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What Do Foreign Associates Need to Understand about the U.S. Trademark Modernization Act?

What is the Act, and why was it passed?

The USPTO is on a mission to clean up its register. The Agency freely admits that in the recent past, a lot of marks got registered that shouldn’t have. The most important tool that the USPTO is using to attack this problem is the Trademark Modernization Act, or TMA. Among other things, the Act provides new ways to get rid of registrations for marks that have never been used in commerce and shortens the amount of time that fake or fraudulent applications can block legitimate ones. Although the TMA was enacted on December 27, 2020, Congress allowed the USPTO a certain window of time to figure out how to implement parts of the law. While we’ve known about the new law for many months, we only received the Final Rule from the USPTO on November 17, 2021. That Rule clarifies how new procedures will work under the law. Regulations implementing the TMA go into effect on December 18, 2021.

What do you need to know about it?

Here are five key points to bear in mind.

(1) In most cases, the USPTO is cutting in half the time allowed to respond to refusals.

Traditionally, when the USPTO refuses an application or maintenance and renewal documents for a registration, the USPTO allows the applicant or registration owner 6 months to respond. Under the TMA, most applicants and registration owners will have only 3 months to respond to refusals. This rule will apply to all applications filed on the following bases:

· Section 1(a): the applicant is already using the mark in commerce*

· Section 1(b): the applicant it not yet using the mark in commerce but intends to in the near future

· Section 44(d) or Section 44(e): the applicant has an application (if 44(d)) or registration (if 44(e)) for the mark in an appropriate country or regional register outside the U.S.

The only exception to this rule will be for applications filed under the Madrid Protocol, also known as Section 66(a) applications. When the USPTO refuses a Madrid application, the applicant will still have the traditional 6 months to respond.

When the USPTO refuses registration renewal and maintenance documents or non-Madrid applications, the registration owner or applicant can buy an extension of time to respond. For $125 USD, they will receive an additional 3 months (for a total of 6 months from the date of refusal). But they can only purchase that extension once.

Although the regulations go into effect on December 18, 2021, the rule that shortens response times will not go into effect until December 1, 2022. If a pending application was already refused, the applicant currently has the full 6 months to respond. If an application is refused between now and November 30, 2022, the applicant should have the full 6 months to respond. But if a non-Madrid application is refused on December 1, 2022 or later, the applicant will have only 3 months to respond, regardless of when the original application was filed.

There is no exception specifically for foreign-based applicants or registration owners. Now that the USPTO requires foreign-based applicants and registration owners to be represented by U.S.-licensed counsel before the USPTO, filings on behalf of these types of clients generally take more time to coordinate. Communications must pass between U.S.-licensed counsel, foreign associates, and the foreign-based applicant or registration owner. During the rulemaking process, this fact was brought to the USPTO’s attention and discussed, but ultimately the USPTO carved out an exception only for Madrid applications.

(2) A lot more registrations are about to be challenged.

For a long time, if someone wanted to bring a bad registration to the USPTO’s attention, they had to file a cancellation proceeding with the Trademark Trial and Appeal Board, also called the TTAB. These proceedings are inter partes and can be very costly and time-intensive.

The TMA establishes two new ex parte procedures designed to move faster and cost less. The first option, expungement, applies to registrations obtained under any basis (regardless of whether the original application was filed based on use, intent to use, a non-U.S. application/registration, or under the Madrid Protocol). In this proceeding, the person challenging the registration would need to show that the owner never used the mark in commerce in connection with the goods/services identified in the registration. In general, expungement proceedings can’t be brought until at least 3 years after a mark registers in the U.S. and must be brought by the 10 year anniversary of the U.S. registration. But, for a limited time, the USPTO will allow this procedure to be used to attack registrations that are more than 10 years old (see below).

The second option, reexamination, applies only to registrations obtained based on use of the mark in commerce. In this proceeding, the person challenging the registration would need to show that the owner had not started using the mark in commerce in connection with the goods/services identified in the registration on or before the date the registration owner established use. If the application was filed based on use, that’s the application filing date; if the application was filed based on intent to use, that’s either (a) the date the amendment to allege use was filed or (b) the deadline for filing the Statement of Use. These proceedings must be brought within five years after the mark registers.

Any person can file a petition for expungement or reexamination. Additionally, and very importantly, the USPTO Director can decide to initiate either proceeding on their own without waiting for a third party to come forward. Given how committed the USPTO has become to cleaning up its register, we can expect the USPTO to challenge many registrations that it finds suspect without waiting for a third-party to initiate proceedings.

Even parties who want to challenge registrations in the traditional method will have a new tool: the TMA provides additional grounds for cancellation: that a mark was never used in commerce. This is different from the preexisting “nonuse” grounds for cancellation. Those grounds required the person challenging the registration to show that the owner had an intent not to resume use. The new grounds don’t require any evidence about the owner’s intent. These grounds supplement but do not replace the older “nonuse” grounds.

In sum, it used to be much harder and more expensive to attack registrations. Attacks only happened if a third party took notice of a registration and determined it was worth spending thousands if not tens of thousands of dollars to initiate and pursue cancellation proceedings. That won’t be the case going forward. The USPTO can initiate its own proceedings as part of its massive effort to clean up the register. And many third parties may determine that the lower-cost ex parte proceedings are worth the effort even though a cancellation proceeding might not have been.

(3) Foreign-based registration owners need to think about actual use in U.S. commerce earlier.

Many foreign-based trademark owners got used to a certain routine: they could file in the U.S. based on a foreign application/registration or under the Madrid Protocol and not worry about establishing use in commerce for awhile. Many did not focus on establishing use until they had to submit specimens as part of their U.S. maintenance and renewal filings (in other words, between the fifth and sixth year anniversaries of their U.S. registrations). Under the TMA, they can’t afford to wait that long. Any person, including the USPTO Director, can initiate expungement proceedings starting 3 years after registration – even against registrations obtained based on a foreign application/registration or under the Madrid Protocol. The same is true for cancellation proceedings based on the new grounds. In either type of proceeding, a registration owner can argue “excusable nonuse” if the U.S. registration was obtained based on a foreign application/registration or under the Madrid Protocol, but this is not a good position to be in. Excusable nonuse requires “special circumstances beyond the owner’s control.” In practice, this can be very difficult to establish.

(4) It’s not just pending applications and recent registrations that are vulnerable.

Do not make the mistake of thinking that old registrations are safe. Although the TMA provides certain deadlines by which proceedings must be initiated, there are important exceptions. While reexamination proceedings cannot be initiated more than five years after registration, expungement proceedings can be brought up to ten years after registration.

Additionally, there is a small window of time during which even older registrations may be attacked. Until December 27, 2023, the USPTO or any third party can institute an expungement proceeding against any registration that is at least 3 years old. During this window, the 10-year time limit does not apply.

Also note that there is no expiration date for the new grounds for cancellation. Although cancellations cannot be pursued on these grounds until at least 3 years after registration, they may be pursued “at any time” afterwards.

(5) Registration owners can take proactive steps to avoid problems.

Registration owners need to make a careful assessment of the goods/services identified in their U.S. registrations. If they do not currently use their registered marks in commerce with all of the goods/services identified in their registrations, then the registrations should be amended before they become vulnerable to attack. U.S.-licensed counsel can delete from those registrations any of the goods/services that the mark is not currently used with. It is better and more cost-effective to take this proactive precaution than to be forced to defend against attacks on the registration on someone else’s timeframe and at greater expense. Registration owners who do not make a good faith effort to ensure that their registrations are accurate may find that their inclusion of goods/services with which they do not use their marks damages their credibility and causes the USPTO to doubt and more closely scrutinize even their legitimate use.

*From the USPTO’s perspective, “in commerce” means a type of commerce that the U.S. Congress can regulate.

This information was posted on December 13, 2021 and was accurate as of the date of writing. However, the law changes frequently, and readers should not rely solely on general online information but instead should consult a licensed attorney by asking questions about their specific issues when they need legal advice.

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