As the economic downturn continues and legal and marketing budgets shrink, now is a good time for brand owners to take stock of their trademark portfolios and to establish priorities on which to focus their more limited budgets. Auditing one's trademark portfolio allows a brand owner to focus resources on core areas and generate savings by limiting spending in other areas. Although, in more flush times, a brand owner might rely on outside counsel to guide or conduct such an audit, the focus of this piece is enabling brand owners to conduct audits themselves.  

What is a Trademark Audit?  

A trademark audit is a brand owner’s review of its trademark portfolio, including both registered and “common law” (unregistered) marks, with the ultimate goal of understanding how each of the marks fits into its marketing and brand strategy. Because brand strategy, marketing objectives, and business models change over time, a brand owner should re-examine its trademark portfolio on a regular basis to ensure that its protection strategy is in line with its goals.  

Conducting an Internal Trademark Audit  

Step One: Review and Complete, or Create, a Docket  

A brand owner typically begins an audit by reviewing its “docket” — a list of all trade names, trademarks, and service marks, whether registered or common law, that it owns and information relevant to each mark, such as date of first use and scope of use — or by creating such a list. Dockets often are limited to registered marks or pending applications, but it is wise to include common law marks as well because trademark rights in the U.S. and many other jurisdictions are created by use, not registration; thus, a brand owner might have strong marks even though unregistered and will be able to make registration decisions more easily if it knows when and how such rights were established.  

Step Two: Flesh Out the Docket with Strength and Use Information

Next, in cooperation with the appropriate business contacts, a brand owner reviews each mark to determine whether it is still in use, how it relates to the owner’s goals, and the overall importance of the mark. This is a good time to fill in missing information regarding a mark, such as first use dates and scope of use. Such a review should include:  

  • the products and services in connection with, and regions and countries in, which each mark is used;  
  • whether the brand owner uses the mark (in the form registered, if applicable) and for how long it intends to continue using it (keeping in mind that in many countries a trademark registration for an unused mark is vulnerable to cancellation);  
  • the expenditures for advertising and promotion of goods or services under each mark;  
  • the revenue generated by goods or services offered under each mark, both total and broken down by country and region, if possible;  
  • whether the mark is licensed to others; and  
  • whether the mark is likely to be infringed upon (this often depends on the type of product and whether there have been infringements in the past) or if other threats to the mark are likely (such as claims of “genericide,” i.e., the mark has become the generic term for the product).  

A brand owner should take this opportunity to compare the actual use information with the registered mark information to see whether any significant uses are not covered by registrations. For those expansions and each common law or unregistered mark, it is helpful to consider registered marks that could block an application for the mark if one were filed and whether any time pressures are related to those registrations (such as registrations that will shortly become incontestable and potentially block registration long term). In the U.S., a brand owner with a basic understanding of the likelihood of confusion factors can search using the search engine on www.uspto.gov.  

Use and strength information that is gathered during an audit can be useful in establishing rights if the mark needs to be enforced or defended. It tends to be most cost effective to develop a picture of the strength of a mark — the breadth of its public recognition — as that strength develops, rather than attempting to recreate the information after an issue has arisen, when time is short and outside counsel have become involved. A brand owner can maintain files on each mark so that demonstrative uses are collected at the time, simplifying the process of responding to office actions, making maintenance filings and demonstrating the strength of a mark when necessary. Moreover, if a brand owner who has failed to maintain such files undergoes staff reductions, important historical information may be lost forever. It is helpful at this stage to ensure that a brand owner’s marketing resources, other business areas and the legal team are on the same page with respect to brand strategy and that communication is flowing freely. Key indications that better training and communication are in order are if intent to use applications commonly are abandoned because the eventual use does not match the application filed initially or if a brand change has been implemented without prior thought given to impact on a trademark portfolio or to the cost of protecting the new brand.

In addition, a brand owner should review its outbound trademark license agreements to determine what other entities are permitted to use its marks, whether the safeguards in the license agreements are adequate, and whether any verbal license agreements exist for which written agreements should be drafted. Inbound licenses should be reviewed for similar issues, such as confirming that the licensed marks are in fact in use and that the scope of use of each mark is within the bounds of the license.  

Step Three: Prioritize Marks Using Tier or Grid System

Once this information is obtained, a brand owner is in a position to analyze which marks are most important to its business, and if it uses or licenses its marks internationally, which countries are most important to its business. For international rights, a brand owner should consider the revenue generated by sales or licensing in each country, but also whether the company intends to expand its operations in each country or into new countries. A brand owner also should keep in mind that in some countries rights are acquired by registration, not use (“first-to-file” countries), unlike the United States’ first-to-use rather than registration model, imposing greater importance on timely registration in the first-to-file countries.  

A U.S. brand owner can create a tiered system for its marks, with the most important marks at the top and then descending into marks of lesser importance. A brand owner with marks in multiple countries could expand the tiers into a grid, with marks on one axis, and countries on the other, with the most important marks and countries falling into one quadrant (perhaps broken into further graduated tiers) and the least important in another, with the other two quadrants containing marks of high importance and countries of low importance, and vice versa. (Of course, it is possible that a mark may be important in one country and not in another.)

see diagram

A brand owner can make a similar grid for domain names (or Twitter names, for example) that relate to each mark using mark variants on one axis and top-level domains (instead of countries) on the other. With a grid system in place, a brand owner can make broad decisions based on the quadrants.  

Step Four: Use the Audit Results to Create a Protection Strategy and Implementation Plan

A brand owner can use the results of the audit to create a protection strategy to simplify decisions regarding allocation of resources based on the newly identified priorities and mark values. For instance, a brand owner might determine that, based on the value of the marks, it will seek registration of marks only in the highest quadrants and perhaps only in the most important countries.  

The implementation plan for that strategy can include applying to register unregistered marks that the audit discloses have become significant, drafting formal trademark licenses if only oral or implied licenses exist, cancelling trademark agreements covering marks that the entity no longer uses, if possible, selling off brands that are no longer useful, and attempting to purchase desired domain names. A brand owner could decide to seek registration, but to abandon applications, for lower priority marks if the Trademark Office issues an office action that is particularly difficult to overcome or if they are opposed. A secondary strategy could be to add a house mark, if possible, to marks refused on the basis of confusion with a prior registration. If funds do not allow for comprehensive registration (for all classes in which mark will be used), a brand owner might consider filing only in the main class so that those searching the Trademark Office database will have a better chance of finding its mark and being deterred from choosing it. For registered marks that are to be maintained, a brand owner should ensure that the ownership information is up to date in the records of the relevant Trademark Office(s), and update those records if necessary. This step avoids potentially expensive refusals if the chain of title becomes clouded or outdated and inaccurate filings are made inadvertently as a result.  

Conclusion  

In difficult economic times, brand owners need sufficient information to manage their resources prudently. They can gather and organize such information themselves by conducting an audit of their trademark and domain name portfolios and then allocating resources based on the priorities as determined by the audit. In the end, a brand owner will have stronger, more focused trademark and domain name portfolios, and will expend resources only where they are needed to further its brand objectives