Even a Good Reason for Non-Use May Not Save Your Abandoned Trademark

Trademark rights flow from use. Continued use of a trademark keeps the trademark alive and makes the trademark right stronger. As per the Lanham Act, suspension of use for a consecutive three years may create a rebuttable presumption of abandonment. In the below case, we will analyze the nuances of trademark abandonment from nonuse.

To-Ricos, Ltd. v. Productos Avíclolas Del Sur, Inc. (September 2024)

Productos Avíclolas Del Sur, Inc. (PAS) used the illustrated “Pollo Picú” trademark (Picú mark) on its chicken products until 2011 and then stopped using the mark because of financial difficulties.

In 2016, To-Ricos, Ltd. (To-Ricos) applied to register the Picú mark, believing that PAS had abandoned it. PAS opposed To-Ricos’s trademark applications. To-Ricos sued PAS in the United States District Court for the District of Puerto Rico, seeking a declaratory judgment that it is the rightful owner of the Picú mark (pictured left).

The district court concluded that PAS had abandoned the mark and granted summary judgment for To-Ricos. PAS appealed before the United States Court of Appeals for the First Circuit.

On appeal, PAS admitted to not using the mark in commerce for at least three consecutive years before To-Ricos applied to register the mark, but argued that its nonuse of the mark was excused by its lengthy litigation with a bank.

In rejecting PAS’s argument, the appellate court said that nonuse of a mark for three consecutive years created a prima facie case of abandonment, regardless of whether the nonuse is excusable or not, and the presumed abandonment can only be rebutted by an intent to resume use of the mark in the reasonably foreseeable future. PAS’s purported reason for nonuse may explain why it stopped using the trademark, but could not toll the statutory period of nonuse or rebut the presumption of abandonment. PAS must produce evidence of an intent to resume use of the mark to rebut the presumption, said the court.

PAS further asserted that it possessed the intent to resume use of the mark based on its attempted sale of the mark, its unencumbering the mark, and its entry into a licensing agreement with IMEX.

The court, after examining each alleged conduct of PAS, found that none of them satisfied PAS’s burden of proof on the intent element in rebutting the abandonment presumption.

In particular, PAS argued that it sought to sell its assets, including the mark, to To-Ricos in 2012, during negotiations in which PAS expressed its intention to either “reopen” production or “do something with the assets”. The court determined that PAS’s attempted sale of the mark was not relevant because it occurred before the three-year statutory window between 2013 and 2016, and PAS’s intention was too vague to tell if and when they may restart chicken production in future.

PAS next argued that its effort to unencumber the mark from the foreclosable assets in its settlement agreement with the bank showed its intent to resume use of the mark. However, the court held that PAS’s protection of the mark from being foreclosed by the bank neither spoke to its intent of use nor indicated when or how it would use the mark, and therefore could not infer PAS’s intended resumption of use of the mark in a relatively narrow time window, considering the ephemeral nature of chicken products.

Finally, PAS contended that its license agreement with IMEX provided evidence of an intent to resume use of the mark. However, the court found PAS’s position problematic first because the license agreement was entered into after the statutory period of nonuse elapsed, and second because PAS failed to exercise actual control over the nature and quality of IMEX’s Picú-branded products despite the fact that PAS retained some contractual right to control under the licensing agreement.

Takeaways

From PAS’s perspective, there is a lot to take away from this case. First, never stop using a trademark for a consecutive period of three years; second, even if you have to discontinue using your trademark for reasons beyond your control, always prepare to resume use of the mark in the near future and keep a record of your express intent to do so; third, if you feel you lost your proprietary right to your trademark anyway, never forget to refile your trademark application as early as possible but no later than your competitor.