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In Brief: When manufacturing stops, cancellation of a trademark is not far behind.
Here’s What Happened:
Peavey Electronics Corporation manufactured a popular series of amplifiers from the 1970s to 2013 under the brand “CS”. Peavey shipped amplifier manufacturing to China and eventually dropped the CS brand from its catalogue. Domestic sales of CS amps dwindled to a few in 2016-2017, none from 2018 through 2020 and one sale in 2021. By then Peavey’s website stated that CS amplifiers are no longer available in the US.
On January 16, 2021, Peavey sent a cease and desist letter to Adamson Systems Engineering demanding that Adamson cease manufacturing and selling intelligent loudspeakers using the mark “CS Series”.
Adamson responded by filing a cancellation proceeding with the Trademark Trial and Appeal Board claiming that Peavey had abandoned the CS trademark.
There are two elements to an abandonment claim: (1) use of the mark has been discontinued; and (2) there is not intent to resume use.
The Board found that the minimal domestic sales of the CS amplifiers from 2016 onward were insufficient to constitute use in commerce and gave rise to a presumption of abandonment.
Peavey presented the arguments and evidence in an attempt to overcome the presumption of abandonment:
1. Advertising and Marketing. Peavey said it had spent millions and millions of dollars in advertising and marketing its products throughout the years. But advertising is not use in commerce. For tangible goods, the mark has to be placed on the goods and the goods have to be in commerce.
2. Residual Goodwill. Peavey argued that a mark is abandoned only when it has lost all trademark significance, including residual goodwill. This is a twist on the chicken/egg argument. Once the chicken is gone, the source of the egg is gone too. Residual good will doesn’t negate abandonment resulting from non-use.
3. Resales, Repair and Refurbishment. Peavey argued that there were active resellers, and a repair and refurbishment market. Here, again, Peavey avoided the issue of lack of sales. Resales and repairs by third parties did not inure to Peavey’s benefit.
4. Planned Resumption of Use. Peavey asserted that the COVID-19 pandemic in 2020 had hindered its planned update of the CS series. Peavey didn’t produce any business records that supported specific activities designed to resume use. The Board rejected Peavey’s vague, unsubstantiated intent to make use of the mark at some unspecified time in the future.
The Board granted Adamson’s petition to cancel the CS mark and ordered the USPTO to cancel the registration in due course.
Why You Should Know This: The COVID-19 pandemic caused business disruptions in many sectors. The unprecedented world health crises could be an argument to relax the rules governing a presumption of abandonment of a trademark. However, Peavey couldn’t prove that it had an intent to resume use of the trademark. An intent to resume use can be shown in many different ways such as internal memos, transcripts of meetings, press releases or market research.
And, be careful when serving a cease and desist letter. It’s always good to put your own house in order before attempting to enforce rights against someone else.
Case Information: Adamson Sys. Eng'g, Inc., No. 9207658, 2023 WL 7274674, at *1 (Nov. 1, 2023)