Author Archives: christina
In a pair of unpublished opinions issued last month, the Fourth U. S. Circuit Court of Appeals in Richmond affirmed District Court judgments and emphatically reminded trademark plaintiffs that there can be a high price to pay if you get it wrong – losing on counterclaim for trademark infringement of defendant’s mark, damages, and an order to pay defendant’s attorney’s fees.
Losing your trademark infringement case and having to pay your own attorney’s fees is not an ideal outcome. Worse still is being ordered to pay the multimillion dollar bill of the opposing party’s attorneys.
That is exactly what happened in Super Duper, Incorporated v. Mattel, Incorporated, decided June 10. Super Duper filed applications with the United States Patent and Trademark Office to register several trademarks. Mattel, Incorporated opposed registration. The parties were unable to reach a settlement. Apparently preferring a federal court forum to the Trademark Trial and Appeal Board, Super Duper filed a declaratory judgment action in the United States District Court for South Carolina requesting the court to rule that its trademarks did not infringe those of Mattel. Mattel counterclaimed for trademark infringement, dilution, unfair competition and fraud.
It did not go well for Super Duper. After a weeklong trial, the jury returned a verdict of trademark infringement for Mattel in the amount of $400,000. That’s not the outcome Super Duper envisioned. I’m guessing neither was this. The court increased the damage award to just under $1 million and awarded Mattel over $2.6 million in attorneys fees.
Same thing in Employers Council v. Feltman, an infringement and cybersquatting case decided June 21. The court found the facts sufficiently egregious to justify an award of attorney’s fees.
The lesson: Get an adequate analysis of the trademark law issues before you use a mark. It’s a lot cheaper than trying to dig yourself out of a hole later on.
In an opinion issued August 8, the United States District Court for the Eastern District of Virginia held that sponsored ads which appeared with search results on Google, in the circumstances of that case, violate trademark law.
Government Employees Insurance Company brought suit against search engine giant Google because it discovered that when the search term “GEICO”, which is a federally registered trademark of the plaintiff insurance company, is entered as a search term in the Google search engine, sponsored ads of its competitors would appear adjacent to the search results. That happened because Google used the term “GEICO” in its computer coding for the sponsored ads. In addition to the term “GEICO” appearing in Google’s computer coding, some of the sponsored ads also contained the term “GEICO.”
A trademark is infringed under federal law if a company uses in interstate commerce a word or design, which is substantially similar to the trademark or service mark of another company, in connection with the sale, distribution, or advertising of goods or services, in a manner which is likely to confuse an ordinary consumer as to the source of origin of the goods or services. Cases often turn on the issue of likelihood of confusion. Actual confusion occurs when a customer thinks he is buying from company “A” when in fact he is buying from company “B.” It is not necessary for a plaintiff to show actual confusion to establish infringement, only the likelihood of confusion. The legal theory of “initial interest confusion” is a variation of the issue of likelihood of confusion. Some courts have recognized this theory that a trademark may be infringed when a consumer is mislead into investigating company B’s product or service because of B’s advertising a name or mark which is confusingly similar to A’s. A’s mark would be infringed even if the consumer did not purchase B’s product, or at some point after the consumer’s initial confusion but prior to his purchase, the consumer came to realize that A and B are not affiliated and that he was buying from B, not A.
The court in GEICO based its decision upon initial interest confusion. The case has drawn widespread interest because Google is a party and because of the impact the case could have on the future of the Internet. But the court’s opinion is curious in several respects and does not provide the guidance which many hoped it would. The Court severely criticized the survey methodology used by GEICO in attempting to demonstrate consumer confusion caused by use of the term “GEICO” in the sponsored ads. Google, however, presented no evidence on that issue apparently thinking its attack on GEICO’s survey methodology would be sufficient to prevent GEICO from establishing its burden of proof. It didn’t work. The Court held that even though the survey results offered by GEICO were flawed, they were sufficient to establish likelihood of confusion. The Court previously ruled that GEICO had established the other elements of trademark infringement. Accordingly, the Court held GEICO’s trademark was infringed.
In another curious aspect of it’s opinion, however, the Court stopped short of holding Google liable for the infringement and instead reserved that issue, apparently in an effort to put settlement pressure on the parties. Since the companies which purchased the sponsored ads are not parties to the suit, there is no one other than Google who can be held liable.
The one thing that is clear from the opinion is that Google’s use of the term “GEICO” solely in its computer coding, which is invisible to the computer user, without more, does not constitute trademark infringement. It is because of the additional fact that some of the advertisers also used the term “GEICO” in their sponsored ads that the Court held there was infringement.
The Court does not describe in any detail how GEICO’s name was used by its competitors in the sponsored ads, so we cannot easily follow the Court’s discussion of initial interest confusion to determine how that legal theory applies to the facts of this case. We only know that the tainted survey concluded there was confusion.
The theory of initial interest confusion has never been accepted by the United States Court of Appeals for the Fourth Circuit. An appeal of GEICO would go to the Fourth Circuit. In an opinion in another Internet trademark case which was decided by a unanimous panel on August 24, only two weeks after the trial court released its written opinion in GEICO, the Fourth Circuit addressed the legal theory of initial interest confusion. While not expressly rejecting it, the appellate panel stated: “(W)e have followed a very different mode of analysis. . . .” The settlement value for GEICO just dropped significantly.
While initial interest confusion may not be a viable theory in the Fourth Circuit, it remains important for a company to protect it’s trade name or mark by registering it as a trademark or service mark. In a case where the facts would fit an initial interest confusion framework but using a different analysis, the Fourth Circuit has protected the owner of a trademark in an Internet context.
Assuming GEICO and Google do not settle, expect an appeal to the Fourth Circuit. It will provide an opportunity for perhaps another panel of the Fourth Circuit to address the legal theory of initial interest confusion in the context of the Internet and expressly adopt it or reject it. An appeal will be closely watched for guidance to web page designers, to companies which advertise on the Internet, and to practitioners in this developing area of the law. If the Fourth Circuit should reject the theory, it will result in a split among the Circuits which could lead to an appeal being heard by the United States Supreme Court which has not previously addressed the issue.
The application of trademark law to the Internet is still in its formative stages. In a major decision handed down June 27, those annoying pop-up ads survived a significant legal challenge. The United States Court of Appeals for the Second Circuit reversed the decision of the trial court and held that WhenU.com’s spyware did not infringe the federal trademark of 1-800 Contacts, Inc.
WhenU is an Internet marketing company that anonymously downloads spyware onto your computer to monitor the sites you visit. If you visit a site, the spyware program randomly generates a pop-up of one of WhenU’s customers which sells the same category of products. In this case, when a computer user visited 1-800’s web site, a pop-up of its competitor, Vision Direct, Inc., appeared.
Plaintiff, 1-800 Contacts, Inc., filed a ten count complaint against WhenU. The trial court granted 1-800’s request for a temporary injunction based upon its federal trademark infringement count.
In an interlocutory appeal, the Second Circuit panel reversed the trial court and not only vacated the in-junction but also held as a matter of law that WhenU does not “use” 1-800’s trademarks in violation of the Lanham Act when it (1) includes 1-800’s website ad-dress, which is almost identical to 1-800’s trademark, in its spyware program directory, or (2) causes eye care product pop-ups to appear when viewing 1-800 Contact’s site.
The Second Circuit’s opinion is consistent with the opinions in two other cases brought against WhenU. Perhaps the result would be different if WhenU used 1-800’s trademark in the text of the pop-up ad. A case involving that issue brought against Internet search engine giant Google is pending in U.S. District Court for the Eastern District of Virginia.
The 1-800 case is not over either. It was remanded for further proceedings on the remaining nine counts.
If your company wants to use a word as its trademark, a recent case decided by a federal appellate court points out the need to consider carefully the word you select. Although its application was initially denied, Freebies Publishing eventually succeeded in registering a stylized type version of the word “Freebies” as a federal trademark. It also registered the domain name “freebies.com” which it used to provide information about free product offers. Retail Services, Inc. provides point-of-sale incentive offers which print out with a retailer’s cash register receipt. To facilitate a promotional contract it had with Blockbuster, Inc., Retail Services, Inc. registered the domain name “freebie.com” so that Blockbuster customers could manage the “Freebie Points” they accumulated by renting videos and DVDs.
Freebies Publishing demanded that Retail Services stop using the word “freebie” in connection with its business. When it refused, Freebies Publishing brought a non-binding arbitration proceeding under the agreement pursuant to which domain names are registered seeking to prohibit Retail Services from using the domain name “Freebie.com.” The arbitrator agreed with Freebies Publishing and ruled that Retail Services should transfer its domain name to Freebies Publishing.
At this point Freebies Publishing has a federally registered trademark and an arbitrator’s ruling in its favor regarding the domain name. In what must have seemed to them an abrupt shift in their good fortune, what happened next is that Freebie Publishing not only had its trademark cancelled, but it also barely escaped from court without having to pay the attorney’s fees of the opposing party as permitted by statute in “exceptional cases.” Rather than comply with the arbitrator’s non-binding ruling, Retail Services responded by filing a declaratory judgment proceeding in federal court seeking to have the Freebies Publishing trademark declared invalid arguing that the word “freebies” is a generic term. After reviewing the evidence which included over 1,600 websites that have the word “freebie” or “freebies” as part of their domain names, as well as Freebies Publishing using the word “freebies” in a generic sense in its own web site, the court ruled in favor of Retail Services by summary judgment and ordered the registered trademark of Freebies Publishing cancelled.
The mistake Freebies Publishing made with their trademark application is that they put too much effort into persuading the government’s trademark examining attorney that the word “Freebies” is not a generic word, but rather a descriptive word which had acquired secondary meaning. Instead, they should have put their effort into selecting a better word to trademark in the first place. Their mistake is a common one. If not a generic word, many companies come up with a word or phrase which “describes” their product or service and want it trademarked. That is also not a good idea. It is more difficult to register a descriptive word, and even if registered on the Principal Register, it is entitled to less protection.
Trademarks identify and distinguish goods produced by one person from those manufactured and sold by others and indicate the source of the goods. They are often analyzed based upon four general categories of distinctiveness: (1) Fanciful, (2) Arbitrary, (3) Suggestive, and (4) Descriptive. Fanciful, Arbitrary, and Suggestive marks may be registered. A Descriptive mark is eligible to receive the protection of being registered on the Principal Register only if it has acquired “secondary meaning”. It has been used in the market for a sufficient length of time that buyers have developed a “mental association” of the mark with the company that owns the mark. Although “the concepts of ‘generic name’ and ‘trademark’ are mutually exclusive because a generic term can never function as a mark to identify and distinguish the products of only one seller” , it is useful to think of “generic” as a fifth category which is to be avoided. Although trademarks are analyzed based upon these categories, the lines separating one from the next can be razor thin.
The Trademark Manual of Examining Procedure refers to a “Distinctiveness/Descriptiveness Continuum” with Fanciful marks the strongest, followed by Arbitrary marks, then Suggestive marks. Descriptive marks are weak, and as Freebie Publishing learned, if the word you have trademarked can be construed as generic, or if it might later become generic, don’t spend money building an advertising campaign around it. The mark may be canceled at any time.
Fanciful marks are terms that have been “coined” or invented for the sole purpose of functioning as a trademark. Such marks comprise words that are either unknown in the language (PEPSI®, KODAK®, EXXON®), or are completely out of common usage. Arbitrary marks consist of words that are in common linguistic use but, when used to identify particular goods or services, do not suggest or describe a significant ingredient, quality or characteristic of the goods or services (APPLE® for computers; OLD CROW® for whiskey). Suggestive marks are those that, when applied to the goods or services at issue, require imagination, thought or perception to reach a conclusion as to the nature of those goods or services. A suggestive term differs from a descriptive term, which immediately tells something about the goods or services. A suggestive mark connotes, without describing, the product (COPPERTONE®, ORANGE CRUSH®) .
The lesson: Don’t fall in love with your first idea about what would be a good word for your company to trademark. Not only do you need to understand the differences between “strong” and “weak” marks, this is also the time to be creative. If your background is administration, you’d probably better stay out of it altogether. The purpose of a trademark is to help build brand identity so that over time, when a potential customer sees the mark, he or she will associate it with the source of origin – your company. To have a strong mark, it must be necessary for the buyer to “exercise his imagination” in order to make this association. The solution for your company is to be creative and select a word which will require it.