Combating Fake Specimens, Trademark Clutter and Depletion: An Interview with NYU Law Professor Jeanne Fromer
Alt Legal Team | January 11, 2021
One of the cornerstones of US trademark law is that in order to be registered, a trademark must be used in commerce in connection with the listed goods and/or services. NYU Professors of Law Jeanne Fromer and Barton Beebe discovered that a disproportionate number of trademark applications and registrations were filed and secured using fake specimens, that is, specimens that were digitally altered or otherwise not showing the mark being used in commerce. They examined this issue in their article, “Fake Trademark Specimens: An Empirical Analysis.” Jeanne Fromer was kind enough to join us to discuss her research on fake specimens, illustrate why this is such a crucial issue, and explain what is being done to combat fake specimens and fraudulent registrations. Watch the video interview and review our breakdown below.
Why did you decide to write on this topic? Can you give me some background on how you discovered the issue of fake specimens being filed?
We were studying the question of whether we are running out of trademarks—which is another important question—but at the same time, we heard from in-house and law firm lawyers noticing this issue. We learned that in 2017, there was a tremendous increase in applications from China, representing 10.5% of USPTO applications. Each year, the numbers continued to climb. As of November 2020, trademark applications originating in China represented 35% of USPTO applications. These high numbers seemed suspicious, and people were trying to understand what was going on. Companies including Target started investigating to see who was using these marks. They found that they couldn’t find anyone actually using these marks, and it became clear that there was a problem.
Jeanne and Barton worked with Congress on what ultimately became the Trademark Modernization Act. They testified before the House and Senate, explaining the problem of fraudulent trademark specimens. However, at the time, nobody had quantified the extent of the problem, so they wrote their article to detail the scope of the problem and outline examples.
How did you go about researching this topic and what did you discover?
All specimens are on file with the USPTO online, and we went through them systematically. We randomly sampled 365 applications from the 6,752 use-based applications originating in China filed with the USPTO in 2017 in Class 25 for apparel. We looked at different factors to indicate fraudulence:
Discontinuity in the images, namely a digital alteration. Does the image appear in a Google reverse image search for another mark? Does it match a specimen that was previously submitted?
Whether the image is associated with a nonsense word totally unpronounceable in English and with no meaning in another language
Inconsistencies on the tag indicating a price in foreign currency (this suggests that the product is not being sold in the US)
If the mark is depicted along with the mark from another company (ex. mark shown alongside “Chanel” on the same clothing article)
If the mark is misspelled from how it appears on the application
If there is no tag attached to the goods, just a card placed on top bearing the mark
We looked at all these factors and found that 66.9% of Chinese-originating, use-based applications filed in 2017 in Class 25 were fraudulent, oftentimes on multiple factors. This was a much higher number than we expected. The USPTO was catching some of these applications, but many went on to publication and registration. We determined that if Class 25 applications are representative of all the Chinese-based applications being filed in the US, then approximately 28,585 applications were fraudulent, representing 14% of use-based applications filed in the USPTO in 2017. Again, this is much higher than we were expecting to find.
Why are so many of the applications with fake specimens originating in China? Why are so many of the fake specimens being filed for goods in Class 25?
We discovered that there are certain regions in China that are offering incentives to local businesses for securing trademark registrations in the US. Perhaps these regions are trying to signal to the central government that commerce and innovation is robust in their region, using as evidence all of the US trademark registrations that its citizens have secured. It is so important for these regions to present this image to the central government that regional governments are providing a monetary incentive for each US registration secured. The incentive ($800) is more than the filing fee for a single-class US trademark application ($275), so applicants stand to profit with each registration.
The reason why many applicants are filing in Class 25 is that it seems that many applicants are using as specimens items that are easily accessible, namely things that they had taken out of their closets, put a tag on, and photographed. Additionally, we noticed many applications for silverware where applicants likely took silverware from their own drawers and photographed it to file for registrations. Goods like this, particularly those in Class 25, are accessible, whereas items in other classes might be more expensive to obtain.
Why is this such a serious issue for business owners, particularly small business owners? What is trademark depletion? What is clutter? What is the cost of these issues?
Depletion is the decreasing supply of unclaimed competitively effective trademarks available to new market entrants. The rate of depletion is increasing over time. Marks are getting longer. They often contain less-desirable, commonly used words and surnames. It’s becoming more difficult to find marks without making up a new name or using an undesirable existing word. Additionally, it’s getting harder to find marks that aren’t confusingly similar.
Clutter refers to marks that are registered but not used in commerce. While US law requires use in commerce, many marks have been registered that are not used in commerce. These marks are not legitimate, but it is difficult to discern what is and is not legitimate just by looking at the register. It is becoming increasingly more difficult for new trademark applicants to find marks that are available and sort through the clutter.
Depletion and clutter are significant issues for legitimate businesses because there are fewer marks available. Additionally, applicants may have to spend money on resources to determine if a mark is actually being used in commerce. Then, should an applicant discover a mark that is not being used and wish to fight it, this is very costly and particularly hard on small businesses with limited financial resources.
How can a trademark examiner discern a fraudulent specimen from a digitally-altered image?
The USPTO has been making a significant effort to detect fake specimens. The USPTO has been developing databases of submitted specimens that can be searched, allowing examiners to determine if a particular submission was already submitted in connection with a prior application. Also, the USPTO is working to utilize AI to detect digital alterations to specimens. Additionally, the USPTO can use Google reverse image searches as Barton and I did in our research.
On my wish list, I would like for the USPTO to re-introduce specialized examination, where examiners are assigned to handle applications
from specific classes. This allows for examiners to become very familiar with the classes and repeated applications in those classes. In the current structure, each examiner gets assigned applications at random so that specialization is lost. Specialized examination would have a host of benefits, and in particular, it would help examiners know what to look for in fake specimens. Specialization could also be by region, where specialized examiners handle the applications coming in from China.
What do you recommend to prevent fake specimens from being filed?
Procedures should be put into place to improve monitoring. Congress has put forth two types of expedited procedures to cancel trademark registrations that have not been used properly or at all:
Ex-parte re-examinations: To be used in connection with marks that were not used before relevant use date and registration.
Expungement: To be used in connection with marks that were never used in commerce.
These procedures can be initiated by third parties or by the USPTO by its own initiative. In addition, Congress is allowing third parties to submit evidence showing that a specimen filed in connection with an application or registration has been doctored. However, this is challenging because we are heavily relying on third parties to come across fraudulent applications and registrations, challenge them, and ultimately clear fraudulent marks from the register. This is really inefficient and insufficient, particularly when the methods for challenging an application or registration are limited. An opposition can only be brought within a very short timeframe and a cancellation has very limited grounds for which it can be brought.
The greatest limitation in challenging fraudulent marks is the high cost of an opposition or cancellation proceeding, which is especially burdensome, particularly for a small business. The estimated average cost of an opposition procedure in the US ranges from $150,000-$500,000. The estimated median cost of an opposition or cancellation is $95,000.
We really need a more streamlined procedure to challenge fraudulent marks that is less expensive and more expedient. This would also provide the USPTO with a way to systematically look back at marks that were erroneously registered and re-examine or expunge them.
What is currently happening in the House, Senate, and USPTO to combat the issue of fake specimens?
In December 2020, Congress passed the Trademark Modernization Act as part of the Coronavirus stimulation bill. The Act includes expedited procedures for re-examination and expungement.
Additionally, the USPTO is working hard to improve its technology to detect fake specimens and applications and is working to produce updated examination guidelines for the examiners to help detect these marks.
It’s so important to sort out the applications and marks that are being used legitimately from the ones that are not to ensure the integrity of the register. I think things are moving in the right direction and I hope it will continue to be a priority.
Jeanne Fromer, Professor of Law, New York University School of Law, Co-Director of the Engelberg Center on Innovation Law & Policy
Professor Jeanne Fromer specializes in intellectual property, including copyright, patent, trademark, trade secret, and design protection laws. She is a faculty co-director of the Engelberg Center on Innovation Law & Policy. In 2011, Fromer was awarded the American Law Institute’s inaugural Young Scholars Medal for her scholarship in intellectual property. She is the co-author, with Chris Sprigman, of a free copyright textbook, Copyright Law: Cases and Materials, which is in use at over 40 law schools around the world. Before coming to NYU, Fromer served as a law clerk to Justice David H. Souter of the US Supreme Court and to Judge Robert D. Sack of the US Court of Appeals for the Second Circuit. She also worked at Hale and Dorr (now WilmerHale) in the area of intellectual property. Fromer received her JD magna cum laude from Harvard Law School, serving as articles and commentaries editor of the Harvard Law Review and as editor of the Harvard Journal of Law and Technology. Fromer earned her BA summa cum laude in computer science from Barnard College, Columbia University. She received her SM in electrical engineering and computer science from the Massachusetts Institute of Technology for research work in artificial intelligence and computational linguistics and worked at AT&T (Bell) Laboratories in those same areas. Fromer was a visiting professor at Harvard Law School and Stanford Law School, and she also previously taught at Fordham Law School.