I’ve had several recent meetings with Robert C. Cumbow, an excellent intellectual property attorney, and have learned much valuable information about trademarks. He writes regularly for the Washington State Bar News, a monthly publication. Mr. Cumbow has generously given me permission to reprint the following article below (it’s long, but extremely valuable information). Every writer should have a basic understanding of the fundamentals of trademark law, particularly in regards to developing a branded series of book.
TRADEMARK BASICS
A Brief Overview of the Fundamentals of Trademark Law
Revised, April 25, 2003
Graham & Dunn PC
Pier 70
2801 Alaskan Way
Seattle WA 98121
(206) 340-9619
Reprinted by permission
ROBERT C. CUMBOW is a shareholder and chair of the intellectual property practice at Graham & Dunn, where he focuses on trademark, copyright, Internet and advertising issues for a wide range of commercial clients. He also counsels artists and arts organizations in intellectual property and media law issues. He is a three-time graduate of Seattle University (B.A. 1967 and M.A. 1969 in English, J.D. 1991). He teaches Trademark Law and Advertising Law at Seattle University School of Law, where he also counsels clients and mentors student interns in an arts law clinic. He serves on the Executive Committee of the Intellectual Property Section of the Washington State Bar Association, and is a volunteer for Washington Lawyers for the Arts.
I. WHAT IS A TRADEMARK?
A trademark is a word, phrase, symbol, product feature, or any combination of these that distinguishes in commerce the goods or services of its owner from those of others. A trademark, therefore, is an indicator of source. It does not tell what the goods or services are, but where they come from. The word “cola” is a generic term; it tells you what kind of beverage this is. The word COCA-COLA is a trademark; it tells you what provider the goods come from, and by doing so it distinguishes those goods from similar goods of the same kind provided by different sources. (As a matter of convention, in legal documents and in commentary, word trademarks are rendered in block capital letters.)
A trademark need not be a word, a group of words, or a visual design. Trademark protection is granted to trade dress—the packaging or overall “look and feel” of the trappings accompanying a business’s product or services. Product configuration—the particular shape or design of a product itself—may also merit trademark protection, if it serves as a source-identifier, rather than performing a purely utilitarian function. A color or a sound or series of sounds may be protected as a trademark (think of the Intel Corporation’s four-tone “logo” in its television commercials). Efforts have been made to seek protection for a particular texture or odor as well, where those serve a source-identifying function—that is to say, if they serve to alert the public that the product comes from one and only one specific source.
II. A TRADEMARK IS NOT A TRADE NAME
A trademark is not the same thing as a trade name. “Trade name” is simply the term given to the name by which a business entity is known. The entity itself may be a sole proprietorship, a partnership, or some form of corporation. The name under which it does business is called its trade name. When the entity is a corporation, its trade name must be registered as a corporate name in the state in which it is registered. This is not the same thing as registering a trademark, and does not provide the same protection or confer the same rights. Many trade names are also trademarks; but separate regimes of protection apply. The easiest way to remember the difference between a trade name and a trademark is to recall that a trademark distinguishes its owner’s goods and services from those of others, while a trade name merely identifies the company by name.
“Trademark” is not a verb. There is no such thing as “trademarking” a word or phrase. When you choose a name under which you will provide a particular line of goods or services, you are adopting a trademark. In the United States, and in many other Common Law countries, you obtain rights in that trademark by using the mark in commerce in connection with the sale of goods or with the promoting and providing of services. You can have no rights in a trademark without actual use of the mark. You do not have to register a mark to have rights in it; in fact, in some cases registration may not even be available.
Note, however, that in most other countries, it is possible—and is even standard practice—to obtain trademark rights solely through registration, even without use and without any intent to use the mark. In many such countries, the registrant will be the holder of rights in the trademark until it becomes possible for third parties to challenge the registration for non-use—anywhere from three years to more than five years, depending on the laws of the specific country involved.
What “right” is protected by trademark law? The owner of a valid, protectable trademark has the right to be the sole and exclusive user of that particular mark, within the relevant geographic area, for goods and services of the kind provided under the mark, and to enjoin others from using the same or a confusingly similar mark in connection with the same or reasonably related goods or services. Unlike copyright and patent rights, trademark rights are not statutorily limited in time, but continue as long as the trademark is in use in connection with the associated goods and services.
Trademark rights are not rights in gross; they are tied to specific goods. Several different companies may use the same mark if they use it for goods and services sufficiently different that no consumer would be confused as to source. The mark EAGLE has been used—and registered—by completely different owners for, among other things, bicycles, automobiles, insurance, shirts, pencils, pretzels, hardware stores and condensed milk. None of the owners of any of these marks may stop the owner of another of them from using the same mark. This is because the products and services are sufficiently different to avoid consumer confusion. No reasonable consumer is likely to think that Eagle pretzels come from the same folks who make Eagle pencils.
Although in many countries trademark rights are protected at common law, and trademark infringement is recognized as a common law tort, governmental entities have enacted regimes of trademark protection. Trademarks used in U.S. interstate commerce may be protected under the federal trademark statute, known as the Lanham Act, 15 U.S.C. §§1051ff. The U.S. government has a trademark registry, maintained by the U.S. Patent and Trademark Office (“PTO”). Anyone who uses a mark in U.S. interstate commerce is entitled to seek registration for that mark on the Principal Register of the PTO. Use in interstate commerce means actually selling goods or providing services under that mark in two or more states, or between the United States and a foreign country.
Federal registration of a trademark entitles its owner to the presumption that the registrant has the exclusive right to use the mark in U.S. interstate commerce with respect to the goods or services recited in the registration. This presumption can be a powerful weapon in trademark disputes. Moreover, after five years’ registration, a trademark becomes incontestable, and its registration may be canceled only for very limited causes.
Businesses whose use of a mark is wholly intrastate are not entitled to federal registration, but may benefit from state registration. Every state has a trademark statute and a trademark registry. Washington state’s trademark statute is found at RCW 19.77. (For purposes of comparison and contrast, the state’s trade name statute is found at RCW 19.80.) The benefits of state trademark registration are intrastate in nature, and thus state registration is of little value to businesses that are using their marks in interstate commerce.
In the United States and other Common Law countries, a trademark that is used in commerce acquires common law rights. Its owner may invoke those rights to stop others from using the same or a closely similar mark in connection with the same or similar goods or services in such a way that the use of both marks would tend to confuse or deceive consumers as to the source of the goods or services. Such common law trademark rights are limited to the geographical area in which the mark’s owner has used the mark. Claims of common law trademark rights are generally supported by such evidence as dated sales receipts and purchase orders, packaging and labeling, records of advertising expenditures, and examples of media references to the mark in association with the claimant.
The term “trademark” refers generally to four different types of mark. It also refers specifically to one of those four types. A trademark, in the specific sense, is a mark used on goods. A service mark (two words, not one) is a mark used in connection with promoting and providing services to others. You are not entitled to claim trademark rights in a service mark if your “services” are provided solely for your own benefit, not for that of others. Thus, for example, a business that uses the mark DAZZLE for a line of clothing, and that also creates its own advertising for its clothing, may not claim that DAZZLE is also a service mark used in connection with advertising services. Only if the advertising services are prepared for others can the company be said to be using its mark for “advertising services.”
The law recognizes two other types of trademark, which are less common. A certification mark is used by parties other than its owner, with the owner’s permission, to show that the parties’ goods or services have been certified by the mark’s owner as meeting specific standards of quality or safety. Familiar certification marks include the Good Housekeeping “seal of approval” and the Underwriters Laboratories “UL” mark certifying electrical safety. A collective mark is a mark used to show membership in an association or collective group. Familiar collective marks include the mark FLORIDA ORANGE GROWERS and the often-seen labor union “bugs.”
Trademarks are protected—whether by common law, the administrative law of trademark registration, or the decisional law of the civil court system—according to their strength. Strong trademarks are accorded greater protection than weak ones. The law recognizes five degrees of trademark protection (or non-protection). At the low end of the scale are generic terms. A generic term can never be a trademark. It simply designates a kind of goods or service, and is incapable of distinguishing the goods of one user from those of another. Whether or not a term is generic depends, of course, upon how it is used. The term APPLE is generic if used in connection with flavors of pie or scents of shampoo; but it is not generic when used in connection with sound recordings or computer products. A term is generic if it merely identifies the kind of goods or services it is used with.
Generic terms are not given trademark protection because they are incapable of functioning as trademarks. A term may be generic to begin with (words such as “shoes,” “soap,” or “beer” are generic by definition). However, an initially strong trademark may become generic—and thus unprotectable—if its owner uses the mark, or encourages others to use it, as a generic term rather than as a brand name. Examples of once-strong trademarks that lost protection because their owners allowed them to become the generic term for a kind of goods include ASPIRIN, CELLOPHANE and ESCALATOR. Examples of trademarks that are still protected, but whose owners fight a continuing battle to keep their marks from becoming generic, include KLEENEX (for facial tissues), ROLLERBLADE (for in-line skates), and VELCRO (for hook-and-loop fastening systems).
Next up from generic terms are descriptive terms. These are words or phrases that merely describe the goods or services, or some feature, characteristic, or purpose of the goods or services. Descriptive terms are not initially capable of trademark protection, because they do not initially serve to distinguish their owners’ goods or services from those of others. Rather, they merely describe those goods and services. They tell us something about the goods and services, but do not act as source indicators.
It may be said that generic terms answer the question “What kind of thing am I?” and descriptive terms answer the question “What am I like?” or “What do I do?”, while trademarks answer the question “Where do I come from?”
However, unlike generic terms, descriptive terms are capable of distinguishing the goods and services of their owners from those of others. To do so, they must acquire distinctiveness—in other words, through continuous use in the market, they must come to be recognized by the consuming public as source-indicators rather than as merely descriptive phrases. This acquisition of consumer recognition as a brand name rather than as a merely descriptive term is called “secondary meaning.”
Descriptive terms are not initially protectable as trademarks because they are terms that must also be available to competitors, who may need to use the same or similar words to describe their own goods. Because trademark law exists to maintain a competitive economy, it would be unfair to allow one business to gain a competitive edge by permitting that business the exclusive right to use a particular descriptive term and to stop his competitors from using it. For example, it may initially be unfair to allow one and only one competitor in the coffee market to claim that its product is “Seattle’s Best Coffee.” However, if through continuous and unchallenged use, the term SEATTLE’S BEST COFFEE comes to be recognized by consumers as a brand name rather than a mere claim of superiority, it has achieved secondary meaning and is entitled to trademark protection.
While generic terms are never trademarks because they can never be distinctive, and descriptive terms may become trademarks by acquiring distinctiveness, the remaining three degrees of strength apply to trademarks that are inherently distinctive. That is, they are capable of functioning as trademarks from the moment they are first used, and are therefore protectable from the very beginning.
Suggestive marks are not “merely descriptive,” but tell us something about a product or service by suggesting something about it. The trademark NIKE—the name of the Greek goddess of victory—suggests something about the quality of the company’s athletic gear. Arbitrary marks are dictionary words that have real-world meaning, but whose meaning has nothing to do with the product or service with which they are used. APPLE has nothing to do with computers. At the highest end of the scale are fanciful marks, which are wholly invented words that have no meaning at all apart from their function as source indicators for their owners. Such marks are the strongest and most protectable. Examples include EXXON for petroleum products, KODAK for cameras and film, and XEROX for photocopiers.
|
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àStrong |
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Non-distinctive |
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shoes |
Hi-Tops |
Dockers |
Mary Janes |
Keds |
|
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Sneakers |
Nike |
Jellies |
Adidas |
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soap |
Clean&Smooth |
Ivory |
Irish Spring |
Camay |
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coffee |
Seattle’s Best |
Bright&Early |
Appassionato |
Sanka |
The “strength” of a trademark is important in resolving trademark disputes by determining the degree of protection to which a given trademark is entitled.
Trademark conflicts may arise in two ways. (1) Registration: A party applying to register a trademark is denied registration either because the PTO finds the party’s mark confusingly similar to a previously-registered mark, or because the owner of another mark believes it will be harmed by registration of the party’s mark and therefore opposes the application. (2) Use: The owner of a trademark brings action against the user of a similar mark, claiming that the “junior user” is engaging in activity that violates the trademark rights of the “senior user.” The terms “junior” and “senior” are commonly used to designate the later user and the prior user of the conflicting marks. The decisional law of trademarks is based on the adjudication of registration cases by the Trademark Trial and Appeal Board, and its reviewing authority, the Court of Appeals for the Federal Circuit; and on use cases brought in civil courts. Most trademark use lawsuits are brought in federal court, under the Lanham Act.
There are two main theories of trademark protection. The first, as already suggested above, is that trademark protection is important in order to protect consumers from being confused or deceived. This theory regards trademarks as a kind of information. Protecting trademarks from being imitated by others in ways that could deceive consumers preserves a healthy economy by ensuring that consumers receive reliable, non-deceptive information regarding the goods and services they purchase. Similarly, by refusing to allow one competitor to gain an advantage over others by gaining exclusive use of a purely descriptive word or phrase, trademark law ensures that competition remains fair and on a level playing field. The underlying assumption is that competition keeps prices down and quality up, and gives consumers choice and variety.
Another very different theory of trademark protection is that trademarks—at least those that are inherently distinctive and have become well known—deserve protection purely by virtue of being the property of their owners and the result of creativity, labor, and expense. Under this theory of trademark protection, consumer confusion or deceit is unimportant; the good that is to be protected is the trademark owner’s inherent right to his own property. But proponents of this theory acknowledge tat such protection should be available only to distinctive and famous marks. Thus, this theory, too, serves an economic purpose, by rewarding those who select distinctive marks and work hard to make them famous. This incentive is another way of seeking to maintain a healthy economy by ensuring clarity in the information consumers receive.
Under the current state of trademark law, there are three ways a trademark may be harmed: infringement, dilution, and cybersquatting.
Infringement arises under the first theory of trademark protection, which regards trademarks as information. Infringement occurs when a junior user uses a mark for goods or services identical or closely related to those of a senior user of an identical or closely similar mark. The test of infringement is likelihood of confusion. Likelihood of confusion is the probability that a reasonable consumer in the relevant market will be confused or deceived, and will believe the junior user'’ goods or services come from, or are sponsored or endorsed by, the senior user, or that the two users are affiliated. Infringement thus is analogous to the tort of fraud.
Likelihood of confusion is tested by application of a series of factors. Each circuit has its own leading case on trademark infringement, from which a set of factors arises. In the Ninth Circuit, the factors for testing likelihood of confusion are found in the case of AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979); see also E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280 (9th Cir. 1992). While actual confusion is not required to find a likelihood of confusion, it is, of course, the best evidence that confusion is likely. Examples of other factors include the similarity of the marks in appearance sound and meaning; the proximity of the parties’ goods and services; the trade channels in which each party provides its goods or services; the relative sophistication of the purchasers; the strength of the senior user’s mark; and the motive of the junior user in adopting its mark.
A trademark owner who successfully shows likelihood of confusion is entitled to both injunctive relief and money damages from the infringer. Developing trademark jurisprudence has recognized some special kinds of confusion. Two of these are “reverse confusion” and “initial interest confusion.”
In a “reverse confusion” situation, the later adopter of the mark is a large organization, whose high-profile use of a mark similar or identical to that of the smaller prior user not only infringes the trademark rights of the smaller company, but also causes the public to mistake the true owner’s goods or services as those of the better-known infringer—in contrast to the more common form of infringement, where a late-coming small company’s goods or services are mistaken for those of a better known prior owner. A good recent examples of reverse confusion is the much-hyped creation of the entertainment company Dreamworks SKG, whose mark was held by a Ninth Circuit panel to infringe the mark DREAMWERKS, long in use by a small organizer of science-fiction conventions.
In an “initial interest confusion” situation, a consumer is attracted to a particular source of goods or services because of its use of a mark similar to that of another company with which the consumer is familiar. Once the consumer is inside the store, has accessed the Web site, or otherwise has made contact with the establishment in question, the consumer immediately becomes aware that it is not the company with which she was familiar, so any “confusion” is immediately dispelled, before any goods or services are purchased. Nevertheless, it was the establishment’s use of a similar mark that initially attracted the consumer’s attention, and this alone is sufficient, some jurisdictions have held, to support a cause of action for trademark infringement. One reason for this is that a consumer who enters a store under a mistaken impression may nevertheless end up doing business with that store rather than with the one she was seeking, and thus the second store has unfairly profited from its use of a mark similar to that of the first. An example of this is the case in which a video store attracted business by calling itself “Video Busters” and decorating its outlets with trim similar to that of the well-established chain Blockbuster Video. Consumers who entered the store became immediately aware that they were not in a Blockbuster store; but many of them rented from Video Busters instead, rather than go to the trouble of seeking out another store. This was held to be actionable trademark infringement.
Infringement: Defenses
The two fundamental defenses to a claim of infringement are (1) a claim that the plaintiff’s mark is not entitled protection, usually because it is either generic or is merely descriptive and has not acquired secondary meaning; and (2) an effort to demonstrate that confusion is not likely, by applying and weighing the likelihood of confusion factors referred to above. Often this is done by undertaking expensive surveys to gather evidence of consumer perceptions of a given trademark; and in such cases, the central issue often becomes the validity of the survey rather than the likelihood of confusion. Of course, where actual confusion has demonstrably occurred, the defendant has an uphill battle.
There are, however, some other standard recognized defenses to a claim of trademark infringement. One of these is the defense of “fair use.” Not to be confused with “fair use” in the copyright context, which is an entirely different analysis, Trademark Fair Use is usually a purely descriptive use of the words of another’s trademark, without reference to their trademark significance. Thus, where the maker of a cranberry confection referred to its product as “sweet and tart,” they were merely describing qualities of their product, and thus did not infringe the trademark SWEET TARTS for sweet-sour candies. This kind of fair use is also considered a “non-trademark use,” meaning that the words are used purely for their ordinary meaning, and not for their trademark significance. (A tip-off is often whether the words are capitalized or not.)
Another defense is that of “collateral use.” A legitimate re-seller of goods is entitled to truthfully inform the public of the nature of those goods, even if he uses someone else’s trademark in doing so. Thus, a business that sold used, reconditioned Champion sparkplugs was entitled to use the CHAMPION trademark to accurately describe its goods, as long as it did not suggest that the business itself was affiliated with Champion. Similarly, a mechanic might open a garage servicing only Volkswagen automobiles. He is entitled to advertise that he services Volkswagens, as long as he does not do so in a way that suggests he is authorized by or affiliated with Volkswagen.
Yet another defense is that of “nominative fair use.” This is a use of the trademark of another that is permitted because the trademark is used solely to identify the trademark’s owner, a company that cannot be identified without using its name. When a radio station ran a promotional contest inviting listeners to enter by identifying their favorite member of the pop group New Kids on the Block, that was not an impermissible use of the New Kids’ trademark, since the group could not be identified except by using its name.
There are also First Amendment defenses to trademark infringement claims. There have been comparatively few cases in which an infringement defendant claimed a free speech right to use the trademark of another, and even fewer in which the defendant has done so successfully. The successful cases are generally those in which the alleged infringer used the mark as a way of criticizing the trademark owner, often through parody. The unsuccessful cases are those in which a mark has been appropriated without permission and used in a non-critical, non-parodying way that associates it with services similar to but unauthorized by the mark’s owner. A group’s effort to hold an athletic event called the Gay Olympics was enjoined from using the OLYMPICS trademark without the authority of the U.S. Olympic Committee.
Dilution arises under the second theory of trademark protection, which regards a trademark as a property right. Dilution thus is analogous to the tort of trespass.
Dilution has been defined as the “whittling away” of the selling power of the senior user’s mark, because the mark no longer uniquely identifies only the senior user’s goods and services, but also those of another party. Confusion is not a factor, and the two parties need not be competitors. A maker of completely different goods can still dilute a senior user’s mark, even if there were no likelihood of consumer confusion. No consumer would think that a coffee shop called The Xerox Coffee Center meant that the Xerox Corporation had gone into the coffee business; yet such a use would dilute Xerox’s trademark rights in its strong, distinctive, and famous mark XEROX.
A mark may be diluted in two ways: (1) “Blurring” is the aforementioned “whittling away” of the mark’s selling power. (2) “Tarnishment” is damage to the mark that results from associating it with either (a) poor-quality goods or services, or (b) unseemly subject matter, such as hate or pornography.
To be entitled to a remedy for dilution, an owner must show that its mark is famous. The Federal Trademark Dilution Act (FTDA), which became law barely five years ago, sets forth several factors by which a mark may be determined to be famous and therefore to merit protection against dilution. Courts, however, have been highly flexible in their application of these factors, resulting in seemingly contradictory findings. The law is in a state of confusion as to what constitutes a “famous” mark for dilution purposes.
Recently, courts have held that a higher standard of distinctiveness is required for protection against dilution than for protection or registration as a trademark. This higher standard requires that the mark be not only “distinctive” but also unique; third-party uses of the same or a closely similar mark will be sufficient to bar a dilution remedy. In addition some courts have held that a mark that is descriptive is never entitled to a dilution remedy, even if it has acquired secondary meaning.
Courts have also reached contradictory findings as to whether the FTDA requires a dilution plaintiff to show actual dilution or merely a likelihood of dilution, in order to obtain relief. In 2003, the U.S. Supreme Court held that, at least where the disputed marks are not identical, a showing of actual dilution is required; but the Court was silent as to how such a showing is to be made, except to say that evidence of economic loss is not required. In any event, a successful dilution plaintiff, under the federal statute, is entitled only to injunctive relief, unless it can show that the dilution was intentional.
Dilution: Defenses
Because a remedy for dilution is available only to the owner of a famous mark, one common defense against a claim of dilution is that the plaintiff’s mark is not sufficiently famous to merit protection. Such a defense involves the application of the “fame factors” specified in the FTDA. A dilution defendant may also attack plaintiff’s mark by alleging that the mark is not sufficiently distinctive to be entitled to dilution protection. In such a defense, a showing of third-party uses of the mark for other goods can be key.
Another common defense is that the allegedly diluting mark was not used commercially—another express requirement of the FTDA (infringement actions, by contrast, are not limited to commercial uses). Also available is the defense that the use was not a trademark use at all—similar to the Trademark Fair Use defense described under Infringement Defenses, above.
A mistake frequently made by dilution defendants early in the life of the FTDA was to argue that the use created no confusion. Confusion is not an element of dilution, and the absence of confusion does not preclude a use from being found to be diluting.
Finally, perhaps the principal defense to a claim of dilution is the most common one of all: absence of harm. As noted above, courts have historically been inconsistent in determining whether actual dilution or merely a likelihood of dilution is required in order to justify a remedy for dilution. Where actual dilution is required, it is very difficult for the plaintiff to show and quantify the impact of the alleged “blurring” of a trademark’s selling power. Thus, especially in light of the U.S. Supreme Court’s 2003 determination that a showing of actual dilution is required, a defense of “no harm” has a good chance of success in a blurring case; less so, however, in a case of tarnishment, in which the negative associations with the mark are alone sufficient to support the claim, irrespective of measurable harm.
Because neither infringement nor dilution causes of action proved entirely effective against opportunists who registered domain names identical or confusingly similar to the trademarks of senior users, Congress adopted the Anticybersquatting Consumer Protection Act (ACPA) in late 1999, to provide an additional remedy.
While the test of infringement is likelihood of confusion, and the test of dilution is the loss of the mark’s selling power, the test of cybersquatting is the bad faith of the defendant. If the domain name incorporating the plaintiff’s trademark was adopted and used by the defendant without a legitimate interest, but solely for the purpose of profiting from the goodwill of the plaintiff’s mark, then a cause of action for cybersquatting may be made out. A successful cybersquatting plaintiff is entitled only to injunctive relief, not to money damages.
The ACPA has been used comparatively little, since at the same time it was enacted, the Internet Corporation for Assigned Names and Numbers (ICANN) introduced its Uniform Dispute Resolution Policy (UDRP)—an international arbitration system for the speedy, low-cost determination of whether a domain name registration harms a complainant’s trademark rights. A successful complainant under the UDRP is entitled only to transfer of the domain name registration, not to injunctive relief or money damages. However, it has recently been held that a party disappointed in the outcome of a UDRP proceeding may bring an action under the ACPA—not strictly speaking an “appeal,” but an additional means of clarifying the rights adjudicated in the UDRP proceeding.
Cybersquatting: Defenses
Like an infringement or a dilution defendant, a cybersquatting defendant has the first-line defense of attacking the enforceability of plaintiff’s mark. In the world of domain name disputes, a successful allegation that plaintiff’s mark is also a generic or purely descriptive word, or is common to many users, can be decisive. Because similar or identical trademarks can coexist among multiple users, but a given domain name is unique, the strength of a plaintiff’s trademark for specific goods or services may not be relevant if that mark is also a word that, in other contexts, is generic or descriptive.
Since a cybersquatting cause of action depends upon a showing of bad faith, the available defenses to a cybersquatting claim are those likely to show that the alleged cybersquatter has a legitimate interest in the domain name, unrelated to its significance to another party’s trademark rights. Both the UDRP and the ACPA enumerate such defenses. ICANN’s UDRP rules specifically provide for three: (i) before any notice of the dispute, respondent had made demonstrable preparations to use the domain name or a term contained in it in connection with a bona fide offering of goods or services; (ii) the term in the domain name is a name by which the respondent as an individual, business, or other organization is commonly known; and (iii) the respondent is making a legitimate noncommercial or fair use of the domain name, without intending to profit by misleadingly diverting consumers, to tarnish the trademark at issue, or to profit by selling the domain name to the trademark owner. All of these boil down essentially to a claim that the respondent has registered and is using the domain name for reasons unconnected with its significance as the complainant’s trademark.
In addition, increasingly common is the claim that respondent registered and is using or intends to use the domain name for purposes of legitimate criticism of the trademark owner. Under the trademark doctrine of nominative fair use, it is permissible to use the trademark of another party when engaged in criticizing that party, since the party you are criticizing cannot be identified without using its name. However, the rule that has developed over half a decade of domain name jurisprudence is that, while you may use the party’s trademark nominatively to identify them for purposes of criticism, you may not use the trademark in the domain name that points to the critical Web site, since such use is likely to unfairly harm the party under criticism by “trapping” consumers seeking that party’s Web site and instead finding a Web site attacking that party. Thus, it was perfectly all right for an individual opposed to abortion to maintain a Web site attacking the policies of Planned Parenthood; but he could not do so using the domain name plannedparenthood.com. The assumption underlying this principle is that Internet users are likely to perceive domain names as source indicators rather than as content indicators.
An exception to this principle is found in the so-called “sucks” cases, in which the trademark used in the domain name is accompanied by other words such as “ihate” or “sucks” that clearly show that the Web site is not sponsored by the owner of the trademark. That analysis, however, is tied solely to an infringement cause of action: including the word “sucks” makes it unlikely that a party will be confused as to the source of the critical Web site. It does not satisfactorily answer a claim of dilution by tarnishment, and for that reason even some “sucks” domain names have been found to have been registered in bad faith and were required to be surrendered to the complaining trademark owner. The issue of whether a domain name itself, as opposed to the Web site to which it points, may be considered a forum of free expression, is still under debate.
In addition to domain name disputes, the rise of Internet commerce has created other interesting challenges to trademark jurisprudence. Questions that have been asked in federal courts include: Does use of the trademark of a competitor in the metatags (hidden text) of a Web site constitute infringement? When may the trademark of another legitimately be used in a different party’s domain name or in the url of a different party’s Web site? Is it trademark infringement when a search engine sells advertising space to a party based on the use of that party’s competitor’s trademark in a computer user’s search request? Such questions—and newer ones appearing every day—are keeping trademark practitioners on their toes, and trademark law on the cutting edge of e-commerce jurisprudence.
Trademark protection is on a country-by-country basis. The trademark owner wishing to use and protect its trademark internationally is well advised to pursue registration in multiple nations—an expensive process, but essential for companies whose business depends upon marketing internationally under a recognized brand name. Some groups of nations, such as the European Community, the Andes Pact, and groups of countries in Central America and Central Africa, have banded together to create group protection, whereby a single registration entitles the owner to protection in every country of the group. In addition, under the Madrid Protocol, registration in any member country, accompanied by an appropriate application for extended protection, will entitle the owner to protection in other member countries. The United States has ratified the Madrid Protocol and the PTO expects to begin accepting foreign registration applications under the Madrid Protocol beginning in November, 2003. This will greatly change—and could significantly simplify—the process of obtaining international trademark protection for U.S. trademark owners.
Like other intellectual property rights, trademarks, trademark registrations, and trademark registration applications are assets that may be assigned or licensed to others. Because trademark rights embody the goodwill of the trademark owner, trademarks may not be transferred without transferring the goodwill as well. Thus any assignment of trademark rights—such as in an asset transfer or a merger or corporate acquisition—must expressly recite the transfer of the attendant goodwill. Registrations and pending applications may also be transferred in such transactions. However, an application filed on the basis of an intent to use the mark, rather than actual use, can be transferred only with an acquisition of the applicant company, or that portion of its business with which the mark is intended to be used. That is because a mark that is not yet in use embodies no goodwill, and cannot be transferred “in gross.”
Similarly, a license to another party to use a trademark must be contingent upon the licensor’s right to control the quality of the goods and services provided under licensee’s use of the mark. A trademark owner who licenses his trademark to others with no regard to quality control risks losing his trademark rights, since such “naked licensing” tends to dilute or altogether destroy the cumulative goodwill the trademark has come to represent.
It is critical for business attorneys to conduct careful trademark due diligence before an IPO, asset transfer, or merger, or in a bankruptcy (sometimes a trademark may be a bankrupt company’s single most valuable asset). Trademarks to be transferred need to be carefully identified, along with any registrations or pending applications, any existing licenses, and any encumbering security interests or existing settlement agreements affecting the use of the mark. It is also crucial that security interests or changes of ownership in registered trademarks or pending applications be recorded in the PTO or the appropriate state registry. Trademark records should be scrupulously kept up to date as to the correct corporate identity of the mark’s current owner, in order to assure a valid chain of title in the event of an acquisition.
For more information about Robert C. Cumbow, and to read additional articles by Mr. Cumbow, please see http://www.grahamdunn.com/whatsnew/articles/attauthored.asp.
Article provided by June Cotner, publishing consultant and author of the bestselling Graces and Dog Blessings and 24 other books. PO Box 2765, Poulsbo, WA 98370 june@junecotner.com
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