John O'Malley and Laura S. Lipschutz of Volpe and Koenig

Business owners and entrepreneurs must understand the basic requirements of trademark usage in order to protect their brand, save themselves unnecessary costs and headaches, and avoid the loss of their trademark rights. Trademark rights do not simply arise from a thought that pops up out of thin air. Although most people know that saying, "Trademark it!" after a clever quip, slogan, or name at a company meeting or happy hour is not enough, many do not fully understand what it takes to retain the rights, whether in the United States or elsewhere, to a mark that is worthy of trademark registration or is already registered.

A U.S. Court of Appeals for the Federal Circuit decision involving a beverage company and another decision from the European Union (EU) involving the famously recluse artist Banksy illustrate the risks of territorial nonuse in the United States and the EU.

In the United States, each trademark application covers specifically listed goods and services, and a person or entity has the opportunity to retain the right to exclusive use of a mark and registration only after showing that the mark is actually used in commerce in connection with the goods or services actually associated with that mark.

This use requirement continues even after the mark is registered. When a registered mark is not used or not used on the proper good or services, the owner is at risk of losing the rights to the mark. The U.S. Patent and Trademark Office (USPTO) imitated a new trademark audit program in which the USPTO randomly selects trademark registrations and subjects them to an "audit," which essentially forces the trademark owner to prove that the mark in question is in fact being used on every good or service protected by the listed goods or services in the registration.

The USPTO's new and permanent post-registration proof of use audit program, which commenced in November 2017, is "intended to promote the accuracy and integrity of the trademark register," see 37 C.F.R Sections 2.161(h), 7.37(h). Since this program may cause many trademark owners to lose their rights, it is imperative that mark owners are aware of this program and are prepared in the event their mark is chosen for an audit.

If selected for and audit, the mark owner will be required to submit "proof of use" for specific goods or services identified in the registration. Proof of use for goods can include photos showing the mark on a tag or label on the goods or screen shots of websites showing the goods for sale in connection with the mark. For services, some examples of proof of use include brochures that show the mark used in advertising the services, photos of the mark on a retail store or restaurant, or photos of the mark on service vehicles. If the mark owner cannot show use to the USPTO's satisfaction, the goods or services that are not in actual use or intended to be used they will be deleted from the registration and the trademark owner's failure to show actual or intended use of the mark for any of the goods or services will result in the entire trademark registration being cancelled.

A trademark owner can also lose rights in a mark through a cancellation proceeding. A third party, think competitor, who believes the registration is not in active use, can attack the registered trademark in a cancellation proceeding by filing a third-party cancellation petition. This adversarial petition before the Trademark Trial and Appeal Board (TTAB) can seek to cancel a registration by alleging and later proving that the mark has not been used in commerce for three years and there is no intent to resume use. The third-party petitioner is required to show that the mark has not been in use for at least three years, and that the owner has not demonstrated intention to resume use.

In a recent case from the U.S. Court of Appeals for the Federal Circuit, the court affirmed the TTAB's decision to grant Ambev's petition to cancel Cervejaria Petropolis' (CP) trademark registration for the mark FUSION in Cervejaria Petropolis v. Ambev, No. 2019-1132, 2019 U.S. App. LEXIS 30330, at *1 (Fed. Cir. Oct. 10, 2019). Ambev's petition was based on evidence that CP had "abandoned" the mark through nonuse and that CP did not intend to resume use. Ambev was able to prove that CP did not use the FUSION mark in connection with the registered nonalcoholic beverage ingredients through "substantial evidence" including CP's own admissions in response to interrogatories, nearly 30 excerpts from CP's website where no mention of FUSION could be found, and a public corporate filing of CP's predecessor indicating that it had discontinued sale of the FUSION products in 2011.

Although the petitioner in a cancellation proceeding has a high burden because the owner of a registration has the presumption of validity, CP was unable to rebut the allegation and failed to produce "a scintilla of evidence or testimony" of intent to use or intent to resume use of the mark. The only evidence CP submitted was an advertisement where the term FUSION appeared on a race car and the driver's jumpsuit at the Iowa Corn 300 in 2015.

This mere use of the mark as an advertisement at an automotive racing event without reference to the particular product under the FUSION mark did not establish the requisite use or intent to resume use to retain the rights in the mark. The Federal Circuit found that CP did not in fact use the mark between Dec. 31, 2011, and July 15, 2015, and this satisfied the three-year statutory nonuse period required to cancel the FUSION registration.

The risks associated with failing to maintain proper use of a mark is not isolated to the United States. Many countries have provisions in their trademark laws that permit cancellations of registrations that have not been used for periods ranging from three to five years. A recent case in the EU  illustrates the risks of nonuse outside the United States.

In contrast to registration requirements in the United States, across the pond, under the European Union Trade Mark Regulation (EUTMR), a trademark applicant need not show use in order for the mark to become registered. But once a mark becomes registered, the law requires the registration owner to begin using the mark within five years and for this use to be continuous. If a trademark owner fails to do this, another party may seek invalidation or cancellation.

Recently, the infamous yet anonymous street artist known as Banksy found himself in a legal dispute over his trademark rights under the EUTMR. Although Banksy is known to rebel against traditional notions of capitalism and has stated "Copyright is for losers," he is nonetheless resorting to the very system he despises to assert rights.

In 2014, Banksy's company, Pest Control Office Limited, was granted a trademark registration in the EU for the famous "flower bomber" image, which depicts a masked man throwing a bouquet of flowers. The flower bomber image was originally a mural painted in the town of Bethlehem in 2003. In March 2019, a small greeting card company, Full Colour Black, filed a cancellation action seeking to invalidate the flower bomber mark. Full Colour Black is a greeting card company that takes photographs of Banksy's street art and places the photographs on greeting cards. The company challenged the registration on the basis that Banksy has not used the mark in commerce for five years as required under the EUTMR.

Banksy responded by opening a brick and mortar shop in Croyden, South London, England, to display items available for purchase online—though nothing could be bought at the store location and the doors never opened to the public. Essentially, the store was a pop-up display that lasted for two weeks in early October. Banksy even admitted that the store was a direct response to the cancellation proceeding, and that it is "possibly the least poetic reason to ever make some art."

The problem is, Banksy himself was allegedly not selling the "flower bomber" image mark in connection with the 11 classes of goods and services under the registration, and the store was only opened in order to assert use of the mark.

Full Colour Black's attorney, Aaron Wood, stated that the company is "contesting the validity of the mark on the basis that it no longer functions as a trademark … and that Banksy never intended to use it as a trademark." Full Colour Black argues that the registration should be cancelled because Banksy only owns the registration to prevent others from using it reproducing it, and never intended for the mark to be used as a source identifier of goods and services.

The Banksy case is still ongoing in the EU, so it is unclear whether this pop-up shop would constitute the commencement of continuous use in order to comply with the EUTMR. The pop-up shop unarguably did not sell any items and was only "open" for two weeks. Calling it a shop is a stretch, as nothing was for sale and the doors were never opened to the public. It may be categorized as an advertisement instead, lacking requisite use requirements under the law, similar to the FUSION case in the United States.

Whether in the United States or European Union, shoddy or fraudulent use of a trademark will not retain a trademark registration owner's rights, and subsequent users may successfully cancel registrations based on this lack of use. It is vital for entities and individuals alike to understand the use requirements for each country they seek trademark protection in order to maintain their rights and avoid unnecessary litigation.

Every trademark owner should maintain current information about its trademark usage to avoid an unintended gap in the proper usage of the mark. The trademark owner should also review any changes to the actual mark to be sure the current form of use is consistent with the registration.

John O'Malley, a shareholder with Volpe and Koenig, focuses his practice on advising clients on strategies for building brands and developing and protecting U.S. and international trademark portfolios. He also conducts IP audits and IP due diligence for banks, IP investment companies, venture capital and private equity investors. Contact him at [email protected].

Laura S. Lipschutz, an associate at the firm, and serves corporate clients as well as entrepreneurs, artists, and start-up clients in a wide variety of intellectual property matters. Contact her at [email protected].