Trademark Use By Trademark Applicant's Related Company
A trademark applicant can base its claim of ownership of a mark on it's own exclusive use, use of the mark by a "related company" whose use inures to the owner, or by use of the mark by both the owner and the related company. A related company is any person or entity whose use of the mark is controlled by the owner with respect to the quality and nature of the goods or services. The owner of the mark (the person or entity controlling the nature and quality of the goods and services) is the only party who may apply to register the mark. See our webpage entitled, Who Should Be The Owner Of A Trademark, for information on how to properly make this important determination. The related company must use the mark for the same goods and services identified in the trademark application or registration.
Section 37 C.F.R. §2.38(b) states that if the related company exclusively utilizes the trademark and there is no use by the applicant, then this fact must be disclosed in the trademark application. If the application is use based then this information should be set forth in the application and if it is an intent-to-use application, the same information should be set forth in the Statement of Use. However, the applicant does not have to provide the name of the related company. In addition, the applicant need not explain how it controls the nature and quality of the goods and services. Section 37 C.F.R. §2.38(b) also states that if first use of the mark is by a predecessor in title or by a related company then a statement should be included to this effect.
Examples of situations where use by a related company may arise would include a wholly owned related company of the applicant, a licensor and licensee arrangement or a store operating under a franchise agreement. In the franchise scenario, use of the trademark by the franchisee inures to the benefit of the franchisor. In the circumstances involving a license or franchise agreement, the most important component of the inquiry of ownership is who is controlling the quality of the goods and services to which the trademark is applied. If a mark owner does not assert sufficient control over the licensees or franchisees an argument can be made that the owner has abandoned its rights in the mark.
Another scenario that requires analysis is the distributor and manufacturer and manufacturer and importer. A distributor or importer of the goods will not be considered a related company user of the mark. In addition, a distributor or importer would not acquire ownership rights simply because they distribute the goods in commerce. However, there are limited exceptions where an importer or distributor could be considered the mark owner. One exception is if an applicant is a U.S. importer or distribution agent to a foreign manufacturer and the owner of the mark provides written consent to have the U.S. importer register the mark in the U.S.
Once the application is filed and the trademark owner is designated, the only way to amend the applicant's name is by assignment. There are some other general rules to keep in mind. with respect to related companies. These rules include: (1) a company would not be considered a related company for the purposes of Section 5 of the Trademark Act simply because they have the same stockowners, directors, or officers and (2) even if two sister companies are controlled by one parent company this will not be enough to demonstrate that the sister companies are related companies.
Often, our clients will inquire about whether a licensing agreement between two parties will prove one is a related company. A formal licensing agreement is not necessary to prove a relationship of a related company and the mere existence of a licensing agreement will not be sufficient to establish ownership rights. The critical inquiry is whether the applicant controls the nature and quality of the goods and services identified in the trademark application and with which the trademark is used. If you have questions regarding trademark ownership or inquiries concerning related companies, please feel free to contact our office for a courtesy trademark consultation.