Trademarks play an increasingly important role in most businesses, yet many companies still deal with them on an ad hoc basis. There are a number of areas companies can focus on to maximize the value of their trademarks. Brand management encompasses everything from providing basic guidelines on proper trademark usage, to drafting complex licensing agreements, to coordinating IP audits, to conducting due diligence in corporate transactions, and administering domain name policies.
Overview And Usage
A trademark can be any word, design, slogan, color, sound or other symbol that serves to identify a specific product or service. The strength of a trademark is determined by reference to five categories: arbitrary, fanciful, suggestive, descriptive, and generic. Trademarks are inherently distinctive and hence protectible from inception if they fall into one of the first three categories. Arbitrary marks are common words used to identify products to which they have no relation (e.g., Apple for computers). Fanciful marks are coined terms such as Kodak or Polaroid. Suggestive terms allude to characteristics without describing the goods or services, for example Roach Motel.
A mark that is descriptive (e.g., Super Glue) is not protectable unless through extensive use it has acquired "secondary meaning." Finally, a generic term (e.g., Light Beer) denotes the general product and is entitled to no protection.
Trademarks should be set off from surrounding text or otherwise "leap out" at consumers to distinguish them from descriptive terms or copy. Trademark owners often place a "TM" (or "SM" for service mark) notice adjacent to unregistered marks. After the federal registration, the " " notice should be displayed with the mark. Though not a prerequisite for protection, failure to use the notice with a registered trademark can reduce the possibility of a monetary recovery in an infringement action.
Securing And Protecting Trademark Rights
Trademark rights in the U.S. are based on use, but registration is generally advisable. Applications for U.S. registration can be filed based on actual use of a mark in commerce or an intention to use (ITU). The ITU application creates a conditional right, which is not perfected until use is established and the registration issues. At that time, priority relates back to the filing date. Many companies choose to file an ITU application immediately after clearing a mark, and before use commences, to secure an earlier priority date and allow the registration process to flesh out possible objections before a product launch.
Foreign registration can be particularly important because in many countries trademark rights depend solely on registration. Registration is generally effected on a country by country basis, though there are significant exceptions. The European Community TradeMark system provides an opportunity for obtaining a single registration ("CTM") that covers all member nations (currently 25). The cost is significantly less than registering in each individual country. There are downsides, including that an opposition by the holder of a trademark in just a single European country may effectively block the entire CTM.
The Madrid Protocol provides a different system for obtaining international trademark protection. It allows trademark owners to file a single application in their home country for an "International Registration" (IR), and through WIPO (World Intellectual Property Office in Geneva) extend that IR at a reduced fee to some or all of the 60 member nations. In this way owners obtain a single registration that covers multiple countries. But there are downsides to an IR as well. If the underlying registration is successfully attacked during the first five years, the entire IR collapses. And, the U.S. is the only major country in the Western Hemisphere that currently is a member of the Protocol.
The Lanham Act protects trademarks from infringement (15 U.S.C. 1114) and dilution (15 U.S.C. 1125(c)). The test for infringement is likelihood of confusion, whether consumers are likely to believe that there is some connection between the plaintiff and defendant or their products. Dilution, which is not dependent on a likelihood of confusion, is the "lessening of the capacity of a famous mark to identify and distinguish goods and services." 15 U.S.C. 1127. Dilution can be caused by "blurring," which is a diminishing of the distinctive quality of a mark, or "tarnishment" which involves injury to a company's reputation.
The U.S. Supreme Court rarely hears trademark cases. Consequently, its decisions on this front are generally much anticipated. Such was the case with Moseley v. V. Secret Catalogue, Inc. 537 U.S. 418 (2003), which dealt with the evolving area of dilution. The case involved whether use of "Victor's Little Secret" for a store that sells lingerie, and adult videos, toys and novelties diluted the well known "Victoria's Secret" mark for lingerie and clothing. The Court held that the Federal Dilution Act (FTDA) requires proof of actual dilution; and that the evidence presented by Victoria's Secret was insufficient to support summary judgment on the claim of blurring. The Court stated that it is the plaintiff's obligation to demonstrate that there has actually been a reduction in the capacity of the famous mark to identify and distinguish its goods and services. While there was evidence that those who saw the advertisements for "Victor's Little Secret" did connect the dots and make the mental association with "Victoria's Secret," there was no evidence that consumers formed any different impression of Victoria's Secret as a result of that mental connection.
The case has a number of implications for trademark owners:
In order to show actual dilution, it may be sufficient in itself if the marks at issue are identical.
Where the marks are not identical, the owner of a famous mark may need survey evidence to show a weakening of the mark's function of identifying the products or services.
Owners may need to prove that their mark is "distinctive" as well as famous.
It is not clear that the FTDA applies at all to dilution by tarnishment as opposed to blurring (though no subsequent case has yet ruled on this).
Congress is currently holding hearings on whether to amend the FTDA to require a showing only of likelihood of dilution.
A recent dilution case with implications for companies that use the marks of others as props in entertainment or advertising is Caterpillar Inc. v. Walt Disney Co., 287 F.Supp.2d 913, 922 (C.D. Ill. 2003). Caterpillar, the well-known manufacturer of bulldozers, sued Disney for what it deemed to be a disparaging use of its trademarks in the motion picture George of The Jungle 2. In the film, the Caterpillar bulldozers, referred to as "deleterious dozers" and "maniacal machines," are used to destroy the jungle. Caterpillar asserted a dilution by tarnishment claim, contending that the movie placed Caterpillar in a bad light. The court denied Caterpillar's request for an injunction against the domestic release of the movie, noting that there was a crucial absence of "free-riding" on the part of the studio and nothing in the film to suggest that Caterpillar's products were shoddy or inferior.
These cases highlight an increasing judicial reluctance to uphold dilution claims for fear of providing too wide a monopoly to a trademark owner. This has implications for practitioners in such areas as trademark clearance (recognizing how broad a protection a prior mark may be entitled to) and in choosing how aggressively to enforce a mark.
The IP Audit
Companies often do not realize exactly what trademarks, copyrights, domain names or patents they own until they've experienced a crisis, generally in the form of litigation, or until they are involved in a major corporate transaction. Cataloging all company trademark registrations and applications is a critical step in determining what intellectual property a company owns and whether it is properly protected. The audit process should be used to determine ownership of the marks, information on licensed marks, and information on trade names and common law trademarks which frequently are not sufficiently protected.
The audit process should also encompass domain names. It is often advisable to obtain multiple domain names for particular trademarks as a means to preempt cybersquatting. These include the singular, plural and hyphenated versions of a mark and common misspellings, as well as top level domains other than just .com (e.g., .net, .biz, .info, .tv, .us and .org).
Enforcement / Policing Of Marks
The value of a trademark may be lessened or lost entirely if a mark's exclusivity is not maintained. To avoid a diminishment of its rights, trademark owners must be vigilant. The first step in enforcement is being made aware of harmful uses. This can be accomplished in a variety of ways. It can include clipping services to monitor the relevant press, review of competitive advertising, periodic Internet searches (e.g., through Google), and review of the USPTO Gazette for potentially conflicting marks published for opposition. For a more systematic approach, many trademark owners rely on computerized "watching" services that comb the records of the USPTO and foreign registries for potentially conflicting marks, as well as domain name registries.
Licensing is an important means of extending the value and notoriety of a brand, especially into product areas where the trademark owner himself does not have the capability or expertise to exploit a mark directly. Maintaining meaningful "quality control" over a licensee's use is a central responsibility of the trademark owner. "Naked licensing" refers to a trademark owner's licensing of a mark without retaining (and exercising) quality control, which can have serious repercussions as illustrated in the Ninth Circuit case, Barcamerica International USA Trust v. Tyfield Importers, Inc. 289 F.3d 589 (9th Cir. 2002).
Barcamerica owned a trademark registration for the mark "Leonardo Da Vinci" in connection with wines. The company licensed the mark to Renaissance Vineyards, granting a non-exclusive and later an exclusive right to use the mark. Neither agreement contained provisions for Barcamerica to control the quality of the licensee's use. The only actual control exercised by Barcamerica was that on rare occasions the company's owner would taste the wine.
Defendant Cantine Leonardo Da Vinci Soc. began selling wines in the U.S. through its exclusive importer. It concluded that Barcamerica had abandoned the "Leonardo Da Vinci" mark and sought to have Barcamerica's registration cancelled. Barcamerica moved for a preliminary injunction enjoining Cantine from further use, but the request was denied by the district court which held that Barcamerica had abandoned the mark through naked licensing.
The Ninth Circuit stated that "it is difficult, if not impossible to define in the abstract exactly how much control and inspection is needed to satisfy the requirement of quality control over trademark licensees," 289 F.3d 589, 598. But wine tasting was not sufficient. The court noted that in theory quality control could exist where the licensor is familiar with and relies on the licensee's own efforts to control quality. In this case, however, there was not a sufficient relationship between the parties for the licensor to have relied on the quality control efforts of the licensee. The lessons are: (1) always include quality control provisions in trademark license agreements; and (2) carry out those provisions by regularly monitoring the quality of the goods and/or services for which the licensee is using the trademark.
Another means of increasing brand awareness and driving sales is arranging for product placement in motion pictures and television shows. Product placement in movies has been a popular marketing strategy for years. The allure of reality television along with the trend toward technology that allows TV viewers to block commercial advertising has brought product placement in TV shows back to life from what was considered a relatively unthinkable tactic.1 Product placement is a convenient way to reach consumers in an ostensibly indirect manner, where they may not realize that they are being marketed to.
Product placement in movies is often prearranged, and at significant cost. Mercedes-Benz reportedly paid $2 million to have its cars used in Jurassic Park 2, and $40 million for Men in Black 2.2 And the cost of product placement on television is increasing. Product placement spots were being sold for $1 million for the first season of Survivor, and escalated to $12 million by the release of the second series.3
If properly implemented, an effective brand management program can increase brand exposure and revenue, and decrease disputes.1 McCarthy, Michael, Ads Pepper Reality Shows With Product Placements, USA Today, July 23, 2001.
2 Wheeling and Dealing in LA, The Australian, 21 March 2002.
3 Kern, Tanja, Commercial Televi$ion, Snack Food & Wholesale Bakery, June 2000.
Jeffrey C. Katz is a Partner and David A. Weems is an Associate in the Intellectual Property Department of Davis & Gilbert LLP in New York.