IRS Section 197 Intangibles include . . .

It looks like the costs involved in applying for, defending, and promoting trademarks go into intangible assets:

Section 197 Intangibles Defined

The following assets are section 197 intangibles and must be amortized over 180 months:

1. Goodwill;
2. Going concern value;
3. Workforce in place;
4. Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers;
5. A patent, copyright, formula, process, design, pattern, know-how, format, or similar item;
6. A customer-based intangible;
7. A supplier-based intangible;
8. Any item similar to items (3) through (7);
9. A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals);
10. A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business;
11. Any franchise, trademark, or trade name; and
12. A contract for the use of, or a term interest in, any item in this list.

IRS Publication 535 & Section 197 Non-Intangibles

Not all assets are created equal, so that trademarks can be considered intangible while patents and copyrights may not be if acquired separately from a business:

The following assets are not section 197 intangibles.

1. Any interest in a corporation, partnership, trust, or estate.
2. Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract.
3. Any interest in land.
4. Most computer software. (See Computer software , later.)
5. Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business.
   1. An interest in a film, sound recording, video tape, book, or similar property.
   2. A right to receive tangible property or services under a contract or from a governmental agency.
   3. An interest in a patent or copyright.
   4. Certain rights that have a fixed duration or amount. (See Rights of fixed duration or amount , later.)
6. An interest under either of the following.
   1. An existing lease or sublease of tangible property.
   2. A debt that was in existence when the interest was acquired.
7. A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business.
8. Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized.

 

The Costs of Securing a Trademark Should be Capitalized Under Section 263A.

Taxpayers subject to section 263A must capitalize all direct costs and certain indirect costs properly allocable to property  produced….” 26 C.F.R. § 1.263A-1(e)(1).  Direct costs consist primarily of materials and labor, id. § 1.263A-1(e)(2).  As to indirect costs, the regulation states the following:

Indirect costs are defined as all costs other than direct material costs and direct labor costs (in the case of property produced) .  .  . .  Taxpayers subject to section 263A must capitalize all indirect costs properly allocable to property produced. . . .  Indirect costs are properly allocable to property produced . . . when the costs directly benefit or are incurred by reason of the performance of production . . . activities.  Indirect costs may be allocable to . . . other activities that are not subject to section 263A.  Taxpayers subject to section 263A must make a reasonable allocation of indirect costs between production . . . and other activities.  Id. § 1.263A-1(e)(3)(i).

Fanciful Trademark to Mark

Generic terms are the common name of a class of things that are incapable of indicating a single source of a product or good.  Generic marks can never function as a trademark or service mark.  For example, blended whiskey, computer software, mouse, disk, or keyboard are each generic terms which cannot be treated as a protectable trademark.

In some cases, generic terms come from a formerly protectable trademark, so that, to the general public, the generic mark refers to the product itself rather than merely a single manufacturer’s brand or version of the product or service.  Such loss of distinctiveness turns a protectable mark into merely a generic unprotectable mark.

Such former trademarks include aspirin, cellophane, cola, cornflakes, cube steak, dry ice, escalator, high octane, kerosene, lanolin, linoleum, and mimeograph.

Geographic terms may be registered on the Supplemental Register.

Geographic terms describe a geographic region.  Trademarks involving a geographical term are “weak” because they describe, and they are entitled to a narrow scope of protection.

A mark composed entirely of a geographic term may be registrable only on the Supplemental Register or on the Principal Register upon proving secondary meaning and/or acquired distinctiveness, which means that the mark has become a distinctive source identifier of that party’s goods.

A mark that is a composite of a geographic term and a distinctive term may be able to register on the Principal Register if the geographic term can be disclaimed and the remaining part of the composite term is distinctive.

Registered Trademarks must be renewed.

Unlike copyrights and patents, trademark rights last indefinitely as long as the owner continues to use the mark in commerce as a source identifier of its goods or services.  The term of a federal trademark registration is 10 years, with 10-year renewal terms.  But the United States Patent and Trademark Office [USPTO] requires an affidavit of use between the fifth and sixth year after the date of registration.  If no affidavit is filed, the registration is cancelled, and the USPTO does not remind the trademark owner to file.

How to obtain trademark rights immediately!

The surest way to obtain trademarks rights is to start using the mark in commerce as a source identifier.  If you don’t start using a trademark, you can’t obtain a registration under the Lanham Act.

MGA v. Mattel: 9th Circuit Restores Brantz Trademark to MGA Entertainment

The 9th U.S. Circuit Court of Appeals restored the Bratz brand of dolls back to MGA Entertainment.  There may be a new trial.

The appellate panel ruled that the trial judge erroneously interpreted an employment contract to cover all works, including those outside the scope of an employee’s job.

About two years ago a Riverside jury awarded Mattel $100,000,000.00 in damages for copyright and other violations.    However, Chief Judge Alex Kozinski indicated that a “significant portion–if not all–of the jury verdict and damage award should be vacated” and the whole case will probably need to be retried.

Lanham Act prohibits trademark infringement and false advertising by using a competitor’s trademarks in meta-data.

The Lanham Act prohibits trademark infringement and false advertising.  New issues have arisen with the internet, e.g. whether website meta-data can infringe a trademark and violate the Lanham Act.

A competitor cannot embed another’s trademarks in website meta-data.  It does not matter that consumers never see the meta-data because the Lanham Act provides that proof of actual confusion is not essential to finding likelihood of confusion.

In one case, the court concluded that the misdirecting consumers by the including a competitor’s trademarks in its own website was sufficient to show a likelihood of confusion, whereby the court granted  summary judgment.

See In Venture Tape v. McGills Glass Warehouse, 540 F.3d 58, 59 (2008).

So you think that London Fog apparel is from England?

If so, check:  http://www.londonfog.com/contact.html.

See also http://tess2.uspto.gov/bin/showfield?f=doc&state=4008:10msmg.2.43 and http://tess2.uspto.gov/bin/showfield?f=doc&state=4008:10msmg.2.48.