Advice To Immediately Trademark Kickstarter Projects Rests On Crowdfunding Not Being Commerce

from the hmmm dept

Because we talk a great deal about trademark law here at Techdirt, it occasionally leads us writers down interesting reading paths. One such path I recently traveled led me to a Gamasutra community post written by attorney Stephen McArthur, a lawyer who has built something of a specialty in video game industry law. The theme of the post is that anyone crowdfunding the production of a video game, via Kickstarter for example, should be registering the trademarks for their game during or before the crowdfunding process, rather than waiting until the production is funded successfully. Putting aside the heavy importance McArthur places on trademark registration, his argument is more of a PSA on the procedural timelines and what he considers to be a misunderstanding about both when common law trademark kicks in and when certain aspects of the trademark-ability of a product or service are initiated. For example:

Many of our clients fund and market their games using crowdfunding platforms like Kickstarter or Fig. They almost always have the same misconception: once they successfully fund a game on Kickstarter, then they would have superior rights to someone who comes along later and begins using the game title. This is based on the otherwise correct understanding that trademark law gives protection over a product name (here, a game title) to anyone who either (1) uses the name in commerce, or (2) files an application to register it as a trademark, even on an intent-to-use basis up to three years before any actual use.

Unfortunately, putting a game title on Kickstarter and successfully funding the project does not count as using the game title in commerce and thus gives you zero rights to the name. The law for what counts as “use in commerce” was not written with crowdfunding in mind, and this is simply another example of law not being caught up with technology.

Under his premise, McArthur’s suggestions seem sound. But is the premise correct that crowdfunding campaigns do not count as commerce? This certainly doesn’t seem to be settled law in the way one might infer from the post. 15 U.S. Code § 1127 defines “user in commerce” thusly:

The term “use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this chapter, a mark shall be deemed to be in use in commerce—

(1) on goods when—

(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.

The problem with the above statute is, as McArthur rightly notes, it was constructed without such a thing as internet crowdfunding in mind. That said, the intention of the law seems fairly easy to translate. The idea is that someone looking to put forth a product or service should be protected by trademark law once the business of the enterprise has begun and is public. Raising money from individual investors for a video game that hasn’t been publicly announced wouldn’t qualify, but what if you’re raising money directly from the end customers, or a subsection of the end customers, as part of the business model? If the crowdsource campaign contributors are indeed the end customers of a product or service, how is their payment via Kickstarter not a commercial exchange?

It certainly seems like it should be, doesn’t it? After all, simply reversing the order of production and payment doesn’t change the nature of the commerce in which both sides are engaged. And if that’s indeed the case, then common law trademark rights ought to apply to Kickstarter projects once the fundraising has begun, rather than being delayed until the product or service, video games in this case, are being sold elsewhere or once they have been shipped/delivered.

As I noted, there is little certainty about this either way, as best as my research has turned up, meaning it will likely take court cases and rulings before anyone actually knows if crowdfunding counts as a use in commerce. Additionally, while we’ve been in the past loathe to see too much codifying of specifics done in trademark law, perhaps this is an exception. After all, if crowdfunding is going to be a normal way of doing business, as it seems increasingly to be, perhaps it’s time the law caught up to the technology.

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Comments on “Advice To Immediately Trademark Kickstarter Projects Rests On Crowdfunding Not Being Commerce”

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Anonymous Coward says:

This could depend on how the related swag is handled.

Most of these funding campaigns offer swag for donors. If the swag is bought, rather than gifted, then the trade name is in actual commerce.

It might be appropriate for the kickstarter campaign to write a receipt designating that some small part of the donor funds are actually a purchase, and provide the receipt with the swag shipment. Pay the respective state sales tax, and you have a formal record of active trade.

My understanding is that trademark registration only reserves the right to litigate, it doesn’t actually give you any special rights. The registration is more of an evidenciary thing than a declaration or grant.

In the early stages of a small company, it is cheaper to be flexible than it is to go to court. I would say plan ahead and call your product “The Foo Project” instead of “Foo Battles”, and schedule a naming party just before the ship date. Maybe work the party into the swag package.

I tend to disagree with the attorney quoted above. His approach is good for HIS business. But I doubt it is for any others. But that is typical. You find the same B.S. with registered agents and incorporation services. Essentially your talking about pimps who do nothing except file a few forms, and charge suckers > 100$/hr. for it.

Just bob and weave. Eventually you will KNOW that you need an attorney not just wonder.

Anonymous Coward says:

It’s commerce.

Having done accounting for kickstarter firms, the amounts received are indeed recorded as straight revenue on which taxes and all that stuff is payable. The timeline on delivery doesn’t really matter.

I see too many people say lawyers or accountants are charging too much, so just to do it themselves. Please… don’t, the headaches I see from the poor decisions people make at incorporation registration as well as regarding future required documentation if the government comes calling because people decided they don’t need no schmancy fance LAWYER or ACCOUNTANT filing my forms, just isn’t worth the headache.

Stephen McArthur (user link) says:

Re: it is not commerce

Tim, thanks for the shoutout. I didn’t go into the details in my article, but it derives from the same rule that pre-orders and pre-sales do not count as interstate commerce even when you are collecting actual revenue from the sales. For example, TMEP 904 states that “a webpage for placing pre-sale orders for goods that are not yet available does not show use of the mark in commerce in connection with the goods, even if it otherwise meets the requirements for an acceptable display associated with the goods.” See also Richardson-Vicks, Inc. v. Franklin Mint Corp., 216 USPQ 989, 991-92 (TTAB 1982) (finding that the goods to be identified by the mark must be in existence at the time of a sale or it does not count as use in commerce).

@AnonymousCoward, I know it’s wasted breath to argue with every troll on the internet, but almost everything you said in your post was wrong. Swag bought and gifted will usually not secure the name in commerce because (1) usually the swag isn’t sent out until the actual product is shipped, and (2) even if it were immediately set out, it is a different type of “goods” than the end product and so wouldn’t give any protection for the end product’s class of goods.
Also, registering a trademark on an intent-to-use basis gives far more than simply a right to litigate. That’s not even close to the most important rights protected by filing.
The law is exponentially more complicated than you think it is. And lawyers are paid a lot more than $100 an hour to make sure people navigate it correctly. If you don’t see why there can be value in that, then you’ve probably never been involved with a project worth protecting.

Anonymous Coward says:

Re: Re: it is not commerce

“If you don’t see why there can be value in that, then you’ve probably never been involved with a project worth protecting”

I’ve gone both routes. Things like corporate charters get revised frequently in the first few years. If the first one lasts 6 months it would beat the average. Second, reporting is quarterly, so you are going to have to file your quarterly report in 3 months anyway. So you still have to learn it or pay somebody… again.

State regulations typically give you at least 30 days AFTER income to begin reporting. So it is a complete waste of time to do this until you have a wad of cash in your hand. And since revision is expected, wasting a heap of time on version 0.1 of your corporate charter is pointless. The other option is to pay a lawyer to do it, and then pay him again, and again.

Save your cherry until you have income. You are going to get fucked. No sense in accelerating the process.

I can understand accountants and lawyers bitching about getting jammed up by ignorant business managers. But it is their JOB to get jammed up by ignorant business managers. The Business manager has way more to deal with than screwing around with accounting software and making sure the state board gets its ass tickled with a feather.

And regarding the complexity of the law, get over yourself. The Latin is just there to scare away the plebs. Yeah, I will grant you IRS regs are a bitch. So is reading any number of technical manuals. What, you want a fucking cookie?

Anonymous Coward says:

Value of the brand vs. cost of litigation

The value of trademark litigation increases proportionally to the value of the brand. So there is a shifting point that a startup goes through.

Markets for products created by startups are fluid. The first brand you pick may not be the right one for the market your product eventually ends up in. So there is a risk factor when investing in an initial brand.

There is a lot of information your not going to have until you start getting customer feedback. Spending buckets of money up front in legal fees is sunk costs. And you’ll be looking back on it asking: “I spent N on my trademark should I defend it?”. If you aren’t generating enough income to sustain protracted litigation, the answer is no. It boils down to: Don’t put money into something until you are POSITIVE it will have a ROI.

The startup advice business is shark welfare. Avoid the chum, chums.

Kevin Wimberly (profile) says:

I concur

As another IP attorney, I agree with Stephen’s analysis. You cannot use traditional notions and definitions of “commerce” to determine if there is a “use in commerce” for Lanham Act purposes. There is also a distinction between use of goods in commerce vs. use of services in commerce. Some of what Mr. Geigner argued sounds like an argument toward crowdfunding as a “service” such that engaging in a crowdfunding campaign might be a use in commerce – of crowdfunding services. However, if the campaign is for a tangible good, and there is no tangible good on which to affix the mark, then you will have a very difficult time convincing the USPTO and/or a court that there has been a statutory use in commerce.

Also, some of Geigner’s points are actually reasons that an intent-to-use path exists. When you create a business entity with your state and start gearing up to make a product, no, that does not mean that you are making a “use in commerce” for trademark purposes. Are you doing something commercial? Absolutely. But you are not using the trademark in interstate commerce on your goods at that point, so you file an intent to use application to put others on notice that you intend to use that mark on your goods in the near future.

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