When is a Trademark Abandoned?

In today’s economy many companies are going out of business.  What happens to the trademarks of a failed company—when are they abandoned?  Can abandoned trademarks be adopted and used by a competitor? 

 The beginning point for answering these questions is the Lanham Act, and particularly 15 USC §1127.  A mark is deemed “abandoned” when “[i]ts use has been discontinued with intent not to resume such use.”

 The landmark case re: trademark abandonment is Saxlehner v. Eisner Mendelson Co., decided by the US Supreme Court in 1900.  US Trademark laws of abandonment, codified in 1987 in the above-referenced statute (15 USC §1127) largely adopted rules of the Saxlehner decision.

 What establishes discontinuation with “an intent not to resume use?

 For the purposes of abandonment, the Lanham Act defines “use” as “the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.”

 The Lanham Act directs that “[i]ntent not to resume [use] may be inferred from circumstances.” Id. Such an intent cannot be far-flung or indefinite; rather there must be an intent “to resume use within the reasonably foreseeable future,”  Note, however, the 9^th Circuit case Grocery Outlet, Inc. v. Albertson’s, Inc. (["i]ntent to resume use of the … mark within the reasonably foreseeable future during the short period of alleged nonuse” prevented the mark from being abandoned. “)

 Under the Lanham Act, nonuse of a mark for 3 consecutive years shall be prima facie evidence of abandonment.  Nonuse for 3 consecutive years creates a rebuttable presumption of intent not to resume use.   See, e.g., a 2008 case from the 11^th Circuit Court of Appeals, Natural Answers, Inc. v. SmithKline Beecham Corp. 

 In Natural Answers, the trademark defendant had not used its mark in commerce for well over three years and, thus, SmithKline had the benefit of the rebuttable presumption that Natural Answers did not have intent to resume its use. The burden of production, although not the ultimate burden of persuasion, then shifted to Natural Answers “to produce evidence that [it] either used the mark during the statutory period or intended to resume use.”  

 In today’s Internet age, use or non-use of an Internet website can be powerful evidence of use in commerce, or the lack thereof. 

 What happens when two competitors attempt to use an abandoned mark—who has priority?

 This question was addressed by the 9^th Circuit Court in a 1984 case, California Cedar Products v. Pine Mountain Corp.  The 9^th Circuit Court found the question of competing claims to an abandoned trademark easy to answer: which company first used the abandoned mark in commerce?

 The 9^th Circuit Court explained (with concurrence of both parties): “the first party to use an abandoned trademark in a commercially meaningful way after its abandonment is entitled to exclusive ownership and use of that trademark and trade dress.

 The “first party to use” an abandoned trademark is an issue of fact determined in the same way that first commercial use is established in the trademark application process.

 Abandoned marks present an opportunity for companies still in business—and a challenge for their counsel to navigate the abandonment issues carefully and accurately.