Use in Commerce - Basic Requirement for Trademark Rights and Registration

There must be Use in Commerce

A trademark (word, name, symbol, sound, or design) is a source identifier for goods and/or services that are provided in connection with the mark. The trademark serves to indicate to the consumer the likely quality and character of the goods or services based on the reputation the trademark owner has built in the marketplace. For example, everyone recognizes that the Nike company makes athletic shoes of a high quality, and consumers expect to get a certain level of quality from a pair of shoes marked with the word NIKE. This reputation is built through the use of the NIKE trademark in connection with its quality products. But when does trademark protection begin?  It is common misconception that one can protect a word, phrase, and/or graphic as a trademark or service mark once it is created.  Under US trademark law, trademark protection does not begin until a mark is “used in commerce”. The Nike company was not able to register its NIKE trademark for use on shoes until it actually began selling shoes to consumers. Trademarks protect both the consumer looking for reliable goods and services and the trademark owner’s business and reputation that it has built through the provision of quality goods or services.

What does "Use in Commerce" mean?

Use in commerce is defined as a mark placed on goods (e.g., on the container, label, tag, packaging, or point of sale display) or presented in connection with services (e.g., on business cards, advertisements, and websites) that are sold or transported in interstate commerce.  Interstate commerce, in this sense, means anything Congress can lawfully regulate.  Generally, this means commerce across state lines and commerce between the US and a foreign market, or with a substantial connection to interstate commerce that is more than nominal.  Solely intrastate commerce does not qualify as “use in commerce” under the Lanham Act (the Federal Trademark Act) and such marks cannot be registered with the USPTO.  A local nail salon, grocery store, or the like probably does not use its service mark in interstate commerce.  However, if an intrastate business affects commerce that Congress can regulate, it would qualify as “interstate commerce” under the Lanham Act.  An example of such a business would be a local travel agency that is booking interstate and/or international travel.  It should be noted that intrastate commercial activity does result in common law trademark rights in the geographic area where the business’s goods are sold and/or services are provided.

In order to demonstrate that transactions constitute uses in commerce, the mark must already be present on the goods or in association with the offered services when they are sold or transported to the public.  It cannot be placed on the good or associated with the service after the sale or swapped out with another mark after the purchase but before the delivery.

There Must be a Legitimate Sale

Use in interstate commerce requires an actual sale: typically an exchange of money for a good or service.  This means members of the public must be exposed to the mark and choose to purchase the good or service offered under the trademark based on their own choice.  Advertising alone is not sufficient. Also, the good or service must actually be available for sale and delivery to the customer.

A Sham Transaction Doesn't Count

A sham transaction refers to a transaction crafted solely for the purpose of creating the appearance of genuine sale of a a good or service in connection with the trademark. For example, a trademark owner requests that a friend or employee purchase a newly offered good to establish a sale. In other words, the sale is not a bona fide commercial transaction, even though money has been paid for the good. For a use to be considered "in interstate commerce" US Trademark Law, it must be a legitimate use of the mark in the ordinary course of trade, and not merely to reserve rights in the mark. The United States Patent and Trademark Office (USPTO) and courts look for actual sales of goods or services under the mark to real customers, where the transaction is indicative legitimate commercial activity. It is contrary to the purpose of trademarks to allow ownership rights in a trademark to a party or business that does not legitimately use the mark in connection with goods or services. A sham sale or transaction is usually done to create inauthentic documentation of a sale to circumvent the legal requirements register a trademark with the USPTO. Such actions are scrutinized and often dismissed as attempts to unjustly reserve trademark rights without engaging in real commercial activities. This principle ensures that trademark protection is granted only to marks that are truly used to facilitate commerce and consumer recognition in the marketplace.

Advertising Goods and Services Under a Trademark is not Enough

Advertising, though it exposes the public to the good, without the ability to perform a sale does not constitute use in commerce.  This applies to television or radio commercials, paper or billboard advertisements, and online ads and websites.  If a website simply displays and advertises a good or service without presenting an ability to purchase it, the trademark is not considered to be used in interstate commerce.  Also, an internal distribution between a manufacturer and regional managers or a distributor is not a sale or use in commerce.  The goods must be presented for public use to potential wholesale or retail customers.

The Goods and Services Must Exist and Be Deliverable

Also, the good or service must be in existence when it is sold. The trademark will not be considered used in commerce until the good physically exists or the service is actually available.  The mark needs to identify or distinguish the goods from others’ goods.

Use in Commerce - Transportation

The other way goods are used in commerce is through transportation.  Transportation also requires the goods to be available for public use.  Therefore, in-house experimentation, evaluation or preparation do not constitute bona fide shipments to satisfy the public use requirement.  However, if the good is shipped to individuals or groups outside the company, e.g., sending a new drug to clinical investigators, this may constitute transportation use in commerce.

The USPTO may allow businesses distributing promotional gifts, free services, or free samples a registration of their trademark.  However, any giveaways will usually need to be connected to selling the good or service in the future.  Additionally, they may allow goods transported for a sale presentation to potential customers to qualify as use in commerce.  Typically, any imported or exported goods will meet the use in commerce requirement.   No matter how the goods are transported or what type of goods they are, the mark owner must authorize any transportation through interstate commerce.

Intent-to-Use Trademark Applications

An intent-to-use (ITU) trademark application under Section 1(b) of the Lanham Act allows an entity to apply for trademark registration before it has actually begun using the trademark in commerce. An ITU application serves specific purposes and has distinct requirements.

Purposes of an Intent-to-Use Trademark Application

  1. Securing Rights Early: The primary purpose of an ITU application is to allow an applicant to establish rights in a trademark before actual use in commerce has commenced. This can be crucial in securing a priority date for the use of the mark, which can be important, e.g., in the event of a dispute with another party over the use of a similar mark.
  2. Market Planning: It provides the trademark applicant secure a filing date with the USPTO prior to using mark, allowing the applicant time to develop, produce, and market the goods or services associated with the mark. This period allows for the planning and execution of business strategies without losing the trademark rights to a competitor.
  3. Legal Protection: Filing an ITU application reserves the mark in the U.S. Patent and Trademark Office (USPTO) database, which can deter other parties from using a confusingly similar mark in the meantime and provides a legal basis to oppose potentially conflicting trademark applications.

Requirements of an Intent-to-Use Trademark Application

  1. Bona Fide Intent: The applicant must have a bona fide intention to use the trademark in commerce. This means there must be a genuine plan to use the mark in the course of trade, which can be demonstrated through business plans, manufacturing activities, marketing efforts, or other preparatory steps.
  2. Description of Goods/Services: The application must clearly identify and describe the goods or services with which the mark will be used. This description should be specific enough to determine the exact nature of the goods or services but broad enough to cover all intended uses under the mark.
  3. Specimen Submission: While the initial ITU application does not require a specimen of use (a sample showing how the mark is used in commerce), the applicant must submit a specimen before the registration can be finalized, once the mark is actually in use.
  4. Statement of Use: After filing an ITU application, and once the mark is in use, the applicant must file a Statement of Use (SOU) with the USPTO, along with the required fee and a specimen showing the use of the mark in commerce. This must be filed within a certain period after the USPTO issues a Notice of Allowance, typically six months, which can be extended for additional six-month periods up to a total of 36 months.

An ITU application is a strategic tool for securing trademark rights in the United States and requires careful planning and timely action to move from an intent-to-use basis to actual use in commerce to achieve registration.

Summary of Use in Commerce

A trademark must be used in at least one commercial transaction in order to generate trademark rights and justify a federal registration for the trademark.  This requires the good or service to be available to the public and exist at the time of sale.  Advertising alone will usually not meet the use in commerce requirement.  An online website must have the capability of selling the good or service on the webpage.  Any transportation of a good or service must be for the purpose of selling the product and the goods and services must be provided in connection with the trademark.  However, a business or entrepreneur may get some early protection of a trademark by filing an ITU application prior to using the trademark in commerce, if they have a bona fide intent to use the mark in commerce.

© Sierra IP Law, PC – Patents, Trademarks, and Copyrights 2022.  The information provided herein is not intended to be legal advice, but merely conveys general information that may be beneficial to the legal professional community, and should not be viewed as a substitute for legal consultation in a particular case.

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