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Trademark Priority: First-in-time, first-in-right . . . but not always.

When two businesses offer the same or similar products or services under the same or confusingly similar mark, the first question is who has superior trademark rights. Superior rights go to the user with “priority,” a term of art in trademark law. In the U.S., with some exceptions, priority is generally determined by the first party to use a mark in commerce. But, determining who first used the mark in commerce is not necessarily straightforward, because it can relate specifically to the date of first use, but also the geographical extent of use, whether one business has filed an intent-to-use application (discussed below), or whether one business already owns a federal trademark registration.

Below we discuss the some of factors that impact trademark priority through hypothetical scenarios.

Scenario 1 – Common Law User v. Common Law User:

  • July 4, 2018  ABC LLC starts selling balloons under the brand BLOOMERS throughout California.
  • July 6, 2018  XYZ LLC starts selling balloons under the brand BLOOMERS throughout Illinois.

Common law (unregistered) rights are granted to the first user of a particular mark in commerce; however, common law rights are limited to the specific geographic area in which the products are sold or services are offered. In this set of circumstances, beginning on July 4, 2018, ABC developed common law rights in California, and beginning on July 6, 2018, XYZ developed common law rights in Illinois. Both are senior users within their separate territories. Though ABC started using the mark first, its rights in California do not extend into Illinois, and XYZ’s rights do not extend into California.

This means that ABC could stop XYZ from selling balloons under the BLOOMERS mark in California, and XYZ could stop ABC from selling balloons under the BLOOMERS mark in Illinois. Common law priority in the other states will depend on who started selling in a given state first and the extent of their use in that state.

Scenario 2 – Prior Common Law User v. Junior User with Intent-to-Use Application/Registration:

  • July 4, 2018  ABC starts selling balloons under the brand BLOOMERS in California.
  • July 6, 2018  XYZ files an intent-to-use application with the USPTO for the BLOOMERS mark for balloons, but has not yet started selling balloons.
  • November 1, 2018  ABC starts selling balloons in Colorado.
  • December 15, 2018  XYZ starts selling balloons in Illinois and Indiana.
  • January 1, 2019 XYZ’s federal registration issues.

An intent-to-use (“ITU”) application essentially allows a user to “reserve” a mark, before actually using it in commerce. By filing an ITU application, the owner obtains nationwide “constructive use” priority dating from the time of filing the ITU application rather than at the time of actual use – but only after the application issues as a registration. “Constructive use” priority means the law treats you as if you started using the trademark in commerce as of the filing date. Meaning, if registration for XYZ’s application does not ultimately issue, XYZ cannot claim the earlier priority date based on its filing date, even while the application is pending at the Trademark Office.

In Scenario 2, once XYZ’s ITU application matures to registration, it grants XYZ a presumption of nationwide priority, and its effective priority date is the filing date of July 6, 2018.

How does XYZ’s registration effect ABC’s common law rights?

A prior user of a mark can defeat a federal registrant’s presumption of nationwide priority in any territory in which it can show that it (1) used the mark prior to the registrant’s application date and (2) before the registrant used the mark in that territory. ABC is considered a prior user because it started using the mark prior to XYZ’s filing date, and acquired common law rights in California and Colorado prior to XYZ’s use in California and Colorado.

As a result, XYZ cannot stop ABC’s use in California or Colorado. That said, ABC’s expansion is frozen as of the date of XYZ’s registration. Meaning, if ABC tried to sell its balloons in Washington after December 15, 2018, it would infringe on XYZ’s rights.

Scenario 3—Prior User & Registrant v. Junior User Who Began Use After Prior User but Before the Prior User Applied for Registration:

  • July 4, 2018  ABC starts selling balloons under the brand BLOOMERS to purchasers in California
  • July 6, 2018  XYZ LLC starts selling balloons under the brand BLOOMERS to purchasers in Illinois
  • November 1, 2018  ABC starts selling balloons in Colorado and submits a federal application
  • December 15, 2018  ABC’s registration issues.

In this situation, both ABC and XYZ would have common law rights to the marks in their respective territories until November 1, 2018. Once ABC applies for and obtains a federal registration, XYZ only retains rights in the territory where it developed common law rights, before ABC’s application date.

This situation differs from Scenario 2 in that ABC is both the prior user and the first to file a federal application. This is significant because XYZ’s rights are frozen geographically upon the date ABC files its application, whereas in Scenario 2, ABC’s rights were frozen as of the date of XYZ’s registration. Meaning, as of November 1, 2018, XYZ’s rights are frozen and limited to Illinois.

Establishing priority is one of the most important factors in trademark disputes. Before adopting a mark or expanding geographically or into new product lines, it is essential to know where your business stands in the trademark pecking order.

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