Trademarks – Timing, Intent and Use in Commerce

I have been following the twists and turns of Kelly Services Inc. et al. v. Creative Harbor LLC (ED Mich) — an interesting trademark dispute over priority in the mark “WorkWire” for a mobile application for use by employers and prospective employees.

Two opinions in Kelly Services v. Creative Harbor illuminate important rules and strategies regarding “intent-to-use” trademark applications and what it means to use a mark in commerce, particularly in the context of newer technologies like mobile apps.  [Note:  The final paragraph of this post lists the key take-aways.]

Creative Harbor claimed priority in the WorkWire mark based on two “intent-to-use” applications (“ITUs”) it had filed with the USPTO.  Kelly Services claimed priority based on having used the mark in commerce before Creative Harbor filed its ITUs.

In early 2013, Kelly Services began developing an iPad application (“App”) for distribution in the Apple App Store.  On February 4, 2014, it submitted the completed App to Apples iTunes Connect – the tool that software developers use to submit an App for approval and eventual sale in the Apple App Store.  After Apple informed Kelly Services that its Workwire App was rejected due to a metadata issue, Kelly resubmitted it the next day.  On February 17, 2014, Apple informed Kelly that the WorkWire App was approved and ready for sale.  Kelly’s WorkWire App was released to the public in the Apple App Store on February 19, 2014 sometime after 8:11 pm (EST).  The first consumer download of the Kelly WorkWire App occurred on February 20, 2014.

In September 2013, Creative Harbor’s founder independently had the idea to create a mobile app called “WorkWire” to connect employers and prospective employees.  Creative Harbor LLC was formed in early February 2014.  Around that same time, Creative Harbor sought advice on trademark protection from an intellectual property attorney.  On February 16, 2014, the attorney informed Creative Harbor that the WorkWire mark was available.  Three days later, on February 19, 2014, Creative Harbor filed its ITU applications at 6:28 pm and 7:56 pm (EST) with the USPTO.

Both Kelly Services and Creative Harbor filed motions for summary judgment, with the issue of priority to the mark being the key issue.

The district court’s first opinion, Kelly Servs., Inc. v. Creative Harbor, LLC, 2015 WL 5013873 (E.D. Mich. Aug. 21, 2015) (“Round 1”), established the facts described above, and determined that:

(1)  Kelly had not used the WorkWire mark in commerce before Creative Harbor filed its ITUs, and thus Kelly did not have priority based on its alleged prior use; and

(2)   Creative Harbor was not entitled to a judgment of priority based on the filing date (and time) of its ITU applications until it had completed the USPTO registration process.

Key to the court’s opinion concerning Kelly’s lack of priority based on its alleged prior use in commerce were the following:

1.  Ordinarily, priority to a mark is established “as of the first actual use of [the] mark” in commerce.  However, the Lanham Act allows a person not yet using a mark to file an anticipatory application for registration—i.e., an ITU application—on the basis of an intent to use the mark in the future.  If the ITU applicant later uses the mark in a commercial transaction and files a statement of use with the USPTO within the prescribed time frame, the mark is registered and the date the ITU application was filed becomes the applicant’s constructive-use date.  This gives the ITU applicant priority-of-use over anyone who adopts the mark after the constructive-use date.

2.  “Use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.  Use in commerce requires a genuine commercial transaction or an attempt to complete a genuine commercial transaction.  While the use need not be extensive nor result in deep market penetration or widespread recognition, there has to be an ‘open’ use, that is to say, a use has to be made to the relevant class of purchasers or prospective purchasers.  An ‘internal’ use cannot give rise to priority rights to a mark. The test for use in commerce is whether or not the use was sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.  Sufficient public use has been found when a claimant offered its services to potential customers through numerous solicitations bearing the mark.

    *The district court found that submission of the Kelly Workwire App to iTunes Connect for Apple’s review was not sufficient to constitute use in commerce because it was not sufficiently open or public to identify or distinguish its application in the minds of consumers.  The bilateral exchange between Kelly and iTunes Connect provided no notice of the Kelly WorkWire App to potential consumers—i.e., persons who might eventually download the Kelly WorkWire App from the Apple App Store. The court characterized Kelly’s submission of the App to Apple as a preparatory step to making the Kelly WorkWire App available to consumers, and noted that “[A]n applicant’s preparations to use a mark in commerce are insufficient to constitute use in commerce.”

Key to the court’s opinion that Creative Harbor was not yet entitled to a judgment of priority were the following points:

  1. ITUs—in and of themselves—do not establish priority to a mark.
  1. ITU applications merely establish an applicant’s constructive-use date, contingent on satisfying the other requirements for registration of the mark — using the mark in commerce and filing a statement of use with the USPTO within the prescribed time frame.

[Since Creative Harbor’s counterclaims against Kelly for unfair competition, trademark dilution, and intentional interference with prospective business all were based on Creative Harbor’s alleged priority rights, the court granted summary judgment to Kelly on those claims.]

At the end of Round 1, Creative Harbor appeared to be headed for a win (in terms of the mark), except for the paragraph at the end of the court’s August 21, 2015 opinion titled, “Supplemental Briefing.”  There, the court requested additional briefing on whether Creative Harbor had a bona fide intent to use the Mark on each and every one of the goods and services identified in the applications.  Noting that “At least one federal court has invalidated an entire intent-to-use application where the applicant lacked a bona fide intention to use the mark on all of the items listed in the application,” the court stated, “[i]f Kelly establishes that the Creative ITUs are invalid, Kelly may have priority over Creative Harbor based on Kelly’s use of the Mark.”  Accordingly, the court requested additional briefing on whether it should (1) decide the validity of the Creative ITUs or (2) leave that issue to the TTAB and stay this action pending the TTAB’s action on Kelly’s Notices of Opposition.

Following additional briefing, the district court filed its second opinion, Kelly Servs., Inc. v. Creative Harbor, LLC, 2015 WL 6108264, at *1 (E.D. Mich. Oct. 16, 2015) (“Round 2”), reconsideration denied, 2015 WL 6955406 (E.D. Mich. Nov. 10, 2015).

As to whether the court or the TTAB should decide the question, the Round 2 opinion notes that counsel for both parties “conferred and determined that the Court should decide the validity of the Creative ITUs.”

The parties having stipulated, the court went on to hold:

(1)  Creative Harbor had a bona fide intent to use the Mark on some, but not all, of the goods and services identified in the ITUs; and

(2)  the ITUs were invalid and ineffective because Creative Harbor had not deleted from the ITUs each of the goods and services on which it lacked a bona fide intent to use the Mark.

Therefore, because Creative Harbor’s ITUs were invalid, Kelly was entitled to summary judgment to the extent Creative Harbor’s claims relied on having priority to the mark based upon the filing date of its ITU trademark applications.

In reaching its decision, the court first set forth history of the Intent-to-Use trademark application, noting that before 1988, the Lanham Act required that a trademark applicant already be using the mark in commerce at the time the application was filed.  The Trademark Law Revision Act of 1988 “changed the Lanham Act by permitting [trademark] applicants to begin the registration process before actual use of [a] mark in commerce at the time of filing, so long as the applicant had a ‘bona fide intention … to use [the] mark in commerce’ at a later date.”

The court then noted recent guidance from M.Z. Berger & Co., Inc. v. Swatch AG, 787 F.3d 1368, 1374 (Fed. Cir. 2015), in which the Federal Circuit Court of Appeals explained:

*  “while the Lanham Act does not define the term ‘bona fide,’ an applicant’s good faith intent to use the mark in commerce ‘must be [objectively] demonstrable and more than a mere subjective belief.'”

*  “a trademark applicant’s intent must reflect an intention to use the mark consistent with the Lanham Act’s definition of ‘use in commerce’:  [T]he bona fide use of a mark in the ordinary course of trade and not made merely to reserve a right in the mark.”

The court noted that it was Kelly Services’ burden, as the party seeking summary judgment, to demonstrate that Creative Harbor lacked a bona fide intent to use the mark on all of the goods and services identified in the ITU applications.

Creative Harbor’s identifications of goods and services in its trademark applications went far beyond any bona fide intended use, as shown in the deposition of Creative Harbor’s CEO, which included testimony:

  • that he (CEO) asked his attorney to file the Creative ITUs in order “to protect this brand … in case the brand got bigger; in case it diversifies a little bit.”
  • that the services and goods listed on the Creative ITUs “were defined with the idea of protecting my present and future exploration of this name—of this brand.”
  • that at the time his attorney drafted the Creative ITUs, he (CEO) “had clear ideas for some of them, and some of them were meant for future exploration.”
  • that he acknowledged that some of the listed “services mightbe of future importance” and that they “mightprotect my endeavors in the future that I have….”
  • that while the goods application stated an intention to use the Mark with “computer game software,” he (CEO) testified that Creative Harbor did “not” intend to use the Mark “with a game.”
  • that while the services application stated an intention to use the Mark in connection with “professional credentialing verification services … on behalf of others,” he (CEO) acknowledged that he simply “wanted to keep the option open to at some point do that.”
  • that the services application stated an intention to use the Mark in connection with “employee relations information services,” but when asked about that listing, he (CEO) did not know what it “refers to.”
  • that while the services application stated an intention to use the Mark in connection with “employment staffing consultation services,” he (CEO) explained that Creative Harbor included this service because “maybe at some point[the application] would have consulting in there, maybe some kind of career advisor, something like this.”
  • that while the services application stated an intention to use the Mark in connection with “business consulting” services, he (CEO) conceded that he “wanted to make sure [that] was there included” because the company “could” perhaps perform those services “at some point” in the future.

These points, the court found, showed that Creative Harbor did not have a bona fide intent to use the Mark on each and every one of the goods and services listed on the Creative ITUs.

Finding that Creative Harbor had not identified any objective evidence that it had a bona fide intent to use the Mark in connection with many of services and goods listed on the Creative ITUs, such as employee relations information services, business consulting services, professional credentialing verification services, computer game software, and/or computer hardware for integrating text and audio, the court held that there was no material factual dispute as to whether Creative Harbor had a firm intent to use the Mark on all of the listed services and goods in the Creative ITUs: it did not.

The court then turned to the remedy – what should it do?

Initially, the court noted that when an ITU applicant has no bona fide intent to use its mark in commerce on any of the goods or services listed in its application, the ITUs are deemed ineffective and the applicant is barred from registering the mark.

However, the court said it was less clear what happens when an applicant, like Creative Harbor, has a bona fide intent to use a mark in commerce on some, but not all, of the listed goods and/or services.

Reviewing decisions of the Trademark Trial and Appeal Board, the court identified the rule as follows:  “absent fraud, an ITU applicant may cure an overbroad listing of goods and/or services by deleting from its application the goods and/or services on which it lacks a bona fide intent to use the mark.”

The court also cited Spirits Int’l, B.V. v. S.S. Taris Zeytin Ve Zeytinyagi Tarim Satis Kooperatifleri Birlgi, 99 U.S.P.Q.2d 1545 (T.T.A.B. 2011), for the proposition that a “lack of bona fide intention to use the mark with respect to any of the goods in each class … [an] opposition against the classes in their entirety would be sustained.”

The court then posed the question:  “What if an ITU applicant fails to delete from its application the goods and/or services on which it lacked an intent to use its mark?  Under those circumstances, should a tribunal void the entire application or should the tribunal, itself, delete the goods and/or services for which the required intent was lacking?”

Because Creative Harbor argued that it had bona fide intent, and did not voluntarily remove services (e.g., employee relations information services, business consulting, professional credentialing verification services) and goods (e.g., computer game software, computer hardware for integrating text and audio) for which it had no bona fide intent to use, the district court invalidated the Creative Harbor ITUs in their entirety.

Acknowledging that the result may appear harsh, the court reiterated that an applicant may not use an ITU “merely … to reserve a right in a mark.”  Because Creative Harbor filed its ITUs to broadly reserve the Mark for use in a “brand” it  “might” develop, and when Kelly raised Creative Harbor’s lack of intent, it failed to cure the problem by deleting the services and goods on which it did not intend to use the mark, and instead forced Kelly to continue litigate the validity of the Creative ITUs, voiding the Creative ITUs did not strike the Court as a disproportionate or extreme remedy.

Here are some take-aways:

  1. When entrepreneurs or a companies have identified a mark and services or goods on which the mark will be used, filing of an Intent-to-Use application can secure priority over others who also may be seeking to use the same mark (or one that is confusingly similar), even if they are closer to actually using the mark in commerce.
  1. It is important to discuss the likely and intended use of the mark with counsel both before filing an ITU, and throughout the registration process.
  1. It is critical to assess the bona fide intended use of the mark once a third party has challenged the intended uses stated in an ITU, and to voluntarily delete goods and services for which no bona fide intended use is present, particularly when the questioned goods or services fall within a class of goods or services that is essential to the ITU applicant’s business and plans for the mark.
  1. It is important to carefully research and consider the preferred forum when certain registration related issues are being considered, particularly when the court provides an opportunity for input on which forum will determine issues like validity of trademark applications (including ITUs).
  1. With the benefit of hindsight from this case, it seems fairly important that deponents, and particularly applicants, executives or persons most knowledgeable from an organization, be familiarized with the rules and purposes of trademark registration and procedures, and evolving case law interpretations of terms like “use in commerce” and “bona fide” intent to use.
  1. For developers of mobile apps (or services/products with submission or approval processes similar to the manner in which the Apple Store reviews mobile applications), it is important not to rely on the submission date or solely on the availability-for-sale date to establish priority based on use in commerce.

 

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3 thoughts on “Trademarks – Timing, Intent and Use in Commerce

  1. Preston Ryan

    An important case laying out the necessity of good “lawyering” skills by following up with clients to make sure their applications are correct and reflect proper registration requirements throughout the entire registration process.

    Like

    Reply
  2. Pingback: A Business May Not Assign (an ITU Application), if the Assign(or) Has No Business | Takes On Law

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