Earlier this month I attended the Pharmaceutical Trade Mark Group (PTMG) annual conference in Cavtat, Croatia. Yes, there are worse places to be in the fall. A presentation was given at this conference on recent updates at the USPTO, specifically the pilot program started this spring to allow challenges to fraudulent specimens of use, and the Post-Registration Audit Program that launched in November of last year. Props to Jason Jones from Fross Zelnick Lehrman & Zissu, P.C., who gave the presentation and did a great job. But towards the end he asked how many people in the room had heard of the programs, and it looked from my vantage point like about twenty percent of the room raised a hand. This was an international crowd who doesn’t necessarily always need to know every rule change at the USPTO (they hire us for that), but this Post-Registration Audit Program once again brings into clear focus the differences between the U.S. and most of the rest of the world when it comes to use of trademarks, and is a program that both U.S. and non-U.S. counsel should be aware of when advising clients who are looking to register trademarks in the U.S.
The U.S. operates as a first-to-use system rather than first-to-file. Registrants based in the U.S. declare at the application stage (or at the stage of filing a Statement of Use) that the mark is being used on all of the goods and services listed in the application. (“Declare” is an important word here. It means the registrant is making a statement under oath and on penalty of perjury and it’s why I make my applicants sign applications, so they’re the ones making the declaration and I don’t end up on a witness stand). Registrants based outside the U.S. have the option of filing based on an international registration and waiting until the five-year renewal to make this declaration (lucky ducks). All U.S. trademark registrations must be renewed between the fifth and six years after registration, between the ninth and tenth years after registration, and every ten years thereafter in order to be maintained.
To renew an application, the registrant has to actually show use of the mark only on one good or service in each class. I guess even the Trademark Office examiners don’t really want to have to sort through 65 specimens. But the Post-Registration Audit Program allows the Trademark Office to ask for more evidence, with any registration where there are:
- more than 4 goods or services listed in the class, or
- if there are more than two classes and at least 2 goods or services in each class.
An audit will come in the form of an Office Action. It will ask for “proof of use” on two additional goods in whichever classes the audit names. For goods, “proof of use” is a higher burden than the “specimen” that was required for registration. For example, for registration, an applicant can show a solid cardboard box containing the goods with the mark stamped on the outside. To satisfy an audit request, the cardboard box will have to have a window in it sufficient to show the actual goods, or the mark will have to be affixed to goods themselves.
The consequences of not being able to satisfy the audit request are unpleasant. If the registrant is using the mark on some of the goods in the class but not all of them, she can delete the goods that were named in the audit request, but then will have to show proof of use on all remaining goods and services in the registration. Failing to respond to an audit request will result in cancellation of the entire registration.
If there is time remaining in the filing period, an applicant can respond by filing a new declaration, but since it is “the registration – not the declaration” that has been selected for audit, there will be another Office Action on the second declaration. But at least the registrant can delete all the non-used goods and services in the second declaration to be able to ensure compliance with the first Office Action.
“Registrations with extensive listings of goods and services are almost certainly more likely to be audited than more concise identifications.”
We are all familiar with the extensive lists of goods and services that make up many non U.S. registrations that are then used as the basis for registration in the United States. Years ago, we were all carefully counseling our international clients that these filings would be subject to a fraud charge that could get the entire registration canceled under the old Medinol standard, but particularly since Bose, we have slacked off on that advice. So I am dusting it off and giving it again. Registrations with extensive listings of goods and services are almost certainly more likely to be audited than more concise identifications. The point of this audit program is to clean up “deadwood” from the register, so I fully suspect examiners are at least doing an internet search for the goods and seeing which ones they can’t find, and then issuing audits for precisely those goods. (I have no data to back this up at this point). Deleting those goods won’t be enough, and the man hours your client will have to put in to find the mark on all the goods and services listed in a 72-line identification, not to mention the lawyer’s time to file all of that with the USPTO, will be significant. Plus, it will be really annoying work.
Practice Tip: Start the review of goods and services before the renewal window opens, and file the declaration for renewal on Day 1
At this point, we don’t have a sense of how many of these audits are going out. Anecdotally, I know of two. Many clients in foreign territories will not be keen to worry about sorting out which of the goods in a class they’re actually using in the U.S. at the time of filing the Madrid Protocol extension in the U.S. or filing directly based on their foreign registration, particularly since things could change in the 5 years before renewal comes due, and because the risk of an audit seems low at this point. But the risk remains and the consequences of non-compliance are pretty awful, so at the time of renewal, time should be taken to go over the identifications with the client and be assured that the mark is in use on everything that’s listed. A good practice tip is to begin the process of review 30 days or so before the window for renewal opens, so that you have as much time as possible to do a thorough review, and to file the Section 8 or Section 71 declaration on Day 1 of your one-year window to ensure time to file a second declaration if for some reason some unused goods or services sneak through the first review.
These audits, while rare, look to be a complete pain. If I am a nag about trying to make sure the identifications of goods and services are truthful, it’s because I’m trying to save you from a world of hurt later on.