On March 2, 2015, the U.S. Court of Appeals for the Federal Circuit issued its first-ever ruling addressing use requirements for registering service marks. The court held that offering a service, without the actual rendering of that service, is not “use in commerce” for the purposes of registering a service mark under Lanham Act § 45, 15 U.S.C. § 1127. Because the applicant misunderstood this requirement, his registration is now invalid, and another business is positioned to register the mark. David Couture v. Playdom, Inc., No. 14-1480.

BACKGROUND

On May 30, 2008, David Couture (Appellant) created a one-page website at <playdominc.com> that claimed to offer writing and production services for the television and film industry. On the same day, he filed an application to register the service mark PLAYDOM for “entertainment services” pursuant to 15 U.S.C. § 1051(a)—otherwise known as a 1(a) “actual use” application, rather than a 1(b) “intent to use” application. Mr. Couture believed that advertising and offering his services constituted the “use in commerce” necessary to support registration of his mark. The U.S. Patent and Trademark Office (USPTO) registered the PLAYDOM mark on January 13, 2009. The record shows, however, that while Appellant continually advertised his services, he did not actually perform any services under the mark until sometime in 2010.

On February 9, 2009, only a month after Appellant’s mark registered, Playdom, Inc. (Appellee) filed an application to register the identical mark PLAYDOM for services including “entertainment services.” The Examining Attorney rejected the application because of Appellant’s identical registered mark, citing Lanham Act § 2(d), 15 U.S.C. § 1052(d).

The Appellee filed a petition to cancel Appellant’s registration of PLAYDOM on June 15, 2009, contending that the mark had not been used in commerce since the date of application and was thus void from the start. The Trademark Trial and Appeal Board (the TTAB) agreed and canceled Appellant’s mark on February 3, 2014, because Appellant had only “posted a website advertising his readiness, willingness and ability to render said services” but failed to actually render any services by the filing date of the application.

CURRENT DECISION

In a decision issued on March 2, the Federal Circuit upheld the TTAB’s decision to cancel Appellant’s mark. The Federal Circuit highlighted the Lanham Act’s “use in commerce” requirement, found at Lanham Act § 1(a), 15 U.S.C. §§ 1051(a)(1); 1127 (emphasis added).

A mark is used in commerce on services when [1] it is used or displayed in the sale or advertising of services and [2] the serviced are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.

The Federal Circuit acknowledged that previous district court decisions focus on the first part of the “use in commerce” requirement but notes that the wording of the statute is clear, requiring both (1) use of the mark in sale or advertising and (2) the actual rendering of the service. The Federal Circuit went on to quote the Supreme Court’s decision in United Drug v. Theodore Rectanus Co., “[T]he right to a particular mark grows out of its use, not its mere adoption….” 248 U.S. 90, 97 (1918). The Federal Circuit also clarified that a mark’s use in commerce must be “as of the application filing date” and a “bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in the mark.” 37 C.F.R. § 2.34(a)(1)(i); 15 U.S.C. § 1127. Finally, the Federal Circuit noted that the TTAB and McCarthy on Trademarks and Unfair Competition concur that “rendering services requires actual provision of services.”

Ultimately, Appellant’s entire trademark registration was canceled. The Court also took the time to emphasize that while Appellant may have liked to convert his 1(a) registration into a 1(b) “intent to use” application, under the present regulations, conversion from registration to application is not permitted. See 37 C.F.R. § 2.35(b). Had Appellant filed a 1(b) application, he would have retained priority over the Appellee and may not have faced a complete loss of his trademark registration.

IMPACT OF DECISION

While other courts have had reason to rule on the amount of activity necessary to support a claim of “use” for the purposes of a trademark or service mark registration, the Federal Circuit’s decision in this arena is the most important. The Federal Circuit has exclusive appellate jurisdiction over decisions coming from the TTAB, making its ruling binding on the Trademark Office.

Prior to this week’s ruling, there was no “brightline rule” for when an entity’s services were eligible to claim rights to a service mark. Many practitioners may have advised that simply advertising a service under a mark—without actually rendering the service—was sufficient to satisfy the “use in commerce” requirement for registration. However, the Federal Circuit has now clarified that 1(a) “actual use” applications require that the applicant already have rendered the services claimed in the registration at the time of the application. Those who file 1(a) applications without meeting both of the requirements for use or display in the sale or advertising of services and rendering of services risk cancellation of their registrations. Services must be actually rendered in interstate commerce.

SPECIAL CONSIDERATIONS FOR SERVICE MARKS

This ruling provides practical advice and guidance for filing service mark registrations. The Federal Circuit emphasizes that “use in commerce” is a two-part requirement and reminds registrants that the second part of the statute, which requires the rendering of a service, cannot be overlooked. The use requirements for a service mark registration are clearly different from the use requirement for goods. Previous rulings explain that merely shipping products in interstate commerce constitutes “use” for the purpose of filing an application for a trademark, and no actual sale is required. Nevertheless, bona fide commercial use is required for both trademarks and service marks to maintain the registration and to garner trademark rights for enforcement purposes. But the different nature of products compared to services results in a different practical impact.

THE TAKEAWAY

The takeaway from this case is that, as a practical matter, there is a higher standard for “use in commerce” when applying for a service mark registration as compared to a trademark registration. While the procedures are the same, the TTAB only recognizes “use in commerce” for a service mark where there is a sale of the services listed in the registration. Registrations for service marks filed prior to the date of actual sales are vulnerable to attack in a cancellation proceeding or as a counterclaim in an infringement lawsuit. By contrast, goods can meet that test merely by shipment in interstate commerce; purchase is not required.

Service mark owners also should heed the cautionary tale taught by Couture v. Playdom Inc.: the Examining Attorney is not infallible. The Appellant’s application was approved by the Examining Attorney despite non-use, likely giving him reason to believe he was the legitimate senior user of the mark. Examining Attorneys at the USPTO are not arbiters of “use in commerce” and only judge the merit of a trademark or service mark application based on the information at their immediate disposal. While ownership of a valid trademark or service mark registration gives rise to a presumption of validity, this case reminds brand owners that there are ways to overcome that presumption.

If you currently have an unpublished 1(a) application pending before the Trademark Office and have doubts about whether the services were rendered prior to filing, you may amend your application to a 1(b) basis by filing a verified statement that you had a bona fide intention to use the mark in commerce in connection with the services as of the filing date. See TMEP § 806.03(c). If your pending application is already published, or if you own a registration for a service mark and have doubts regarding its validity in light of the recent decision, you may need to consult with a trademark attorney to determine the best course of action for your particular situation.

NEW PRACTICES MAY BE WARRANTED

As Appellant was not rendering services at the time he submitted his service mark application, it would have been advisable that he file a 1(b) “intent to use” application. The 1(b) application costs a little more, and a brand owner may be hesitant to file an application that suggests the mark is not yet in use when it has taken substantial steps toward starting to offer services, but that is why the 1(b) application exists. Under this ruling, a restaurant that has purchased ingredients, printed menus, decorated its dining room, hired employees, advertised its services and opened its doors would still not have the “use” necessary to support a 1(a) application. In this example, “use” occurs when the first customer actually pays for a meal. If a section 1(a) application is desired, then the brand owner should document actual sales of the services as of the application date.

Those engaged in services should be hesitant to insist on a 1(a) application claiming “actual use” unless they are already providing services under the mark. Once the mark registers, it is too late to cure the defect, so service mark applicants must “use it or lose it.”