Hard Times for Trademarks: Filings plunge, TTAB docket shrinks
In this very tough recession, reports are widespread that companies are cutting back on marketing and legal expenditures. If you’re looking to distill that anecdotal evidence into hard numbers, you need look no farther than the U.S. Patent & Trademark Office, where the demand to register new trademarks has taken a very steep slide. The number of new applications fell by 16% in the last quarter of 2008 compared with the previous year, and by 20% in the first four months of 2009. The number of appeals and disputes in the Trademark Office has fallen as well. Since companies typically seek registration when they intend to use a new brand name, logo, or tagline, the falloff suggests a dramatic cutback in new product launches and marketing campaigns. Still, one can see bright spots in the gloom – applications for new “green” environmentally friendly trademarks have increased substantially, as have retail chains’ filings for private label brands. And brand owners remain zealous about protecting their intangible assets, at least in federal court, where the number of new trademark lawsuits has not significantly diminished.
Glenn Gundersen, who leads Dechert’s trademark law practice and has been reporting on trends in branding annually since 1992sees a number of interesting developments reflected in the numbers from the Trademark Office:
- The drop in applications indicates not just a decrease in marketing activity, but also reflects cutbacks in corporate legal budgets, as companies become more selective about which marks merit the expense of a federal filing.
- The falloff provides some temporary relief to businesses that are still creating new trademarks, since the diminished number of filings makes it slightly easier to find new brands that aren’t already taken.
- Selecting a new trademark is not materially less risky, however, because the robust level of litigation indicates that companies are still intent on challenging a newcomer if they believe the newcomer’s mark is likely to cause confusion.
- Despite the overall decrease in trademark filings, there’s no relief for a company seeking to find a mark to convey the idea that a product or service is environmentally friendly. The continuing boom in ecooriented marks has created a greenbranding gridlock.
- Trademark applications have not fallen quite as far as they did in 2001, but this time the slump in filings comes from several sectors of the economy, and not just from bursting .COM bubbles.
- In the last recession, it took two years for applications to emerge from a slump, and if this recession is similar, filings won’t recover until 2011.
The following pages provide a more detailed picture of Dechert’s findings on the U.S. trademark landscape in 2008 and the beginning of 2009.
Gauging the depth of the downturn via trademark applications
It’s not at all surprising that trademark filings rise when the economy booms, and fall when things go bust. Each application represents a brand name, logo, slogan, package, or product design that a business or organization is either using or intends to use in the future. When companies are optimistic about the consumer appetite for new products and services, applications go up – and when their outlook turns gloomy, applications go down.
Trademark Office filings can echo larger economic developments in uncanny ways. For example, applications reached an all-time high in March 2000, the same month that NASDAQ hit its high-water mark during the .COM boom. They fell to an all-time low in December 2001, and didn’t begin to recover until the fall of 2002.
However, late 2002 marked the beginning of six straight years of growth in which, almost without exception, the number of applications filed in a given month exceeded the number filed a year earlier. This upsurge culminated in March 2007, with the second-highest number of filings of all time.
Economists estimate that the current recession began at the end of 2007, and one can spot the first weakness in trademark filings not long after that – in March 2008, when the number of applications fell about 1,000 short of the previous year. While this suggests that the Trademark Office can serve as a bellwether, providing early signals of a faltering economy, the flow of applications did not diminish dramatically until October of 2008, after Wall Street was already in freefall.
In fact, calendar year 2008 was remarkably good in the trademark world, until things turned south in the fourth quarter. It was the second-best year in history, with U.S. applications exceeding 291,000 – topped only by 2007, when they broke the 300,000 mark. Of course, even though the year began strongly, by the fourth quarter applications had fallen 15% lower than the fourth quarter of 2007. This year has been even worse, with filings in January–April 2009 flattening at nearly 20% below the same period in 2008. The question now is whether applications have hit bottom, or whether marketers’ confidence will decline further.
TTAB sees fewer pending oppositions, appeals
Companies have also decided to throttle back on Trademark Office activities after their applications have been filed. The Trademark Trial and Appeal Board has seen a significant drop in applicants who appeal examining attorneys’ refusals to register new marks, as well as a decrease in the number of parties involved in contentious proceedings. The Board’s docket of ex parte appeals dropped 20% from October 1, 2007 to September 30, 2008 (from 2,732 to 2,176), and has fallen another 25% in the 6 months since then (down to 1,636 as of March 31, 2009). This decrease is somewhat surprising, since it takes well over a year for an application to reach the appeal stage. The pool of applications now facing final refusal dates back to the boom years, so one might have guessed that the Board’s appeal caseload would be increasing rather than decreasing. The trend in the opposite direction indicates that a larger number of applicants are choosing to throw in the towel after being turned down by the examining corps, rather than appealing that refusal to the Board.
Companies have also cut back on contentious disputes in the Trademark Office. The number of pending oppositions and cancellations dropped by 9% between the end of September 2008 and the end of March 2009. This decrease counters the anticipated trend, since applications that are currently subject to opposition were filed during the boom years. One might expect that the Board’s docket would be increasing, but budget concerns have presumably made trademark owners less prone to challenge new applications, more likely to settle existing disputes, or both. This means less work for the lawyers who handle appeals and oppositions, but good news for applicants whose applications are being published during the downturn.
Although trademark owners are less prone to file actions in the Trademark Office, they have not lost their taste for litigation. Even as the Trademark Trial and Appeal Board docket shrank in the first quarter of 2009, there was no material decrease in the number of new trademark infringement cases filed in federal court. Brand owners are presumably choosing to concentrate their enforcement expenses in the courts, where they can potentially obtain an injunction or damages, rather than the Trademark Trial and Appeal Board, which can only determine whether a mark merits registration. Thus, a business seeking to clear a new mark cannot be any less careful during a recession, because the negative consequences of selecting the wrong mark have not diminished.
However, the process of searching and clearing new marks may be somewhat less grueling in the short run – with more pending applications being abandoned without appeal, and with fewer new applications, trademark counsel will have to sift through fewer active marks when reviewing a search. This represents a dramatic change from the last six years, when new filings rose annually. By the time applications hit their peak in 2007, they were being filed at a rate that was 40% higher than in 2002. During the boom, it became progressively more difficult to find a mark that another party hadn’t already claimed. The silver lining in the current recession is that trademark clearance may become a bit easier, for at least a while, because fewer applications are in the queue, blocking newcomers.
Financial services filings fall, pharma goes up
With overall trademark applications down nearly 5% in 2008, the pain was felt across different industries. Filings for marks to be used for financial services, not surprisingly, fell much more sharply than the average, with applications referencing securities brokerage falling more than a third. Then again, applications for mutual fund services fell by only 7%, not much more than overall.
Although the tech sector bore the brunt of the previous recession, that’s not the case this time around – 2008 applications for products and services related to computers, the Internet, or telecommunications fell 7%, just slightly worse than average.
With all of these negative numbers, you might think that consumers would need a stiff drink, but applications for beer and wine were down 7%. Perhaps medication is the answer – marks for pharmaceutical products bucked the negative trend, rising almost 5% in 2008.
In each of these categories, the decline has continued into 2009. Overall filings through April 2009 fell 20% below those in the first four months of 2008, but some business segments were harder hit. New applications for marks for watches were down 40%, and perfume and fragrance marks fell 24%. Even clothing applications dropped 24%. On the other hand, food marks fared slightly better than the average, declining 18%.
Retailers stock shelves with private labels
Tough economic times have increased the market share for private-label products, and some retailers have responded by filing more applications for their own marks. Stores such as Target (up 135%), Macy’s (up 36%), and JC Penney (up 19%) all increased their trademark filings in 2008, and the discount grocery chain Aldi filed nearly three times as many applications as it did the previous year. However, not all retailers have been shopping for trademark registrations – Wal-Mart (down 51%) and Kmart/Sears (down 29%) filed fewer applications in 2008, as did supermarket chains Safeway (down 38%) and Whole Foods (down 16%).
The silver lining is green
While marketers seem to doubt whether any new products or services will catch the public’s fancy in this market, they do seem to believe that green-themed marks will thrive. Applications for marks containing the word GREEN increased 32% in 2008 (to more than 3,200 filings), ECOprefix marks were up 86% (with 1,700+ applications), and applications for more than 500 ENVIRO-marks were filed, representing a 22% jump. The word CLEAN was also a popular buzzword, appearing in over 1,000 marks to suggest environmental friendliness, up 30% from the year before.
It’s dead, but it’s alive! Zombie marks abound
The recession has battered retailers, in particular, pushing a number of well-known companies into liquidation. In earlier times, a liquidation may have meant the end of a brand, but now, some investors are betting that the value of a famous brand can live on even after the company that created it is gone. In the past 18 months, the trademarks and other intellectual property of a number of American mall and restaurant staples that fell victim to the economy were acquired out of bankruptcy to be repurposed in new ways. The Sharper Image, for example, has been re-launched as a wholesale web and catalog operation. The CompUSA and Circuit City brands have been acquired by a multi-channel computer and electronics retailer. The Bombay Company is poised for a re-launch sometime this year, Bennigan’s has emerged from bankruptcy much smaller, but with designs on expanding its franchising operations, and there will be an auction soon for the trademarks and other intangibles of the KB Toys retailer.