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22 IPL Newsl. 1 (2003-2004)

handle is hein.journals/iprolane22 and id is 1 raw text is: 




FALL 2003

The Fallacy of Trademark
           Residual Goodwill

                          BY DAVID S. RUDER

                  I. Introduction
                     When a trademark owner ahan-
                  dons his trademark, what legal rights
                  does lie retain to prevent someone
                  else from acqutiring and usitg that
                  inark? A commo flawed belief
                  among trademark owners and Irade-
       1 7        mark lawyers is that the owner retains
   David S. Ruder residual goodwill-ltat is, the for-
                 mer trademark owner asserts thal lie
has the power to bar someone else's use of his old mark dtie
to a lingering association consumers may continue to have
between the mark and the forner owner.
  The theory behind residual goodwill is itat because con-
sumers may associate a discontinued trademark with the
producer of a discontinued product, any new user of the
trademark would be improperly trading off of the residual
goodwill that still exists from when the trademark was used
in the marketplace. According to this argument, a new user
ertld employ a discontinued trademark only after con-
stners have ceased to associate the trademark with the orig-
inal owner and residual goodwill has dissipated.
   There is almost no support whatsoever for the residual
goodwill theory in trademark law or practice. Once a trade-
mark is abandoned, it reverts to the public domain and is
then available Int new users. An innovalor may use an aban-
dotted tradeutark in its original class of goods or services,
provided that no false connection is made to the original
producer. Residual goodwill, if it evea exists, does not give
the previous trademark owner atty right to prevent the new
user's acquisi tion and employment of the itark.

1i. What Is (he Current Abandonment System?
   Once a trademark is abatdoned under the trademark
laws, no goodwill remains in the trademark, residualor
otherwise. The abandoned status allows new users ol a
trademark to launch a new product or service, and itipor-
tantly can serve as a defense to t trademark infringement
suit. In discussing trademark abandonment, there are
two important issues to understand: (I) how exactly a
   David S. Ruder is an attorney and chief executive oJicer oJ
River West Brands LLC in Chicago.

trademark becomes abandoned under (ie Irademark laws
and (2) the impact of abandonment on the trademark,
A. lTe Abandomnent'Prcess
   Wlhenever a trademark is discontinued, there is a very
real risk that the trademark will be deemed abandoned
under tie trademark laws. There is ;n explicit provision
in the Lanham Act (tile federal trademark statute) describ-
ing how a trademark becomes abandoned:
   A mark shall he deemed 1o be abandoned... when its use
   has been discontinued with inleni ol itt restune such use.
   Intent not to resune nmay be inferred from circumstances.
   Nonuse for three consecutive years shall be prima facie evi-
   dence of :bandonmilent. IIse of a mark iicans the bona
   tide use of such mark made in the ordinary course of trade,
   and not made merely to reserve a right in a mark.'
This means that if a marketer stops using a trademark for
three years and has not done anything substantial within
that time to reintroduce the trademark into commerce, the
trademark becomes abandoned. 'ro keep trademark rights
alive, marketers must use the trademark in commerce.
   It used to be that marketers would attempt to make
token shipments of products in order to keep trade-
marks in commerce and not risk a trademark becoming
abandoned and possibly falling into a new competitor's
hands. Procter & Gamble went as far as to create a
Minor Trademarks Program that was designed to
rebut aty stch inference of abandonment by shipping
Iitly units bearing a discontinued trademark name to tell
                                (coititmel oil age 5)

.@ Ofl ~


Keeping Current with the Chair ................... 2
Fron the Editors  ............................... 3
Tie i flh Anicndiiell Takiug Clause aid Iatellectual
Property  .................................. ...
Negotiation Ethics: No an 0iynurouii ............. 16
2003 Expen Update: Kumnho-Wre.llin ............ 22
Recent Developnent.s in Intellectual Prpqry Law ...30
Chi Appoints Sr t'ion Nt'lninatig C01uniftee, ..... 42
11 Graup News' ............................,. 43


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