Can a Common Law Trademark Owner Defend Against a Federally Registered Trademark?

DEREK FAHEY, ESQ.

Several potential clients have asked me questions regarding their trademark rights similar to the following: “I have been selling goods under my trademark for several years. I never registered my trademark. Another business sent me a cease-and-desist letter stating that my use of my unregistered trademark infringes on their registered trademark rights. What do I do?” I hear this question quite often. The answer depends on several factors. However, this article focuses on defenses that an unregistered trademark owner may have under Section 33(b)(5) of the Trademark Act, also known as the Lanham Act. 15 U.S.C. §§ 1065, 1115(b)(5).

I. Common Law Trademark Rights and the First-User Principle

As an initial matter, it is a bedrock principle of service mark and trademark law that the first user of a service mark or trademark generally acquires rights in the mark if conflicts arise with rival claimants. For purposes of this article, I will use the word “mark” to refer collectively to service marks and trademarks. Once basic rights in a mark are acquired through use, a business may supplement or extend those rights through federal registration of the trademark. Registration of a mark with the United States Patent and Trademark Office provides several advantages, which are beyond the scope of this article. However, an unregistered mark may still have rights under common law trademark law. This distinction is particularly important when a business that has used an unregistered mark receives a cease and desist letter from the owner of a federal trademark registration.

II. The Section 33(b)(5) Defense for Common Law Trademark Owners

Section 33(b)(5) addresses a defense that may be available to a qualifying common law trademark owner. Section 33(b)(5) of the Lanham Act states the following:

“(5) That the mark whose use by a party is charged as an infringement was adopted without knowledge of the registrant’s prior use and has been continuously used by such party or those in privity with him from a date prior to (A) the date of constructive use of the mark established pursuant to section 1057(c) of this title, (B) the registration of the mark under this chapter if the application for registration is filed before the effective date of the Trademark Law Revision Act of 1988, or (C) publication of the registered mark under subsection (c) of section 1062 of this title: Provided, however, That this defense or defect shall apply only for the area in which such continuous prior use is proved;”

In practical terms, Section 33(b)(5) may provide a defense for a defendant or accused infringer that adopted and continuously used a mark without knowledge of the registrant’s prior use and otherwise satisfies the statutory requirements. Importantly, the defense is geographically limited to the area in which the accused infringer can establish continuous prior use.

III. How Section 33(b)(5) May Apply

The following example helps illustrate how these principles may apply. Company A begins using a mark in one geographic area. Company B then begins using the same mark in a different geographic area in good faith and without knowledge of Company A’s use. Both Company A and Company B may acquire common law rights to the mark in their respective territories. Company A subsequently applies for and obtains a federal registration for the mark.

Under Section 33(b)(5), B may retain rights in the territory in which Company B can establish the required prior continuous use. The timing of the parties’ respective uses and A’s federal trademark application therefore becomes important in determining the scope of B’s rights.

IV. The Geographic Limits of Common Law Trademark Rights

Section 33(b)(5) can be very helpful to owners of unregistered marks, but its geographic limitation has significant practical consequences. In the example above, Company A’s federal registration can have the practical effect of freezing the geographic scope of Company B’s common law trademark rights, thereby restricting Company B’s ability to expand its use of the mark beyond the territory in which it established the requisite prior use.

This limitation is particularly important for businesses that intend to expand into new geographic markets. A business may have enforceable common law rights in the territory where it has established trademark rights through use, yet those rights may not provide the same ability to expand geographically as rights associated with a federal registration.

V. Why Federal Trademark Registration Can Be Beneficial

The limitations associated with common law trademark rights also demonstrate why federal trademark registration can be beneficial. Although federal registration is not legally required to acquire all trademark rights, relying exclusively on common law rights may leave a business with rights that are geographically limited. As the example above illustrates, another party’s federal registration may significantly affect the common law user’s ability to expand its use of the mark into new geographic areas.

For this reason, businesses should consider federal trademark registration as part of a broader brand-protection strategy. This consideration can be particularly important for businesses that anticipate expanding their operations, selling goods or services in additional markets, or otherwise increasing the geographic scope of their activities. Addressing trademark protection early in the development of a brand may help a business avoid some of the limitations that can arise when it relies solely on common law trademark rights.

VI. What Should a Common Law Trademark Owner Consider?

A business should not assume that the absence of a federal trademark registration means that it has no trademark rights. At the same time, a business should not assume that prior use of an unregistered mark necessarily gives it unrestricted rights to continue or expand that use.

When a common law trademark owner receives a cease and desist letter from a federal registrant, the particular facts matter. Among other considerations, the dates of first use, the parties’ respective geographic territories, the continuity of use, and the common law owner’s knowledge of the other party’s use may be important in evaluating whether Section 33(b)(5) applies and the geographic scope of any defense.

Accordingly, receiving a cease and desist letter based on a federal trademark registration does not necessarily mean that a prior common law user has no rights. The existence and scope of those rights should be evaluated based on the particular facts and applicable trademark law.

The trademark attorneys at The Plus IP Firm have advised numerous clients regarding their common law and registered trademark rights. If you have questions regarding your trademark rights, including questions concerning the use of a trademark on the internet or a dispute between common law and federally registered trademark rights, the attorneys at The Plus IP Firm are available to discuss those issues with you.