2008 FEBRUARY 28TH - 29TH

Transcription

1 2008 FEBRUARY 28TH - 29TH ALI ABA - NEW ORLEANS LITIGATING TRADEMARK, INTERNET, AND UNFAIR COMPETITION CASES LOOK BEFORE YOU LEAP: CLEARING MARKS AND WAYS TO CLEAR OBSTACLES AND ASSURE THAT LITIGATION RISKS WILL BE MINIMIZED JILL MCWHIRTER MERILLAT FROST CRAIG STONE 1100 Louisiana St., 40 th Floor, Houston, Texas (713) ; (713) (facsimile)

2 I. INTRODUCTION LOOK BEFORE YOU LEAP This paper provides a general overview of the search and clearance process as a way to minimize potential third-party conflicts when securing rights to use and register a trademark. Once a client selects a prospective mark, a trademark search should be conducted to identify potentially blocking third-party marks. Depending on the results of the search, additional investigation or clearance measures may be appropriate. A. What Is a Trademark Search? A U.S. trademark search involves gathering publicly available information and evaluating those results to determine whether a particular mark is (1) available for use without the reasonable expectation of infringing the rights of a prior user, and (2) eligible for registration under 15 U.S.C. 1052, which prohibits the registration of a mark that is likely to cause consumer confusion, to cause mistake, or to deceive. The search results may reveal that a mark is available for use but cannot be registered due to lack of distinctiveness or functionality. If the mark is available for use only, the trademark owner may still be able to use the mark on its goods or services, but may not be able to prevent other trademark owners from using the same or similar marks. B. Why Conduct a Trademark Search? Utilizing search reports helps one make informed decisions regarding whether to adopt and register prospective marks. There is no legal requirement to conduct a full search before beginning use of a mark, nor does the failure to conduct a search serve as conclusive evidence of bad faith in an infringement claim. See, e.g., Streetwise Maps, Inc. v. Vandam, Inc. 159 F.3d 739 (2nd Cir. 1998). However, properly conducted searches can save money by identifying potential obstacles to the use and registration of a mark, thereby reducing the likelihood of being the target of costly infringement actions or failed attempts at registration that could force one to cease use of a mark. Such forced rebranding can result in negative publicity as well as the considerable loss of goodwill among consumers. In addition, if litigation ensues, the existence of a detailed search opinion can serve as a defense to willful infringement. See Mattel, Inc. v. Robarb s, Inc., 139 F.Supp. 2d. 487, 495 (S.D.N.Y. 2001) (reliance on the advice of counsel is indication of good faith). II. INITIAL CONSIDERATIONS A. Asking the Right Questions. Gathering all relevant information regarding the prospective mark from the client at the outset of the search process helps the attorney devise an appropriate search strategy to assess the availability of the mark. To start, the attorney should request specifics of the mark itself, such as its spelling, any punctuation, and the details of any design element included in the mark. The attorney should also seek to gain an understanding of the industry in which the client operates and discuss any budget constraints for the search and evaluation process. Additional considerations include: 1. Whether use of the mark has already begun; 2. How the client intends to use the mark in the future; 3. The goods or services on which the mark will be used; and 4. The geographical scope of any future use of the mark. KING & SPALDING LLP

3 Such information helps the attorney make a determination of the potential risk posed by thirdparty marks. B. Timeline. How quickly results are required may dictate the extent of the review that is undertaken. An impending product launch or internal corporate deadlines may affect this decision. If time is of the essence, an attorney may simply provide a verbal clearance opinion, namely, that the mark is available or not. Other options include drafting a formal letter or legal memorandum that outlines the details of an opinion and the analysis supporting it. C. Format. The clearance attorney should also inquire with the client about the preferred format of the opinion, which is often driven by budgetary and time restraints, but may also depend on the level of the client s sophistication and trademark knowledge. Trademark search opinions typically assess whether a mark is clear or not and cite some of the more significant marks that were evaluated. Formal search opinions often include citation charts summarizing the basic details of marks that could pose a risk to the use or registration of prospective marks. These charts allow the client to quickly review the findings of the clearance attorney and assess the need for additional information. Some clients may wish the clearance attorney to assign a numeric percentage to the likelihood that the proposed mark is available for use and registration or apply simply a go/no go criteria. III. SEARCH TOOLS A. Types of searches. Depending on budgetary and time constraints, trademark clearance is frequently done in two stages, with attorneys first conducting a preliminary knockout search to identify possible obstacles and then ordering a comprehensive search from a thirdparty vendor such as Thomson Compumark or CT Corsearch. 1. Knock-Out Searches. Preliminary knock-out searches are used to identify any obvious conflicts that would rule out the adoption of the proposed mark and allow the client to forego further searching. Knock-out searches to identify potential third-party conflicting pending or registered marks can be done inexpensively using available online resources, such as the free trademark database available at the U.S. Patent and Trademark Office website; state trademark registry databases; and internet-based searchable databases such as SAEGIS or CT Corsearch. Using internet search engines such as Google may also bring to light evidence that the mark is already being used by a third party or that the mark has a heretofore unknown meaning in a given industry and may therefore be descriptive. One may also consider expanding the knock-out search past the U.S. results, especially if utilizing on-line databases and the proposed territorial range reaches beyond the U.S. borders. 2. Comprehensive Searches. If no obvious conflicts are identified during the initial knock-out search, a formal, comprehensive search may be ordered from a professional search firm such as Thomson Compumark, CT Corsearch, or Corporation Service Company, to name a few. Comprehensive searches typically examine both federal and state registrations, business names, common-law usage, and domain name listings to determine if the mark is already registered or in use. In foreign jurisdiction, full searches are usually conducted by contacting local counsel in that jurisdiction who will conduct similar-type searches at its local trademark registry and utilize any other similarly available searching mechanisms. Costs of formal searches depend on the complexity of the prospective mark and the scope of anticipated KING & SPALDING LLP

4 use of the mark in connection with specific goods and services. On average, vendors fees for a formal search for a basic word mark in a single class is approximately $500 on a normal turnaround basis. These results can be produced on an expedited basis for an additional fee, but typical turn around time is five days. B. Search Strategy. Searching pure word marks or slogans raises fewer issues in the search strategy than searching composite marks, those marks that incorporate both a word mark or slogan and a design element due to the complexity of the search. With respect to composite marks, it is recommended that searching be conducted on the design alone and the word/slogan alone to ensure all aspects of the mark are being searched properly. Additional words marks that can complicate a search strategy are phonetic marks and marks that are synonymous and create the same commercial impression, but would not appear on search report because the spelling or combination of the words differ so greatly. One needs to carefully review the search strategy that has/will be employed to ensure that all potential third-party marks will be uncovered during the process. In addition, one may also consider in the search strategy giving deference and wider latitude to competitor marks as well. IV. SEARCH RESULTS A. Evaluating Results. The ultimate test to determine whether a conflict exists is whether there is a likelihood of confusion between the prospective mark and the marks cited in the search report. It is important to understand the analysis for determining whether a third party poses a potential conflict or violate 15 U.S.C. 1052(d). Quoting from 1052(d), Section 1207 of the Trademark Manual of Examining Procedure states: No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it... [c]onsists of or comprises a mark which so resembles a mark registered in the Patent and Trademark Office, or a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive.... The test: Are consumers likely to confuse the source or origin of the goods or services to be associated with a prospective mark with the source or origin of the goods or services associated with the senior, existing mark or marks? The marks need not be identical; the marks merely need to give the same commercial impression so as to create confusion in the marketplace. Unfortunately, [t]here is no mechanical test for determining likelihood of confusion. The issue is not whether the actual goods are likely to be confused but, rather, whether there is a likelihood of confusion as to the source of the goods. T.M.E.P The degree of similarity necessary to create a likelihood of confusion will differ depending on the marks and the goods and services in connection with which the marks are used. The influential KING & SPALDING LLP

5 case In re E.I. du Pont Nemours & Co., 476 F.2d 1357 (C.C.P.A 1973) outlines the factors for this analysis, which include but are not limited to the following: The similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation and commercial impression; The relatedness of the goods or services as described in an application or registration or in connection with which a prior mark is in use; The similarity or dissimilarity of established, likely-to-continue trade channels; The conditions under which and buyers to whom sales are made, i.e., impulse vs. careful, sophisticated purchasing; The number and nature of similar marks in use on similar goods; and A valid consent agreement between the applicant and the owner of the previously registered mark. B. Strength of Mark. When analyzing the availability of a prospective mark, one must evaluate its strength by gauging where it falls on the spectrum of trademark distinctiveness. More-distinctive marks are stronger and better distinguish their owner s goods and services and thus better protect against infringement by other marks. Prospective marks fall within one of the following five classifications: 1. Fanciful: Fanciful marks offer the strongest protection of all marks on the continuum of trademark distinctiveness. Fanciful marks are made-up words not found in any dictionary that are created solely to serve as trademarks. Examples include KODAK cameras, EXXON gasoline and XEROX copiers. Fanciful marks are particularly appealing to trademark attorneys, since they are inherently distinctive, but are less appealing to clients, since substantial amounts of advertising dollars must be spent to create a connection in a consumer s mind between the goods or services and the mark. 2. Arbitrary: Like fanciful marks, arbitrary marks offer strong protection. Arbitrary marks are normal words with ordinary definitions that have nothing to do with the way they are used as trademarks. Examples of arbitrary marks include APPLE computers and CAMEL cigarettes. 3. Suggestive: Suggestive marks hint at, but do not directly describe, characteristics or qualities of the goods or services of the products with which they are associated. Suggestive marks are inherently distinctive, but are weaker than fanciful or arbitrary marks. Examples of suggestive marks include GREYHOUND bus lines and COPPERTONE suntan oil. 4. Descriptive: Descriptive terms describe rather than suggest a characteristic or quality of the products or services in connection with which they are used. They are generally not protectable as trademarks unless they acquire secondary meaning to consumers through substantial expenditures on advertising or extensive, long-term use. Surnames and geographic KING & SPALDING LLP

6 terms are typically considered descriptive, as are laudatory terms such as QUALITY or SUPERIOR. 5. Generic: Generic terms cannot function as trademarks as they have become synonymous with the common name of the relevant product or service. Examples of generic words that were once registered trademarks but are now incapable of functioning as marks include escalator and aspirin. C. Additional Considerations. In addition to the likelihood of confusion analysis, there are several other considerations to keep in mind when reviewing the marks of third-parties that appear on a search result. 1. Disclaimers. The USPTO will request a disclaimer of a portion of a mark that by itself would be descriptive of or generic in connection with the goods or services for which the mark has been applied. An applicant or registrant that enters a disclaimer gives up its exclusive right to that term apart from the mark as shown. For example, if the applied-for mark were SPECTRA BUILDING and was intended to be used in connection with construction services, the USPTO likely would require a disclaimer of the term BUILDING but allow the mark to register as a whole. Assessing whether existing applications or registrations have already disclaimed a component word, phrase, or design element helps an attorney determine the availability and registrability of a prospective mark. 2. Gaps in PTO Records. Lag time may exist between the moment an application is filed and when that application is entered into the USPTO s computerized database system. With nearly 90% of all trademark application now being filed online this is less of a concern. With the current online system, details of a new application are uploaded and made available to the public quickly. However, it is important to remember that even properly conducted searches can fall prey to blind spots. For example, the details of applications filed on paper at the USPTO may not be available for searching for up to six weeks. Additionally, an entity can file an application in any of the Paris Convention member countries and within six months file an application in the United States that claims priority from the original foreign application. Information on a Madrid application filed in the United States at the end of the six-month priority period may take as long as eight months from the date the base application to be made public. 3. Abandoned Marks. On occasion, marks covered by trademark registrations that have been abandoned at the USPTO continued to be used by their owners. Particular care should be taken with marks having a long period of use and/or registration that have been abandoned for a failure to file a declaration of use or renewal of continued use pursuant to Sections 8 and 15 of the Lanham Act. In some cases, these marks are still in use with prior existing and valid rights. Special attention should be paid to identical marks or competitor marks that have an abandoned status. 4. Natural Zone of Expansion. Even if a mark does not currently pose a threat, it is important to determine whether a mark s prospective goods or services reside within the natural zone of expansion of a potentially conflicting mark. An attorney may need to go back to the client to ask follow-up questions to discern the trends in a particular industry and how an expansion of use could affect the prospective user s rights. KING & SPALDING LLP

7 5. Third-Party Litigation Strategies. In addition to focusing on the similarities between a prospective mark and the marks of others, it is equally important to focus on information concerning the owners of third-party marks. An attorney must determine whether the third-party is a direct or potentially direct competitor of the prospective user. Moreover, some third parties are especially aggressive when policing their trademark rights. With the ownership information of a potentially conflicting mark in hand, it is advisable to log into the USPTO s Trademark Trial and Appeal Board website ( to ascertain the approach an owner has taken in the past with the filing of oppositions and cancellation proceedings. PACER, the online federal court system, can also provide helpful insight into a litigant s historical behavior. 6. State Registrations. Registering a trademark at the state level can be done in addition to, or in lieu of, federal registration. Registering a mark at the state level may be undertaken if the mark is to be used primarily in a single state and there is no use in interstate commerce. As these registrations may impede the use and/or registration of prospective marks in individual states, it is important for the client to appreciate that these registrations may constrain their use of potential marks, particularly if the prospective marks are to be used nationwide. The junior user in these instances may be precluded from use of its mark in the states where the senior state registrant either has use or registrations. 7. Common Law Uses. It is recommended to fully investigate common law uses, as you may be able to eliminate third-party marks if they are only in use in a particular geography, have limited use, or are now abandoned. D. Clearing a Third-Party Obstacle. Even if a search uncovers a problematic third-party application or registration that raises concerns regarding the availability of the client s mark for use or registration, clearing a path for the client s mark may still be possible. It may be possible to purchase the conflicting registration from its owner, for example. Other possible actions include conducting use investigations into the third-party mark to determine depth and breadth of its usage; filing an opposition or cancellation action against the application; or pursuing concurrent-use agreements or licensing arrangements with the owner. It is also important to take a global approach when clearing an obstacle. The fact that a mark is registered in several different jurisdictions could potentially impact a concurrent-use agreement. Many jurisdictions allow for the registration of class-headings or all goods in class when use of the mark is much narrow. A concurrent-use agreement can limit the scope of use to allow another mark owner to enter the marketplace without creating a likelihood of confusion. 1. Investigation. If your searches turn up a substantially problematic third-party mark, conducting further investigation into the risk posed to your client s proposed mark is recommended. Preliminary investigations may involve searching the internet for information about the cited mark s owner or ordering a Dun & Bradstreet report. It may also be advisable to hire a private investigator to conduct a more formal investigation to into the risk posed by a cited mark. These third-party investigators can gather information useful in making a final assessment of any potential conflict, such as the goods and/or services used in connection with the mark, dates of the mark s first use, sales revenues, geographic areas of distribution, channels of trade, nature and quality of the use of a mark, and comprehensive information concerning the owner. Initial investigations may cost about $350, with costs increasing depending on the scope of the investigation requested. KING & SPALDING LLP

8 2. Contacting a Third-Party Owner. Although no ethical obligations exist that prevent outside counsel or the client from contacting the owner of a potentially problematic mark in situations where no impending litigation is present, it is advisable to avoid these situations. If counsel or the client decides to contact an owner of a potentially problematic mark to inquire whether a third party will consent or agree not to object to the use of a prospective mark, be aware that seeking the approval of a senior user can create the impression that the prospective user believes there is a chance that consumer confusion is likely in the marketplace. If litigation ensues, this evidence could be presented as an admission that a conflict exists. In addition, approaching third-parties can be troublesome and create traps down the road especially when attempting to assert rights of an owner in a subsequent infringement action or opposition proceeding against a another party. For example, if two trademark owners enter into an agreement that states that the parties do not believe there is a likelihood of confusion between two marks, you must consider the impact of this concession on the enforcement of an owner s rights in future litigation. Such an agreement could provide a defense to another party when the trademark owner later asserts there is a likelihood of confusion with a mark similar to the one from the prior concurrent-use agreement. V. INTERNATIONAL CLEARANCE Ownership of a trademark application or registration in the United States does not automatically extend protection to the same mark abroad. Unfortunately, given that trademark rights are territorial in nature, it is not possible to clear a mark internationally through a single source. Rather, clearance must proceed on a country-by-country or jurisdiction-by-jurisdiction basis. Hiring local counsel to conduct searches of each country s registry may prove necessary depending on the client s plans to use its mark internationally. Although some international jurisdictions utilize online databases to track their registration records, many countries have not yet converted their paper filing systems into an online ones. Clearance in such jurisdictions can be expensive and time consuming. Moreover, searches conducted in countries with paper filing systems are less likely to uncover problematic marks. In many foreign jurisdictions, it is many months if not years from the date the date an application is filed before its details are made publicly available. Local counsel can provide indispensable assistance in gauging the extent of these risks and ultimately interpreting the results of a search in a jurisdiction outside the United States. Also note that another country s requirements for registrability can differ vastly from the U.S. system. Word marks should also be chosen carefully, and clearance and filing should mirror the appropriate form of use (i.e., foreign script, translations). Though more of a marketing than legal issue, it is important to know whether the mark in English has a meaning in the language of the jurisdiction in which protection is being sought that may be offensive to or inconsistent with the marketing message. One of the most famous examples of a problematic mark is the mark NOVA for automobiles. In English, the word NOVA means a star that suddenly increases in light and then fades away. In Spanish, the expression NOVA, or no va, means it does not go not a desirable characteristic of an automobile. KING & SPALDING LLP

9 Searching pure design marks can also pose logistical problems at the international level. Most countries do not assign design codes to pure design marks like the USPTO does. 1 This can make locating potentially conflicting design marks extremely complicated. Assuming there is no prior knowledge of an existing conflicting mark, many foreign associates simply recommend filing an application in this situation and waiting to see if a third party opposes the application. VI. POST-CLEARANCE ISSUES When delivering a clearance opinion, the attorney should be sure to communicate to the client that there is no guarantee that the proposed mark does not conflict with a third party s prior rights. Clients should also be advised that the validity of the opinion has a limited lifespan and an application to register the mark should be filed as promptly as possible. Intervening users or trademark applicants can file competing applications at any time. In many instances, conflicts are so significant the prospective mark is simply unavailable for use. However, a prospective user may still be able to secure rights to use the mark by securing consent to use from senior users through concurrent-use agreements or licenses. Depending on the client s business strategy, it may also be appropriate for the client to acquire the rights of a senior user. Prospective buyers often employ anonymous third-parties to approach an owner of a mark if the notoriety of the purchaser could potentially impact the sale price. Trademark searches and investigation are indispensable when helping clients assess the level of risk involved in adopting and using a new trademark. Understanding of these risks helps clients and their marketing teams properly assess the potential obstacles to the use and registration of their proposed mark and develop the appropriate strategies to help achieve their ultimate business goals. 1 Clearance of design marks domestically can also be problematic, since state trademark registries and common law sources are difficult if not impossible to search in any organized and efficient manner and the only well-organized and searchable database for design marks is the U.S. Patent and Trademark Office registry. KING & SPALDING LLP