It’s about that time of year, when you may be thinking about tax season. Tax day is still a few months away, but you may already have received your W-2, or 1099, (or other various assortments of mysterious numbers and letters), which will determine how much you’ll owe Uncle Sam (or perhaps a nice refund is on the way?). You might also be thinking about the possibility of an audit. Depending on your particular business or personal income situation, the chances of an audit may be quite small, but it’s hard not to think about.

What you’re probably not thinking about, however, is an audit by the U.S. Patent and Trademark Office (USPTO), regarding any trademark registrations that you own. It can happen. Luckily, a trademark registration audit is not nearly as onerous or time-consuming as a tax audit. For any trademark owners or practitioners out there, who may receive an audit this year, here’s a quick overview and some tips.

In March of last year, following a two-year pilot program, the USPTO implemented new rules, establishing a random audit program for trademark registrations. The audit program is targeted at the required maintenance filings (“Declarations of Use”) for any registrations with more than one good or service per class. The goal of the audit program is to randomly request additional verification, that the registered mark is actually being used in commerce with the identified goods or services (which is required to maintain a valid trademark registration). Specifically, each year about 10% of all trademark registrations with recent maintenance filings will be randomly selected for an audit.

The rationale for the program is that under current rules, registration maintenance filings (every 5 years for the first 10 years, then every 10 years after that), only require the registrant to submit proof of use (a “specimen”) for one of the identified goods or services in each class, rather than all identified goods or services. Therefore, this can lead to invalid (or partially invalid) registrations sitting on the register for years (referred to as “deadwood” registrations), that identify goods or services for which the mark is no longer being used in commerce. The goal of the audit program, therefore, is to “to assess and promote the accuracy and integrity of the register” (Trademark Rule 2.161(h), as amended) by cleaning up the deadwood.

When a registration is randomly selected for an audit, the USPTO will issue a “Post-Registration Office Action,” stating, “Registration Selected for Audit.”  This Office Action will require the registrant to submit additional specimens for two goods or services, which are randomly selected among all the goods and services identified in the registration. Linked here is a sample of such an audit Office Action–this should look the same for everyone, other than the registration data.

The electronic response form is straightforward, which requires the registrant to submit acceptable specimens of use according to the applicable specimen rules (see TMEP §§ 904, 1301.04), and a verified statement of use. However, if it turns out that the registrant was not using the mark in commerce for the selected goods/services, the next step is to request deletion of those goods or services from the registration.  If deletion is requested, the USPTO, unfortunately, will then expand the audit to require specimens for all remaining goods or services identified in the registration.

Here are a few tips for dealing with the new audit system, for both trademark owners and practitioners:

  • Carefully Confirm Use for All Goods and Services; Amend Registration as Needed: When it comes time for filing the Declaration of Use, confirm use in commerce of the registered mark for all identified goods and services (even though only one specimen is required), and if use has ceased for any goods and services, they should be deleted from the registration. That way, there won’t be any hiccups when it comes time for an audit.
  • Get Ready for Expansion of the Audit if Deletion Is Requested: If you must delete any of the goods or services selected in the audit for non-use, the audit will expand to all goods or services identified.  Therefore, if any deletion is required, you should comb through all identified goods/services and make any necessary deletions at the same time–don’t just delete those currently selected in the audit. Otherwise, after the audit expands, it will further delay the process if you need to request more deletions.
  • File a Timely Response to the Post-Registration Audit, or Entire Registration will be Cancelled: There is a six-month deadline for responding to the audit issued in the Post-Registration Office Action. One might think that without a timely response, only the audited goods/services would be deleted by the USPTO. But unfortunately, the consequence is harsher than that–if a response is not submitted by the six-month deadline, the entire registration will be cancelled.

What do you think about the new audit process? Is it worth it having the deadwood registrations cleaned up, which can be beneficial from both a prosecution and enforcement perspective? Or are the benefits outweighed by the additional administrative time and cost associated with gathering more specimens and responding to these Office Actions? Perhaps that answer might depend on whether you fall within the audited 10% this year–so, good luck to all!

-Wes Anderson, Attorney

Reliant Beverage Co., makers of “Recovery Water,” has an endorsement from Russell Wilson and heaps of buzz surrounding the purported benefits of its products and “nanobubbles,” but thanks to some errors from both Reliant and the PTO, a federal trademark may be out of reach.

home-banner-bottles

Reliant applied for the RECOVERY WATER mark back in March, and soon thereafter received a descriptiveness refusal from the PTO, with the Examining Attorney stating the following:

The attached evidence from Collins dictionary shows the wording “RECOVERY” means the act of recovering or the gaining of something lost.  The word “water” appears in applicant’s identification of goods and thus is generic for an ingredient of applicant’s goods.  As shown by the attached evidence from Size or Shred, Cardiostrong, Bodybuilding.com, C12, RoadRunner Sports, and an article entitled “Why Bother with Recovery Drinks,” “recovery drinks” are commonly sold in the athletic industry to allow athletes to improve the rate of recovery after serious exercise in order to enable the drinker to improve performance.  Therefore, the wording taken together merely describes an ingredient and quality of applicant’s water drinks.

This must not have been entirely unexpected for Reliant – countless sports drinks and related supplements emphasize their effectiveness for post-workout or post-exercise “recovery.” But no matter – the Examining Attorney helpfully included a standard form “advisory” informing Reliant that it could amend this application to the Supplemental Register. While the Supplemental Register is effectively the “junior” register for descriptive marks and many advantages of a typical trademark registration on the Principal Registration are lost, it would at least allow Reliant to exclude others from registering a similar mark while it sought to obtain acquired distinctiveness in RECOVERY WATER over time.

So, Reliant dutifully amended its application to the Supplemental Register (with a disclaimer of the generic wording “WATER”), and all seemed well. Then in mid-August, the bombshell came with another office action:

Upon further review, the trademark examining attorney has determined that amendment to the supplemental register is insufficient to overcome the Section 2e1 refusal, as the mark appears to be generic. Therefore, applicant’s response raises a new issue, which applicant must address. The examining attorney regrets the delay in raising this issue, and apologizes for any inconvenience to the applicant.

Unfortunately for Reliant, the Examining Attorney neglected to consider whether RECOVERY WATER was not only descriptive but also generic, a finding of which would be fatal to any trademark registration (and, indeed, would preclude any legitimate enforcement of the mark for third-party use). As evidence to support a generic refusal, the Examining Attorney unearthed a press release from Reliant itself that used the wording “recovery water” generically:

Reliant is the first and only recovery water proven to reduce the muscle damage and soreness that often comes with an active lifestyle. Drinking Reliant helps you recover faster so you can do more and feel better.

Reliant recovery water has become the beverage of choice for world-class athletes wanting to train harder and perform better.

The cardinal rule to avoid genericide: always use your trademark as a trademark (“Recovery Water® sports drink”), rather than as a synonym for the thing itself — or, ideally, choose a distinctive mark in the first place. Now Reliant, once thought to be nearing a registration, has a genericness battle on its hands, thanks in part to its own marketing materials.

Not to be too cruel to Reliant, but perhaps the Russell Wilson endorsement is particularly appropriate here: right on the goal line, success looking inevitable – only to have it snatched away in an instant.

Sorry, Seahawks fans.