STATEMENT OF

MICHAEL K. KIRK
EXECUTIVE DIRECTOR
AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION

Before the

SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
COMMITTEE ON THE JUDICIARY
UNITED STATES HOUSE OF REPRESENTATIVES

On

H. R. 1565, the
"TRADEMARK AMENDMENTS ACT OF 1999"

May 5, 1999

Mr. Chairman:

I am pleased to have the opportunity to present the views of the American Intellectual Property Law Association (AIPLA) on H.R. 1565, the "Trademark Amendments Act of 1999."

The AIPLA is a national bar association of nearly 10,000 members engaged in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property.

The AIPLA supports H.R. 1565 which would effect a number of improvements in the protection of trademark assets. Section 2 of the bill, which would empower the Trademark Trial and Appeal Board to refuse the registration, or to cancel the registration, of a mark on the basis of dilution through an opposition or cancellation proceeding, would provide an efficient means for trademark owners to resolve dilution issues. This will benefit both trademark registrants and applicants and will have no impact on the workload of trademark examining attorneys. Section 3 would clarify that the remedies for trademark infringement set forth in the Lanham Act are available in actions brought under the Trademark Dilution Act in cases involving willful dilution. Similar provisions were passed by the House last year in H.R. 1661 and we are pleased to see them contained in H.R. 1565. Section 4 would waive the sovereign immunity of the United States Government and its contractors for trademark infringement and dilution, similar to the waiver of immunity for infringement of other types of intellectual property. While the AIPLA supports Section 5 of the bill, which would place on a party seeking protection of unregistered trade dress the burden of proving that the matter sought to be protected is not functional, we would encourage the Subcommittee to address all of the clarifications contained in H.R. 3163 of the 105th Congress. We believe that bill would have made the registrability and protection of trade dress more efficient both for the applicant and for the examining attorneys in the Patent and Trademark Office (PTO) and would have provided greater certainty and uniformity in the enforcement of trade dress protection. Section 6 corrects an oversight in Public Law 105-330 which amended the Lanham Act to implement the provisions of the Trademark Law Treaty and makes certain technical corrections.

Section 2 of H.R. 1565 would amend the Lanham Act to provide a basis for the Trademark Trial and Appeal Board (TTAB) to refuse the registration of a mark or to cancel the registration of a mark which when used would cause dilution under Section 43(c) of the Lanham Act. Conforming changes would be made in Section 13(a) of the Lanham Act to authorize a person who believes that he or she would be damaged by registration of a diluting mark on the principal register to oppose the registration of the mark and in Section 14 of the Lanham Act to permit such person to file a petition to cancel a registration of a diluting mark. Finally, Section 24 of the Lanham Act would be amended to authorize a person who believes that he or she would be damaged by the registration of a diluting mark on the supplemental register to file a petition for the cancellation of such registration. Of course, nothing in the proposed amendments to Section 2 of the Lanham Act would limit the ability of a court to determine the right to registration under Section 37 of the Lanham Act.

Section 2 of H.R. 1565 addresses a ruling of the TTAB that the Trademark Dilution Act does not authorize a trademark owner to oppose or petition to cancel the registration of a mark on the basis of dilution, Babson Bros. Co. v. Surge Power Corp., 39 USPQ 2d. 1953 (TTAB 1996). The Board also found nothing in the legislative history of the Act that suggested that dilution was intended to provide a basis for opposition or cancellation.

The AIPLA supports Section 2 of H.R. 1565. It would allow the issue of dilution to be addressed much earlier in the process, especially in the case of an intent-to-use application, than is possible under the Babson decision. It is illogical to withhold relief from a trademark owner against the registration of a diluting mark until after the mark is registered. Under Babson, a trademark owner must wait until the diluting mark is registered, then bring an expensive action under the Trademark Dilution Act in a federal District Court to enjoin the diluting use and seek the cancellation of the registration of the diluting mark. Not only would allowing the issue of dilution to be addressed in an opposition or cancellation proceeding cost considerably less than the torturous route otherwise available today, it would also permit the applicant or owner of a diluting mark to seek an alternative mark for his or her goods or services at an earlier stage, thereby avoiding wasteful advertising and promotional expenditures.

The need for this legislation takes on added significance in view of the decision of the Fourth Circuit in Ringling Bros.- Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Development, 50 USPQ 2d. 1065 (4th Cir. 1999), which held that the Federal Dilution Act proscribes only actual dilution and not "likelihood of dilution." This raises the bar, at least in the Fourth Circuit, for owners of "famous" marks to prevail under the Federal Dilution Act. While this might encourage them to bring more actions under State dilution statutes and the common law, they will not be able to do so if the alleged dilutor has obtained a federal registration (see Section 43(c )(3)). Accordingly, the Ringling Bros. case significantly increases the desirability of allowing owners of famous marks to oppose and petition to cancel the registration of diluting marks.

We would also note that Section 2 is carefully crafted to impose an absolutely minimal burden on the Patent and Trademark Office. Importantly, the issue of dilution is not a ground on which a trademark examining attorney can refuse registration. A diluting mark could only be challenged before the TTAB, which is better equipped to consider the types of evidentiary and legal issues which are involved in dilution cases.

Moreover, while Section 2 may increase the workload for the TTAB to some extent, this increase will be more than offset by a commensurate reduction in workload of the federal courts and savings for owners of famous marks. Clearly, the balance between resolving such issues in a relatively inexpensive administrative proceeding in the PTO or in an action under the Trademark Dilution Act in a Federal District Court weighs heavily in favor of Section 2.

For all of the reasons discussed, the AIPLA strongly endorses the enactment of Section 2 of H.R. 1565.

Section 4 of H.R. 1565 would amend the Lanham Act to waive the sovereign immunity of the United States for trademark infringement as well as for trademark dilution, thus precluding a recurrence of cases such as Preferred Risk Mutual Insurance Company v. United States, 39 USPQ 2d. 1131 (8th Cir. 1996). In that case, the Federal Emergency Management Agency offered federally-backed flood insurance using the term "preferred risk" on policy application forms and advertisements. The Eighth Circuit held that the United States was not liable for infringing the "Preferred Risk" trademarks of the Preferred Risk Mutual Insurance Company since the Federal Government cannot be held liable absent an explicit waiver of sovereign immunity.

The AIPLA believes that the United States Government and its contractors should be liable for infringement and dilution of trademarks, and not in the limited way that it is liable for the infringement of patents, copyrights, protected plant varieties, and semiconductor mask works. With respect to these other forms of intellectual property, the United States is subject to an action in the United States Court of Federal Claims for the recovery of "reasonable and entire" compensation. This waiver of the sovereign immunity of the Federal Government for other forms of intellectual property extends also to infringing activity of Government contractors that is authorized or consented to by the Government. Only in those cases where there is no extrinsic evidence that the Government authorized or consented to an alleged infringement is an action under the respective intellectual property law in a District Court proper.

The waiver of sovereign immunity for patents, copyrights, protected plant varieties, and semi-conductor mask works is found in Section 1498 of Title 28, United States Code. The precursor of this section was originally adopted to furnish patentees with at least some remedy for the infringement of their patents by the Federal Government without going so far as to subject the government to injunctive relief which could prevent it from carrying out critical programs. Most of the cases which have been brought under Section 1498 have involved claims of patent infringement by the Government or its contractors. While arguments can certainly be advanced as to why the Government's procurement of defense-related products and services should be free from the possibility of injunction for patent infringement (and to a lesser degree with respect to the other rights), the same arguments simply do not apply in the case of the infringement or dilution of a trademark.

Unlike the situation where the manufacture and use of a patented invention is necessary for the performance of a critical government function, there is simply no valid justification for the Government or its contractors to use a word or symbol which would infringe or dilute a trademark. It may not be possible to quickly find an acceptable substitute for a patented alloy that may be essential for a high speed turbine in a jet engine, but there can be no argument that the English language is so limited that the Government must infringe or dilute a trademark to describe its goods or services.

Moreover, unlike the case with a patented invention, recovery of "reasonable and entire compensation" cannot begin to be an adequate remedy for a trademark owner. Compensated use by the Government of a patented invention at least arguably provides an adequate reward for the patent owner and does not interfere with its non-government markets. The consumer confusion, potential harm to reputation, and loss of distinctive quality which result from trademark infringement and dilution can destroy the very essence of the trademark owner's property. Full Lanham Act remedies, including injunctive relief, to terminate government infringement or dilution of trademarks must be provided.

Accordingly, the AIPLA supports the provisions in Section 4 of H.R. 1565 which would waive the sovereign immunity of the United States for all of the remedies for trademark infringement and dilution contained in the Lanham Act.

When you introduced the "Trade Dress Protection Act," H.R. 3163 last year, Mr. Chairman, you stated that it was intended to provide the courts, as well as the PTO, with guidance as to the relevant factors to consider in determining whether or not product designs or packaging are inherently distinctive. The goal was to make the registrability and protection of trade dress as efficient as possible for both the applicant and the examiner. We agreed with your goals then and believe they are just as valid today.

The omission of an express reference to trade dress from the Lanham Act's otherwise comprehensive statutory scheme has resulted in a number of uncertainties as to the extent to which trade dress per se can be registered like a trade or service mark. It has also resulted in many inconsistencies and even conflicts among court decisions on issues essential to the protection and enforcement of trade dress rights. Some of those uncertainties and inconsistencies have been resolved by decisions such as Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992) (inherently distinctive trade dress is protectable without a showing of secondary meaning), and Qualitex Co. v. Jacobson Products Co., 514 U.S. 159 (1995) (color alone can qualify for registration under the Lanham Act). Nevertheless, many others remain.

While the PTO has adopted a practice of registering trade dress which serves as a trade or service mark in line with controlling judicial precedents, a number of issues remain, e.g., whether a particular design or coloration in fact serves as a mark or is only decorative. The situation is, if anything, less uniform and clear with respect to conflicts among decisions in the courts. In the absence of a Lanham Act definition of trade dress, or at least some enumeration of criteria for determining subsidiary matters such as inherent distinctiveness and functionality, court decisions in trade dress cases have presented a patchwork of overlapping, inconsistent, and even overtly conflicting precedents. Among other things, the federal district courts and circuit courts of appeal have diverged in their interpretations of what criteria should be applied to determine distinctiveness,

how functionality should be determined, which party has the burden of proof on elements of a trade dress infringement claim or defense -- and even what constitutes protectable trade dress itself.

Section 5 of H.R. 1565 addresses only one of the myriad issues surrounding the protection of trade dress, namely, which party to a trade dress infringement action bears the burden of proving functionality. Some courts have held that proof of nonfunctionality is an element of the plaintiff's case; other courts have held that it is an affirmative defense and that the burden of proof rests on the defendant. H.R. 1565, like H.R. 3163 in the 105th Congress, would provide additional uniformity and predictability on this issue by amending Section 43(a) of the Lanham Act to add a new subsection (3), stating that, in an action for infringement of trade dress not registered on the Principal Register, the party asserting trade dress protection has the burden of proving that the matter sought to be protected is not functional. This proposed addition would follow the majority view as to burden of proof obligations in actions for the infringement of unregistered trade dress. We continue to believe that this change will provide greater certainty and endorse it; however, we believe the need remains for a more comprehensive measure defining trade dress and providing guidance as to when trade dress serves as a source identifier and when it is functional. Accordingly, we would hope the Subcommittee would expand Section 5 of H.R. 1565 to include the other desirable clarifications in H.R. 3163.

We again commend you, Mr. Chairman, for your continuing leadership in striving to improve our intellectual property system. The AIPLA looks forward to working with you, the other Members of the Subcommittee, and your able staff, to support you in any way we can.