Over the years, we have written about many trademark-related concepts and many times we have referenced the consequence of “abandonment,” referring to the penalty that a trademark owner may suffer from not adhering to trademark formalities. But what does it mean for a trademark to go abandoned and under what circumstances does it occur?
What Causes Trademark Abandonment
Here is a brief summary of some circumstances under which a trademark may become abandoned by its owner:
- Non-use: If the trademark has not been used in commerce for three consecutive years, it can be considered abandoned. This is often referred to as the “three-year rule.”
- Intentional Abandonment: If the owner explicitly indicates an intention to stop using the trademark, this can also lead to abandonment.
- Failure to Renew: Trademark registrations must be renewed periodically. If the owner fails to file the necessary renewal documents and fees, the trademark registration (but not necessarily the mark itself so long as it is in use) may become abandoned.
- Lack of Enforcement: If the trademark owner fails to enforce their rights against infringers or does not take action against significant misuse, it may lead to abandonment claims.
- Transfer of Ownership: If the trademark is transferred and not used by the new owner, it may become abandoned if it is not used.
- Genericization: If a trademark becomes so generic that it no longer identifies the source of goods or services, it may be deemed abandoned.
- Naked License: If a trademark is licensed without a contractual requirement that the owner supervise the quality of the goods or services provided identified by the mark, the mark may be considered abandoned.
To-Ricos, Ltd. V. Productos Avícolas Del Sur, Inc.
Whether a trademark owner has abandoned its trademark can be the subject of dispute and lead to very contentious litigation. Take for example the recent case of To-Ricos, Ltd. V. Productos Avícolas Del Sur, Inc. in which one party registered a trademark believing that the original owner had abandoned it. Here are the facts:
Productos Avícolas del Sur, Inc. (“PAS”) sold chicken in Puerto Rico under the “Pollo Picú” trademark (“the Mark”). The product was so popular it was referred to as the “Coca-Cola” of chicken in Puerto Rico. But all good things come to an end, and in 2011 when the company ran into financial difficulties, it stopped selling products marked “Pollo Picú”. Five years later, seizing the opportunity and believing the Mark was abandoned, PAS’ competitor, To-Ricos, Ltd. (“To-Ricos”) applied to register the Mark. When PAS opposed To-Ricos’s trademark application, To-Ricos sued PAS in federal district court, seeking a declaratory judgment that it is the rightful owner of the Picú mark. The District Court was not persuaded by PAS’ arguments and granted summary judgment in favor of To-Ricos. Undeterred, PAS appealed the court’s decision to the United States Court of Appeals for the First Circuit.
The Court of Appeals explained the “trademark abandonment framework.” Under case law, only the “bona fide” use of a trademark will establish the right to use it. Token use of a trademark aimed at “reserving” it for future use is not sufficient. Once a trademark owner stops using it in commerce, the owner may lose its trademark rights. Trademark rights are considered “abandoned” if use of the mark is discontinued with, “intent not to resume such use.” Abandoned marks are available to the public for use according to the rules of trademark priority. Should trademark ownership be challenged on grounds that a prior owner never abandoned its trademark, the current owner may establish “a prima facie case of abandonment by showing that the mark has not been used for three consecutive years.” The Appellate court referred to the three-year period as the “statutory period.” As we shall see, the “statutory period” is central to understanding the Court’s opinion. To rebut a presumption of abandonment, “The prior owner [PAS] must produce evidence that, within the statutory period, it either used the mark or held an intent to resume the use of the mark in the reasonably foreseeable future.”
PAS contended that it only stopped using its trademark when it was overcome with financial insecurity and litigation with its bank. It also asserted that it presented evidence of its intent to resume use of the mark. The Court of Appeals was not persuaded by PAS’ argument that it’s financial insecurity and bank litigation comprised “excusable neglect.” The Court held that a trademark owner may indeed assert that events beyond its control forced it to temporarily withdraw from the market; however, such excusable neglect must occur within the statutory three-year period.
Indeed, the statute is agnostic about the reason for the mark’s hibernation. What matters, for the purpose of establishing prima facie case, is whether the mark was in use or not.
As to its evidence of “excusable nonuse”, the prior owner must produce evidence of its intent to use the mark within a “reasonably foreseeable future.” Such evidence, however, must be produced to demonstrate that the intent to use the mark occurs within the three-year statutory period.
If the law were otherwise, a mark owner would be free to indefinitely warehouse unused trademarks so long as that proprietor could provide some excuse for the mark’s nonuse.
The Court of Appeals examined each piece of evidence offered by PAS to support its intent to use the mark. If you are interested, we urge you to examine the opinion in more detail than space permits here.
Thus, the Court of the Appeals First Circuit affirmed the district court and held that To-Ricos had established its primae facie case that PAS had abandoned the Picú trademark three years after it stopped using the trademark. Clearly, the Mark was deemed by PAS to be a valuable asset but once it stopped using it, the clock began to run. Could have it avoided these consequences? Certainly, if it used the mark before expiration of the statutory period with an intent to continue using it. Without the financial resources, it may have been a losing proposition.
The lesson of the case is don’t stop using your trademark and if business issues intercede, consult a trademark attorney.
— Adam G. Garson, Esq.