SUMMER 2019 TODAY’S GENER AL COUNSEL
Intellectual Property
Responding to Surge in Fraudulent USPTO Specimens By Tamar Niv Bessinger and Jessica Vosgerchian
B
30
rand owners know that U.S. trademark registrations are valuable in protecting their marks from infringement by third parties. That is why it is a concern that the United States Patent & Trademark Office (USPTO) has recently seen a surge in fraudulent trademark applications relying on digitally altered specimens of use. Rather than providing an image of the genuine goods bearing the trademark, applicants use graphics software to digitally place an image of the trademark on an image of the goods. The resulting registrations cause problems for legitimate trademark owners, especially since online retailers such as Amazon utilize trademark registrations to manage sellers. Fortunately, there are several strategies available for brand
raised concerns over the legitimacy of these applications and subsequent registrations. For example, the province of Shenzhen, known for its booming commercial growth, began a subsidy program in December 2014 in which companies or individuals could receive a subsidy of about $800 for each trademark registration obtained in other countries. The Shenzhen district of Longhua also instituted a subsidy program paying about $400 per registration. Moreover, it appears that companies and individuals in Longhua can apply for both subsidies, meaning that a single U.S. registration, costing $275 in filing fees, would be worth about $1,200 in subsidies. The onset of these subsidy programs closely precedes the surge in U.S. trademark applications originating from China. In 2014, the year before Longhua District launched its program, 200 U.S. trademark applications originated from the district, which has a population of about 1.3 million. A few years later, in 2017, Longhuabased applicants filed 4,372 applications. For context, Germany, with a population of over 82 million, only slightly outpaced Longhua with 4,991 U.S. applications in 2017. Shenzhen-based applicants are seemingly incentivized to falsely claim use of a trademark on goods based on altered specimens because a use-based application is usually the quickest and cheapest avenue to registration. Under U.S. trademark law, use-based applications must provide a specimen showing use of the applied-for mark for the identified goods or services. The Chinese subsidy programs only pay subsidies for issued registrations. Thus, applicants file use-
In 2014 Shenzhen began a subsidy program of about $800 for each trademark registration obtained in other countries. owners seeking to prevent fraudulent specimens from hindering their trademark rights and business interests. The major source of the problem is Chinese applicants incentivized by government subsidies. From 2016 to 2017, the USPTO experienced a 12 percent increase in trademark application filings. U.S. applicants accounted for about 34 percent of the increase, while Chinese applicants made up another 33 percent. This created an uptick of over 43 percent in the rate of filings from China. The USPTO reported that the increase in filings from China has
based applications relying on altered specimens, rather than filing applications based on intent to use, which usually take longer to register and require payment of additional USPTO fees. Foreign applicants can avoid the requirement to provide specimens showing use of the mark for the goods by filing applications under the Paris Convention or the Madrid Protocol. However, a registration under the Paris Convention can take years to issue because it requires registration of an underlying home-country registration (which itself requires investment of time and money). The subsidy programs pay substantially less for Madrid Protocol extensions of protection than for individual country registrations. Thus, filing a use-based registration with an altered specimen is the most cost-effective and time-efficient manner to obtain a registration and claim the subsidy payment. It is not known whether the subsidy programs provide an incentive to maintain the registrations once obtained, so it is possible that many of the suspect registrations will lapse when the Declaration of Use required at the sixth year anniversary is not filed. CONSEQUENCES FOR BRAND OWNERS
Registrations based on fraudulent claims of use cause problems for companies seeking to protect their trademarks on the USPTO register. A fraudulent registration may block an application for a similar mark even though the registrant does not actually have prior rights. Moreover, the strength of registered marks can be diminished if the register is crowded by fraudulent registrations. Amazon’s procedures to prevent counterfeit sales present opportunities for sellers of counterfeit goods to use fraudulent trademark registrations to subvert actual brand owners. One illus-