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Trademark Applications Take a Dive With Economy
Glenn A. Gundersen
The National Law Journal
06-20-2002
The year 2001 was when the bubble burst in the world of trademarks; after 10 straight years of increases, the number of new trademark applications filed with the U.S. Patent and Trademark Office fell in 2001, and the decrease was dramatic. Just as the 1990s boom in trademark filings was a barometer of the expanding economy and the Internet gold rush, the sudden downturn vividly reflected America's economic pessimism in 2001. The 23 percent decrease in 2001 marked the first downturn in the volume of new filings in a decade.
The pattern of U.S. trademark filings over the last decade certainly suggests that the pace of filings is a barometer of business optimism -- and more lately pessimism -- about the public appetite for new products and services. Companies and individuals can apply to register marks they plan to use months or years from now, not just brands they are currently using. Thus the flow of applications reflects plans for new product and business launches, not just current activity. One can see a decade of economic bullishness reflected in the rising tide of new filings from 1992 through early 2000. And after the spring of 2000, one can witness the downturn reflected month-by-month in a declining stream of applications.
More than 221,700 applications for U.S. trademark registration were filed in 2001, down from nearly 288,000 in 2000. The net decrease of 66,000 applications represented a 23 percent drop from 2000 -- a stunning and unprecedented decrease.
The chart below [Trademark Application Filings 1991-2001] illustrates the decade-long increase in new trademark filings, the rate at which they increased over time, and the speed with which they plummeted last year.
THE 2001 DROPOFF
Just as the 1999 explosion in new applications was extraordinary, the drop in 2001 is just as remarkable. Throughout most of the decade, the annual increase in filings was in the range of 10,000 to 20,000 -- a substantial amount. Then came a 64,000 increase in 1999, another jump of 22,000 in 2000, and the plunge of 66,000 in 2001. Even though the pace of filings came down to earth last year, it's misleading to suggest that it was a bad year from a long-term perspective -- in fact, the number of filings in 2001 was still the third-highest in history.
However, it's also misleading to suggest that all of 2000 was a boom year, and that the rude awakening did not occur until 2001. In fact, there were extraordinary variations in the number of filings during the course of each of the last three years.
When, exactly, did the bubble burst? The exact same month when the Nasdaq Stock Market Composite Index hit its peak -- in March 2000, when more than 30,000 applications were filed in a single month, a level never before or since achieved. And it was truly a bubble -- trademark applications in March 2000 were almost double those just 14 months earlier, in January 1999. And the bubble really did pop -- applications in December 2001 were half those in March 2000. One can see the patterns by looking at the number of filings in selected months. For example, in December 1999, there were 24,301 filings. By December 2000, it was down to 18,225, and last December it was 14,259 -- a drop of 10,000 in two years.
Anyone looking for good news in the monthly figures for 2001 won't find it, since they trended lower as the year went on. Applications for the first six months of the year annualized at 242,000, while those in the second six months annualized at 202,000. Thus, if new trademark applications signal companies' optimism about the market for new branded products and services, one can see the giddy optimism of a boom in the 1999 and early 2000 numbers, increasing pessimism after the summer of 2000, and a bleak outlook through 2001. Not surprisingly, September 2001 applications were at an all-time low for the three-year period, reflecting the national tragedies, but applications in November 2001 were not much higher, and those in December were lower than September.
What about 2002? Preliminary figures for January show just over 16,000 applications, about on a par with January 1999. If filings for the rest of 2002 continue at that rate, they will fall below 200,000 for the first year since 1997, representing a 10 percent decrease from 2001.
IMPACT OF THE GO-GO YEARS
The decade-long boom in new trademarks, and the decline in 2001, has affected businesses, the trademark office and the legal profession in a variety of ways.
Since each new application potentially blocks someone else from using a similar mark in the same field, boom times at the trademark office have meant frustration for marketers, corporate identity consultants and others who must create and select new marks. As a result, it's difficult to find a new trademark that isn't already spoken for. Even though filings had a sharp decline in 2001, the overall level of trademark filings last year was still double that of a decade ago. It is unquestionably more laborious and difficult to find an available trademark in 2001 than it was in 1991.
Not every application represents an actual new product or business. In fact, a large portion of the marks in new applications are never used, but they contribute to the brand-name-choice gridlock while they are pending -- and they can remain pending for a very long time. A company signals its intent to use a mark by filing an application, but has at the very least 3 1/2 years (usually longer) to start using the mark and get a registration. As long as an application is pending, it deters other companies from adopting similar marks for competing or related products.
A substantial portion of applications are abandoned; as of this month, 40 percent of 1998 filings had been abandoned, 39 percent of 1999 filings and 28 percent of 2000 filings. Most applications are abandoned because the applicant has given up on plans for the product, decided to use a different mark, or gone out of business, although some marks in abandoned applications are in fact in use. The bottom line, however, is that at any given time at least a third of the marks in pending applications are destined to be abandoned.
SCARCITY OF DOMAIN NAMES
A second difficulty in selecting new marks has been the scarcity of domain names. Even with the collapse of the dot-com bubble, almost anyone creating a new company would like to secure a dot-com domain that matches the company's name. Many companies also want product names to have corresponding URLs. With virtually every common dictionary word already registered as a dot-com domain, companies have been forced to buy existing domains or adopt coined marks or unusual combinations of words. Thus, applicants often resort to the following:
ââ¬Â¢ Coined marks. New marks continue to be created from whole cloth by corporate identity consultants and software products, although it was hard to find new coined brands in 2001 that made as much of a splash as 2000 filings like Accenture and Cingular.
ââ¬Â¢ Deliberately misspelled marks. Variations from conventional spelling have always been customary in the trademark world -- the federal register, for example, contains more than 1,000 marks where EZ replaces EASY. The need to find available (and EZ-to-use) dot-com domains has created new incentives for variations from the norm, such as these examples from year 2001 filings: Rite2u for online sales of electronic equipment, Cb4ugo for travel services and Jerky4u for mall food court kiosks featuring a certain processed beef product.
ââ¬Â¢ Strange juxtapositions. A company looking for cutting-edge branding and unclaimed dot-com real estate can combine two dictionary words that have never found themselves together before and find a phrase that works as both a mark and a domain, such as Jumpspring for a vertical online marketplace.
Of course, the wild gyrations in trademark applications have had an impact on professionals in the field. The trademark office has been riding a roller coaster, first dealing with unprecedented increases in demand for its services, and now a sharp decline. The silver lining in the 2001 downturn is that trademark applicants now get much faster service from the trademark office. In recent years, applicants typically waited six to eight months, at times even longer, before an examining attorney reviewed a new application.
In early 2002, the average wait is now two to four months. It is enormously beneficial to an applicant to know sooner, rather than later, if the trademark office has found a conflicting mark in the queue ahead of the applicant's mark. If the applicant discovers a serious problem and hasn't yet launched the new mark, it will have the opportunity to consider an alternative.
The recent boom in trademark filings coincided with a trademark office initiative to make it easier for applicants to file for trademark registration without a lawyer; the office posted electronic application forms at its Web site at www.uspto.gov. This doubtless made it easier for individuals and small businesses to file applications. However, because of the voluminous rules in the office's Manual of Examining Procedure, most applicants used an attorney to find their way through the examination process.
The 1990s created unprecedented demand for intellectual property legal services. Law firms that did not practice in the field either hired lawyers with trademark experience from other firms or tried to develop their own expertise. Even with the drop in 2001 filings, these are still busy times for trademark lawyers, although it remains to be seen what happens after the 1999/2000 wave of "pig-in-the-python" applications has moved through the registration process. Time will tell whether the practice can sustain all of the newcomers who entered in recent years.
DOT-COM HO-HUM
Nowadays, trends in brand names come and go quickly -- "in Internet time," to use an outmoded phrase from two years ago. During the boom, an easy way for a company to signal its new-economy bona fides was to include ".com" as part of the trademark. Applications for marks incorporating the ".com" suffix started at 26 in 1994, were up to 764 in 1996 and 1,665 in 1998, then rose dramatically to 12,164 in 1999 and 13,412 in 2000. Then they plummeted just as far and fast in 2001, to 2,744.
The specific month in which ".com" applications peaked? March 2000, of course, coinciding precisely with the peak in Nasdaq and in overall filings. The gold rush mentality is obvious when one looks at filings in selected months over the last three years. They moved from 330 in January 1999 to 1,591 by December of that year and 2,103 in March 2000. By August 2000, they were down to 938, then fell to 405 in December. By December 2001, they were down to 127.
Even if the ".com" suffix hadn't fallen out of vogue in 2001, demand might have been diminished by the fact that attractive ".com" marks were in short supply after the flood of applications in 1999 and 2000. The shortest, most user-friendly domain names had already been snapped up, and what remained were less wieldy URLs that often require a lot of typing to enter into a Web browser. Some samples from 2001 trademark filings include: Getsmartcreditcard.com, Ilove-alpaca.com, Teachersfleamarket.com, Yourlogogoeshere.com, Allaround-Philly.com and Backgroundscreen-ingcentral.com.
TRADEMARK OFFICE REJECTIONSM
The plethora of "Generic.com" marks like Pets.com and Furniture.com was also absent in 2001. The trademark office continued to take the view that tacking on ".com" to a description of the user's product or service does not create a distinctive trademark, and such applications were for the most part refused full-fledged registration. There was only a trickle of applications for such marks in 2001 (Mortgage.com, Vodka.com, NJ.com, Rock.com, Jewelry.com), but most such applications were for phrases rather than single words -- e.g., Localhomesforsale.com, Expensive-cigars.com, Family reunionTshirts.com.
If the bursting new-economy bubble had not already reduced demand for new marks with the prefixes e- and i-, the trademark office did its best to put a damper on things. The office's Trial and Appeal Board published a new decision almost every month declaring that e- and i-marks could not be protected as trademarks, but merely descriptive of an electronic version of a product or service.
The following would-be marks all went down in flames: eTerm for term insurance, eOutdoors for online information about outdoor products, ePhysician for providing patient information online, eCatalog for computer software used in creating electronic merchandise catalogs, eCertified for providing certification of e-mail delivery, and e-Chain for an electronic catalog selling industrial roller chains. One exception: e-Option was held not descriptive for stock brokerage services, because the word "option" was not straightforwardly descriptive, but a double-entendre, signifying both a type of security and a synonym for "alternative."
Also gone from hot to cold -- marks containing buzzwords like Internet, cyber, Web, virtual and, relative newcomer, B2B. In a year in which the total number of applications was down by 23 percent, applications for these marks were down 50 percent to 85 percent. For example, applications for marks containing the word Web fell from a high of 1,986 in 2000 to 692 last year, and those for marks containing the word Internet fell from 1,199 in 2000 to 302 last year, a 74 percent decrease.
The trademark office treated the word virtual as no more distinctive than e- and i-marks, rejecting as descriptive applications for Virtual cast for computer software for simulating metal-forming processes and Virtual fashion for electronic fashion retailing.
The year 2001 was a far cry from the days when bullish young companies filed for marks like Yahoo. In an atmosphere of lowered expectations, the most exuberance that one could find in dot-com marks was an application for the mark Hey.com for video-production services.
The rude awakening experienced by the tech sector in 2001 is echoed in the downturn in new trademark applications filed for computer-related products and services.
Applications for goods or services that mentioned computer hardware or software, or otherwise referred to computerization, dropped by half, from 79,699 in 2000 to 40,571 last year.
An even steeper drop was suffered by applications in which the products or services referred to the Internet. Trademark office nomenclature for the World Wide Web is less than uniform, but a comparison of applications that mentioned the two most frequently used expressions ("Internet" or "global computer network") tells the tale: from 27,575 in 1999 to 41,816 in 2000 to 16,867 last year.
One can compare the decline in tech applications with trademark filings for food products in trademark office classes 29 and 30, which stayed relatively steady from year to year: 11,091 in 1999, 10,513 in 2000 and 10,417 in 2001.
Even if the market for the latest Internet-based schemes has curdled, everyone still needs to put food on the table.
Glenn A. Gundersen is a partner in the Philadelphia office of Dechert, the author of the International Trademark Association's book "Trademark Searching" and a co-author of the new book "Intellectual Property in Mergers & Acquisitions."
Glenn A. Gundersen
The National Law Journal
06-20-2002
The year 2001 was when the bubble burst in the world of trademarks; after 10 straight years of increases, the number of new trademark applications filed with the U.S. Patent and Trademark Office fell in 2001, and the decrease was dramatic. Just as the 1990s boom in trademark filings was a barometer of the expanding economy and the Internet gold rush, the sudden downturn vividly reflected America's economic pessimism in 2001. The 23 percent decrease in 2001 marked the first downturn in the volume of new filings in a decade.
The pattern of U.S. trademark filings over the last decade certainly suggests that the pace of filings is a barometer of business optimism -- and more lately pessimism -- about the public appetite for new products and services. Companies and individuals can apply to register marks they plan to use months or years from now, not just brands they are currently using. Thus the flow of applications reflects plans for new product and business launches, not just current activity. One can see a decade of economic bullishness reflected in the rising tide of new filings from 1992 through early 2000. And after the spring of 2000, one can witness the downturn reflected month-by-month in a declining stream of applications.
More than 221,700 applications for U.S. trademark registration were filed in 2001, down from nearly 288,000 in 2000. The net decrease of 66,000 applications represented a 23 percent drop from 2000 -- a stunning and unprecedented decrease.
The chart below [Trademark Application Filings 1991-2001] illustrates the decade-long increase in new trademark filings, the rate at which they increased over time, and the speed with which they plummeted last year.
THE 2001 DROPOFF
Just as the 1999 explosion in new applications was extraordinary, the drop in 2001 is just as remarkable. Throughout most of the decade, the annual increase in filings was in the range of 10,000 to 20,000 -- a substantial amount. Then came a 64,000 increase in 1999, another jump of 22,000 in 2000, and the plunge of 66,000 in 2001. Even though the pace of filings came down to earth last year, it's misleading to suggest that it was a bad year from a long-term perspective -- in fact, the number of filings in 2001 was still the third-highest in history.
However, it's also misleading to suggest that all of 2000 was a boom year, and that the rude awakening did not occur until 2001. In fact, there were extraordinary variations in the number of filings during the course of each of the last three years.
When, exactly, did the bubble burst? The exact same month when the Nasdaq Stock Market Composite Index hit its peak -- in March 2000, when more than 30,000 applications were filed in a single month, a level never before or since achieved. And it was truly a bubble -- trademark applications in March 2000 were almost double those just 14 months earlier, in January 1999. And the bubble really did pop -- applications in December 2001 were half those in March 2000. One can see the patterns by looking at the number of filings in selected months. For example, in December 1999, there were 24,301 filings. By December 2000, it was down to 18,225, and last December it was 14,259 -- a drop of 10,000 in two years.
Anyone looking for good news in the monthly figures for 2001 won't find it, since they trended lower as the year went on. Applications for the first six months of the year annualized at 242,000, while those in the second six months annualized at 202,000. Thus, if new trademark applications signal companies' optimism about the market for new branded products and services, one can see the giddy optimism of a boom in the 1999 and early 2000 numbers, increasing pessimism after the summer of 2000, and a bleak outlook through 2001. Not surprisingly, September 2001 applications were at an all-time low for the three-year period, reflecting the national tragedies, but applications in November 2001 were not much higher, and those in December were lower than September.
What about 2002? Preliminary figures for January show just over 16,000 applications, about on a par with January 1999. If filings for the rest of 2002 continue at that rate, they will fall below 200,000 for the first year since 1997, representing a 10 percent decrease from 2001.
IMPACT OF THE GO-GO YEARS
The decade-long boom in new trademarks, and the decline in 2001, has affected businesses, the trademark office and the legal profession in a variety of ways.
Since each new application potentially blocks someone else from using a similar mark in the same field, boom times at the trademark office have meant frustration for marketers, corporate identity consultants and others who must create and select new marks. As a result, it's difficult to find a new trademark that isn't already spoken for. Even though filings had a sharp decline in 2001, the overall level of trademark filings last year was still double that of a decade ago. It is unquestionably more laborious and difficult to find an available trademark in 2001 than it was in 1991.
Not every application represents an actual new product or business. In fact, a large portion of the marks in new applications are never used, but they contribute to the brand-name-choice gridlock while they are pending -- and they can remain pending for a very long time. A company signals its intent to use a mark by filing an application, but has at the very least 3 1/2 years (usually longer) to start using the mark and get a registration. As long as an application is pending, it deters other companies from adopting similar marks for competing or related products.
A substantial portion of applications are abandoned; as of this month, 40 percent of 1998 filings had been abandoned, 39 percent of 1999 filings and 28 percent of 2000 filings. Most applications are abandoned because the applicant has given up on plans for the product, decided to use a different mark, or gone out of business, although some marks in abandoned applications are in fact in use. The bottom line, however, is that at any given time at least a third of the marks in pending applications are destined to be abandoned.
SCARCITY OF DOMAIN NAMES
A second difficulty in selecting new marks has been the scarcity of domain names. Even with the collapse of the dot-com bubble, almost anyone creating a new company would like to secure a dot-com domain that matches the company's name. Many companies also want product names to have corresponding URLs. With virtually every common dictionary word already registered as a dot-com domain, companies have been forced to buy existing domains or adopt coined marks or unusual combinations of words. Thus, applicants often resort to the following:
ââ¬Â¢ Coined marks. New marks continue to be created from whole cloth by corporate identity consultants and software products, although it was hard to find new coined brands in 2001 that made as much of a splash as 2000 filings like Accenture and Cingular.
ââ¬Â¢ Deliberately misspelled marks. Variations from conventional spelling have always been customary in the trademark world -- the federal register, for example, contains more than 1,000 marks where EZ replaces EASY. The need to find available (and EZ-to-use) dot-com domains has created new incentives for variations from the norm, such as these examples from year 2001 filings: Rite2u for online sales of electronic equipment, Cb4ugo for travel services and Jerky4u for mall food court kiosks featuring a certain processed beef product.
ââ¬Â¢ Strange juxtapositions. A company looking for cutting-edge branding and unclaimed dot-com real estate can combine two dictionary words that have never found themselves together before and find a phrase that works as both a mark and a domain, such as Jumpspring for a vertical online marketplace.
Of course, the wild gyrations in trademark applications have had an impact on professionals in the field. The trademark office has been riding a roller coaster, first dealing with unprecedented increases in demand for its services, and now a sharp decline. The silver lining in the 2001 downturn is that trademark applicants now get much faster service from the trademark office. In recent years, applicants typically waited six to eight months, at times even longer, before an examining attorney reviewed a new application.
In early 2002, the average wait is now two to four months. It is enormously beneficial to an applicant to know sooner, rather than later, if the trademark office has found a conflicting mark in the queue ahead of the applicant's mark. If the applicant discovers a serious problem and hasn't yet launched the new mark, it will have the opportunity to consider an alternative.
The recent boom in trademark filings coincided with a trademark office initiative to make it easier for applicants to file for trademark registration without a lawyer; the office posted electronic application forms at its Web site at www.uspto.gov. This doubtless made it easier for individuals and small businesses to file applications. However, because of the voluminous rules in the office's Manual of Examining Procedure, most applicants used an attorney to find their way through the examination process.
The 1990s created unprecedented demand for intellectual property legal services. Law firms that did not practice in the field either hired lawyers with trademark experience from other firms or tried to develop their own expertise. Even with the drop in 2001 filings, these are still busy times for trademark lawyers, although it remains to be seen what happens after the 1999/2000 wave of "pig-in-the-python" applications has moved through the registration process. Time will tell whether the practice can sustain all of the newcomers who entered in recent years.
DOT-COM HO-HUM
Nowadays, trends in brand names come and go quickly -- "in Internet time," to use an outmoded phrase from two years ago. During the boom, an easy way for a company to signal its new-economy bona fides was to include ".com" as part of the trademark. Applications for marks incorporating the ".com" suffix started at 26 in 1994, were up to 764 in 1996 and 1,665 in 1998, then rose dramatically to 12,164 in 1999 and 13,412 in 2000. Then they plummeted just as far and fast in 2001, to 2,744.
The specific month in which ".com" applications peaked? March 2000, of course, coinciding precisely with the peak in Nasdaq and in overall filings. The gold rush mentality is obvious when one looks at filings in selected months over the last three years. They moved from 330 in January 1999 to 1,591 by December of that year and 2,103 in March 2000. By August 2000, they were down to 938, then fell to 405 in December. By December 2001, they were down to 127.
Even if the ".com" suffix hadn't fallen out of vogue in 2001, demand might have been diminished by the fact that attractive ".com" marks were in short supply after the flood of applications in 1999 and 2000. The shortest, most user-friendly domain names had already been snapped up, and what remained were less wieldy URLs that often require a lot of typing to enter into a Web browser. Some samples from 2001 trademark filings include: Getsmartcreditcard.com, Ilove-alpaca.com, Teachersfleamarket.com, Yourlogogoeshere.com, Allaround-Philly.com and Backgroundscreen-ingcentral.com.
TRADEMARK OFFICE REJECTIONSM
The plethora of "Generic.com" marks like Pets.com and Furniture.com was also absent in 2001. The trademark office continued to take the view that tacking on ".com" to a description of the user's product or service does not create a distinctive trademark, and such applications were for the most part refused full-fledged registration. There was only a trickle of applications for such marks in 2001 (Mortgage.com, Vodka.com, NJ.com, Rock.com, Jewelry.com), but most such applications were for phrases rather than single words -- e.g., Localhomesforsale.com, Expensive-cigars.com, Family reunionTshirts.com.
If the bursting new-economy bubble had not already reduced demand for new marks with the prefixes e- and i-, the trademark office did its best to put a damper on things. The office's Trial and Appeal Board published a new decision almost every month declaring that e- and i-marks could not be protected as trademarks, but merely descriptive of an electronic version of a product or service.
The following would-be marks all went down in flames: eTerm for term insurance, eOutdoors for online information about outdoor products, ePhysician for providing patient information online, eCatalog for computer software used in creating electronic merchandise catalogs, eCertified for providing certification of e-mail delivery, and e-Chain for an electronic catalog selling industrial roller chains. One exception: e-Option was held not descriptive for stock brokerage services, because the word "option" was not straightforwardly descriptive, but a double-entendre, signifying both a type of security and a synonym for "alternative."
Also gone from hot to cold -- marks containing buzzwords like Internet, cyber, Web, virtual and, relative newcomer, B2B. In a year in which the total number of applications was down by 23 percent, applications for these marks were down 50 percent to 85 percent. For example, applications for marks containing the word Web fell from a high of 1,986 in 2000 to 692 last year, and those for marks containing the word Internet fell from 1,199 in 2000 to 302 last year, a 74 percent decrease.
The trademark office treated the word virtual as no more distinctive than e- and i-marks, rejecting as descriptive applications for Virtual cast for computer software for simulating metal-forming processes and Virtual fashion for electronic fashion retailing.
The year 2001 was a far cry from the days when bullish young companies filed for marks like Yahoo. In an atmosphere of lowered expectations, the most exuberance that one could find in dot-com marks was an application for the mark Hey.com for video-production services.
The rude awakening experienced by the tech sector in 2001 is echoed in the downturn in new trademark applications filed for computer-related products and services.
Applications for goods or services that mentioned computer hardware or software, or otherwise referred to computerization, dropped by half, from 79,699 in 2000 to 40,571 last year.
An even steeper drop was suffered by applications in which the products or services referred to the Internet. Trademark office nomenclature for the World Wide Web is less than uniform, but a comparison of applications that mentioned the two most frequently used expressions ("Internet" or "global computer network") tells the tale: from 27,575 in 1999 to 41,816 in 2000 to 16,867 last year.
One can compare the decline in tech applications with trademark filings for food products in trademark office classes 29 and 30, which stayed relatively steady from year to year: 11,091 in 1999, 10,513 in 2000 and 10,417 in 2001.
Even if the market for the latest Internet-based schemes has curdled, everyone still needs to put food on the table.
Glenn A. Gundersen is a partner in the Philadelphia office of Dechert, the author of the International Trademark Association's book "Trademark Searching" and a co-author of the new book "Intellectual Property in Mergers & Acquisitions."
