Trademarks are among the most important assets of any company, as they serve to enable a business to develop a distinctive brand reputation in the marketplace in association with the goods and services it offers. Companies generally try to protect their trademarks, but sometimes, despite the best of intentions, a company can endanger its trademark rights by doing (or failing to do) a few simple things. To avoid some of the most common missteps that can result in the loss of a trademark, here’s a list of scenarios to watch out for:
Non-use: The most common way to lose a trademark is by abandonment. A trademark is considered to be abandoned if its use in commerce has been discontinued with no intent to resume use. In certain circumstances, though, non-use of a mark may be excusable, and will not result in abandonment of the mark if the period of non-use is temporary. For example, Bell’s summer seasonal beer, OBERON®, which is typically not sold during the winter months, will not be deemed abandoned due to its temporary period of non-use, because it is intended to (and does) re-launch every summer. However, discontinued use as a result of a business decision, such as low demand for a product, is not considered “excusable” non-use, and can result in the loss of rights to the mark.
Misuse: Regular misuse of a mark, if not corrected, can diminish the distinctive quality of a trademark to such a degree that the mark is no longer a meaningful indicator of the source of goods or services. In the event that a mark loses its distinctiveness, a loss of trademark rights will result. Generally speaking, a trademark should be used in a manner that is distinguished from its surrounding text, and should be used as an adjective followed by a generic word rather than as a noun. “OREO® cookies,” for example, would be an appropriate use of the mark, while “oreos” would be considered an improper use. Although this type of misuse is quite common among consumers, a trademark holder should be reasonably diligent to ensure that it doesn’t misuse its own marks and to prevent misuse by trademark licensees.
Naked Licensing: When a business wants to allow a third party to use its trademark, it can grant a license to the third party permitting such use. It is critically important, however, that the trademark license also include “quality control” provisions, which typically set forth numerous requirements that the licensee must meet with respect to the quality of the mark’s use. If a trademark license fails to adequately address quality control measures (called a “naked license”), or if a licensor fails to enforce the quality control measures in place, the mark may be deemed abandoned and the licensor could lose their rights in the mark.
Assignment in Gross: Similar to naked licensing, if a business decides to assign one of its trademarks to a third party, but does not include language regarding the contemporaneous assignment of the goodwill associated with the trademark (called an “assignment in gross” or a “naked transfer”), then the assignment will not only be considered invalid, but the assignee will acquire no rights in the mark. Moreover, assignments in gross can result in abandonment of the trademark.
Genericizing: Sometimes a trademark can be so successful that it actually becomes synonymous with an entire type or category of a goods or services. If a business enables its trademarks to become genericized, the business will lose its rights in the mark. For example, BAND-AID® adhesive bandages have become such a household name that consumers in the marketplace often refer to all adhesive bandages as “band aids,” regardless of what brand the adhesive bandages actually are. BAND-AID® brand has made significant efforts to revive the distinctiveness of the brand, but arguably came quite close to the loss of its trademark rights as a result of becoming generic. Accordingly, it’s important for trademark holders to take reasonable measures to police others’ use of the mark to prevent it from becoming generic and preserve the mark’s distinctiveness.
Acquiescence: If a trademark owner is aware of infringement activity of third parties and fails to take action of any kind, the trademark holder may be deemed to have abandoned the mark for failure to maintain the exclusive and distinctive nature of the mark as a designator of the source of the trademark holder’s goods. Although a trademark holder is not required to bring a lawsuit each and every time a third party engages in infringement, some action should be taken (even if only in the form of a cease and desist letter or co-existence agreement) in order for the trademark holder to protect the mark from abandonment.
Material Alteration of Trademark: If a company rebrands its longstanding trademark, and the original trademark is changed so dramatically that its commercial impression is transformed, the original form of the trademark will be deemed abandoned.
It’s easy to inadvertently lose rights in a trademark, and it can be difficult to re-establish those rights. By avoiding these common blunders, a business can continue to reap the benefits of its trademark for so long as it continues to make use of the mark in commerce. If you believe your mark(s) may be at risk, you should contact a trademark attorney to explore your options in preserving your trademark rights.