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 who engage in trademark preparation and prosecution services for Chinese applicants.  Dozens of U.S. attorneys have received public, published discipline, resulting in punishments from reprimands to suspensions to exclusion (disbarment) from practicing before the USPTO.  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 a major part of OED’s workload.  And the work keeps piling up as the OED continues to investigate more and more practitioners. 

A review of the OED’s “Freedom of Information Act Reading Room” confirms Director Covey’s observations.  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.  While the USPTO may not be intentionally targeting practitioners of Chinese descent, the number of published decisions against native Chinese U.S. attorneys is staggering.   

For practitioners who engage in international IP law, the fact that so many Chinese native U.S. attorneys are often the subject of such matters should come as no surprise.  Foreign clients who seek IP rights in the U.S. usually desire to get help locally in their home country by individuals with native language skills and cultural connections.  In China, for example, from where much of the alleged misconduct arises, a citizen does not have access to the Google search engine, which makes it difficult, if not impossible, to locate and engage directly with a U.S. licensed trademark attorney.  While we in the United States take it for granted that finding a U.S. licensed attorney experienced in trademarks is simple, on the other side of the globe, residents in China do not have the same access to U.S. attorneys.  

As a result–and as is typical in foreign associate practices–local Chinese law firms, trademark agencies, and other entities are usually the only way a Chinese resident can access a U.S. attorney.  Those foreign law firms, associates, and other intermediaries are the “de facto” client spokesperson.  They generally serve as a co-agent (along with the U.S. attorney) in helping a Chinese trademark applicant with gathering the information needed to prepare a trademark application for filing in the U.S.  

Since the U.S. Counsel Rule’s implementation, the OED has worked side-by-side with the Trademark Commissioner’s Office of Trademark Policy and the “Trademark Register Protection Office.”  The USPTO uses artificial intelligence and other technical tools to help identify potential problematic behavior, such as preparation, review, and filing practices that may violate the USPTO’s trademark rules of practice or “terms of service” for accessing the USPTO’s databases.   Separate from attorney discipline, in the past five years, the USPTO has issued over 1000 “administrative orders and sanctions” based on alleged improper trademark filing conduct.  In nearly all of the sanction cases, the sanctioned party is 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 who acquire foreign intellectual property rights.  Because those government subsidies typically exceed the lowest cost U.S. application filing fee, China’s subsidies alone created a profit center simply for an individual to “get” a USPTO trademark registration.  Not surprisingly, the profit potential created a surge in demand for U.S. registrations.  Unfortunately, many of those individuals were subsequently found to have filed 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.  While 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 platform.  It also controls vast distribution networks worldwide.  As a practical matter, it may be impossible for many manufacturers in China and other overseas markets 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.”   

But Amazon gets to say who qualifies for the “Brand Registry.”  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 also working together with the USPTO, including (some believe) by filing what are purportedly anonymous “grievances” against U.S. practitioners who complain about Amazon’s refusal to allow marks to be “Brand Registered” when, in Amazon’s opinion, the mark or applicant has any connections to any trademark practitioner or entity that has been sanctioned or disciplined by the USPTO.   This has led to situations where licensed practitioners who had nothing to do with an original (allegedly improper) filing, but who later become the applicant’s representative pursuant to a post-application filing of a Change of Address or Representation (CAR) form, may find themselves running into problems with getting clients’ marks examined by the USPTO and 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

The trends in filing misconduct, and the related ethical investigations, sanctions and discipline, have continued.  While the USPTO may have believed the “U.S. Counsel” rule would solve the problem of improper trademark filings, experience has proven that the conduct is continuing. 

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 is a middleman or intermediary between attorneys from around the world and clients looking to register IP rights abroad.  In China, for examples, there are hundreds of trademark agencies, law firms, and other entities that assist locals with getting a trademark registered in the United States and other key markets outside of China.  Many of these applicants are individuals, small and mid-size companies; those clients often lack the means, funds or sophistication for locating and directly engaging with a qualified licensed U.S. attorney on their own.  As a practical matter, without an intermediary, those individuals will find it difficult, if not impossible, to locate themselves a U.S. counsel.   

For U.S. attorneys who work with foreign intermediaries, vetting the associate is critical.  The U.S. attorney should ensure themselves that the foreign associate is conducting itself properly and ethically.  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.

U.S. attorneys should 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 prior to forming any type of relationship.   Questions U.S. attorneys may wish to ask include: 

  • Is the entity authorized to provide trademark legal rights or services by the laws of its own country? 
  • 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 type of capacity?  
  • What is the intermediaries’ familiarity with the legal 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 to review.  The U.S. lawyer might start with the foreign associate’s draft, but ultimately, it is the U.S. attorneys’ responsibility to ensure that the application meets U.S. legal requirements.  Practitioners who sign, file or later advocate positions in papers filed with the USPTO certify that 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 limited by the U.S. attorney regarding what the associate can and can not do, the foreign associate serves an invaluable role in helping the U.S. attorney communicate important legal advice to the applicant-client.   

Step 2. Know Who You Represent 

Another 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 the applicant or registrant itself.  Some trademark practitioners believe the intermediary is “the client” because that is who “pays the bills.”  But just because a foreign law firm pays your fees, that does not make them your “client”–at least as that term is used in the world of legal ethics.  Paying the attorneys’ invoice does not make the associate the client–the associate is still 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 new 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

Step 2 is necessary before proceeding to Step 3–can I even represent this particular client for this particular trademark application?   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 trademark client; or (2) the lawyer is materially limited in their ability to represent the new prospective trademark client due to some other interest–whether it is an interest of another client, a former client, a third party, or a personal interest of the lawyer.  Additionally, a U.S. attorney may not represent a new trademark 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 by conducting a conflict check, preferably before agreeing to represent each (or any) of the foreign clients.  The conflicts rules necessitate that lawyers 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 also check on whether the lawyer or their firm have been doing work on identical or substantially similar 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, that is a red flag for a possible conflict.  For example, due to the similarity in the marks and the classifications of goods, if the Firm files an application for prospective client B’s DOODLES application, it is reasonably foreseeable they may receive a likelihood of confusion rejection over 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

You have done an intake, checked the client, checked the mark and determined there is no conflict.  Great start.  But more is needed.  What are you agreeing to do, and where and how is this agreement documented? 

Some lawyers may believe that they can simply file a trademark application and the representation has concluded.  But in most cases, the client desires more than just filing the application.  A “typical” trademark representation can last for months, if not years.  When a client says they want your help with securing a trademark registration, it is generally understood that you are agreeing to do more than simply file the application.  A “full scope” trademark representation ordinarily means preparing, filing, and prosecuting the application, such as responding to official actions.   

The most important thing for a practitioner to have to document everyone’s agreement on the scope and other important information about the representation is a written agreement that binds not only the associate but also is agreed to by the applicant-client.  And when dealing with a foreign intermediary, that engagement agreement should be signed off on by 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.  Without direct client communication, a U.S. attorney may have no way of knowing whether the prospective client understands that you are their U.S. practitioner and what are your schedule of fees for your services. 

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 advised practitioners to ensure that the applicant-client is aware of the intermediaries’ involvement and has given its “informed consent” for the client instructions to be relayed through the foreign associate.  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, but 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 must 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. 

Step 5  – Review, Revise and Verify Information 

In many cases, the practitioner must rely upon information provided by the foreign associate to draft a U.S. trademark application or Office Action response.  Often those client instructions are provided in an .obj file, which allows the U.S. practitioner to easily upload information into TEAS.  Trademark practitioners are expected not to simply “rubber stamp” whatever information has been compiled by their clients or their foreign representatives.   The OED expects the practitioner to actually do work.   

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. 

Some practitioners also make sure that the foreign client is provided with instructions in both English and in their native language.  Practitioners who wish to validate the information provided by their intermediary may require that the client execute a declaration (in the client’s native language) attesting to the legality of the mark, its date of first use, and the types of goods or services to which the mark relates. 

Establishing the date of first use in commerce with a valid specimen is 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.  There are many excellent tools that a creative fraudster can use to create specimens that look just like the “real thing.”  Consider the usage of tools, such as Google Reverse Image searching, to determine if that same image or specimen is being used in connection with other branded products or in other applications.  

In addition, practitioners must ensure that applications are “personally” signed by the named signatory.  The USPTO is very literal about the purported duty for the named individual to “personally” sign his or her own name in the trademark application.  That rule, literally speaking, would preclude the common practice of having a secretary or legal assistant create a document that already includes the attorney’s S-signature typed into the form as a matter of convenience.  If a client or client representative is the individual whose name is being used on the application, a best practice is to ensure that the individual whose name appears has personally entered their own signature.  Attorneys are also expected to type in their own S-signatures on trademark filings, including with typed in S-signatures.   For more information, check out our post, Trademark Signature Best Practices at OED.

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.  For more thoughts on the dangers of dabbling check out our post: “Lawyers Who Dabble In USPTO Trademark Matters Face Nightmare of OED Ethics Investigations, Discipline.” 

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, including reviewing the OED FOIA Reading Room, 2) Ensure accurate and complete documentation, 3) Maintain meticulous client and foreign associate communication records, 4) Ensure that signatures are properly being entered by the client or the practitioner, and 5) Seek guidance from experienced intellectual property attorneys, especially those specializing in China trademark matters.  By adhering to these best practices, attorneys can mitigate the risk of facing USPTO sanctions and OED disciplinary actions in relation to their Chinese and other foreign client trademark matters.