According to New York University School of Law professors, Barton Beebe and Jeanne Fromer, the world is running out of trademarks.
This, in their opinion, is due to the consumption and clogging of trademarks, which has forced the use of marks concerned to be inferior in strength. In 2020, the number of applications for new trademarks increased approximately 200,000 from the previous year, 459,000 in 2019 to 659,000 in 2020. This one-third increase in new applications supports Beebe and Fromer’s opinion and is especially remarkable given the mediocre state of the U.S. economy in the wake of the pandemic. This increase in numbers also impacts whether a new applicant may obtain the mark they wanted or has to settle for second or third-runner up because the mark they truly wanted has already found an owner
This opinion is backed by the increasing surge in trademark applications over the years, with 2020’s applications increasing by one-third despite a pandemic that severely crumbled the U.S. economy, going from 459,000 in 2019 to 659,000..
The 2020 surge in applications can largely be attributed to two components. A vivacious U.S. economy filled with hope was the first component. Trademark applications are a useful economic indicator. The number of applications increases when companies feel optimistic about consumer desire for new goods and services and decrease when that optimism fades. The second component was the Chinese market. China-based applicants made up nearly two-thirds of the increase in applications from 2019. In 2020, China-based applicants made up one-fourth of the total applicants, a startling difference from the eleven percent that market represented in 2017.
A consequence of this increase in trademark applications is that the clearance process is becoming progressively more drawn-out and costly. Lawyers are forced to spend more time assessing the multiplying number of marks and face a more complex legal analysis than in years prior. After all the work, if a client’s choice in a mark proves unavailable then lawyers must begin the process all over again.
The USPTO has a free data search engine to help determine if a prior conflicting mark exists. However, many companies and law firms turn to commercial search firms to handle clearance searches since these firms are better equipped to find marks that could have any potential conflict with the chosen mark. These firms hire specially trained analysts to detect potential conflicts and more recently, incorporate artificial intelligence to lower costs and accelerate the process. But using AI presents some challenges: AI’s algorithms tend to miss the “play on words” and intentional misspellings that may still be considered confusingly similar to a trademark’s more traditional counterpart. These AI tools have also been employed to detect conflicts with visual logos. The tools used depend on image recognition to detect conflicts between desired logos and existing ones by locating and comparing shapes and characteristics resembling one another. But these tools are not yet reliable since a computer does not translate an image in the same manner as a human eye.
The clogging of trademarks is not as appalling as the number of applications in 2020 suggests. While there has been a surge of Chinese applications, the marks being sought are, for the most part, unappealing to U.S. applicants. Many marks are simply a random series of letters or unspeakable “coined terms” such as FCEDAUS. The USPTO has suggested that this surge in China-based applications is due to the Chinese government’s incentivization of U.S. applications, offering subsidies that often exceed the cost of filing. Many think that Chinese applicants file for financial gain alone. But this spike in China-based applications does make it difficult for the USPTO to plan their workload since submissions of applications are unpredictable.
In an article for the New York Times, John Herrman proposed that Amazon is the culprit behind many China-based applicants applying for these seemingly bogus marks. Herrman claimed that Chinese entities make up close to half of Amazon’s top U.S. sellers and noted that trademark registration was a prerequisite to utilize Amazon’s Brand Registry, generating motive for foreign vendors to apply. He also noted the online explosion of strange marks like NERTPOW, concluding that the intrinsic allure of a mark appeared immaterial to a China-based vendor’s triumph on Amazon. Also, embracing random, incoherent marks is a fast and effective way to gain U.S. registration because it reduces the likelihood that the mark is obstructed by a prior similar mark.
Numerous China-based applicants offering evidence of U.S. trademark use in commerce are undeniably fake, with one famous example being an application for INSTAMARKET retail stores using a photoshopped image of a Walmart as supporting evidence. Professors Beebe and Fromer found that falsified specimens made up about seventy percent of China-based applications in 2017, that the USPTO approved roughly sixty percent of those, and that close to forty percent ultimately registered. The pair determined that fourteen percent of all applications in 2017 were false and that this fact exacerbated the problems with trademark clogging. The USPTO subsequently established additional rigorous measures to uncover false claims of use.
Trademark’s issues with overcrowding and clogging is due in large part to past marks that are still registered but no longer in use. These marks, known as “deadwood,” block a new mark’s application for a similar mark despite the fact that the old one was abandoned. Fortunately, the U.S. has a “use it or lose it” system to prevent trademark owners from retaining rights ad infinitum. Trademark owners must maintenance their marks with the USPTO by filing proof of continued use of the mark by the sixth, tenth, and successive ten year anniversary of registration. However, a pilot audit program in 2012 uncovered that about fifty percent of audited registrations could not provide actual proof of their claims of use. This finding prompted the Office to create a permanent audit program in 2017, increasing the number of registrants audited and creating financial penalties for fixing errors made in maintenance filings. Despite these measures, audits continue to confirm that approximately fifty percent of applicants were not really using their marks.
The Trademark Modernization Act of 2020 gives mark owners more power to get rid of “deadwood” registrations as well as those prior registrations obtained fraudulently. Although not available until December 2021, the most powerful tool within this Act is the ability for ANYONE to challenge a registration on the basis of non-use. A party would be able to purse provided that the mark is registered for at least three years, on the basis that the mark has never been used in commerce for some or all of the identified goods and services. Additionally, re-examination proceedings will target registrants no older than five years old on the basis that the mark were not used for some or all of the identified goods as of specific important dates, particularly the filing date of an application asserting use in commerce. These new tools could facilitate the clearance of new trademarks, providing a quicker and more affordable method of determining that old marks are “deadwood,” removing them as barriers. These tools would only be helpful to those applicants that have more time versus those that need to select their new mark quickly since the proceedings could take some time.
(Then the article breaks down the 1000 most frequently used words in the English language as they relate to their use in trademarks and common words that are now being trademarked.)
In the past, the shortage of more traditional “.com” domain names also played a significant role in selecting a mark. But companies have found a way around that by coining new marks, combining words, and getting creative through various other methods. Thinking outside the box and influencing consumers to familiarize themselves with these new methods have opened the doors to what can be available as a mark. Instead of being clogged, such novel ideas will open up the doors for new trademarks.
This blog article was written by Assouline & Berlowe PA Law Clerk Eva Sarmiento, 3rd Year Law Student at Florida International University School of Law, and only edited by Assouline & Berlowe, P.A. attorneys.
213 East Sheridan Street, Suite 3
Dania Beach, Florida 33004