13, 15, 17, 19, or 21.

European Community: Color Trademarks    top

In 2003 the European Court of Justice ("ECJ") ruled in the Libertel case (C-104/01) that color per se is technically capable of registration as a trademark and is not barred by Article 3(1)(b) of the European Union Trademarks Directive (89/104/EEC) provided it is graphically represented in a way enabling it to be identified with clarity and precision.

In the case of trademark application for a color trademark by Heidelberger Bauchemie GmbH ("Heidelberger", ECJ Case No. C-49/02), the ECJ revisited the issue of color trademarks.

Heidelberger made application in the German Trademark Office for a trademark for goods in Class 3 the representation of which consisted of the colors blue and yellow. The filing contained the following description:

"The trademark applied for consists of the applicant's corporate colors which are used in every conceivable form, in particular on packaging and labels. The specification of the colors is RAL 5015/HKS 47 - blue and RAL 1016/HKS 3 - yellow."

The code numbers preceding the color names are Pantone codes, an industry standard color chart.

The German Trademark Office refused the application on the basis that the mark was non-distinctive. Heidelberger appealed, and on referral by the Budespatentgericht, the ECJ ruled that a trademark that is not spatially delimited is not registrable because it is not sufficiently precise so that competitors can ascertain from the Register exactly what is protected. The ECJ stated:

"[T]he mere juxtaposition of two or more colors, without shape or contours, or a reference to two or more colors 'in every conceivable form' ... does not exhibit the qualities of precision and uniformity required under Article 2 of the European Union Trademarks Directive."

Article 2 of the European Union Trademarks Directive states:

"A trade mark may consist of any sign capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, the shape of goods or of their packaging, provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings".

The decision in Heidelberger is consistent with the decision in Libertel in that descriptions and representations of trademarks be such that owners and competitors be able to identify the extent of claimed rights.

It is difficult, however, to reconcile the finding in Heidelberger that a color combination not spatially delimited is not registrable with the finding in Libertel that a single color, not spatially delimited, is registrable.

The effect of the ruling in member states of the European Community is that pending applications for such marks will likely be refused and that owner's of previously granted registrations for such marks may now take pause before seeking to enforce such registrations.

European Community: European Court of Justice and Further Questions on Parallel Imports of Pharmaceutical Products    top

The following questions have been referred to the European Court of Justice ( ECJ Case No. C-348/04 P) in the matter of Boehringer Ingelheim v Swingward Limited.

    Reboxed products
  1. Where a parallel importer markets in one Member State a pharmaceutical product imported from another Member State in its original internal packaging but with a new exterior carton printed in the language of the Member State of importation (a "reboxed" product):
    1. does the importer bear the burden of proving that the new packaging complies with each of the conditions set out in Joined Cases C-427/93, C-429/93 and C-436/93 Bristol-Myers Squibb v Paranova or does the trade mark proprietor bear the burden of proving that those conditions have not been complied with or does the burden of proof vary from condition to condition, and if so how?
    2. Does the first conditions set out in Bristol-Myers Squibb v Paranova as interpreted in Case C-379/97 Upjohn v Paranova Bristol-Myers Squibb v Paranova and Case C-143/00 Boehringer v Swingward, namely that it must be shown that it is necessary to repackage the product in order that effective market access is not hindered, apply merely to the fact of reboxing (as held by the EFTA Court in Case E-3/02 Paranova inc V Merck & Co Inc) or does it also apply to the precise manner and style of reboxing carried out by the parallel importer, and if so how?
    3. Is the fourth condition set out in Bristol-Myers Squibb v Paranova, namely that the presentation of the repackaged product is not such as to be liable to damage the reputation of the trade mark or its owner, only infringed if the packaging is defective, of poor quality or untidy or does it extend to anything which damages the reputation of the trade mark?
    4. If the answer to question 1(c) is that the fourth condition is infringed by anything which damages the reputation of the trade mark and if either (i) the trade mark is not affixed to the new exterior carton ("debranding") or (ii) the parallel importer applies either his own logo or a house style or get-up or a get- up used for a number of different products to the new exterior carton ("co-branding") must such forms of box design be regarded as damaging to the reputation of the trade mark or is that a question of fact for the national court?
    5. If the answer to question 1(d) is that a question of fact, on whom does the burden of proof lie?

    2. Overstickered products
  2. Where a parallel importer markets in on Member State a pharmaceutical product imported from another Member State in its original internal and external packaging to which the parallel importer has applied an additional external label printed in the language of the Member State of importation (an "overstickered" product):
    1. do the five conditions set out in Bristol-Myers Squibb v Paranova apply at all?
    2. If the answer to question 2(a) is yes, does the importer bear the burden of proving that the overstickered packaging complies with each of the conditions set out in Bristol-Myers Squibb v Paranova or does the trade mark proprietor bear the burden of proving that those conditions have not been complied with or does the burden of proof vary from condition to condition?
    3. If the answer to question 2(a) is yes, does the first condition set out in Bristol-Myers Squibb v Paranova as interpreted in Upjohn v Paranova and Boehringer v Swing ward, namely that it must be shown that it is necessary to repackage the product in order that effective market access is not hindered, apply merely to the fact of overstickering or does it also apply to the precise manner and style of overstickering adopted by the parallel importer?
    4. If the answer to question 2(a) is yes, is the fourth condition set out in Bristol-Myers Squibb v Paranova, namely that the presentation of the repackaged product is not such as to be liable to damage the reputation of the trade mark or its owner, only infringed if the packaging is defective, of poor quality or untidy does it extend to anything which damages the reputation of the trade mark?
    5. If the answer to question 2(a) is yes and the answer to question 2(d) is the fourth condition is infringed by anything which damages the reputation of the trade mark, is it damaging to the reputation of a trade mark for this purpose if either (i) the additional label is positioned so as wholly or partially to obscure one of the proprietor's trade marks or (ii) the additional label fails to state that the trade mark in question is a trade mark owned by the proprietor or (iii) the name of the parallel importer is printed in capital letters?

    3. Notice
  3. Where a parallel importer has failed to give notice in respect of a repackaged product as required by the fifth condition of Bristol-Myers Squibb v Paranova, and accordingly has infringed the proprietor's trade mark(s) for that reason only:
    1. is every subsequent act of importation of that product an infringement or does the importer only infringe until such time as the proprietor has become aware of the product and the applicable notice period has expired?
    2. Is the proprietor entitled to claim financial remedies (i.e. damages for infringement or the handling over of all profits made by infringement) by reason of the importer's acts of infringement on the same basis as if the goods had been spurious?
    3. Is the granting of financial remedies to the proprietor in respect of such acts of infringement by the importer subject to the principle of proportionality?
    4. If not, upon what basis should such compensation be assessed given that the products in question were placed on the market within the EEA by the proprietor or with his consent?

    4. Israel: Personal Jurisdiction in the United States Over Israeli Website Operator Upheld    top

    The District Court of Jerusalem, finding sufficient contacts by the defendant with the United States to support the jurisdiction of the US court, declared enforceable in Israel a trademark infringement ruling issued by the US District Court for the Southern District of New York against the operator of a website run from Israel (Ahava USA Inc v JWG Ltd (Originating Motion 003137/04, October 10 2004).

    Ahava USA Inc ("Ahava USA") purchases skincare and beauty products manufactured in Israel by Dead Sea Laboratories Ltd. The products are sold under the trademark AHAVA. Dead Sea Laboratories originally registered AHAVA in its name in the United States and on December 18 2003 and thereafter it assigned the rights in the mark to Ahava USA.

    JWG Ltd, is an Israeli company that operates a website offering some 2,000 products manufactured in Israel. JWG buys the products in Israel and sends them via courier or post to customers around the world, including the United States. Under a category on its website entitled Dead Sea Cosmetics, JWG offers AHAVA-marked products made by Dead Sea Laboratories.

    On January 29 2003 Ahava USA filed a lawsuit in the US District Court for the Southern District of New York claiming that JWG was infringing its AHAVA trademark. JWG argued that the court had no jurisdiction. The court rejected JWG's contention.

    In the absence of a statement of defense, the US court issued a default judgment prohibiting JWG from importing, marketing or selling in the United States beauty and healthcare products that bear the AHAVA mark. JWG did not comply with the order and Ahava USA initiated contempt proceedings. On August 18 2003 the US court upheld Ahava USA's claim and ordered JWG to pay $1,000 for each day it failed to obey the order. JWG continued to offer the products on its website and on October 20 2003, the US court ordered JWG to pay Ahava USA approximately $57,500 in compensation. JWG did not make payment and Ahava USA moved to enforce the judgment in Israel by obtaining an order from the District Court of Jerusalem.

    In respect to a defense by JWG that the US court did not have jurisdiction over JWG and that the order was therefore unenforceable, the court held that the following facts were sufficient to create a link between JWG and the United States, giving the US court personal jurisdiction over JWG: JWG sent the products to the United States; the website was available in English; the prices were set in US dollars; and the website made some reference to a US tax issue.

    Madrid Protocol: Recent Filing Figures    top

    As of the end of October 2004, approximately 8,500 Requests for Extension to the United States have been filed pursuant to the Madrid Protocol. The top ten countries filing such requests are as follows:

    Germany - 20%
    France - 13%
    Switzerland - 10%
    Italy - 9%
    Benelux - 8%
    United Kingdom - 5%
    Australia - 5%
    Japan - 5%
    China - 4%
    Spain - 3%

    Approximately 1,800 International Registrations designating the Untied States as the Office of Origin had been filed as of the end of October 2004. Of these, 842 have proceeded to registration.

    Thailand: Registrability of Geographic References    top

    Effective September 20, 2004, The Thai Trademark Office amended its practice and considers the following not inherently registrable as trademarks:

    1. Names of countries, blocs of countries, regions or administrative units regions having the same characteristics as those of countries;
    2. Names of territories, sovereign states or prefectures/provinces/counties;
    3. Names of capitals, ports, provinces, special local administrative regions;
    4. Names of continents;
    5. Names of oceans, seas, gulfs, peninsulas, capes, islands, archipelagos, or lakes;
    6. Other geographical names commonly known to the public, such as names of mountains, rivers, districts, villages, street.

    The above include commonly used designations as well as official names.

    Turkey: Ratification of Trademark Law Treaty    top

    On October 1, 2004 Turkey deposited its instrument of accession to the Trademark Law Treaty ("TLT") at the World Intellectual Property Organization. The TLT will become effective in Turkey on January 1, 2005.

    The TLT harmonizes the filing, maintenance and assignment requirements for trademarks. Some of the issues covered by the TLT are:

    1. registration term and renewal terms of trademarks are fixed at ten years.
    2. a general power of attorney may be used for filing applications and legalization is not required.
    3. requirements for submission of certificates of incorporation or corporate status, chamber of commerce certificates, certificates of good standing, and similar documents are eliminated.
    4. a single application may be filed to cover multiple international classes.


    Copyrights

    Canada: Originality and the Fair Dealing Clause    top

    Jeffrey A. Schwab and Alan J. Hartnick, Partners, Abelman, Frayne & Schwab

    The Supreme Court of Canada recently released its decision in the CCH Canadian Ltd. v. Law Society of Upper Canada case (2004 SCC 13). The decision radically changes Canadian copyright law on the copyright standard of originality for the protection of works in Canada. It expands the scope of the "fair dealing" defense to infringement.

    • The Court developed a new copyright originality standard based on the following principles:
    • The work must originate from an author and be more than a mere copy of another work.
    • The work must be the product of an author's exercise of skill and judgment.
    • The exercise of skill and judgment must not be so trivial that it could be characterized as a purely mechanical exercise.
    • Labor, "sweat of the brow" or "industriousness" is not enough.
    • "Creativity" is not required to make a work "original."

    The Court's elimination of "labor" as a factor that can contribute to the originality of a work will result in the lessening of protection for "whole universe" compilations and databases.

    The Court addressed the meaning of the term "fair" in "fair dealing". The Court accepted the following non-exclusive factors that had been proposed by the Federal Court of Appeal as relevant to that determination: (1) the purpose of the dealing; (2) the character of the dealing; (3) the amount of the dealing; (4) alternatives to the dealing; (5) the nature of the work; and (6) the effect of the dealing on the work. These factors are similar to the factors used in the U.S. fair use defense.

    The Court also made a number of important observations regarding the concept of fairness. They include the following:

    • Research done for commercial purposes may not be as fair as research done for charitable purposes.
    • If multiple copies of works are being widely distributed, this will tend to be unfair.
    • The amount of work copied is an important factor in assessing the fairness of a dealing.
    • The alternatives to copying can effect the determination of fairness.
    • The effect of the copying is an important factor. If a copy is made to compete in the market for the original work, or for a rival purpose, this suggests that the dealing is not fair.
    • The availability of a license from a collective society is not relevant to deciding whether a dealing has been fair.

    CCH shifted the emphasis from protecting the labor and investments of authors to a balance between promoting the public interest in the encouragement and dissemination of works and rewarding authors for their intellectual efforts.


    Domain Names and Other Internet Matters

    European Union: Status of .EU    top

    On October 12, 2004 the European Commission and EURid signed an agreement designating EURid as the entity for operating the .EU domain registry. The European Commission must now notify ICANN of the selected registry operator to start official negotiations between EURid and ICANN for placing .EU in the root internet directory. This may require another 6-9 months before .EU registrations can begin. It is not currently possible to register or reserve a .EU domain name.

    Rules for registration, the fees for registration and dispute procedures are still being worked out. The following registration rules are envisioned:

    1. Parties qualified to own a .EU domain name are undertakings having their registered office, central administration or principal place of business within the European Community, or organizations established within the European Community without prejudice to the application of national law, or natural persons resident within the European Community.
    2. At the launch of .eu, there will be a sunrise period of 4 months during which only public bodies and those with recognized rights to a name (such as trademark holders) may register.
    3. After expiration of the sunrise period, registration will be on a first-come, first-served basis.
    4. Registration shall be a for a term of one year. Fees have yet to be determined.
    5. Domain names must be at least two characters long and may not exceed 63 characters. Domain names may not begin or end with a hyphen nor contain such in positions 3 or 4. Permitted characters are a-z, 0-9, and -. Accented characters and non-roman alphabets will be introduced later.

    .PRO: Registration Extended to Accredited Professionals in Canada, Germany, and the United Kingdom    top

    The .PRO domain name space is open to the registration of domain names by accredited accounting, legal, and medical practioners. Originally, the registry accepted applications only from applicants accredited in the United States. The .PRO registry is now open to applicants in these professions accredited in Canada, Germany, the United Kingdom as well as those accredited in the United States.

    Palau: .PW Opens for Domain Name Registrations    top

    .PW is the country-code designation for Palau, an independent republic located in the northern Pacific. Palau is offering domain name registration for individuals at the third level (e.g., name@nic.pw). Additionally, Palau is offering resellers the right to register domain names at the second level (trademark.pw). Such second level registrations are being promoted by Palau as a means to develop "Communities of Shared Interests". The .PW registry will begin accepting applications for domain names on December 15, 2004 on a first-come, first-served basis. Owners of trademarks, whether acquired through use or by registration, may register defensively to block third-party use of their trademarks as .PW domain names at both the second and third levels. Please contact us for details.


    Discussions

    United States: Gone but Not Forgotten: Protecting Discontinued Marks with Residual Goodwill    top

    Marie Anne Mastrovito, Partner, Abelman, Frayne & Schwab

    Under the United States Trademark Act, the non-use of a mark for three consecutive years is deemed to be prima facie evidence of an intent not to resume use and hence abandonment of the mark. Despite this statutory presumption, in some cases the life of a well known mark which has been discontinued can be extended far beyond this three year period. This extended life is the result of what some courts and commentators have designated as "residual goodwill."

    Under the doctrine of residual goodwill it is recognized that the substantial goodwill which accrues to the owner of a mark because of extensive promotion and use of the mark does not necessarily cease immediately upon a decision to discontinue the manufacture and sale of the goods associated with the goodwill. A well known mark can retain residual goodwill until the purchasing public no longer is reasonably likely to associate a subsequent party's product with the first party. Exxon Corporation v. Humble Exploration Company, Inc., 695 F.2d 96, 101 (5th Cir. 1983), quoting, Lyon Metal Products, Inc. v. Lyon Incorporated, 134 USPQ 31 (TTAB 1962). As a result, where the public continues to associate a mark with its original owner, residual goodwill has been found to exist even where there has been no evidence of the owner's intention to resume use of the mark. See, Ferrari S.p.A. Esercizio Gabbgriche Automobili e Corse v. Thomas McBurnie et al 11 USPQ 2d. 1843, 1852 (S.D. Ca. 1989).

    One rationale behind recognizing "residual goodwill," is that even if a mark has been discontinued courts must still be cognizant of the consumer protection function associated with a trademark. Intel Corp. v. Terabyte International Inc., 6 F.3d 614, 619 (9th Cir. 1993). Although in one perspective trademark laws protect commercial interests and assure that the goodwill associated with a word or symbol in respect to a product or service is the goodwill and property of the first user, in a broader sense, trademark laws are intended to have social implications by protecting the innocent public from being deceived by improper and mistaken association between goods and services and their alleged supplier. See Mishawaka rubber & Woolen Mfg. Co. v. S.S. Kresage Co., 316 U.S. 203, 205 (1943).

    The existence of residual goodwill has been recognized in several cases involving discontinued automobiles. For example, in American Motors Corp. v. Action-Age, Inc. 178 USPQ 377, 378 (TTAB 1973), the Trademark Trial and Appeal Board found that the mark RAMBLER had not been abandoned despite discontinued use in connection with automobiles because AMC showed a considerable reservoir of good will in the mark through (i) the large number of RAMBLER automobiles remaining on the road, (ii)AMC's continued supply of parts and accessories for RAMBLER vehicles, and (iii) the use of RAMBLER by many dealers as part of their name and maintained signage.

    Similarly, in Ferrari S.p.A. v. McBurnie, 11 USPQ 2d 1843 (S.D. Cal. 1989) the Court found residual goodwill in the trade dress of Ferrari's Daytona Spyder sports car. The Ferrari case involved a suit against a manufacturer of replicas of Ferrari's Daytona Spyder automobile. Although Ferrari had discontinued production of the automobile 13 years earlier, the Court found that there was no abandonment of the mark because (i) Ferrari manufactured and sold replacement parts, (ii) Ferrari and licensees occasionally refurbished the automobiles, and (iii) Daytona Spyder cars were still driven extensively. The Court noted that even independent of the sales of replacement parts and refurbishing activities, the trade dress of the Daytona Spyder was strongly associated with Ferrari. In view of this strong association, the Court found that the mark not only had achieved a strong existing goodwill but also maintained a residual goodwill. Id. at 1849.

    It is likely that the success in the Ferrari case can be attributed to the strong record before the court. The record included substantial evidence supporting Ferrari's contention that consumers would associate the Daytona Spyder trade dress with Ferrari including, samples of publicity surrounding the Daytona Spyder, numerous magazine and newspaper articles concerning the automobile from its initial introduction to the present, publicity concerning recent sales of Daytona Spyder automobiles at high prices, materials showing that the automobiles had continuously appeared at vintage car shows, and survey evidence showing that 73% of readers of Road & Track and Car and Driver identified the car even with all indicia removed. Although the survey was criticized as covering too narrow a consumer base, the results were considered in assessing the strength of the mark.

    The bottom line is residual goodwill is not likely to be found absent a strong showing that the public still associates the mark with the original owner. For this reason, automobile cases have been good fodder for finding residual goodwill because automobiles have a relatively long life span and may continue to be driven and collected for many years after their manufacture has been discontinued.

    As "residual goodwill" is found only in cases where a plaintiff can make a strong showing that its mark has retained substantial goodwill, the owner of a mark should not assume that a court will find that its mark has residual goodwill after it has been discontinued. The safest way to retain rights in a mark is through the continued bona fide use of the mark in the ordinary course of trade. If a mark is temporarily discontinued, every effort should be made to resume use within three years because the presumption of abandonment that attaches at the three year mark may be difficult to rebut.

    On the flip side, when selecting a mark, the fact that the mark has not been used for many years does not necessarily leave it up for grabs for use by a new owner. Thus, particularly in the case of well loved and well remembered marks, it is best to steer clear when adopting a new mark.

    Patent and Trademark History    top

    Marie Anne Mastrovito, Partner, Abelman, Frayne & Schwab

    On November 24, 1874, the U.S. Patent and Trademark Office issued U. S. Patent No. 157,124 entitled, "Improvement in Wire Fences" to Joseph F. Glidden of DeKalb. Ill. The patent disclosed the creation of what came to be referred to as "barbed wire."

    Despite being considered a revolutionary invention for its time as a means for cattle farmers to protect their livestock, the '124 patent (or "the Barbed Wire Patent") was at the core of one of the most famous (or infamous) U.S. Supreme Court patent decisions of all time.

    In 1887, the assignee of the patent (Washburn & Moen Mfg. Co.) initiated a suit for patent infringement against the Beat-Em-All Barb-Wire Co. The defendant asserted that the patent was invalid because it lacked novelty and had been in use for many years before Mr. Glidden filed his patent application.

    At trial, twenty-four witnesses testified on behalf of the accused infringer and stated that they had seen a barbed wire fence in use approximately 14 years before Glidden filed his application. The 24 witnesses testified that they had seen barbed-wire exhibited by a man named Morley at an 1858 or 1859 county fair at Delhi in Delaware County, Iowa. The defendant asserted that this fact provided sufficient evidence of prior use by a third party so that Glidden's patent should be held invalid.

    The district (original/lower) court found that it was unlikely that all twenty-four witnesses were lying and declared the patent invalid stating that "[N]ot only is there an entire lack of evidence to show that such a nefarious plan had been undertaken, but no motive can be conceived of, that would induce so large a number of well-known persons to engage in such a conspiracy.").

    However, the case was appealed and made its way up to the U.S. Supreme Court. Despite the testimony of the twenty-four witnesses and the credibility determinations made by the district court, the Supreme Court in its 1892 decision reversed the district court's invalidity finding, noting:

    [T]he very fact . . . that almost every important patent, from the cotton gin of Whitney to the one under consideration, has been attacked by the testimony of witnesses who imagined they had made similar discoveries long before the patentee had claimed to have invented his device, has tended to throw a certain amount of discredit upon all that class of evidence, and to demand that it be subjected to the closest scrutiny.

    The result of the decision was that the use of oral testimony to invalidate a patent without any corroborating documentation became extremely suspect. Later court decisions used the Barbed-Wire Patent case as precedent to develop a list of factors for evaluating the credibility of oral statements made by witnesses to establish prior use or prior invention of a patent. In essence, today, a person can be found guilty of committing murder based solely upon eye-witness testimony but it is virtually impossible for eye-witness testimony alone to be sufficient to invalidate a patent.


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