In most U.S. states, merely using a trademark confers trademark rights to the owner.  As such, many companies question why they should spend time and money registering their trademarks with the United States Patent and Trademark Office (PTO).  There are many reasons to register a mark, but one of the most important reasons was recently highlighted in a case from the First Circuit Court of Appeals (the federal appellate court whose rulings cover Massachusetts, Rhode Island, Maine, New Hampshire and Puerto Rico).  That case is Dorpan, S.L. v. Hotel Melia, Inc., 728 F.3d 55 (1st Cir. 2013). 

The case involved a dispute between two hotels over the right to use the mark “Meliá” in Puerto Rico.  Hotel Meliá, Inc. (“HMI”) has operated the Hotel Meliá in Ponce, Puerto Rico for over a century – since the 1890s – but had never registered that mark with the USPTO.  The Hotel Meliá has a storied history, with many famous guests such as U.S. President Theodore Roosevelt.

The relative newcomer, Sol Meliá, owns and operates the third largest hotel chain in Europe, as well as numerous hotels in North America using variations of the Meliá mark.  Sol Meliá and its affiliates have registered several trademarks containing Meliá with the PTO for their various hotels and resorts.  In 2007, Sol Meliá opened a hotel called “Gran Meliá” in Coco Beach, Puerto Rico -- only 80 miles from the Hotel Meliá in Ponce.  HMI filed suit against Sol Meliá for trademark infringement.  Sol Meliá countersued, seeking a ruling that its use of “Gran Meliá” did not infringe HMI’s trademark. 

On appeal, the First Circuit acknowledged that common-law trademark rights derive from use of the mark, not from registration.  The court analyzed the scope of Sol Meliá’s trademark rights under federal law (through its federal registrations) and HMI’s trademark rights under common law (through its longstanding use).  Even though Sol Meliá was the later or “junior” user, because its federal registration was more than 5 years old, the registration had become “incontestable.”  Once a mark has been registered and in continuous use for five consecutive years without an adverse ruling against the holder, there is a presumption that the holder of the mark is entitled to exclusive use of the mark throughout the United States.  Thus, Sol Meliá’s incontestable trademark registrations cannot be cancelled by an earlier or “senior,” user like HMI.  But even though Sol Meliá’s registration could not be cancelled, federal law also provides that HMI, as the earlier or “senior” user, could keep using its mark in the limited geographical area that it had been doing business.  The First Circuit then sent the case back to the lower court to determine the extent of the area in which HMI does business.

This case serves as a potent reminder that businesses owners should file trademark applications as early as possible.  If HMI had registered its mark before Sol Meliá, then Sol Meliá likely would not have been able to obtain U.S. registrations.  The modest cost of obtaining a U.S. registration is a mere fraction of the cost of litigation.

Moreover, by not challenging Sol Meliá’s trademark registrations within five years of registration, Sol Melia’s trademark registrations are now incontestable, and HMI’s use of its “Meliá” mark is now limited to the area where it “did business” prior to the date of Sol Meliá’s registration.   If HMI had registered its mark first, it would be able to expand its use of the mark throughout the United States.  Indeed, by not registering its mark earlier, HMI lost the chance to ever register its mark.  

Other benefits of registration include:                                 

• Use of the ® symbol, which provides notice to others of ownership and decreases the likelihood of another party adopting a similar mark;
• A federally registered mark will appear in trademark search reports ordered by others, likely discouraging them from trying to register a confusingly similar mark.  Also, the PTO will automatically refuse registration to any trademarks it deems confusingly similar to a federally registered trademark;
• A federal registration confers the right to recover up to triple damages and attorneys’ fees from an infringer; and
• A federal registration increases the likelihood of success in disputes involving domain name cybersquatting and typo-squatting.

Finally, most foreign countries use a first-to-file system, as opposed to the first-to-use system in the U.S.  Thus, the first individual or entity to file an application in such a jurisdiction can obtain a registration and preclude your right to use your mark in that country, regardless of whether your use began earlier.