When Does Use Of A Name In Business Reach The Level Of “Use As A Trademark?”

Trademark rights in the United States arise through use of the mark in commerce, rather than from registration of the mark. In addition, a federal trademark registration will not generally issue without showing real use of the mark in the ordinary course of trade, and thus demonstrable use of a mark in commerce is essential to establishing federal trademark rights. 15 U.S.C. § 1127. So what constitutes “use in commerce”?  The U.S. Patent and Trademark Office and U.S. courts have interpreted this requirement flexibly, so as to encompass various genuine, but often less traditional, trademark uses. However, a trademark owner should take measures to confirm that the use it is engaging in constitutes use that imbues trademark rights in the owner.  

What is “Use in Commerce”

The Trademark Act now defines “use in commerce” 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.” 15 U.S.C. §1127. Goods will usually be deemed to be "in commerce" if they are shipped over state lines at the mark owner's instructions or with his foreknowledge in furtherance of a sale. Use in commerce may also occur when goods are shipped interstate in furtherance of a potential sale, such as for display at a trade show. However, what qualifies as “bona fide use in the ordinary course of trade” under current law can often be difficult to ascertain, and a review of case law concerning “use” is instructive. 

Development Stage Trademark “Use”

Sales made in a good faith effort to develop a business may be sufficient to establish use as a trademark. Thus, the law can be thought of allowing “bona fide use of a mark in the ordinary course of a good faith effort to establish a trade.” In such a case, it may be important to document efforts over time to develop the business, to minimize doubt regarding the early use of the mark. In the United States, a trademark applicant may not file a trademark application claiming actual use of the mark if the use was merely pre-sale advertising or promotion of the goods or services. Era Corp. v. Electronic Realty Associates, Inc., 211 U.S.P.Q. 734, 745 (T.T.A.B. 1981), cited in Cake Divas v. Charmaine Jones, Opposition No. 91177301 (T.T.A.B. Feb. 23, 2010).

However, in the United States, where two parties dispute which is the senior user of a mark,  “use analogous to trademark use,” including advertising campaigns to announce the launch of a new product, or taking orders for a product that will soon be on the market, can sometimes be “tacked” onto actual use for the purposes of establishing priority. The key is that the trademark owner must show this kind of prior use created an association in the minds of the purchasing public between the mark and the goods. T.A.B. Systems v. PacTel Teletrac, 77 F.3d 1372 (Fed. Cir. 1996).

The issue is more nuanced with respect to the use and promotion of a service mark. In Aycock Engineering, Inc. v. Airflite, Inc., 90 U.S.P.Q.2d 1301 (Fed. Cir. 2009), the U.S. Court of Appeals for the Federal Circuit held that the use in commerce requirement is not met when an applicant uses a service mark in the preparatory stages of a service’s development but never offers the service to the public. The court observed that the Trademark Act “makes plain that advertisement and actual use of the mark in commerce are required; mere 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 court thus held that the application was void ab initio. 

Similarly, in the matter La. Ath. Down on the Bayou L.L.C. v. Bayou Bowl Ass’n, 2013 U.S. Dist. LEXIS 68582 (M.D. La. May 14, 2013), the United States District Court for the Middle District of Louisiana considered whether the plaintiff had ever used the mark “Bayou Bowl” in commerce in connection with the promotion of an annual football game featuring graduating seniors from Texas and Louisiana high schools. The defendant steering committee for the Bayou Bowl, argued that the plaintiff had never used the mark in commerce, and had only used it in connection with his role as a member of the steering committee until his termination by the committee. The plaintiff argued that he had been using the mark in commerce individually long before his involvement with the Bayou Bowl steering committee. In determining that the plaintiff had not used the mark in commerce outside the steering committee the court observed, “law is clear that ‘preparations to use a mark in commerce are insufficient to constitute use in commerce”, and found that most of the Plaintiff’s alleged use of the mark were mere “preparatory actions” which did not rise to the level of use necessary for trademark rights to inure.      

While preparatory actions do not typically equal use, pharmaceutical trademarks on the other hand may present special circumstances given the means by which products are marketed and sold within that industry. A pharmaceutical product cannot be sold commercially without approval by the U.S. Food and Drug Administration; however, before the drug is put on the market, it will undergo clinical trials and testing that are very much a part of ordinary business.

The House Judiciary Committee has noted:

… “the ordinary course of trade” varies from industry to industry. Thus…a pharmaceutical company that markets a drug to treat a rare disease will make...a few sales in the ordinary course of its trade; the company’s shipment to clinical investigators during the Federal approval process will also be in its ordinary course of trade….

H.R. Rep. No. 1028, 100th Cong., 2d Sess. 15 (1988). Thus, U.S. courts have indicated that shipping a drug to a clinical investigator for use in clinical trials during the Food and Drug Administration approval process can constitute use sufficient to file a trademark application with the USPTO. See G.D. Searle & Co. v. Nutrapharm, Inc., No. 98-6890 (S.D.N.Y. Oct. 29, 1999).

Internal “Use” of Service Trademark

Whether the use of a trademark by a company in its internal operations is sufficient to establish trademark rights depends on the identity of the primary beneficiary of any products or services offered under the mark.  The Trademark Manual of Examining Procedure (“TMEP”), provides:

“To be a service, an activity must be primarily for the benefit of someone other than the  applicant…that sets up a personnel department to employ workers for itself  is merely facilitating the conduct of its own business, while a company whose business is  to recruit and place workers for other companies is performing employment agency  services.”

“The controlling question is who primarily benefit from the activity for which  registration is sought…if the activity primarily benefits applicant, it is  not a registrable service even if other derive an incidental benefit.” 

(TMEP Section 1301.01(a)(ii)).

Applying the above principles in the trademark cancellation proceedings City National Bank v. OPGI Management GP, Inc./Gestion OPGO, Inc., 106 U.S.P.Q. 2d 1668 (2013), the Trademark Trial and Appeal Board determined that a trademark applicant’s use of the mark TREASURYNET in connection with a database made available only internally to its employees did not constitute use in commerce as the primary beneficiary of the service provided was the registrant of the trademark itself. 

Conversely, in the matter Am Int’l Reinsurance Co. v. Airco, Inc., 570 F.2d 941, 197 U.S.P.Q. 69, 71 (CCPA 1978), the predecessor to the TTAB found that a manufacturer of sundry products was rendering a service in commerce and acquired trademark rights by using its mark in connection with administering an annuity pension plan on behalf of its employees. The court noted that the employees had the option to use the employer’s services or they could “go to the marketplace and select a different annuity plan”, and thus the employee was personally the recipient and primary beneficiary of the offered retirement pension benefit service. 

“Use” and the Internet

Use of trademarks on the Internet can raise questions about whether an actual “use in commerce” has occurred and the geographic reach of the mark holder’s rights. Mere advertising or promotion of a trademark on a web page is not “use in commerce,” a website page that displays the trademark, the product and a means to buy the product is considered to be “use in commerce.” See In re Sones, 590 F.3d 1282, 93 U.S.P.Q.2d 1118 (Fed. Cir. 2009). There must be a means of ordering the goods directly from the web page, such as a telephone number for placing orders or a pull-down menu for online ordering. In re Quantum Foods, Inc., 94 U.S.P.Q.2d 1375, 1380 (T.T.A.B. 2010).

The question of a trademark’s territorial reach may also be raised where a mark is used on the Internet. In the recent case of Dudley v. HealthSource Chiropractic, Inc., No. 6:07-cv-6631 (W.D.N.Y. Aug. 7, 2012), a federal court declined to grant a broad territorial reach based on common-law trademark use over the Internet. While the court was satisfied that the plaintiff was the senior user of the common-law trademark HEALTHSOURCE CHIROPRACTIC for chiropractic services, the plaintiff’s rights were limited to his use in the greater Rochester, New York, area. The judge reasoned, “The rights of concurrent users would be substantially harmed if one user were able to monopolize the internet to the exclusion of other lawful users of the same mark. If, as the Plaintiff suggests, a senior common law user could claim exclusive use on the internet, then it would undermine the benefits and security provided by federal registration.”

Conclusion

“Use in commerce as a trademark” is the sin qua non of trademark rights, and is also an essential prerequisite to federal registration. Without such use, trademark rights are simply not established. Thus, an understanding of what it means to use a mark is imperative to ensuring that trademark rights are properly acquired and maintained. Failure to secure such rights through inadvertence or unfamiliarity with legal requirements can prove devastating, especially if a business competitor is able to establish prior and continuing use of what you believe is “your” mark.