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Significant 2019 Trademark Developments

February 27, 2020

In the past calendar year, we saw several significant decisions from the Supreme Court pertaining to trademarks.

In Iancu v. Brunetti, 139 S. Ct. 2294, the Supreme Court took another step in dismantling the prohibitions on registration found in Section 2(a) of the Lanham Act by ruling that a ban on "immoral" or "scandalous" trademarks violated the First Amendment of the U.S. Constitution. This decision followed on the heels of the Court's 2017 decision in Matal v. Tam, 137 S. Ct. 1744, that the Lanham Act's prohibition on the registration of "disparaging" trademarks violated the First Amendment. In reaching its decision in Brunetti, the Court rejected the argument that "immoral" or "scandalous" marks differed from the "disparaging" marks of the Tam decision because "disparaging" marks express a viewpoint whereas "immoral" or "scandalous" marks do not express a viewpoint but should be prohibited due to content. The Court rejected that argument noting that because the Lanham Act "allows registration of marks when their messages accord with, but not when their messages defy, society's sense of decency or propriety..." the rejection of "immoral" or "scandalous" marks amounts to unconstitutional "viewpoint-discriminatory application." Thus, the Court found the statutory provision in question to be unconstitutional.

Following the Brunetti decision, the U.S. Patent and Trademark Office (USPTO) issued Examination Guideline 2-19, which provides that "immoral" or "scandalous" matter within a mark is no longer a valid ground on which to refuse registration or cancel a registration. Consequently, trademarks previously considered "disparaging," "immoral" or "scandalous" may now be registered in the United States if other statutory conditions are met.

In Peter v. NantKwest, Inc.,__S. Ct.__, (Supreme Court 2019), the Supreme Court preserved the so-called "American Rule" that litigants pay their own attorney's fees. This case arose out of the USPTO's attempt to recoup its legal fees in appeals taken to the United States District Court; the USPTO argued that "expenses" specified in § 145 of the Patent Statute included the salaries of attorney employees and paralegals. Thus, the USPTO argued it was to be awarded legal fees irrespective of whether it won the appeal. The Supreme Court rejected this interpretation, saying that Section 145 "[d]oes not overcome the American rule's presumption against fee shifting..." Although this was a patent case, the decision applies equally to appeals from decisions of the Trademark Trial and Appeal Board (TTAB) by way of civil action in a United States District Court pursuant to Lanham Act § 21 (b)(1) and allocation of expenses against the party bring the case per Lanham Act §21(b)(3). As a result, parties should not be dissuaded from seeking review of adverse decisions of the TTAB by way of a civil action by the specter of having the USPTO's legal fees awarded against them.

In addition to the foregoing Supreme Court decisions, we saw an important rule change affecting foreign domiciled applicants and registrants.

On July 2, 2019, the USPTO took a significant step in curtailing the flood of improper applications from outside the United States by issuing a final rule that requires foreign-domiciled applicants, registrants and parties to be represented by a licensed U.S. attorney. The determination of "foreign-domiciled," "licensed U.S. attorney" and certain exceptions to the rule are set forth in Examination Guide 4-19 (Revised).

In a nutshell, the licensed U.S. attorney must be an active member in good standing of the bar of the highest court of a state in the U.S. and, in practice, is required to provide his/her bar information. In fact, amended Rule 2.17(b)(3) requires bar information for attorneys in all trademark filings. The final rule also removed reciprocal recognition of foreign patent agents and attorneys to practice in trademark cases before the USPTO. Only Canadian attorneys and agents have been reciprocally recognized to represent Canadian domiciled parties, but now such party must additionally have a U.S. representative. Just recently, the TTAB enforced the new rule in Cloudworks Consulting Services Inc. v. Ongoing Operations, LLC, Cancellation No. 92073144 (TTAB, February 21, 2020). In a precedential order, the TTAB noted that a reciprocally recognized attorney or agent may appear as an additionally appointed practitioner, but a qualified U.S. attorney must be appointed the party's representative.

For determining whether or not an applicant/registrant is domiciled within or outside the United States, the USPTO will look at the party's street address - note a post office box, c/o address or other similar variation is generally not acceptable and will be questioned as to whether it is the correct address for determining the domicile requirement.

One should carefully review the Examination Guide 4-19 (Revised) for further information on this important rule change.

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