Trademark Recordation: Competitors Beware


We are observing a new development in the US which could be of serious concern to importers of products into this country: the use of trademark law to exclude foreign competition, despite the fact that patent protection on the trademarked products has expired.

There is, of course, nothing new about the use of a trademark with a patented product. For decades, patent owners, especially those selling to consumers, have tried to associate a trade-name or logo with their patented product. Their purpose is the same as that of any other trade-mark holder, namely, to identify their products in the consumer's mind with a unique symbol or trade dress. This is, of course, an entirely legitimate exercise of an owner's right to establish a unique identification for its product.

New Development The new development is different. To understand it, one needs to know that the patent laws in the US confer a lawful monopoly on the patent-holder for 17 years from patent issuance. This extensive period of monopoly is designed not only to promote inventions but also to encourage the disclosure of inventions to the public. At the end of the 17 years, the patent expires and anyone may practice the art disclosed by the patent without liability or obligation to the original patent-holder.

By contrast, trademark protection continues indefinitely. In effect, it lasts as long as the trademark-holder polices its trademark against infringement.

Now, suppose the patent-holder has trademarked a key feature of its patented device. Suppose further that it asserts that its trademark is not just on a representation of that feature in a two-dimensional drawing but in the feature itself as a three-dimensional object. If the US Patent and Trademark Office (PTO) - the agency which is responsible for issuing trade-marks and patents in the US - accepts the filing, then a trademark issues.

Following this, the trademark-holder takes its trademark to the US Customs authorities and has it recorded under US Customs laws. The effect of this 'recordation of trademark' (as it is called in the US) is to put Customs on notice to seize all trademark-infringing articles awaiting import into the US. Recordation of a trademark compels Customs to seize infringing imports.

A foreign manufacturer of a previously-patented product that imports its version of that product to the US faces seizure of the product if the product includes the trademarked feature, even if that feature is part of a product on which patent protection has expired. In fact, we have observed situations in which the trademark filing has occurred a significant time after the patent expiration and at a time when overseas imports of the previously-patented product had been entering the US for some time. Yet the seizure by Customs still occurred.

Functional vs Non-Functional Features US trademark law distinguishes between functional and non-functional features. A trademark is not supposed to issue on a functional feature but only on aspects of a product's style or presentation that are non-functional. This distinction means that trademarks are capable of denoting origin in a particular source without preventing others from making the product associated with the trademark.

On most products, the dividing line between functionality and non-functionality is clear. Is the design in question the only way the object could be created? If so, it is clearly functional. Is the design in question the most efficient way for the product to work? If so, again the design is functional. Conversely, is the design-feature one which the product could operate as well with as without? If so, the feature is probably not functional.

While US trademark laws clearly distinguish between functional and non-functional features, the PTO will not necessarily focus on the functionality of a feature when a trademark registration is filed. Unless an objection is filed once the PTO gives notice of its intention to allow a registration, all the PTO sees is the materials presented by the applicant. These materials may well not focus on the question of functionality if such a focus might prejudice the applicant's chances of successful registration.

The PTO will publish the proposed trademark registration in its Principal Register once it has decided to allow the registration. However, if your company is not alert to the publication of the registration (perhaps because your company does not periodically review the Register), you might well not know of the registration until after the trademark issues and Customs has seized your goods. Your US competitor has thus found a very inexpensive way to cause you, its overseas competitor, a lot of grief. For the nominal price of an application for trademark and recordation of the trademark with Customs, your competitor has blocked your ability to compete with it in the US.

'Non-Price Predation' For a domestic US competitor with a large market-share, what the competitor has accomplished is referred to as "non-price predation." It is a sad fact that, in this way, the recordation features of US Customs law can allow the trademark-holder to use US Customs to exclude its foreign competitors.

What can be done?

First and foremost, it is useful to have a US law firm which specializes in trademark law review the Principal Register periodically. If one of your competitors is trying to pull this trick, the law firm can alert you in time so that you can object to registration by the PTO before the trademark is issued. Blocking the registration before a trademark is issued is the best way to have maximum impact, and at the least cost to you.

By contrast, if the registration has already been accomplished, an appeal to Customs following recordation of the mark there is unlikely to be successful. While Customs may be sympathetic to your plight, its hands are really tied under the law once the PTO has issued the trademark to your competitor. However, we have had success in the US courts in gaining preliminary injunctive relief to block enforcement of the recordation by US Customs. US antitrust regulatory authorities can also be contacted to seek their intervention if the competitor involved has a significant market-share. The key point is to act quickly and aggressively to counter this pernicious use of US trademark and customs laws.