A Trademark Is Insurance, Not PropertyOctober 4, 2019

It is widely accepted patents and copyrights confer a Constitutional exclusive right. See the Intellectual Property Clause, U.S. Const., Art. I. § 8, cl. 8. Unlike patents and copyrights, the constitutional foundation for trademarks is the Commerce Clause, U.S. Const., Art. I, § 8, cl. 3. Thus, the trademark right may conceivably be a property right, while patents and copyrights are not.

Trademarks rights accrue through lawful use of the trademark, regardless of whether the trademark owner registers the mark. The trademark is maintained so long as the owner continues to actively use the trademark in the course of trade. Unlike personal property, for example, the owner of a mark loses rights to the mark if the owner fails to use the mark.

Additionally, unlike property:

a trademark cannot be assigned in gross (assigned without its accompanying goodwill), see Marshak v. Green, 746 F.2d 927 (2d Cir. 1984);

a trademark cannot be confined to one physical object, rather, the trademark is generally, “the adoption of something already in existence as the distinctive symbol of the party using it, “In re Trade-mark Cases, 100 U.S. 82 (1879); and

a trademark can act as a form of commercial speech, Friedman v. Rogers, 440 U.S. 1, 11 (1979).

Aspects of a trademark that weigh in favor of a trademark being property include:

it has monetary value, see Pro-Football, Inc. v. Harjo, 565 F.3d 880 (D.C. Cir. 2009) (wherein, after the D.C. Cir. upheld registration of the mark, an offer to sell the Washington Redskins for $800 million was accepted, even though a similar offer was formerly rejected);

ownership is given to those who are first to use (i.e. priority) the mark, similar to the first-in-time first-in-right rule, see Pierson v. Post, 3 Cai. R. 175 (N.Y. 1805); and

trademarks can be licensed.

To help resolve whether a trademark is a property right, it is important to note trademark law nests within the broader law of unfair competition law. United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918). Trademark rights allow (a) the owner the right to build goodwill with the mark and (b) consumer identification of goods and services with a particular origin. Trademarks, and even common law trademarks, thus act as insurance. They provide remedies to those harmed by unfair competition during the course of trade.

The owner is given the option to further insure themselves within the American legal system with a registered mark. A registered mark confers several additional benefits to the owner of the mark, including: (c)notice, all would-be infringers are charged with knowledge of the registration and the benefits derived thereunder; (d) deterrence, the use of the ® symbol provides some deterrence to would-be infringers; (e) national protection; (f) incontestability after five years of registration; (g) preventing cybersquatting, it is easier to establish a bona fide commercial interest in a registered trademark for purposes of both the Uniform Dispute Resolution Policy and the Anti-cybersquatting Consumer Protection Act; and (h) evidentiary advantages, “the registration shall be conclusive evidence of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the registered mark in commerce.” 15 U.S.C. § 1115.

There are many parallels between trademarks and insurance.

First, trademark owners can lose the trademark by behaving unreasonably (e.g. trademark bullying), like how insurance owners can lose the ability to collect on or be forced to pay more for insurance if they behave in a reckless or malicious manner.

Second, insurers only provide monetary benefits to insurance owners when the insurance is used. Both insurance and trademarks provide the peace of mind that the legal system will take care of the owner in the event of a catastrophe.

Third, both insurance and trademarks benefit the public. For example, the hospital system is greatly benefited by health insurance. Sophisticated insurers help negotiate prices for health care, rather than unsophisticated and/or ill patients. Health care in the case of an emergency is made more affordable because patients are subsidized by other health care holders. Likewise, trademarks signal to the consumer that the product on which they are associated with has a particular set of qualities. A consumer who buys Tide laundry detergent immediately knows that the detergent found in the bottle will effectively clean their clothes and leave them with a particular smell. This helps reduce transaction costs within the marketplace because the consumer does not have to evaluate every bottle of detergent they buy.

The idea of trademark as insurance isn’t flawless. Car insurance holders, for example, benefit from not using the insurance. Trademark owners can lose the mark from lack of use. Furthermore, different insurance holders can share the same insurance policy within the same geographic area. There can be only one trademark owner for a single mark to be associated with a single set of goods or services within a single geographic area.

The author of this article is extremely interested in comments, including criticisms, of the ideas expressed in this article. The article was prepared solely for educational purposes to contribute to the understanding of U.S. intellectual property law. This article reflects only the personal views of the author and is not individualized legal advice. It is understood that every business and IP situation is fact specific, and that the appropriate solution in any instance will vary. Therefore, this article may or may not be relevant to any situation. Thus, the authors and McKee, Voorhees & Sease, PLC, cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in this article. The presentation of this article does not establish any form of attorney-client relationship with these authors. While every attempt was made to ensure that this article is accurate, however errors or omissions may be contained therein, for which any liability is disclaimed.

This article is dedicated to Professor Ken Port, who passed away peacefully in hospice surrounded by his family on Sept. 27, 2019. His instruction of Copyright Law and Trademark Law continue to help the author, Gregory Lars Gunnerson, in his career today. Professor Port will be sorely missed.

Gregory “Lars” Gunnerson is a Patent Attorney in the Mechanical and Electrical Patent Practice Groups at McKee, Voorhees & Sease, PLC. For additional information please visit  www.ipmvs.com or contact Lars directly via email at gregory.gunnerson@ipmvs.com .