Assignment of Intent-to-Use Trademark Applications Comes with Hidden Risks

By Lauren Mack and Kristen Kennedy
First time founders are often surprised to learn that trademark rights are automatically created when a business uses a name, slogan, logo, or other brand signifier in connection with the sale of its goods or services. However, by filing a trademark application with the United States Patent and Trademark Office
(USPTO), a business may obtain additional trademark protections that are only available with a federal registration. If a business has the perfect branding in mind but is not yet ready to go to market, then another powerful tool is to temporarily reserve rights in the brand signifier with the United States Patent and Trademark Office (USPTO) by filing an “intent-to-use” (ITU) trademark application. The trademark will not be registered until the applicant files proof that it is using the trademark in connection with the sale of the goods and/or services listed in the application within three years of the date the application has completed all other steps of the trademark application process, provided that all extension requests are made and granted.

There is a considerable advantage to filing an ITU application before a trademark is in use, as the USPTO will refuse registration of subsequent applications if they are confusingly similar to the trademark in the ITU application, even if the trademarks in the later-filed applications are being used in connection with the sale of goods or services before the brand signifier in the ITU application. This allows the applicant to get a head start on protecting its planned branding when the business would otherwise have been beaten to market by a competitor or related business.

A critical constraint on ITU applications is that they generally cannot be assigned before valid proof that the trademark is being used in connection with the sale of the goods and services listed in the application is filed with the USPTO. The primary purpose behind this limitation is to prohibit the mass filing of ITU applications by persons without any actual intent to use the trademarks and selling them to others who do intend to use the brand signifier as a trademark (or already are), but were blocked from filing their own trademark application due to the conflicting ITU application.

The exception is that an ITU application may be assigned prior to the trademark being used in commerce if it is assigned to a “successor to the business of the applicant, or portion thereof, to which the markpertains, if that business is ongoing and existing”. This exception is often narrowly interpreted by the courts, and it is therefore very important to strictly follow its requirements. To be valid, an assignment of an ITU application must:

1. Be in writing;
2. Be assigned by a person or entity that has an ongoing business;
3. Include the assignment of the goodwill of the business in which the trademark is used; and
4. State that the trademark is being assigned in connection with the purchase or transfer of an
existing business.

Where applicants usually stumble is assigning an ITU application to an entity that is not truly a successor to the applicant’s existing business. For example, if a founder files an ITU application in her own name and then subsequently forms a corporation that will eventually sell products or services using the trademark, then the founder’s assignment of the ITU application to her new corporation would likely not be considered valid, unless she was already engaging in an ongoing business in her personal capacity (which is typically not the case). Assignment of only the ITU application and nothing else associated with an existing business is another common situation where applicants risk loss of their ITU application. For this reason, it is advisable to list the ultimate owner of the ITU application as the owner of the trademark  to avoid any missteps. However, a potential solution in such a situation may be to have the founder license the rights to the ITU trademark to the newly formed corporation so that the eventual use of the mark by the corporation can form the basis for the founder filing proof of use, which would then allow assignment of the application to the corporation.

Given that the USPTO records assignments without reviewing them for validity, any improper assignment of an ITU application will be recorded. The ensuing registration issued in the assignee’s name, however, will be open to attack and cancellation by any business that is using a conflicting trademark. It is therefore recommended to obtain legal advice from a trademark attorney when filing or
assigning an ITU application to ensure that you have strong trademark rights that are not open to attack.