Pete

About Peter Lemire

Peter Lemire is a founding member of Leyendecker & Lemire, LLC, specializing in business and intellectual property law.

A forgotten right the government can’t take away

If you have followed the news lately, you’ve probably have heard about the United States Patent and Trademark Office’s (USPTO) board decision to cancel the Washington Redskin’s federal trademark registrations covering their name and graphical logo. The USPTO had determined that the term, “Redskin” and the graphical logo associated with the NFL team, violated trademark laws’ prohibition against scandalous or immoral subject matter at the time the mark was registered.

It should be noted that this isn’t the first time the USPTO has come to such a conclusion with respect to the football team. The courts reversed the previous determination on a procedural issue regarding whether or not the individual that brought the cancellation action had standing to sue. It was interesting to see some of the initial commentary regarding the decision and the lack of knowledge about trademark law and the nature of trademark rights.

No matter your particular view of the underlying case, the situation with the Redskins is a good example of the public’s misperception of trademarks, how trademark rights are accrued, and why trademark registrations can carry more benefits in the eyes of the public than those actually conveyed under the law.

The most interesting aspect of the discussion is the mistaken belief that trademark rights are granted by the government. In fact, at the most basic base level, trademark rights are created by an individual or company’s use of a trademark to identify their goods or services in commerce. By naming your product “XYZ” and selling it in the marketplace you accrue what are called, “common law rights.” The longer you use it and more geographic areas your goods and services are sold, the strong your rights become.  These rights are not contingent on any government approval or certificate.

However, while the federal registration does not create trademark rights per se, it does grant you certain extra add advantages. First and foremost, for smaller businesses the benefits of the federal registration definitely make sense as they will protect your mark nationwide, even if you haven’t sold product or provided your services in all 50 dates. This can be important if a company has plans to start regionally and slowly expand operations or a larger geographic region or even nationwide.

Without a federal registration, a business could find itself in the position of looking to enter into a new market where another common law user has already established rights in that geographic area. Therefore you will either be barred from entering that area or, if you do work in that area, you will have to do so under a different name. This can severely hamper and make more costly marketing and brand awareness campaigns. Larger companies (e.g. Microsoft) don’t necessarily have this problem due to the fact that they can launch products and services nationwide. Therefore, they create common law rights in all geographic areas from the get-go. While federal registration is still important to larger companies, they will still have powerful rights even if they just rely on common law trademark rights.

As the 2014-2015 football season starts up, think twice about producing Redskins merchandise to line your pockets. Though the USPTO did cancel the Redskins federal trademark registrations, you are out of luck for cashing in on the brand.

The law still recognizes strong common law rights in the Redskins name and logo, and you will more likely find yourself on the other side of a lawsuit for trademark infringement and counterfeiting if you endeavor on that path. Furthermore, the team has vowed to appeal the USPTO’s ruling to the federal courts. Given the history of the case and the seemingly thin factual support for the USPTO’s decision, there stands a high likelihood that the Redskins would prevail on an appeal.

Hazy times for Colorado’s marijuana businesses

Many businesses are dealing with the impacts of Colorado’s foray into recreational marijuana. Often, this uncertainty is focused on how the new laws and regulations will be implemented. While compliance with the Colorado regulatory framework is often the first priority of companies associated with the marijuana industry, another important legal issue is lurking below the surface, and unfortunately how it is resolved remains to be seen. The issue concerns an area of intellectual property law that all businesses have – trademarks.

Trademarks protect identifiers of the source of goods in commerce – essentially they protect brands. Trademarks can be any non-functional aspect of a product or service that identify its source. They can be business or product names, logos, or even things such as product packaging or design (e.g., the shape of an I-Phone or a Coke bottle).
The law protecting trademarks has two main purposes. The first is to protect the goodwill built up by business owners with the consuming public.

Basically, we don’t want a company to spend 20-plus years building a good reputation only to have another company come in and adopt a mark that is intended to ride on the coattails of the first company. The second purpose is to protect the consuming public. Essentially, when you go and buy a Coke, you do so because you have certain expectations about the product including quality, price etc. Therefore, the law recognizes that it is in the public’s best interest to not allow dish water to be bottled and sold to the unsuspecting consumer as a Coke or for a fly-by-night company to sell shoddy knock off shoes as a pair of Nikes.

There are basically two types of trademarks – registered and unregistered. Unregistered trademarks (also called common law trademarks) arise from the business’ use of the terms to identify its goods. The scope of protection for common law trademarks is generally narrow. Fights about the geographic scope of common law trademark rights often get down to the zip code level. Because of these limitations it is not preferable to just rely on common law rights.

Registered marks are those in which the trademark owner has sought registration of the trademark with a state or with the federal government. Each state’s laws are different and can range from highly complex systems to Colorado’s system, which basically just defaults back to common law protection. Most trademarks are protected under the federal Lanham Act. Trademarks registered under the Lanham Act are enforceable in all 50 states even if the business hasn’t had sales nationwide.

The problem facing Colorado companies that are involved in or sell goods or services related to the marijuana industry is that, generally speaking, the law doesn’t allow for trademarks rights in goods or services that are illegal. On a broad level this makes sense; if you are conducting an illicit activity, you shouldn’t be able to sue someone else for doing the same illicit activity under a similar name. Doing so would tend to legitimize the illegal activity. But what happens when something is legal under state law but illegal under federal law?

Usually the answer would be that the state law is invalid due to the Supremacy Clause of the United States Constitution. However, this inconvenient fact is essentially the third rail in the marijuana debate. Even though the last two administrations have looked the other way, marijuana is still illegal federally. The federal controlled substances act prohibits among other things the manufacturing, distributing, dispensing or possession of certain controlled substances including marijuana and marijuana-based substances.

Additionally the CSA makes it illegal to sell, or offer for sale any drug paraphernalia (“any product, equipment or material which is primarily intended or designed for use in manufacturing, compounding, producing, preparing, injecting, ingesting, inhaling or otherwise introducing into the human body a controlled substance”) 21 U.S.C. §863. Because of this a company will not be granted federal trademark registration for marijuana or marijuana paraphernalia. Therefore a business owner cannot get a federal trademark for the name of their dispensary or their own brand they might assign to a particular strain of marijuana. Additionally a business owner would also be denied federal common law protection for any such mark under the Lanham Act.

Things most likely don’t fare much better under a state common law analysis. While there isn’t any case law out on this yet, but strictly going by the law, a court would have to deny state common law protection as well, due to the Supremacy Clause. This causes a huge conundrum – how are marijuana business owners supposed to protect their goodwill?  How do we protect consumers that rely on brand names to make purchasing decisions regarding, quality, strength and safety?

Most ironically, a grower could produce a new strain, protect it with a plant patent, and give it a new name. If someone infringed the patent the grower could sue and obtain an award for damages. However, if the same individual sold an existing (non-patented) stain under the same brand name as the patented strain, the grower might not have any recourse.

So does this mean that marijuana-related businesses should just ignore trademarks? I would say that is not a wise choice. There are still many strategies that a business can use to get the most protection possible under both state and federal law, which while might not be ideal, it is definitely better than nothing. Additionally, sophisticated legal counsel can also employ other areas of intellectual property may also prove helpful in protecting brand identity.

Lastly, we really are in a situation of wait and see. Until either the federal law is changed, or some cases concerning these companies move their way through the courts, it’s all a bit hazy.

The perils of third-party IP policy shifts

Gammers Teach us a lesson on the perils of shifting 3rd Party IP Policies.

 

Before Christmas a client gave me a heads up about some new developments in Youtube’s Content ID System that was causing an uproar in the gamming community and others who monetize their YouTube videos.  The conflict stems from what appears to be overally aggressive actions on YouTube’s part to attempt to deal with copyright infringement on its service.  While YouTube’s actions may not directly affect a lot of mainstream businesses, it can serve as a good lesson for those that use 3rd party providers to host and disseminate content for their business and how a change in policies by these third parties can radically affect one’s business.

 

It all started in early to mid-December when content owners started receiving notices that their vlogs (video blogs) were flagged for violating copyright law.  As a result the content was either removed or all revenue created by the post through the hosting of ads was funneled to the copyright owner (often without the copyright owners request).  The main problem with the system is that it is automated and apparently isn’t triggered by a request from the copyright owner.  Therefore, there have been a lot of questionable flagging, some of which most likely constitute fair use.  One of the more humorous responses (at least in my opinion) was posted by a YouTube user here: http://www.youtube.com/watch?v=JQfHdasuWtI  (Caution NSFW).  Personally, I like the example of a video interviewing representatives from the game Tomb Raider that gets flagged because there are images of the game and sound from the game in the background.  Others that have been flagged are reviews of products that might include a brief clip or a screenshot of a user interface.

 

The YouTube policy once again puts the concept of fair use in the spotlight.  The fair use doctrine, allows for use of copyrighted works without the copyright owners permission in certain circumstances.  In general use for purposes such as criticism, comment, news reporting, teaching, scholarship or research are generally not considered an infringement of a third parties copyright.  The rationale is that the 3rd parties use is not merely to copy but to use limited pieces of the work in a transformative way by incorporating it into a new work.  The trick is, in an age where so much content is being generated how do you separate the truly infringing works from those that would fall under fair use.  With millions and millions of videos on YouTube, it is certainly a daunting task. Often time companies cast a very broad net with the knowledge that some legitimate use will be included.

 

The YouTube situation is another manifestation of the clash between content owners and those who wish to use small amounts of the pre-existing content in an on line context.  For example, an online retailer may want to show screen images of a certain video game to potential customers, or may want to create on-line reviews of the games or computer programs in order to help their customers make purchasing decisions. In the context of a product review, the use of those images or video most likely would fall under the preview of fair use.   If you are a big enough retailer, you may simply host those review on your own website and you most likely would not be affected.  However, smaller enterprises often times rely on YouTube to actually host the content, even if the company includes an embed link to the video on its home page.  Therefore these companies and individuals are at the mercy of YouTube’s intellectual property policies and user agreements, which have and continue to evolve over time.  Essentially, a business that relies on you tube i) exclusively to provide its content based product or ii) uses YouTube essentially as a hosting platform for its content based marketing materials is always subject at some level to YouTube and Google’s (YouTube’s parent company) prevailing views of intellectual property rights.  This can subject businesses to great harm, if the business has not made other preparations.  For companies that provide video product reviews for their customers, they may want to consider hosting the content on their own website as opposed to exclusively on YouTube or Facebook.  Failure to do so can put businesses behind the eight ball in the event the tech company they are relying on has a sudden change in policy.

By | January 29th, 2014|COPYRIGHTS, CYBER LAW, Fair Use, INTELLECTUAL PROPERTY|0 Comments

The murky law of fair use

Weird Al doing a Michael Jackson song parody?

In our practice, we deal not only with the enforcement of intellectual property rights, but we also do a fair amount of defense of accused infringers. One of the surest ways of getting into an intellectual property dispute (aside from illegally downloading movies using BitTorrent) is to make reference to, mention or otherwise utilize someone else’s intellectual property.

While this may seem obvious, it can creep up in the business context in unexpected ways. Generally speaking, business will cite that they are allowed to do their activities under the doctrine of “Fair Use.” Additionally, it is important to note that there is a difference in running afoul of the law and being embroiled in a conflict with another business. While a company’s actions may be justified legally, it may still find itself in a dispute which can cost a lot of money, time and resources.

These issues come up in two different areas of intellectual property – copyright and trademark. While each area of law adopts a concept that allows certain usage by parties other than the owner, the concepts are quite different in what they allow third parties to do.

In general, trademark law can be seen as more lenient when it comes to the commercial use than copyright law, which is somewhat understandable given the objectives of each type of protection. The goals of trademark law are to: 1) prevent consumer confusion in the marketplace between the source, sponsorship or affiliation of different goods, and 2) to protect the goodwill built with respect to trademarks by their owners.

Copyright has a slightly different focus of protecting the benefits to society derived from the labors of those who create creative works. The underscoring notion is that unimpeded copying of creative works will lessen the incentive for authors to create such works, which will yield an overall undesirable outcome. To that end, copyrights have a definite term (in theory) and then become part of the public domain, free for all to use. Trademarks, on the other hand, can be indefinite as long as the owner continues to use the mark to identify its goods or services.

Fair Use in copyright law generally favors noncommercial use whose benefits are mainly felt by society as a whole. It covers limited usage for things such as criticism, comment, new reporting, teaching, scholarship or research. The use will be treated more favorably if the use is “transformative” as opposed to mere copying, meaning that the user has added something of their own to the work. In determining whether a use constitutes a fair use under copyright law, a four-factor test is applied:

1) Whether the use is commercial in nature or is for nonprofit educational purposes;
2) The nature of the copyrighted work;
3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4) The effect of the use upon the potential market for or value of the copyrighted work.

As a rule of thumb, the more artistic the use, the more likely it could qualify as a fair use. On the other hand, the more commercial the use, the less likely it will be considered fair use. Simply put: Weird Al doing a parody of a Michael Jackson song – okay. But using a photo or music in an advertisement without the copyright holder’s permission – not okay.

While these broad generalizations might be pretty easy to determine what is OK and what is not, in reality these determinations are often highly complex and are always very fact determinative.

Because of the explicitly commercial nature of trademarks, the law is more allowing of use of someone else’s mark in a commercial environment. However, there are still restrictions and business owners still need to be extremely careful to not run afoul of the law.

Classical Fair Use is when a business uses a term not as a mark but in a descriptive sense. Therefore, the owners of the Aspen trademark for ski resorts cannot preclude someone from using the term Aspen to refer to the Colorado town or the tree.  Additionally, you can generally use a third party’s trademarks to refer to their own goods. This usually comes up when your product or service is complementary to another, or you are engaged in comparative advertising. Some jurisdictions call this use Nominative Fair Use.

In Colorado, the  U.S. 10th Circuit Court of Appeals has not officially adopted the defense of Nominative Fair Use, but various district court decisions have stated that such a use does not cause a likelihood of confusion. Therefore, in general companies can state that their accessory is designed to be used with an iPhone or an Xbox, or that more people prefer Coke over Pepsi (or vice versa). However, there are important restrictions placed on the use. For example, you only should use the trademark as much as necessary to identify the other person’s mark. Excessive use of their third party mark could be interpreted as an attempt to leverage the other party’s mark for your own benefit. As with copyrights, what constitutes proper use of a third party mark is a complex analysis and utilization of qualified intellectual property counsel is essential.

The last consideration when using third party copyrights or trademarks in your business is more of a practical consideration rather than a legal one. A lot of business owners (and business lawyers) do not understand the laws regarding use of others’ intellectual property. Often clients will get threats of lawsuits even though we believe that their use is permitted by the law. People often get emotionally attached to these sorts of things and do not appreciate someone else using them.

While your position may be vindicated, in the end these disputes, do take time and money to sort out. Therefore, if a company is highly risk adverse and would rather stay away from any potential problems (regardless whether they are in the right), then the best course of action would be not to engage in any use of another company or individual’s intellectual property.

A fool’s bargain: Part 2 – Think before you sue

In the first part of this article, I discussed what trademarks are, what they protect and what factors courts generally use to determine if a trademark has been infringed.  In this installment I will be discussing how courts have dealt with the rise of keyword advertising and the use of trademarks in keyword advertising.

In the early days of the keyword advertising cases, the courts struggled with some threshold concepts, such as whether bidding on someone else’s trademark was a use in commerce. Some courts said yes, and some said no. After many years, everyone seems to agree that even though the consumer never sees the keyword bidding process, that the act of bidding on another’s trademark as a keyword is a use in commerce.

The next question is whether the company’s actions cause a likelihood of confusion. The situation in which the ad text doesn’t mention the trademark is almost universally accepted as not causing a likelihood of confusion. But what about ads that do mention the trademark?  This situation is a little less cut-and-dry and this is where society’s use and understanding of technology starts to play a role.

Whenever courts are dealing with novel legal questions, they often try to look back to something that is known to compare the current situation to. The legal arguments start to become a battle of analogies. Sometimes they can get quite humorous. In the key word advertising context, several competing analogies have evolved. One is of a driver driving down a desolate highway (picture something on Route 66 in New Mexico) that sees billboard advertising that a store sells a certain product – for example, Coca-Cola.

The driver exits the highway and drives a few miles to the store. When they get to the store, the driver finds out that the store does not sell Coke, but instead sells their own house brand cola.  Tired, dejected and thirsty, the driver buys the house brand cola, turns around and drives back to the highway.

Early courts advocating this analogy often found trademark infringement for use of a trademark in the ad text. The rationale was that just as the driver was duped to exit the highway and drive to the store expecting to buy a Coke, so to are Internet users who type search queries into a search engine expecting to find a certain product and upon landing on a website; they too are so tired, dejected and thirsty that they buy the “house cola” instead of the cold refreshing Coke that they were originally seeking.

While the above analogy works well for misleading billboards and weary interstate travelers, it doesn’t necessarily represent the realities of the Internet world and online advertising, at least not in its current state. It is conceivable that in the early days of the Internet, people just shopped at the first site they came across. But as time has gone on, consumers searching habits have evolved and become more savvy.

As this has happened, the transaction costs of searching on-line have dropped and the billboard example has become less and less appropriate.  In the billboard example the consumer purchases the house brand cola because the transactions costs are too high – they would have to drive back to the highway, go down to another exit and try a different store.

It is much easier to buy the house brand cola, even though it was not what they were looking for. One of the great benefits of the Internet is that it vastly reduces transactions costs. Almost an infinite amount of information is available to users at the click of a button. If someone does a search click on a result and doesn’t get what they are looking for, the remedy is as simple as clicking the back button on their browser.

Consequently, the analogies used by courts have also changed. One of the more prominent ones is that of a consumer at a drug store where the brand name medication sits right next to the generic store brand with its packaging that says “same active ingredient as ____”.  In these cases, the courts rationalize that the use of the competing trademark benefits society in that it gives consumers more options to choose from. Since the consumer is not confused by the presence of the generic medication and understands that it is an alternative to the branded medication, the use of the trademark on the packaging is not considered a trademark infringement.

Our analogy in arguing the General Steel case is that search engine results and keyword advertising are more like a menu, where the possible choices are presented before a consumer and that the consumer can pick or choose the ones that fit their needs. If they click an ad that they think is for the product they want and it leads to a different product, they can easily hit the back button, chose another item off the menu and see if that takes them where they need to be. Courts have come around to this reality and the changing direction in trademark law reflects it.

So what is a company to do?  If you are a trademark owner, it’s best to get used to other companies using your trademark as a keyword. That’s just life in the digital age. As for mentioning the trademark in the ad text, we will have to wait and see. Things seem to indicate that those types of activities will be allowed as well. However, one thing can be guaranteed – trademark owners will not like that sort of activity and will more likely take issue with it and potentially even continue to sue on it. However, the odds are that those trademark holders will continue to lose.

For trademark holders, it is probably wiser to develop other strategies to deal with keyword advertising than to spend massive amounts on litigation and enter into a fool’s bargain. As with any sort of trademark matter, it is always important for business owners to seek out the advice of qualified trademark counsel before embarking on any keyword advertising or other marketing strategy. Failure to do so could end up costing a company in the future.

By | September 25th, 2013|BLOGGING, CYBER LAW, TRADEMARKS|0 Comments

A fool’s bargain: Part 1 – Should you sue over keyword advertising?

A Fools Bargain: Want to Sue Over Keyword Advertising?  Think Again.

 

One thing is guaranteed, the law will always lag technology.  That’s just the way it is.  However, eventually the law catches up and usually comes up with the right result.  Such is the case with paid search advertising such as Google Ad-words.  In case you have been living under a rock for the past decade, paid search advertising is where a company purchases web based advertising that is triggered by users typing certain keywords into a search engine.  When the user types in their query the search engine will display the paid ads in addition to the organic search results.  The ads generally contain a few lines of text and will have a link that directs you to the advertiser’s website.  Advertisers pay per click and the dollar amount paid as well as the order in which the ads are displayed are determined through a bidding system.  One of the most common practices and thus far controversial practices is to bid on competitor’s names as keywords.  Recent decisions have indicated that while this practice may be annoying to trademark holders, such activities are not a violation of trademark law.

 

Before going much further I must disclose that our firm is involved in one of the most recent and broadest reaching decisions in this area in the case of General Steel Domestic Sales, LLC v. Chumley, 2013 WL 1900562 (D.Colo. May 7, 2013).  Since the case is still ongoing with post-trial activities I will not comment specifically on it, but it is available for your reading pleasure at http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1382&context=historical.  However, the case does represent the continuing evolution in the law and acknowledges that as a society our use and understanding of technology is also an evolutionary process and as consumers in the marketplace our sophistication also increases as technology advances.

 

When dealing with keyword advertising, they basically come in two flavors: 1) cases in which an ad is trigger by keyword that utilizes a competitor’s trademark, but does not mention the trademark in the text and 2) one in which the person is so brazen (insert sarcasm) as to use the trademark as a keyword and mention the trademark in the ad text.  In the past there have been decisions regarding merely using a competitor’s trademark to trigger an ad, but very few cases dealt with using a competitor’s trademark in the ad itself.

 

In recent years there has been a lot of confusion amongst trademark owners about what these rights actually cover.  We have seen an increasing rise in what a commonly called trademark bully’s.  These are individuals or companies that take an overly broad and often time unjustifiable position concerning the breadth of their rights.  A lot of times trademark owners feel as if they “own” words, phrases or symbols and that no one can ever use the same or similar marks– ever.   Contrary to these positions, trademark law does not solely exist for the benefit of the trademark holder.  In fact, the thrust and most important aspect of trademark law (as recited by courts) is to present consumer confusion about the source or sponsorship of goods or services.  Trademarks are an exclusionary right, meaning that a trademark owner can prevent others from using a mark that causes confusion amongst consumers as to the source, sponsorship or endorsement of the goods or services in question.  If there is no confusion or a likelihood of confusion, then there is no trademark infringement.  Therefore as our society changes and evolves so does the concept of what trademark infringement is.

 

In the early days of the keyword advertising cases the courts struggled with some threshold concepts such as was bidding on someone else’s trademark a use in commerce.  Some courts said yes and some said no.  After many years everyone seems to agree that even though the consumer never sees the keyword bidding process, that the act of bidding on another’s trademark as a keyword is a use in commerce.  The next question is whether the company’s actions cause a likelihood of confusion.  The situation in which the ad text doesn’t mention the trademark is almost universally accepted as not causing a likelihood of confusion.  But what about ads that do mention the trademark?  This situation is a little less cut and dry and this is where society’s use and understanding of technology starts to play a role.  Whenever courts are dealing with novel legal questions, they often try to look back to something that is known to compare the current situation to.  The legal arguments start to become a battle of analogies.  Sometimes they can get quite humorous.  In the keyword advertising context several competing analogies have evolved.  One is of a driver driving down a desolate highway (picture something on Route 66 in New Mexico) that sees a billboard advertising that a store sells a certain product, let’s say for example Coca Cola.  The driver exits the highway and drives a few miles to the store.  When they get to the store the driver finds out that the store does not sell Coke, but instead sells their own house brand cola.  Tired, dejected and thirsty the driver buys the house brand cola, turns around and drives back to the highway.  Early courts advocating this analogy often found trademark infringement for use of a trademark in the add text.  The rationale was that just as the driver was duped to exit the highway and drive to the store expecting to buy a Coke, so to are internet users who type search quarries into a search engine expecting to find a certain product and upon landing on a website, they to are so tired, dejected and thirsty that they buy the “house cola” instead of the cold refreshing Coke that they were originally seeking.

 

While the above analogy works well for misleading billboards and weary interstate travelers, it doesn’t necessarily represent the realities of the internet world and online advertising, at least not in its current state.  It is conceivable that in the early days of the internet, people just shopped at the first site they came across.  But as time has gone on, consumers searching habits have evolved and become more savvy.  As this has happened the transaction costs of searching on-line have dropped and the Billboard example has become less and less appropriate.  In the billboard example the consumer purchases the house brand cola because the transactions costs are too high – they would have to drive back to the highway, go down to another exit and try a different store.  It is much easier to buy the house brand cola, even though it was not what they were looking for.  One of the great benefits of the internet is that it vastly reduces transactions costs.  Almost an infinite amount of information is available to users at the click of a button.  If someone does a search clicks on a result and doesn’t get what they are looking for, the remedy is as simple as clicking the back button on their browser.

 

Consequently, the analogies used by courts has also changed.  One of the more prominent ones is that of a consumer at a drug store where the brand name medication sits right next to the generic store brand with its packaging that says “same active ingredient as ____”.  In these case the courts rationalize that the use of the competing trademark benefits society in that it gives consumers more options to choose from.  Since the consumer is not confused by the presence of the generic medication and understands that it is an alternative to the branded medication, the use of the trademark on the packaging is not considered a trademark infringement.  My own analogy that we used in arguing the General Steel case is that search engine results and keyword advertising are more like a menu, where the possible choices are presented before a consumer and that the consumer can pick or choose the ones that fit their needs.  If they click an ad that they think is for the product they want and it leads to a different product they can easily hit the back button, chose another item off the menu and see if that takes them where they need to be.  Courts have come around to this reality and the changing direction in trademark law reflects it.

 

So what is a company to do?  Well if you are a trademark owner, you better get used to other companies using your trademark as a keyword.  That’s just life in the digital age.  I would suggest that you do the same.  As for mentioning the trademark in the ad text, well we will have to wait and see.  Things seem to indicate that those types of activities will be allowed as well.  However, one thing can be guaranteed – trademark owners will not like that sort of activity and will more likely take issue with it and potentially even continue to sue on it.  However, the odds are that those trademark holders will continue to loose.  For trademark holders it is probably wiser to develop other strategies to deal with keyword advertising than to spend massive amounts on litigation and enter into a fool bargain.  As with any sort of trademark matter, it is always important for business owners to seek out the advice of qualified trademark counsel before embarking on any keyword advertising or other marketing strategy.  Failure to do so could end up costing a company in the future.

By | September 11th, 2013|BLOGGING, CYBER LAW, GENERAL INTEREST|0 Comments

It’s not always best to follow the leader

Case in point: Twitter’s new IPA

A few months ago, I attended an intellectual property conference where the head IP counsel for Twitter discussed its new Innovator’s Patent Agreement, or IPA.

A few of the panel members hailing from academic institutions were drooling over the IPA as a revolutionary new path for companies to take with regard to their employees and intellectual property rights. As I was not familiar with Twitter’s recent announcement, my immediate gut reaction was that the only good IPA is one in a frosty mug that is full of golden, hoppy goodness. Upon delving into the Twitter IPA, I have come to the conclusion that my initial assessment was correct — well, at least for most of us out there.

Twitter claims that the development of the IPA came about as a result of the need to recruit the best and brightest software developers. Since these individuals grew up in a time that movies and music were expected to be freely available on the Internet, the new generation of developers do not like patents and want more control over how their software innovations are used.

Enter Twitter and the IPA. The IPA is basically a different breed of the Proprietary Information and Inventions Agreement. These types of agreements are the contracts used by companies to formalize the assignment of the invention from the employee to the company (if the employee is essentially paid to invent, they have a duty to assign it to the company under the law). Once the invention is assigned, the company can do with it what it wishes, including suing for infringement under any resulting patents.

The IPA changes things up a bit. While the invention is still assigned to the company, the company makes certain agreements on how the patent is used. Most notably, the IPA states that a company will not assert any of the claims of the patent unless it is for defensive purposes.

“Defensive” is generally defined as asserting it against another company or individual that 1) filed or threatened a patent infringement lawsuit against the company; 2) threatened or filed a patent lawsuit against any company in the last 10 years; 3) or to otherwise deter a patent litigation against the company. Otherwise, the company or any successor in interest to the patent must obtain the inventor’s consent before enforcing the patent.

While Twitter’s aims of reducing contentious patent litigation (which is a bit ironic because twitter does not have any issued patents and only has three pending applications) may be laudable, adoption of the IPA by young startups could prove to be disastrous. First of all, patents are just not good defensive weapons. Patents, by their nature, are exclusionary rights, meaning that you can only use a patent to exclude someone else from doing something.

Simply put, a patent is a deal between innovators and the government. In granting the patent, the government grants the patentee an exclusionary right to some product, process or other invention for a set term of 20 years. In exchange, the patentee is forced to basically disclose an instruction manual on how to create, manufacture or practice the invention, and at the end of the term the invention is dedicated to the public for anyone to use, manufacture or practice.

This exclusionary right is enforced through the filing of a lawsuit. Apart from the right to exclude competition, patents have no other intrinsic value. While you may put differing values on what that exclusionary right is worth, there may be a time in the future in which you wish to sell the company and/or some or all of its assets. Patents may be of great interest to the potential buyer.

By restricting your rights, you have essentially gutted the economic value of the patent and your fledgling company. Additionally, putting restrictions on how you may enforce your intellectual property will most likely negatively affect your ability to attract venture capital or other investors. Investors want to make sure that the company they invest in has the best chance to return their investment with a profit.

If a company puts restrictions on how it will enforce its hard earned intellectual property, investors may be wary that the company will not be able to adequately protect its market share. If a company is already generating enough revenue that it can self-finance its capital needs, this may not be a bad deal for you. However, if you are looking at using OPM (other people’s money) to help your business grow, such restrictions could have disastrous affects.

Lastly, the law itself makes patents a bad defensive weapon. Under the law, a party who knows of an infringement, but fails to enforce its rights may lose the ability to enforce its legal rights under the doctrine of latches.

Simply put, if I have known that your company has been violating our patent for 10 years, but I do not do anything about it until you file suit against me, I am most likely out of luck due to latches. Now that defensive weapon doesn’t look so menacing, and you may be without a lot of that leverage that you were counting on.

New concepts in business practices come and go. New and small ventures really need to take a look at whether the next up and coming thing will strategically work for their business, or if it could possibly do more harm than good.

Just because Twitter’s IPA may seem to work for them does not mean that it works for every company out there. Putting these sorts of restrictions on a company’s intellectual assets may cost some companies significant value down the road in terms of the purchase price in an acquisition or the price received for assets in a spin-off transaction.

It always pays to take a look at a proposed strategy and see if it fits into your business plan prior to taking any action.

By | July 30th, 2013|PATENTS|0 Comments

Can you keep a secret? Resist the urge to blab about that new gadget

Sometimes keeping quiet about a new product, service or venture can be difficult. While it may be difficult to fight the urge to tell everyone on the street all about your new innovative process, formulation or gadget, it is wise for a business to take a bit of time and see whether the new innovation is protectable under one of the theories of intellectual property law.

Some of the available protections such as trade secret require the business to take certain actions, or act in a certain way, and if not properly done, the protection under the law may be lost forever. In these cases we often discuss some of the more well-known intellectual property protections such as patents, copyrights and trademarks.

However, sometimes an item, process or other valuable information or asset is not patentable for one reason or another, or the inherent limitations of a patent (e.g., its limited term of protection) do not make it an ideal choice for a company. In these situations, protecting the innovation as a trade secret may be a possibility and could add great value to a company.

In Colorado the definition of a trade secret is pretty broad.  t covers “the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.”

Basically, think of the “secret formula” to Coke as an example.  There are a few things to note about this definition. The first thing is that it doesn’t have to be your product or a tangible item, it could be data, technical information, or the process you use to create your product or deliver your service.

Many times, companies will look at what they do and figure they don’t have anything protectable because the end product or service is not necessarily unique.  However, they never give thought to how they create the product or deliver the service. If their process is innovative and not known to the public, then it can qualify as a trade secret. However, it is important to identify potential trade secrets early on because their validity heavily depends on how the business treats the trade secrets.

To be a trade secret “the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.” While it may seem obvious in order for something to be a trade secret, it must be in fact secret. In practice this is actually more of a sticking point than one would imagine. The rule concerning secrecy includes people within the company itself.

For example, if the receptionist knows the detailed ins and outs of the process you use to create your whiz-bang product – it’s probably not a secret. Likewise, if your marketing department puts out a marketing pamphlet bragging about the specific algorithms that your software has that your competitor doesn’t, its probably not a secret.

Within the company trade secrets must be kept on a need to know basis. Those knowing of or possessing the trade secrets must also take reasonable precautions to keep the trade secret secret.  This includes password protecting computers that have the trade secret on them, implementing restricted access for any part of the building in which the trade secrets are being practiced, having restricted access for network resources utilizing the trade secrets.

Failure to observe such practices can result in the loss of a trade secret and loss of the ability to go after a competitor or other third party for misappropriation of that information latter on down the line. Therefore, it is important at the outset to identify potential trade secrets and take the appropriate steps to protect them. Additionally, once you have your systems to protect the trade secret, you need to stay on top of them because after all it only has protection from misappropriation if it is secret. If at any time the cat gets out of the bag – game over.

Just as any other type of intellectual property protection, trade secrets are another tool in a company’s toolbag and should be considered when rolling out a new product or service, or even to protect existing internal operations. These determinations need to be made early on to ensure that what you view to be your trade secrets are really trade secrets under the law.

By | May 27th, 2013|INTELLECTUAL PROPERTY, TRADE SECRET|0 Comments

Hey, that’s mine! The ins and outs of grey markets and the law

At some time or another, anyone who produces a product or commercializes a copyrightable work will inevitably run into the situation where you see your products being resold by someone that is not you or one of your direct distributors.

Oftentimes, this becomes an issue for a business because of the price at which the items are being sold (usually lower than the business would like) or possibly because of the bad reputation of the seller in question. Other times, it is a grey market situation where goods that were originally produced and sold in overseas markets make their way back to the United States.

The question my clients have is almost universally, “How do I stop this?” Generally speaking, the answer is that in the United States, it is either extremely difficult to stop it or you flat out cannot stop it at all, due to a theory of law called the Right of First Sale.

The Right of First Sale doctrine is recognized in both trademark and copyright law. Trademark law protects source identifiers of goods and services – basically brand names and logos. Copyright, on the other hand, protects creative works of authorship – books, movies, music, etc. While slightly different in the technical application, in copyright and trademark law the underlying theory is essentially that the owner of a branded item or creative work is entitled to control and receive compensation for the first sale of the product.

The first sale is just that, the first sale of the product – regardless if it is to a retail consumer or to a distributor/wholesaler. Therefore, authors are entitled to royalties only on the first sale of their book and not any subsequent resale of the book. On the basic level this makes sense and allows for a robust secondary market of used goods. Think of the pain it would be if you had to pay a royalty to J.K Rowling for selling a used copy of Harry Potter on Amazon, or if you sold your Specialized Shiv time trial bike on eBay.

However, the questions can get a bit more sticky when the seller isn’t unloading unwanted items, but is instead engaged in a commercial enterprise and the goods might be new instead of used. For example, what happens if due to market conditions a product is sold at a lower price in a foreign country than it is in the United States?

Depending on the price differential, there may be an arbitrage situation where a foreign purchaser can purchase the product in the foreign country and then turn around and sell it to American consumers for less than the domestic retail prices at a guaranteed profit. This very scenario came before the Supreme Court in the case of Kirstaeng v. John Wiley & Sons. In the case, a student named Kirstaeng from Thailand came to the United States to study at Cornell and U.S.C.

Since college is not cheap, the entrepreneurial student sought ways to defer his expenses. One thing he noticed was that textbooks were a lot cheaper in Thailand than they are in the United States, so Kirstaeng arranged to buy legal copies of popular textbooks in Thailand, import them here and resell them at a large profit – somewhere in the ballpark of $100,000.

The publisher, not liking this, sued and originally obtained a $600,000 judgment against Kirstaeng. The Supreme Court in a 6-3 decision overwhelmingly overturned the lower court decision. The Court also did something that it normally doesn’t do in copyright cases – it drew a clear line in the sand.

As long as the copyrighted works that were made overseas were done legitimately (not counterfeited), then the first sale doctrine applied and the copyright holder cannot ban their importation and sale in the United States. Similarly under trademark law, as long as a party is merely stocking and reselling the goods (no modification to the goods), then the first sale doctrine applies.

So what is a business owner to do? There are a few different things to try to minimize the impact. The first would be to take a look at your pricing structure. Are there any markets in which you might be at risk for an arbitrage situation? In theory, exchange rates should equal out prices, but sometimes distortions do occur.

Don’t just look at foreign markets, because these situations can happen in domestic markets as well. An example would be a pricing decision concerning a large clearance sale. Could a savvy party buy a large amount of clearance items and then resell them on eBay? Careful pricing and quantity limit strategies can help eliminate this risk.

Additionally, if you sell your products through authorized distributors that you have contractual agreements with, you can add language that prevents the distributor from selling the products back into the United States, or allows you to revoke their distributorship if they violate lot size restrictions or if they knowingly sell to customers that intend to export the products back into the United States. While these strategies are not foolproof, they are the best tools that companies have to combat these sorts of situations.

By | April 15th, 2013|BUSINESS LAW, COPYRIGHTS, TRADEMARKS|0 Comments

The $64,000 Innovation Question

What do Yahoo, telecommuting and intellectual property legal services have in common?

At first glance, the popular answer may be “Absolutely nothing.” But those three seemingly unrelated topics might actually have a profound effect on your business and the quality of your intellectual property legal representation.

Yahoo made some waves last month by issuing an edict that it was discontinuing its telecommuting program.  While many in the techno press panned the decision as backward thinking, Yahoo’s rationale is actually quite interesting.  Yahoo’s reasoning was not based on efficiency, productivity or employee morale, it was based on innovation.

Yes, innovation—that magical moment sparked by conversations and personal interaction at the vending machine, water cooler and even in the restroom.  While some studies have shown an increase in worker productivity through the use of telecommuting, studies by Google and Isaac Kohane of Harvard Medical School have shown that people who work in close proximity create a positive impact on a company’s business, including innovation.  Therefore, telecommuting may work for those who perform repetitive routine tasks as their productivity may increase, but it may not be so effective for employees whose jobs rely on collaboration with other individuals.

For example, telecommuting may work well for telemarketers, call centers, help desks, etc., but probably will not work well for people in product development or other strategic departments.  While individual employees may feel that their performance or efficiency increases through telecommuting, the performance of the company as a whole may actually decrease.

Effect of Face-to-Face Interaction on Innovation

So what does this have to do with the delivery of legal services, and in particular legal services pertaining to intellectual property?  Intellectual property is different from a lot of other areas of the law in that it is based mainly on federal statutes.  Most other areas of law are primarily based on state law.  State unauthorized practice of law rules generally limit the possible pool of attorneys that can represent a particular client.  If a lawsuit is filed in Colorado state court, for instance, it can only be tried by attorneys that are admitted to the Colorado Bar.

Because most intellectual property cases are based on federal laws, they are considered a nationwide practice.  Thus, an attorney in New York can represent a client in San Francisco for IP matters.  This fact has created many “firms” that advertise on a nationwide basis.  Oftentimes these firms offer cut rates and rely on a high-volume business model that offers only limited contact over email or the phone.

While we are big believers in technology and frequently employ it with our clients that live out of state or in remote parts of Colorado, nothing beats good old face-to-face interaction.  The spontaneous conversations that happen often lead to insights that help us represent our clients better.  Sometimes it’s the ability to manipulate and play with a prototype with the inventor present; other times it’s sitting down and listening to a few tracks of a musician’s CD, or even visiting a client’s business to understand their processes and how they do what they do.  Unfortunately, many times these intangibles cannot be communicated in a phone call, email or even over Skype.

Recently, I was watching a local program on PBS that featured representatives from local wine and spirits companies.  They were commenting on how consumers in Colorado really get into the “buy locally” concept.  A representative from Shanahan’s Whiskey recounts seeing consumers pulling out bottle after bottle in a liquor store looking for one that was bottled by a specific individual or bottled while listening to specific bands.

If people take such care in buying whiskey, why not take the same care in choosing a law firm to protect some of your companies most valuable assets?  The plain and simple truth is that while technology is great, it simply cannot replace actual human interactions.  Virtual law firms and out of state high volume legal service “mills” can offer a lower price point; however, they cannot offer the quality of representation that one gets when you meet face to face, and the client learns about the firm, and even more importantly, the firm learns the ins and outs of its client’s intellectual property.

While technology is a wonderful tool, there are some things it cannot replace:  The chance meeting at the water cooler that sparks a revolutionary idea, the impression left by someone’s office space, or the sweet sound of a note being played through an all tube guitar amp.  Some things just still need to be done the low tech way.

By | March 26th, 2013|COPYRIGHTS, GENERAL INTEREST, INVENTION PROMOTERS|0 Comments