F. Scott Fitzgerald, The Great Gatsby (1925)

It’s been a long pandemic. While there seems to be light at the end of the tunnel, it still feels like we’re limited in what we might otherwise feel comfortable doing wherever there are a lot of other people around. For a reader like me, you’d think that would be great news, right?

Except that, for purposes of entreVIEW, I seem to be running out of books that have any real entrepreneurial content to them. When’s the last time you saw a book proclaiming that this is a great time to start a business? Yeah, I thought so. (But do check out this post from a fellow EntreVIEW editor.)

Maintaining Trademark Rights: A Primer on Use and Termination

Newcomers to trademarks are often surprised (and frequently frustrated) to learn that unlike business names and domain registrations, trademarks must actually be used in order to establish rights and are neither acquired nor maintained merely by registration. United States trademark rights are use-based. Common law rights are established and maintained by actual use of a mark in connection with goods and services. Although an application for a U.S. registration can be filed prior to use (“intent to use”), actual use in interstate commerce is required for the issuance and maintenance of the registration. To maintain a registration, proof of the continued use of the mark is required between the fifth and sixth year after registration and with each renewal of the registration (every 10 years).

“Use” for purposes of establishing and maintaining trademark rights generally means bona fide use in the ordinary course of trade and is the same standard for purposes of obtaining and maintaining a federal registration. The use must be more than nominal. First use should not be a one-off sale created solely for obtaining a registration, but should be initiation of use in the ordinary course for the relevant goods or services. Ongoing use for maintenance purposes should be regular and continuous in the ordinary course, although temporary non-use may be excused for reasons such as a change in governmental regulation or authorization, product modification or redesign, supply line disruption, labor dispute, etc., provided that the owner of the mark at all times has a bona fide intention to resume use.

An owner’s rights in a mark may be terminated, and an applicable registration cancelled, at any time for non-use of the mark. Under federal law, non-use for three consecutive years creates a presumption of abandonment placing responsibility on the owner to prove bona fide use or an excusable suspension for the relevant period in question. Historically, the risk of the loss of rights for non-use has been limited to private action, either as a defense to a claim of infringement, or through a proceeding to cancel the registration of a “confusingly similar” mark blocking a new applicant’s registration. However, four years ago this month, the United States Patent and Trademark Office (USPTO) implemented a post-registration audit program intended to pro-actively rid the USPTO register of marks that were not being used as required by law.

Trademark registrations are issued for use of a mark in connection with specific goods and services grouped in different classifications. Where an application is filed for a mark covering multiple goods within a class, a specimen showing the use is required for one item within each class. To maintain the registration, similar proof must be filed between the fifth and sixth year after registration, and for each renewal. Although these submissions include a declaration of the applicant/registrant that the mark is in use on all listed goods and services, the fact that specimens are not required for all goods within a class make it relatively easy to inadvertently or intentionally submit an inaccurate declaration for goods or services that were never used under the mark or discontinued without any intention of reviving.

For years, unsupported claims of use in registrations have gone mostly unnoticed, discovered only if a subsequent applicant, upon being refused registration because of likely confusion, discovered the nonuse and could prove it to the USPTO examiner, or undertook a cancellation proceeding against the prior registration. Under the new audit program, the USPTO randomly selects registrations with required maintenance filings to prove use of goods and services covered by the registration that are chosen by the USPTO. A registrant unable to prove use of the audited goods or services will be required to delete them from the registration and may receive a second demand for proof of all of the remaining goods or services in each class for which the owner has been required to delete goods or services initially identified by the USPTO. A per-class fee is charged each time goods or services are deleted, so it is advisable to remove all goods or services for which proof of use cannot be provided - not just those chosen for audit – in the first response. Failure to respond to an audit will result in cancelation of the registration.

Since commencing the program, the USPTO claims to have canceled or removed goods or services from registrations in more than 50% of audited registrations.

Prior to the adoption of the audit program, even responsible registrants would typically remove goods and services from their registrations only at the time of making a maintenance filing. However, to avoid incurring fees, registrants are now advised to delete goods and services prior to the opening of a maintenance filing window.

Because continuous use is basic for maintaining rights in a trademark and corresponding registration, owners should regularly conduct a self-audit to verify not only that it is used on the goods and services covered by any registration, but also that the mark is being used consistently and appropriately. For example, always use the mark as an adjective and not a noun (not “keep KLEENEX in every room” but “keep a box of KLEENEX brand facial tissues in every room”) or a verb (not “XEROX your document but “make a XEROX copy of your documents”; avoid using it in possessive or plural form; where practical, the mark should be accompanied by ® (federally registered marks only), TM or SM (for registered or unregistered trademarks or service marks, respectively); and use the mark in a consistent format and as shown in any registration, without alteration or variation (this can be any style of a word mark registration, but without variation in any design registration).

The Truth About the Tooth Fairy: Inflation Stinks

This week my child lost a tooth. You know the drill: sneak into their bedroom, pretend to check on them, and then carefully swap the tooth for money without trying to wake them up.

If you have experience with this, then you have inevitably asked the question: how much should I pay? One dollar is what my child received for their tooth, which happens to be the exact amount I received for one tooth. Is that fair? It’s the same amount I received decades ago; if today’s children got wise, they would realize they are getting a raw deal compared to previous generations. This is all due to inflation.

Have You Been Stung by the Privacy Bee?

Privacy Bee, and other so-called privacy advocate organizations, have been sending thousands of data access and deletion requests invoking the California Consumer Privacy Act (“CCPA”). They assert such rights on behalf of individual consumers pursuant to a power of attorney authorized by the CCPA. In many cases these individual consumers have had no interaction with the business. 

Here is a sample of such a request from Privacy Bee:

I am hereby submitting a personal data request pursuant to Section 1798.105 of CCPA (SB-1121), Article 17 of GDPR, Nevada SB-220, New Hampshire HB 1680-FN, Washington Privacy SB-5376, Illinois DTPA SB2330, New York S5462, Hawaii SB 418, North Dakota HB 1485, Massachusetts S-120, Maryland SB 613, Texas Privacy Protection Act HB 4390, or other applicable right-to-be-forgotten legislation. If you feel my data is exempt from privacy legislation for any reason, I'm still asking you to respect my wishes regardless, as I believe privacy is a universal human right and I'm hopeful the integrity of your organization will honor my request with or without legal requisite.

TSMC

About this time last year, I posted my top five favorite podcasts for entrepreneurs. Avid readers may remember that one podcast, Acquired, was far and away my favorite listen—and I am happy to report that after a year of searching, downloading, subscribing and un-subscribing, Acquired still remains a must-listen in my podcast rotation.

For those who do not remember (or did not heed my suggestion), each episode of Acquired examines the history of a different tech company and the founder(s) who built them. Most of the companies featured on Acquired are familiar (think Apple, Uber, Lyft), but every so often, the hosts, Ben and David, pull back the hood of a Company I have never heard of before—the most recent case being Taiwan Semiconductor Manufacturing Company (TSMC).

Minnesota Cup Finals: A Clean Sweep for the Student Division

As frequent readers of entreVIEW will know from many prior posts since the early days of our blog, the our Entrepreneurial Services Group at Lathrop GPM has been a supporter and sponsor of the Minnesota Cup since its early days.

In case you aren’t familiar with the program fostered by the Holmes Center for Entrepreneurship at the Carlson School of Management, the Minnesota Cup is a business plan competition (purportedly the largest in the country) to help identify promising Minnesota-based start-up businesses. Over the years, over 16,000 businesses have participated in the competition, which has awarded prize money of about $3 million dollars. It isn’t just about prize money because the competition also helps entrepreneurs hone their business plans and pitch deck and also access mentorship and other valuable connections. The competition reports that Minnesota Cup alumni companies have raised nearly $400 million in capital! 

There are currently nine divisions in the competition and members of Lathrop GPM serve as judges in the general, high tech, and impact ventures divisions. Yours truly also has been serving as a judge in the student division for the last several years. It is always impressive to see great ideas from undergraduates and graduate students, many of whom have made considerable progress on their plans. This year’s crop of competitors in the student division was especially strong, making the judging that much more difficult.

Fortnite and In-App Purchases, Continued

Last year, I posted about Epic Games’ lawsuit against Apple, which claimed that Apple’s tight control over apps for iOs devices, particularly Apple’s in-app purchase system, violated antitrust and unfair competition laws. Now, a bit over a year later and after extensive coverage in technology and gaming circles, a judge in the Northern District of California has ruled on the merits of the case. The opinion is a mixed bag, as the court found in favor of Apple on most points but in favor of Epic on one claim; the court declined to find that Apple has an unlawful monopoly, but did find that Apple’s conduct in prohibiting app developers from providing information to consumers about payment alternatives was anticompetitive. While the ruling is narrow, it does open the door for mobile gaming developers to potentially avoid Apple’s commission on in-app purchases.

Taking the good news (at least for independent app developers) first, the court issued a nationwide injunction preventing Apple from prohibiting developers from including information in their apps and consumer communications regarding alternative purchasing mechanisms in addition to Apple’s proprietary in-app purchase system. This is potentially a very financially significant step, as Apple was previously requiring that developers of apps in its App Store only use Apple’s payment system for in-app purchases and was taking a commission of up to 30% on all such purchases. Now, developers will be able to inform customers about alternative channels to make these purchases, avoiding Apple’s commission, without being prevented from offering their app for download on the App Store. Consumers spend a massive amount of money on in-app purchases; one source estimates that consumers spent $32 billion on in-app purchases via the App Store and Google Play just in the first quarter of 2021. Many apps rely on in-app purchases for their profitability, and doubtless many developers will be very interested in avoiding Apple’s 30% commission, if possible.

As for Epic’s unsuccessful antitrust claim, a large part of the arguments turned on defining the “market” within which Apple was allegedly a monopolist. While somewhat technical, this fundamental struggle to define the relevant market goes to show how emerging technology does not necessarily fit easily within the boundaries of traditional legal or commercial analysis. Apple argued that the relevant market was the entire digital gaming market (featuring some interesting conceptual discussion of what, exactly, is a “video game”), whereas Epic argued that the relevant market was the market of all mobile apps running in the iOs ecosystem. The court disagreed with both, finding that the relevant market was that of “mobile gaming transactions.”

While this market may seem to be very narrow, the court noted that the “mobile gaming market itself is a $100 billion industry.” In fact, 70% of Apple’s App Store revenue was estimated to come from gaming apps as compared to other types of apps. The court ultimately found that Apple had about a 55% market share in digital mobile gaming transactions, with “extraordinarily high profit margins,” but that Epic had not produced enough evidence to show that Apple was a monopolist. The door appears to be cracked open for future monopoly claims against Apple, though, as the judge noted “the evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share.”

For those interested in software, and particularly the mobile app market, the first part of the 185-page opinion is worth a read as it includes many interesting figures regarding consumer behavior and the app market. The Verge also has comprehensive discussion of this case for busy entrepreneurs who don’t have the time to (or interest in) reading legal opinions—especially if they aren’t suffering badly enough from insomnia to otherwise have a need to do so…

Epic has already appealed the court’s judgment to the Ninth Circuit, so this case is not over yet. It will be interesting to see whether the Ninth Circuit takes a broader view of the potential monopoly issues raised in this case and whether it agrees with the lower court that the relevant market is “digital mobile gaming transactions.” The universe of mobile apps has grown very quickly over the last decade and the legal system’s analysis will have to catch up. The fact that Epic succeeded in its challenge of Apple’s rule against developers informing consumers of alternate payment methods, however, suggests that app developers in other spheres might also start challenging the restrictions placed on them by Apple’s App Store and Google’s Play Store. And should Apple’s control over the market grow in the future, it’s possible that a new antitrust claim would succeed.