The U.S. Patent and Trademark Office (“USPTO”) has proposed a rule change that would enable it to conduct random audits of affidavits or declarations of use filed under sections 8 and 71 of the Trademark Act as a permanent extension of the pilot program. See Federal Register, Vol. 81, No. 120 (Wednesday, June 22, 2016) (the “Proposed Rule”).
U.S. trademark owners are required to file affidavits of use and a specimen proving use for each class between the fifth and sixth year of registration and before every tenth year of registration pursuant to section 8 of the Trademark Act and section 71 for Madrid applications.
USPTO audits affidavits
The proposed rule comes in the wake of the USPTO’s two-year pilot program during which the USPTO randomly audited 500 registrations with recently filed affidavits averring use. In addition to the usual specimen submitted for each class of goods or services, the USPTO asked registration owners to submit proof of use of their marks for two additional goods or services per class selected at random by the USPTO.
During the two-year pilot program, the USPTO found that 51% of the audited registration owners were unable to satisfy these additional proof requirements. The USPTO cancelled 16% of the audited registrations in their entirety because the registration owners failed to respond to the request for additional proof or any other issues raised during the examination of the original affidavit. In addition, 35% of the audited registration owners requested that some of the goods or services be deleted from their registration.
The Proposed Rule
In its recent rule proposal for an increase in trademark filing fees, the USPTO alluded to a need for enhanced scrutiny of affidavits of use as a result of the pilot program, in order to maintain the integrity of the Principal Register and clear the register of unused marks. The Proposed Rule would grant the USPTO broad authority to “require the owner to furnish such information, exhibits, affidavits, or declarations, and such additional specimens as may be reasonably necessary to the proper examination of the affidavit or declaration . . . or for the Office to assess and promote the accuracy and integrity of the register.”
Although not explicitly provided for in the Proposed Rule amendment, the Federal Register notice states that the USPTO plans to implement a permanent version of the pilot program auditing up to 10% of the section 8 and 71 affidavits filed each year. In Fiscal Year 2015, approximately 147,497 section 8 and 5,000 section 71 affidavits were filed with the USPTO. In other words, the USPTO could audit over 15,000 affidavits of use in one year.
The USPTO would issue the audit request in the form of an Office Action, and registration owners would need to respond within six months or before the end of the statutory filing period, whichever date is later. If the registration owner cannot provide the requested proof, the USPTO will delete the goods or services in question from the registration. If no response is filed, the USPTO will cancel the registration in its entirety unless the registration is still within the six-month grace period. With time remaining in the grace period, the registration owner will be allowed to submit a new affidavit with a new filing fee and grace-period surcharge. Otherwise, the USPTO anticipates that the only added cost to registration owners will be no more than an additional hour of preparation for the approximately two-thirds of registration owners represented by trademark counsel.
As we previously wrote, the USPTO has proposed increasing fees, including several fees described above. Under the USPTO’s proposal, the affidavit of use fees would increase from $100 to $150 for affidavits filed electronically through the TEAS system, and would increase from $100 to $250 for those affidavits filed on paper. The grace period surcharge would increase from $100 to $200. The fee for correcting deficiencies in an affidavit would increase from $100 to $200.
Although the USPTO stated that notice and opportunity for public comment was not required, “the USPTO has chosen to seek public comment before implementing the rule.” Comments to the Proposed Rule can be submitted via email to TMFRNotices@uspto.gov and viewed for public inspection on the USPTO’s website at www.uspto.gov or the Federal eRulemaking Portal. The period for public comment closes on August 22, 2016.
If the new rule goes into effect, trademark owners may want to consider creating a document repository with multiple examples of ongoing trademark use for all of the goods and services covered by a registration. This evidence library should be routinely updated and will be a helpful resource when maintenance filings come due or in the event a registration is selected for auditing.
The audit program is also a good reminder of the difference between the U.S.’s use-based trademark system and trademark regimes in other countries which do not require use. Madrid applicants may need to cull the list of goods and services claimed in U.S. extensions, and applicants should take care to heed the requirement of having a bona fide intention to use the mark. Lastly, where a U.S. application or registration has been used as a springboard for international Madrid extensions, brand owners should be cognizant of the vulnerability to cancellation if the U.S. registration is cancelled during the first five years of the International Registration.