Authored by Laurence R. Hefter
Long after a product runs its course and is no longer actively marketed, it often leaves behind some very valuable intellectual property—its trademark, trade name or trade dress. Known among trademark practitioners as "residual goodwill," this valuable piece of property derives from the ability of a trademark to identify a source even after the product associated with the mark has long since passed from the retail shelves.
For entrepreneurial spirits, the past is often prologue, for the "new idea" may entail resurrecting an old product. And if the time is right to resurrect the product, it may be time to resurrect the associated mark as well.
Adopting a fondly remembered mark from the past can provide a marketing boost, giving a sizable advantage over those with competing products.1 But if the original owner of the mark remains in business, an unrelated party's introduction of the old product identified by the old mark can create the very sort of consumer confusion—indeed deception—that trademark law aims to prevent. However, under current U.S. trademark law, the original trademark owner may be unable to stop the use or stem the confusion.
International trademark practice presumes that marks are abandoned if they are not used for a period of time. In the United States, this period is three years.2
This presumption of nonuse may be countered with contrary evidence. However, the US court rulings on abandonment offer little certainty that a trademark owner can rely on the residual goodwill it holds in its mark to thwart a clever entrepreneur who resurrects the old product and uses the "abandoned" mark.
A Changeable Burden
The U.S. courts have differed in defining the burden a trademark owner must meet to rebut a presumption of abandonment.3 The Fifth Circuit, for example, has strictly followed the language of the Trademark Act in holding that "the mark's owner has the burden to demonstrate that circumstances do not justify the inference of intent not to resume use."4
Other courts have held that a trademark owner need only produce evidence of an intent not to abandon the mark.5 This appears to place a lighter burden on trademark owners. Yet even in these cases, it remains unclear whether a court will treat evidence of continuing goodwill as evidence inconsistent with an intent to abandon the mark. (Moreover, even some courts that have accepted evidence of residual goodwill have wondered how strong consumers' memories of the mark must be to justify warehousing the mark at issue.)6
A review of the federal courts' treatment of residual goodwill evidence shows that the courts are reluctant to block defendants from using marks that are not being actively used by the marks' owners. In most cases involving the abandonment of a still-famous mark, the U.S. courts have examined whether a trademark owner's de minimis use of a mark was sufficient to maintain the owner's exclusive rights.7 A few U.S. courts, however, have been willing to weigh evidence of the persisting goodwill of the mark in favor of the owner even where the owner did not continue to use the mark in commerce.8
Those courts that have refused to treat evidence of residual goodwill as sufficient to rebut a statutory presumption of abandonment typically focus on the trademark owner's inability to establish an intent to resume use of the mark before the defendant began its use.9 Moreover, these courts do not accept as sufficient a simple statement of a desire to continue use.10
The few courts that have accepted evidence of residual goodwill to rebut the statutory presumption of abandonment frequently claim that special circumstances justify the excusable-nonuse-of-the-mark exception to abandonment policy. For example, courts have excused nonuse due to a company's bankruptcy or its inability to sell its business.11 Such rare circumstances would not seem to support any shift in policy or legal constructs.
In the Seidelmann Yachts12 and Sterling Brewers13 cases, the marks' owners could point to several facts to support the lasting goodwill of the marks, in addition to simple but lasting public fame, and these facts were deemed sufficient by the courts to warrant findings of nonabandonment. These facts included: (i) relatively short periods of nonuse (five and eight years, respectively); (ii) nonuse due to circumstances out of the owner's control (financial trouble and a labor dispute, respectively); and (iii) continued efforts to sell the business, including the trademark, during the period of nonuse.
More commonly, "special circumstances" cases involve products that are no longer in active manufacture, but continue to be present in the marketplace.14 For example, the Fourth Circuit has held that public recognition, and enforceable trademark rights, persisted in the cartoon character Skippy despite 23 years of nonuse.15 In reaching this conclusion, the Court relied on evidence that during those years, the trademark owner continually attempted to market the Skippy cartoon character, that its Board of Directors met occasionally, and that the company later became more active.
Also illustrative is the Ferrari case,16 where the trademark owner produced no evidence of intent to resume manufacturing the auto body design at issue, but the district court nevertheless found the mark had not been abandoned. The court cited the following facts to support its view: (i) Ferrari continued to manufacture and sell parts for the car; (ii) Ferrari's cars continued to be driven extensively, thus keeping the trademark in the public eye; and (iii) resales of the cars continued and received much publicity.
One prominent legal commentator has suggested that the courts have been too timid in this area and that, when examining whether a mark has been abandoned, residual goodwill should be more important than the mark owner's intent: "It is error to give greater weight to the nonuser's subjective intent than to marketplace perception of customers. While both aspects are irrelevant to the ultimate determination of whether abandonment has taken place, where the firm claims that it had an intent to resume use and has some evidence in support, the primary emphasis should be on the degree to which customers still recognize the mark, for it is this which will result in a likelihood of confusion."17
There is an additional argument in favor of giving greater weight to residual goodwill: U.S. case law recognizes that intentional copying can evidence secondary meaning in a mark, so by analogy, a trademark owner seeking to enforce residual goodwill could point to the newcomer's own actions to rebut the presumption of abandonment. In essence, if a defendant resurrects a mark for the express purpose of benefitting from its goodwill and commercial value, the defendant's own words and actions belie a claim that the mark lacks goodwill and has become abandoned. Rather, the defendant's conduct reflects its belief that the public remembers and will respond favorably to the trademark. The defendant's actions thus show the continuing vitality of the mark.
A Better Policy
Trademark protection must balance three goals—protecting consumers from confusion and outright deception, encouraging and preserving investments in quality goods and services, and encouraging competition.
Where a party resurrects a well-known and remembered trademark from the past and associates it with the same or very similar products with which it was previously used, all three policy concerns come into play. If the mark holds continuing goodwill, the likelihood of consumer confusion increases, as does the threat to the economic interests of the original owner of the mark.
Where goodwill remains, consumers' familiarity with the mark may well lead them to connect the new product to the original, not the current, producer. Yet because the original manufacturer has no connection to the new product and no control over its quality, consumers cannot rely on the mark as a symbol of goodwill. Seemingly familiar in its current incarnation, the new product bears no connection to its past, raising the possibility of consumer confusion, if not outright deception.
Further, if the original manufacturer remains in business, it may face an unwanted risk to its reputation and goodwill due directly to its lack of control over the quality of the new product the mark identifies. That risk can become more compelling if the new product becomes the subject of product liability investigations or simply falls into a product category the original manufacturer wants to avoid.18
In such cases, consumers may blame the original manufacturer for any defect or deficiency in the infringer's product, yet the original manufacturer is powerless to redress the situation. The original producer has little or no control over these outside forces. Such loss of control over reputation is the very essence of irreparable harm, justifying relief.19
To counter this dilemma, at least one court has required those who make later use of a technically abandoned, but not forgotten, mark to "take reasonable precautions to prevent confusion," noting that this is especially important where "the former owner of the abandoned mark continues to market the same product or service under a similar name."20 Thus, the Canadian Football League may call its Baltimore-based team the CFL BALTIMORE COLTS, despite strong memories of the National Football League's BALTIMORE COLTS team now playing under the name INDIANAPOLIS COLTS.21
In short, the traditional policy of fostering competition by preventing the warehousing of trademarks becomes less compelling in the situation where a mark, although no longer in use, retains substantial goodwill. For that type of mark, the public's continuing awareness presumably provides the prime impetus for resurrecting the mark. In promoting competition, trademark law need not allow such "free riding" activities. Moreover, the policy against warehousing can be realized by requiring compelling evidence of lasting goodwill of the resurrected mark.
The U.S. courts should not apply the legal test of abandonment mechanically. Rather, courts facing such issues should instead seek to harmonize the statutory presumption of abandonment with the primary goal of the Lanham Act—protecting the public against confusion. Confusion can only be avoided by recognizing the effect and value of a trademark whose goodwill has persisted despite the absence of use over some period of time.
1 Recent events demonstrate the continuing value of old-time brands to current marketers: e.g., the resurrection (and repeated demise) of PAN AM Airlines; the resurgence of cigar smoking in the U.S., where world-famous COHIBA cigars from Cuba are not available but COHIBA cigars from the Dominican Republic can be bought; the significant interest in nostalgia, as evidenced by a series of film remakes and television networks devoted exclusively to re-runs of shows first aired in the 1960s, 1970s, and 1980s.
2 15 U.S.C. § 1127.
3 See Stanley A. Bowker, Jr., “The Song Is Over but the Melody Lingers On: Persistence of Goodwill and the Intent Factor in Trademark Abandonment,” 56 Fordham L. Rev. 1003 (April 1988) (discussing in detail the federal courts' treatment of how the rebuttable presumption of abandonment shifts the burden of proof).
4 Exxon Corp. v. Humble Exploration Co., 695 F.2d 96, 99 (5th Cir. 1983) (emphasis added). See also Intrawest Fin'l Corp. v. Western Nat'l Bank, 610 F. Supp. 950, 958 (D. Colo. 1985); Restatement (Third) of Unfair Competition § 32, comnt. b (Tentative Draft No. 3, 1991).
5 See, e.g., Seidelmann Yachts, Inc. v. Pace Yacht Corp., 14 U.S.P.Q.2d 1497, (D. Md. 1989); Citibank v. City Bank of San Francisco, 206 U.S.P.Q. 997 (N.D. Cal. 1980) ("The party seeking to prove abandonment must prove an intent to abandon on the part of the trademark owner.").
6 Sterling Brewers, Inc. v. Schenley Indus., Inc., 441 F.2d 675 (C.C.P.A. 1971).
7 See, e.g., Defiance Button Machine Co. v. C & C Metal Prod. Corp., 759 F.2d 1053 (2d Cir. 1985); Miller Brewing Co. v. Oland's Breweries Ltd., 548 F.2d 349 (C.C.P.A. 1976); Silverman v. CBS Inc., 666 F. Supp. 575 (S.D.N.Y. 1987); Kingsmen v. K-Tel Int'l, Ltd., 557 F. Supp. 178 (S.D.N.Y. 1983); Dreyfus Fund Inc. v. Royal Bank of Canada, 525 F. Supp. 1108 (S.D.N.Y. 1981).
8 See, e.g., Seidelmann Yachts, Inc., 14 U.S.P.Q.2d 1497; Ferrari S.p.A. v. Esercizio Fabbriche Automobili e Corse, 11 U.S.P.Q.2d 1843, (S.D. Cal. 1989); Sterling Brewers, Inc. v. Schenley Indus., Inc., 441 F.2d 675 (C.C.P.A. 1971).
9 Societe de Devs. Et D'Innovations Des Marches Agricoles Et Alimentaires-Sodima-Union de Coops. Agricoles v. International Yogurt Co., 662 F. Supp. 839 (D. Or. 1987) (plaintiff's continuing product development efforts held insufficient to support its claim of a continuing intent to use the mark at issue); Cerveceria Cetroamericana, S.A. v. Cerveceria India, Inc., 892 F.2d 1021 (Fed. Cir. 1989) (rejecting rebuttal argument that consisted only of "vague" and discredited statements regarding intent to resume use during period of nonuse); Major League Baseball Properties, Inc. v. Sed Non Olet Deanrius, Ltd., 817 F. Supp. 1103 (S.D.N.Y. 1993); Exxon Corp. v. Humble Exploration Co., 695 F.2d 96 (5th Cir. 1983) (finding proof of Exxon's intent not to abandon HUMBLE, but no proof of Exxon's intent to resume use of mark).
10 See Oklahoma Beverage Co. v. Dr. Pepper Love Bottling Co., 565 F.2d 629 (10th Cir. 1977) (although there was ample evidence of intent to continue to use mark in the future, it was not sufficient to avoid abandonment due to the 8 year gap between uses, given the owner's knowledge that a third party was using the mark). Skippy Inc. v. CPC Int'l. Inc., 674 F.2d 209 (4th Cir.), cert. denied, 459 U.S. 969 (1982).
11 See Seidelmann Yachts, Inc. v. Pace Yacht Corp., 14 U.S.P.Q.2d 1497 (D. Md. 1989), aff'd, 898 F.2d 147 (4th Cir. 1990); Skippy, Inc. v. CPC Int'l, Inc., 674 F.2d 209,216 (4th Cir. 1982); Saratoga Vichy Spring Co., Inc. v. Lehman, 625 F.2d 1037 (2d Cir. 1980); Defiance Button Mach. Co. v. C&C Metal Prods. Corp., 759 F.2d 1053 (2d Cir. 1984); Pan Am v. Pan American Sch. of Travel, Inc., 648 F. Supp. 1026 (S.D.N.Y. 1986) ("if the proponent of a mark stops using it but demonstrates an intent to keep the mark alive for use in resumed business, the mark retains 'residual goodwill' and thus continues to enjoy trademark protection"). See also Societe Des Produits Marnier Lapostolle v. Distillerie Moccia S.R.L., 10 U.S.P.Q.2d 1241 (T.T.A.B. 1989) (rejecting residual goodwill argument, but allowing trademark owner to develop its argument regarding nonuse due to special circumstances); E. Remy Martin & Co., S.A. v. Shaw-Ross Int'l Imports, 756 F.2d 1525 (11th Cir. 1985) (allowing trademark owner to attempt to develop record in support of a "special circumstances" argument).
12 Seidelmann Yachts, Inc. v. Pace Yacht Corp., 14 U.S.P.Q.2d 1497 (D. Md. 1989), aff'd, 898 F.2d 147 (4th Cir. 1990).
13 Sterling Brewers, Inc. v. Schenley Indus., Inc., 441 F.2d 675 (C.C.P.A. 1971).
14 Ferrari S.p.A. Esercizio Fabbriche Automobili e Corse v. Mc Burnie, 11 U.S.P.Q.2d 1843 (S.D. Cal. 1989) (presumption of abandonment rebutted because plaintiff continued to manufacture mechanical and body parts; plaintiff remade or refurbished more than 350 cars, and its cars were still driven extensively); American Motors Corp. v. Action-Age, Inc., 178 U.S.P.Q. 377 (T.T.A.B. 1973) (continued reservoir of goodwill for RAMBLER evidenced by the large number of cars still on the road, plaintiff’s continuing to supply parts, dealers continuing to use RAMBLER in their trade names, and dealers continuing to post signs with RAMBLER on it). But see Parfums Nautee, Ltd., Inc. v. American Int'l Indus., 1992 TTAB LEXIS 311 (1992) ("A party cannot defend against a claim of abandonment by relying on some residual goodwill generated through post-abandonment sales of the product by distributors or retailers").
15 Skippy Inc. v. CPC Int'l. Inc., 674 F.2d 209 (4th Cir.), cert. denied, 459 U.S. 969 (1982).
16 Ferrari S.p.A. v. Esercizio Fabbriche Automobili e Corse, 11 U.S.P.Q.2d 1843, (S.D. Cal. 1989).
17 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 17.03[a], at 17-17 (3d ed. 1993) (emphasis added). See also Ithaca Indus. at 1206 ("...in view of the fact that abandonment is a forfeiture of a property interest, courts should be reluctant to find abandonment and statutory aid to such proof should be narrowly construed.").
18 The problem also arises when circumstances such as bankruptcy or governmental interference cause the nonuse.
19 A.J. Canfield Co. v. Vess Beverage, Inc., 796 F.2d 903 (7th Cir. 1986); Church of Scientology Int'l v. Elmira Mission of the Church of Scientology, 794 F.2d 38, 43 (2d Cir. 1986).
20 Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club L.P., 34 F.3d 410 (7th Cir. 1994) (citing McCarthy).
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