The central foundation of U.S. trademark law is that a trademark is created by use of a particular name and/or design in commerce, so that the mark comes to represent, in the eyes of the target customers, your particular goods or services marketed, offered and sold under that mark. (NOTE: For simplicity’s sake, I am using “trademark” to refer to both trademarks for products and service marks for services.) Establishing that your mark is sufficiently distinct and uniquely indentifies your product—thus giving assurance of the nature and quality customers have come to rely upon—creates the trademark, gives you ownership of that mark, and leads to a variety of legal protections. Unlike many other countries, registration of your mark does not create a trademark; rather, it gives you important nationwide legal protections of the trademark you have created by your use in commerce.
From this starting point flows an important corollary: If you stop using a trademark with an intent to not resume its use, you will be deemed to have “abandoned” your trademark. That intent is judged on the circumstances (e.g., you drop the product line using the brand name, or you continue the line but replace the name with another). Non-use for three consecutive years creates a presumption of abandonment. Since use in commerce is what creates the trademark, non-use can cost you your trademark rights.
But does this really matter? If you have stopped using a name and/or mark, do you really care whether you lose your rights to protect the trademark? It may surprise you to learn that, under a variety of circumstances, you may care a great deal. I have recently seen stark examples in two different contexts.
The first involved a once prominent brand discontinued by a national company. A decade later, a relatively young company began using the same name to promote a new generation of products targeting the same general customer base through similar distribution channels. While that marketing strategy was clearly designed to play off consumers’ memories of the former brand name, the prior trademark owner had abandoned any trademark rights it formerly owned. In essence, the old “trademark” had ceased to exist, and the same name was now a new trademark created by the second company’s use in commerce.
In the second example, the owners of a closely-held wholesale distribution business sold that business, with all of its assets and goodwill, including the trademark under which it had operated for many years, to a much larger company. The large company phased out the target’s trademark within a year of the acquisition, to consolidate operations and its branding of the combined enterprise to wholesale customers. The founder and former principal owner of the target company felt his brand had been foolishly discarded and, following expiration of his five year non-compete, began forming a new wholesale business to operate under the now-abandoned name in competition with the larger company. The buyer’s counsel sent a standard letter demanding that the seller cease and desist his use of “the trademark now owned by buyer”. However, the seller’s trademark counsel then compellingly responded, citing relevant cases, the buyer had abandoned the purchased trademark and had no right to interfere with the valid creation of a new trademark for the same name. The buyer apparently heard the same from its trademark counsel, since they dropped their demand.
In short, the “take away” lessons are these:
A trademark is created by use of a name and/or design in commerce in a manner that causes customers to identify and rely upon that mark as representing a specific product or service from a particular business.
When a trademark owner stops using that name and/or design in commerce, its ownership of the trademark, indeed the existence of the trademark itself, will vanish through abandonment.
Before letting that happen, the trademark owner should consider the potential consequences of someone else picking up the name and/or design to create a new trademark in the future and, if circumstances warrant, whether there is a strategically effective way to maintain use and ownership of the trademark.