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Franchise Law Update Commentary on Business and Legal Issues of Franchising

Trademarks: How Does One Show Their “Bona Fides”?

Posted in Legal Decisions

Contributed by Christopher R. Kinkade

Trademarks are an essential part of building a franchise brand. Trademark owners who have not yet used a mark but have an intent to use the mark in commerce may file a registration application with the United States Patent and Trademark Office under Section 1(b) of the Lanham Act.  Trademark owners must, however, possess documentary evidence of their “bona fide intention” to use the applied-for mark in connection with the claimed goods and services.  The Trademark Trial and Appeal Board recently confirmed that failure to posses such evidence may result in a successful opposition of the application or cancellation of a resulting registration in Spirits Int’l B.V. v. S.S. Taris Zeytin Ve Zeytinyagi Tarim Satis Kooperatifleri Birligi, Opposition No. 91163779, 99 U.S.P.Q.2d 1545.

This ruling means that franchisors will need to engage in advance planning on how franchisees will use a new mark prior to filing an intent-to-use application. Specifically, in order to meet the “bona fide intention” requirement, franchisors should have reasonably concrete plans to commercialize all of the claimed goods and services under the Trademark.  Franchisors might consider taking steps to implement its plans such as:  product research and development or incorporating the new goods, services, and marks into the franchise system.

Importantly, this decision means that a mere hope or desire that the franchise system will expand at some point in the future to encompass additional goods or services, or that future franchisees may implement certain goods or services without any present concrete plan for doing so, is not sufficient. 

Moreover, creating a documentary record of trademark developments–such as photographing product prototypes, preserving draft promotional materials and product specifications, saving draft business plans, and incorporating marks into franchise disclosure documents and agreements–will likely be key to saving a challenged application or registration.

Franchisors should also be careful in selecting the goods and services they list in an application. It may be tempting and seemingly quite prudent to list a broad array of goods that the franchisor hopes to sell at some point in the future. Franchisor trademark owners who do not themselves commercialize goods or services under the mark and rely on franchisee use of the mark to inure to the owner’s benefit should be especially wary of claiming a bona fide intention to use a mark without first incorporating the new mark into the franchise model. Without a documentary record to support the owner’s intentions, the entire application and resulting registration could be jeopardized.

Further, because applicants must continue to have a bona fide intention to use the mark on all listed goods and services throughout prosecution of the application, upon filing a statement of use, and at all renewal periods, trademark owners and franchisees should routinely inventory their marks vis-à-vis their product offerings and franchise plans to ensure the accuracy of the registrations. While it may not be desirable to cancel goods or services that were previously used (and perhaps hoped to be used again), it is not worth risking the validity of the entire registration and contractual obligations to licensees.