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‘Common law’ trademarks: An important backup to federally registered marks

Consider this scenario: a local eatery known as, THE HUMONSTRO HAMBURGER JOINT, just a single hamburger stand a few years back owned and operated as a dba by Hugo Louie, became well-known and well-liked in its metro area for its large, tasty hamburgers, the “Humonstro”. The Humonstro burger was often listed in on line “best burger” ratings, and had a highly favorable reputation in the local community. At Louie, Sr.’s unfortunate death, his son, Hugo Louie, Jr. (Junior) approaches you, an attorney in the area, about helping him form an LLC, becoming his in-house counsel for the new enterprise, with the goal of opening new Humonstro Burger Joints in and around the metro, and perhaps franchising it well beyond, if the venture proved successful. However, about a year before Louie Sr.’s death, but well after the original Humonstro Burger Joint’s run had begun, another establishment, The Humonstro Burger Bistro, opened in the metro area, and was also doing solid business. Louis, Sr. was sure the new Bistro was a rip-off of his own business’s reputation, and if fact, took some of his business away, but had not confronted it’s owner at the time of his passing. Unfortunately for Junion, Louie, Sr. had never filed for federal (or state) registration of the “Humonstro” trademark for either hamburgers (as goods) or for restaurant services more generally.

You advise Junior that you think he has an interesting proposition, but, at least to yourself, you question whether his Dad’s failure to federally register or to stop Bistro before his death, might be fatal to Junior’s plans. You have other questions in mind as well. So you pull out your legal pad to jot down some questions:

  1. Is Louie, Sr.’s failure to federally register “Humonstro” for burgers or restaurant services a fatal blow to Junior’s plans? What about Bistro’s intervening opening?
  2. Can Junior sue Bistro’s owner to enjoin him from continuing to use the restaurant’s name even without first obtaining a registration?
  3. Should Junior (or his LLC) consider filing a federal registration application?

As you might suspect (as a fellow lawyer is writing this article), the answer to each of these questions is, “it depends”, at least to some degree, on the specific circumstances of Junior’s situation.

The answer to the first question starts with the major lesson you should take away from this article – the United States has a well-established tradition of enforceable common law trademarks. So, yes, even if Louie, Sr. never applied to federally register HUMONSTRO (or even sought a state trademark registration; e.g., see MO Rev Stat §417.016), he acquired enforceable trademark rights once he began using, and continuously used, this mark to designate himself as the source of these goods and services.

It is important to note, however, that one claiming common law trademark rights must establish that he is the senior user (i.e., was the first to use and has continuously used) of the mark. Further, he should be aware that common law rights are considered limited to the geographic territory of its regular usage. (Note – in this era of the Internet and website sales, the concept of “geographic territory” is subject to extrapolation and interpretation; but that is the topic for another article unto itself.) Otherwise, the conditions to establish a common law trademark are largely the same as for registering a trademark once it is used in interstate commerce – i.e., prior use over the same or confusingly similar marks in the area and not being merely descriptive of the goods or services, either because it is a coined or fanciful term, or has acquired distinctiveness by significant use and promotion.

A key, probably critical, issue that Junior (or his LLC) will need to address is whether he can “tack on” his father’s prior use of the HUMONSTRO trademark for hamburgers to his own. While this seems self-evident, it can be problematic. If he fails to establish a clear chain of title, e.g., being the sole heir himself of, or by an Assignment from the collective heirs of, Louie, Sr., together with relatively continuous use of the mark by all owners in the chain of title over this period, then his priority of use would only date from when he starts using the mark himself, and he would lose senior user status to the Humonstro Burger Bistro which started using the mark a year earlier.

Regarding the second question – yes, common law trademarks are enforceable in court without first obtaining a registration. In fact, if in the above scenario, it can be established that Bistro’s use of the HUMONSTRO mark for its burgers is “likely to cause confusion . . . or to deceive as to the affiliation, connection, or association of such person with another person (Joint), or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person”, then Junior, upon establishing common law trademark rights in the mark, could bring a cause of action under 15 USC §1125(a) of the Federal Lanham Act (the Federal Unfair Competition Law) against.

Bear in mind that jurisdictional hurdles remain for Junior to bring a federal lawsuit based on Bistro’s actions. Moreover, since a common law trademark has likely limited geographical reach, if the Humonstro Burger Bistro was in a remote location such as another part of the country, then there would be no cause of action under either the common law or the Lanham Act.

Finally, Junior would need to be able to prove the “likelihood of confusion” caused by the simultaneous use of the two marks. For example, the owner of Humonstro Burger Bistro might argue that “Burger Bistro,” attached to “Humonstro” sufficiently distinguishes the full mark from “Humonstro Hamburger Joint”, thus avoiding any likelihood of confusion. Courts look to a number of factors to decide whether there is a likelihood of confusion. However, the two most important ones are usually considered to be the similarity of the marks and the relatedness of the goods/services they are used with. The marks and goods/services do not need to be identical to be likely to cause confusion. Here, while “Hamburger Joint” and “Burger Bistro” differ, they are largely descriptive of the goods/services – hamburger and burger being variations on the same word, and both Bistro (as a Parisian imported term) and Joint (as a colloquialism) both connote a small restaurant. The truly distinctive part of each mark, HUMONSTRO, is identical, and the goods/services are either identical or nearly so.

If Junior sues, he could possibly need to be ready to fend off a defense by Bistro that those claiming rights from Louie, Sr.’s use of the HUMONSTRO mark should be estopped or prevented by laches to pursue a cause of action against Bistro, because he let Bistro co-exist in the marketplace while he owned the Joint. However, unless Louie, Sr. made some express representation of that nature to Bistro (giving rise to an estoppel), it is unlikely that a one-year failure to stop Bistro’s use would be sufficient to give rise to a successful laches defense. However, case treatment of these equitable defenses are quite fact specific, and conscious steps should be made to avoid becoming subject to them.

In view of the value of common law trademarks without registering, discussed above, does that mean that Junior (or his LLC) should forego the trouble and expense of seeking a federally registered trademark? Assuming he can establish use in interstate commerce (i.e., between states), there are strong incentives to obtaining a federal registration. As stated by the U.S. Trademark Office, here are some basic advantages:

  1. Registration gives nationwide constructive notice to the public of the registrant’s claim of ownership (and a legal presumption of ownership attaches).
  2. The registered mark’s owner has his mark listed in a USPTO searchable database on its website making it easier to locate and thus to dissuade would-be users of the same or similar marks from doing so (and obtains the right to use the ® symbol with the mark on the goods so competitors and others know it is federally registered).
  3. The “geographically limited” extent of rights available to a common law trademark goes away, as the owner acquires the exclusive right to use the mark with the listed goods and services nationwide.
  4. After five years on the Register, the mark can be made “Incontestable”, which severely limits challenges, e.g., based on claims of prior use, or claims that the mark is merely descriptive (see above).
  5. The owner gains the ability to sue without restriction in Federal Court for trademark infringement of the registered mark and can gain remedies of enhanced (up to treble) damages and attorneys’ fees for certain more willful and/or egregious violations.
  6. In terms of filing for registration, in general, it is just not that expensive to accomplish.

In short, the bang for your buck one gets from obtaining a federal trademark registration is pretty darn good. In Junior’s case, where he is considering opening additional restaurants, and perhaps even franchising, it is probably an essential further step, all made possible by his recognition and protection of his father’s initial common law trademark rights!

Harley Blosser is a licensed patent attorney in the Clayton, Missouri office of Sandberg Phoenix & von Gontard P.C. is a licensed patent attorney specializing in all aspects of intellectual property, emerging technology and business law. As an intellectual property attorney, Harley’s technical specialties include biotechnology, chemistry, clean energy and pharmaceutical patents; trademarks; copyrights; intellectual property portfolio strategic management; licensing and enforcement. He holds a law degree and a Bachelor of Arts in Chemistry, both from the University of Missouri Kansas City. Harley can be reached at 314-425-4906 or hblosser@sandbergphoenix.com

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