“Due to the changing tactics and incentives of bad-faith actors, USPTO should improve its registration process or it will be at risk of allowing additional inaccurate registrations to clutter the trademark register.” – OIG report
On August 11, the U.S. Department of Commerce Office of Inspector General (OIG) published a final report on the audit of the United States Patent and Trademark Office (USPTO) trademark registration process. Since 2015, the USPTO has seen a rapid uptick in potentially fraudulent trademark applications, and a previous audit in 2012 found that more than 50% of audited trademark maintenance filings contained goods/services not in use in commerce. The current audit determined whether inaccurate trademark applications are prevented by the USPTO from being entered and maintained on the trademark register, and further assessed the USPTO’s management of fraud on the register. The report ultimately found that the trademark registration process was ineffective in this respect:
Due to the changing tactics and incentives of bad-faith actors, USPTO should improve its registration process or it will be at risk of allowing additional inaccurate registrations to clutter the trademark register. This clutter imposes costs—such as increased time and effort to search for or challenge unused marks—on legitimate users of the trademark system.
I. USPTO Lacks Controls to Effectively Enforce the U.S. Counsel Rule
The U.S. counsel rule, implemented in 2019 by the USPTO in an attempt to address fraudulent or inaccurate specimens and claims of use in commerce, requires foreign-domiciled trademark applicants to be represented by a US-licensed attorney. The OIG audit assessed USPTO enforcement of the rule and its effectiveness in increasing compliance with trademark laws and regulations. The OIG first determined that the USPTO lacked controls to enforce the domicile address requirement of applicants. According to the trademark examination guide applicants must provide an address of their domicile, defined as a permanent legal place of residence or principal place of business. Post office boxes or “care of” addresses are not generally valid as domicile addresses. The U.S. counsel rule further requires applications filed with the assistance of an attorney to include the attorney’s name, address, email address, and bar admission information. In reviewing a judgment sample of trademark applications and maintenance filings, the audit found that out of 19 applications with unacceptable domicile addresses, examiners failed to request acceptable documentation from 18 of those applications. The report noted that no adequate procedures exist for examiners to review domicile addresses, nor is there definitive criteria for when to request additional documentation.
Furthermore, the OIG determined that the USPTO did not have adequate procedures to hold accountable those attorneys who submitted inaccurate trademark filings. The report noted that the rule did not prevent the submission of “digitally altered or mocked-up specimens” by applicants represented by an attorney. In fact, just five attorneys filed 20% of applications that examiners suspected of containing altered or inaccurate specimens, despite accounting for only 6% of the total applications received by the USPTO, and despite the USPTO’s statement to OIG that it had taken formal action against a limited number of attorneys for these patterns of behavior. Thus, the report found that the USPTO lacks adequate controls to enforce its rule.
II. USPTO Approved Trademark Filings with Digitally Altered or Mocked-Up Specimens
The OIG also found that in addition to allowing the submission of digitally altered or mocked-up specimens, the USPTO approved trademark applications and maintenance filings for many of these specimens in conflict with examination guidelines. The audit reviewed a judgment sample of 448 approved applications and 159 accepted maintenance filings, finding that 37% of applications and 8% of maintenance filings contained a specimen with one or more indicators that the specimen was digitally altered or mocked-up. Additionally, the audit found that the examination guidelines lacked adequate guidance for examiners to follow, as evidenced in the differing refusal rates of applications for digitally altered or mocked-up specimens by individual examiners. Moreover, the report found that the USPTO lacked procedures to ensure consistency and coordination of application examination, because specimen rules were not consistently applied by examiners to multiple filings of similar applications. Thus, the report found that the USPTO lacked adequate guidance and procedures for the examination of specimens.
III. USPTO Did Not Ensure Accurate Identification of Goods and Services
The OIG next looked at 204 trademark applications and 57 maintenance filings from the latter sample above in which the submitted specimen was a webpage, to determine if the listed goods were in use in commerce. The report found that 58% of the applications and 14% of filings included one or more goods not for sale via the listed webpage. Applicants/registrants may legitimately sell goods through other channels, but the absence of goods on available webpages may indicate an inaccurate claim of use in commerce. Examiners have the authority to request additional specimens when the “range of goods or services in a trademark application or maintenance filing is wide or contains unrelated articles.” The report noted the comments of a USPTO official, however, that stated that examiners do not frequently use this authority. The report further found that where they do use this authority, that use is often inconsistent. In fact, the examination guidelines do not clarify what goods are considered unrelated or wide, and thus applications/filings are subject to the interpretation of individual examiners who have no additional guidance in how to apply this authority consistently. Thus, the report found that the USPTO also lacked clear guidance and procedure for the use of examiner authority in the identification of goods and services.
IV. USPTO Lacks a Comprehensive Fraud Risk Strategy
The OIG referred to the Fraud Risk Management Framework identified by the Government Accountability Office in reviewing the USPTO’s fraud risk management efforts. The report found that the USPTO failed to plan regular fraud risk assessments or create a fraud risk profile to identify inherent risks, analyze current fraud controls, and allocate resources to anti-fraud efforts. The report highlighted that taking these steps would allow the USPTO to “prioritize risks and use agency resources efficiently,” which should, in turn, improve the accuracy of the trademark register:
If approved and maintained,  inaccurate registrations clutter the register and leave fewer trademarks available for future applicants, increasing their search costs and time.
The report ultimately identified the following recommendations for the USPTO Director to instruct Commissioner for Trademarks David Gooder to implement:
- Develop controls and/or tools to detect post office boxes, post offices, CMRAs, registered agents, and other unacceptable domicile addresses in trademark applications and other trademark filings.
- Develop standards and procedures to (1) identify and investigate U.S.-licensed attorneys who are properly listed as the attorney of record on high numbers of fraudulent or inaccurate trademark applications and (2) address the attorneys’ behavior by providing guidance, taking disciplinary action, or taking other actions as appropriate.
- Revise Examination Guide 3-19, or other procedures as appropriate, to clarify (a) expectations for the extent of examining attorneys’ use of third-party information sources when examining specimens, (b) steps for assessing webpage specimens (to include an overall assessment of a website’s authenticity), and (c) guidance for identifying mocked-up labels and tags in specimen photos.
- Develop controls to ensure consistency and coordination among examining attorneys for the examination of multiple trademark applications from a single applicant.
- Develop specific guidance for examining attorneys’ use of TMEP Section 904.01(a).
- Create a risk framework to address fraudulent or inaccurate trademark filings, to include a risk profile, goals, and targets; update the risk framework on a regular basis; and update the STF charter to align with the risk framework.
- Develop procedures to aggregate data from managing attorneys’ reviews of examining attorneys’ work, and use this data to monitor and assess the effectiveness of efforts to improve the accuracy of the trademark register.
On Wednesday, August 18, Drew Hirshfeld, Performing the functions and duties of the USPTO Director, wrote on the USPTO’s Director’s Forum blog that the Office that the USPTO agrees with the OIG report and that the Office has been “actively enhancing our register protection efforts to meet this challenge for some time now.” The post also noted that, as of August 18, there has been a 40+% increase in trademark applications over the last year, which marks the greatest number of applications in history.
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