Lee v. Tam – Disparaging Mark or Free Speech? – Pending Decision

By Michael Small

 

Section 2(a) of the Lanham Trademark Act, 15 U.S.C. §1052(a) allows the United States Patent and Trademark Office (USPTO) to refuse registration of marks that contain immoral or scandalous matter.[1]  Known as the disparagement clause, the USPTO enforces the rule in the Trademark Manual of Examining Procedure (TMEP) Section 1203.01, specifying the types of rejected marks that fall under immoral or scandalous nature, such as obscene graphics or disparaging terms.[2]  Examples of rejected trademark applications include the following: Stop the Islamisation of America; Democrats Shouldn’t Breed; Naturally Intelligent God Gifted Africans; and most recently, the cancellation of the Washington Redskins NFL football team’s trademark name in 2014.  Rejected trademarks are void from government benefits, such as preventing registration from other confusingly similar marks during the application process, receiving sole ownership of the mark for advertising purposes, and prevent foreign companies with similar marks to import their trademarked goods.  In the pending U.S. Supreme Court case Lee v. Tam, the justices will make a decision that determines whether Section 2(a) of the Trademark Act violates the First Amendment.[3]  If the justices confirm that Section 2(a) violates the First Amendment, it would mark one of the most significant changes to the Lanham Act since the amendment of the Trademark Counterfeiting Act of 1984.[4]

Background

Before the case began, Tam created an all-Asian American band in 2006, named “The Slants.”  According to Tam, the name addressed issues with racism that Asian Americans face and share the band members’ experiences with the term, ultimately reclaiming the word for Asians.[5] Tam attempted to register the band name with the USPTO in 2011; however, an USPTO examiner rejected the application, arguing that the name is derogatory of Asians and those of Asian descent, despite the band’s intent.  Tam appealed to the USPTO’s Trademark Trial and Appeal Board, but the Board affirmed the examiner’s position.  Tam filed an appeal to the United States Court of Appeals for the Federal Circuit, arguing that the USPTO’s rejection of his mark is unconstitutional in accordance to the First Amendment.  Although the Federal Court initially affirmed the USPTO’s decision, Tam filed a petition for a rehearing en banc.  The en banc panel found that the government erred in treating the case with strict scrutiny because the government did not take into consideration Tam’s accusation of First Amendment violation.  The en banc panel reversed the USPTO’s rejection of the trademark, arguing that the USPTO examiner’s rejection under Section 2(a) despite the band’s ideology is viewpoint discrimination and therefore violates the First Amendment.  The panel further clarifies that the First Amendment protects even hurtful speech.  The director of the USPTO, Lee, filed a writ of certiorari to the Supreme Court.  The Supreme Court accepted the writ and heard oral arguments of the case in January 2017.  A final decision from the Supreme Court is pending.

 

Analysis

The Supreme Court’s decision on this case will have a huge impact on U.S. Trademark Law should the Court rule in favor of Tam.  If the Court agrees that Section 2(a) of the Trademark Act is unconstitutional, it would mean the readjustment of the Lanham Act to accommodate trademark registration that contained restrictions on immoral or scandalous materials.  Trademark registrants would have to depend on other regulations to take down purposeful slanders of their marks, such as dilution or likelihood of confusion.  Consumers would also be at risk of exposure to trademarks that may offend them, which could discourage their investment into U.S. markets.  For instance, consumers and entrepreneurs of black descent in the U.S. would not be open to purchasing goods whose mark consists of material that may offend them, such as marks that refer to hate groups or openly mocks their descendent.  The approval of Tam’s mark, despite the owner’s intent, may bring about a challenge as to how the consumers will react to future disparaging marks.

There is a previous Supreme Court case that dealt with a similar situation as Lee v. Tam.  In 2015, the Court reviewed Walker v. Texas Division, Sons of Confederate Veterans, Inc., in which the state of Texas rejected the Sons of Confederate Veteran’s confederate flag design for license plates.  The Board’s reasoning for this rejection centered around the public’s view, who may find the confederate flag offensive due to its association with organizations that express hatred directed towards specific people and/or groups.[6]  In this case, the Supreme Court ruled that license plates are government speech because of their maintenance and distribution by the state of Texas.  Therefore, license plates are exempt from the First Amendment defense, even from the expression of private individuals.  As the USPTO also mandates the marks that will receive protection, it is likely that the Supreme Court could also decree trademarks government speech and rule in favor of Lee.  However, the ruling in Walker had a 5-4 decision amongst the justices, making the ruling a narrow victory for government speech.  It is evident that there is a divide between justices in determining the eligibility of protection under government speech or the First Amendment.

Conclusion

Based on evidence from previous Supreme Court decisions and the treatment of government speech and the First Amendment, one can conclude that the court’s ruling on this case will have an impact on how the legal system views trademark law.  If Tam acquires the court’s favor and receives registration of his mark, it would open the opportunity for other groups to register marks for similar purposes as Tam.  However, the intent to use said marks will vary for each group, bringing about a concern of whether future registered marks will be used in good or bad faith.  If the court rules in favor of Lee, then trademarks could be identified as government speech.  Therefore, it may be recommended for future owners of rejected trademarks not to rely exclusively on the First Amendment to defend their trademark.  Debate might also arise as to whether other aspects of government-protected intellectual property rights are government speech, such as trade dress or patents.  This would bring about confusion in IP law as to whether the acquisition of government protection is enough to warrant government speech.  One can hope that regardless of the Supreme Court’s decision, the outcome will further clarify what terms are eligible for protection under the First Amendment or government speech for trademark registration.

 

[1] See 15 U.S.C. §1052(a)

[2] E.g. Greyhound Corp. v. Both Worlds Inc., 6 U.S.P.Q.2d 1635, 1639 (T.T.A.B. 1988) (holding that a mark of a defecating dog as a logo for polo shirts and t-shirts was scandalous, and thus barring the mark from registration under Section 2(a)).

[3] Lee v. Tam, No. 15-1293, 2016 U.S. LEXIS 4462 (U.S. Sept. 29, 2016) (granting certiorari).

[4] The Trademark Counterfeiting Act of 1984 enforces a penalty for the unauthorized or intentional usage of counterfeit trademark, with the maximum sentence of five years imprisonment or a $250,000 – $1 million fine.  See 18 U.S. Code § 2320.

[5] See Katy Steinmetz, “The Slants” Suit: Asian-American Band Goes to Court Over Name,” Time, Oct. 23, 2013, http://entertainment.time.com/2013/10/23/the-slants-suit-asian-american-band-goes-to-court-over-name/ (“Prior to the term Asian becoming in vogue, the term that the Asian-American community used [to describe themselves] was “yellow.” It’s empowering when people use it and embrace it as part of their identity.”).

[6] See Walker v. Tex. Div., Sons of Confederate Veterans, Inc., 135 S. Ct. 2239 (2015).

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Trader Joe’s Co. v. Hallatt, 981 Fed. Supp. 2d 972 (W.D. Wash. 2013).

This case is currently awaiting a decision from the Ninth Circuit.  Case No. 14-35035.

Facts and Procedural History:

Trader Joe’s, a specialty United States (“U.S.”) grocery store, filed a Lanham Act trademark infringement and dilution action against Canadian grocery store owner, Michael Hallatt.  To stand apart from its competition in the U.S., “Trader Joe’s developed a rustic South Pacific-inspired theme.”  Brief for Appellant at 6, Trader Joe’s Co. v. Hallatt, (No. 14-35035).  Although Trader Joe’s has a website that displays its products, Trader Joe’s only sells its products at its retail grocery stores in order “[t]o maintain the exclusivity of its branded products.”  Brief for Appellant at 7, Trader Joe’s Co. v. Hallatt, (No. 14-35035).  Trader Joe’s has received several U.S. trademark registrations for its marks, including “the word TRADER JOE’S for retail store services in the field of specialty foods and beverages (Trademark Reg. No. 2,171,157); for processed foods (Trademark Reg. No. 1,424,176); and for beverages (Trademark Reg. No. 2,158,990).”  Brief for Appellant at 10, Trader Joe’s Co. v. Hallatt, (No. 14-35035).  Moreover, Trader Joe’s owns a registration for its stylized word mark TRADER JOE’S for retail services.  Id.  Trader Joe’s operates more than 390 retail grocery stores in “30 states and the District of Columbia, including 14 stores in the state of Washington.”  Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 974.

Appellee, Michael Norman Hallatt, is a U.S. resident alien and a Canadian citizen. Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 976.  Hallatt “owns and operates a grocery store in Vancouver, British Columbia, Canada, operating under the name Pirate Joe’s.”  Id. at 975.  Hallatt’s store previously operated under the name “Transilvania Trading.”  Id.  Hallatt concedes that “he and others at his direction have purchased products at Trader Joe’s paying full retail prices in the state of Washington.”  Id.  Hallatt then transported the products across state borders to Canada and sold the goods unmodified in Pirate Joe’s.  Id.  Hallatt also “publically acknowledges the products he sells were purchased from Trader Joe’s.”  Id.

According to Trader Joe’s Opening Brief, Pirate Joe’s displays an identical South Pacific themed trade dress.  Brief for Appellant at 11, Trader Joe’s Co. v. Hallatt, (No. 14-35035) (“Pirate Joe’s is decorated in a manner evocative of Trader Joe’s famous and distinctive trade dress, including a colorful mural depicting a ship at sea, products sold on wooden shelves and in baskets, and hand-drawn signage.”).  Hallatt admitted that Pirate Joe’s used Trade Joe’s paper grocery bags in the past, but alleges that such practice has ceased. Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 975.  Unpleased by Hallatt’s actions, Trader Joe’s alleged that Pirate Joe’s used its marks to pass as an approved Trader Joe’s retailer.  Id.  As such, Trader Joe’s filed its Complaint in federal court against Hallatt, alleging trademark infringement, unfair competition, and federal trademark dilution.  Id.  Trader Joe’s also brought claims under state court.  Subsequently, Hallatt moved to dismiss for lack of subject matter jurisdiction, arguing that the Lanham Act should not apply extraterritorially in this case.  Id.

Reasoning and Holding:

Upon Hallatt’s motion to dismiss for lack of subject matter jurisdiction, the Washington District Court engaged in a lengthy analysis of the extraterritorial application of the Lanham Act.  See Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 976-81.  The court recited the Ninth Circuit’s three Timberlane factors that the Circuit uses to determine whether extraterritorial application is appropriate: “(1) the defendant’s actions creates some effect on American foreign commerce, (2) the effect is sufficiently great to present a cognizable injury to plaintiff under the Lanham Act, and (3) ‘the interests of and links to American foreign commerce [are] sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.’”  Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 976 (citing Reebok Int’l v. Marnatch Enters., 970 F.2d 552, 554 (9th Cir. 1992)).

The court found that all three factors disfavored extraterritorial application.  In its analysis, the court combined the first two factors of the Timberlane test, stating that a plaintiff need only demonstrate that there is “some” effect on U.S. foreign commerce.  Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 977 (citing to Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 428 (9th Cir. 1977)).  The court reasoned that “all alleged infringement takes place in Canada and Trader Joe’s cannot show economic harm,” so “there is no economic harm to Trader Joe’s because the products were purchased at Trader Joe’s at retail price.”  Id. at 977.  Comparing this case to Love v. Associated Newspapers, Ltd., 611 F.3d 601 (9th Cir. 2010), the court found the chance of confusion in Canada is likewise too great a stretch to claim harm in the U.S.  Id. (“Like in Love, any ‘goodwill’ related harm is too tenuous to support a cognizable Lanham Act claim when all infringing conduct is abroad.”).

The court balanced seven other relevant factors in analyzing the third factor of the Timberlane test.  Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 978.  Those seven relevant factors include: “The degree of conflict with foreign law or policy, the nationality or allegiance of the parties and the locations or principal places of business of corporations, the extent to which enforcement by either state can be expected to achieve compliance, the relative significance of effects on the United States as compared with those elsewhere, the extent to which there is explicit purpose to harm or affect American commerce, the foreseeability of such effect, and the relative importance to the violations charged of conduct within the United States as compared with conduct abroad.” Id. at 978 (citing Reebok, 970 F.2d at 555).  The only one of the seven relevant factors that the court found in favor of Trader Joe’s was nationality or allegiance of parties and locations of corporations.  Specifically, the court concluded that “Hallatt’s connections with the U.S. are likely sufficient to support extraterritorial jurisdiction.”  Id. at 979.  The court, nevertheless, decided that application of the Lanham Act could potentially conflict with Canada’s trademark law (and Trader Joe’s had two pending trademark applications in Canada).  Id.  After an evaluation of the Timberlane factors, the court found that it does not have subject matter jurisdiction in this case.  Id. at 980.

Two months after the decision, Judge Marsha J. Pechman dismissed Trader Joe’s remaining state law claims, finding that no party in the lawsuit was a Washington resident, all of the alleged wrongful conduct occurred out of state, and any harm to Washington residents was “extremely tangential.”  Order Granting Motion to Dismiss Amended Complaint at 10-11.  As such, Judge Pechman dismissed the case with prejudice. Trader Joes Co. v. Hallatt, 981 Fed. Supp. 2d at 981; Order Granting Motion to Dismiss Amended Complaint at 11.

Appeal:

Trader Joe’s appealed the district court decision.  In its Opening Brief, Trader Joe’s argues that the Lanham Act “is one of the few statues that Congress specifically extended beyond the borders of [the U.S.]”  Brief for Appellant at 27 (citing Steele v. Bulova Watch Co., 344 U.S. 280, 283, 286 (1952)), Trader Joe’s Co. v. Hallatt, (No. 14-35035).  Trader Joe’s asserts that Pirate Joe’s conduct is analogous to the defendant’s conduct in SteeleId. at 30-31.  Specifically, Trader Joe’s contends that “Hallatt’s activities in the United States – most notably obtaining goods from Trader Joe’s stores – were ‘essential steps in the course of business consummated abroad,’” and therefore, the U.S. purchases were part of Hallatt’s “unlawful scheme.”  Id. at 31 (citing Steele, 344 U.S. at 287).  Accordingly, Trader Joe’s submits that “[b]ecause the scheme directly involves U.S. domestic commerce, there is no need to consider whether Hallatt’s activity has ‘some effect’ on U.S. foreign commerce.”  Id. at 34 (citing Reebok Int’l Ltd. V. Marnatech Enters., Inc., 737 F. Supp. 1515, 1518 (S.D. Cal. 1989)).

Nevertheless, Trader Joe’s asserts that the Timberlane factors are satisfied in this case.  Brief for Appellant at 35, Trader Joe’s Co. v. Hallatt, (No. 14-35035).  Addressing the first two Timberlane factors jointly, Trader Joe’s argues that a customer who purchases a defective product – a product that does not adhere to Trader Joe’s quality control procedures – from Pirate Joe’s “would not be able to tell whether the defect is the fault of Trader Joe’s,” and thus “the customer would likely view Trader Joe’s less favorably, causing harm to the reputation and goodwill that Trader Joe’s has carefully cultivated over the past 40 years.”  Id. at 36-37.  Trader Joe’s contends that any issues with TRADER JOE’S branded products sold at Pirate Joe’s “would inevitably travel back to the United States, where it would injure Trader Joe’s reputation and goodwill.”  Id. at 37.

Trader Joe argues that the third Timberlane factor also favors a finding of subject matter jurisdiction. Id. at 42.  Likewise, Trader Joe’s accesses all seven sub-factors.  For the third sub-factor, Trader Joe’s asserts that because “Hallatt . . . admitted to hiring people in the state of Washington to purchase TRADER JOE’S-branded products for him,” he has “an even stronger ‘presence’ in the United States.”  Id. at 47 (citation omitted).  As such, Trader Joe’s asserts that Hallatt orchestrated the activities in the U.S. and is a permanent U.S. alien, his presence in the U.S. is strong, despite his Canadian citizenship.  Id.  Further, Trader Joe’s argues that the sixth sub-factor weighs in its favor because “[i]t was entirely foreseeable that by selling TRADER JOE’S-branded goods outside Trader Joe’s quality control structure, the goodwill and reputation of a U.S. company would be hurt in the United States.”  Id. at 49 (citing to Reebok, 970 F.2d at 557 (finding it “undeniabl[y]” foreseeable that defendant’s products sold in Mexico border towns would damage plaintiff’s brand in the United States).

Finally, Trader Joe’s claims that the district court erred in dismissing Trader Joe’s state law dilution claim and its CPA claim.  Id. at 50-57.  Focusing on the fact that Trader Joe’s operates 18 stores in Washington, Trader Joe’s asserts that a large portion of the resulting dilution from sick Vancouver residents will be felt in Washington.  Id. at 54.  Also, Trader Joe’s argues that the defendant’s conduct in “trade or commerce” is satisfied because “Hallatt engages in a persistent pattern of ‘trade or commerce’ by traveling into Washington, purchasing products from Trader Joe’s stores. . ., exporting the goods to Canada, and reselling them.”  Id. at 57.  Accordingly, Trader Joe’s urges the Ninth Circuit to reverse the district court’s decision.

Hallatt, on the other hand, argues that the district court properly dismissed Trader Joe’s Lanham Act claims for lack of subject matter jurisdiction, reiterating the district court’s reasoning.  Brief for Appellee at 10-20.  Hallatt analyzes the seven sub-factors of the Timberlane test and echoes the district court’s reasoning with all but one factor – the only factor found against him.  Id. at 32.  Finally, Hallatt argues that the district court properly dismissed Trader Joe’s state law claims and Washington Consumer Protection Act claims.  Id. at 39-54.

US Trademark Office Ordered to Respond to Petition from the Federal Circuit Regarding Disparaging and Scandalous Marks

 Written By Chitakone Arounlangsy

The Federal Circuit, on March 15, 2016, ordered the USPTO to respond to a petition which asserted that the USPTO was ignoring the Federal Circuit’s ruling in December 2015 involving disparaging or scandalous marks.  In In re Tam, an Asian-American rock band’s application for the trademark “The Slants” was denied under 15 U.S.C. § 1056 of Section 2(a) of the 1946 Lanham Act. In re Tam, 808 F.3d 1321 (Fed. Cir. 2015). The TTAB found that the proposed mark was disparaging to the Asian-American community. Id. 15 U.S.C. § 1052, involves marks that consist of or comprise of immoral or scandalous matter, or matter which may disparage persons, institutions, beliefs, or national symbols, or bring them into contempt or disrepute. 15 U.S.C. § 1052 (1946). In 2014, the trademark for the Washington Redskins was canceled by the TTAB, for being disparaging to the Native American community. Pro-Football, Inc. v. Blackhorse, 62 F. Supp. 3d 498 (E.D. Va. 2014). In In re Brunetti, applicant Erik Brunetti’s trademark application was denied by TTAB because the mark FUCT comprises of immoral or scandalous matter. In re Brunetti, 2014 WL 4426133 (Trademark Tr. & App. Bd. 2016). Brunetti appealed and the case moved to the Supreme Court for review. Id.

While the constitutionality of the provisions under Section 2(a) are being reviewed, the PTO will be issuing advisory refusals for trademarks that consists or comprises of scandalous, disparaging, or immoral matter. The PTO still uses TMEP § 1203 for refusal on the basis of immoral or scandalous matter; deceptive matter; matter which may disparage, falsely suggest a connection, or bring into contempt or disrepute.

The PTO will be following certain guidelines pending final review of the Supreme Court. Any suspension based on the scandalous provision under Section 2(a), will remain suspended until the Federal Circuit court makes a final decision in In re Brunetti. After which, the PTO will then reevaluate the need for further suspension. For suspensions based on the disparaging provision, the application will remain suspended until one of the following occurs: (1) the period to petition for a writ of certiorari (including any extensions) in In re Tam expires without a petition being filed (2) a petition for certiorari is denied; or (3) certiorari is granted and the U.S. Supreme Court issues a decision. The outcomes in In re Tam and In re Brunetti, will determine what the new standard the PTO will use for disparaging and scandalous trademarks.

 

References:

https://www.linkedin.com/pulse/uspto-publishes-new-examination-guidelines-light-re-tam-garet-galster

http://www.uspto.gov/trademark/guides-and-manuals/trademark-examination-guides

http://www.bna.com/slants-applicant-asks-n57982068631/

The Wild West of gTLDs and Trademarks

By Evan Jensen

Generic top-level domains (gTLDs) are a new and soon-to-be-huge feature of the internet. New websites using a wide variety of newly created domain names will soon be springing up like weeds. Owners of brands and trademarks need to be aware of the threats, and of their options and the tools that are available to protect their intellectual property on the web.

This huge expansion of internet real estate also brings a new wave of speculators and cybersquatters. New gTLDs open up a world of possibilities for speculators and cybersquatters to claim popular words and marks for their own profit. Trademark holders need to be proactive in order to protect their marks from being exploited by vultures on the web by taking advantage of ICANN’s new trademark protections, including legal rights objections to gTLD’s and the newly-created Trademark Clearinghouse.

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Generic Top-Level Domains: The Gold Rush is On

By Evan Jensen

The biggest gold rush since the creation of the internet is in full swing. The creation of new top-level domains is the largest expansion of the internet ever, opening up a new world of opportunity to stake a claim to newly available names that will be immensely valuable in the future. The land grab for virtual real estate is back, and this time it is millions of times larger.

On June 20, 2011, ICANN’s board decided to remove nearly all the restrictions on generic top-level domains (gTLDs).[1] This decision would eventually lead to the creation of ICANN’s New Generic Top Level Domain program to auction off gTLDs. The program allows companies and institutions to purchase any desired string of characters to act as a top-level domain, and to sell domain names beneath that gTLD to anyone who wants one.

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Fourth Circuit Remands Rosetta Stone Ltd. v. Google Inc. 2010 Ruling

By Virginia Dudley

On April 9, 2012, the U.S. Court of Appeals for the Fourth Circuit revived the trademark infringement case Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010). The Fourth Circuit overturned the summary judgment granted in favor of Google by the U.S. District Court for the Eastern District of Virginia.

The Rosetta Stone case stemmed from Google’s sale of marks as AdWords. Adwords are Google’s online advertizing tool that allows a sponsor to “purchase” keywords that prompt the appearance of the sponsor’s advertisement when the keyword is entered as a search item. Rosetta Stone, a language-learning software company, was established in 1992 and began advertizing in connection with Google’s website in 2002.

Rosetta Stone initially accused Google of trademark infringement as a result of the website’s use of their mark in AdWords. In terms of this appeal, the Fourth Circuit re-addressed the possible elements of confusion, application of the functionality doctrine, dilution claims, and Google’s knowledge of infringement formerly discussed in favor of Google by the district court.

In August 2010, the district court rejected Rosetta Stone’s claim of an element of confusion caused by Google’s use of their mark by considering 3 out of 9 “likelihood-of-confusion” factors: (1) Google’s intent, (2) actual confusion, and (3) sophistication of the consuming public. The district court dismissed confusion claims against Google by ruling that Google did not intend to create confusion and that high consumer sophistication could be determined based on the nature and price of the product alone.

Conversely, the Fourth Circuit called for greater proper analysis of possible evidence of confusion and found a genuine issue of fact in terms of the previously discussed three factors of confusion. In particular, the Fourth Circuit reasoned that Google’s shifting trademark policies from the year 2004 on, as well as Rosetta Stone’s evidence of 123 complaints from those who had purchased knockoff software believing it to be legitimate, could reveal that Google had an intent to confuse. Also, the presence of confusion was further suggested by the difficulty Google’s own witnesses experienced in distinguishing between authentic and counterfeited Rosetta Stone advertisements on the search engine’s site.

Secondly, the district court held that the use of Rosetta Stone marks as keywords was protected by the functionality doctrine. The court found that Google’s use of Rosetta Stone’s trademarks as keywords was functional in that the keywords have “an essential indexing function because they enable Google to readily identify in its databases relevant information in response to a web user’s query.”[1] Trademark law’s functionality doctrine states, “a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” The district court claimed that Google’s AdWords were also protected under the Lanham Act, which states that a party cannot receive exclusive rights over solely functional features. 15 U.S.C. § 1114(a).

This past April, the Fourth Circuit stated that the district court did not consider whether the mark was functional in the way Rosetta Stone used the mark. Instead, the appellate court affirmed that the District Court focused solely on how Rosetta Stone’s mark made Google’s product more useful. The Fourth Circuit asserted that the functionality doctrine had been incorrectly applied to the case. In general, the Fourth Circuit emphasized that the words “Rosetta Stone” are not necessary to the function of the language-learning software, thus establishing the mark’s non-functional nature.

As for dilution claims against Google, the district court denied the presence of dilution in Google’s use of the mark. The district court also applied the fair use argument, which is present in the federal statute dealing with dilution 15 U.S.C. §1125 (c) (3) (a). The district court confirmed that Google did not use Rosetta Stone’s mark to identify its services. Moreover, the possibility of dilution of the mark was also disregarded by the district court as a result of the increase in public awareness of Rosetta Stone’s mark following its appearance in Google’s AdWords.

The Fourth Circuit, on the other hand, found evidence of dilution and stated that the notion of good faith arises in regards to the fair use inquiry mentioned by the district court.

Lastly, the Fourth Circuit addressed the extent of Google’s knowledge of infringement. In 2010, the district court referenced the Second Circuit ruling in Tiffany v. eBay 600 F.3d 93 (2d Cir. 2010)to claim that generalized knowledge of infringement makes Google less liable. The district court also ruled that Google would not be liable unless Rosetta Stone could provide concrete evidence that the search engine was aware that an act of infringement was occurring.

However, the Fourth Circuit held that the district court’s decision was gathered in an inappropriate and untimely manner. As with many of the other aspects addressed in this case, the appellate court supported Rosetta Stone and called for further analysis on Google’s knowledge of infringement in its use of the words “Rosetta Stone.”

Such recall of a former trademark infringement case also occurred on April 5, 2012 when the U.S. Court of Appeals for the Second Circuit heard Viacom International Inc. v. YouTube Inc., No. 10-3270 (2d Cir. April 5, 2012). Similar to Rosetta Stone Ltd. v. Google Inc., the Appellate Court pushed for greater analysis of trademark infringement claims against Google because they found the trial court to have been too swift in their decision making.

In sum, in focusing on the factors of confusion, mark functionality, dilution, and Google’s knowledge, the Fourth Circuit remanded the summary judgment granted by the U.S. District Court for the Eastern District of Virginia in favor of Google. [1]

[1] Rosetta Stone Ltd. v. Google Inc. Court of Appeals, Fourth Circuit 2012. available at http://scholar.google.com/scholar_case?case=11203645518793090722&q=rosetta+stone+v.+google&hl=en&as_sdt=2,9&as_vis=1

ICANN’s New gTLD: Dot.Protect.Your.Trademark

By Meera El-Farhan

The Internet Corporation for Assigned Names and Numbers’ (ICANN) leap into the new generic Top-Level Domains (gTLDs) will introduce one of the largest unprecedented Internet developments. ICANN’s introduction of the New gTLDs is aimed to promote competition, add consumer choice, increase market differentiation and enhance the diversity pool of geographical and service providers.[1] The New gTLD program allows any private or public entity worldwide to apply for any custom-made gTLDs (example: .com or .yournewdomainname). Furthermore, gTLD strings will be capable of incorporating characters from other languages such as Mandarin Chinese.

Although many corporations and other organizations publicly announced their application to certain gTLDs -Google announcing its application to .google, .docs, .youtube, and .lol- ICANN has postponed sharing applicants’ information until “Reveal Day” (June 13, 2012). On Reveal Day ICANN will publicly post all TLD character strings entities have applied for; thus, triggering the processes of trademark “protection” mechanisms.

Background

The new gTLD is designed to virtually introduce an unlimited number of namespaces. Qualifying for a new gTLD requires an applicant to meet a fairly limited but stringent number of requirements. Once the applicant satisfies the financial requirements, such as the $185,000 fee, the applicant may apply to two types of gTLDs:

  1. Community-based: whereby the applicant must demonstrate its association and representation of a recognizable and defined community.

 

  1. Standard: applications that do not qualify for community-based usually fall under the standard category.

Additionally, as part of the application process, ICANN will conduct background screening to ensure an applicant passes specific criteria for criminal history and general business diligence.

Furthermore, to be mindful of potential trademark protection challenges, ICANN incorporated mechanisms within the gTLD system itself to ensure legal rights are protected. Prior to the introduction of the new gTLD, previous gTLD expansions allowed ICANN to better-prepare for the coming trademark challenges. Nevertheless, the appropriate balance between protecting trademark owners and other interests cannot be perfected. To assist ICANN with the coming new gTLD, the World Intellectual Property Organization identified the need for “preventative mechanisms;” prior solutions rather than post-remedies. To create such “preventative mechanisms,” ICANN formed the Implementation Recommendations Team (IRT), a team consisting of a diverse group of trademark experts. IRT’s recommendations formed the basis for trademark protections. IRT sought to provide a “tapestry of globally effective-solutions to some of the major overarching issues of trademark protection in connection with the introduction of new gTLDs.”[2] Additionally, many parties in the trademark community also had an influential impact on increasing the protection mechanisms for the new system.

 

Strategies for Trademark Protection

Although many individuals argue that ICANN’s trademark protection mechanisms tip in favor of trademark owners, such assertions do not translate into guaranteed trademark protections. Private and public entities must remain on the lookout to ensure that their trademark rights are not infringed. Accordingly, there are three approaches a trademark owner may take.

First, participating in ICANN’s processes. ICANN outlined the following three main protection processes within the application to provide various forums for interested groups to discuss, object, or resolve trademark protection issues: (1) Application Comment Process, (2) Program Feedback, and (3) Objection Period.  Trademark owners will likely find the Objection Period to be the most relevant to protecting their trademark rights. According to ICANN, grounds for filing an objection include (1) String Confusion Objections: objecting to strings likely to result in user confusion, (2) Legal Rights Objection: objecting to strings infringing on existing legal rights, (3) Public Interest Objection: objecting to strings contrary to international legal norms of morality and public order, (4) Community Objection: a significant portion of the community which the gTLD string is targeted at objecting to the gTLD. [3] Note that an objector does not need to be an applicant.

Second, utilizing the mechanisms ICANN will facilitate once the new gTLD program is operating:

  1. 1.      Trademark Clearinghouse: this repository organization accepts, authenticates, stores and pertains rights of trademark holders. Trademark holders are advised to register their trademarks to increase trademark protections. Additionally, the Clearinghouse will serve as an information bank enabling trademark owners to have access to a wide-variety of gTLD information.
  1. 2.      Uniform Dispute Resolution Policy (UDRP): UDRP is limited to clear cases of “bad-faith, abusive registration and use of some domain names.”[4] UDRP, being an out-of-court mechanism, applies to all gTLDs. Successful claims enable the transfer of the infringing domain name to the complainant’s control.
  1. 3.      Uniform Rapid Suspension system (URS): URS is also limited to clear cases of trademark infringements. Remedies under the URS are limited to temporary suspension of a domain name for the duration of the registration period.  Additionally, a successful complainant has the option of paying for one additional year at commercial rates.

Third, additional steps a trademark owner is recommended to take are: (1) applying for a second-level domain within a new gTLD registry, and (2) monitoring Reveal Day’s published gTLD strings to object to those in conflict with the entity’s trademarks.

Future Considerations and Challenges

Introducing the new gTLD will create a multitude of global challenges thus affecting organizations of all sizes. Entities are advised to avoid the wait-and-see strategy. Instead, entities should reassess risks associated with their trademarks continuously. Although the new gTLD’s risks might not be fully understood today, organizations are advised to plan, discuss, and carefully evaluate the implications of the new gTLDs as it unfolds itself worldwide.

 

Introducing Stein McEwen LLP Fall 2012 IP Training Program October 1-19, 2012

 Stein McEwen LLP is pleased to announce that it will be hosting an intellectual property training program from October 1-12 with an add-on session from October 15-19, 2012 in Washington DC.

 The purpose of the Stein McEwen LLP Fall 2012 IP Training Seminar is to provide an overview of U.S. Intellectual Property Law, including patents, trademarks, copyrights, and trade secrets. The lectures will cover fundamentals of patent procurement, with optional sessions extending to the scopes of trademarks and copyrights, IP licensing, and IP litigation. A series of lectures will be presented by Stein McEwen LLP attorneys regarding these subjects, including workshops for the participants to receive hands-on experience.  These workshops will include activities such as reviewing disclosures of an invention and drafting sample claims to cover the subject matter of the invention. Tours of the U.S. Patent and Trademark Office, the U.S. Court of Appeals for the Federal Circuit, and a U.S. District Court will allow the participants an opportunity to understand the complexities of these agencies and courts.  At the U.S. Court of Appeals for the Federal Circuit, the participants will likely have an opportunity to observe a portion of a hearing involving patents. The IP Training Seminar is intended to provide a broad-based understanding of U.S. Intellectual Property Law, with a strong emphasis on patents. The already-implemented and still-to-take-effect provisions of the Smith-Leahy America Invents Act (AIA) will be woven throughout the syllabus.

 

Who Should Attend?

In-house staff members of corporate IP departments, patent attorneys, staff members of overseas law firms, inventors, and members of academia who deal in some aspect of IP.

Basic understanding of patent law for at least one country is recommended. No formal registration of any country’s patent office is required.

More information can be found at www.smiplaw.com/seminar_ipt.cfm.

If you have any questions, please contact Sarah Brogi at sbrogi@smiplaw.com or SM2012training@smiplaw.com.

Hermes LosesTrademark Battle on its Chinese Name for the Third Time in China

By Evelyn Li

Beijing Municipality First Intermediate People’s Court ruled against Hermes International on its appeal for an earlier 2011 decision made by the Trademark Appeal Board of State Administration for Industry and Commerce of PRC (the “Board”) on an issue of a trademark cancellation dispute. A clothing manufacturing company in Guangdong province, China, applied for the trademark “ai ma shi (爱馬仕)” with the Chinese Trademark Office in 1995. After passing the Board’s preliminary review and being publicly announced through the official trademark Gazette in 2002, the manufacturing company, Dafeng Garment Factory (“Dafeng”), gained trademark rights to use the mark “ai ma shi (爱馬仕)” in China mainland. “Ai ma shi” is what the Chinese call Hermes in Mandarin. Although there are several different ways for spelling out “ai ma shi” in Chinese characters, all of them look extremely similar and all of them pronounce the same way.

According to the record in the Chinese Trademark Office and the Board, Hermes had asked the trademark office and the Board separately in 1997 and 2001 to cancel the trademark registration of Dafeng’s “ai ma shi”, but was denied both times. In 2009, Hermes asked the Board to cancel the disputed mark “ai ma shi” used by Dafeng on ties and clothing, saying Hermes’s Chinese name enjoyed a high reputation around the world including mainland China, but this argument was again rejected by the Board. Hermes had not lost its hope at that point.

After learning the Board’s ruling, Hermes sued the board in Beijing Municipality First Intermediate People’s Court asking for a reversal of the Board’s decision in 2012. And this time, Hermes was let down again. The Beijing court did not agree with Hermes on its arguments and accordingly affirmed the Board’s decision, allowing Dafeng to continue the use of trademark on “ai ma shi.”

Admittedly, Chinese courts sometimes share a reputation of favoritism towards national businesses, and Hermes’s foreign identity most likely did not help it in the case. However, if we read the Chinese trademark law carefully, the failure to convince the Beijing court in this case was most likely a result of Hermes’s ineffectiveness on proof of being a “well-known” mark to the related public in mainland China. Court records showed that most of the evidence presented by Hermes was media reports fifteen years ago from Hong Kong. Those reports are not enough to prove the “well-known” requirement of a mark under Article 13 of the Trademark Law in China. Besides, Hermes also failed to provide evidence showing the disputed trademark was acquired by Dafeng illegally. Consequently, the court ruled against the French luxury brand. Hermes lost the battle for taking backing its Chinese name for the third time.

It has always been somewhat ambiguous for foreign companies, even the ones with registered marks in mainland China, to figure out what the standard is when Chinese courts rule on the issue of “well-known” marks. Statutes from the Chinese Trademark Law Article 14 listed out five factors that shall be considered in determining whether a mark is well-known: (1) the degree of knowledge of the relative public; (2) the duration of use; (3) the duration of time, degree and geographical range of any publicity of the mark; (4) any record of the mark being protected as a well-known mark; (5) other factors which make the mark well-known. Courts in most cases consider all the factors together as a basis for their rulings. Nevertheless, results of different cases show that courts have not followed a consistent pattern—a considerable amount of judges’ discretion is often involved in the outcomes of cases. Interestingly, in this case, the Beijing court’s ruling hardly showed much of a judge’s discretion on weighing of those aforementioned factors. It seemed relatively clear that Hermes had not quite satisfied the burden of proof that it had become famous in mainland China before Dafeng’s registration of “ai ma shi,” which probably requires showings of sales records, market promotions and other related evidence from mainland China before 1997. It is not clear whether Hermes only had related evidence before 1997 from Hong Kong area, or it was not very well prepared to meet the requirements of being a “well-known” mark before 1997 in mainland China for this particular lawsuit.

After the courts’ decision, Hermes and “ai ma shi” will exist together in the mainland market. Hermes will probably have to reconsider its promotion strategy in order to make sure consumers in China are not confused when they speak of Hermes’s Chinese name. (Remember “ai ma shi” is what the Chinese call Hermes in mandarin.) Or Hermes could try to buy the name from Dafeng. But after observing a series of trademark cases concerning similar issues, specifically Ipad v. Proview and Michael Jordan v. Qiao dan (both mentioned in our previous blog articles), Dafeng will probably not be very easy-going in any negotiations for a fair price on its mark.

An interesting question to ask is why such a big brand like Hermes, who registered its mark with the Chinese mainland government in the year 1977 would lose for the third time in this thirty- year long battle against a relatively small clothing manufacturing company in China. It is possible that Hermes neglected the importance of obtaining a Chinese name/Chinese transliteration of its mark when it first registered in 1977. However, Dafeng only applied for registration of the mark “ai ma shi” in 1995. Hermes did use an almost identical Chinese transliteration in Hong Kong before 1995 for many years, but it never registered that transliteration with the trademark office of mainland China. Some are wondering if it is too late for Hermes to get angry at acts of Dafeng in 1997 when it eventually realized the importance of getting back the Chinese name.

A lesson to be learned from this case for companies who is planning to enter the market of mainland China, is that they need to think ahead of time a catchy translations in Chinese for their products in order to avoid similar trademark problems later. Chinese customers are often more comfortable accepting foreign products that bear “friendly” names in Chinese. (e.g. Coke’s Chinese name is “ke ko ke le”, which not only sounds like Coca-Cola but also means ‘tasty and feel happy’ in Chinese.)

If a company’s mark is already enjoying fame internationally, that company should always be very careful in choosing its Chinese name because someone in China might have already registered a transliteration for that company’s mark and might have already been using that transliteration for a while.  Consultation with attorneys well-versed in Chinese trademark law is well-advised.

Linsanity Hits Trademark Registration both in the United States and China

By Evelyn Li

New York Knicks’ rising star Jeremy Lin has filed a trademark application with the United States Patent and Trademark Office for the term “Linsanity” on Feb. 13th, 2012. Three different fillings under the same term came to the agency before Lin acted on claiming his IP rights. Yenchin Chang, one of two California applicants who works as an importer/exporter, has paid the $1,625 filing fee to use the phrase on sports apparel so that he could “be a part of the excitement.” The other California applicant, Slayton, purchased the domain name http://www.linsanity.com. None of those three applicants have any ties to Jeremy Lin.

15 USC §1052 (c), states that no trademark shall be refused registration unless it “Consists of or comprises a name, portrait, or signature identifying a particular living individual except by his written consent, or the name, signature.” Also, in determining whether a particular living individual with that “name” would be associated with the mark, the TTAB must consider: “(1) if the person is so well known that the public would reasonably assume the connection, or (2) if the individual is publicly connected with the business in which the mark is being used.” Given the popularity the term “Linsanity” has gained through media publication and other communicational channels, it would appear that the public is well informed of the indication on the identity of Lin whenever such term is used. Thus, if anyone tries to put “Linsanity” on their product, they would very likely need to obtain Lin’s written consent. However, it is unlikely that Lin will give his consent since he is already applying for the same term for his own trademark.

On the other hand, because these applications are still in the process of trademark examination, they all need to show “use” on the term in identifying the source of their goods. To fulfill the “use” requirement, applicants must provide “one specimen showing use of the mark in commerce for each class of goods/services.” It remains unclear whether the applicants will be able to show such specimens. In addition, if a potential mark is used “solely to identify a character” it is unlikely that the application for registration will be successful. “[P]ersonal names (actual names and pseudonyms) of individuals or groups function as marks only if they identify and distinguish the services recited and not merely the individual or group.” In re Mancino, 219 USPQ 1047 (TTAB 1983). It is arguable whether “Linsanity” qualifies as a source identifier due to the lack of use in all of the applicants’ cases.

Another interesting report from the China Daily, the Chinese government’s official English language newspaper, just made Lin’s case more complicated. According to the report, Minjie Yu, owner of WuxiRisheng Sports Utility Company, has successfully registered the trademark “Jeremy S.H.L.” with the Chinese trademark office in 2010 prior to Jeremy Lin’s rise to fame. The company applied to trademark a variation of Lin’s name, “Lin Shuhao (in Chinese characters) Jeremy S.H.L. (initials of Lin’s Chinese name),” according to the website of the trademark office of China’s State Administration of Industry and Commerce. The application was approved in August, with the company paying just 4,460 Chinese yuan (US$710) for the rights and creating a headache for Lin and his corporate partner Nike, with whom Lin signed a three-year contract in 2010. WuxiRisheng Sports Utility Company is a major manufacturer of sports equipment in China, reportedly producing about one million basketballs, volleyballs, and soccer balls each year. Under the registration of Lin’s name, the company is entitled to use the trademark for sportswear, accessories, balls, and toys until August 2021. According to Chinese trademark law, if Lin wants to use his name as trademark on any goods he wants to sell in China, he will have to obtain WuxiRisheng’s consent.

Under Chapter I Articles 9, 10, and 11 of the Trademark Law of the People’s Republic of China, there are limitations against registering certain types of names and symbols as trademarks. However, there are no clear regulations on whether anyone could register a trademark under the names of celebrities. If anyone wanted to register a celebrity name as trademark, the trademark examiner has relatively broad discretion in granting the application. As a result, celebrities often find it hard to rely on the judgment of those examiners to protect their commercial interests. Thus, the Chinese trademark system makes it relatively easy for other people to profit from celebrities’ names and the protection of trademark interests under celebrity’s names is mostly the burden of the celebrities themselves. In Lin’s case, he could have filed a trademark opposition claim within three months of the publication of the preliminary examination and approval of WuxiRisheng’s trademark under Chapter III, Article 30 of the Trademark Law of People Republic of China. Such a claim would require Lin to present proof that the use of his name as another’s trademark harmed his reputation or confused the related public. However, as the three month period has elapsed, Lin may no longer choose this course of action.

However, there is another way for Lin to bring an action against the company in China. Under Chapter V Article 41 of the Trademark Law of China, Lin may file a request with the Trademark Review and Adjudication Board for adjudication to cancel the registered trademark. Although highly unlikely to succeed, Lin may petition the Board to revoke WuxiRisheng’s trademark by asserting that his name is a “well-known mark” and was registered in bad faith by WuxiRisheng.

Where the Chinese Trademark Law has failed to adequately protect the rights of private persons to trademark their name, courts have introduced principles found in Chinese civil code. When cancelling registered trademarks under celebrities’ names, courts have considered Article 9 of the Chinese Trademark Law together with the rights guaranteed under Article 99 of the General Principles of the Civil Law. Article 9 states that, “the trademark for which an application for registration is filed shall have distinctive characteristics easy to identify, and may not conflict with the legal rights acquired by others in priority.” Under Article 99, “Citizens shall enjoy the right of personal name and shall be entitled to determine, use or change their personal names in accordance with relevant provisions. Interference with, usurpation of, or false representation of personal names shall be prohibited.” Thus, Lin could argue that the right to use his personal name existed prior to the WuxiRisheng’s trademark rights. However, Lin would have a difficult time convincing a Chinese court to revoke WuxiRisheng’s trademark under this rationale because the courts rarely uphold the rights of foreign nationals over that of Chinese citizens.

It should be noted that there is no “first to use” doctrine under Chinese trademark law. Instead, China uses the “first to register” doctrine. Therefore, based on the facts of Lin’s case, the Chinese company has a very good chance of prevailing in the Chinese courts.

It is not a new trend in China for businesses to register trademarks under celebrity names, both foreign and domestic. In fact many businesses have been making considerable profit using such names as their trademarks for a long time. For example, most recently, Michael Jordan has brought lawsuit against Fujian Province-based Qiaodan Sports Co. Ltd. for allegedly building its business around his Chinese name and jersey number. Unfortunately the case was thrown out by a court in Beijing. In the court’s decision it stated that Michael Jordan’s Chinese name was “neither distinctive nor unique.” The court found the name “Qiaodan” was a common one, which could refer to any number of people and didn’t specifically refer to the former NBA superstar. Similarly, if Lin were to bring a lawsuit against WuxiRisheng’s registration on his Chinese name, he would most likely be facing the same difficulty in proving that his Chinese name solely indicates him. In addition, the businesswoman who registered Lin’s name has also registered other basketball players’ names based on her judgment of their future potential. As long as she claims that making such registrations is an “entrepreneurial investment”, she should be safe under the current Chinese trademark system.

There is an old saying in China that one should “think twice before acting.”  Given the realities of the Chinese trademark system, it appears that Jeremy Lin should think twice before planning to bring a trademark suit in China.