Preparing for the Trademark Office’s Permanent Audit for Registrations

Many businesses keep records for audits from the Internal Revenue Service, but businesses should also now be ready to preserve certain records for their brands or provide them in advance to their attorneys, to prepare for subsequent “Trademark Audits” to maintain trademark registrations at the U.S. Patent and Trademark Office (PTO). Under a pilot program from the PTO that recently became permanent, the PTO is now randomly selecting 10 percent (or more) of trademark registrations to ask for additional proof of use of the trademark or risk cancellation if the owner cannot prove use in a manner suitable to the PTO, as of a certain date for potentially all the items listed in the trademark registration.

Background

As many businesses know, clearing and obtaining a trademark registration can entail significant effort and expense to obtain the advantages of a federal trademark registration. After obtaining the registration, owners often feel a sense of relief knowing the registration process is largely behind them, apart from complying with (hopefully) fairly routine maintenance requirements post-registration such as submitting Declarations of Use. Usually, submission of a Declaration of Use entails confirming current use in commerce for the goods/services listed in the trademark registration under Declaration, and by providing limited examples to the Trademark Office (a/k/a “specimens”) showing use to the Trademark Office for each “class” of goods/services. In common practice, this means providing the PTO with proof of use of the mark in commerce during the statutory period for maintaining the trademark, between the fifth and sixth year after issuance of the registration, and every 10th year thereafter, by providing one acceptable specimen, as defined under the PTO requirements, for each class of goods/services. Usually, even though a registration could list many goods/services within a class, the Declaration and one specimen per class were sufficient to satisfy the agency’s requirements. Most other countries in the world merely require payment of a fee to renew a trademark registration, but the U.S. PTO has always had more stringent proof of use requirements.

One reason for the proof of use requirements is to remove outdated trademarks to clear the Register of trademarks that could block a subsequent trademark application for a potentially similar mark. In recent years, among other trends, many trademark applicants, including many foreign owners who are not initially required to prove use to obtain a registration, identify a laundry list of goods or services and, according to the PTO, there is also a proliferation of seemingly fraudulent claims of use, enabling  owners to obtain registrations for a broad list of goods/services that might not otherwise be entitled to registration. 

Changes in Procedure and Implications for Trademark Owners

Under the PTO audit program for Declarations of Use, the PTO selects 10 percent (or more) of post-registration filings to conduct random audits and request additional “proof of use” for two items in registrations with multiple items. It is significant that the requirement for “proof of use” in response to an audit is slightly different from the PTO traditional “specimen” requirement for procuring, maintaining and renewing a registration. For the audit, acceptable proof of use for goods includes photographs that show the mark on the actual goods or packaging or photographs of displays associated with the actual goods at their point of sale. A tag or label that is not shown affixed to the goods is not acceptable proof of use (unlike a traditional “specimen”). Essentially, the PTO wants to see the mark in context to counteract issues with owners submitting bogus or doctored specimens. 

Providing acceptable specimens of use has presented difficulties for trademark owners. The PTO is strict, often requiring evidence that is beyond that which a court would require to show sales. For example, invoices are not acceptable specimens although, as a practical matter, in Court or for tax purposes, such documents are often reliable proof of sales and the accompanying association of consumers with the brand/mark and the underlying goods. Owners are used to collecting “specimens” to maintain trademark registrations, but now proof of use requirements might vary from longstanding specimen requirements (and what business people collect or can easily acquire especially in a large organization could be complicated—for example, does someone need to take a picture of the box with the label in the warehouse?). There are also situations, particularly with industrial goods or goods that are not consumer products with traditional labels, etc., or if the mark is not a suitably prominent trademark, where the PTO will not accept the specimens (or presumably proof of use) and additional evidence or Declarations are required to explain how the mark is used and how purchasers associate the mark with the goods. 

If your mark is selected for a post-registration audit, an Office Action will issue and, even if the specimen you provided was acceptable, you will also be asked to provide proof of use that was in use as of the relevant time frame for filing a Declaration of Use and it will need to be submitted under penalty of perjury. Often times, the specimen is submitted at the end of the statutory period and examined by the PTO months later, and an owner has six months to respond to the audit inquiry. This means that even if you find proof of use, you will then have to swear that the proof of use was in use potentially six months or earlier, or risk the validity of the registration. This will entail additional effort and expense to track down suitable proof of use during the relevant time frame.

Another option to comply with the audit is to delete the goods that are the subject of the inquiry but this will invite further scrutiny. If you delete the goods/services to avoid gathering and submitting proof of use, the PTO will issue another Office Action requesting additional proof of use for the other goods/services. Without taking extra efforts early on to guard against this issue, this means that taking simple steps to try to resolve the issue, will not necessarily save the registration. And, if you do not reply to an Office Action, the whole registration will be canceled. 

If an owner wants to challenge the decision of the PTO Examiner, the decision can be challenged by petition, but owners can expect the PTO to be strict with petitions as well.

Best Practices

With this in mind, Dykema attorneys will remind you of the legal requirements for filing the Declaration up front and remind you to collect extra specimens/proof of use when it is timely and easier to do so. Dykema attorneys and paralegals usually do this as a matter of course and, on their own, try to obtain screen grabs and other evidence from websites to bolster the claim of use later on, if necessary. This will also help when it comes to submitting the required Declaration which could be months later when it is harder to collect use from a certain time frame. We will work with you to find specimens and proof of use to minimize the burden and ensure all company trademarks are fully protected.

Because of the ramifications and burdens to trademark owners to deal with the audits, we are also taking other efforts to provide feedback to the PTO and we invite you to contact us if you would like us to share particular concerns. The PTO is open to input and we are willing to share concerns and comments on the audit program with the PTO.   

Trademark registrations are valuable assets and we welcome the opportunity to create programs and procedures to collect and prepare appropriate proof of use and specimens to help you avoid these issues and strengthen trademark rights. We also invite you to contact us if you would like additional information on what constitutes acceptable specimens or proof of use in particular situations.

For more information about the information in this alert, please contact Jennifer Fraser (202-906-8712 or jfraser@dykema.com), Eric Fingerhut (202-906-8618 or enfingerhut@dykema.com), Marsha Gentner (202-906-8611 or mgentner@dykema.com), or your Dykema relationship attorney.