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Sunday, 8 March 2015

Offering a service is not use in commerce Under Lanham Act, says Federal Circuit Court

The case that forms the subject of this guest blog from Katfriend, blogger and recent guest Kat Marie-Andrée Weiss is one that immediately caught the IPKat's attention since his first thought was to ask whether it highlights a difference of approach between the trade mark law of the United States and that of the European Union.  That's why he is so pleased that Marie-Andrée agreed to explain it for readers of this weblog.  Here she writes as follows:

Playdom, Inc's logo
On 2 March 2015, the Federal Circuit affirmed a February 2009 decision of the Trademark Trial and Appeal Board (TTAB), which had granted appellee Playdom, Inc.’s petition to cancel appellant David Couture’s PLAYDOM mark because the appellant had not satisfied the use requirement for a service mark under the Lanham Act. The case is David Couture v Playdom (Fed. Circ. 2015). 
In May 2008, Couture filed a section 1(a) trade mark application, that is, an application based on use in commerce, for the PLAYDOM mark, for entertainment services, such as script writing and film production. The applicant provided a screen capture of his website offering entertainment services as a specimen of use. The PLAYDOM mark was registered in January 2009. 
Couture's logo
Playdom, which creates online games, filed a section 1(b) intent-to-use application to register PLAYDOM on February 9, 2009. The USPTO refused, however, to register the mark because of a likelihood of confusion with Couture’s mark. Playdom then filed a petition to cancel Couture’s mark, claiming that his application was void ab initio because he had not rendered any services on or before the filing date of the application and that, therefore, his PLAYDOM mark was not in commerce.  On 3 February 2014, the TTAB granted the petition to cancel the mark. Couture appealed to the Federal Circuit, which affirmed the TTAB’s decision. 
What is use in commerce under the Lanham Act? 
If an application to register a trade mark is filed based on use in commerce under Section 1(a) of the Lanham Act, 15 U.S.C. § 1051(a), the applicant must use the mark in commerce in connection with all the goods and services listed in the application as of the filing date of the application. 
15 U.S.C. § 1127 defines use in commerce of a mark as “the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark (my emphasis) and further states that a service mark is used in commerce 
“when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services”. 
The phrase “the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark” was added in 15 U.S.C. § 1127 by the Trademark Law Revision Act of 1988. The intent of the legislature was to eliminate the practice of “token use,” that is, use made solely to reserve rights in a mark.  
Playdom had provided as evidence in its petition to cancel the PLAYDOM mark a letter it received from Couture stating that “upon request” he would be “willing and capable of performing all services listed in [his] trademark registration.” Argued Playdom, having the will and capacity to perform services listed in the application did not equate to using the mark in commerce under the Lanham Act. 
The TTAB reproduced in its decision Couture’s discovery deposition testimony, where he testified that he had only one client, and that he had billed it for the first time in March 2010, almost two years after the trade mark registration. For the TTAB, granting the petition for cancellation of the PLAYDOM mark, “the services identified in a use-based service mark application must be rendered before the filing of a service mark application”. 
Offering services without providing them is not a Lanham Act use 
The case is significant because the Federal Circuit had never previously addressed the issue of whether offering a service without actually providing it is sufficient to constitute use of commerce under § 1127. 
In our case, Couture had advertised his services, without having providing any until 2010, well after his trade mark had been registered. The TTAB noted that 
“Respondent had merely posted a website advertising his readiness, willingness and ability to render said services. In view thereof, we find that respondent’s mark PLAYDOM was not in use in commerce for the listed services at the time respondent filed its application, that the registration is therefore void ab initio and the petition to cancel is granted on this ground.” 
The Federal Circuit cited its 2009 Aycock Eng’g Inc. v Airflite, Inc. ruling, which explained the use requirement for a service mark. In Aycock, the Federal Circuit held (at 1360) that 
”an applicant's preparations to use a mark in commerce are insufficient to constitute use in commerce. Rather, the mark must be actually used in conjunction with the services described in the application for the mark”. 
 The Federal Circuit added(at 1358) that, in Aycock, mere advertising is not enough to be use in commerce, but that advertising must relate to "an existing service which has already been offered to the public”. 
In Couture, the Federal Circuit found § 1127 to be clear on its face, and reflective of long established case law, such as United Drug Co. v Theodore Rectanus, a 1918 Supreme Court case known by every U.S. trade mark law student. The Supreme Court held in 1918 that 
“there is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed … [T]he right to a particular mark grows out of its use, not its mere adoption.” 
The Federal Circuit also cited a 2003 Fourth Circuit case, International Bancorp, LLC v Société des Bains de Mer et du Cercle des Étrangers à Monaco, where the court held that both the Lanham Act and the Supreme Court “make clear that a mark's protection may not be based on mere advertising” (at 365) and that “a mark is used in commerce only if it accompanies services rendered in commerce” (at 364). The Federal Circuit also cited Sensient Techs. Corp. v Sensory Effects Flavor Co. (2010), from the Eighth Circuit, where the Court found that a press release, announcement, a website, and two presentations were insufficient to establish use in commerce of a mark. 
Accordingly, for a mark to be used in commerce under the Lanham Act, it must accompany services rendered in commerce, but advertising of that mark does not alone establish its protectability, even though advertising itself is commerce. The Federal Circuit concluded in Couture that there was no evidence in the record which showed that Couture had rendered services before 2010, and that it was therefore appropriate to cancel registration of his PLAYDOM mark. 
Impossible to amend an application after the registration is issued 
Couture had testified that he believed that use in commerce meant that one must “advertise services and offer them for consideration in interstate commerce”, and the TTTAB indeed found that Couture had filed a use-based application instead of an intent-to-use application because he had misunderstood the technical definition of use in commerce, as he “thought that the offering of the services was sufficient to establish that he was rendering the services [listed in his application]”. However, the TTAB did not let him amend his trade mark application to an intent-to-use application, a decision which the Federal Circuit also upheld, noting that a petition to change the basis of an application must be filed before the registration is issued. 
A practitioner’s parting comment 
From a trade mark practitioner’s point of view, this case shows how long, and thus costly, is the process of petitioning to cancel a mark. Playdom had the financial means to initiate such proceedings, but many trade mark practitioners have seen in their practices examples of registered marks supported only by a screenshot as specimen of use in commerce, thus preventing another mark, in actual use, from being registered. Even when advised by an attorney that the senior mark is probably not in commerce, and thus that a petition to cancel the senior mark may be an option to successfully register their own mark, applicants often do not take advantage of this option for fear of legal costs.
What could the USPTO do? Should it provide a form to allow an applicant to report a mark which they believe is not really in use? Or should applicants be allowed to file a claim, not of fraud, but a mere request that the registered mark should further prove to the USPTO its use of the mark of commerce? 
Both of these processes could lead to many filings and may use too much of the USPTO resources. However, marks not used in commerce should not be registered, especially if their registrations prevent bona fide marks being registered and used in commerce.
It seems to this Kat that trade mark law in Europe is more focused on whether there is genuine use of a trade mark for a service in the course of trade, and that it would not therefore matter if the service were provided so long as the trade mark was genuinely used for the purpose of providing it. After all, consumers have the choice of whether to purchase goods or services or not: if they decide not to buy the goods or order the services attached to the mark on the basis that they provide another brand, this wouldn't affect the essential function of the mark -- though plainly it would be an indication that there was little or no goodwill in it for the commercial purpose of attracting customers and, ideally, repeat orders. He's not sure about conditional offers to supply one or more services under the mark if customers should request such supply though.

What do readers think?

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