Articles

Speech: Trademark Opinions: To Write or Not to Write

By Baila Celedonia

Apr. 1, 1999

Introduction
Considerations in Searching and Clearing a Mark
Why In-house Counsel May Not Want a Formal Opinion Letter After Clearing a Mark
Why Opinion Letters Are Written
The Relevance of a Finding of Bad Faith in a Trademark Case
Proving Good Faith
What Needs to Be in a Trademark Opinion Letter
Conclusion

Trademark attorneys are asked to render opinions on the availability of marks for use and/or registration in different circumstances and based on varying amounts of information. Some of those circumstances call for the attorney to write a formal opinion letter, others do not. This paper will outline these various circumstances, and discuss reasons why a written opinion may or may not be drafted, and considerations regarding the content of the letter.

The most usual situation in which a trademark lawyer renders an opinion is when clearing a mark for use by the client. However, not all marks are of equal business importance. Therefore, all searching is not done with the same level of thoroughness. Following are three examples: Your client, a costume jewelry company, is (1) choosing earring style names for this year's line (the 30-50 styles change every year or so); (2) adding a type of bracelet to an existing line; and (3) starting a new division which will launch an entirely new line of sterling silver jewelry -- the start-up costs are expected to be over 50 million dollars, with 12 million dollars to be invested in an initial advertising campaign.

In situation (1), counsel may only do a scan of the records of the USPTO to confirm that no competitor cares enough about the searched term to register it. The company won't be filing to register these earring style names (they would likely change before any registration would issue; the mark -- if a style designation is use as a mark -- isn't worth the cost of a registration to the company; and the business people don't care if a competitor uses the same style name). In addition, if the company receives a complaint, it is relatively simple to change a style name.

No formal written opinion would likely be done here. It is not worth the expense.

Counsel may or may not write a formal opinion, depending on the circumstances, as well as the 'culture' of the client. For example, if there were no marks or trade names which were close, or if the mark were merely descriptive and there were so many similar marks, so that the mark is 'weak', leading to the conclusion that the mark is 'clear' for the intended purpose, in-house counsel may not want to pay for a written opinion from outside counsel. It is quite common for in-house counsel just to discuss the results of the search with outside counsel. For companies which clear numerous marks, the extra cost of a written opinion from outside counsel may be difficult to justify, especially if the report is clear.

In situation (3), counsel would also order a full search from an outside search company. Given the amount at stake, a second search may be ordered from a different company. Any possibly relevant citations would be investigated, and if possible, potential problem citations purchased, etc..

In both situation (2) and (3), if the ultimate decision is that the mark is available, some experienced in-house counsel do not request a written opinion, but rather just maintain the search reports and further investigative materials, if any. Other in-house counsel routinely want, or produce written opinions.

As intimated above, the primary reason why trademark opinion letters are not routinely drafted is cost, whether or not the mark is cleared. Even in situations where a search reveals that there may be marks which required further investigation, and there is concern that the owner of one or more of the preexisting marks may complain -- or even sue for infringement -- opinion letters may not be routinely drafted. The reason is the nature of the trademark clearance process.

Trademark clearance is more art than science. The test for likelihood of confusion is amorphous -- judging factors including strength of the other marks found in the report, the similarity of the marks, sophistication of the customer, similarity of the channels of trade and similarity of the goods and services, and now, the fame of third-party marks for dilution analysis. No single factor is dispositive. Rather, each trademark case rests on its unique set of facts. Often, in reading a trademark case, you can see how a judge could have easily reached the opposite conclusion on likelihood of confusion.

By the very nature of the process, even after reviewing a comprehensive search report and conducting further investigation of various citations, the lawyer clearing the mark still may not have all of the possible useful information in existence. Ultimately, the conclusion on availability is based on the lawyers experience and the (economically reasonable to obtain) information available. Another lawyer (or the court) may disagree with that conclusion.

Moreover, a search may reveal two or three potentially problematic, preexisting marks or trade names, each raising a different, possibly contradictory problem. Before the claim is made, it is often difficult to predict which potentially conflicting mark in a report may give rise to a claim. The reason an attorney may believe there is no likelihood of confusion as to mark 'A' may be one which the client may not want to be of record when sued by the owner of mark 'B'. Yet, a complete opinion would have to discuss marks 'A', 'B' and 'C', etc.

There are a number of situations in which trademark opinion letters are usually, or often written.

1. When searching and clearing a mark for a foreign client, the outside attorney normally would write an opinion letter. The level of detail, however, would depend on the situation.

2. Certain companies have, as their routine policy, at least a brief opinion letter (whether by in-house or outside counsel) stating that the mark appears to be available.

3. There are times when a mark is not available or is so seriously problematic that in-house counsel may inform his or her client in writing or request a confirmatory opinion letter from outside counsel to that effect. This is usually for political reasons at the corporation.

4. A claim letter has been received, or only one mark in the search appears problematic, and the client wants written documentation that the client is acting reasonably in proceeding forward.

There are two times that a finding of 'bad faith' on the part of a defendant in adopting or continuing to use a mark may be relevant. First, a defendant's alleged bad faith is one of the many factors a court considers when determining likelihood of confusion. Under whatever is the local Circuit's version of the multi-factor likelihood of confusion test, the defendant's predatory intent or intent to confuse in adopting the mark may be relevant.

A defendant who purposely chooses a particular mark because it is similar to that of a senior use is saying, in effect, that he thinks that there is at least a possibility that he can divert some business from the senior user -- and the defendant ought to know at least as much about likelihood of confusion as the trier of fact.

Little Caesar Enterprises, Inc. v. Pizza Caesar, Inc., 834 F.2d 568, 572 (6th Cir. 1987) (dictum, as no such intent found).

A finding of predatory intent is not necessary for a court to find a likelihood of confusion, but may tip the scales in a close case. However, in the overwhelming majority of trademark cases, neither good faith nor bad faith is the dispositive factor in determining likelihood of confusion.

Second, a defendant's good or bad faith may have an impact on the relief available to plaintiff. Other than in counterfeiting cases, the usual relief in most trademark infringement actions is simply an injunction. Case law generally requires a finding of actual confusion before awarding damages or profits. Wrongful intent to cause confusion is not required in order to recover damages. However, a finding of willful infringement makes such award more likely. An accounting for profits does, however, usually requires a showing of bad faith.

Some courts have begun adopting the view that a finder of fact may draw an adverse inference from the failure to waive the attorney-client privilege with regard to the clearance of a mark. Nabisco, infra; Zip Dee. Inc. v. Domestic Corp., No. 93 C 3200 (N.D. Ill. June 11, 1997), 1997 WL 323814. To rebut this inference, or to affirmatively establish good faith adoption, the privilege is frequently waived. The purpose of waiving the privilege and putting an opinion letter into evidence, if there is one, is to aid the client in defending against a claim that the client adopted and/or continued to use a mark in 'bad faith.' Because of this, you should always assume that any opinion letter you write may become evidence.

Opinion letters (formal or otherwise) are not generally discoverable unless the client waives the privilege by invoking the defense of advice of counsel. However, trademark search reports and investigation reports undertaken before a claim is made generally are not privileged.

Remember that it is the failure to waive the attorney-client privilege, and not the failure to have a formal, written opinion, which allows a court to make the adverse inference. Unlike patent law, there is no presumption of bad faith if a party does not get a written opinion of outside counsel, yet proceeds to use a mark knowing of a similar third party mark or corporate name, or even after a claim letter has been received from a senior user. Cf., King of the Mountain Sports v. Chryster Corp., 968 F. Supp. 568, 574 (D. Colo. 1997); Parenting Unlimited Inc. v. Columbia Pictures Television Inc., 743 F. Supp. 221, 230 (S.D.N.Y. 1990).

Many companies with in-house counsel prefer not to have a written opinion letter from outside counsel, but rather, in case of suit, rely solely on his or her own testimony regarding the clearance process. See, e.g., Prime Media, Inc. v. PRIMEDIA Inc., 33 F. Supp. 2d 932 (D. Kan. 1998). See also, Lang v. Retirement Living Publ. Co., 759 F. Supp. 134 (S.D.N.Y.), aff'd 949 F.2d 576 (2d Cir. 1991) (no written opinion, outside counsel testified, good faith found). If the privilege is waived, in-house counsel and/or the business person at the client responsible for proceeding with a mark and/or the outside counsel who cleared the mark would likely have to testify in any event, even if there was a formal opinion letter (or informal written opinion).

In International Star Class Yacht Racing Ass'n v. Tommy Hilfiger U.S.A., Inc., 94 Civ. 2663 (S.D.N.Y. March 3, 1999), 1999 U.S. Dist. LEXIS 2147, there was an informal opinion letter and outside counsel testified. The court ultimately held that the client was not in bad faith in not doing a full search despite the letter forwarding the results of the quick search of the federal records which stated:

At this point, we would not necessarily rule out your use and registration on this mark subject to our usual disclaimers regarding the need to first obtain and review a full trademark search. Id at p. 3. Given the limited nature of Tommy Hilfiger's intended use (similar to hypothetical (1) above), the court held Hilfiger was not in bad faith for failing to order a full search under the circumstances.

There is no single answer to what needs to be in a trademark opinion letter. This will depend on: (i) its purpose; (ii) the sophistication of the intended recipient; (iii) the relationship between the client and its counsel; (iv) the factual and legal issues raised by the search and other investigative materials; (v) the scope of the intended use of the mark; (vi) the litigiousness of the industry; and (vii) cost. Depending on the recipient, you may wish to explain the limitations of the search or other materials upon which your opinion is based. Many firms have a 'Search Report Information Sheet' which is separate from the letter.

However, in order to avoid the Tommy Hilfiger problem, don't just automatically put in caveats about further search or investigation into the opinion. If you are going to recommend further searching, or cannot clear a mark given all the circumstances without further investigation or a fuller search, call your client first. Write the opinion only after you and the client have agreed that the investigation has been thorough enough. If the client does not authorize any further searching or investigation, you have to determine if you can write a meaningful opinion within the Canons of Ethics without such further investigation.

As is clear from the above discussion, the decision whether or not to prepare a written opinion must be made by taking into account various factors, including both the client's particular situation and the results disclosed by the search. On the whole, in most situations, unless a compelling reason exists to prepare a written opinion, there probably is no need to do so.

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