Pet Butler Trademark Application Suspended

Pet Butler’s Trademark Application for Registration Rejected, Then Suspended

FRISCO, Texas (Blue MauMau) — The Pet Butler franchise chain has no registered trademark. It never did. And now the franchisor of some 80 poop-scooping franchises is trying to register with the United States Patent and Trademark Office but having considerable difficulty.

Pet’s application and request for reconsideration of trademark has been rejected by the Trademark Office. The relatively goliath Pet Butler name is too close to an already registered dog waste removal company, a two-unit small independent business in the Pacific Northwest, Dog Butler. So Pet petitioned to cancel Washington-based Dog's trademark, and in turn its pending application is suspended until the outcome of the Dog cancellation is known.

Such trademark uncertainty puts additional risk and financial burden on potential franchisees, who assume that the trademark is part of what they are buying. Franchise unit owners incur business expenses in relation to the company marks. Worse yet, franchisees must rebuild a brand presence with existing customers when they have to change their name.

Mr. Nick Bibby, a franchise consultant and principal of the Bibby Group, comments, "It is a disservice to franchisees as well as to the entire network to market an unprotected name. The development of brand recognition is a pivotal element in successful franchising and it cannot be done when standing on quicksand."

How Does a Franchisee Know If a Franchise Has Trademarks? Sometimes Not Easily.

Franchisors do not like to disclose that they do not hold the registration to a trademark. Combing through the UFOC, a disclosure document that is supposed to convey relevant business information to franchise buyers, a franchise buyer with his lawyer would be hard pressed to see any trademark problems at all in Pet’s document. It is there, though.

“Trademark registration applications have been filed for the primary trademarks set forth below (list of names provided). By not having a Principal Register federal registration for the trademarks, Company does not have certain presumptive legal rights granted by a registration...

"There are no effective determinations of the US Patent and Trademark Office, Trademark Trial and Appeals board, the trademark administrator of any state listed in the attached exhibits, or any court. There are not pending infringements, oppositions or cancellations concerning the principal trademarks. There is no pending material litigation involving the principal trademarks." (October 2006, UFOC for Pet Butler, pdf)

Does the above phrase in Pet’s UFOC say that it has no effective trademark, or does it say that there is nothing impeding it from its trademark rights? A well-respected patent attorney and another franchise attorney missed the meaning of the clause above. And "effective determination" is not a legal trademark phrase. The highlighted second sentence above reads like some sort of required legal disclaimer, which in fact it is. But it is also a description of Pet’s circumstance.

The words reassure that it has filed primary trademarks. Yet, there is some sort of disclaimer on "principal register". The reader reads on, understanding that legal documents tend to like disclaimers for protection. Trademark and franchise attorney Jim Sims of law firm Morgan Lewis & Bockius LLP provides a translation into plainer English. “Please note that although we [Pet Butler] have filed the application for federal registration on the principal register for all these marks, we do not currently have registrations for any of them. As a result, there are certain legal benefits that we do not yet have because we do not have those registrations.”

But such frank words sound harsh to a franchisor's ear because it could turn away buyers. The above UFOC wording softens such a message and sounds to some potential buyers like Pet controls the marks. For example, "Trademark registration applications have been filed for the primary trademarks set forth below," Pet writes.

Material Change of the Trademark Is Required To Be in the Disclosure Document, but What Is Material?

Attorneys might spend hours arguing over what “no effective determinations of the US patent and Trademark Office” means. It can be argued that a final revocation and suspension of the trademark registration is not final enough to be an “effective determination”. For example, no notice of revocation of their application for trademark registration was made in compliance with the California rule when Pet Butler announced a new Beverly Hills, California franchise in February 2007.

The State of California adds some insights to this quandary.

Mark Leyes, Director of Communications for California's Department of Corporations, says, “A commercial logo or other symbol representing the franchisor does not need to be trademarked or copyrighted in order for the franchisor to grant the right for its use by the franchisee, but if the commercial logo or symbol is not trademarked or exclusive, it should be so stated in the UFOC (offering circular) along with the fact that the franchisee is being granted the right to use it. California law states that ‘the franchisor shall promptly notify the Commissioner in writing, by an application to amend the registration, of any material change in the information contained in the application as originally submitted, amended or renewed.’”

Mr. Leyes added, “It is up to the franchisor to determine the materiality of a change in the status of the trademark (or any logotype or commercial label) and ultimately whether to amend the disclosure as it is registered with the Department. If there is a dispute between the parties and a complaint is filed with the Department alleging the failure to disclose the material fact that there has been a change in the trademark status, the Department would review the facts to determine if it is clear that the trademark is a material element of the franchise and therefore the loss of the use of the trademark would affect the franchise business. If so, a violation of the law may have occurred if the status of the trademark were not disclosed in the UFOC in a timely manner.”

According to trademark attorney James Sims, Pet is asserting that it has not yet registered its trademarks. Sims says, "Technically, Pet Butler would likely argue that the UFOC statements are correct as it has filed applications for registration and there has been no final determination yet from the PTO (or elsewhere) that Pet Butler will not obtain a trademark registration for the Pet Butler mark. And even if there were, such a determination would not necessarily go to the issue of the right of Pet Butler (and its franchisees) to use the Pet Butler name — only to its ability to register."

Pet Butler and Dog Butler in Negotiations

Pet Butler's CEO, Matt "Red" Boswell, told Blue MauMau that he has been negotiating with Dog Butler while at the same time trying to cancel Dog's trademark registration. Mr. Boswell declares, "We have a petition to cancel a mark that has been in dispute for a while. We are in talks with the trademark office actively and the disputed party over what we should do. There is not a chance in the world of us losing the mark. The petition has not been rejected whatsoever. If anything, they [Dog Butler] will lose theirs."

Washington-based Dog Butler started their "pooper scooper" business in 1991. Pet Butler, Inc. began June of 1998 in Texas. The company who now claims "We're #1 in the #2 business" began franchising through Pet Butler Franchise Services, Inc. in 2004. If Pet cannot protect its trademark, its franchisees might find it difficult to be compensated through litigation for potential business loss.

According to Sims, an experienced attorney who practices in the trademark and franchise areas, "Pet Butler says that based on the alleged likelihood of confusion with Dog Butler and the fact that it used its mark before Dog Butler did, it should prevail. According to the response it filed with the PTO, however, Dog Butler claims that it used its mark before Pet Butler's, implying that the real date may have been masked by clerical error."

There are solutions to the name problem. Dog could also relinquish its rights to the trademark and change its name for the right fee.

Often where two similarly named companies have been growing their business in different geographical areas, it is not uncommon for one party to seek an accommodation by the other for concurrent use, and for concurrent use registrations to be issued which in effect assigns a territory to each of the companies.

For example, a Pet franchise unit inside Dog's assigned geography of say the Pacific Northwest would not be able to do business as Pet Butler. However, Pet’s franchises outside of Dog's territory would be able to retain the Pet Butler brand name. And an accommodation could be made that Pet Butler use its name if Dog agrees. That might mean that Dog Butler receives part of the royalties or a set fee.

Or Pet might need to change its name. Pet's franchisees may find that their customers may be confused for a time about the new name, but franchise experts assert that buying a franchise is about much more than a name.

Nick Bibby, who often consults franchisors, observes, "Although one important element in quality franchising is the recognition value of a ‘protected’ name, the franchise ‘system’ and all that it entails is far more important than any ‘name.’”

Most likely its franchisees would not be able to do much about losing their trademark. Jon Solish, franchise attorney for Bryan Cave, LLP, thinks that, "Many franchise agreements allow the franchisor to change the name if they need to. It depends on what the contract provides. There are a couple of cases where this happened. In both cases, the court found that this was not enough to breach the franchise agreement. Convenient Mart was one. The company found that it was generic and lost the name. But the court held that they still had their rights as a franchisor."

Solish may have a point. Butler’s UFOC distances itself from any legal repercussions of a change in name from disgruntled franchisees.

"The Franchise Agreement does not require us [Pet Butler Franchise Services, Inc.] to participate in your defense or indemnify you [the owner of the franchise unit] for expenses or damages if you are a party to an administrative or judicial proceeding involving any of the trade names, trademarks, or the System, or if the proceedings is resolved unfavorably to you . . . We have the right to modify or discontinue the use of any of the trade names, trademarks or its system . . .” (Item 13, Pet Butler's 2006 UFOC)

At any rate, Pet's franchisees may not know with certainty what they will be called until the trademark issue is resolved. And that could take years.

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Supplemental readings:

• When Pet Butler and Dog Butler Used Their Names, A Timeline of Claimed Events That Could Affect the Trademark Registration