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An unprecedented surge in applications for US trademarks has unleashed an equally extraordinary rise in fraud schemes targeting applicants, leaving investigators struggling to keep up.
A few scams have been dismantled, like the China-based network that filed hundreds of applications under a dead US lawyer’s name, and the Latvian national who bilked millions of dollars from unsuspecting applicants by creating a fake company with a name nearly identical to a government agency.
But through the first few months of this year, the US Patent and Trademark Office had already issued four times as many sanctions for fraudulent or improper applications than it did all of last year.
Many more go unchecked, officials concede. A specialized task force the office built five years ago to combat trademark scammers remains under-resourced and overwhelmed. The rise in fraud has also led to delays in processing and approving legitimate applications, stunting business plans and potentially prohibiting innovation, according to some attorneys.
Amy Cotton, the deputy commissioner for trademark examination policy who oversees the task force, now known as the Register Protection Office, confirmed the surge. She said she can’t even hazard a guess at how pervasive the problem has become.
“We just weren’t built to handle fraud,” said Cotton.
Every year, businesses, inventors, and entrepreneurs apply to register hundreds of thousands of US trademarks, aiming to protect the name of their business or brand. The number has more than doubled in the last two decades.
Typically, applicants fill out an application and pay between $250 and $350 per class of goods or services. The cost increases if they enlist the help of a trademark attorney, but so does the likelihood of being granted registration.
All the information submitted to the PTO is public record, which in turn makes applicants easy targets.
Common scams include misleading solicitations that warn applicants their trademark registration is about to expire and demand a fee to keep it active. Some fraudsters openly impersonate the patent office and its examiners through calls and letters and emails using the official PTO seal.
“They’re spoofing our examining attorney names, they’re spoofing our email addresses, and they’re spoofing our phone numbers,” said Cotton.
Others pretend to be attorneys and law firms skilled at getting trademarks approved, or threatening action.
Caleb Green, an intellectual property lawyer at Dickinson Wright PLLC’s office in Las Vegas, recalled getting a call from a trademark applicant who said he had been called by a man claiming to be Green, accusing him of infringing a client’s work and demanding a licensing fee.
The scammer went as far as to create a fake website that looked like Green’s firm’s site, complete with made-up partner profiles. Green said his firm intends to take action, though he declined to elaborate.
Attorneys also have seen a rise in companies that offer bargain-rate deals to register trademarks but then either file applications incorrectly or use the client’s information to intercept communications between the applicant and the PTO.
“When we work with somebody who found a trademark application filing for $60, I would say 99% of the time it’s a mess,” said Carrie Olson, an attorney at Day Pitney LLP, who said she notices around a dozen scams a week. “And sometimes we can’t save the originally filed application.”
There’s also been a dramatic increase in international trademark firms hijacking a US-licensed attorney’s credentials or bribing such lawyers to file thousands of applications, because the patent office requires foreign-domiciled applicants to use a US-licensed attorney.
Last year, PTO investigators determined a group of grifters based in China had filed more than 2,000 fraudulent trademark applications under the name of Jeffrey Stewart Firestone, an American lawyer who died in July 2021.
The scammers also created a fictitious attorney, named “Jackson George,” who was identified as the attorney of record in over 2,500 US applications and registrations.
The PTO is also working to shut down auction sites where the scammers sell US trademarks they’ve successfully, if illegally, registered. The marks allow buyers to then sell their goods and services on Amazon and other platforms that require a US-approved mark.
“To the legitimate trademark community, all these application registrations that are infected, so to speak, clog up the system,” said David Gooder, the PTO’s commissioner for trademarks.
In one of the more infamous fraud cases, PTO examiners noticed an unusual number of applications filed by an attorney citing a mailing address of Colima Road in Boulder, Colo. When the examiners checked, they couldn’t find such a road in Boulder. Ultimately, they determined more than 10,000 applications listed that bogus address.
These days, they rely on an electronic mapping system to flag invalid mailing addresses. But the rest is up to examiners and the Register Protection Office.
The office is led by a full-time director and has three focuses: post-registration audits, which are done by roughly 20 examining attorneys and two part-time paralegals; non-use cancellation proceedings, under the Trademark Modernization Act; and an administrative sanctions program.
The office has no law enforcement power, but can place a suspicious filing in a holding docket while it gets reviewed, a process that can delay it for months or years. Examiners can also issue administrative sanctions against applicants who, at a minimum, violate PTO filing rules.
There have been approximately 115 sanctions issued this year so far, up from 35 last year.
At one time, violators were difficult to track down. But in 2022 the office created a mandatory identity verification program for attorneys who file applications, and can terminate account-holders suspected of fraud.
Still, their methods aren’t foolproof.
Sometimes an application slips through the cracks and gets registered before the PTO finds proof that it should be sanctioned. The office puts a note in these files, but has not yet figured out how to proceed in these cases.
Gooder said the strength of the Register Protection Office has increased over the years but it remains under-resourced.
Cotton said that another reason for the spike in fraudulent schemes is the lack of attention from law enforcement agencies.
An exception was the 2021 prosecution by federal prosecutors in South Carolina of a Latvian national, Viktors Suhorukovs, who bilked more than $4 million from unsuspecting trademark holders and applicants by sending them fake notices that their trademarks were about to expire.
According to an affidavit filed by a federal agent, the investigation began with a complaint in 2020 from a woman in Greenville, S.C., who held the trademark for the natural protein bars she created for her diabetic son.
When she got an expiration warning in the mail from the “Patent and Trademark Office LLC”—a bogus firm registered by Suhorukovs—she sent $1,850 to its Washington, D.C., address. After getting suspicious, she contacted authorities.
Agents tracked the checks she sent to a West Virginia bank and found the account holder had tried to deposit hundreds of checks, from all over the country, with a total value of $1.2. million. Other victims included the South Carolina Farm Bureau Federation, which had sent the fraudulent office a check for $1,650 to renew the mark “South Carolina Farmer.”
Suhorukovs pleaded guilty to mail fraud in 2021 and is serving a 52-month prison term.
Though applicants targeted by scammers have the option to file a complaint with an enforcement agency such as the Federal Trade Commission or Department of Justice, Suhorukovs’ scheme—which impacted over 2,900 victims—has been the only one to lead to prosecution, according to the PTO.
The lack of law enforcement interest has created a belief among attorneys and clients that registering complaints of trademark fraud isn’t worth it.
“We’ve never actually received any sort of communication from any federal agency that we’ve reported this kind of activity to,” said Kelly McCarthy, an attorney at Sideman Bancroft LLP. “It may be that they are taking action against certain companies, and we just aren’t privy to that information.”
The FTC and the US Department of Commerce Office of the Inspector General didn’t respond to requests for comment.
The PTO regularly sends out alerts and holds events to educate applicants about fraud in addition to its scam prevention webpage. It will hold its latest webinar later this month.
But PTO Director Kathi Vidal also hinted that the agency is considering new steps to combat the fraud.
“We are looking into something that I can’t really address yet because we don’t know where to land the plane on it,” Vidal said at a news conference in early April. “But we’re working hard to use all of our capabilities and all of our power to make sure we’re keeping the trademark registry as clear as possible.”
These days, most trademark attorneys send a notice to clients warning them about potentially fraudulent entities that may attempt to contact them. But attorneys still get calls from clients who’ve been duped by scammers claiming to be the patent office.
“We’ve had some people who unfortunately have paid them,” said Jennifer Mikulina, an attorney at McDermott, Will & Emery LLP. “Sometimes I found out because I sent a bill to my client and they said ‘Well, we already paid for this trademark.’”
The increase in schemes has led to higher wait times for applicants because examiners can’t take what an application says at face value, according to the PTO.
“They used to be able to trust what was in, as lawyers would call it, the four corners of the document, and they just can’t anymore,” said Gooder.
The PTO claims that it takes 12-18 months to register a trademark, but Olson, the Day Pitney lawyer, said she’s handled applications that remained pending for nearly a year before being assigned to a PTO examiner.
Green, the Dickinson Wright attorney, said he believes the longer it takes the agency to respond to applications, the more vulnerable applicants become.
“There’s this nine-, 10-month period where you may not have interaction with your client because there’s nothing to report,” he said. The lack of communication prompts scammers to reach out after a few months, making it seem like a reasonable time for there to be progress in an application.
The delay also has the potential to create an unfair imbalance in terms of who is able to afford a trademark registration, given that an increase in time to register an application could mean additional attorney costs, Olson said.
Olson said that while the agency has made progress in tackling the issue, “at the end of the day, it’s really the trademark owners that have to deal with this stuff on the front lines—and it wreaks havoc at all levels.”
To contact the reporter on this story: Riddhi Setty in Washington at rsetty@bloombergindustry.com
To contact the editors responsible for this story: John P. Martin at jmartin@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com
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