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Seniority: Are You Sure You Can Prove You’re the Prior User for Common Law Rights?

August 21, 2017Basic Trademark Matters

Old Man on a Scooter. Can you prove seniority under common law?

This is the fourth post on proving common law trademark rights. In order to prove common law rights, you need to establish (1) seniority, (2) market penetration, and (3) natural zone of expansion. Some courts also let you use reputation theory instead of market penetration. All these topics have been covered except seniority.

For some reason, I didn’t start this series of posts with seniority. But now I’m circling back to the beginning and addressing seniority. It’s the first thing you need to establish to prove common law rights. But what does it take to establish seniority?

Seniority Requires Sufficiently Public Use

Anyone familiar with trademark law knows that, in order to own a trademark, a party must have priority of use. Hanginout, Inc. v. Google, Inc., 54 F. Supp. 3d 1109, 1119 (S.D. Cal. 2014). This means that the party claiming ownership must have been the first to actually use the mark in the sale of goods or services. Id.

Section 1127 of the Lanham Act defines use in commerce:

The term “use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this chapter, a mark shall be deemed to be in use in commerce

(1) on goods when—

(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.

15 U.S.C. § 1127. The Ninth Circuit has interpreted § 1127 as requiring an element of use and an element of display. Chance v. Pac-Tel Teletrac Inc., 242 F.3d 1151, 1159 (9th Cir. 2001) ( "For both goods and services, the 'use in commerce' requirement includes (1) an element of actual use, and (2) an element of display.").

Priority Through Sales of Goods and Services

Of course, the traditional way to establish seniority is to actually sell the good or service under the trademark. Even that isn’t always as simple as it sounds because federal courts do not have a uniform opinion on what sales suffice to establish seniority.

Some courts hold that a single sale or small quantity of sales is sufficient. McCarthy § 16.6. Others hold that de minimis amounts of sales are not sufficient. Id.

And there is also the inquiry into the quality of those sales and whether there has been continuous use. Id. at § 16.7. Sales that are not bona fide sales or “token sales” don’t count. The use also has to have continued to the present. Id. at § 16.9.

Therefore, while bona fide actual sales of goods or services under the mark are usually sufficient to constitute use in commerce and establish seniority, that’s not always the case. If you are litigating in a court that doesn’t recognize de minimis sales or if your sales are not bona fide or if you didn’t follow up with more sales, those sales can be held insufficient to establish priority.

Another wrinkle is that seniority does not require evidence of actual sales of goods or services under the mark. Hanginout, 54 F. Supp. 3d at 1119. But it does require that the use of the mark be sufficiently public so that the public identifies the trademark with the user. Id.

Sufficiently Public Use Is Determined by the Totality of the Circumstances

Whether the use is sufficiently public depends on whether the totality of the user’s actions, taken together, establish a right to use the trademark. Id. In other words, it’s determined by the totality of the circumstances. Id.

In determining whether the use of a mark has been sufficiently public to establish priority, a court can consider the genuineness and commercial character of the activity, the determination of whether the mark was sufficiently public to identify or distinguish the marked service in an appropriate segment of the public mind as those of the holder of the mark, the scope of the non-sales activity relative to what would be a commercially reasonable attempt to market the service, the degree of ongoing activity of the holder to conduct the business using the mark, the amount of business transacted, and other similar factors which might distinguish whether a service has actually been rendered in commerce. Chance v. Pac-Tel Teletrac Inc., 242 F.3d 1151, 1159 (9th Cir. 2001).

In this regard, it’s important to not that although a court can consider the mark’s promotion, there must be non-sales activity or use beyond just advertising. It is clear that “mere advertising by itself may not establish priority.” New West Corp. v. NYM Co. of Cal., 595 F.2d 1194, 1200 (9th Cir. 1979).

Examples of Cases Finding Seniority

In Hanginout, the Court found that Hanginout had established priority as of March 2011. The finding was based on the fact that 200 consumers had registered and used Version 1.0 of the Hanginout platform, which was followed up by continuous marketing on LinkedIn, Twitter, and YouTube. Id.

Examples of Cases Not Finding Seniority

In Future Domain, the Northern District of California found that Future Domain had not established seniority because its pre-sales marketing activities were not sufficiently public to create an association between the mark and Future Domain in the public’s mind. Future Domain Corp. v. Trantor Sys. Ltd., 1993 U.S. Dist. LEXIS 9177, *11-25 (N.D. Cal. 1993). The court made this finding despite the fact that Future Domain had promoted its mark at the COMDEX trade show, which included 2,400 people filling out inquiry forms, 200 people requesting Beta releases, distributing 3,500 informational flyers, and distributing 1,000 company brochures. Id.

In Chance, the Ninth Circuit held that “T.A.B.'s mailing of the 35,000 post cards, which generated 128 responses to its 800 number and no sales,” was insufficient to establish priority. Chance, 242 F.3d at 1160.

The Last Word

The last word here will strike a familiar chord. It echoes my final thoughts in the prior three posts on proving common law rights. You are leaving too much to chance if you do not at least try to obtain a federal trademark registration.

Common law trademark rights are a crapshoot. I’ve shown you that every step of the way from market penetration to natural zone of expansion to reputation theory and now to where it all begins, seniority. Each step is rife with hurdles and uncertainty.

In the absence of bona fide commercial sales of goods or services under the trademark, priority will be determined by a totality of the circumstances on a case-by-case basis. So unless your evidence of use is extremely robust, you will be left guessing as to whether you will have enough to establish seniority as a threshold matter.

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