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The sweet spot: When to file for your patent

Things have changed recently

By Kurt Leyendecker

Over the years, I have written a significant amount concerning patent strategy and patent procedure aimed at entrepreneurial companies and individuals, and most of the information was available on my firm’s website.  The firm recently unveiled a new modern and streamlined website.   Much of the old content was removed with the intention of updating it and making it available as PDF white papers on our new site.  What struck me most during the updating process is how dramatically my advice has changed in light of the changes to patent law, most of which went into effect a little over two years ago as part of the America Invents Act (AIA).  Some of the procedural considerations are worth noting here.

Prior to March of 2013, the person first to invent a new invention was first in line to receive patent protection, even if another person who invented a substantially similar invention filed for patent protection first. Accordingly, I advised many of my clients to keep copious notes and fully develop the invention before filing a patent application, reducing the chance that the client would have to file a second or third application at significant additional expense because of changes made during development. Under the current first to file rules, however, whomever files first on an invention is the inventor who will receive a patent even over another later-filing inventor who came up with the idea first.  Now, I recommend an inventor get an application on file as soon as reasonably possible, even if significant and potentially substantial changes may occur during subsequent development. The failure to file quickly could be the difference between receiving a patent or not.

I used to recommend against the use of provisional patent applications.  For those who are unaware, provisional patent applications are less formal and less expensive applications that have a limited pendencyof one year, are never examined by the patent office and consequently never issue as a patent. Essentially, a provisional patent application provides a filer up to one year to decide whether to file a more formal more expensive regular patent application.   Under the old rules, however, the need for a placeholder was less critical since the first inventor would be awarded the patent whether or not he/she was the first to file an application.  Being less formal, the provisional application, especially if prepared based on a still evolving product, runs the risk of not satisfying one or more statutory criteria.  Further, since provisional applications are not docketed for examination, the issuance of a patent is delayed by up to a year.  Add to all this the additional cost of filing both a provisional and a non-provisional a year later and the drawback significantly outweighed the benefits.

Things changed with the advent of the first-to-file paradigm.  While provisional applications still suffer from the risks mentioned above, to ensure that he/she is not beaten to the punch, an inventor is advised to file a provisional application as soon as possible after conception to secure his/her priority rights even if changes may occur to the invention in the coming year.  Changes, if they occur, can usually be incorporated into the regular patent application when it is filed. Unlike before, timing has become critical and takes precedence over other considerations.

Traditionally, patent lawyers have as a matter of course fought to obtain for their clients as broad of patent protection as is possible.  With broad protection, however, there is a risk that if litigated, a court will invalidate the patent as being obvious or anticipated by prior art that was not previously considered by a Patent Office patent examiner.  This risk was balanced by a presumption of the patent’s validity and the substantial cost of seeing litigation through to its conclusion on the hope of obtaining a favorable invalidity verdict instead of an unfavorable infringement verdict.  Cost and uncertainty pushed most cases to settle.

The AIA instituted a new review procedure that permits a party to challenge a patent’s validity on limited grounds and, most significantly, obtain a ruling within a little over of a year.  This process replaced re-examination which could be dragged out for years.  The difference in timing is significant.  Under the previous procedure, a patent holder suing an alleged infringer could hold out in re-examination until the patent case concluded and hopefully a judgment of infringement was entered; whereas, under the review procedure, a validity determination is made long before the court case concludes, giving the alleged infringer a bit of a timing advantage.

The point of the foregoing is simple: Patent claims are more likely to be adjudicated and broad claims are more likely to be found invalid than ever before.  Narrower, carefully tailored claims are more likely to survive a challenge.  Unlike in the past, I am more likely to advise a client to take allowed patent claims that are narrower than I might have in the past.  The consideration as to whether a claim is not only reasonably broad but also able to withstand challenge must now be more seriously considered.

For the entrepreneur and business owner, the upshot of all this is simple: When you have an idea or invention you believe has potential value, see a patent attorney as soon as possible to discuss what steps are necessary to maximize your potential protection and value. Waiting is more dangerous than ever.

By |2020-05-06T15:44:54-06:00October 18th, 2015|BLOGGING|Comments Off on The sweet spot: When to file for your patent

Pay attention to the dancing baby

What businesses need to know before sending takedown notices

By Peter Lemire

A while back, the 9th U.S. Circuit Court of Appeals issued a decision in what has come to be known as the “Dancing Baby Case”. Every business needs to know about it before sending Digital Millennium Copyright Act (DMCA) takedown notices to Web hosts and other companies that host third-party content such as Facebook, YouTube, Amazon and eBay.

Although the biggest users of the DMCA are media companies and content producers, pretty much any business could find itself dealing with DMCA issues. A frequent issue in our office is competitors’ unauthorized utilization of product photographs, product videos, or logos that are protected by copyright.

The DMCA has been a powerful tool for businesses to fight copyright infringement, but it is somewhat of a double-edged sword that can land companies in a host of trouble that they never expected.  While it is important to police one’s intellectual property, the dancing baby case is a good example of how knee-jerk reactions and overly aggressive enforcement can land a company in a whole host of legal trouble that it never anticipated.

The DMCA was passed in 1998 to implement two treaties of the World Intellectual Property Organization.  The two treaties dealt with digital rights management and providing a safe harbor for companies that host third-party content.  The latter created a procedure that is commonly referred to as “notice and takedown.”   The notice and takedown procedures were established to provide third-party hosts a shield from secondary copyright infringement liability.

If a host complies with certain procedures, promptly removing or denying access to infringing content upon receiving a takedown, it will be shielded from copyright infringement liability.  The notice and takedown procedures also provide a host with a liability shield from its own customers in the event that it removes or denies access to allegedly infringing content.  This can be very handy in the situation where you are dealing with an uncooperative or foreign infringer, as hosts are generally willing to comply with a conforming takedown notice.

Because this procedure works so well and is so effective, businesses and their attorneys will sometimes fire off notices without considering all the factors.  The DMCA requires that the notice be sent with a “good faith belief that the use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.”  Generally speaking, it’s the “the law” portion that trips people up.  Additionally, the DMCA has provisions that are aimed at deterring abuse of the system by authorizing damages to be awarded if a person “knowingly materially misrepresents … that the material or activity is infringing.”  When you add in the often-confusing doctrine of fair use, that’s when things start to get interesting and we end up talking about dancing babies.

The heart of the dancing baby case (formally named Lenz v. Universal Music Corp. et al.) revolves around a 29-second video of Stephanie Lenz’s 13-month-old son dancing to Prince’s song “Let’s Go Crazy” that was posted to YouTube in 2007.  The song was playing on a stereo in the background as Lenz’s son danced around the kitchen.

Universal Music, which was responsible for enforcing Prince’s rights at the time, had paid employees that searched YouTube on a daily basis.  They would look for videos that used Prince’s compositions in which the song was recognizable, was in a significant portion of the video or was the focus of the video.  If the video met those criteria, then a takedown notice would be sent.  The analysis did not consider fair use.

Universal Music sent a notice and takedown letter to YouTube and YouTube removed the video. Lenz then sued Universal seeking damages alleging that Universal had misrepresented the infringement in violation of the DMCA because the appearance of “Let’s Go Crazy” in the video was protected by fair use.

The issue on appeal was whether Universal had to consider fair use aspects when determining whether there was a good faith belief of infringement It now goes back to the trial court to see if Universal really had a good faith belief of infringement.  Since the music was in the background, was distorted, not high quality, and was only incidental to the main focus of the non-commercial video (the dancing toddler), things don’t look good for Universal.

The main lesson for businesses is that it is really important to fight the immediate urge to fire off a DMCA takedown letter every time a potential copyright violation is found on the Internet.  Doing so without a thoughtful consideration of the elements of copyright infringement and exceptions to copyright infringement such as fair use may not only result in the content to continue to be accessible, but it could very well subject your business to a very large judgment against it for abuse of the DMCA.

By |2020-05-06T15:44:54-06:00September 18th, 2015|BLOGGING|Comments Off on Pay attention to the dancing baby

The rise and fall of the labradoodle

June 22, 2015

How a trademark would have made all the difference

Peter Lemire

Leyendecker & Lemire speaks to trademark issues often – with clients and within this column. In the world of intellectual property, this might seem strange. After all, patents are usually the ones in the spotlight, soaking up all of the adoration and discussion in intellectual circles. Even some intellectual property attorneys will give short shrift to trademarks and almost treat them as an afterthought – an add-on to the patent, if you will.

However, there’s good reason we spend so much time talking about trademarks: They are universal. Most businesses have them, and oftentimes they account for the vast majority of business value represented by a company’s intangible assets. Trademarks are eternal, whereas patents and copyrights have a fixed term that will eventually expire. At the end of the day, once your technology is not necessarily the newest thing, your trademark is what will differentiate your company. Additionally, trademarks can be used to great effect and commercial gain in situations where other forms of intellectual property are not available.

I recently came across an article in Psychology Today that shows not only the power of branding, but also the risks that are associated with not adequately protecting and policing your mark. The seemingly unlikely focus of this analysis is, well, a dog; specifically, a pseudo-breed that everyone knows – the labradoodle. The focus of the article is actually on the regret of Wally Conron, the creator of the labradoodle, in introducing these dogs to the world.

Labradoodles, despite what a lot of people think, are not actually a breed of dog. They are a crossbreed, or what is more commonly referred to as a mutt. So if the labradoodle is really just a mutt, then how has it earned such high stature in society, where people are willing to shell out thousands of dollars for one? One word: branding.

As the article recounts, the labradoodle came about when Conron was the puppy-breeding manager for the Royal Guide Dog Association (RGDA) of Australia. A request came in from a woman seeking a seeing-eye dog that did not shed, since her husband was allergic to dog hair. Conron originally thought it would be easy – just train a standard poodle to be a seeing-eye dog as standard poodles were traditional working dogs and they don’t shed much.

The problem was that apparently standard poodles don’t make good seeing-eye dogs. So over the span of three years, Conron tried to train 33 dogs and they all failed. Eventually, he had an idea of cross-breeding a Labrador retriever (which make very good guide dogs) with the standard poodle (which don’t shed). The result was three puppies. However, Conron had a new challenge: He needed foster homes for the pups to live in until they were ready to start training. To his surprise, he couldn’t place the dogs because everybody wanted a purebred dog.

So Conron had the association’s PR team announce that they invented a new dog – the labradoodle. The response to the rebranding was astounding; not only did they immediately place the pups, but the organization was inundated with interest from people all over the world.

While the concept of crossing a Labrador with a poodle is not protectable under patent law or any other theory in intellectual property, the term labradoodle when it was first introduced was certainly trademarkable. Trademarking the term, combined with proper enforcement, could have prevented a lot of the subsequent ills that Conron regrets such as unethical breeding practices and false claims that “doodles” are hypo-allergenic.

While anyone could have crossed Labradors with poodles, they would not have been able to market them under the labradoodle name. Enforcing the trademark would have allowed RGDA to determine which breeders could use the trademark and establish guidelines, quality rules and dog placement guidelines for breeders wishing to sell their crossbreeds as labradoodles.

The lack of such structure and enforcement of the brand has led to serious issues regarding the health of many dogs and potential safety concerns regarding the temperament of dogs bred by unscrupulous breeders.

Additionally, the requirement that breeders be licensed to sell their dogs as labradoodles or face a lawsuit would have dissuaded a lot of the unscrupulous breeders from getting into the market for this lucrative pseudo-breed. Instead, anybody and everybody started breeding labradoodles, often because they could charge exorbitant prices. The use of the term labradoodle is now so widespread that it is a generic term and not entitled to legal protection.

The labradoodle is a wonderful example of the power of trademarks to create amazing commercial value for a product for which exclusivity is not protectable under other areas of law. However, it also shows the downside when a business fails to protect and enforce those trademarks.

By |2020-05-06T15:44:54-06:00June 23rd, 2015|BLOGGING|Comments Off on The rise and fall of the labradoodle

It’s all in a name (or not)

Where would Amazon be if it had been called “An Online Bookstore”?

By Kurt Leyendecker

Driving into the office recently, I heard a commercial for a local small business broadcast over the radio.  A well-known local radio personality and pitchman explained the business was changing its name to one that better reflected the fact that the business offered its services for a flat fee.  I had heard this commercial probably a couple of dozen times over the previous months.  Clearly, this business was spending a lot of money on its radio campaign.

Presumably, the business sought to associate itself with the descriptive content in its new name so that potential clients and customers looking for this particular attribute would more easily find it.  I yelled at the radio, “No, bad idea!” No one heard me. Descriptive names and trademarks might boost exposure and even revenues in the short term, but in the long term, the business risks anonymity as others adopt similar names or, more likely, use a similar phrase to describe their similar services.

An example is in order, and I will use my firm as the example, rather than identify the shortsighted business.  “Leyendecker & Lemire” has been my Firm’s name since inception.  Our name, which also serves as our trademark, does not reveal anything about the services we provide.  Let’s say I convince my business partner, Pete, that we should change the name to “Colorado Flat Fee Patent and Trademark Legal Services.” To promote our new name and the fact that we provide flat fee legal services, we embark on an extensive and expensive marketing campaign.

Initially, the increased revenues in the first few months after the change almost equal the additional expense of the name change marketing campaign.  We project that these higher revenues will continue even as we wind down the campaign. Pete and I discuss hiring new associates to handle the increased workload. The future looks so bright, I buy some shades.

Seeing our success with the flat-fee pricing model, a couple of our competitors change their websites to proclaim that they offer flat fee intellectual property legal services as well. They also starting running Google ads with headlines like “Patent drafting for a flat fee” or “Flat Fee Trademark Application Filing.”  Potential clients who heard our radio ad and type our new name into Google to find our contact information are presented with several law firms all professing to offer similar flat fee services. Some of our competitors are even using headlines very similar to our name and confuse our potential clients.  We begin to lose business to our competitors.  The marketing campaign has been wildly successful, just not in driving clients to us but rather in promoting the availability of flat free intellectual property legal services generally.

We consider suing our competitors for trademark infringement. There is no question that their headlines and services descriptions are causing confusion with our name to our detriment.  However, as astute trademark attorneys, we realize we are likely to lose any lawsuit we file.  We know descriptive trademarks do not possess broad rights and we wonder if a court would recognize our name as a valid trademark.  We also know we cannot use trademark law to prevent competitors from using certain generic and necessary terms and phrases to advertise their services, such as “flat fee.”

In the end, we are forced to shutter the firm as the liabilities associated with the advertising contracts far exceeded our revenues. It isn’t all bad, however, as I finally get the opportunity to pursue my long held dream of chucking it all and becoming a dive instructor (albeit an aging one) on Key West.

What should we and the local small business have done? Companies should pick names that are more fanciful or arbitrary instead of descriptive when compared with the services offered by the business. The purpose of a marketing campaign is to associate the type of services you provide with the unique name so that when a potential customer or client seeks to find a flat fee provider, your trademark name pops into their heads, so that when the potential client performs a Google search to get your contact information, she types your name into the box and not a descriptor of what you do.  If a competitor tries to trade off of your unique name, you send it a cease and desist letter, and if that does not work, you sue it for trademark infringement and damages.

Still not sure?  Ponder these parting questions: Where would Amazon be today if it was named “An Online Bookstore” at its beginning?  Would Google have become the wildly successful company it is today if it began life as “A Search Engine”?

By |2020-05-06T15:44:54-06:00June 2nd, 2015|BLOGGING|Comments Off on It’s all in a name (or not)

Trademarks + marketing = power

Take Ford, for example

By Kurt Leyendecker

Anyone who has watched even a small amount of television over the past year or so is probably familiar with the Ford commercials featuring Mike Rowe of Dirty Jobs fame pitching cars with engines that utilize EcoBoost® technology.

EcoBoost engines are those that offer power comparable with that of their larger counterparts but do so at about a 20 percent improvement in fuel efficiency. The two most prominent examples of EcoBoost technology are the 4-cylinder engine in the new Ford Mustang that produces over 300 hp and the V6 engine in the F-150 that produces 365 hp as well as oodles of torque for hauling and towing. Both engines offer significant improvements in rated MPG over larger available engines not incorporating the technology.

The EcoBoost engines have been tremendously successful for Ford and are now being rolled out in more sizes and being made available for more cars in the manufacturer’s lineup. Ford’s skillful marketing and education campaign has been able to convince even skeptical truck buyers that the old adage “there is no replacement for displacement” may no longer be true. Ford has even been able to charge more for smaller displacement EcoBoost engines than its larger counterparts, thus turning a legacy of more than 50 years of automotive sales tradition on its head.

The truth is, however, that EcoBoost technology isn’t revolutionary or even particularly unique. Simply, the term describes engines that are both turbocharged and direct injected. Turbocharging has been available on cars sold in the United States since at least the early sixties, back when a turbocharger was an option on the Chevrolet Corvair, the car with suspect handling that helped to launch Ralph Nadar’s career.

Direct injection is a newer technology but numerous car companies offer engines that incorporate it. “EcoBoost” is, therefore, really nothing more than trademarked name for a couple of technologies that are already fairly well known.

While trademarks are most commonly used to identify brands and product names, they can also be used to identify features that are incorporated or utilized in a particular product or in relation to a particular service. But why obfuscate the actual underlying technology in some made-up name?

Ford could have easily spent millions advertising its line of direct injected turbocharged engines, rather than using the same amount to promote a line of engines incorporating “new” EcoBoost technology, with roughly the same level of success.

Not everyone (and probably very few automotive consumers) knows or even cares what the underlying technologies incorporated in an EcoBoost engine are. To many of us, EcoBoost technology is engineering magic that somehow, in some way completely unbeknownst to us, increases the fuel efficiency of our cars.

And magic, with all of its glamour and seduction, sells far better than a straightforward list of already well-known techniques that are now being incorporated in an engine – even if the truth behind the words is exactly the same. This is not lost on me.

Even though I know exactly what makes an engine an EcoBoost engine, I still have an underlying, subconscious belief that an engine boasting the “EcoBoost” designation is somehow something special and unique. This is testament that a good trademark backed by a great advertising and PR campaign is very powerful stuff, indeed.

What’s more, to Ford’s credit, the brand probably understood from the start that marketing the actual technologies behind EcoBoost engines rather than the shiny, new, branded product would inadvertently also market similar engines produced by other manufacturers – and they didn’t want that.

They didn’t want to simply educate consumers about existing technologies but also create and perpetuate the idea that their proprietary blend of these technologies was somehow better than the rest. If they had done it another way, other manufacturers who produce turbocharged and/or direct injected engines could have benefited from Ford’s hard-earned (and handsomely paid for) marketing efforts. By creating and marketing a specific name, however, the company was able to simultaneously educate the consuming public and elevate the Ford name.

Because Ford chose to market a combination of technologies under the EcoBoost banner, the best a competitor (such as, say, Chevrolet) could do would be to run an advertisement or air a commercial describing how its engines incorporate the same technologies as Ford’s EcoBoost – thus repeating the Ford name, and extending the reach of the company’s original marketing campaign even further.

Of course, no self-respecting marketing department (Chevrolet’s or otherwise) would think to run such an ad or commercial, at the risk of helping their competitor out – but also at the risk of (depending upon the actual use of Ford’s trademark) finding themselves on the wrong side of a trademark infringement suit.

It’s an ingenious strategy, and one that would probably be effective even without the help of a celebrity endorsement. Well played, Ford.

By |2020-05-06T15:44:54-06:00February 20th, 2015|BLOGGING, TRADEMARKS|Comments Off on Trademarks + marketing = power

Kick-starting the new year

Crowdfunding might be just what your business needs

By Peter Lemire

When meeting with clients, we often explain to them that securing intellectual property rights of inventions or products is an important step of the process, but it is just the start and sometimes is the easiest part of bringing a product to market or starting a new business venture. Millions of great ideas are conceived every day; however, just because something is a great idea does not guarantee success.

Business owners face major obstacles, including the practical realities of bringing the product to market and generating sufficient consumer awareness to sustain the business. Previously, this could be a monumental task that dooms many business ventures. However, the advent of crowdfunding sources may make the process of exposing a product to the market and making that initial purchase of inventory easier.

Crowdfunding websites such as www.kickstarter.com have existed for a few years, but I never seriously considered participating in a Kickstarter project. In the early days many of the projects revolved around funding the arts – projects included independent films, musicians seeking to fund albums, and projects to launch or revive TV shows. In exchange, benefactors generally would receive tickets to the premier, copies of the film or CD or other associated swag.

At the time I saw Kickstarter as an interesting and effective way for the artist community to fund projects. As time has gone on, Kickstarter has shown to be wildly successful for these sorts of projects. Most notably for Colorado is the successful funding of the documentary Touch The Wall, which documents Missy Franklin and Kara Lynn Joyce in the years leading up to and during the 2012 London games. When looking at the number of projects successfully funded through Kickstarter in 2014, these sorts of projects still dominate.

It wasn’t until last fall that I was able to see the potential benefit of a website like Kickstarter for entrepreneurs and small businesses. When browsing Facebook, I saw an ad for a pole to be used with a GoPro that contained a battery inside the handle that could power a camera for eight-plus hours.

As an avid skier and GoPro enthusiast, the ability to have enough battery power to last a whole day of skiing was interesting. I clicked the link and, to my surprise, was taken to a Kickstarter page. I watched the video and checked out the company’s website. What struck me was that this was not a call to fund a concept or some “pie in the sky” idea. It was an actual product that the company had spent time developing – they had already acquired production-ready molding, tooling and packaging. They just lacked the operating capital to purchase the first large order of product.

I felt I would actually get the product, so backed the product. The pole arrived, it works great, and the overall experience was great. I even bought a few PolarPro filters.
It then occurred to me that Kickstarter could be a way for clients to obtain the capital needed for a product launch, as well as gain exposure and marketing for their product.

A look at Kickstarter’s 2014 data indicates that artistic endeavors dominate the number of 2014 funded projects, but technology and designs dominate the amount of money raised. Funding, however, is not automatic. Here are tips to enhance crowdfunding success:

1) Project professionalism. Kickstarter’s terms and conditions state that accountability lies solely with the creator of the project. Backers are encouraged to do their own research. The more established and reliable of a company you are, the better chance to get funded.
2) Crowdfunding can catapult you over the last hill. Funders want product, not concept. Products put through the R&D process and tooling are ready to manufacture. Funders are not eager to fund design and development. With Touch the Wall, all of the footage had already been shot. The money raised by the Kickstarter campaign went to editing, post production, distribution, etc.
3) Be able to show a production-ready prototype. This ties in to No. 2, but consumers want to see the product and to see people using it. They want to see that it is real and that it works. SolidWorks drawings and computer animated images do not instill confidence that the project is at a point that invites participation.
4) Lower price points make it easier for backers to take that leap of faith. More people will take a calculated risk to back campaigns at amounts of $100 or less versus something that costs several hundred dollars or more. I was willing to risk $100 on the power pole and if nothing ever materialized, I may have been annoyed but it wouldn’t have been catastrophic. If it had cost much more than that, I don’t know that I would have participated. The takeaway here is that your ultra-cool GPS-enabled widget may be a really neat product, but you may not find many backers if your starting price is $1,500.00.
5) A history is a plus. If you have a worth highlighting. And say upfront why you need the money. If it is because your first production run will cost $50,000 and you simply don’t have that sort of cash lying around, say so.

If you are a business owner and you haven’t thought about using crowdfunding as an arrow in your to get the capital and marketing exposure your company needs when launching a new product.

Who knows – it might just be the kick start your business needs in 2015.

By |2020-05-06T15:44:54-06:00January 16th, 2015|BLOGGING, INTELLECTUAL PROPERTY|Comments Off on Kick-starting the new year

Trademarks on wheels

Caveat emptor

By Kurt Leyendecker

For as long as I can remember, I have loved bicycles. In 1981, two high school buddies and I biked around Lake Ontario. The next year, two of us cycled across New England. On both these trips I rode a Motobecane, which was the premier French bicycle brand back in late 70’s and early 80’s.

My obsession with bicycles and a desire to make them stronger and lighter inspired me to get a degree in materials engineering, which I applied to building satellite components as an engineer with a major aerospace company. In the early 90’s, before becoming a lawyer, I started a company that made mountain bike components of my design. Sadly, I don’t ride as much anymore, preferring now to simply strap on a pair of running shoes. Nevertheless, I still enjoy bicycles and maintain a small stable in my garage.

A little while back, I got the desire to obtain a track bike – or “fixie,” as they are commonly known. They have been all the rage the past five years or so, as some people have eschewed multi-speed bicycles for the inherent simplicity of the fixie.

I hopped online to investigate and find a suitable fixie, and ended up at a website that sold several brands I was very familiar with from back in my high school days – including my old favorite, Motobecane. I also noticed several other brands from my youth: Dawes, a once well-known English manufacturer of touring bicycles; Mercier, another high-end French bicycle manufacturer from the 70’s; and Windsor, an early 80’s brand that produced high-quality but low-cost bicycles in Mexico. Interestingly, despite knowing that all these brands had either gone bankrupt or stopped importing to the United States many years ago, I found myself still favorably disposed to these new versions.

I did some research. The current trademarks for all these brands are owned by the same Florida company that appears to import bikes from China, and sell them for relatively low prices directly over the Internet. The current brands have absolutely no connection to the old brands. Rather, when the original trademark owners failed and the marks went abandoned, they were re-registered by the current owner, who is now benefiting from the warm feelings that people like me still have towards the old brands. In essence, the new owner is benefiting from the goodwill created by the long failed company, finding it easier to sell a budget bike as a Motobecane instead of under a new name that has no name recognition.

The whole purpose of a trademark is to designate quality and the source of a good or service. You know when you by a Coke that it is going to taste substantially the same as any other Coke you have recently consumed, and that it was produced by the Coca-Cola Company. Trademark law prevents competitors from using the mark of another or using a mark that is confusingly similar to another’s mark. For example, Coca-Cola could stop a company from selling cola under the name Koke, as the mark might confuse some consumers into thinking the Koke cola is made by Coca-Cola or that the product possesses the same taste and quality that has been established over the years by Coca-Cola. In essence, the purpose of trademarks is to protect consumers so that they know what they are buying.

However, when a company fails and its marks go abandoned, anyone can pick them up and register them as their own – and then sell products under the old venerable brand. Even though I know the new Motobecane has no relationship to the old company, I still am inclined to trust the brand more than a no name brand by the same manufacturer. Other consumers not in the know may be even more inclined. Accordingly, the new owner may be able to sell a Motobecane branded bike for a little bit more than it could if it was identified by an unknown brand. The consumer is fooled into thinking he or she is buying a bike from a French company, not an importer based in Florida.

Perhaps the best example of this is another two-wheeled cycle brand, Indian Motorcycle. The trademark is currently owned by Polaris Industries, a snowmobile manufacturer. The company in its advertising invokes the Indian tradition of 60-70 years ago, when Harley-Davison and Indian competed for dominance in the world of American-made motorcycles. U.S.-based Indian failed in the early 50’s but another company acquired the trademark rights and sold slightly modified English motorcycles under the Indian brand until 1960, when the mark was sold to another company that soon went out of business.

In 1962, Floyd Clymer Imports started using the Indian name. Clymer had no relationship with the previous owners. The lineage of the mark back to 1898 was broken. Over the years the mark has traded hands many times until coming to rest with its current owner. Polaris Indian Motorcycles owe their lineage to a 50cc Italian minibike sold by Clymer, not the post-WWII chiefs of legend and lore that they would have us believe.

So, when you see an old venerable brands suddenly reappear: caveat emptor.

By |2020-05-06T15:44:54-06:00December 10th, 2014|BLOGGING, TRADEMARKS|Comments Off on Trademarks on wheels

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.

The K-cup story

Many years ago, John Sylvan had an idea: provide a hermetically-sealed, compact cartridge containing a filter and enough ground coffee to brew a single serving in a specially designed brewer. After the freshly brewed coffee was delivered, the remaining carcass would simply be discarded without fuss or muss. Sylvan’s brilliant idea came to him in the mid-80s. He did not begin working on the idea in earnest until the 90s. John and the company he formed had the forethought to apply for patents on his innovation.

Keurig, named after the Danish word for excellence, toiled through the 90s funded almost exclusively by investors perfecting the cartridge, which came to be known as the K-cup, and its associated brewer. John and his fellow founders were able to convince the investors that the benefits of the K-cup system far outweighed the simple fact that a cup brewed with it cost five-to-10 times as much as a traditionally brewed cup. Truth be told, the otherwise visionary investors really only saw a play for the corporate/office market where convenience outweighed cost: a niche market in the multibillion dollar coffee industry but one with potential sales at least in the tens of millions annually.

Around 1998, when Keurig finally started selling brewers and K-cups in earnest, it registered trademarks for the brand names. When the system took off, the competition was left scratching their heads. A new product segment had been created, one with terrific margins and one in which purchasers of Keurig coffee makers were forced to buy consumables from Keurig itself. The strong patents coupled with Keurig’s aggressive enforcement stance contrasted with the time, cost and uncertainty in developing a suitable non-infringing alternative, left potential competitors with no other alternative than to figuratively beg Keurig for a license to make their own versions of the K-cup.

Keurig and its successor in interest Green Mountain Roasters, who bought the company out in 2002, were under no compulsion to grant patent licenses, but wisely realized it was better to derive revenue from its competitors than to back them into a corner and force them to try and develop a K-cup alternative. If successful, the competitors would have jeopardized the company’s future. Keep your friends close and your enemies closer: The maxim rings true in business as well.

The Keurig system found a place not only in the office and commercial markets but in homes as well. The K-cup system has proven to be the biggest thing to hit the industry since Mr. Coffee killed percolators in the 70s.

One might figure Sylvan became a wealthy man. Sadly, inventors and innovators often do not make great businessmen. He had trouble getting along with the investors and was forced out for a mere $50,000 shortly before the company’s first production commercial brewer was released. In hindsight, perhaps he should have demanded a percentage. Suffice it to say, the sharks freely roaming the ocean of commerce aren’t as tame as those kept in primetime tanks.

As the product grew, Keurig continued to innovate and protect the improvements to the brewers and the K-cups. Even though the seminal patents were strong, they realized it would expire someday. Hopefully, however, improvements to the K-cup would mean competitors’ post patent cartridges would remain a step behind the K-cup in terms of cost, functionality and quality. To date Keurig has been issued 44 patents in the United States and has more pending all related to their K-cup cartridges and the associated brewers.

Patents weren’t the only intellectual property trick up Keurig’s sleeve: they also had trademarks, and trademarks don’t have expiration dates as long as you keep using them. Currently Keurig has 15 registered United States trademarks and about 35 more pending.

When the company’s initial patents expired in 2012, many articles predicted Keurig’s decline. Keurig’s competitors still face major obstacles. Any systems and cartridges they may develop might not infringe the expired patents but they have to be very careful not to infringe the remaining 40-plus patents. While the remaining patents are much more narrow, they do lay a minefield that competitors must navigate in developing their non-infringing alternatives, greatly increasing the cost of development. Stepping on a mine can mean an expensive lawsuit.

Even if successful in developing a suitable K-cup alternative, competitors don’t have a word or phrase to describe their coffee cartridges. If a competitor strays and improperly insinuates some connection with K-cups or Keurig, the company, which is now the 500-pound gorilla in the coffee industry, releases its pack of lawyers to shut things down.
If a competitor stays clear of the Keurig marks, it faces the monumental and uncertain task of educating the public about a new single serving cartridge without reference to the original – all at great expense and huge risk of failure. Ultimately, most of the industry players have or will decide to go the certain and predicable route of licensing Keurig’s technology and trademarks adding even more money to its $4 billion-a-year revenues.

Would there be a Keurig or even a single-serving coffee cartridge today if they had not pursued intellectual property protection? Its seminal patents helped garner investors in the 1990’s permitting the system’s development. The patents kept competitors at bay during its growth years of the 2000s.

Today, as the industry leader, its trademarks and patent portfolio continue to thwart competitors and allow it to maintain its position as the market leader. Sometimes my start-up clients ask me whether it is worthwhile to pursue patent protection on their idea. All I need to do is look over my shoulder and point to the coffee machine on the credenza and say, “Yes, it is.”

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 |2020-05-06T15:44:54-06:00September 25th, 2013|BLOGGING, CYBER LAW, TRADEMARKS|0 Comments