Paul Kilmer is a Partner in our Washington office
What is the purpose of trademark opposition proceedings?
Considering the purpose of such proceedings, do some jurisdictions
offer a better cost-to-benefit value than others? If so, why is
this the case, and what factors drive that more advantageous
cost-benefit result? Does an analysis of these matters tend to
indicate that certain jurisdictions may need to consider reforming
their opposition processes in order to deliver a better
cost-benefit result?
Most oppositions are brought to determine whether one trademark is
confusingly similar to another when used in relation to the goods
or services of the parties. There may be a number of factors that
come into play in making that determination and some variants in
terms of the grounds for opposition (e.g., U.S. dilution law; lack
of distinctiveness); however, the ultimate issue is seldom far from
likelihood of confusion. That determination generally comes down to
the similarity of the marks and the similarity of the
goods/services, with other factors, such as the fame of the senior
mark, actual confusion, similarity of customers and trade channels,
intent to deceive and the length of time the marks at issue have
been used concurrently (if at all), also having significance.
With such a relatively limited scope of analysis, how much should
an opposition cost the parties involved? When does the cost of an
opposition become sufficiently great to deter parties with fewer
resources (such as new competitors) from pursuing or defending an
opposition? Do more expensive opposition systems result in
fundamental unfairness to parties with fewer resources such that
any benefits the more expensive systems deliver are outweighed by
their cost? Do more expensive systems cause injury to the
competitive environment and diversion of resources from other
desirable purposes (such as research and development and the
introduction of new products or services) such that those negative
consequences are sufficiently severe to warrant reform?
The small-scale, informal study carried out by the author as the
basis for this article (Study) tends to indicate that the current
U.S. opposition system entails such significant costs that it may
deter smaller companies or those with less investment in a
particular mark from pursuing or defending opposition proceedings,
and might lead to unnecessary or ill-advised settlements that do
not benefit or protect consumers. The Study included more than 40
participants, all of them involved in multinational trademark
practice. (This is about the size of the typical "pilot"
survey used to assess secondary meaning or likelihood of confusion
in trademark oppositions and litigation.)
Participants were from different nations, with more participants
coming from the jurisdictions under study than elsewhere. The Study
focused on the cost and benefits of oppositions in Brazil, Canada,
China, the European Union (OHIM), India, Japan and the United
States, with a few inquiries also aimed at practice in Australia
because, like the United States, that jurisdiction extends
common-law rights to trademarks and its legal system has its roots
in that of the United Kingdom.
The relatively negative cost-benefit ranking of U.S. opposition
proceedings in this Study appears to arise from the court-like
procedures of the U.S. system. However, there does not currently
appear to be any significant pressure from the U.S. bar, U.S.
companies, Congress or the U.S. Patent and Trademark Office (USPTO)
to reform the system. In fact, in recent years the USPTO has put in
place even more procedural and other requirements, which are
driving opposition costs ever higher, without a perceived increase
in the benefits of that system.
Specifically, results of the Study indicate that opposition
proceedings in the United States are vastly more expensive than in
Australia, Brazil, Canada, China, the European Union (OHIM), India
and Japan. For example, an "expensive" opposition in
Canada (the second-most-expensive jurisdiction after the United
States) generally costs $100,000 less than an
"inexpensive" proceeding in the United States. There are
thus no opposition systems in commercially significant
jurisdictions that cost litigants more than U.S. proceedings, and
the Study indicates that U.S. proceedings cost from four to over
100 times more than oppositions in the other jurisdictions
studied.
The Study indicates that the range of average costs for oppositions
in the jurisdictions reviewed tends to be as follows (all estimates
are in U.S. dollars and are for oppositions pursued through to an
initial decision):
- Australia: $15,000–$30,000
- Brazil: $1,500–$10,000
- Canada: $20,000–$50,000 (oppositions in excess of $50,000 are relatively rare, but they do occur and seem to be increasing in number)
- China: $2,000–$10,000
- European Union (OHIM): $5,000–$25,000
- India: $3,000
- Japan: $5,000–$25,000
- United States: $150,000–$500,000
Cost Drivers
The major cost drivers in the United States are procedural
requirements of the USPTO's Trademark Trial and Appeal Board
(TTAB), discovery and motions practice. The increasing use of
surveys and other expert evidence in oppositions also appears to be
contributing to the significant cost differential between U.S.
oppositions and proceedings in other jurisdictions.
The TTAB has increased the costs of the early stages of opposition
proceedings by implementing court-like procedural requirements
that, the Study indicated, do not appear significantly, if at all,
to lead to an early resolution of oppositions.
Before 2007, the stages of a U.S. opposition proceeding consisted
of the filing of a notice of opposition, the filing of an answer by
the applicant, a discovery period, a testimony period and briefing.
Generous extensions of time often delayed proceedings for
significant periods, but they appear to have reduced overall costs
substantially and increased the likelihood of desirable
settlements.
Changes to U.S. opposition procedures put in place in 2007 added
requirements for an early discovery conference, initial voluntary
disclosures of evidence, voluntary disclosures regarding experts
and their opinions, pretrial disclosures by both parties and
rebuttal disclosures by the opposer. Electronic discovery added
another layer of additional cost and complexity, many times forcing
a party that already had placed its trademark into use or had
engaged in extensive preparations to use its mark to employ
electronic discovery vendors to assist with the task of reviewing
large volumes of electronic records, including emails and
electronically stored documents.
In none of the other jurisdictions studied are there discovery
procedures to obtain evidence from the other party. Nor is any
significant level of procedural or substantive motions practice
allowed in most nations, with many nations not permitting any such
filings. However, some jurisdictions—such as the EU (OHIM),
Australia and Canada—have other types of procedures that
result in somewhat greater costs, although nothing approaching the
procedural, discovery and motions practice costs in the United
States.
In Canada, although evidence is submitted by affidavit,
cross-examination of affiants (deponents) is permitted. In
addition, survey evidence and other expert evidence are allowed.
Oral hearings before the Trade-marks Opposition Board may be
requested, although arguments generally are presented only in
writing. Naturally, all of these procedures may increase the cost
of oppositions.
In addition, in recent years the Trade-marks Opposition Board has
become what one respondent called "more court-like and less
tribunal-like." In this regard, the perception is that the
Opposition Board has been imposing higher standards for affidavit
evidence, stricter requirements for pleadings and other measures
that, according to some Canadian practitioners, may be increasing
costs without significantly, if at all, increasing the quality of
decision making. Use of costly survey and other expert evidence
also appears to be on the rise in Canada, especially in drug shape,
alcoholic beverage and beer trademark oppositions.
The Canadian opposition system is under review and may be subject
to some amount of streamlining in the future. However, even under
existing practice in Canada, it is unlikely that opposition
proceedings will exceed the equivalent of US $50,000 through a
decision on the merits.
In OHIM proceedings, the applicant may request that the opponent
provide proof of use of a registered mark on which the opponent has
relied in bringing the opposition. This procedure will increase the
costs to the opponent, especially if the "use" documents
require translation. However, it is still unlikely that the cost of
an OHIM opposition will exceed $20,000. This may be compared with a
top-end cost of as much as $500,000 in a U.S. opposition
proceeding.
Similarly, in Brazil a party may submit evidence that its mark has
"renown," and this may increase the cost of an opposition
proceeding to perhaps $3,000. Again, this amount pales in the face
of the cost of U.S. oppositions, which may be 100 times more
expensive.
Cost-Benefit Analysis—Settlement Rates
The Study indicates that oppositions in the United States are
settled at a rate exceeding 90 percent of those filed. Settlement
rates in the EU (OHIM) and Canada appear to exceed 80 percent, and
the cost of oppositions in the EU is around 20 times less than in
the United States, with the cost of proceedings in Canada being, on
average, more than 65 percent less than that of U.S. proceedings.
It therefore does not appear that U.S. proceedings produce a
significantly higher rate of settlements than occurs in the EU or
Canada, and the cost of proceedings in those two jurisdictions is
considerably less than in the United States.
By contrast, the settlement rate in Brazil appears to be something
between 50 and 80 percent of proceedings filed. Settlement rates in
China and Japan are less than 20 percent. This may mean that,
despite lower costs, China and Japan are somewhat less desirable
jurisdictions in which to oppose applications, as litigants are
unlikely to arrive at a settlement. Possibly that is because in
China the applicant is not required to defend an opposition
(thereby incurring no costs) and in Japan the success rate of
oppositions is fairly low, thus giving applicants little incentive
to settle.
Cost-Benefit Analysis—Perceptions of the Quality of Decisions
As to the quality of opposition decisions, although the United
States is ranked well by Study participants, so are the EU (OHIM)
and Canada. In fact, ratings for the quality of U.S. opposition
decisions were basically the same as ratings for the quality of
decisions in the EU and Canada.
China and Brazil ranked lowest in terms of the quality of decisions in the Study. Japan and India were in the middle tier.
Thus, on balance, there may be no benefit in terms of the
quality of decisions in bringing an opposition in the United States
versus opposing an application at OHIM or in Canada.
Cost-Benefit Analysis—Time to Decision
The EU ranked better than the United States in the Study in
terms of the amount of time required to obtain an opposition
decision. Canada was rated roughly the same as the United States.
Japan was rated somewhat slower than Canada in reaching decisions.
India, Brazil and China were rated slower than the other
jurisdictions.
Therefore, in terms of the time it takes to obtain a decision, the
United States does not offer significant advantages over the EU
(OHIM) or Canada.
Preferred Jurisdictions
When survey participants were asked to rank selected
jurisdictions in terms of where they would prefer to bring and
prosecute opposition proceedings, the EU was favored by a margin of
almost two to one over other forums. The United States tied with
Canada for the second-most-preferred forum. However, the United
States inspired the widest divide in terms of opinion as to whether
it was a "preferred" jurisdiction, with a third of
participants rating it at the very bottom of the studied
jurisdictions, another third placing it in the middle and the final
third placing it at or near the top.
Conclusion
The small-scale study used for this article, which includes few
participants and does not test every factor in measuring the cost,
benefits and value of opposition proceedings, may not be an
entirely fair or accurate basis for proposing changes to any of the
systems that were reviewed. However, it does raise a number of
questions, particularly about the cost and benefits of U.S.
opposition proceedings, which appear to merit a more expanded study
and analysis.
For example, the Study suggests that the U.S. opposition system may
employ procedures that increase costs without giving any greater
perceptible benefits than much-less-expensive proceedings in the EU
and Canada. There is also some indication that U.S. proceedings
give an unfair advantage to the party that is better funded or more
willing to expend resources on litigation. This may drive potential
competitors from the market without providing any better protection
to consumers from trademark confusion. There is also some concern
that unjust or unwarranted settlements may occur in the United
States simply as a result of the cost of pursuing and defending
opposition proceedings.
By contrast, settlements are reached at a fairly high rate in both
the EU and Canada even though costs are considerably lower than in
the United States. This tends to indicate that settlements may
still be reached on rational commercial grounds where the cost of
oppositions is relatively moderate.
Another issue the Study raises is whether current U.S. procedural
rules and discovery and motions practice are necessary or may be
wasting resources that (as EU and Canadian proceedings seem to
demonstrate) are not really needed to reach qualitatively good
decisions in relation to the limited scope of issues that are
determined in opposition proceedings.
Although more in-depth study and analysis are called for, even a
small-scale study seems to raise serious questions as to whether
U.S. opposition proceedings exceed in cost what they deliver in
benefits to either litigants or the public.
Although every effort has been made to
verify the accuracy of items in the INTA Bulletin, readers are
urged to check independently on matters of specific concern or
interest.
Previously published International Trademark Association Bulletin
Vol. 68 No. 5 March 1, 2013 Vol. 68, No. 5
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
