Referring to Trademarks

I’ve spent a fair amount of time recently working on commercial agreements, and I’ve noticed that some companies require that their registered trademarks be stated in all capital letters, with the registration symbol “®” appended, whenever the trademarks are referred to in a contract.

When reading a contract that refers repeatedly to, say, “FLEXORBALIN^®” (I made that up), I find it distracting to encounter all capitals and the registration symbol at every turn. So here’s what I recommend: Using all capitals and the registration symbol in contracts doesn’t help protect trademark rights. To make your contracts more readable, drop the registration symbol. In trademark license agreements or other agreements relating to rights in a trademark, use all capitals when referring to that trademark. But if a trademark simply serves to identify particular goods or services, use initial capitals.

If your client has strict across-the-board rules about how its trademarks are to be referred to, you’ll need to follow those rules, even to the detriment of readability. But judicious use of defined terms can allow you to minimize the effect on readability.

I’ve outlined below how I arrived at these recommendations.

All Caps or Initial Caps?

Treatises on trademark law recommend that when using a trademark you distinguish it from surrounding text so that the public will recognize it as a trademark. In this regard, 1-2 Gilson on Trademark Protection and Practice § 2.02 states as part of a “Checklist for Preventing Loss of Distinctiveness” that “the mark owner should use a distinctive type face, quotation marks, solid capital letters or, at the very least, capitalization of the first letter.” In the same vein, Siegrun D. Kane, Trademark Law § 5:2 says that to distinguish trademarks from ordinary descriptive or generic terms, they should be set off from surrounding text, and that this can be accomplished, among other ways, by using all caps or initial caps.

In so recommending, the treatises don’t distinguish between types of use, but I will. When considering how trademarks should be shown in contract text, bear in mind that commercial agreements aren’t disseminated publicly. (And I wouldn’t consider filing a contract on the SEC’s EDGAR database to constitute dissemination to the public.) Compared with the text on pill bottles, in promotional materials, or in advertising, the risk that contract text could contribute to loss of distinctiveness is infinitesimal. Consequently, what typographic convention you use in a contract to refer to a trademark wouldn’t jeopardize rights in that trademark.

Trademark law and I are merely passing acquaintances, so I ran this conclusion by David M. Klein of Paul Hastings, author of Intellectual Property in Mergers & Acquisitions (West Group). He concurred that as a matter of trademark law, nothing is gained by stating in all capitals contract references to a trademark.

If protecting trademark rights isn’t an issue, how should you refer to trademarks? Glenn Mitchell, of the Schwimmer Mitchell Law Firm and the Trademark Blog, told me that he’s in favor of using all capitals in contract references to trademarks. He said that it’s customary to do so, and that it can help prevent confusion when a party’s name and its trademark are the same.

Here’s my take on that: Glenn acknowledges that he mostly deals with trademark license agreements and other agreements relating to trademark rights. Such agreements involve trademarks purely as trademarks.

By contrast, other kinds of contracts use trademarks as labels for particular goods or services. For example, in an agreement providing for purchase of vials of Tamiflu vaccine, the trademark “Tamiflu” simply serves to identify the vaccine—the fact that it’s a trademark is entirely incidental.

So in trademark license agreements and other agreements relating to trademark rights, the extra emphasis provided by all capitals helps distinguish the meaning conveyed by trademark references in such agreements from the meaning conveyed by trademark references in other kinds of agreements. And when a given trademark reference doesn’t relate to rights in that trademark, nothing is gained by using all capitals, so you can give it the initial capital befitting a proper noun.

Registration Symbol or No Registration Symbol?

The owner of a registered trademark doesn’t have to use with its trademark the registration symbol “®”or some other statutory notice (such as the words “Registered in U.S. Patent and Trademark Office”) in order to be entitled to protect that trademark from unauthorized use. But to recover damages and profits in a suit for infringement under the Lanham Act, a trademark owner must be able to show either that it used the registration symbol or other statutory notice or that the defendant had actual notice that the owner had registered the mark. (See 15 U.S.C. 1111.) And using a statutory notice is another way to protect against loss of distinctiveness.

Consequently, 1-2 Gilson on Trademark Protection and Practice § 2.02 states, in the checklist mentioned above, that “the trademark owner should indicate the legal status of the mark wherever it appears.” Other authorities acknowledge, however, that doing so can drive a reader batty. For example, the International Trademark Association says the following: “Generally, it is not necessary to mark every occurrence of a trademark in an advertisement or other promotional materials but, at a minimum, this identification should occur at least once in each piece of printed matter, either the first time the mark is used or with the most prominent use of the mark.”

But if trademark protection were the only concern, drafters could, for two reasons, drop from their contracts registration symbols and other statutory notices.

First, as mentioned above, commercial agreements aren’t disseminated publicly, so there’s essentially no risk of loss of distinctiveness.

And second, it would seem unlikely that a contract party would ever need to rely on statutory notice. Any trademark license agreement or other agreement relating to trademark rights would state explicitly that the one or more trademarks in question are indeed trademarks, so appending a statutory notice to each trademark reference would be redundant. And with respect to other kinds of agreements, if I enter into a contract with a drug company to buy quantities of a given drug, I couldn’t rationally argue that because the registration symbol isn’t appended to references to the drug in the contract, I didn’t know that the drug’s name was a registered trademark. A court should find that I had actual notice, given that the registration symbol had been prominently displayed in all public materials relating to the drug.

If a trademark owner is concerned about unauthorized use of its trademarks by a party to one of its contracts, it would be advised to address that explicitly instead of relying on appending statutory notice to references to its trademarks.

I ran this argument by David and Glenn. They concurred, and each noted that he has rarely encountered the registration symbol in contracts.

Relationship to Trademark Guidelines

Given the issues outlined above, I’ve concluded that using all capitals and the registration symbol in contract references to trademarks does nothing to reinforce trademarks rights and in fact serves only to distract the reader. I recommend that instead you use initial capitals and drop the registration symbol.

But I know from experience that some companies will respond that while these recommendations might otherwise have some merit, their trademark guidelines are clear that all capitals and the registration symbol have to be used in each instance, and they don’t want their businesspeople thinking that they can start making exceptions whenever the mood takes them.

In this context, a balancing is involved: On the one hand, having a set of guidelines that applies across the board, with no exceptions, has the benefit of being simple to understand and enforce. On the other hand, it can be awkward to impose a rule in contexts where it serves no purpose, and the more trademark references a contract contains, the more awkward the all-capitals-and-registration-symbol approach would become.

One way around this might be to suggest that the company revise its trademark guidelines. For instance, it might be considered overkill to mandate that all capitals and the registration symbol be used in each trademark reference. And it might make sense to revise the guidelines to say that in any contract the registration symbol need only be used once for any given trademark.

But revising trademark guidelines would likely be a relatively time-consuming and unwieldy process. David Klein reminded me of a more expedient fix—using a defined term instead of repeated all-capitals-and-registration-symbol references to a given trademark. In a trademark license agreement, you might use the defined term “the Licensed Mark”; in a commercial agreement, you might use the defined term “the Product.” (A defined term could very well be useful independent of any trademark-guideline considerations.)

Postscript

Incidentally, I can imagine some readers wondering why I would devote 1,500 words to what is—no doubt about it—a minor issue.

Clear and effective contract drafting requires making innumerable small decisions; if you muff enough of them, it will take a toll on your drafting. Deciding how to handle a given issue of contract usage, even the most minor ones, requires weeding through the alternatives and selecting the one that seems to works best.

Sometimes the process feels like using a sledgehammer to smash a walnut. Well, consider another walnut smashed.