In addition to COVID-19 relief and government funding, December’s Consolidated Appropriations Act of 2021 (H.R. 133), also included legislation creating new tools for intellectual property owners to add to their arsenals.
The first, the Trademark Modernization Act of 2020, creates new procedures to challenge trademark applications that should have never been allowed to register. The Act is intended to help declutter the trademark register from fraudulent registrations and increase the number of available marks for applicants seeking to register, and is a response to the growing number of fraudulent applications being filed by foreign entities. Most important from a trademark enforcement perspective is the creation of a statutory presumption of irreparable harm, which revived the presumption trademark owners enjoyed for many years, until it was overturned by the U.S. Supreme Court’s ruling in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).
The second new statute is the Copyright Alternative in Small-Claims Enforcement Act, which creates an administrative tribunal within the U.S. Copyright Office to streamline the adjudication of small copyright disputes. This alternative forum will potentially provide a new avenue for copyright owners to protect and enforce their rights, and may increase the number of copyright infringement claims that are actually resolved, given the relatively low filing fees, limited discovery, and expedited timeline. The creation of this “small claims court” is expected to deter copyright infringers, although some worry that it will encourage copyright trolling.
Trademark Modernization Act (“TMA”)
With the goal of improving and strengthening the federal trademark register, the TMA institutes new procedures to protect consumers from confusion and prevent fraudulent registrations from making it to the federal register. As noted, the TMA also restores the presumption of irreparable harm in trademark infringement cases, an important weapon in a trademark owner’s arsenal against infringers.
1. Presumption of irreparable harm: trademark owners seeking to stop infringement will no longer be required to prove irreparable harm in order to obtain injunctions or temporary restraining orders upon a finding of infringement or a likelihood of success on the merits. The burden of proof will now be on the defendant to show that their continued use of the mark at issue will not lead to consumers being confused about the source of the goods or services. This is a shift from the standard applied in other areas of the law, which require a plaintiff to prove irreparable harm in order to obtain an injunction. Not only does the new presumption reduce the cost of litigation (especially because litigation often settles after a preliminary injunction ruling), it also effectively shortens the time necessary for a trademark owner to obtain relief from infringement.
2. New avenues to challenge registered trademarks: even though the USPTO has struggled to keep fraudulent applications away from the register, in order to cancel a fraudulent trademark registration, an applicant currently has to go through a costly and time-consuming procedure before the Trademark Trial and Appeal Board, or embark on federal litigation. In an effort to unclutter the trademark register and increase the number of viable marks available for legitimate business owners, the TMA creates two potentially more cost-effective proceedings aimed at expediting the cancellation of fraudulent registrations. It also allows the USPTO Director to initiate either of these procedures on its own initiative.
a. Removal (expungement): if a registered trademark has never been used in commerce, a petitioner can ask the USPTO to cancel the registration if it has been on the register for three to ten years. If the USPTO finds that the petitioner, after making a “reasonable investigation,” has shown that the mark was never used in commerce, it can require the trademark owner to prove use. If the trademark owner cannot show use, the USPTO will either cancel the registration in its entirety, or remove the goods or services for which evidence of use was not available.
b. Reexamination: if a registered trademark was not used on or before the “relevant date” (i.e., the initial filing date or the date a Statement of Use was filed), a petitioner can ask the USPTO to cancel the registration within five years after the mark was registered. As in the removal proceeding, if the USPTO finds that the petitioner, after a “reasonable investigation,” has made a prima facie showing, it can require the trademark owner to prove use on or before the “relevant date,” and cancel the registration in its entirety, or remove some goods or services, if no use can be shown.
3. Third-party evidence: the TMA codifies a little-known USPTO practice (called Letter of Protest) that allows third parties to step into the Trademark Examining Attorney’s shoes by submitting evidence on the registrability of a pending application, if the third party believes that there are relevant legal grounds for refusing that mark a place in the register, such as their own prior use. The USPTO Director’s decision of whether to allow such evidence into the application record will be final and non-reviewable, but the low fee charged to interested parties ($50) will surely incentivize anyone who believes that an application should not be allowed to register to step forward.
4. Shortened trademark registration periods: the TMA allows Trademark Examining Attorneys to reduce the time applicants have to respond to preliminary rejections from the current standard of 6 months, to as little as 60 days. Although applicants will have the option to pay a fee in order to get the full 6-month period for filing their answer, this change is intended to shorten the overall trademark registration process. Of course, a client can always choose to file a response sooner, so it is unclear how effective this option will be in shortening the process, and could add additional cost for Applicants that may need the full 6-month period for various reasons.
Except for the presumption of irreparable harm, which is effective immediately, these provisions will not take effect until December 27, 2021. The Act gives the USPTO one year to regulate and implement these changes.
Copyright Alternative in Small-Claims Enforcement Act (“CASE”)
The newly-created Copyrights Claim Board (“CCB”) will have three members and jurisdiction over copyright infringement matters that do not exceed $30,000 in claims. The CCB will have authority to adjudicate claims related to copyright infringement, declarations of non-infringement, claims for failure to remove or disable access to infringing content after DMCA procedures, misrepresentations in connection with DMCA notifications of infringement, counterclaims arising out of DMCA representations, and defenses to copyright infringement claims or counterclaims, including first sale, fair use, and express or implied license.
Copyright owners may voluntarily submit their claim to the CCB without attorney representation or decide to sue in federal court, and alleged infringers will have the option to opt-out of proceedings before the CCB, forcing the copyright holder to sue in federal court. However, the Act encourages infringers to stay in the CCB by capping potential awards to $15,000 for a single infringement, and $30,000 for multiple infringements. No such caps exist in federal court, where a plaintiff may be awarded up to $150,000 in statutory damages per work infringed, with no limit on multiple infringements. The Copyright Office has until December 27, 2021 to establish and implement regulations for CCB proceedings.
We can see the potential benefits to intellectual property owners from the new mechanisms created by the TMA and the CASE Act, but how much of an overall impact they will have on intellectual property protection remains to be seen. The potential impact from the change in the presumption of irreparable harm in trademark infringement cases will be harder to measure. But to the extent it increases the chances (and reduces the cost) of obtaining preliminary injunctions in trademark disputes, it adds needed teeth to trademark owners’ suits against infringers.
