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Trademarks: Property Plus Insurance

October 11, 2019
Post by Gregory "Lars" Gunnerson

Intellectual property is a category of property that includes intangible creations of the human intellect. It is widely accepted patents, copyrights, and trademarks confer an exclusive right. Unlike patents and copyrights, the constitutional foundation for trademark law is the Commerce Clause, U.S. Const., Art. I, § 8, cl. 3, rather than the Intellectual Property Clause, U.S. Const., Art. I. § 8, cl. 8.

A trademark is typically a name, word, phrase, logo, symbol, design, image, or a combination of these elements. As such, the trademark does not have to be confined one physical object, see In re Trade-mark Cases, 100 U.S. 82 (1879). Trademarks rights accrue through lawful use of the trademark, regardless of whether the trademark owner registers the mark. The trademark is maintained so long as the owner continues to actively use the trademark in the course of trade. The owner of a mark loses rights to the mark if the owner fails to use the mark.

As property, the trademark has monetary value, see Pro-Football, Inc. v. Harjo, 565 F.3d 880 (D.C. Cir. 2009) (upholding an offer to sell the Washington Redskins for $800 million), ownership is given to those who are first to use (i.e. priority) the mark, similar to the first-in-time first-in-right rule regarding traditional real property, see Pierson v. Post, 3 Cai. R. 175 (N.Y. 1805), and trademarks can be licensed.

It is important to note trademark law nests within the broader law of unfair competition law. United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918). Trademark rights allow (a) the owner the right to build goodwill with the mark and (b) consumer identification of goods and services from a particular source. In addition to being property, trademarks, including common law trademarks also act as insurance as they provide remedies to those harmed by unfair competition during the course of trade.

The owner is given the option to further insure themselves within the American legal system with a federally registered mark. A registered mark confers several additional benefits to the owner of the mark, including: (a) notice, as infringers are charged with knowledge of the registration and the benefits derived thereunder; (b) deterrence, stemming from use of ® symbol; (c) national protection against later adopters; (d) incontestability after five years of registration; (e) prevention of cybersquatting as it is easier to establish a bona fide commercial interest in a registered trademark for purposes of both the Uniform Dispute Resolution Policy and the Anti-cybersquatting Consumer Protection Act; and (f) evidentiary advantages, the registration is considered evidence (either prima facie evidence or conclusive evidence depending on the incontestability status of the mark) of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the registered mark in commerce, see 15 U.S.C. § 1115.

First, both trademarks and insurance are used in response to the occurrence of another event. Insurers only pay the insured party due to injury/harm to the insured party. Likewise, trademark holders only receive damages / royalties if there exists another party who is using or seeking to use the protected mark.

Second, both trademarks and insurance deter fraud. A trademark can be cancelled by the USPTO if it is procured or maintained through fraud, just as insurers can refuse to pay out on claims where there is fraud.

Third, both trademarks and insurance deter reckless and/or unreasonable behavior. In truly exceptional cases, courts reserve the right to award attorneys’ fees to prevailing defendants where the trademark owner has initiated a meritless trademark infringement action. See §35 of the Lanham Act. Insurers deter reckless behavior by reserving the right to drop insured parties or to substantially increase the rate of the insurance policy.

Fourth, both insurance and trademarks benefit the public. For example, the hospital system is greatly benefited by health insurance. Sophisticated insurers help negotiate prices for health care, rather than unsophisticated and/or ill patients. Health care in the case of an emergency is made more affordable because patients are subsidized by other health care holders. Likewise, trademarks signal to the consumer that the product on which they are associated with has a particular set of qualities. A consumer who buys Tide laundry detergent immediately knows that the detergent found in the bottle will effectively clean their clothes and leave them with a particular smell. This helps reduce transaction costs within the marketplace because the consumer does not have to evaluate every bottle of detergent they buy.

The idea of trademark as insurance isn’t flawless. Car insurance holders, for example, benefit from not using the insurance whereas trademark owners can lose the mark from lack of use. Furthermore, different insurance holders can share the same insurance policy within the same geographic area whereas there can be only one trademark owner for a single mark to be associated with a single type of goods or services within a single geographic area.

This article is dedicated to Professor Ken Port, who passed away peacefully in hospice surrounded by his family on Sept. 27, 2019. His instruction of Copyright Law and Trademark Law continue to help the author in his career today. Professor Port will be sorely missed.

Gregory “Lars” Gunnerson is a Patent Attorney in the Mechanical and  Electrical Patent Practice Groups at McKee, Voorhees & Sease, PLC. For additional information please visit  www.ipmvs.com or contact Lars directly via email at  gregory.gunnerson@ipmvs.com.


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The attorneys of McKee, Voorhees & Sease, P.L.C. designed this blog as an informational and educational resource about intellectual property law for our clients, other attorneys, and the public as a whole. Our goal is to provide cutting-edge information about recent developments in intellectual property law, including relevant case law updates, proposed legislation, and intellectual property law in the news.

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