T.M.E.P. § 1201.03
Use by Related Companies
Executive summary:
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1201.03 Use by Related Companies
Section 5 of the Trademark Act, 15 U.S.C. 1055, states, in part, as follows:
Where a registered mark or a mark sought to be registered is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration, and such use shall not affect the validity of such mark or of its registration, provided such mark is not used in such manner as to deceive the public.
Section 45 of the Act, 15 U.S.C. 1127, defines "related company" as follows:
The term "related company" means any person whose use of a mark is controlled by the owner of the mark with respect to the nature and quality of the goods or services on or in connection with which the mark is used.
Thus, §5 of the Act permits applicants for registration to rely on use of the mark by related companies. Either a natural person or a juristic person may be a related company. 15 U.S.C. 1127.
The essence of related-company use is the control exercised over the nature and quality of the goods or services on or in connection with which the mark is used. When a mark is used by a related company, use of the mark inures to the benefit of the party who controls the nature and quality of the goods or services. This party is the owner of the mark and, therefore, is the only party that may apply to register the mark. Smith International, Inc. v. Olin Corp., 209 USPQ 1033, 1044 (TTAB 1981).
Reliance on related-company use requires, inter alia, that the related company use the mark in connection with the same goods or services recited in the application. In re Admark, Inc., 214 USPQ 302 (TTAB 1982) (related company use not at issue where the applicant sought registration of a mark for advertising agency services and the purported related company used the mark for retail store services).
A related company is different from a successor in interest who is in privity with the predecessor in interest for purposes of determining the right to register. Wells Cargo, Inc. v. Wells Cargo, Inc., 197 USPQ 569 (TTAB 1977), aff'd, 606 F.2d 961, 203 USPQ 564 (C.C.P.A. 1979).
See TMEP §1201.03(c) regarding wholly owned related companies, §1201.03(d) regarding corporations with common stockholders, directors or officers, §1201.03(e) regarding sister corporations, and§1201.03(f) regarding license and franchise situations.
1201.03(a) Use Solely by Related Company Must be Disclosed
If the mark is not being used by the applicant but is being used by one or more related companies whose use inures to the benefit of the applicant under §5 of the Act, then these facts must be disclosed in the application. 37 C.F.R. 2.38(b). See Pease Woodwork Co., Inc. v. Ready Hung Door Co., Inc., 103 USPQ 240 (Comm'r Pats. 1954); Industrial Abrasives, Inc. v. Strong, 101 USPQ 420 (Comm'r Pats. 1954). Use that inures to the applicant's benefit is a proper and sufficient support for an application and satisfies the requirement of 37 C.F.R. 2.33(b)(1) that a §1(a) application specify that the applicant has adopted and is using the mark.
The party who controls the nature and quality of the goods or services on or in connection with which the mark is used should be set forth as the applicant. In an application under §1(a) of the Trademark Act, the applicant should state in the body of the application that the applicant has adopted and is using the mark through its related company (or equivalent explanatory wording). In a §1(b) application, the statement that the applicant is using the mark through a related company should be included in the amendment to allege use under 15 U.S.C. 1051(c) (see TMEP §§1104 etseq.) or statement of use under 15 U.S.C. 1051(d) (see TMEP §§1109 etseq.).
The applicant is not required to give the name of the related-company user unless it is necessary to explain information in the record that clearly contradicts the applicant's verified claim of ownership of the mark.
The applicant may claim the benefit of use by a related company in an amendment to the application. Greyhound Corp. v. Armour Life Insurance Co., 214 USPQ 473, 475 (TTAB 1982).
If the applicant and a related company both use the mark, and it is the applicant's own use of the mark that is relied on in the application, then the applicant does not have to include a reference to use by a related company in the application. See TMEP §1201.05.
1201.03(b) No Explanation of Applicant's Control Over Use of Mark by Related Companies Required
Where the application states that use of the mark is by a related company or companies, the Office does not require an explanation of how the applicant controls the use of the mark.
Similarly, the Office does not inquire about the relationship between the applicant and other parties named on the specimens or elsewhere in the record, except when the reference to another party clearly contradicts the applicant's verified statement that it is the owner of the mark or entitled to use the mark. See TMEP §1201.04.
1201.03(c) Wholly Owned Related Companies
Related-company use includes situations where a wholly owned related company of the applicant uses the mark or the applicant is wholly owned by a related company that uses the mark.
Frequently, related companies comprise parent and wholly owned subsidiary corporations. Either a parent corporation or a subsidiary corporation may be the proper applicant, depending on the facts concerning ownership of the mark. The Office will consider the filing of the application in the name of either the parent or the subsidiary to be the expression of the intention of the parties as to ownership in accord with the arrangements between them.
Either an individual or a juristic entity may own a mark that is used by a wholly owned related company. See In re Hand, 231 USPQ 487 (TTAB 1986).
1201.03(d) Common Stockholders, Directors or Officers
Corporations are not "related companies" within the meaning of §5 of the Trademark Act, 15 U.S.C. 1055, merely because they have the same stockholders, directors or officers, or because they occupy the same premises. In re Raven Marine, Inc., 217 USPQ 68, 69 (TTAB 1983) (statement that both the applicant corporation and the corporate user of the mark have the same principal stockholder and officer held insufficient to show that the user is a related company).
If an individual applicant is not the sole owner of the corporation that is using the mark, the question of whether the corporation is a "related company" depends on whether the applicant maintains control over the nature and quality of the goods or services such that use of the mark inures to the applicant's benefit. A formal written licensing agreement between the parties is not necessary, nor is its existence sufficient to establish ownership rights. The critical question is whether the applicant sufficiently controls the nature and quality of the goods or services with which the mark is used. See Pneutek, Inc. v. Scherr, 211 USPQ 824 (TTAB 1981) (detailed written agreement and substantial evidence in the record indicating that the applicant, an individual, exercised control over the nature and quality of the goods sold under the mark by the user corporation held sufficient to show that the corporation was a related company).
Similarly, where an individual applicant is not the sole owner of the corporation that is using the mark, the fact that the individual applicant is a stockholder, director of officer in the corporation is insufficient in itself to establish that the corporation is a related company. The question depends on whether the applicant maintains control over the nature and quality of the goods or services.
See TMEP §1201.03(c) regarding use by wholly owned related companies.
1201.03(e) Sister Corporations
The fact that two sister corporations are controlled by a single parent corporation does not mean that they are related companies. Where two corporations are wholly owned subsidiaries of a common parent, use by one sister corporation is not considered to inure to the benefit of the other unless the applicant sister corporation exercises appropriate control over the nature and quality of the goods or services on or in connection with which the mark is used. In re Pharmacia Inc., 2 USPQ2d 1883 (TTAB 1987); Greyhound Corp. v. Armour Life Insurance Co., 214 USPQ 473 (TTAB 1982).
See TMEP §1201.03(c) regarding use by wholly owned related companies.
1201.03(f) License and Franchise Situations
The Office accepts applications by parties who claim to be owners of marks through use by controlled licensees, pursuant to a contract or agreement. Pneutek, Inc. v. Scherr, 211 USPQ 824, 833 (TTAB 1981).
A controlled licensing agreement may be recognized whether oral or in writing. In re Raven Marine, Inc., 217 USPQ 68, 69 (TTAB 1983).
If the application indicates that use of the mark is pursuant to a license or franchise agreement, and the record contains nothing that contradicts the assertion of ownership by the applicant (i.e., the licensor or franchisor), the examining attorney will not inquire about the relationship between the applicant and the related company (i.e., the licensee or franchisee).
Ownership rights in a trademark or service mark may be acquired and maintained through the use of the mark by a controlled licensee even when the only use of the mark has been made, and is being made, by the licensee. Turner v. HMH Publishing Co., Inc., 380 F.2d 224, 154 USPQ 330, 334 (5th Cir. 1967), cert. denied, 389 U.S. 1006, 156 USPQ 720 (1967); Central Fidelity Banks, Inc. v. First Bankers Corp. of Florida, 225 USPQ 438, 440 (TTAB 1984) (use of the mark by petitioner's affiliated banks considered to inure to the benefit of petitioner bank holding company, even though the bank holding company could not legally render banking services and thus could not use the mark).
Joint applicants enjoy rights of ownership to the same extent as any other "person" who has a proprietary interest in a mark. Therefore, joint applicants may license others to use a mark and, by exercising sufficient control and supervision of the nature and quality of the goods or services to which the mark is applied, the joint applicants/licensors may claim the benefits of the use by the related company/licensee. In re Diamond Walnut Growers, Inc. and Sunsweet Growers Inc., 204 USPQ 507 (TTAB 1979).
Stores that are operating under franchise agreements from another party are considered "related companies" of that party, and use of the mark by the franchisee/store inures to the benefit of the franchisor. Mr. Rooter Corp. v. Morris, 188 USPQ 392, 394 (E.D. La. 1975); Southland Corp. v. Schubert, 297 F. Supp. 477, 160 USPQ 375, 381 (C.D. Cal. 1968).
In all franchise and license situations, the key to ownership is the nature and extent of the control by the applicant of the goods or services to which the mark is applied. A trademark owner who fails to exercise sufficient control over licensees or franchisees may be found to have abandoned its rights in the mark. See Hurricane Fence Co. v. A-1 Hurricane Fence Co. Inc., 468 F. Supp. 975, 208 USPQ 314, 325-27 (S.D. Ala. 1979).
In general, where the application states that a mark is used by a licensee or franchisee, the Office does not require an explanation of how the applicant controls the use. See TMEP §1201.03(b).