IP Gets “Modernized” In Stimulus Bill

Embedded within the 5,600-page Consolidated Appropriations Act, 2021 – more commonly known as the $2.3 trillion Coronavirus Relief Stimulus Bill enacted on December 27, 2020 – are significant changes to federal trademark and copyright laws.

Specifically, the Trademark Modernization Act of 2020 (“TM Act”) will change trademark practice in several ways. The TM Act:

• includes a statutory rebuttable presumption of irreparable harm in trademark litigation;

• creates new expungement and reexamination proceedings before the United States Patent and Trademark Office (USPTO) to more efficiently remove unused marks from the registry; and

• enables USPTO examiners to set shorter response times for office actions, which are a common facet of trademark prosecution practice.

For copyright owners, the Copyright Alternative in Small-Claims Enforcement Act of 2020 (“CASE Act”) establishes a new Copyright Claims Board within the United States Copyright Office, to adjudicate disputes valued at $30,000 or less in damages.

Irreparable Harm in Trademark Cases Presumed

Previously the Ninth Circuit Court of Appeals rejected the common law rebuttable presumption of irreparable harm in trademark suits, in light of a 2006 U.S. Supreme Court opinion in a patent case, eBay v. MercExchange, LLC, 547 U.S. 388 (2006).

Federal circuits were divided on whether harm could be presumed or if it needed to be proved and weighed against other factors in the injunction analysis. The TM Act now confirms that a trademark owner is entitled to a rebuttable presumption of irreparable harm when it has shown a likelihood of success of prevailing in a motion for a preliminary injunction or temporary restraining order, or a Lanham Act violation has been found. This lowers the bar for obtaining an injunction for trademark infringement in the Ninth Circuit.

Ex Parte Cancellations

The TM Act creates new ex parte procedures for removing trademark registrations of marks that were not used in U.S. commerce.

Previously third parties with a direct or personal stake in the outcome could only request the cancellation of trademark registration through an inter partes procedure before the Trademark Trial and Appeal Board (TTAB) or district court. Starting December 27, 2021, third parties with or without an interest in the outcome will have the ability to file expedited ex parte proceedings in the Trademark Office requesting cancellation or reexamination of trademark registrations.

With regard to the new ex parte expungement procedure, the new law allows parties to initiate the proceeding at any time following the third-year anniversary date of registration to force the registrant to prove use of the mark and to avoid cancellation of the registration for those goods and services not in use. This procedure will be used most frequently to expunge foreign originating marks (such as those registered by foreign applicants in the U.S. based on the Madrid Protocol).

Alternatively, the new law provides a mechanism to file a petition for the Trademark Office to reexamine a registration on the basis that the mark was not in use in commerce on or in connection with some or all of the goods covered by the registration as of the filing date (if the application was based on use) or the date of filing the Statement of Use (if based on intent-to-use). Under this mechanism, third parties will now be able to request ex parte review of offending registrations through the fifth-year anniversary of the registration.

The primary goal is to combat more quickly and cheaply an increase in foreign applications that either do not require proof of use, use doctored photos to prove use or other fraudulent practices. The new ex parte procedures enable fraudulent or “deadwood” registrations to be removed from the trademark register. Over this next year, the USPTO is required to establish regulations implementing this procedure.

Office Action Response Time

Office Actions are letters from USPTO examiners refusing registration or requesting other conditions and amendments to an application as a condition for approving registration. The Trademark Office will now be able to set response time shorter than the current six-month standard window. The response time could now be set anywhere from 60 days to six months. An applicant will be able to request extensions to a full six-month period for a fee.

Third-Party Evidence

The TM Act confirms the ability of third parties to submit evidence showing that a pending trademark application should be refused. This was already a common practice in the form of a Letter of Protest. The new law formalizes the Letter of Protest process and will require examiners to review the evidence submitted within 2 months. The Director of the USPTO (“Director”) is expected to establish procedures for considering such evidence and gives the Director a final say in the inclusion of such evidence on the record. The Trademark Office will also be able to charge a fee for these types of submissions, in contrast to letters of protest where no fees were previously charged.

Alternative “Small-Claims” Tribunal for Some Copyright Disputes

The CASE Act creates the Copyright Claims Board, a small-claims type of tribunal at the Copyright Office, to decide claims of copyright infringement or abuses of the Digital Millennium Copyright Act (DMCA) takedown procedures.

Proceedings are voluntary; an accused infringer may opt-out within 60 days of a complaint. Such disputes would be heard by a three-person panel of “claims officers” or copyright experts. Infringement awards are capped at $15,000 per infringed work and $30,000 total for all works infringed. Further, parties will be able to remotely participate in the hearing without the requirement of attorney representation.

Protecting Lawful Streaming Act (PLSA)

In addition to the CASE Act, the stimulus bill includes separate legislation that increases penalties for illegal streaming of copyrighted works from a misdemeanor to a felony, punishable by up to 10 years of imprisonment. The purpose of the PLSA is to impose on unauthorized streaming of copyrighted works the same penalty as unlawful reproduction or distribution, and to target large-scale sites that primarily stream unlicensed works without permission for profit and have no other commercially significant purpose.

Conclusion

It is fair to say the TM Act benefits trademark owners, by reducing the evidentiary burden for receiving injunctive relief, and providing expedited procedures to challenge registrations based on foreign registrations with long lists of goods and services that were not required to prove use in commerce. It would also allow trademark owners to more easily seek expungement of registrations that inappropriately claimed use at the time the registration issued when that was not the case.

The CASE Act is similarly driven to protect rights owners by offering an affordable and efficient means to resolve relatively small-scale copyright disputes. But the limited ability to appeal incorrect decisions, uncertainty of how a given panel will apply the law, and separation of powers questions relating to a quasi-judicial tribunal acting within the Copyright Office (part of the legislative branch), are concerns to bear in mind as the Copyright Office, as well as the USPTO, conduct rulemaking proceedings over the next year to implement regulations consistent with the above changes.

Tal Grinblat and Matthew J. Soroky are attorneys in our Intellectual Property Practice Group, and California Bar Certified Specialists in Franchise & Distribution Law.