Summary of Statement

Garo A. Partoyan

Intellectual Property Owners Association (IPO)

Before the House Judiciary Subcommittee

on Courts and Intellectual Property

May 5, 1999

• IPO supports H.R.1565, the "Trademark Amendments Act of 1999," which improves and clarifies trademark law in several respects.
• Section 2, which allows claims of dilution of the distinctive quality of famous marks to be raised in opposition and cancellation proceedings, will reduce effort and expense by giving parties an opportunity to resolve disputes at an earlier stage than under existing law.
• By making federal government agencies liable for trademark infringement and dilution, section 4 will help protect trademark investments of private firms.
• In placing the burden on parties who assert rights in an unregistered trade dress to prove that the matter they seek to protect is not functional, section 5 adopts a uniform rule that is consistent with other rules for registered and unregistered marks.
• Other sections of H.R.1565 make useful clarifications and corrections in the Trademark Act of 1946.

Statement of

GARO A. PARTOYAN

CHAIRMAN, TRADEMARK COMMITTEE

INTELLECTUAL PROPERTY OWNERS ASSOCIATIONbefore the

HOUSE JUDICIARY SUBCOMMITTEE ON COURTS

AND INTELLECTUAL PROPERTY

on

H.R.1565, the "Trademark Amendments Act of 1999"

May 5, 1999

2:00 p.m.

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to appear before the Subcommittee today on behalf of Intellectual Property Owners Association (IPO). I am Chairman of the IPO Trademark Committee. Until recently I was General Counsel - Marketing Property for Mars Incorporated in McLean, Virginia, and for many years I served on the Board of Directors of IPO.

IPO is a trade association that represents companies and individuals who own patents, trademarks, copyrights, and trade secrets. IPO members own thousands of federal trademark registrations granted by the Patent and Trademark Office (PTO). They also file about 30 percent of the patent applications that are filed in the PTO by U.S. companies and inventors.

We compliment Chairman Coble on introducing H.R.1565, the "Trademark Amendments Act of 1999." IPO favors this legislation, which will improve and clarify the Federal Trademark Act of 1946 in several respects.

Dilution Issues in PTO Opposition and Cancellation Proceedings

We support section 2 of the bill, which will give parties an opportunity to resolve disputes over dilution of the distinctive quality of famous marks at an earlier stage than under existing law.

Section 2 permits owners of famous marks who believe registration of another mark will dilute the distinctive quality of their mark to oppose registration of the other mark under section 13 of the Trademark Act, and to petition to cancel the registration of the other mark under section 14 of the Trademark Act.

At present owners of famous marks cannot raise dilution claims in opposition and cancellation proceedings. In a 1996 opinion, the PTO's Trademark Trial and Appeal Board construed the Federal Trademark Dilution Act, which was enacted in 1995, not to authorize dilution as a ground for opposition or cancellation. Section 2 of H.R.1565 changes the statute to authorize dilution explicitly as a ground for opposition and for cancellation in proceedings before the Trademark Trial and Appeal Board. We agree with taking this step.

By allowing the owner of a famous mark to raise a dilution claim in an opposition or cancellation proceeding, the bill will provide an opportunity for parties to contest and resolve disputes sooner than they now are able to do so. Disputes might be resolved before the party seeking to register the second mark has made a substantial investment, or any investment at all, in adopting and using the mark for a product or service. Earlier resolution of dilution disputes should reduce effort and expenses for both parties. This is an important benefit of S.1565.

We also agree that the bill should not go further to make dilution a ground for refusing registration of a mark by the PTO during ex parte examination. Dilution claims, which may depend on extensive testimony or other evidence, are appropriate for court proceedings or inter partes proceedings conducted by the Trademark Trial and Appeal Board.

While it is important that owners of famous marks should be able to raise dilution at an early date in the PTO, it also is essential for them to continue to be able to raise dilution claims in court without any collateral estoppel or issue preclusion effect of an earlier decision on dilution by the Trademark Trial and Appeal Board. Procedures in U.S. District Courts generally afford fuller opportunities to present and challenge evidence as well as arguments than is available in proceedings before the Trademark Trial and Appeal Board. Also, additional evidence is likely to be available by the time of a later court proceeding. Recent experience with dilution cases suggests that a very full airing of the evidence and arguments may be needed in order to resolve some cases fairly.

H.R.1565 does not limit the ability of owners of famous marks and their opponents to litigate dilution in a civil action after a Trademark Trial and Appeal Board decision. Section 21(b) of the Trademark Act (15 U.S.C. 1071(b)) allows a party who is dissatisfied with a decision of the Trademark Trial and Appeal Board to have a remedy by a civil action in U.S. District Court, where the parties can present evidence and arguments in a trial de novo. Also, later lawsuits in court based on dilution claims are not precluded by earlier Trademark Trial and Appeal Board decisions. It is essential to retain these options for litigating dilution in court following a Board decision. Without these options, owners of famous marks might be unwilling to seek earlier, less expensive rulings from the Trademark Trial and Appeal Board.

Trademark Liability of the Federal Government

IPO also supports section 4 of the bill, which amends sections 32, 40, and 45 of the Trademark Act, to make federal government agencies liable for trademark infringement and dilution. This change is needed to protect investments of private sector firms in trademarks and goodwill.

In 1996 the U.S. Court of Appeals for the Eighth Circuit ruled that the Preferred Risk Mutual Insurance Co. could not enforce its trademark rights in "Preferred Risk" against the Federal Emergency Management Agency (FEMA), an arm of the United States Government, when FEMA began using the term "Preferred Risk" to identify a category of government flood insurance. The court said the Trademark Act of 1946 does not apply to the federal government.

Thus, federal government entities enjoy the benefit of having the right to register and protest marks under the Trademark Act of 1946, but are immune under that Act from liability for pirating the marks of others. The unfairness of this result is obvious. A trademark owner should have the same remedy against agencies and instrumentalities of the federal government and persons acting for the federal government who infringe or dilute marks as the owner has against private parties. The Eighth Circuit in the Preferred Risk case said,

If in the future, however, the legislative branch finds that such concerns must be addressed, it is free to amend the Lanham Act to expressly waive the sovereign immunity of the United States as it has done with states.

Enactment of section 4 of H.R.1565 will help level the field and insure that businesses, new and established, can invest in products and services without fear of being damaged by infringement or dilution of their marks by a federal agency.

Burden of Proving that Trade Dress is Not Functional

We also favor section 5 of H.R.1565, which places the burden on the person who asserts rights in an unregistered trade dress rights to that prove the matter he seeks to protect is not functional.

This provision is needed in order to resolve a split among the federal courts of appeals on the question of which party has the burden. Section 5 of H.R.1565 settles the issue -- correctly in our view -- by placing the burden on the plaintiff. This is consistent with the common law rule that the burden of proving a case is on the plaintiff. It also is consistent with the rule that for unregistered marks other than trade dress the plaintiff has the burden of proving the mark is valid.

For registered marks, on the other hand, the Trademark Act establishes a presumption of validity, and validity includes lack of functionality. Section 7(b) of Act, for example, states, "A certificate of registration of a mark on the principal register . . . shall be prima facie evidence of the validity of the registered mark . . . ." In the case of trade dress that has been registered, the presumption that it is not functional is justified by the examination for functionality that the PTO conducts before registration. Consistent with enjoying this presumption for registered trade dress, the burden is properly on the plaintiff for unexamined, unregistered trade dress. Also, it is equitable to place the burden on the party who can bear it with least expense, namely the plaintiff, who should know better than the defendant whether the trade dress is functional.

Other Provisions in H.R.1565

IPO also favors the other sections of the bill: section 3, "Remedies in Cases of Dilution of Famous Marks," and section 6, "Technical Amendments." Section 3 merely corrects drafting oversights in the Federal Trademark Dilution Act, passed in 1995. It makes clear that section 34(a) of the Trademark Act covering injunctions also applies to dilution, and that sections 35(a) and 36 covering damages and destruction of articles also apply in the case of willful dilution. Section 6(a) of the bill merely corrects a typographical error.

Finally, we note with enthusiasm that section 6(b) of the bill completes the job of eradicating the hyphen from the term "trade-mark", to conform with modern usage. Trademark lore has it that years ago, when the PTO deleted the hyphen from "trademark" in its regulations, it held a ceremony to celebrate the feat.

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Thank you again for inviting us to testify in support of these changes in trademark law that will improve and clarify the Trademark Act of 1946. I will be pleased to answer any questions.