Remarks by Director Iancu at International Trademark Association (INTA) 141st Annual Meeting
“Conversations with USPTO Leadership” Session “CM41”
Director of the U.S. Patent and Trademark Office Andrei Iancu
May 20, 2019
As prepared for delivery
Thank you, Ayala, for the introduction. And good afternoon everyone! I’m honored and delighted to be here with all of you today. And greetings from Washington, D.C. Well, greetings from Alexandria, Virginia, where the USPTO is headquartered.
In Alexandria, Virginia, there is a local craft brewer called Port City Brewery that we have featured in a few of our events as a local IP innovator and brand owner. Bill and Karen Butcher started in 2011 with four tanks but have grown 25% each year to their current capacity of 13 tanks that produce 18,000 barrels a year. In just four years, they earned the national title of Small Brewing Company of the year in 2015.
They are a local business but have a nationwide, global brand-protection strategy. Their registered trademarks for crafts beers include Optimal® Wit, Metro® Red, Monumental® IPA, and Integral® IPA. In addition to trademarks, the brewery has a patent on a system for injecting hops into the finished beer without introducing oxygen. They market that injection system directly on the packaging of the beer, with the registered trademark of Hopzooka®, to alert customers that they’re drinking beer that has undergone a quality-improvement process. The company has melded patents and trademarks to accelerate the power of their brands. And that power has contributed to Port City Brewery’s significant growth. And they are not alone.
Indeed, studies show that businesses leveraging the power of brands and brand protection grow faster than comparable firms. According to one study by economists at the USPTO and U.S. Census Bureau, new firms that file for a trademark registration upon company formation tend to experience faster employment growth. Average employment nearly quadruples for trademark applicants in their first year, while only doubling among new firms that do not file. Among all firms, trademark applicants have, on average, 34% higher employment and 24% greater revenue in the period following first filing, compared to a control group of non-filers.
On a larger scale, trademark-intensive industries generate significant growth for the U.S. economy. According to a study by our Chief Economist and our colleagues at the Department of Commerce, trademark-intensive industries are the largest in number and contribute the most to U.S. employment and GDP. These industries directly accounted for 23.7 million jobs in 2014 or 15.5% of all U.S. jobs. They also accounted for $6.1 trillion in value added to the U.S. economy, which is about 34% of GDP. In short, brands and brand protection are critically important to the economy, trade, and job creation. But you all at INTA certainly know this already.
By the way, I wanted to take a moment to acknowledge that INTA was the driver behind a new, two-year exhibit in the National Inventors Hall of Fame museum on the USPTO campus. This new exhibit focuses on the importance of trademarks and their role in the American economy. Thank you very much to Etienne and Debbie Cohn and all from INTA who worked to make the exhibit a success. Please come visit the USPTO and see the exhibit!
Because trademarks are so important to businesses and to the economy, the U.S. Trademark Register is a critically important tool in making business decisions, and its accuracy is paramount. When the Port City Brewery owners—it turns out that Karen is also a trademark attorney—come up with a clever name for a new craft beer, they turn to the U.S. Trademark Register to figure out whether it is available for their use and registration. And this is true for all of our applicants.
If the register is not accurate, they cannot rely on it to tell them whether to apply for registration or to start over with a different idea for a trademark. An inaccurate register, one that is filled with marks that are not in use, or features registrations obtained by improper means, makes trademark clearance more difficult; time-consuming and expensive; and leads to expensive opposition and cancellation proceedings, or federal court litigation to clear deadwood and enforce rights. And in turn, it may cause companies to alter business decisions, often at significant cost.
So it almost goes without saying: We must promote an accurate Trademark Register. Our use-based rights system and the good faith of our applicants previously insulated us against most bad faith behavior. But this insulation, unfortunately, seems to be wearing thin. Bad faith is a global problem that has now reached the United States.
Indeed, in recent years, we’ve seen a significant increase in the number of applicants who are not fulfilling their legal and ethical obligations to file accurately and in good faith, particularly as to claims of use of the mark in commerce. We have seen a surge in improper submissions and bad faith behavior. Some are domestic, but a significant and increasing number of these comes from overseas.
You have likely heard many of such behaviors reported in the press. They include submitting fake or altered specimens of use; submitting inaccurate or knowingly false claims of use in U.S. commerce to obtain and maintain registrations; using practitioners who aren’t authorized to represent others before the USPTO; making efforts to circumvent the newly proposed U.S. counsel requirement even before it has been implemented; and making unauthorized address changes and unauthorized assignments of ownership. Let me briefly address each of these in turn. Mary and the rest of the panel will fill you in on our responses to these attacks.
We increasingly have been receiving specimens that do not actually show use of the mark in U.S. commerce in the ordinary course of trade as required by our law. Many appear to be fake, mocked up, or doctored, but in fact this is often hard—and increasingly harder and harder—to detect. When our examining attorneys start questioning the applicant about these fake specimens, the applicant will in many cases submit substitute specimens that perhaps are just better digital creations. Once we object, they get better at fooling us.
We can infer from fake specimens that use claims in affected applications are likely false, but we also have seen that many registrations are being maintained with false claims of use in commerce, contributing to a cluttered register. Since 2012, in our Proof of Use Audit Program, we’ve been testing the accuracy of claims of use made by registrants in their maintenance filing that is made between the 5th and 6th anniversary and every 10 years after registration. Over 50% of the audited registrations have ended up deleting goods or services because the registrant could not provide proof of use for the good or services we queried. Seventy-eight percent of those audited were represented by counsel and, of those audited who had a lawyer, 52% have deleted goods. The results are troubling to say the least.
Over the last few years, the USPTO has seen a tremendous uptick in foreign applications with inaccurate or possibly fraudulent claims of use of the mark for the goods or services specified in the application. We have observed that many of these questionable applications are coming in from non-U.S. “filing factories,” which appear to be using practitioners not authorized to practice law in the United States or even overseas. As a result, they are not allowed under U.S. law to represent trademark applicants at the USPTO. We have addressed this by issuing orders excluding some of these unauthorized foreign practitioners, but have found that our ability to sanction them is extremely limited, and they often find ways to hide their improper activities from us.
Because of the increase in these questionable foreign trademark applications and use of unauthorized foreign practitioners, the USPTO has proposed that those with a foreign-domicile must have a lawyer licensed to practice law in the United States to represent them in any trademark matter at the USPTO. Many other countries worldwide have had this requirement for decades. In the United States, we hope to implement this rule shortly. We believe that this will help improve the quality of submissions to the USPTO.
But within days of proposing the U.S. counsel rule, we were alerted to hundreds of emails sent from overseas to U.S. lawyers, offering money for use of the lawyers’ bar information on trademark filings, in an effort to circumvent this rule. One was literally signed “Bruce from China.” We immediately issued an alert, reminding U.S. lawyers that taking up “Bruce” on his offer would be considered misconduct.
We have had an alarming increase in third parties making unauthorized changes of correspondence addresses in our electronic database. We understand that most of these changes were made so that an online platform would mistakenly validate trademark registration ownership to the wrong party. We moved to a manual process for correspondence address changes to stem the tide until we can make some significant IT changes. Additionally, we have seen fraudulent consent agreements and assignments of ownership filed.
Our trademark system remains robust and, for many reasons, the very best in the world. But our open and easily accessible registration system that relies on the good faith of our applicants has made us a target for bad actors. This must stop.
The USPTO established a working group to devise changes to our current practices to defend against these various threats. That group also is evaluating new authority through rulemaking and possible statutory changes to give the USPTO more tools to combat bad faith behavior. In the process, we have to find the appropriate balance between accessibility for the vast majority of our applicants, who operate in good faith, while deterring the bad actors. We have developed a series of initiatives that are designed to strike that balance.
You’ll hear some specifics about these ideas from Commissioner Denison and Chief Judge Rogers. You’ll also be hearing from our Chief Policy Officer Shira Perlmutter about our search for solutions for global problems like trademark cluttering and counterfeiting. We look forward to your support as we move these ideas into practice.
Our trademark system is a gold standard. It is a fundamental component of our economy, indeed, a driver of economic growth and job creation. We are committed to maintaining its integrity. Thank you again for the opportunity to be with you here today, and I hope you enjoy the rest of the meeting.