COVID-19 Brings New Procedural Hurdles to Evict Commercial Tenants in New Jersey

On July 14, 2020, the Supreme Court of New Jersey issued an order authorizing several steps to support the resumption of landlord/tenant cases during the COVID-19 crisis. The good news is that the procedures allow for resumption of adjudication. The bad news is that there still could be a delay/lag in getting a tenant out. The following is a brief discussion and some practical pointers for commercial landlords.

County Given Power to Set up Protocols

The July 14^th Order requires county court systems to come up with protocols to: (a) mediate all pending landlord tenant cases; and (b) set up trial procedures in the event cases do not settle. This allows the counties to set up a best practice system for themselves, as some counties may have a higher volume of commercial cases rather than others.

For the first part of the protocols, counties are quickly implementing procedures to meet the mediation requirements of the Order. Some counties have already started scheduling mediation over ZOOM or other video conferencing applications. However, irrespective of differences between county approaches, commercial landlords must remember mediation is a voluntary process. Meaning, “it takes two to tango”. There will certainly be many cases where: (a) landlord and tenant will not agree to mediate; and (b) cases where mediation takes places, but a settlement is not reached. The trial procedures will likely be implemented after the mediation protocols are put in place. It may take 60 or more days for trials to resume. As such, commercial landlords for the sake of finality may want to reassess their settlement stance based on this information.

Orders to Show Cause MAY Get a Hearing Date Earlier

This leads to the question of, “Does a landlord has any recourse in the event it needs to proceed with a commercial eviction action in short order?” The July 14^th Order answers that question, but the answer creates new questions and uncertainty.

Pursuant to page 2 of the order, a landlord may file an emergent Order to Show Cause application in limited circumstances to seek a prompt trial. However, the basis of that landlord/tenant action cannot be just nonpayment of rent.[1]

As most commercial landlord know, an Order to Show Cause may get you to court sooner, but it can also be costlier than proceeding in the ordinary course. Further, all applications for an Order to Show Cause will be reviewed and will proceed to a trial only if the court determines that an actual emergency exists. Examples of such emergencies, include, but are not limited to, documented violence, criminal activity, or other health and safety concerns.

The July 14, 2020 Order also acknowledges and provides that an eviction may proceed in the “interest of justice” as provided by Executive Order 106 (issued March 19, 2020). What the “interest of justice” means is open to interpretation.

Executive Order No. 106 reads, in pertinent part:

While eviction and foreclosure proceedings may be initiated or continued during the time this Order is in effect, enforcement of all judgments for possession, warrants of removal, and writs of possession shall be stayed while this Order is in effect, unless the court determines on its own motion or motion of the parties that enforcement is necessary in the interest of justice. This Order does not affect any schedule of rent that is due.

Dichotomy Created by the Orders

The general rules governing an eviction hearing, July 14, 2020 Order and Executive Order No. 106, create an interesting dichotomy: (a) to promptly move a commercial landlord’s case to trial, the landlord must meet a high bar and show that the eviction trial should proceed due to egregious circumstances such as “documented violence, criminal activity, or other health and safety concerns.” If that standard is proved through an Order to Show Cause application, the court should then schedule a trial. (b) Once a trial is scheduled, there is nothing in the July 14^th Order that would raise the bar in terms of proofs required to prevail. Presumably, Landlord could support the substance of the eviction by showing non-payment of rent, alone. The Court would also be hard pressed not to issue a warrant of removal if landlord obtains a judgment of possession at the trial. However, the net issue is enforcement of that warrant. Meaning how quickly are court officers proceeding with lockouts? That is an unknown issue and should be reviewed by counsel prior to proceeding so that a commercial landlord understands the time constraints on the same.

Accordingly, it is conceivable that a landlord meets the high bar needed to schedule a trial, but then is further delayed because the trial is simply scheduled and takes several more weeks to complete. Or, there could be an enforcement delay due to the court officers’ backlog. Although there is no precedent governing the Order to Show Cause proceeding and subsequent trial, it would be logical if the Court scheduled the eviction trial on the return date of the Order to Show Cause Application to expedite the processing of trials that need to take place on an emergent basis.

All commercial landlords proceeding under these new Orders, should consult counsel prior to any filing. Understanding the timing and pros and cons of this new system is keys to maximizing the effectiveness of your actions.

If you have questions about evicting a commercial tenant during these times, do not hesitate to reach out to Marshall Kizner, (609) 219-7449 or Thomas Onder, (609) 219-7458, Shareholders at Stark & Stark’s Shopping Center & Retail Development Group. The Group represents national regional and local commercial landlords throughout New Jersey and are here to help.

[1] The Order does provide that in the case of the death of the tenant, a landlord may file such an action for non-payment of rent.

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Now is a Good Time to Make Your Estate Plan

Living in the time of COVID-19 has heightened everyone’s anxiety. With all of the uncertainties in life, implementing estate planning documents that provide for you and your family can afford some level of relief. Estate planning documents allow you to designate agents to assist with your affairs, while providing structure to assist loved ones as they navigate through turbulent situations. Working with an attorney can help to address questions you will have about your estate plan and will offer personal guidance through this process.

While estate planning is often viewed as only having a Will in place, there are other planning documents that are critically important. A Power of Attorney appoints an agent to manage your financial and legal affairs in the event of your incapacity. The Power of Attorney must be drafted and executed correctly so that the agent has authority to conduct necessary transactions and take necessary action in a timely manner.

When a person is incapacitated, hospitals and medical providers will require a surrogate decision maker to exercise medical decision making authority. A Power of Attorney for Healthcare allows you to designate a healthcare agent who you believe is best suited to make these types of decisions. A properly drafted Power of Attorney for Healthcare protects you by enabling the agent to take timely action on types of treatment, choice of medical staff, pain management and other important issues.

Lastly, a Will is necessary to manage and distribute a person’s estate after they pass. This includes naming appropriate beneficiaries and designating executors and other fiduciaries to carry out the terms of the Will. A Will provides a basic level of protection to your spouse and loved ones and avoids unnecessary expenses for your Estate. In some instances, more sophisticated estate planning documents, including trusts, are needed to accomplish your overall goals.

A Will, Power of Attorney, and Healthcare Power of Attorney provide a basic level of protection in the event of unexpected illness or injury. Failure to have these documents in place relinquishes your right to control these decisions and will generally require Court intervention to resolve them – with the resultant costs that will follow. The uncertainties created by this void may also encourage disputes among your heirs or cause unnecessary emotional hardship. An experienced estate planning attorney will help you through this process, while being available to answer questions you may have about your unique circumstances. Now is a good time to address these issues.

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Ascena Files for Chapter 11 Bankruptcy in Virginia

Ascena Retail Group, Inc., the parent of the Ann Taylor, Lane Bryant, Lou & Grey and LOFT retail chains, filed for Chapter 11 bankruptcy on Thursday, July 23, 2020 in the Eastern District of Virginia, docket # 20-33113. According to MarketWatch, the New Jersey-based company expects to reduce debt to become profitable. Ann Taylor, Loft, Lane Bryant and other chains will continue to operate through the restructuring with about 95% of stores open, while the company reduces its footprint.

This filing is the fourth on our Top 20 Watch List issued just a few weeks ago, joining Chuck E. Cheese’s, GNC, and Brooks Brothers.

If you have an Ann Taylor, Lane Bryant, Lou & Grey, and LOFT lease in your portfolio or if you are a trade creditor owed money, Stark & Stark’s Shopping Center Group can help. Our bankruptcy attorneys regularly represent landlords throughout the country, including recently in the Eastern District of Missouri, District of New Jersey, Southern District of New York, District of Delaware, District of Minnesota and the Western and Eastern Districts of Pennsylvania regarding a variety of issues. Our Group has been counsel to landlords and trade creditors in the GNC, Stage Stores, Modell’s, Pier 1, Art Van’s Furniture, Fairway Market, Mattress Firm, Toys “R” Us, Payless, A&P, rue21, Central Grocers and Sports Authority chapter 11 bankruptcy cases. For more information on how Stark & Stark can assist you, please contact shareholders Thomas Onder or Joseph Lemkin.

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Jerry Seinfeld’s Ex-Partner Time Barred in Copyright Dispute Over “Comedians in Cars Getting Coffee”

“The Second Circuit Court of Appeals affirmed a dismissal of untimely copyright infringement claims that an ex-partner brought against Jerry Seinfeld over the hit series “Comedians in Cars Getting Coffee”. Charles v. Seinfeld, 803 F. App’x 550 (2d Cir. 2020). Plaintiff Christian Charles brought suit claiming ownership over the pilot episode of the show “Comedians in Cars Getting Coffee” that he and his production company helped develop back in 2011.

Disputing Charles’ claimed ownership of the episode, Seinfeld maintained that he conceived the show, and that Charles worked as a work-for-hire producer and director. Seinfeld filed a motion to dismiss seeking dismissal of the ownership claims based on the expiration of the three-year statute of limitations period, which commenced when Charles knew, or should have known, that ownership was disputed. The District Court granted the motion concluding that Charles should have been aware of the ownership dispute in 2012, when Seinfeld rejected Charles’ request for back-end compensation and the show premiered without crediting Charles. Because the copyright suit was not filed until six years later in 2018, which coincidentally was shortly after Seinfeld had signed a deal with Netflix for streaming the show at approximately $750,000 per episode, the court dismissed the claims as time-barred.

Seinfeld and Charles were coworkers on multiple projects since the 1990s, but the important year was 2011, when Seinfeld “allegedly mentioned to Charles that he was considering a talk show about ‘comedians driving in a car to a coffee place and just chatting.’” Charles then immediately reminded Seinfeld that this was originally his idea from back in 2002, and the two subsequently started working together on the project. According to Charles, Seinfeld was not very involved, and Charles was largely responsible for the creativity behind the script. A dispute over compensation arose in 2012 when Charles wanted to be paid on an ownership basis with backend royalties, but Seinfeld maintained that Charles would only be paid on a work-for-hire basis. Seinfeld was upset with Charles for wanting more than the directing fee, and called him “ungrateful.” Their disagreement led to a fallout of their relationship, and Charles had no further involvement in the series. The show premiered in July 2012 without crediting Charles, at which point his ownership claim was publicly repudiated. The court determined that either one of these developments was enough to place Charles on notice that his ownership claim was disputed, thereby triggering the running of the three-year statute of limitations.

The Copyright Act has a three-year statute of limitation to ensure any claims of ownership in a work are brought and adjudicated in a timely fashion. 17 U.S.C. § 507(b). The Second Circuit has previously held that when “ownership is the dispositive issue” in an infringement claim, and the “ownership claim is time-barred,” then the infringement claim itself is time-barred, even if there had been infringing activity in three years preceding the lawsuit. Kwan v. Schlein, 634 F.3d 224, 230 (2d Cir. 2011). Seinfeld argued that Charles was on notice when he was denied backend compensation in 2012, and the lower court agreed. The District Court held that a reasonably diligent plaintiff would have understood that Seinfeld had repudiated Charles’s claim of ownership, giving rise to the requisite knowledge to begin the running of the statute of limitations. Furthermore, Seinfeld went on to produce and distribute the show without giving any credit to Charles, which also should have put Charles on notice of the ownership dispute.

In May 2020, the Second Circuit agreed with the District Court’s “well-reasoned” dismissal of the suit. Based on the events in 2012, the three-year statute of limitations expired in 2015, rendering Charles’s 2018 lawsuit untimely.

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Drake Wins Big With Fair Use

Drake scored a big win as the Second Circuit affirmed his use of another work in one of his songs as “fair use.” Estate of Smith v. Graham, 799 F. App’x 36 (2d Cir. 2020). The original lawsuit alleged Drake violated a copyright by sampling a 1982 word recording, “Jimmy Smith Rap,” in his own song, “Pound Cake.”

In April 2014, the estate of Jimmy Smith filed suit against Drake, alleging infringement of the copyright of “Jimmy Smith Rap.” It is worthwhile to note that Drake had actually obtained a license to the sound recording, but not the composition. In 2017, the District Court ruled that the portion of “Jimmy Smith Rap” used in Drake’s song was fair use because Drake’s objective was “sharply different from the [original artist’s goals] in creating it.” Estate of Smith v. Cash Money Records, 253 F. Supp. 3d 737, 750 (S.D.N.Y. 2017).

In affirming the District Court, the Second Circuit considered four well known non-exclusive factors in determining the work constituted fair use. The statutory framework for analyzing fair use includes (1) the purpose and character of use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. See 17 U.S.C. § 107; see also TCA Television Corp. v. McCollum, 839 F.3d 168, 179 (2d Cir. 2016).

The Court held that the first factor supported fair use because Drake’s use of the copyrighted material was transformative. A transformative work is one that uses copyrighted material for a purpose that differs from that for which it was created. TCA, 839 F.3d at 180. “Jimmy Smith Rap” was one about the greatness of jazz, and painted a negative view of all other types of music. It proposed that jazz would stand the test of time, where other types of music would not. Drake’s “Pound Cake,” however, sent the message that all music reigned supreme, regardless of genre. The Court held that while “Jimmy Smith Rap” promoted the elitism of jazz music, “Pound Cake” criticized it. Because the message Drake presented contrasted that of “Jimmy Smith Rap,” the Court held the copyrighted work was used for “a purpose, or imbue[d] it with a character, different from that for which it was created.” The Court found that because the work was transformative, the second factor supported fair use. With respect to the third factor, which looks at “whether the amount and substantiality of the portion used in relation to the copyrighted work as a whole are reasonable in relation to the purpose of the copying, the Court found the amount “Pound Cake” borrowed from “Jimmy Smith Rap” was reasonable because it was “necessary to emphasize its own message: that the ultimate attribute of music is its authenticity, not the production process that created it.” The Court also found the fourth factor in favor of fair use because “Pound Cake” did not negatively affect the market for “Jimmy Smith Rap” or decrease the demand for it in any way. The Court emphasized that “Pound Cake” was rap and hip-hop music, and “Jimmy Smith Rap” was by a jazz musician about jazz music, and therefore the two works targeted different audiences.

This is an interesting case for copyright infringements because most sample cases focus on recording rights, as opposed to musical or lyrical rights. Because Drake’s label already had a license to the recording rights and also because Drake sampled more than 35 seconds of the copyrighted track, the entire issue rested on fair use. Drake won big, especially since there has been disparity in what courts around the country consider “reasonable” in sampling-centric copyright infringement lawsuits.

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Tax Woes of the Cannabis Plant

The 16th Amendment to the U.S. Constitution provides that, “Congress shall have power to lay and collect taxes on incomes, from whatever source derived…”. According to § 162 of the Internal Revenue Code, businesses are generally allowed to deduct from their adjusted gross income the ordinary and necessary expenses they incur in carrying on their business. 26 U.S.C. § 162. One pesky provision in the Internal Revenue Code, § 280E, disallows these business expense deductions “if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.” 26 U.S.C. § 280E. Because marijuana is still illegal at the federal level under the Controlled Substances Act, according to § 280E, businesses that are engaged in the growing, manufacturing, or sale of marijuana are not entitled to deduct their ordinary and necessary business expenses from their adjusted gross income under § 162.

According to The Wolters Kluwer Bouvier Law Dictionary, income may be defined as “Gain in wealth realized from one’s labor, property, commerce, or investment.” For any taxpayer, taxable income is equal to their gross income less the deductions they are entitled to. In order to lessen overall tax liability, and thus avoid higher rates of taxation, it is in the taxpayer’s best interest to utilize all available deductions. Deductions are available to taxpayers so that their taxable income more properly reflects their overall “gain in wealth”.

With the emergence of state-sanctioned marijuana businesses over the last 10 years, the application of § 280E has left many marijuana businesses with tax liabilities that do not accurately reflect the income, or “gain in wealth realized”, they are generating. Recently, a marijuana business, Harborside Health Center, which was hit with an $11 million tax liability by the U.S Tax Court, has challenged the constitutionality of § 280E, arguing that it violates the 16^th Amendment’s reliance on “income”. Patients Mut. Assistance Collective Corp. v. Commissioner, Nos. 29212-11, 30851-12, 14776-14, 2018 Tax Ct. Memo LEXIS 211 (T.C. Dec. 20, 2018). The business maintains that § 280E improperly categorizes all monies generated by the business as income rather than more appropriately distinguishing those monies from “gain in wealth realized”. Harborside Health Center’s appeal will be heard in the Ninth Circuit, but remains unscheduled to this point. Patients Mut. Assistance Collective Corp. v. Commissioner, 19-73078. Per the brief that has been submitted by the appellant, the premise of their argument is that, “[b]y blocking a marijuana business from taking any deductions related to their expenses, § 280E is improperly classifying all money that passes through the business as income”. The National Cannabis Industry Association and the Marijuana Industry Group have filed amicus briefs echoing the appellant’s 16^th Amendment challenge to § 280E.

In addition to attacking the constitutionality of § 280E as a whole, Harborside argues that its “cost of goods sold should include the costs of the staff and materials it uses to examine, process and package the marijuana flower, clones and edibles it buys from wholesalers and sells in its shop.” Since § 280E only applies to business deductions, cannabis businesses are still allowed to reduce taxable income by the costs associated with selling inventory. According to 26 CFR § 1.61-3, “In a manufacturing, merchandising, or mining business, “gross income” means the total sales, less the cost of goods sold”, where the cost of goods sold is not an expense, but rather an adjustment that impacts the total amount of taxable gross income. Harborside argues that it functions like a grocery store that makes prepared food and butchers meat before putting it out for sale. Grocery stores are free to claim the cost of preparing the goods for sale as part of their costs of goods sold, so Harborside should as well.

Harborside’s tax challenge is just one in a series of lawsuits and actions aimed at reducing § 280E’s detrimental impact on legitimate, licensed marijuana businesses. Recently, the United States Tax Court acknowledged that if a business has both legal and illegal components (expenditures in connection with the illegal sale of drugs within the meaning of § 280E), the business will be permitted to take § 162 deductions for just those business-related expenses that are not in violation of § 280E. In 2007, the Tax Court, in Californians Helping to Alleviate Med. Problems, Inc. v. Commissioner, 128 T.C. 173 (2007), held that a California marijuana dispensary which provides counseling and caregiving services in addition to selling marijuana was allowed to deduct expenses relating exclusively to the counseling and caregiving aspects of its business. The burden of distinguishing the expenses concerning marijuana-related activity from those that were related to the counseling and caregiving services fell on the dispensary taxpayer. Along those same lines, in Alterman v. Commissioner, No. 13666-14, 2018 Tax Ct. Memo LEXIS 83 (T.C. 2018), the Tax Court determined that when a marijuana business is unable to distinguish legal business-related expenses from those expenses relating to the illegal activity (those associated with the trafficking of marijuana), all business deductions will be disallowed.

Beyond the Tax Court, in Alpenglow Botanicals, LLC v. United States, 894 F.3d 1187 (10th Cir. 2018), the U.S. Court of Appeals for the Tenth Circuit ruled that the IRS has the authority to determine that a cannabis business is trafficking in a controlled substance for purposes of applying § 280E. The court stated that a criminal conviction is not a prerequisite for the IRS to apply § 280E and that the IRS has the authority to determine through an audit that a taxpayer is trafficking in a controlled substance. Furthermore, the court stated that §280E is not an unlawful penalty and disallowing a deduction is not a “punishment.” Critics condemned this decision on the grounds that it gives the IRS the power to investigate non-tax crimes for tax administration purposes and allows them to administratively determine that a crime has been committed. The plaintiff’s writ of certiorari was denied by the Supreme Court of the United States.

Cannabis businesses across the country anxiously await the Ninth Circuit’s upcoming ruling in Patients Mut. Assistance Collective Corp. v. Commissioner, 19-73078. For now, it remains obvious that as long as marijuana remains illegal under the Controlled Substances Act, § 280E will continue to act as a barrier to marijuana businesses realizing their deserved profit.

One of the most important things a cannabis enterprise can do is ensure it maintains accurate and factually detailed records of its business transactions and expenses. Making sure there are proper accounting methods in place to detail business operations and not trying to account for costs and expenses after-the-fact are all best practices. If the IRS chooses to request further documentation supporting the deductions a business claimed when filing its taxes, and the business is able to offer substantiated documentation for such claimed deductions, the court will be less likely to prohibit the deductions altogether. It is also important to structure the business in a way that clearly distinguishes the marijuana business from the non-marijuana business. Selling paraphernalia next to actual drug products—without any other activities—will probably not be enough for a company to deduct necessary and ordinary business expenses and subsequently claim that those expenses do not run afoul of § 280E’s prohibition on deductions for marijuana businesses. Proper planning and accounting are key.

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Booking Is Generic But Booking.Com Is A Registerable Trademark

On June 30, 2020, Justice Ginsburg, writing for the Supreme Court, concluded that the addition of “.com” to a generic mark can be sufficient to elevate the mark beyond genericism and trigger federal trademark protection.

Previously, Booking.com was denied federal trademark recognition on the basis that it was a generic term, signifying a class of online hotel-reservation services rather than a particular brand or service of that class. Both the examining attorney and the Trademark Trial and Appeal Board (“TTAB”) concluded that the term “Booking.com” was generic for the services it provided and was therefore unregistrable. The TTAB, the PTO Appeal Board, analyzed the two components of the mark separately, concluding that “Booking” represented a generic term that was indicative of making travel reservations; and adding “.com” did not enhance the distinctiveness of the mark, it merely represented that the service is located on a commercial website. Booking.com sought review in the U.S. District Court for the Eastern District of Virginia, where that court relied on evidence of the consuming public’s understanding of the mark in determining that Booking.com met the distinctiveness requirement for trademark registration. The PTO did not appeal the District Court’s determination of how consumers perceived the term “Booking.com”, and instead only appealed that court’s holding that the mark was not generic.

A trademark distinguishes one producer’s goods or services from another; a chief purpose of granting trademark recognition is to further the ability of consumers to distinguish among competing producers. See Park ‘N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 198 (1985). Among the conditions for registration, the mark must hold some level of distinctiveness; the more distinctive the mark, the more readily it qualifies for the principal register. A generic descriptive term is unregistrable if it signifies to the consumer only a broad class of goods or services rather than a specific one (i.e. coffee versus Starbucks, sport cars versus Lamborghini, luxury handbags versus Louis Vuitton). The Lanham Act, enacted in 1946, extended protection to descriptive terms; in order to be placed on the principal register, however, descriptive terms must achieve significance in the “minds of the public”. See Wal-mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205, 211 (2000). The public’s perception of a mark is a core principle of the Lanham Act; whether a term is considered generic depends on its meaning to consumers. Without a secondary meaning, generic descriptive terms may only be eligible for the supplemental register, which provides more modest benefits. Relying on this core principle, the Supreme Court found that if “Booking.com” was generic, consumers would understand other related services (i.e. Travelocity, Kayak, Expedia) to be a sub-species or sub-set of Booking.com, which is simply not the case.

The PTO maintained that when a generic term (i.e. booking) is combined with a generic top-level domain (i.e. “.com”), the resulting combination is inherently generic. The PTO urged that this exclusionary rule follows from a pre-Lanham Act common-law principle applied in Goodyear’s India Rubber Glove MFG. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), holding that a corporate designation affixed to a generic term cannot confer trademark eligibility. The dissent joined in this argument, stating that “Generic.com” conveys that the generic good or service is offered online and nothing more. Writing for the majority, Justice Ginsburg refuted this argument, pointing to the PTO’s past practices in granting registrability of “art.com” and “dating.com”. If the PTO’s argument were successful, those existing “generic.com” trademarks would be at risk of cancellation. Relying on the reasoning in Goodyear, the Court pointed out that the PTO and the dissent disregarded a foundational principle of the Lanham Act, i.e. whether a term is generic depends on the meaning to consumers.

Additionally, the Court found it important that only one entity can occupy a particular Internet domain name at one time. Because of this, a consumer is likely to understand that any “generic.com” mark refers to a specific entity rather than a broad class of goods or services. This Internet real estate exclusivity sets the proposed marks apart from terms like “Wine, Inc.” and “The Wine Company”. For this reason, the Court resisted the PTO’s position that “generic.com” terms are only capable of signifying a class of goods and services and are incapable of identifying a single source provider, a requisite for trademark registrability.

Booking.com conceded that its mark is weak, and that federal registration of the term will not prevent competitors from using the word “booking” to describe their own services. That said, Booking.com can obtain federal registration of its “Booking.com” mark and will be afforded all of the trademark protections and perks that come with it. Good news for other “generic.com” marks. The Court’s decision, however, does not suggest that every generic term affixed to an Internet domain will be afforded the same protection. A company needs to advance a generic trademark term to the point where it is specifically and distinctively identifiable by the consuming public and serves to distinguish the company’s goods and services from those of its competitors to be entitled to federal trademark registration.

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Welcome John Kelleher, Esq., Family Law Attorney

Simon Law Group, LLC, is proud to announce that John Kelleher, Esq. has joined the firm, located in Somerville, Somerset County, New Jersey.

Is Zoom On The Verge Of Becoming A Generic Mark?

The videoconferencing platform Zoom has become a ubiquitous part of the new normal and an integral part of American life during the recent coronavirus pandemic. With such widespread adoption at an exponential pace, does the brand risk becoming a generic term like Aspirin, Elevator, and Thermos? Or will the brand be able to hold on to its trademarked ground like Kleenex, Band-Aid and Xerox, which are still legally protected trademarks even though they are frequently used as generic terms.

Which one will it be? Aspirin, Elevator, Thermos … Zoom OR Kleenex, Band-Aid, Xerox … Zoom

The critical question here will be whether the Zoom mark has become a common verb such that the term no longer serves a source-identifying function.

Genericide and the Effects of Advertising

Once a mark is generic, it is in the public domain for use by all, including competitors. Under U.S. law, genericide is a form of abandonment. A mark will be deemed to be “abandoned” if: (1) its use has been discontinued for three years with intent not to resume such use; or (2) when the mark becomes the generic name for the goods or services on or in connection with which it is used.

Courts have defined “generic” as “the genus of which the particular product or service is a species.”[1] In other words, a generic term is “the name of the product or service itself – what [the product] is, and as such . . . the very antithesis of a mark.”[2] In the case deeming ASPIRIN generic in the United States,[3] the late Judge Learned Hand set forth a standard for determining whether a mark has become generic:

“The single question, as I view it, in all these cases, is merely one of fact: What do the buyers understand by the word for whose use the parties are contending? If they understand by it only the kind of goods sold, them [sic], I take it, it makes no difference whatever what efforts the plaintiff has made to get them to understand more. He has failed, and he cannot say that, when the defendant uses the word, he is taking away customers who wanted to deal with him, however closely disguised he may be allowed to keep his identity.”

A trademark can become the generic name for the goods or services on or in connection with which it is used if the trademark owner fails to use the mark correctly on its goods or services and in advertising, fails to prevent infringements and generic uses, or fails to educate the public as to the proper generic name for the goods or services.[4]

Perhaps one of the earliest marks to become generic was LINOLEUM (1878); and one of the first cases where cancellation was invoked under the Lanham act based solely on the fact that the mark had become generic was FORMICA (1978).[5] In FORMICA, the FTC alleged that the term had become “the common descriptive name for decorative plastic laminates used on counter tops, table tops and the like.”[6] The implication of the FTC’s allegation was that no material differences in quality existed between the plastic laminates produced by the Formica Corporation and those offered for sale by its competitors and therefore, all manufacturers of such products should be able to describe their wares as FORMICA. The FTC’s attempt to cancel the mark FORMICA ultimately proved fruitless, however, and the mark was spared from becoming generic.

Other marks that were once on their way to becoming generic include XEROX, JEEP, BAND-AID, and KLEENEX. These marks continue to be protected by active trademark registrations, and thus are spared from genericide for now. To prevent these trademarks from becoming generic, each trademark owner ran aggressive advertising campaigns aimed at educating consumers to view its trademark as a source identifier as opposed to a common name for its goods and/or services.

Examples of the Ad Campaigns

Xerox Corp.’s

“You can’t Xerox a Xerox on a Xerox. But we don’t mind at all if you copy a copy on a Xerox® copier.”

Chrysler LLC’s

“They invented “SUV” because they can’t call them Jeep®.”

Johnson & Johnson Corp.’s

“I am stuck on Band-Aids brand cause Band-Aid’s stuck on me.”

Kimberly-Clark Corp.’s “‘Kleenex’ is a brand name…and should always be followed by an ® and the word ‘Tissue.’ [Kleenex® Brand Tissue] Help us keep our identity, ours.”

The critical question for Zoom will be whether the Zoom mark has become a mere common verb, falling within the generic mark category and therefore becoming ineligible for ongoing trademark protection. Between “Zoom meetings,” “Zoom trivia,” “Zoom yoga”, “Zoom weddings,” and Zoom just-about-anything-else-you-can-imagine, the company’s name has quickly evolved into a kind of shorthand for a livestreamed substitution for physical attendance in the new normal. While sudden popularity and market dominance such as this can be the beginning of genericide, it does not have to follow that trajectory.

Strength of the Zoom Mark

Courts recognize four trademark categories:

• Generic marks,
• Descriptive marks,
• Suggestive marks, and
• Arbitrary or Fanciful marks.[7]

At one end of the spectrum, warranting the greatest level of trademark protection, stand arbitrary or fanciful marks—those words which offer no inherent description of the product (i.e., Apple, Kodak, Verizon, Rolex).

On the other end of the spectrum lie generic marks—those made up of common descriptors to which courts afford no trademark protection (i.e., Escalator, Trampoline, Videotape).[8]

Zoom is arguably a suggestive mark. A suggestive trademark has wording that suggests characteristics of the underlying goods or services without saying it outright (i.e., Netflix, AirBus, KitchenAid). As stated in the USPTO trademark manual[9], suggestive trademarks “require imagination, thought, or perception to reach a conclusion as to the nature of those goods or services.”[10] Suggestive marks belong to the category of strong trademarks known as ‘inherently distinctive marks’ that do not require a showing of acquired distinctiveness for registration. While a suggestive mark may contain wording that hints at the goods or services, a bit of a leap of imagination is required.

On the other hand, merely descriptive marks tell you something about the goods or services, such as an ingredient, quality, characteristic, feature, function, purpose or use and are generally not registrable on the Principal Register without acquired distinctiveness. Therefore, a suggestive mark like Zoom is generally stronger than a descriptive mark.

Avoiding Genericide

Marks are at particular risk if no generic term exists, such as in cases where the trademark owner is the first entrant and, thus, the mark is adopted as the product name. Generally, the more typical victim of genericide is a first-of-its kind product — often patent-protected — that creates an entire new genre of goods. Usually a trademark becomes the name for a type of product when there is no other generic word for it. When upstart competitors start making rival versions, consumers use the name they know. Despite all its pandemic-fueled growth, Zoom is not the first of its kind. Videoconferencing services existed before Zoom exploded this spring — including Skype, FaceTime, Google Hangouts, and Microsoft Teams — and consumers know what to call them.

Moreover, the legal consensus has evolved on how consumers use trademarks in a generic sense. In 2017, the Ninth Circuit ruled that “Google” had not succumbed to genericide despite widespread use of “google” as a generic verb for searching the internet.[11] The Lanham Act states that it is an “accepted concept that a trademark can serve a dual purpose.”^[i] The Court in Google emphasized this principle in stating that simply because a mark is used as a different form of speech (a verb or noun as opposed to an adjective), does not mean that the mark loses its source-identifying function. Further, the Court held the fact that a mark is used as a verb does not mean that it is no longer being used to identify the source—the dual purpose nature of a trademark allows for verb use while still maintaining its source-identifying function. The same is likely true for Zoom. People are using the term generically to mean videoconferencing, but they also know that Zoom is a particular platform, distinct from Skype, Google and so on.

As consumers become savvier about brand choices, especially in the digital age, the phenomenon of genericide occurs less, as has been the trend in recent years. Hence, it is more likely than not that Zoom will avoid the fate of genericide.

 

 

---

• [1] Surgicenters of America, Inc. v. Medical Dental Surgeries, Co., 601 F.2d 1011, 1014 (9th Cir. 1979).
• [2] 2 J. Thomas McCarthy, Trademarks and Unfair Competition § 12:1[1] (4th ed. 1997).
• [3] Bayer Co. v. United Drug Co., 272 F. 505, 509 (S.D.N.Y. 1921).
• [4] 1-2 Gilson on Trademarks § 2.02 (2011).
• [5] Melton, Carol A., “Generic Term or Trademark?: Confusing Legal Standards and Inadequate Protection,” American University Law Review, 29 (3), 109-133 (1979) (citing FTC v. Formica Corp., Cancellation No. 11955 (T.T.A.B., filed May 31, 1978)).
• [6] FTC v. Formica Corp., Cancellation No. 11955 (T.T.A.B., filed May 31, 1978).
• [7] Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976).
• [8] Id.
• [9] TMEP § 1209.01
• [10] Id.
• [11] Elliot v. Google, Inc., 860 F.3d 1151, 1156 (9th Cir. 2017).
• [i] S. Rep. No. 98-627, at 5 (1984).

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The Pandemic Has Hit the Family Courts- What Should I Do Now?

In recent weeks, the Administrative Office of the Courts has released its statistics, and the news is not surprising. The courts in New Jersey are facing an unprecedented backlogs, and the Family Court has been hit particularly hard.

For those facing divorce, custody issues, post judgment issues, or any family matter, there are alternatives to consider.

Mediation is a process in which the parties hire a neutral individual who has been trained, and certified as a mediator to help them reach a resolution. In family law cases, the mediator is typically someone who has had significant experience practicing family law, or may be a retired family court judge. The mediator does not advocate for either party nor does the mediator give legal advice.. After the parties reach an agreement, the mediator typically prepares an agreement and advises the parties to seek their own separate lawyers to review the agreement, and make sure it is fair for both of them. Then, one of the parties will typically have their attorneys provide the agreement to the court, and in the case of the divorce, obtain the official judgment of divorce. In certain cases, such as ones in which there are complex issues, mediation will be conducted with each person having their own attorney participate as well.

Arbitration is a process by which the parties agree to have their disputes heard, and decided by a decision-maker who has been trained and certified as an arbitrator by the New Jersey Bar Association, American arbitration Association, or other organization providing training and certification. The arbitrator in family law matters is typically a lawyer who has had many years of experience in family law, or is a retired family law judge. The parties to the dispute often have a lawyer and the proceeding is similar to a court proceeding, although the parties are able to agree upon the formality of the process. An arbitrator’s decision is usually binding although the parties can agree to an appeal process. One of the most important benefits of arbitration is that unlike a case in the Superior Court, the arbitrator is only dealing with one case during the time that he or she is presiding. In the Superior Court, a trial may be on a judge’s calendar for a certain day, but that judge is almost always interrupted with emergency matters which shorten the time the judge has to address the case at hand. Arbitrating a case results in attorneys not having to spend significant time, and a client’s money waiting to be heard.

Collaborative law is a process by which the parties to a family law matter agree to settle their case without turning to the court system for the resolution of disputes. Collaborative cases take a “team” approach, where each party has their own lawyer, but the purpose is to act as a team in order to reach the best resolution for the family. There are two ways that make the collaborative process particularly unique. The first is when the parties agree to engage in the collaborative process, they are committing that they will not leave the process for litigation. In other words, if the going gets tough, the tough stay. If a party elects to leave the collaborative process, then that person has to obtain brand new counsel. This is because an essential part of the agreement is to remain in the collaborative process. The second unique characteristic is that there is typically a mental health professional who is part of the team, and a financial expert as well. These people guide both parties towards a resolution that is best for the entire family.

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Outsourced Compliance Services

As you may already be aware, Stark & Stark has assisted countless investment advisers with regulatory, legal, and compliance matters over the past thirty plus years. We have assisted our clients with registration issues, preparing policies and procedures, interpreting and advising on new rules and regulations, avoiding and defending litigation, and serving as counselors. We look forward to continuing to be able to serve our clients in this manner for countless more years to come.

Historically, we had been reluctant to provide outsourced compliance services for several reasons, but chief among them was our belief that an investment adviser must own its compliance program. We have received numerous inquiries over approximately the last five years from clients and prospective clients to see if we could assist them with carrying out certain routine and required elements of their compliance program.

After continued discussions with these clients, building out the essential infrastructure and hiring the necessary personnel, we began offering these services to a small subset of clients about four years ago.  Since then, many firms have engaged us for these services, and we successfully assisted  several of them to complete  SEC examinations. We are now in a position to make the outsourced compliance services offering available to all of our clients.

We remind firms seeking out our services that there is no one-size fits all program or approach to compliance. We tailor the scope of our services to each client depending upon their specific needs. As such, we will customize our engagement to fit your specific needs and won’t force you to pay for services that are not required or that can easily be performed in-house.

Some of the services that we currently perform for clients include:

• Review and maintain Form ADV;
• Prepare and submit Forms U-4 and U-5;
• Prepare and update policies and procedure manual;
• Conduct email review;
• Determine requirements for and submit state notice filings;
• Prepare and submit Form 13F, 13H and Schedules 13D/G;
• Conduct advertising reviews;
• Assist with performing annual reviews of the firm’s policies and procedures;
• Conduct annual compliance meetings with firm employees;
• Conduct branch office reviews; and
• Engage in monthly compliance calls.

We would be happy to discuss this offering with you.

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Cybersecurity Amid the Current Pandemic

Since it first announced its “Cybersecurity Initiative” in April 2014, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has been relentlessly setting its sights on RIA’s information security programs. In fact, as recently as its 2020 Examination Priorities, OCIE noted it will “continue to prioritize information security in each of its five examination programs.” I spoke to my partner, and our cyber expert, Cary Kvitka, regarding this ever-increasing important issue.

We’ve been helping RIAs draft customized cybersecurity policies and procedures under Regulation S-P, Rule 30(a) since April 2014. Among other things, it broadly requires RIAs to adopt written policies and procedures addressing technical safeguards to protect their clients’ data “against any anticipated threats or hazards to the security or integrity of customer records and information; and protect against unauthorized access to or use of customer records or information that could result in substantial harm or inconvenience to any customer.” Therefore, when we customize written cybersecurity policies and procedures for our clients, we have turned to OCIE’s published guidance to help identify and address their expectations.

We’ve also learned practical lessons by guiding our clients through focused cybersecurity examinations since 2014, one of which is that size really doesn’t matter much to the SEC’s examination staff. They seem to apply the same standards to RIAs of all sizes, ostensibly because they all face the same type of palpable risks. It is simply not enough for RIAs to adopt and enforce narrowly tailored policies and procedures for the protection of their clients’ data from internal or external breaches. Rather, they must also evaluate and update those policies and procedures on an ongoing basis in response to operational changes and evolving risks.

Since this pandemic has clearly changed the way RIAs conduct business and resulted in increased cybersecurity risks, we think this is an excellent time for RIAs to conduct a formal risk assessment and consider some changes to their policies, procedures, or infrastructure, if appropriate. In doing so, OCIE’s Cybersecurity and Resiliency Observations, released not long before the pandemic took hold, serves as a benchmark for industry best practices. In this respect, SEC Chairman Clayton himself opined:

Data systems are critical to the functioning of our markets and cybersecurity and resiliency are at the core of OCIE’s inspection efforts . . . I commend OCIE for compiling and sharing these observations with the industry and the public and encourage market participants to incorporate this information into their cybersecurity assessments.

Here are a few items we suggest RIAs specifically consider during those risk assessments, based OCIE’s Cybersecurity and Resiliency Observations:

Access Management – OCIE highlights multi-factor authentication as an effective tool to mitigate both internal and external penetrations. In the context of the pandemic, RIAs should consider whether to implement or increase their use of multi-factor authentication, especially where users will be logging into firm systems from outside the firm’s physical office.

Vulnerability Scanning – RIAs should establish a vulnerability management program that could scan network components, information systems, and endpoints. Since the RIA’s endpoints may have spread well outside the office during the pandemic and they may be relying upon different vendors, they should consider the adequacy of their vulnerability management program and consider additional fortification if necessary.

Vendor Monitoring and Testing – As RIAs rely more and more on third-party service providers, OCIE has apparently increased its due diligence obligations for RIAs. This includes monitoring vendor relationships to ensure that they continue to meet security requirements and notify RIAs about critical personnel changes. The pandemic may have put overwhelming strain on some of these vendors, and therefore, RIAs may be at risk of a service interruption that could ultimately damage their clients. RIAs should therefore consider additional communications with their vendors and evaluation of substitute vendors if necessary.

Risk Assessments – The risk assessment should identify, manage, and mitigate cyber risks relevant to the RIA’s business. This includes identification and prioritization of “potential vulnerabilities, including remote or traveling employees or insider threats.” In the case of the pandemic, RIAs should assess the increased risks of having its staff working from home or inability to access firm resources as they could at the office.

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CBD May Be Legal, but Challenges Still Persist in Obtaining CBD Product Trademark Registration

CBD is more common than ever these days, conveniently placed on your local corner store’s checkout aisle. But are they legal to purchase in your state? What about their names and logos, can they be federally registered as trademarks?

Last week, the Trademark Trial and Appeal Board (TTAB) ruled that a Colorado Cannabidiol (CBD) company could not register a trademark for hemp oil extracts because it violated the Food, Drug & Cosmetics Act (FDCA). In In re Stanley Brothers Social Enterprises, LLC, 2020 U.S.P.Q.2d 10658 (TTAB 2020), the Applicant developed a strain of cannabis that contained high CBD and low THC content. This specific strain of cannabis was found to help a young girl with severe form of childhood epilepsy. The girl’s name was Charlotte, and the strain was subsequently named “Charlotte’s Web,” which led to the Applicant’s attempt to trademark “CW.”

CBD is a non-psychoactive naturally occurring phytocannabinoid found in certain strains of cannabis, including marijuana and hemp. Tetrahydrocannabinol (THC) is another compound, well known for its psychoactive properties – the one that gets you “high.” Some studies have found CBD to be effective in providing relief from various mental health conditions, including anxiety, depression, insomnia, and post-traumatic stress disorder. The popularity of CBD products has exploded in recent years thanks to the passage of the U.S. Farm Bill in 2018 that legalized industrial hemp. The popularity has been bolstered by the legalization of medical and recreational marijuana at the state level. The production and purchasing of CBD is federally legal as long as it does not contain more than 0.3 percent THC; however, some state law restrictions may apply. For example, in Virginia, a prescription is necessary to obtain CBD.

When it comes to selling food to which CBD or THC has been added, the FDA’s position is a negative one. Under section 301(11) of the FDCA, it is prohibited to introduce or deliver for introduction into interstate commerce any food to which has been added a substance which is an active ingredient in a drug product that has been approved under section 505 of the FDCA, or a drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public. The FDCA also bans the sale of food products that have drugs added to them under 21 U.S.C. § 331(11).

Because the TTAB determined CBD to be a “biological product for which substantial clinical investigations” are ongoing, registration of the Applicant’s hemp extract product was prohibited. The Applicant argued the product was exempt from the FDCA’s restrictions under the Industrial Hemp Provision; however, the TTAB said that the industry group’s opinion does not change the law. The TTAB found that “a trade group’s unadorned statement of a ‘position’ (as opposed to fact), unsupported by any evidence, is an insufficient basis upon which to make a finding of fact, especially where the FDA disputes the stated position.” The second argument the Applicant presented was that dietary supplements were not “food;” however, because the Applicant identified its hemp oil extract as “an integral component of dietary and nutritional supplements,” the TTAB determined it fell within the FDCA’s definition of food. Lastly, the Applicant argued that CBD fell within an FDCA exception for drugs or biological products “marketed in food … before any substantial clinical investigations involving the drug or the biological product have been instituted.” The TTAB disagreed, however, citing lack of probative evidence.

Trademark registrations associated with cannabis have repeatedly been refused on similar grounds, because they cannot be “lawfully used in commerce.” See PharmaCann, 123 USPQ2d at 1123 (quoting In re JJ206, LLC, 120 USPQ 1568, 1569 (TTAB 2016) and In re Brown, 119 USPQ2d 1350, 1351 (TTAB 2016) (“to qualify for a federal … registration, the use of a mark in commerce must be ‘lawful.’”). In those decisions, the TTAB cited the Controlled Substances Act, which prohibits marijuana at the federal level. The most recent ruling, however, cited only the FDCA, which is likely because hemp and non-psychoactive CBD derived from hemp have been removed from the Controlled Substances Act.

It is interesting to note that a recent litigation proceeding concerning the legality of marketing and selling of CBD was stayed. Glass v. Global Widget, LLC, No. 2:19-cv-01907-MCE-KJN, 2020 U.S. Dist. LEXIS 104400 (E.D. Cal. June 15, 2020). The Defendant claimed the FDA was poised to issue CBD guidance soon, which would provide substantial clarification concerning the issues raised in the lawsuit. The Court decided to stay the lawsuit “until such time as the FDA completes its rulemaking regarding the marketing, including labelling, of hemp-derived ingestible products.”

It would not be surprising if the TTAB adopts a similar standard, where applications involving CBD would not simply be denied, but suspended pending guidance from the FDA. In Glass, the parties were directed to notify the Court within ten days after the expected FDA regulations were issued. This appears to be a reasonable decision, in light of what the FDA has been doing in the last year. The FDA conducted a public hearing on CBD in 2019, and thereafter appointed an agency task force along with a public docket for comments. In November 2019, the FDA issued a consumer update on CBD entitled “What you Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis-derived Compounds, Including CBD.” Furthermore, the FDA stated that the agency is “evaluating the regulatory frameworks that apply to certain (CBD products) that are intended for non-drug uses, including whether and/or how the FDA might consider updating its regulations, as well as whether potential legislation might be appropriate.” All of this indicates that the FDA will be releasing regulations and guidelines very soon, which will not only inform the issues raised in Glass but will also provide guidance for the issuance of CBD trademarks.

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Proving Abandonment: How Trademark Rights Can Be Lost Through Non-Use

Section 45 of the Lanham Act states a trademark is considered abandoned when “its use has been discontinued with intent not to resume such use.” Abandonment may be inferred from the surrounding circumstances, but proof of nonuse for three consecutive years is prima facie evidence of abandonment. Since use of a mark must be bona fide and registration cannot be used to reserve rights in a mark (apart from intent to use applications), a challenger seeking to cancel a registration on the basis of abandonment must either provide evidence of three consecutive years of nonuse or prove (1) the respondent discontinued use, and (2) the respondent intended not to resume use.

In Ross Bicycles LLC v. Century Sports, Inc., Cancellation No. 92067406, 2020 TTAB LEXIS 128 (T.T.A.B. Mar. 27, 2020), the challenger filed a petition to cancel the mark ROSS for “bicycles and structural parts thereof.” There were many evidentiary objections, and ultimately, the TTAB’s decision was based merely on oral testimony and one screenshot from a website selling a bike with the ROSS mark. The TTAB concluded that the reliable oral testimony presented by the challenger established a prima facie case of abandonment because the mark was shown to not have been used in commerce during the period of at least July 2013 through November 2017, which corresponded to the time period between when the trademark owner acquired the mark and when the petition for cancellation was filed. Additionally, there was no evidence that the owner intended to resume use of the mark. The Board, therefore, granted the cancellation petition and cancelled the registration on the basis of abandonment.

In contrast, the TTAB declined to find abandonment in My Organic Zone v. Shawgo, Cancellation No. 92068377, 2020 TTAB LEXIS 123 (T.T.A.B. Apr. 10, 2020). There, the Respondents owned a registration for the mark “Organic Zone” for online retail store services and café-restaurants featuring both food and clothing. The Petitioner filed a petition to cancel on the grounds of abandonment, arguing the mark was not used in commerce for at least three years, since April 2015. The TTAB found that the evidence did not establish any period of nonuse, and therefore, the mark was not abandoned. The evidence on which the TTAB based its decision was the Respondents’ interrogatory responses, which showed the registered mark was still in use in commerce and had not been discontinued for any period. The trademark owner came forward with specific information regarding prior and current use of the mark, as well as showed product offerings that used the mark.

Most recently, the TTAB considered abandonment of the CHICLETS trademark in Retrobrands USA LLC v. Intercontinental Great Brands LLC, Cancellation No. 92066647, 2020 TTAB LEXIS 239 (T.T.A.B. May 29, 2020). Retrobrands filed a petition for the cancellation of the Chiclets trademark registrations on the grounds of abandonment, arguing that the marks had not been used in the United States for a period of at least three years. Retrobrands is in the business of relaunching formerly famous, now abandoned brands, and it filed an application for registration of the mark CHICLETS for chewing gum; this gave Retrobrands standing to petition for cancellation of the mark.

Since 1900, Chiclets branded gum has been sold in the United States; various companies have acquired the Chiclets brand over the years, and most recently in 2011, it was acquired by Mondelēz, of which the Respondent is a part. It was undisputed that Mondelēz North America sold Chiclets branded gum through March 2016, when it decided to discontinue sales of Chiclets in the United States; the Respondent presented evidence that sales continued through the end of 2016. During 2016 and 2017, Mondelēz Exports, another division of the Mondelēz family considered whether to continue sales of Chiclets branded gum. Petitioner filed the petition for cancellation on August 9, 2017. Mondelēz Exports began distributing Chiclets gum in the United States by April 2018, after entering into an agreement with a distributor to import and sell the products. Evidence of sales since 2018 led the TTAB to conclude that the sales were not “token” sales. Based on these facts, the TTAB found that the Petitioner did not establish three years of nonuse, and therefore, did not establish prima facie abandonment. Nevertheless, because there was a period of nonuse from approximately January 2017 through April 2018, the Petitioner could still show abandonment if it could prove that the Respondent intended not to resume use of the mark.

In an effort to meet its burden, the Petitioner presented evidence that the Respondent had not done any advertising or marketing to promote the product since 2015. The TTAB found this evidence showed that only one member of the Mondelēz family decided to discontinue selling Chiclets branded gum, not that the entire family of companies intended not to resume use. The Petitioner also showed product lists and customer service emails showing the Chiclets branded gum had been “discontinued.” The TTAB again found this evidence was limited to Mondelēz North America, not the entire family of companies. The TTAB concluded that the Petitioner did not meet the burden of establishing that the Respondent did not intend to resume use of the mark; therefore, the registration was presumed valid. The TTAB considered the Respondent’s evidence, even though it did not have to, and found that there was an intent to use the mark based on the fact that another member of the Mondelēz family considered taking over the Chiclets branded gum by at least January 2017, and ultimately began distributing the product again in April 2018.

These cases illustrate that a prima facie case of abandonment is easily establish upon a showing that a mark was not in use in commerce for at least three years. If such evidence of consecutive non-use is unavailable, it becomes much more difficult to prove abandonment. To carry its burden, a challenger must show not only that the trademark owner discontinued use of the mark, but also that the respondent intends not to resume use of the mark.

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Paycheck Protection Program Extension

Late Tuesday June 30, 2020, just a few hours before the expiration of Paycheck Protection Program (PPP), the Senate voted to extend the PPP five more weeks. The move was made to allow eligible small businesses that have not applied or been denied a loan under the PPP more time to claim the remaining $129 million in the program.

Currently, the Small Businesses Administration (SBA) which oversees the PPP stopped taking applications as of midnight Tuesday. However, if the House and President sign-off on the extension the PPP will be reopened and remain available until August 8, 2020.

We will continue to update you as we learn more.

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