Client Alert: Updates From The Trademark Public Advisory Committee (Spring 2019)

Updates from the Trademark Public Advisory Committee

The Trademark Public Advisory Committee (TPAC), a small group of senior trademark industry professionals who advise the Director of the United States Patent and Trademark Office (USPTO or the Office) and the Commissioner for Trademarks, held its second public meeting of the year on April 26, 2019, coinciding with World Intellectual Property Day. The second quarter of 2019 saw the USPTO return to normal operations, following a first quarter that was significantly disrupted due to the extended United States government shutdown. Please find below a discussion of key updates discussed during the April 26 TPAC meeting.

RECOVERY FROM THE GOVERNMENT SHUTDOWN

Trademarks Performance. After the government shutdown ended on January 25, 2019, the Office resumed operations at full capacity. Even though the Office was able to offset its operating expenses with the fees collected from trademark and patent filings and operate fairly seamlessly during the shutdown from an external perspective, the Office still faced setbacks in exhausting the operating reserve, hiring delays, and moving any rule making forward. The Office continues to review internal practices on how such disruptions may be further minimized in the event of future shutdowns; however,  the Office succeeded in its efforts to maintain essential functions and keep trademark pendency up within its targeted goals during a challenging time in which other government agencies saw much more severe effects.

PROSECUTION PRACTICE UPDATES

U.S. Counsel Requirement. The Office is finalizing the rule to require foreign-domiciled trademark applicants and registrants to be represented by a United States licensed attorney to file trademark documents. Comments for this proposed rule closed in March, and the rule now at the Director’s office for review. The Office expects the final rule to be slated for publication in the next few months. As a practical matter, this will require attorneys to provide their law license information and indicate they are an active member in good standing with an appropriate Bar. The Office warned that one week into the comment opening period for this rule, attorneys were receiving solicitations from individuals abroad offering to pay licensed attorneys to use their bar information to circumvent the rule. The Office strongly discourages this behavior.

Marijuana Trademarks. The Office is receiving many questions regarding whether the Office will approve marijuana-related trademark applications. The Office expects to publish an online manual addressing these applications, for which review will continue to be conducted on a case-by-case basis. Individuals must consider three key limitations: The Controlled Substances Act; the 2018 Farm Bill; and the Food Drug & Cosmetics Act. The Office has always refused drug paraphernalia applications, and regardless of state law, the federal law provides no exception for marijuana. Pursuant to the Controlled Substances Act and the Food Drug & Cosmetics Act, marijuana is still listed as a controlled dangerous substance. The Office will not approve a good or service used in commerce that is considered to be a controlled dangerous substance.

Proof-Of-Use Audit Program. In November 2017, the Office initiated a program under which trademark registrations with Declarations of Use alleging use of at least four categories of goods or services within a class or two categories of goods and services in each of at least two classes are randomly selected for Office Actions. Since this time, the Office has issued over 3,000 Office Actions, which identify two additional categories of goods and services for which the applicant must submit specimens of use. If audited, the Office will require submission of proof of use for additional goods or services in registration to ensure that the register accurately reflects that the marks are in use in the United States for all goods and services identified. The Office plans to double the number of Office Actions they will issue this year, meaning that registrants who have not yet been audited are likely to receive Office Actions in the near future. The Office found nearly 80% of respondents were represented by an attorney.

Unauthorized Changes to Registration Contact Information. The Office continues to police unauthorized changes whereby third-parties parties file change of correspondence forms without trademark owners’ authorization. These changes usually modify the email addresses associated with applications and registrations, in an apparent effort to circumvent verification procedures for third-party brand registries, such as the one maintained by Amazon. The Office is issuing individual email alert warnings if the primary correspondence email address is changed. The Office will roll out a three step authentication process step-by-step beginning in 2019, requiring any further changes to be made through myUSPTO. Step two will require authenticating the change, and finally, step three will be an additional authorization mechanism. The three step process should be fully implemented by late 2020.

Fraudulent Specimen Reporting. The Office continues to see a troublesome increase in mock-up or fake specimens supporting use-based applications. The Office continues to welcome assistance in reporting these falsified applications through the Specimen Protest Pilot Program. The Office asks that trademark practitioners inform it by email if they encounter any questionable specimens, including with any report: (1) objective evidence of a third party use of images identical to the specimen of record; or (2) registration or serial numbers showing identical specimens bearing different marks. All reports should be sent to TMSpecimenProtest@uspto.gov.

POLICY INITIATIVES

SCOTUS Hears FUCT Arguments. In mid-April, the United States Supreme Court (SCOTUS) held oral arguments in the Office’s appeal of In Re Brunetti, 877 F.3d 1330 (Fed. Cir. 2017), concerning the constitutionality of Lanham Trademark Act Section 2(a) refusing federal registration of “immoral” or “scandalous” trademarks. The U.S. Court of Appeals for the Federal Circuit ruled that the provisions of Section 2(a) of the Trademark Act, which would prohibit registration of the mark FUCT as vulgar, were a content-based regulation of expressive speech. As such, it held they would be subject to strict scrutiny under the First Amendment. The Federal Circuit further found that the government did not identify the necessary compelling interest to meet that scrutiny—or even the substantial interest that would be required to overcome the intermediate scrutiny applicable to restrictions of commercial speech. SCOTUS is expected to make a determination on the matter in the next month, before June 30, 2019.

“Abnormal Applications” in China. The Office continues to focus on bad faith applications from China, given the influx of Chinese filings with specimen issues and counterfeiting. Overall in 2019, 8.6% of all trademark filings in the United States are originating from mainland China. In response, China issued draft provisions for comment to address these problems, and the United States responded with comments. China has dubbed these filings to be “abnormal applications.” While “abnormal” remains undefined, there have been a few standards set in place for if an applicant knew or should have known the application violates good faith, infringes on others, or disrupts the market. China has proposed stringent penalties for applicants in China, due to go into effect by the end of 2019.

Advocacy by the 116th Congress. There is an increased interest in trademarks and protecting United States commerce in the House of Representatives, starting with the Fair Licensing Access for Government (FLAG) Act (H.R. 1999/S. 963). This Act was introduced April 1, 2019, and would allow registration of marks consisting of the flag, coat of arms, or other official insignia of the United States, any state or municipality of the United States, or any foreign nation. The bill is a simplified version of the Trademark Act of 1956, and is expected to move forward (perhaps even in time for 2019 Flag Day). Likewise, on April 9, 2019, Senator Cruz introduced legislation that would impose sanctions with respect to the theft of U.S. intellectual property by Chinese persons, and for other purposes (S. 1092).

Senate Subcommittee on Intellectual Property. The subcommittee has formed, and held a hearing regarding the oversight of the USPTO on March 19, 2019. Senators raised issues of Chinese trademark applications; fake specimens; de-cluttering the register; modernizing the IT systems; and broader intellectual property issues. The subcommittee asked what issues were faced on the staff level, offering the senators greater insight on the USPTO’s day-to-day functions. There may be a similar oversight hearing before the House Judiciary Committee in the next coming months to continue the discussion.

IT UPDATES

Pending Updates to IT Infrastructure. The Trademark Next Generation (TMNG) program will be reviewed in the next few months, and remains at the top of the Office’s list. The beta testing reviewed many flaws of the TMNG, including the inability to process 66(a) international applications. This has been a significant setback in rolling out a functioning program, but provided valuable feedback from the Office’s Examining Attorneys participating in the beta test. Aside from the updated platforms promised by the TMNG program, the Office continues to update some of the backend systems of its existing systems.

Mandatory E-Filing. The Office expects to implement mandatory e-filing for new trademark applications this year. The Office reported processing 140 paper applications in 2018 and continues to push in order to have 99.9% of all applications conducted online. There will be a few exceptions for international agreements with twenty-eight countries; specimens for non-traditional marks (i.e. scent, or flavor); or any emergencies or interruptions. The final rule to implement this roll out is drafted and ready for publication and implementation this year.

My.USPTO.gov. The Office will be requiring all filings to be made through the “Form Finder Widget” Or “Trademark Form Finder” on myUSPTO. Trademark owners and attorneys should sign up for their own myUSPTO site to: file an application; respond to the USPTO; make changes to an application or registration; or conduct any communication through myUSPTO. The Office will be further simplifying myUSPTO, eliminating legalese to make the page friendlier to pro-se applicants.

TEAS Plus Short Form Development. The Office continues to beta test the new TEAS Plus short form for intent-to-use (ITU) word marks with a small set of users. The Office is hoping this widget will be rolled out later this year to replace the current, aging TEAS system.

BOARD PRACTICE UPDATES

Deputy Chief Judge. The Trademark Trial and Appeal Board will welcome a new Deputy Chief Administrative Trademark Judge, Mark A. Thurmon, later this month.

Filing Trends. The number of appeals, extensions of time, and opposition filings have decreased in 2019, but cancellations have increased. The Office and the Trademark Trial and Appeal Board credit the decrease in filings to how quickly a decision or motion is able to be dismissed or determined.

Expanded Input for the Standard Protective Order. The Board is re-examining handling of Attorneys’ Eyes Only (AEO) information under its Standard Protective Order, specifically the circumstances under which in-house counsel could have access. Because of significant differences of opinion, the Board has drafted a very specific set of questions, and extended the comment period until June 30, 2019. Some parties contend that the Standard Order should be amended to grant in-house counsel access to AEO documents under the rationale in U.S. Steel Corp. v. U.S., 730 F.2d 1465 (Fed. Cir. 1984). Others oppose any such modification to the current standard, relying on the reasoning in Akzo N.V. v. U.S. Int’l Trade Commission, 808 F.2d 1471 (Fed. Cir. 1986), stressing unfair risks to companies producing AEO material. The Board continues to look for comments from law firms, in house counsel, or anyone with trademark interests.

Expedited Cancellation Pilot Program. The Board continues to conduct a pilot program for expedited non-use cancellations, in an effort to test possible mechanisms for a new streamlined proceedings. The default rate for cancellations remains very high at 44%, increasing to 49% when cancellation is coupled with more claims than abandonment. The Board will continue to discern precisely what level of discovery really is necessary under these proceedings.

INTERNAL USPTO CHANGES

Trademark Staffing. The Office continues to achieve all of its pendency and quality goals, with the addition of a new class of examining attorneys in 2019. The Office intends to continue to increase the number of Examining Attorneys over the next year, adding another 100 attorneys by the end of this year.

Budget and Spending. The estimate for trademark fees to be collected in 2019 is $346.5 million. This number is slightly under the Office’s original estimate, but still represents an increase from last year’s total trademark fee collections. The Office was obviously affected by the shutdown and needed to access about $11 million of operating reserve funds, but overall the Office has worked diligently to stay on track. The Office is projected to have 4.1 months of funding in reserve should another shutdown occur. In looking forward to 2020, the President’s Budget was released on March 26, 2019, and is on target with what the Office requires. Legislation regarding the budget should be enacted by October 1, 2019.

Please feel free to reach out with any questions or comments about the work being done by the Trademark Public Advisory Committee and we would be pleased to share your feedback with the United States Patent and Trademark Office. If any of the above topics are of interest and you would like more information, we would be delighted to hear from you. Otherwise, we look forward to sharing updates from the next TPAC meeting, which will take place on July 26, 2019, as well as to keeping you apprised of other intellectual property developments.

We hope that this overview provides you with timely insight into important developments within the trademark community in the United States. Please feel free to reach out to us if you have any questions regarding these developments. For further information regarding the content of this article, please contact Brian Winterfeldt of Winterfeldt IP Group at +1.202.759.5833 or at brian@winterfeldt.law.

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