Intellectual Property Newsletter Fall 2011

How to Prevent Your Trademark from Going .XXX
by Flavia Campbell

The Internet Committee for Assigned Names and Numbers (ICANN) has approved the launch of the new .XXX top-level domain name (“TLD”), targeted to serve the needs of the adult entertainment industry. As we’ve seen in the past, the launch of new TLDs may give cybersquatters the opportunity to register domain names that incorporate established marks to profit from unlawfully diverting Internet traffic or from selling the domains to their rightful owners. The risk of brand damage caused by cybersquatting is enhanced in this case by the fact that the .XXX TLDs are, by definition, associated with sexually oriented content. Sensitive to the issue, the registry behind the .XXX TLD is giving trademark owners outside the adult industry the opportunity to preemptively block their marks from being registered with .XXX web address.

Trademark owners have until October 28, 2011 to opt their trademarks out of the .XXX registry. In order to block a trademark from being used as a .XXX web address, the trademark owner must have a valid trademark registration that was granted before September 1, 2011. The opt-out feature is only being offered during the above term and it is available upon payment of a one-time fee that ranges from $200 to $400, depending on the registrar. Only exact matches of a registered trademark may be entered in the opt-out list, which means that abbreviations, acronyms, typos or close variations if a trademark cannot be blocked.

Starting on December 6, 2011, parties who do not own a trademark registration will be given an opportunity to block names of interest from being registered within a .XXX domain name during the “General Availability” phase. Some registrars are already accepting applications for desired names and claim that the sooner one deserves a name, the better their position will be when the General Availability registration period opens. The registration fee in this case costs approximately $100 for the first year of the domain name registration.

While trademark owners can still attempt to recover .XXX domain names that make unauthorized use of their trademarks through existing anti-cybersquatting mechanisms such as UDRP complaints, the preemptive opt-out feature will be less expensive and more efficient. We therefore encourage our clients to review their trademark portfolios and consider applying to block their main brands from registration within the .XXX registry.

5 Keys to Choosing a Company Name
By Alexandra Horne

When deciding on a name for a company, consider the following five guidelines.

Key #1: Choose a Memorable Name

When selecting a company name, remember that the name will communicate the essence of your business to the public. Businesses may be tempted to adopt a name that readily describes their products or services, but because a company cannot have exclusive rights to a descriptive name unless it can show that due to extensive use consumers associate the mark with one particular company, it is better to choose a name that is merely suggestive (i.e., “Greyhound Lines” or “Microsoft”). The strongest name, however, is one that is “totally arbitrary and non-descriptive,” such as “Apple” when used with computers or electronics, “Xerox” or Etsy, an e-commerce website that allows users to sell handmade and vintage items. According to CNN, Etsy was selected by its founder because he wanted a “nonsense word … and to build the brand from scratch.” A coined name can quickly develop name recognition and may minimize the risk of confusion with another company name, thereby providing the owner with a stronger scope of protection.

Key #2: Choose a Name that is Simple and Easy to Spell

A company will also want to choose a name that is simple and easy to spell, so it will be easy for a consumer to recognize and remember. Particularly in this era of Internet domain names, a short name can be critical to a company’s success. Regardless of how a company selects a name, clearance of the name by trademark attorneys is essential. This reduces the chances of the company selecting a name that is identical or confusingly similar to a preexisting trademark, thereby diminishing the risk of trademark infringement. The consequences of trademark infringement can be severe and extremely expensive. In addition to costly litigation, a company may have to choose a new name and completely rebrand everything to do with the company—from its products, services and website to stationery, business cards and signage.

Key #3: Choose a Name with a Positive Connotation

In most cases, a company will want to select a name that has a positive connotation—a name that makes consumers “feel good” about the company. According to CNN, when Microsoft was considering a name for its new search engine, it wanted a name that was “a single syllable, memorable, and easy to spell.” Although Microsoft was naming a search engine rather than a company, the same key factors apply. Microsoft considered—and rejected— the name “BANG,” because when used as a verb it did not have a positive connotation. Instead, the company selected “BING,” because it sounded like “BINGO” and Microsoft hoped “BING” would also connote the moment an idea was created.

Key #4: Consider an Eye-Catching Design or Logo

An eye-catching design or logo can be invaluable once the consumer comes to associate it with a particular company. For example, the stylized COCA-COLA® name and the NIKE® “swoosh” are known around the world and are immediately recognizable to consumers. Selecting a logo or a particular design for the company name can require consumer research to determine whether the design will be viewed favorably and provide a positive connotation. In addition, a logo can also run the same risk of infringing another company’s trademark rights, so it is essential that a qualified attorney clear a logo or design before the company begins to use it.

Key #5: Consider a Singular Corporate Color

Selecting and maintaining a corporate color can be difficult; however, the benefits to a company can be invaluable. In order to maintain strong rights associated with a color, it is critical that the company sticks with its chosen color and provides explicit guidelines about the proper use of the color both within the company and to any licensees or franchisees. Everyone is familiar with the blue used by Tiffany & Co. and the brown used by UPS. Once a company has selected a name—or even a handful of frontrunners—it is critical not only that the corporate name be registered in its state of incorporation (often Delaware, because of corporate benefits), but also that the company file trademark applications with the U.S. Patent and Trademark Office. The company may also consider filing applications in foreign jurisdictions if it is a multi-national company or is contemplating expanding beyond the United States. By registering its company name as a trademark, a company will have exclusive rights to use the name with its particular products and services and to enforce its rights against infringing use by another entity of an identical or similar name with the same or similar products or services.

Ninth Circuit Ruling Offers New Guidance in Online Keyword Advertising Disputes
By Dana Brody-Brown

On March 8, 2011, the U.S. Court of Appeals for the Ninth Circuit issued a key ruling in Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011). Reversing a District Court’s injunction, the Ninth Circuit found that purchasing a competitor’s trademark as a keyword for a sponsored link promoting the defendant’s product did not constitute sufficient evidence of likelihood of confusion to support an injunction.

Overview of the Dispute

Network Automation and Advanced Systems both sell job scheduling and management software. Network Automation sells its software under the mark “AUTOMATE”, while Advanced Systems sells its product under the mark “ACTIVEBATCH.” Network purchased keyword ads through Google, Microsoft Bing, and others for “ACTIVEBATCH” such that when a user enters the term “ACTIVEBATCH” in one of the relevant search engines, in addition to the search results, an ad for Network Automation’s product would appear under the “sponsored links” section.

Advanced Systems sent multiple demand letters to Network Automation objecting to this practice, and Network Automation filed a declaratory relief action seeking a judgment of non-infringement. Advanced Systems counterclaimed alleging trademark infringement and sought a preliminary injunction against Network Automation’s use of the “ACTIVEBATCH” mark as a keyword.

“Internet Troika” Guides District Court

The district court granted the request for injunctive relief, focusing primarily on the “Internet troika”—the three factors it viewed as significant for “cases involving the Internet.” The 9th Circuit reversed, vacating the injunction and remanding the case back to the lower court for further proceedings consistent with the guidance contained in its opinion.

The “Internet troika” comes from the Brookfield case, in which the court focused on 1) the similarity of the marks, 2) the relatedness of the goods or services, and 3) the simultaneous use of the Web as a marketing channel, as the three most important factors in resolving the domain name dispute presented in that case. Brookfield Commc’ns Inc. v. West Coast Entm’t Corp., 174 F. 3d 1036, 1054 (9th Cir. 1999). Since Brookfield, the “Internet troika” has been widely used by courts considering a variety of cases involving infringement claims and the Internet.

Ninth Circuit Relies on ‘Sleekcraft’ Factors

In Network Automation, the court posits that the “Internet troika” is not appropriate to all infringement cases involving the Internet, and is particularly ill-suited to keyword ad cases. Instead, the court says that in keyword ad cases, the Sleekcraft factors should be considered flexibly in order to consider those most relevant in any particular case. AMF Inc. v. Sleekcraft Boats, 599 F. 2d 341 (9th Cir. 1979).

Under a “flexible” consideration of the Sleekcraft factors, plus “other relevant” factors, the court in this case found the most relevant factors for consideration were: 1) the strength of the mark; 2) the evidence of actual confusion; 3) the types of goods and degree of care likely to be exercised by the purchaser; and 4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results.

The court notes that the ads in this case appear as “sponsored links” which lessens the possible likelihood of confusion; presumably, this is because when results appear in “sponsored links” they provide a visual clue for users that the link is an advertisement not necessarily coming from the same source as the product indicated in the search. Based on the court’s discussion of labeling, one could infer that clear labeling of the source of an ad (while not present in this case) would also weigh in favor of a finding of no infringement under similar circumstances.

Significance of Ninth Circuit’s Ruling

This case is significant because it sends a clear signal that the Ninth Circuit does not believe the “Internet troika” to be appropriate in keyword ad cases. Further, it provides guidance on how to determine whether using a competitor’s mark as a keyword in online advertising amounts to infringement. In addition, it suggests that ads appearing as “sponsored links” are less likely to be found infringing than ads that are not segregated and labeled as “sponsored links.”

It will be interesting to see if other circuits follow this approach, and how the case law continues to develop in this area. For now, it appears that the ruling makes it more difficult for a trademark holder to protect its trademark as a keyword for online advertising, particularly when the resulting ad appears as a “sponsored link.”

One on One with Emily Bayton

What is your most important possession?
The patchwork quilt my Grandmother made me for my high school graduation.

Who are your real-life heroes?
My 4-year-old son, Jack. He’s been through a lot this year and continues to be the strongest, bravest little guy I know.

Most amazing place you’ve been?
The Grand Canyon. I love that the entire landscape of the Grand Canyon changes as you hike down. It is such an amazing, awe-inspiring place.

Favorite sport to play?
To play – volleyball, basketball and softball. To watch – college football. I’ve been known to spend an entire Saturday watching college football with my husband.

When you were a child, what job did you most want to have when you grew up?
Interior designer.

What is your most marked characteristic?
Probably my crazy (and loud) laugh.

How would your friends describe you?
Loyal, kind and funny (hopefully).

What would you like to do as a follow-up career once you retire from the practice of law?
I’d love to go to culinary school and become a chef, or teach law and marketing courses at a college or university.

What food can’t you live without?
Chocolate chip cookies.

Who would you most like to meet?
Kirk Ferentz – Iowa Hawkeye football coach.

To view this newsletter in PDF format, click here.

This Newsletter has been prepared by Lewis and Roca LLP for informational purposes only and is not legal advice. Readers should seek professional legal advice on matters involving these issues.

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