Valuing Residual Goodwill after Trademark Forfeiture

By Linford, Jake | Notre Dame Law Review, December 2017 | Go to article overview

Valuing Residual Goodwill after Trademark Forfeiture


Linford, Jake, Notre Dame Law Review


INTRODUCTION                                                         812   I. TRADEMARK FORFEITURE                                            818      A. Trademark's Forfeiture Mechanisms                            821         1. Statutory Language                                        822         2. Generislide Through Consumer Use                          824         3. Abandonment Through Nonuse                                825         4. Assignment in Gross                                       829         5. Naked Licensing                                           830      B. Information-Forcing Failures                                 833      C. Forfeiture's Inconsistent Presumptions                       835  II. CONSUMER PERCEPTION AND TRADEMARK MEANING                       836      A. Standard Justifications for Forfeiture Mechanisms            836         1. Trademark Warehousing and the Public Domain               837         2. Trademark Forfeiture and Consumer Search Costs            838      B. How Trademarks Add Meaning                                   840      C. Consumer Perception and Trademark Property                   842 III. FORFEITURE, APPROPRIATION, AND HARM TO CONSUMERS AND      COMPETITORS                                                     844      A. Residual Goodwill and Harm to Consumers                      844      B. Residual Goodwill and Harm to Competitors                    846      C. Residual Goodwill and Harm to the Market                     848  IV. CHANGING THE FORFEITURE INQUIRY TO ACCOUNT FOR      CONSUMER GOODWILL                                               850      A. Reading Consumer Goodwill Back into the Lanham Act           850      B. Reforming Forfeiture Mechanisms to Account for Residual      Goodwill                                                        851   V. USING AUCTIONS TO DISCOVER RESIDUAL GOODWILL                    856      A. Why Auctions?                                                857         1. Acquiring Information About Residual Goodwill             858         2. Meeting Consumer Expectations                             860         3. Earlier Assignment of Property Rights                     860      B. The Auction Mechanism                                        861         1. Initiating the Auction                                    862         2. Administering the Auction                                 863         3. Structuring the Auction to Limit Arbitrage                864      C. Tailoring the Auction to Benefit Consumers                   866 CONCLUSION                                                           868 

INTRODUCTION

Coca-Cola Co. sold a fruit-flavored, highly caffeinated soft drink under the Surge trademark from 1996 to 2003. (1) After Coca-Cola discontinued Surge, fans of the beverage bought billboards and started social media campaigns hoping to convince the bottler to bring the beverage back. (2) The campaign worked: following a trial run through Amazon.com, (3) Coca-Cola relaunched Surge in several eastern states on September 7, 2015. (4)

Coca-Cola is lucky, however, that the twelve-year gap in sales was not fatal to its rights. In fact, it was a close call: two different firms filed applications with the U.S. Patent and Trademark Office (USPTO) stating an intent to use Surge as a trademark for beverages. (5) In a hypothetical fight between the soda giant and the upstarts, Coca-Cola's decade of nonuse would provide prima facie evidence that the company abandoned the Surge mark and thus forfeited its trademark rights. (6) Had either firm brought its planned beverage to market prior to 2014, that firm would have secured superior rights in Surge (7) and thus the ability to keep Coca-Cola's relaunch off the market. (8)

Some mark owners are not as lucky as Coca-Cola. Abandonment derailed a relaunch of the Stratotone line of guitars. (9) Stratotone was one of the lines formerly offered by the Harmony Company, which was perhaps the largest musical instrument manufacturer in the United States in the mid-twentieth century. …

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