Wednesday, November 21, 2012

In Between a Rock and a Disclaimer - by Mahmoud A. Fadli by Mahmoud Fadli

In Between a Rock and a Disclaimer
By Mahmoud Fadli

A wealthy young entrepreneur looks for opportunity in a fledgling economy. Her many years of schooling and limited experience have somewhat opened her eyes to the vast array of opportunities to be seized that lay within her reach. After many months of pondering what her first venture will be, she settles in on an idea. Fed up with the hidden costs of air travel, she decides to start her own little venture. Her goal is simple: charging her customers with the lowest prices and using the most cost efficient aircraft she can find. In her own words, she is fed up with airlines “charging an arm and a leg to get that same arm and a leg from point A to point B.”

Consulting her business partners and associates, she settles on a name: “ThriftAir.” She sends her idea to her private designers who come up with a stunning visual logo: an outline of the state of California with wings drawn on either side, filled in with a soft blue hue. Within the states borders are little dots representing the various cities the airline plans to serve within the state, with lines connecting them to one another. Below the visual logo comes the text, “ThriftAir,” with the words “Thrift” and “Air” joined together, with “Air” in bold. Pleased with the mark, she sends it to her attorney and instructs him to file for trademark protection with the United States Patent and Trademark Office (“PTO”). Diligently, the attorney does so, filing the application under class 39 for transportation services.

Weeks go by, and finally the PTO sends its response.

“The examining attorney has searched the Office records and has found no similar registered or pending mark which would bar registration under Trademark Act Section 2(d), 15 U.S.C. Section 1052(d). TMEP section 704.02.”

Pleased, the attorney reads on, and on the next page, he sees the following: “The applicant must disclaim the descriptive wording ‘ThriftAir’ apart from the mark as shown.”

Presenting this to the wealthy young entrepreneur, the attorney meets her dissatisfaction. She makes it clear that she wants the entire mark to receive protection, and will not settle for anything less. Unable to dissuade her from altering her word-mark, the attorney is presented with a task of fighting the PTO and getting the protection that the entrepreneur’s business desperately needs. To do this, the attorney begins to research – his goal: to fight the disclaimer and protect the entire mark.

In this paper, I will outline the history of disclaimers, and then discuss their usage today. I will then discuss the meaning of a disclaimer and the rights that come with it compared to full protection under the Trademark Act. Next, I will discuss methods of fighting the disclaimer, and present two arguments that may see success against the PTO. I will then conclude with a prediction of whether our wealthy entrepreneur will succeed, and how others in similar positions should proceed to seek full protection over marks that may require a disclaimer.

The History of Disclaimers

Understanding disclaimer practice in the United States requires us to first examine the history of disclaimers in US Trademark Law. According to the (legislative notes?) in 15 U.S.C. §1056, a disclaimer is a statement that the applicant “…does not claim the exclusive right to use a specified element or elements” of a mark.   This is used when the application contains a mark that has elements which, standing alone, are unregistrable.  They can be unregistrable for various reasons, including being generic or merely descriptive.  For example, the name of the good or services is considered unregistrable under TMEP §1213.03(a). This means that, for example, a dry cleaning business cannot protect the words “dry cleaning” if they appear in its mark, or a smoke shop cannot protect the words “smoke shop” in its mark. Nevertheless, through the use of a disclaimer, the words may be incorporated into the final mark. In effect, a disclaimer allows an otherwise unregistrable component of a mark, which is registrable as a whole, to receive U.S. Trademark protection.

While a novel idea, it was not until 1946 that disclaimer practice was codified into law.  Prior to 1946, no statutory authority for disclaimers existed.  Thus, the PTO’s practice fluctuated between requiring applicants to disclaim unregistrable portions of their mark apart from the mark as shown, or remove the unregistrable portions from the mark altogether.  This inconsistent application of disclaimers to various marks resulted in the 1920 Supreme Court case of Estate of P.D. Beckwith v. Commissioner of Patents.

The case centered on the Patent Office’s  requirement that the Estate remove the words “Moistair Heating System” from the plaintiff’s seal, which had already been in use for 18 months in conjunction with a protectable visual mark.  The Commissioner of Patents argued that the words “Moistair Heating System” were merely “descriptive of a claimed merit of the petitioner’s system,” and that “one person may not lawfully monopolize the use of words [of] general use which might be used with equal truthfulness to describe another system of heating.”  Under the Registration Act of 1905, in force at the time and a precursor to modern US Trademark Law , the words “Moistair Heating System” were required to be removed as “no mark consistent merely in words or devices … descriptive of the goods with which they are used” shall be registered.

The Court considered whether the applicant may “lawfully register the words ‘Moistair Heating System’” when combined with other, registrable and protectable words or symbols.  Noting a previous appeal’s court decision in 1909 , the Court tracked Patent Office’s use of disclaimers after the 1909 appeal’s court decision despite there not being any statutory basis for doing so.  It noted that so long as the marks contained words that were associated with registrable words or were part of “an arbitrary or fanciful design or device…” deleting the descriptive matter was not necessary even when it was an “essential part of the composite trade-mark…”  Thus, noting that the commercial impression of a trade-mark is “derived from [the mark] as a whole, not from its elements separated and considered in detail,”  the Court held that the words “Moistair Heating System” did not have to be removed from the mark, and that a disclaimer was sufficient to avoid any potential confusion over the scope of the mark in question.

The PTO continued the practice in accordance with the Court’s decision until 1946, when the Trademark Act finally created a statutory basis for the practice in §6, 15 U.S.C. §1506.  While the 1946 Trademark Act stated that the Director “shall” require the unregistrable matter to be disclaimed, §6 was amended in 1962 to read that the Director “may” require the applicant to disclaim an unregistrable component of a mark that is “otherwise registrable,” thus allowing greater discretion on the part of the examining attorney.  This also resulted in the use of standardized language in disclaimers, which requires that the applicant make no claim to the “exclusive right to use [the unregistrable components of a mark] apart from the mark as shown.”  While a cunning way to ensure that an entire mark is protected, the question of what, if any, legal protection is afforded to the unregistrable component of a mark remains. The next section endeavors to examine this unique area of Trademark Law.

Protections Afforded to Disclaimed Material and Their Use Today

Having a disclaimer on a mark does not result in the removal of the disclaimed material from the mark, but instead prevents the applicant from claiming exclusive rights to the disclaimed words or symbols.  Generally, prior to 1982 when the PTO adopted a standardized form for disclaimers, wording for disclaimers contained the phrase “without disclaiming any common law rights that [the] applicant may have acquired in [the word disclaimed].”  However, such wording is not always used. Nevertheless, Lanham Act section 1056(b) states that a disclaimer will not “prejudice or affect the applicant’s or registrant’s rights then existing or thereafter arising in the disclaimed matter…”  Even if such wording is not present in the disclaimer, “statements that no common law rights are disclaimed are merely redundant, for the Lanham Act itself provides that a disclaimer will not affect [the] registrant’s rights in the disclaimed matter.”  Thus, in essence, there is still hope with regard to the disclaimed material even if the applicant or registrant acquired any common law rights to the disclaimed matter.

All states protect unregistered Trademarks under the common law of trademarks.  In this sense, it is important to look at what common law Trademark protection truly entails. According to the PTO, federal registration is “not required to establish rights in a trademark.”  Thus, since registration is not required, no directory exists for competitors to determine whether a mark is actually used. Unlike federal registration, common law trademark rights are limited to the geographic area in which the mark is used.  Thus, competitors are free to use a similar mark in another geographic area – however, when competitors come into the area where the original mark acquired common law protection, they would be prohibited from doing so.

Moreover, under the common law of trademarks, the “first in time rule” applies. This means that in order for common law protection to be received, the applicant must be the first to use the mark in commerce.  This can be actual use in connection with the sale of goods or provision of services, or through filing an “intent to use” application with the PTO.  Thus, in our hypothetical, our entrepreneur must be the first person to use “ThriftAir” in commerce to receive common law protection. This occurs irrespective of whether the mark is actually registered or not.

While these protections may be adequate for some, in our hypothetical, our entrepreneur would likely seek greater protections. Common-law Trademark rights are only enforceable in local courts, and unlike Federal Registration, there is no constructive notice to competitors of the mark’s use by our entrepreneur.  While users of unregistered marks may place the “™” symbol in conjunction with their mark to indicate a claim of common law rights,  some attorneys note that it is less costly to enforce trademark rights in conjunction with federal registration, which brings with it many benefits to applicants (such as nationwide protection and enforcement).

Thus, in our hypothetical, our entrepreneur will likely request her attorney to fight the need for a disclaimer. The next section will look at the arguments that can be made in conjunction with our entrepreneur’s application. Specifically, the next section will examine the argument that the mark has acquired “secondary meaning” and that in the alternative, a disclaimer would be unnecessary as the mark is “unitary,” and thus elements within the mark are inseparable.

Unitary Marks

One saving grace for our entrepreneur’s predicament is the argument that the mark “ThriftAir” is unitary. A mark is unitary when it “creates a commercial impression separate and apart from any unregistrable component.”   Factors to consider include whether the words or marks are “physically connected by lines or other design features; the relative location of the respective elements; and the meaning of the terminology as used on or in connection with the goods or services.”  In general, however, a “mark is unitary if the whole is something more than the sum of its parts.”  Thus, the key issue in determining whether a mark is unitary is “whether the combination [of words] invokes a new and unique commercial impression.”  Courts will often look at the presentation of a mark to determine whether the disputed matter is simply descriptive of the nature of the goods and services or whether it is meant to be a mark in and of itself.

In our entrepreneur’s case, the mark, “ThriftAir California,” can be considered unitary as the mark itself creates its own unique commercial impression. Words “Thrift” and “Air” cannot in anyway be separated as to do so would result in the mark losing its meaning. While separately they may be considered descriptive, with “thrift” describing the relative cost of the services rendered, and “air” merely descriptive of the type of services offered (air transport), together, they form a new and unique mark. The mark itself makes the terms inseparable since they are joined together with “air” in bold typeface, making it an element of the design itself. Moreover, the location of “ThriftAir” in conjunction with the visual mark is prominent, with the words “ThriftAir” appearing in large font below the visual mark. Thus, taken as a whole, “ThriftAir” is inseparable, and the combination of the terms cannot be regarded as separable elements.

However, in the event that our entrepreneur loses the argument that “ThriftAir” is unitary, she may attempt to claim that the mark has acquired secondary meaning, and thus, should enjoy full protection under the Trademark Act.

Secondary Meaning

According to TMEP § 1212, entitled “Acquired Distinctiveness or Secondary Meaning,” nothing in the trademark act shall “prevent the registration of a mark used by the applicant which has become distinctive of the applicant’s goods in commerce.”  This, however, comes with a catch-22, as the mark must have been used in commerce for “five years before the date on which the claim of distinctiveness is made.”  Moreover, evidence must be provided to show distinctiveness, which can be done in one of three ways.  The first is a claim of ownership of one or more prior registrations of the same mark that is the same as or related to those named in the pending application; the second is a statement verified by the applicant that the mark has become distinctive of the applicant’s good or services through substantially exclusive and continuous use in commerce for five years; and the third is through actual evidence of acquired distinctiveness.  Thus, in laymen’s terms, our entrepreneur must show that she had either registered the same or a similar mark on the principal register, used the mark for five years continuously and exclusively in commerce, or show actual evidence of acquired distinctiveness.

In this hypothetical, our entrepreneur has no previously registered marks that are similar to or the same as the mark in question. Moreover, the mark in question has not been used in commerce exclusively for five years. Thus, the only real option left for our entrepreneur is to show actual evidence of acquired distinctiveness.

To establish distinctiveness by actual evidence, our entrepreneur may show evidence “of the trademark owner’s method of using the mark, supplemented by evidence of the effectiveness of such use to cause the purchasing public to identify the mark with the source of the product.”  Moreover, the “kind and amount of evidence necessary to establish that a mark has acquired distinctiveness in relation to good or services depends on the nature of the mark and the circumstances surrounding the use of the mark in each case.”  Nevertheless, courts will always look to see whether the distinctiveness of a mark has actually been established in the minds of the purchasing public, and not whether the mark is capable of becoming distinctive.

Thus, in our hypothetical, our entrepreneur may show actual distinctiveness though long use of the mark. However, the case law concerning this does not leave our entrepreneur with much hope as both cases concern marks that have been used in commerce for eighteen and sixteen years, and in one instance, sales figures were submitted as evidence.  In this hypothetical, our entrepreneur has yet to establish long and continuous use of her mark, and thus, it would be difficult for her to meet this standard.

However, our entrepreneur may submit evidence of advertising expenditures pursuant to TMEP § 1212.06(b) as a significant indicator of the mark’s exclusive use.  However, simply offering proof of an advertising campaign that is expensive and even successful is not enough.  Courts will focus on the success of the efforts in “educating the public to associate the proposed mark with a single course.”  This requires the examining attorney to review the advertising material itself to determine “how long the term is being used, the commercial impression created by such use, and what the use would mean to purchasers.”  Thus, to meet this element, our entrepreneur would have to show the court that she both spent considerable sums on advertising her mark and that as a result of such advertising, “ThriftAir” attracted more consumers. In our hypothetical, our entrepreneur may advertise on national television, newspapers, magazines, and though the use of billboards to promote awareness of her product. If this were to yield positive results in terms of sales and awareness in the public, she may be successful in proving secondary meaning and thus, receive full protection of her mark.

Lastly, pursuant to TMEP § 1212.06(c) and 1212.06(d), our entrepreneur may provide affidavits or declarations asserting recognition of a mark as a source indicator or survey evidence, market research and consumer reaction studies to prove secondary meaning.

With regard to affidavits or declarations asserting recognition of a mark as a source indicated, affidavits from the applicant or her agents is insufficient.  Thus, the “value of the affidavits or declarations depends on the statements made and the identity of the affiant or declarant.”  Moreover, the sampling of consumers used to compile the affidavit or declaration is key, as a small sample of consumers who have had previous familiarity with the product was held to be insufficient.  In one instance, a retailer had been in contact with purchases of its products, with a substantial number recognizing the design of the product originating from the retailer.  Also relevant to showing secondary meaning through the methods described above as market research and consumer reaction studies.  While not required, such evidence is a “valuable method of showing secondary meaning.”  The surveys must show that the public associates the mark with the source of the product of service, with the applicant documenting the “statistical accuracy of this type of evidence and carefully frame the questions contained therein.”  Thus, to show this, our entrepreneur may rely upon consumer groups and studies, as well as its own consumer surveys, to establish secondary meaning. This, however, may come at considerable expense and take much time to conduct, resulting in this method being undesirable for our entrepreneur. However, it is nevertheless a method of getting around the disclaimer requirement in a trademark application.


For the reasons mentioned above, it is likely that our entrepreneur will overcome the disclaimer requirement by arguing that her mark is unitary. While the establishing secondary meaning may be timely and burdensome, it is nevertheless a way to get around the disclaimer requirement and enjoy full trademark protection. The moral of this hypothetical is to show that business owners and entrepreneurs should not settle for a disclaimer, and instead find unique and creative ways to enjoy full trademark protection of their marks.

No comments:

Post a Comment