The Impact of the 2021 Consolidated Appropriations Act on Intellectual Property Print PDF
When signed into law by the President on December 27, 2020, the Consolidated Appropriations Act, 2021[1] (the “Appropriations Act”) provided additional stimulus relief for the COVID pandemic.
However, most people are not aware that the act also included some significant changes and additions to intellectual property laws, particularly the Lanham Act (which the Trademark Act of 1946 is more well known as) and the Copyright Act. This article highlights some of the substantive intellectual property changes and additions.
Trademark Modernization Act of 2020
The portion of the Appropriations Act that amends the Lanham Act is known as the Trademark Modernization Act of 2020 (the “TM Act”). Many of the substantive additions and amendments are intended to address the recent increase in trademark registrations that falsely claim use of a mark. Through fraudulent evidence of use, many applicants are obtaining registrations for trademarks that they have never used or that they have not used in accordance with the use requirements. In particular, there were recently a large number of fraudulent trademark registrations emanating from China that utilized fake or digitally altered specimens of use. A summary of the Act provided by its sponsors states that “The TM Act addresses the false-use claim problem by creating new procedures to improve examination effectiveness and efficiency…” and “[the Act] promotes remedies designed to protect consumers in trademark cases.”[2]
Challenges to Validity of Registration
The TM Act provides third parties two new means to challenge registrations for trademarks that are not, or have never been, in use (known as “deadwood” registrations): ex parte reexamination and expungement by the U.S. Patent and Trademark Office (“PTO”). Currently, third parties can only request cancellation of a trademark registration through an inter partes procedure before the Trademark Trial and Appeal Board (“TTAB”) or a district court. This approach can be time consuming and costly, and also requires the third party to demonstrate a “direct or personal stake” in the decision. An ex parte procedure removes this requirement and offers a less costly alternative.
The reexamination process allows third parties to challenge a registration by providing evidence that the trademark was not in use in commerce for or in connection with some or all of the goods and services set forth in the registration on or before the date of filing (or when use was claimed for an intent-to-use application). Under the reexamination process, the claimant must file no later than five years after the registration date of the applicable mark.
The expungement process allows third parties to challenge a registration by providing evidence that the trademark has never been used in commerce with some or all of the goods and services set forth in the registration. Under the expungement process, a filing may be made between three and 10 years after the registration date of the applicable mark. However, for the initial three-year period following the effective date of the TM Act (i.e., through December 27, 2024), a claimant may make a filing for any trademark that has been registered for at least three years (regardless of whether it has been more than ten years from the registration date).
These new reexamination and expungement procedures go into effect as of December 27, 2021. However, to be clear, third parties can use these procedures to challenge trademarks that registered before that date.
Updates to Trademark Examination Procedures
The TM Act codifies the current “Letter of Protest” procedure, whereby third parties may, during the PTO’s examination of trademark applications (rather than after the publication of the mark), submit evidence of grounds for refusal of the mark. Such evidence can relate to any ground on which the PTO could refuse registration, including that a mark is not actually in use for the filed goods and services and/or that a senior registration exists. This portion of the TM Act also goes into effect December 27, 2021.
In addition, to streamline the review and registration process, the Act allows the PTO to modify the response period for office actions from six months to a period of no less than 60 days. For periods of less than six months, respondents can automatically obtain an extension of time upon request (for a fee and for an extension period to be set by the PTO).
Presumption of Irreparable Harm
Federal Circuit Courts have been split on whether a party seeking to obtain permanent injunctive relief in connection with a trademark violation claim is: (a) entitled to a rebuttable presumption of irreparable harm upon a finding of a violation or a likelihood of success on the merits; or (b) if such party was required to prove irreparable harm. The split has come mainly as a result of the Supreme Court’s decision in eBay v. MercExchange, LLC, 547 U.S. 388 (2006), which held that there is no such rebuttable presumption of irreparable harm in connection with patent cases. The TM Act specifically adds such a rebuttable presumption in connection with a trademark violation claim, putting to rest the split amongst courts. This amendment goes into effect immediately.
The Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2020
Individual and small business copyright owners are frequently unable to assert their rights and seek infringement claims because of the time-consuming and expensive process of bringing actions in federal court. The Case Act seeks to provide such owners a less costly and streamlined option through the creation of a Copyright Claims Board (the “Board”) within the U.S. Copyright Office to hear copyright disputes valued up to $30,000. The Board has the power to hear the following: (i) infringement claims; (ii) declarations of noninfringement; (iii) misrepresentation claims; (iv) counterclaims arising out of the related infringement claims; and (v) available legal or equitable defenses in response to a claim or counterclaim before the Board. A claimant must bring an action within three years after the claim accrued.
The use of this avenue is optional, and a respondent is free to elect to opt out of the proceeding within 60 days of notice of a complaint. In this event, the claim is dismissed without prejudice and the claimant is required to refile in federal court. However, if the parties agree to the Board Process, they relinquish the right to be heard before a court and the right to a jury trial (except in very limited circumstances). The opt-out choice for respondents could significantly erode the usefulness of this process for claimants, as it would require them to resort to the more expensive alternative of bringing a formal legal action.
Generally, discovery in the proceeding is limited to “production of relevant information and documents, written interrogatories, and written requests for admission.”[3] However, for good cause, the Board can approve additional discovery, such as specific information and documents and voluntary submissions from nonparticipants.
The Board can: (a) issue actual or statutory damages, at the claimant’s election, in an amount no greater than $15,000 per claim and $30,000 for the entire procedure (and can also award attorneys’ fees up to an additional $5,000); and (b) order a party to cease its infringing conduct. Board determinations are final, except for extraordinary situations in which an appeal may be filed (e.g. determination was issued as a result of fraud or other misconduct, or Board exceeded its authority). However, the decisions cannot be cited or relied upon as legal precedent.
The Board must begin operation no later than December 27, 2021 (or within 180 days of that date if for good cause it needs more time).
The Protecting Lawful Streaming Act
In addition to the CASE Act, the Appropriations Act includes The Protecting Lawful Streaming Act, which raises from a misdemeanor to a felony copyright infringement based on streaming copyrighted works without permission. The violator must be “willfully, and for purposes of commercial advantage or private financial gain” digitally transmitting material without authorization of the copyright owner or pursuant to applicable law.[4] While this act is broad, it is primarily aimed at large scale, for profit piracy.
The foregoing information is provided only for general reference. It does not constitute legal advice. Legal advice may be provided based only on specific facts. Please consult Parker Ibrahim & Berg before relying on any general information stated herein. We are happy to discuss any questions you may have regarding legal issues related to direct marketing.
[1] The text to the Act can be found here: https://www.congress.gov/bill/116th-congress/house-bill/8337/text.
[2] https://hankjohnson.house.gov/sites/hankjohnson.house.gov/files/documents/TM%20Act%20-%20One%20Pager.pdf
[3] Continuing Appropriations Act, 2021, H.R. 133, 116th Cong. (2020) at 1009.
[4] Continuing Appropriations Act, 2021, H.R. 133, 116th Cong. (2020) at 995.