This week marks five years since the USPTO implemented its Requirement of U.S. Licensed Attorney for Trademark Applicants and Registrants. Also known as the “U.S. Counsel Rule”, the USPTO on August 2, 2019 amended parts 2, 7, and 11 of Title 37 to require any non-U.S. domiciled trademark applicant, registrant, or party to a USPTO trademark proceeding to be represented by an attorney licensed in good standing by at least one State, the District of Columbia, or a U.S. commonwealth or territory.
When it published this new rule, the agency explained that in the few years prior, it had seen “many instances of unauthorized practice of law” (or UPL) by foreign parties who are not authorized to represent trademark applicants. “As a result, increasing numbers of foreign applicants are likely receiving inaccurate or no information about the legal requirements for trademark registration in the U.S.” 84 Fed. Reg. 31498 (July 2, 2019).
The USPTO cited foreign applicants filing inaccurate or false claims of “use in commerce,” including by the usage of digitally-altered specimens, which the Office said “places a significant burden on the trademark examining operation” and “undermines the accuracy and integrity of the U.S. trademark register.” Id. The USPTO stated the U.S. Counsel requirement would “instill greater confidence in the public that U.S. registrations that issue to foreign applicants are not subject to invalidation for reasons such as improper signatures and use claims” and would “enable the USPTO to more effectively use available mechanisms to enforce foreign applicant compliance with statutory and regulatory requirements in trademark matters.”
USPTO’s Campaign of Discipline and Attorney Sanctions
Since implementing the U.S. Counsel rule, the Office of Enrollment and Discipline has investigated scores of licensed U.S. practitioners. Dozens of U.S. attorneys have received public, published discipline as a result. As OED Director Covey explained at a recent conference at Mitchell Hamline School of Law focusing on U.S.-China trademark issues, “trademarks used to be a sleepy side” of the OED’s activity. Now, it is the majority of OED’s workload. And the workload keeps piling up as more practitioners continue to be investigated.
A review of the OED’s “Freedom of Information Act Reading Room” confirms Director Covey’s comments. The Reading Room show that prior to 2019, relatively few practitioners were disciplined for trademark filing related misconduct. Since then, however, the majority of matters of original USPTO discipline have arisen from alleged trademark misconduct. A quick word search of those decisions over the past several years show an enormous uptick of disciplinary decisions against practitioners who are themselves Chinese. This is no accident. While the USPTO may not be per se targeting ethic Chinese practitioners, the published decisions demonstrate a disproportionate impact of discipline against native Chinese U.S. licensed attorneys. Foreign clients who seek IP rights in the U.S. often desire to be represented locally in their home country by individuals with native language skills and cultural connections. In China, for example, it is essentially not possible for a citizen to gain access to the type of publicly available resources, such as the Google search engine, to “find” a U.S. licensed trademark attorney.
As a result, Chinese law firms, trademark agencies, and other trademark filing entities in China are usually a necessary interface between those in-country applicants who seek to secure trademark rights in the United States and a U.S. attorney who agrees to represent them. Those law firms, associates, and other intermediaries are the “de facto” client representative, and they generally serve as a co-agent (along with the U.S. attorney) in fulfilling the applicant-client’s legal needs.
The OED continues to work hand-in-hand with the Trademark Commissioner’s Office of Trademark Policy and the “Trademark Register Protection Office” to identify potential problematic behavior, such as preparation, review, and filing practices that violate U.S. trademark rules of practice. Separate from attorney discipline, in the past five years, the Director has issued over 1000 “administrative orders and sanctions” alleging improper trademark filing conduct. In nearly all cases, the sanctioned party was a Chinese individual or entity.
Why China? Subsidies and Amazon Brand Registry
The USPTO’s disciplinary and sanctions enforcement measurements have overwhelmingly been focused on trademark applicants from China–and the U.S. attorneys who represent them. The USPTO has been highly critical of the Chinese government for allegedly creating financial incentives in the form of government subsidies paid to Chinese individuals and entities. Because those government subsidies typically exceed the U.S. application filing fee, China’s subsidies created a surge in demand for obtaining a U.S. registration just for the sake of the profit from the subsidy. Unfortunately, many of those individuals were filing bogus trademark applications, often creating fake proofs of use and manufacturing fraudulent specimens.
In January 2021, the USPTO announced its criticisms of the Chinese subsidy system in “Trademarks and Patents in China: The Impact of Non-Market Factors on Filing Trends and IP Systems.” The USPTO commented that:
Although the USPTO is not aware of public source information . . .it has observed the impact of Chinese subsidies granted for foreign trademark applications. After Shenzhen and other cities began offering subsidies for overseas trade applications, the USPTO experienced a surge in fraudulent trademark applications originating in China.
A second reason for the surge of trademark applications from China is Amazon. As China continues to be a world leader in manufacturing and exporting products sold overseas, Amazon has solidified its role as the world’s leading e-commerce market which also controls vast distribution networks worldwide. It is, as a practical matter, difficult if not impossible for many manufacturers in China to sell their products in the United States on a non-Amazon platform.
But Amazon itself saw a surge in knockoffs and infringing goods being sold on its platform, to the chagrin of legitimate rights owners. To address these and other problems, Amazon created the “Amazon Brand Registry.” Amazon advertises its Brand Registry as providing “access to powerful tools to help protect your trademarks, including proprietary text and image search and predictive automation.”
The downside of the Amazon Brand Registry is that if Amazon believes that marks are being used inappropriately, it will ban not only the owners of the marks from inclusion in the Brand Registry–it also bans applications based on the identity of practitioners. Amazon is now playing an outsized role in working with the USPTO to file grievances against U.S. practitioners who complain about Amazon’s tactics, which includes Amazon’s refusal to allow a brand to be registered when the mark or applicant has any connection to a trademark practitioner or entity that was sanctioned or disciplined by the USPTO. Indeed, licensed practitioners who had nothing to do with an original improper filing, such as those whose names are only associated with an application due to a post-application filing of a CAR, may find themselves running into problems with getting clients’ marks approved for the Brand Registry.
Some attorneys have referred to this practice as being “blacklisted.” Amazon, however, denies the existence of any “blacklist” of attorneys. But at the same time, Amazon has rolled out its “IP Accelerator” which purports to “sidestep trademark registration pitfalls by accessing our network of trusted IP law firms and get high-quality services at competitive rates.” Some critics say the Accelerator reduces competition and raises prices for trademark legal services. As of the date of this posting, less than twenty law firms have been approved for the IP Accelerator program.
Five Steps To Avoid USPTO Discipline And Sanctions
Whether you have been practicing law for many years or are just starting in the field of IP law, there are several basic steps a practitioner can take to avoid, or mitigate the risk, of being investigated, sanctioned or otherwise disciplined by the USPTO as a result of allegedly improper trademark application filing practices. Many of the issues that have arisen concern practitioners who receive referrals from foreign intermediaries and associates–those are law firms and other service providers to whom “local” clients reach out to as a first step in obtaining a USPTO trademark registration.
Step 1. Vet the Referral Source
Most international IP practices where a non-U.S. client is seeking patent or trademark rights in the USPTO necessarily involve a foreign intermediary–that is, someone (or something) not themselves “the client” but who insert themselves into the matter by virtue of their relationships between those who are looking to sell/export products from China and the USPTO and other trademark registers. In China, for examples, trademark agencies, law firms, and other entities are almost always the direct contact of China-based individuals, small and mid-size companies; those clients often lack the means or sophistication for locating and directly engaging with a qualified licensed U.S. attorney.
Before agreeing to engage in any type of a business relationship with an intermediary or foreign associate, a U.S. attorney should vet the organization–just as it would with any outsource legal service provider. For a more detailed discussion on best practices for sizing up a possible intermediary or associate relationship, check out our post Get Out of Town: The Ethical Perils of Outsourcing IP Services.
be certain that the intermediary is a legitimate enterprise that is licensed to provide the services that it is providing under the laws of its own country. Every country has their own rules on who may provide legal advice or services to clients. Attorneys seeking to form relationships with such intermediaries would be well-served to due extensive due diligence on the party purporting to serve as the client intermediary. Questions U.S. attorneys may wish to ask include:
- Is the entity authorized to provide trademark legal rights or services?
- Are the individuals who are working for the intermediary licensed or otherwise authorized by law in their jurisdiction?
- How long has the intermediary served in this capacity?
- What is the intermediaries’ familiarity with the subject area?
- What other U.S. law firms or legal service providers has the prospective intermediary worked with?
- How does the intermediary handle communications between the client and the intermediary, and from the intermediary to the U.S. attorney?
- How will the intermediary allow the U.S. attorneys to communicate with the applicants/clients?
- Is the intermediary engaging in the practice of trademark law before the USPTO, such as by providing advice to clients on legal matters without a U.S. lawyer’s supervision?
- Have you visited the intermediary personally, seen its operations, and met with those who would be involved?
- How does the intermediary handle conflicts of interest?
In many cases that have arisen over the last several years, the “middleman” or intermediary was not a licensed legal service provider in the foreign country. The involvement of a non-law firm like intermediary as a necessary link between the U.S. attorney and the foreign applicant can pose ethical risks for U.S. attorneys. The USPTO rules prohibit non-U.S. attorneys from providing legal advice or legal services to clients regarding preparing, filing and prosecuting a U.S. trademark application or post-application filing. However, the USPTO rules permit the assistance of a “non-U.S. practitioner” but only if the U.S. attorney retains ultimate supervisory responsibility over the foreign associate’s work.
For example, foreign associates may draft an application, but only as a draft for the U.S. lawyer. The U.S. lawyer can start with the draft, but ultimately, it is the U.S. attorneys’ responsibility to ensure they have done a reasonable pre-filing inquiry regarding any factual or legal representations made in any USPTO trademark application or post-application filing. When the foreign associate is strictly limited by the U.S. attorney regarding what they may and may not do, then the foreign associate can serve an invaluable role in helping the U.S. attorney to communicate important legal advice to the applicant-client.
Step 2. Know Who You Represent
One common pitfall for trademark practitioners, particularly those who engage in large volume practices of applications from overseas, is failing to appreciate who is their client. In a trademark representation, the practitioner’s legal “client” is almost always the applicant or registrant itself. Some trademark practitioners believe the intermediary is “the client” because that is who “pays the bills.” But paying the attorneys’ invoice does not make the associate the client–the associate is still but an agent for the client
What this means is that U.S. practitioners must treat each matter individually in understanding their client relationships. If one intermediary refers to a trademark practitioner 1,000 unique trademark applications on behalf of 1,000 different applicants or owners, the U.S. attorney is being asked to form 1,000 separate attorney-client relationships. They are not “representing” one party (the intermediary). They are representing separately each of the 1,000 rights holders.
Step 3. Conduct a Robust Conflict Check Of Each Client And Each Proposed Mark
Regardless of the volume of potential application referrals, the U.S. practitioner should FIRST determine before agreeing to any representation, including any referral from any foreign intermediary, whether it is ethically permissible for them to represent those rights owners for their respective marks.
Lawyers in the U.S. owe a duty of loyalty and confidentiality to their current clients. Generally speaking, that means before taking on a new representation, the U.S. attorney should determine whether they–or anyone else in their organization–have any possible representational conflicts regarding the trademark owner. The USPTO and state bar ethics rules prohibit an attorney from representing two clients simultaneously when: (1) the lawyer or her firm is representing another client (even in an unrelated matter) whose interests are directly adverse to those of the prospective new client; or (2) the lawyer is materially limited in their ability to represent the new prospective client due to some other interest–whether it is an interest of another client, a former client, or even a personal interest of the lawyer. Additionally, a U.S. attorney may not represent a client in a matter that is substantially related to a former client’s matter and is directly adverse to the former client’s interests.
The only way to make these determinations is with a pre-representational conflict check. The conflicts rules necessitate that lawyers must maintain a system for identifying and resolving potential conflicts of interest. Many firms use computerized search systems, in combination with manual “real-time” firmwide communications, prior to accepting any new engagement. A good conflicts checking system should have at least two components.
First, it should be able to search for whether the lawyer’s firm is currently representing, or has in the past represented, another client in any matter where the interests of that past/current client is adverse to the interests of the prospective new applicant client. For current clients, a conflict could exist even if the clients have wholly unrelated matters. If the lawyer or the lawyer’s firm is representing another client in a matter directly adverse to the prospective new client, then the lawyer will need to either decline the representation or attempt to get a waiver of the conflict from both the existing client and the prospective new applicant client. Likewise, if the lawyer previously represented a client in a matter that is substantially related to a new client’s matter and is adverse to the interests of the former client, the lawyer may have to pass on the representation unless they can obtain a waiver from both the current and former client.
Second, the conflict system should check on related marks. If the Firm is representing client A to register the mark “DOODLE” for apparel, and is also simultaneously representing client B to register the mark “DOODLES” for apparel, then that may raise a red flag for a possible conflict. For example, due to the similarity in the mark and the classification of goods, if the Firm files an application for prospective client B’s DOODLES application, they may very well receive a likelihood of confusion rejection due to client A’s DOODLE application. In that situation, the Firm may be forced to withdraw from the new client’s representation unless they can receive a conflict waiver from both affected clients.
Step 4 – Document the Scope and Duration of Your Representation
A “typical” trademark representation can last for months, if not years. When a client says they want your help with securing a trademark, it is generally understood that you are you agreeing to do more than simply filing the application. A “full scope” trademark representation ordinarily means both filing the application as well as handling post-filing matters, such as responding to official actions. Those post-filing matters can arise months or years after the initial application filing.
The most important thing for a practitioner to have is an engagement agreement. And when dealing with a foreign intermediary, that engagement agreement should include the actual client–the applicant or owner–as a party to that agreement. In many large volume trademark filing cases, the attorneys may agree with the foreign intermediary to a schedule of different fees for services. While the USPTO has always recognized the ability of a U.S. practitioner to receive instructions from and obtain payments for their services from an intermediary, such as a foreign associate, the USPTO has also advised practitioners to ensure that the applicant-client is aware of the intermediaries’ involvement and gives its “informed consent.” For a more detailed discussion on best practices for dealing with foreign associates, see our posts: Breadth of PTO Ethics Opinion Could Alter How IP Firms Interact with Foreign Associates.
Some practitioners prefer to limit the scope of the representation to a discrete task, such as filing an application but then providing no other services. Such a limited scope representation (also referred to as “unbundled” legal services) is ethically permissible, with a significant caveat: the limitation must be reasonable under the circumstances and the client must give its informed written consent to the limited scope. Practitioners ordinarily should get the client to agree to any such limitation in the scope of services at the outset of the engagement, preferably in the engagement agreement.
At a minimum, the engagement agreement should inform the client and its representative (the associate) that you are their attorney in the matter and that the role of the foreign intermediary is to serve as a conduit for U.S. attorney-client communications. The engagement agreement also should address matters such as the cost of the practitioner’s services, not only for preparing and filing the application but also how are fees determined for post-filing services.
Step 5 – Review, Revise and Verify Information
In many cases, the practitioner is forced to rely upon information provided by the foreign associate to draft a U.S. trademark application or Office Action response. Trademark practitioners are expected not to simply “rubber stamp” whatever information has been compiled by their clients or their foreign representatives.
For example, one of the issues that has dogged the IP bar since implementation of the U.S. Counsel Rule is the adequacy of an applicant’s proof of use in U.S. commerce. U.S. attorneys in trademarks are expected to oversee and instruct foreign associates to help them understand what are the U.S. specimen requirements. When receiving an alleged proof of use, a U.S. practitioner should attempt to verify independently the availability of the marked goods or services in the United States. Insist on proof that the marked product is actually available for sale in the United States. For example, if a client provides a link to a website, the U.S. practitioner should confirm that the link works, the product is actually listed for sale under the mark, and that the product is available for sale in the United States.
Establishing the date of first use in commerce is also critically important. If an applicant indicates a particular first use in commerce date, demand evidence showing the branded product was available in commerce in the United States at least as early as that date. When receiving specimens and alleged proofs of use, U.S. counsel should be mindful of potential fraudulent images. Tools such as Google Reverse Image searching may be used to determine if the same image or specimen is being used in connection with other branded products.
In addition, practitioners must ensure that applications are “personally” signed by the named signatory. The USPTO’s rules on signatures for trademarks requires that the person who enters a signature on a trademark filing is the named individual. If a client or client representative is the individual whose name is being used on the application, ensure that the individual has received the application and has personally entered their own signatures. Attorneys are also expected to type in their own S-signatures on trademark filings.
Last Thoughts – Don’t Dabble
IP law is complicated and constantly evolving. A non-IP lawyer who occasionally “dabbles” in providing IP services runs the risk of getting in over their head, potentially causing harm to a client. If you or your firm are not set up to run an trademark practice representing large volumes of foreign clients, complete with a strong intake system, commitment to conflicts checking, and competency in the underlying subject matter, then consider declining the work. Counsel who insist on working on a matter that they are not competent in should, at the very least, co-counsel with someone who is. Otherwise, refer the matter to someone else—you will sleep better at night.
Conclusion
The USPTO is intensifying its efforts to address Chinese trademark practices, prompting attorneys to take proactive measures to avoid sanctions and discipline from the Office of Enrollment and Discipline (OED). In order to navigate this landscape successfully, attorneys should consider implementing the following top five steps: 1) Stay updated on U.S. trademark regulations and guidance, 2) Ensure accurate and complete documentation, 3) Maintain meticulous client communication records, 4) Abide by ethical guidelines and professional conduct, and 5) Seek guidance from experienced intellectual property attorneys specializing in China trademark matters. By adhering to these best practices, attorneys can mitigate the risk of facing OED sanctions and disciplinary actions in relation to Chinese trademark practices.