Trademark Due Diligence

INTELLECTUAL PROPERTY AND TECHNOLOGY DUE DILIGENCE

©2018 by the American Bar Association. Reprinted with permission. All rights reserved. This information any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

IPTechDueDiligence_HALFTP.indd 1 5/4/18 10:53 AM 9781641051248_FM.indd 1 16/05/18 2:59 pm 9781641051248_FM.indd 2 16/05/18 2:59 pm Chapter 4 Trademark Due Diligence

By Edward Klaris*

I. Introduction

Comprehensive due diligence requires a determination of the target’s trademarks. Trademarks have a direct bearing on a target’s reputation and goodwill, making them one of the target’s most valuable assets. By conducting thorough trademark due diligence, you will be in a position to maximize the ever-increasing value of the target’s intellectual property (IP). The goal of this chapter is to identify the things counsel should ask for and do in the process of undertaking IP due diligence for trademarks. Trademark law is a highly specialized area. Section II therefore begins by explaining a basic, but key, concept: ownership. It explains how to determine ownership of a trademark and the two ways in which such ownership can be transferred (assignment and licenses). It also supplies a glossary of provisions to consider when drafting new licenses and to pay attention to in existing ones.

* I would like to thank Cindy Hong, Luke Budiardjo, and Emily Borich for their remarkable, diligent, and intelligent contributions to the copyright, trademark, and technology chapters of this book. In particular, Cindy Hong led the writing and re- searching team, staying on schedule, and drafting and redrafting where appropriate, all while holding down a rigorous federal clerkship. I am forever grateful to Cindy, Luke, and Emily for their contributions.

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Once ownership of a trademark is established, the second inquiry is whether the trademark is valid; this is the focus of Section III. Although trademark protection can be established in the United States through the legitimate use of a mark, federal registration is beneficial because it establishes a presumption of trademark validity. This section explains the registration process, as well as the term of such registration. It goes on to set out in detail what kinds of marks are entitled to protection and those that are designated unprotectable and proscribed by the Lan- ham Act.1 Once a mark is deemed protectable and is registered, it must be maintained to avoid losing its protection. Section III thus concludes by explaining the concepts of abandonment and genericization. Trademark holders must closely monitor the exploitation of their trademarks to make sure others are not infringing on the trademark and, conversely, that the trademark does not infringe on others’ rights. Section IV explains how getting a freedom-to-operate (FTO) opinion and performing a rights clearance search are the first steps to help you monitor the target’s trademarks effectively. Section V further details monitoring methods, both for trademarks and the licenses relating to those trademarks. Section VI is focused on marketing. The business the target is currently or might be involved in is highly relevant to trademark registration. When registering a trademark, you should think not only about the services the target currently provides but also about future uses and the corresponding trademarks that may be needed in the course of exploiting such uses. Though not necessarily thought of intuitively as trademarks, Internet domain names do overlap with trademarks and are registered in a similar way. Section VII explains the basic terminology in this area and discusses registration of domain names, due diligence on domain names, and the interaction between trademarks and domain names.

1. 15 U.S.C. § 1051 et seq. (15 U.S.C. ch. 22).

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Section VIII sets out the special considerations regarding trademark infringement procedure, which will come in handy if, during the course of conducting due diligence, you discover pending litigation involving the target’s trademarks. It explains how to bring an action for trademark infringement as well as an action for trademark dilution and the remedies available in the event of a successful claim. Finally, Section IX attempts to unpack the complicated international framework for the registration and protection of trademark assets, which will be useful for anyone performing due diligence for a global company. Figure 4.1 shows a template that can be used as a general guide for trademark license review.

Parties Term & Renewal [Effective date, end date, renewal terms, and deadlines] Exclusivity [Exclusive][Nonexclusive] Territory Products [Products covered by agreement] Sublicensing [Ability to sublicense: Does licensor have to approve sublicense? Does owner have right to inspect sublicensee’s use of mark?] Product Design [Procedure for designing and approving new designs] Packaging/Labeling [Procedure, cost responsibilities] Manufacturing [Licensee manufacturing, ability to subcontract to manufacturer] Royalty [Payment structure] Advertising/Promotion [Process, responsibilities] Quality Control [Quality control process] Ownership [Ownership of current and future trademarks and copyrights in packaging, advertising, promotional materials] Infringement [Procedure and responsibilities for infringement by third parties and counterfeit products] Termination

Figure 4.1: Trademark License Review Template

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II. Ownership of Trademark

A. Establishing Ownership In general, ownership of a trademark belongs to the first individual or entity to use the mark in commerce. In rare circumstances, multiple, unrelated entities may simultaneously own a trademark if, prior to registration, the marks were developed under state law in different parts of the country and where they were not in direct competition. The Lanham Act formalized simultaneous ownership by creating a mechanism for registering co-ownership with use by different entities, with each restricted to its own territory. Courts recognize agreements by multiple entities that allow con- current use of marks for closely related products.

B. Transfer of Ownership Ownership of a trademark may be transferred in one of two ways: (1) by assignment, in which the entire bundle of rights is given over to the assignee; and (2) by license, in which any portion of the rights associated with the trademark may be licensed to the licensee.

1. Assignments As an initial matter, there is no legal requirement that trademark assignment of common law rights must be in writing to be effective.2 However, the assignment of a registered mark must be executed in writing.3 Typically, the sale of all the assets of a business also conveys the trademarks owned by the business.4

2. Speed Prods. Co. v. Tinnerman Prods., 179 F.2d 778 (2d Cir. 1949) (holding that “an assignment in writing under 15 U.S.C. § 90 was not necessary to pass common-law rights to the trademarks”) (citing Ph. Schneider Brewing Co. v. Century Distilling Co., 107 F.2d 699 (10th Cir. 1939)). 3. 15 U.S.C. § 1060(a)(3) (“Assignments shall be instruments in writing duly executed. Acknowledgment shall be prima facie evidence of the execution of an assignment”). 4. United States Ozone Co. v. United States Ozone Co., 62 F.2d 881 (7th Cir. 1932) (“In the absence of evidence to the contrary, [trademark rights] will be assumed to have passed, without formal assignment, with the business when the business with which the trademark has been identified is sold or transferred.”).

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To transfer title of a trademark, the assignor must also convey the goodwill that the mark symbolizes. Thus, if the mark has lost its goodwill through misuse or abandonment, the assignee will not receive any rights from the transfer.5 The United States Patent and Trademark Office (USPTO or PTO) advises trademark owners to record the ownership transfer (assignment) or name change with the Assignment Recordation Branch of the USPTO.6 Proper recordation is required in order for the USPTO to recognize the assignee’s interest in the mark.7

2. Licenses A trademark may be licensed to one party on an exclusive basis, or to many licensees at once.8 For example, in the case of a franchise, the franchisor may wish to license its marks to hundreds of fran- chisees. In order to avoid abandonment of a mark, licenses should be in writing and include provisions to ensure the maintenance of a certain level of quality by the licensee as determined by the owner. Licenses are not needed for middlemen merchants, resellers, or distributors of finished goods to sell a product because they are typically not perceived as the source of the mark. Because a mark trades on and embodies the goodwill associated with that name, a licensee is expected to do nothing that would harm that goodwill. For example, when the licensees of

5. SMI Indus. Canada Ltd. v. Caelter Indus., 586 F. Supp. 808 (N.D.N.Y. 1984) (“When a trademark is the subject of an in gross transfer, the purchaser obtains only the symbol but not the reality. Since the Lanham Act places an affirmative duty on trademark owners to exercise some degree of control over the trademarks they license, the courts have required a simultaneous transfer of both the trademark and its goodwill in order to preserve the validity of the trademark”) (citing Dawn Donut Co. v. Hart’s Food Stores, 267 F.2d 358 (2d Cir. 1959)). 6. United States Patent and Trademark Office, Trademark Assignments: Change & Search Ownership, https://www.uspto.gov/trademark/trademark-assignments-change- search-ownership. 7. 37 C.F.R. § 3.73(c)(1)(i) (“In order to request or take action . . . an assignee who is not the original applicant must establish its ownership”). 8. Susser v. Carvel Corp., 206 F. Supp. 636 (S.D.N.Y. 1962), aff’d, 332 F.2d 505 (2d Cir. 1964) (holding franchisor permitted to license its trademark to many franchisors, and accordingly to establish conditions of operation without violating the antitrust laws).

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Michael Jordan, who were using his name for a restaurant in Chi- cago, publicly disparaged Jordan for not visiting the restaurant often enough, their license was terminated upon a showing that as a result of their comments, a restaurant licensee of Michael Jordan in New York suffered a loss of income.9 A license should also explicitly identify the extent to which the licensee is permitted to use the mark in commerce. The following is a glossary of provisions to consider when drafting new licenses and to note in existing trademark licenses:10 • Advertising/Promotion: Advertising and promotion terms should be addressed in the license agreement. Spe- cifically, the responsibilities of each party with respect to costs should be identified. In addition, the parties’ rights to accounting and approval of advertising should also be specified and agreed to. • Exclusivity: Whether the license grant is exclusive or nonexclusive should be clearly stated in the license. If the grant is nonexclusive, the license should state if the licensor can grant other licenses for the same product, or only for different products. • Infringement: The license should provide a means for identifying and addressing infringements and counterfeit products. It should specify whether the licensor reserves the right to take action. Is the licensee permitted to take action? If so, must it seek licensor approval first? Alterna- tively, a license may also provide that the licensee must take action, and subject the licensee to liability for not taking action. • Manufacturing: The agreement should address whether the licensee also manufactures. If not, is the licensee permitted to subcontract with a manufacturer? If not, the

9. Jordan v. 23 Food, Inc.,., 126 F. Supp. 2d 1130, 1138 (N.D. Ill. 1999). 10. For more on the drafting of trademark licenses, see WIPO, Module 12: Trademark Licensing, http://www.wipo.int/export/sites/www/sme/en/documents /pdf/ip_panorama_12_learning_points.pdf.

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provision should explain how a manufacturer will be chosen and the responsibilities of each party in selection of a manufacturer. In addition, the provision should state whether the licensor requires the licensee to terminate its relationship with the manufacturer for cause, including trademark infringement. • Ownership: The license should specify that the licensor is the owner of the trademark, and that all activities of the licensee in furtherance of the license inure to the benefit of the licensor. To the extent that the licensee is permitted to engage in product design, the license should specify who owns what with respect to product designs. The license should also specify who owns the copyright in packaging, advertising, and promotional materials that include use of the mark. • Packaging/Labeling: As with product design, the terms for packaging and labeling the product should be clearly addressed in the agreement. The provision should identify the party that bears responsibility for packaging the product, the extent of input required from the other party, and the responsibilities for costs associated with packaging. • Product Design: The agreement should set forth the procedure for designing and obtaining approval for new product design. For instance, how will the responsibility for new product design be shared? The agreement should identify whether the licensee(s) will have an obligation to participate in product design, and if so, the extent of their obligation to obtain approval from the licensor. • Products: The agreement should identify the specific products that are subject to the agreement. • Quality Control: The provision should specify the licensor’s standards for quality control, and the procedures that the licensee must follow to maintain those standards. The agreement should specify means by which the quality of products produced by the licensee is kept consistent with

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the image of the licensed trademark and other products sold under that trademark. • Royalty: The agreement should make monetary terms clear. A royalty provision should include details about how the licensor is to be paid under the agreement. Different royalty arrangements exist; they include a guaranteed minimum royalty when the royalty is a predetermined figure, a percentage royalty based on revenue, or a combination of both a guaranteed royalty and a percentage of sales. The royalty provision should also identify payment dates and the licensor’s right to access royalty statements and to audit the books and records of the licensee. • Sublicensing: This provision addresses whether the licensee has the right to further sublicense the trademarks. If so, will the original licensor have any rights to approve the sublicensee? This provision also identifies whether the trademark owner will have inspection rights over the sublicensee’s use of the trademark. • Territory: The license should identify the geographic area that it covers. Where will the licensee be permitted to use the mark? Will the licensor be permitted to compete with the licensee in that geographic area? • Term/Renewal: The agreement should clearly define the time frame of the license by specifically defining the effective date and end date. The agreement should identify whether the parties have an option to renew. If so, is renewal a matter of right or based on performance during the initial term? The renewal provision should identify the criteria that the licensee must meet, if any. Finally, the renewal provision must also identify the notice period and steps for adequate notice. Adequate notice is important for the licensor in order to ensure that it has the time to get another licensee if the present licensee does not intend to renew. • Termination: The agreement should address how the license may be terminated by either party and what

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conduct would subject the agreement to termination. It could include the licensor’s right to terminate the contract upon the occurrence of certain events such as unauthorized use of the licensed mark, failure to pay royalties, or failure to maintain the business. The provision may identify the licensee’s right to cure, such as the grant of a certain number of days to address a problem. In addition, it may spell out the licensee’s rights upon termination, including the right to sell off inventory and the right to obtain a new license.

III. The Validity of a Trademark

A. Registration Considerations Trademark protection may be established in the United States through the legitimate use of a mark. Although federal registration of a trademark is not a requirement to establish protection, it is beneficial to establish a presumption of trademark validity.11 Benefits of registration include constructive notice to the public of the registrant’s claim of ownership of the mark; a legal presumption of the registrant’s ownership of the mark and the registrant’s exclusive right to use the mark nationwide on or in connection with the goods and/or services listed in the registration; the ability to bring an action concerning the mark in federal court; and the ability to use the U.S. registration to enforce its trademark in other countries.

11. 15 U.S.C. § 1057(b); see also Glover v. Ampak, Inc., 74 F.3d 57, 59 (4th Cir. 1996) (manufacturer of custom knives brought trademark infringement action against competitor for unauthorized use of “White Tail” trademark on pocket knives. Com- petitor counterclaimed, seeking to cancel registration of mark on grounds that it had become generic. Because trademark’s certificate of registration carries with it presumption that mark is valid, party seeking cancellation of registration on ground that mark has become generic must carry burden of proving that fact by preponderance of evidence; such evidence may come from purchaser testimony, consumer surveys, listings and dictionaries, trade journals, newspapers, and other publications.).

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In the United States, registering a mark entitles the owner to use the ® symbol. Without registration, a business may claim rights in a mark by using the “TM” (trademark) or “SM” (service mark) designation to alert the public to a claim. However, one may use the federal registration symbol “®” only after the USPTO actually registers a mark, and not while an application is pending. Also, the registration symbol with the mark may only be used on or in connection with the goods and/or services listed in the federal trademark registration.

1. Registration Process A mark may be registered with the USPTO by filing a written application. The written application must contain a verified statement with the following elements: (1) when the mark was first used in commerce; (2) the goods and services that the registration is used with; and (3) a drawing of the mark plus specimens of the mark as used.12 Applicants from outside the United States must designate a resident agent for service of process.13 After an application has been submitted, it is examined by the Commissioner of Patents and Trademarks to evaluate whether or not it can be registered. If registration is allowed, the mark is then published in the Official Gazette of the Patent and Trade- mark Office.14 A notice and comment period then allows for public opposition by any person who believes that he or she may be damaged by issuance of the registration.15 The commissioner evalu- ates such claims and the validity of proposed registration.16 The commissioner’s determination is subject to review by the Trade- mark Trial and Appeal Board (TTAB) and then the United States Court of Appeals for the Federal Circuit.17

12. 15 U.S.C. § 1051 (2002). 13. Id. 14. 15 U.S.C. § 1062(a). 15. 15 U.S.C. § 1063 (2006). 16. Id. § 1068. 17. 15 U.S.C. § 1071 (2000).

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2. Registration of Marks not Currently Used in Commerce A mark that has not been used in interstate commerce may also be registered if the owner has a bona fide intent to use the mark. Such a mark may also be filed with the USPTO if the owner submits a verified application with the following elements: (1) a drawing of the mark; (2) a statement avowing that the registrant intends to use the mark, and that he or she knows of no obstruc- tion to that intended use.18 Upon appropriate review, the commissioner may issue a notice of “allowance,” which preserves the applicant’s filing priority. 19 Either during the pendency of the initial application, within six months of the issuance of the allowance, or within a permitted extension of the said six months cumulatively not greater than twenty-four months granted pursuant to written application, the applicant must file a Statement of Use revealing that the mark is being used in interstate commerce, the products or services it is being used in connection with, and the initial date of that use, accompanied by samples of the mark as actually used.20 This will prompt publication in the Official Gazette, along with the accompanying notice and comment opportunity. Failure to file a Statement of Use within the specific time period will result in abandonment of the application.21 For due diligence purposes, the buyer should examine all completed registrations that the seller holds, as well as any outstanding applications. In addition, it is important to identify registrations with the USPTO, state registries, and foreign registries.

B. Subject Matter of Trademark Protection The Lanham Act identifies a number of “marks” that are entitled to protection and registration: trademarks, certification marks,

18. 15 U.S.C. § 1051(b) (2002). 19. 15 U.S.C. § 1057(c) (2000). 20. 15 U.S.C. § 1051(b) (2002). 21. Id. § 1051(d)(4).

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collective marks, and service marks.22 They are statutorily defined as follows: Trademark: any word, name, symbol or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured or sold by others. Service mark: means any word, name, symbol, or device, or any combination thereof used to identify and distinguish the services of one person, including a unique service, from the services of others and to indicate the source of the services, even if that source is unknown. Titles, character names, and other distinctive features of radio or television programs may be registered as service marks notwithstanding that they, or the programs, may advertise the goods of the sponsor. Collective Mark: is a trademark or service mark used by the members of a cooperative, an association, or other collective group or organization and includes marks indicating membership in a union, an association, or other organization. Certification Mark: means any word, name, symbol, or device, or any combination thereof used to certify regional or other origin, material, mode of manufacture, quality, accuracy, or other characteristics of such person’s goods or services or that the work or labor on the goods or services was performed by members of a union or other organization.23

C. Distinctiveness In general, a mark must be distinct in order to receive trademark protection. The mark must be clearly distinguishable from the

22. 15 U.S.C. § 1127 (2006). 23. Id.

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marks of others,24 so that its use is not likely to cause confusion or mistakes or to deceive others. To be legally protectable under the Lanham Act, a mark must be “distinctive” in one of two ways: (1) a mark is inherently distinctive if its intrinsic nature serves to identify a particular source, and (2) a mark has acquired distinctiveness, even if it is not inherently distinctive, if it has developed secondary meaning, which occurs when, in the minds of the public, the primary significance of a mark is to identify the source of the product rather than the product itself.25 Courts gauge the inherent distinctiveness of a mark based on a spectrum.26 In Abercrombie & Fitch Co. v. Hunting World, Inc., the Second Circuit established five categories of distinctiveness: (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, and (5) fanciful. Whereas suggestive, arbitrary, and fanciful marks are inherently distinctive, generic marks cannot be distinctive, and descriptive marks are distinctive only if they have acquired “secondary meaning.”27 Similar to descriptive marks, geographic terms and surnames are also prohibited from registration unless they have attained secondary meaning. A mark is (i) suggestive when it describes or suggests a characteristic of the product or service; (ii) is arbitrary when it is a word in common use, but applied to a product or service unrelated to its meaning, so that the word neither describes nor suggests the product or service; and, (iii) is fanciful when the mark is a word

24. 15 U.S.C. § 1052. 25. Nola Spice Designs, LLC v. Haydel Enters., 783 F.3d 527, 537 (5th Cir. 2015) (holding that “Mardi Gras Bead Dog” word mark was entitled to protection only if it acquired secondary meaning, which it did not, warranting cancellation of the marks and preclusion of holder’s unfair competition claim). 26. Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976). 27. 15 U.S.C. § 1052; Sugar Busters LLC v. Brennan, 177 F.3d 258, 268 (5th Cir.1999) (determining whether title of diet book, SUGARBUSTERS! Cut Sugar to Trim Fat, was eligible for protection under Lanham Act’s unfair competition provision required factual findings as to whether title had acquired secondary meaning at time defendants published cookbook entitled SUGAR BUST For Life!, and as to whether defendants’ title was so likely to confuse consumers as to outweigh defendants’ First Amendment interest in their title).

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devised or invented for the purpose of identifying the product or service.28 The term generic describes a particular genus or class of which an individual article or service is but a member.29 It is typically the common name of the item.30 The test for genericness is whether the public perceives the term primarily as the designation of the article.31 Evidence of genericness may include consumer surveys and testimonials, as well as dictionary definitions.32 A descriptive term identifies a characteristic or quality of an article or service, such as its color, odor, function, dimensions, or ingredients.33 The concept of descriptiveness is construed broadly.34

28. Tisch Hotels, Inc. v. Americana Inn, Inc., 350 F.2d 609, n. 2 (7th Cir. 1965) (illustrating action for alleged trademark infringement and unfair competition brought by plaintiffs who owned service mark “Americana,” which they used in connection with their hotel operations in Miami Beach, Florida; New York City; and San Juan, Puerto Rico, against defendant that operated two motels under name “Americana” in Chicago area); McGregor-Doniger, Inc. v. Drizzle, Inc., 599 F.2d 1126 (2d Cir. 1979) (finding that it was unlikely that senior user of mark would bridge gap between products was not clearly erroneous; nor did evidence compel conclusion that consumers would assume that senior user of mark on golf jackets would move into women’s coat market under trademark, in action alleging trademark infringement by use of similar trademark on noncompeting products). 29. Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225 (5th Cir. 2010) (holding that overall appearance of facilities could be protected as trade dress despite lack of distinctiveness of star mark). 30. Schwan’s IP, LLC v. Kraft Pizza Co., 460 F.3d 971, 974 (8th Cir. 2006) (term “Brick Oven” to identify pizza was generic term not entitled to trademark protection). 31. Soc’y of Fin. Exam’rs v. Nat’l Ass’n of Certified Fraud Exam’rs Inc., 41 F.3d 223, 227 (5th Cir.1995) (holding that genuine issue of material fact existed as to whether initials “CFE” used by organization to denote “certified financial examiner” was generic mark and whether another organization’s use of same letters to denote “certified fraud examiner” was likely to cause confusion; this precluded summary judgment). 32. See Nola Spice Designs, LLC v. Haydel Enters., 783 F.3d 527, 537 (5th Cir. 2015) (considering consumer affidavits to find that term “Mardi Gras Bead Dog” was not generic, but descriptive). 33. Amazing Spaces, 608 F.3d at 241. 34. KP Permanent Make-Up v. Lasting Impression I, 543 U.S. 111 (2004) (defendant asserting fair use defense to infringement claim had no burden to negate likelihood of confusion; plaintiff claiming infringement of an incontestable mark must show likelihood of consumer confusion as part of the prima facie case, but defendant has no independent burden to negate the likelihood of any confusion in raising— fairly, and in good faith—the affirmative defense that a term is used descriptively rather than as a mark).

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A descriptive term gains secondary meaning when the mark becomes associated in the public mind as the source of a particular product or service.35 Intentional copying of a mark may be considered presumptive evidence that the mark has acquired secondary meaning.36

D. Dilution In 1995, Congress passed the Federal Trademark Dilution Act (FTDA) as an amendment to the Lanham Act. The FTDA intro- duced the concept of “famous marks.” The purpose of the FTDA was partly to create a reciprocal form of protection for the concept of famous names recognized in other countries. However, the FTDA was interpreted as requiring actual dilution rather than likelihood of dilution to establish the requisite fame for a mark.37

35. See Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817 (9th Cir. 1980) (pants manufacturer brought action against competitor for trademark infringement and unfair competition, seeking to enjoin competitor’s use of folded ribbon “pocket tab” sewn with its ends captured in seam of rear patch pocket; court held that findings that manufacturer’s pocket tab trademark had acquired a secondary meaning in the marketplace and was distinctive of manufacturer’s garments in commerce were not clearly erroneous, and manufacturer established that competitor’s use of its pocket tab was likely to cause confusion or mistake or to deceive the public as to the source of competitor’s pants from or with manufacturer). 36. See Osem Food Indus. Ltd. v. Sherwood Foods, Inc., 917 F2d 161, 164 (4th Cir. 1990) (presupposition of likelihood of consumer confusion arose from defendant’s admitted copying of plaintiff’s dehydrated soup package). 37. Moseley v. V Secret Catalogue, 537 U.S. 14 (2003) (holding that affiliated cor- porations engaged in sale of lingerie under the trademark “Victoria’s Secret” failed to establish that the famous mark was diluted by adult novelty store named “Victor’s Lit- tle Secret,” absent evidence of any lessening of the capacity of the mark to identify and distinguish goods or services sold in Victoria’s Secret stores or advertised in Victoria’s Secret catalogs); Times Mirror Magazines v. Las Vegas Sports News, 212 F.3d 157 (3d Cir. 2000) (holding that publisher of weekly sports periodical “The Sporting News” was likely to prevail on merits of its trademark dilution claim against publisher of sports betting periodical entitled “Las Vegas Sporting News,” based on blurring of plaintiff’s mark, in view of similarity of marks, fact that both publications were published weekly, evidence that such periodicals were purchased on impulse, evidence that publisher of “Las Vegas Sporting News” was aware of “The Sporting News” when he changed the name of his periodical, and fact that “The Sporting News” was well known, whereas “Las Vegas Sporting News” was not).

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Following these interpretations, Congress passed the Federal Trademark Dilution Revision Act of 2006 (FTDRA). The FTDRA clarified the requirements for a dilution action.38 Specifically, dilution actions may only be brought to protect famous marks. One of the most significant revisions that the FTDRA made was the change from an actual dilution standard to a likely-to-cause- dilution standard. In other words, the plaintiff no longer needs to prove actual dilution in order to prevail.39 The FTDRA identifies four factors to consider when determining whether a mark is indeed famous: (1) the duration, extent, and geographic reach of advertising and publicity of the mark; (2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; (3) the extent of actual recognition of the mark; and (4) whether the mark was registered under the Principal Register.40 The FTDRA also specifically defines dilution by blurring to be an association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark. In determining whether a mark or trade name is likely to cause dilution by blurring, courts may consider all relevant factors, including (1) the degree of similarity between the mark or trade name and the famous mark; (2) the degree of inherent or acquired distinctiveness of the famous mark; (3) the extent

38. 15 U.S.C. § 1125(c)(3). 39. ComponentOne, LLC v. Component Art, Inc., 2007 U.S. Dist. LEXIS 89772 (W.D. Pa. Dec. 6, 2007) (noting that defendant contended, and plaintiff did not refute, that plaintiff’s claim was based on a theory of “niche market fame”; this effectively eliminated the only theory upon which plaintiff claimed to have established dilution); World Triathlon Corp. v. Dawn Syndicated Productions, 2007 U.S. Dist. LEXIS 72544 (M.D. Fla. 2007) (granting defendants’ summary judgment motion against claim alleging that defendants’ use of the term “Ironman” in connection with a reality dating television series infringed on plaintiff’s registered trademarks in violation of state and federal law); Verilux, Inc. v. Linaya Gail Hahn, 2007 U.S. Dist. LEXIS 58507 (D. Conn. 2007) (illustrative case in which plaintiff and defendants both sold lighting products that attempted to simulate natural daylight, using technology called “natural spectrum light” and “full spectrum” light). 40. Times Mirror Magazines v. Las Vegas Sports News, 212 F.3d 157 (3d Cir. 2000) (holding that trademark “The Sporting News” was registered in 1886 and was famous in niche market and therefore entitled to protection from dilution).

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of the famous mark owner’s substantially exclusive use of the mark; (4) the famous mark’s degree of recognition; (5) whether the user of the mark or trade name intended to create an association with the famous mark; and (6) any actual association between the mark or trade name and the famous mark.41 In addition to dilution by blurring, the FTDRA creates a separate cause of action for dilution by tarnishment. The FTDRA defines dilution by tarnishment to be an association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.

E. Unprotectable Marks Certain marks are unprotectable and proscribed by the Lanham Act. These marks include: (1) marks that are immoral, slan- derous, or disparaging of persons, beliefs, or national symbols; (2) marks that embody the flag or symbol of a government entity; or (3) marks that consist of the name, portrait, or sig- nature of a living individual without that individual’s consent, or a deceased president of the United States.42 The Lanham Act also prohibits registration of a mark involving a living person whose name or identity is part of the mark without disclosing this fact to the USPTO, as this is considered to be fraud upon the USPTO.43 In addition, as in copyright law, functional or utilitarian features of a product (despite attaining secondary meaning) are not

41. 15 U.S.C. § 1125. 42. Id. § 1052(a)‑(c). 43. Gilbert/Robinson, Inc. v. Carrie Beverage-Mo, Inc., 989 F.2d 985 (8th Cir. 1993) (owner of “Houlihan’s” restaurant sued for alleged service mark infringement, unfair competition, and dilution based on competitor’s use of service mark “Mike Houlihan’s”; competitor, which did not exist at the time the trademark was fraudulently registered (as result of failure to obtain permission of person whose name was being used in trademark), was not immediately injured by registration of mark and thus any injury, which arose many years later and was attributable to trademark holder’s prior right to employ name in line of business, was not within zone of interest that Lanham Act was intended to protect).

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protectable under the Lanham Act.44 Such protection as may exist would arise under patent law.45 Marks may encompass religious concepts. So long as the mark bears the characteristics of protectability, it may be protected against infringement by another religious organization.46

F. Term 1. Term of Registration Upon initial registration of a trademark with the USPTO, the owner is granted a certificate of registration good for an initial term of ten years. To maintain protection during this period, though, the owner must still file an affidavit testifying to the continued use of the mark in commerce. Specifically, an Affidavit of Use (Section 8 affidavit) must be filed (1) between the fifth and sixth year following registration, and (2) within the year before the end of every ten-year period after the date of registration. The registrant may file the Section 8 affidavit within a grace period of six months after the end of the sixth or every tenth year, with payment of an additional fee.47 The original registration may be renewed indefinitely for additional ten-year periods if the owner files the required renewal applications (called a Section 9 affidavit) with the USPTO. Failure

44. See Vaughan Novelty Mfg. Co. v. G.G. Greene Mfg. Co., 202 F.2d 172 (3d Cir.), cert. denied, 346 U.S. 820 (1953) (petition was filed to enjoin alleged violation of consent judgment providing that defendant had right to manufacture and sell can opener imitating functional features of plaintiff’s can opener, provided that prospec- tive buyers were not caused to regard defendant’s can opener as plaintiff’s can opener; held that defendant had taken sufficient steps to distinguish its opener from that of plaintiff). 45. 35 U.S.C. § 171. 46. Te-Ta-Ma Truth Found.–Family of URI, Inc. v. World Church of the Creator, 297 F.3d 662 (7th Cir. 2002), cert. denied, 537 U.S. 111 (2003) (holding that phrase “Church of the Creator” was descriptive, not generic, and that alleged infringer who used phrase “World Church of the Creator” as its name after registration of “Church of the Creator” trademark was junior user). 47. USPTO, Keeping Your Registration Alive, https://www.uspto.gov/trademarks- maintaining-trademark-registration/keeping-your-registration-alive.

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to renew a registration does not void all rights to the mark, but if the owner fails to re-register, the special benefits of federal registration will be lost.48

2. Unregistered Trademarks Regardless of whether a mark is registered, it is still protected by trademark law. There is no fixed term for trademark protection in general. A trademark will remain the exclusive property of its owner forever if it continues to be used in commerce.49

G. Abandonment Abandonment is a term of art that means the discontinued use of a trademark with an intent to abandon it, or when any course of conduct causes the mark to lose its significance as an identification of origin.50 Under the Lanham Act, only marks used in commerce receive trademark protection. Thus, abandoned marks cannot receive trademark protection. Abandonment may be found based on an owner’s affirmative actions, as opposed to mere inaction in using a particular mark. For instance, a men’s clothing company was held to have abandoned its trademark on one of its labels when it engaged primarily in making clothing for other brands, and failed to sell clothing under the registered trademark brand name for a period of at least ten years.51 In another case, a potato chip company sent out a notice to its customers that the potato chips would be sold under another brand name. In so doing, the business was deemed to have abandoned its trademark in the original brand name of

48. Id. 49. Diamond, Properly Used, Trademarks Are Forever, 68 A.B.A.J. 1575 (1982). 50. 15 U.S.C. § 1127. 51. Phillips Van Heusen Corp. v. Calvin Clothing Co., 444 F. Supp. 2d 250 (S.D.N.Y. 2006) (owners of a clothing line using the mark “Calvin” sued alleged infringers, claiming, inter alia, that use of the “Calvin” mark beyond boys’ tailored apparel infringed the owners’ marks. Infringers sought a declaration that the owners had no rights in the “Calvin” mark and that their use of that mark violated the infringers’ rights under the Lanham Act and New York common law. Held, inter alia, that owners had acquired common law rights in the “Calvin” mark for all apparel except boys’ tailored clothing).

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the potato chips, and another potato chip maker was immediately allowed to sell potato chips under the original brand name.52 Abandonment of a trademark or service mark must be strictly proven.53 Although there is no consensus on the standard of “strictly proven,” courts impose a heavy burden on a challenger to prove the period of nonuse. Under the Lanham Act, three years of nonuse is prima facie evidence of abandonment.54 However, courts are split on whether the prima facie showing of abandonment shifts the burden of proof in an action to determine whether a mark has been abandoned. The Ninth, Sec- ond, and Seventh Circuits favor registered mark owners in that the prima facie showing—three years of nonuse—creates only a rebuttable presumption of abandonment.55 In these circuits, the trademark owner only has to present evidence to rebut the presumption that the mark has been abandoned. A business can rebut the presumption by showing that its nonuse was not due to an intention to abandon the mark but rather was due to “special circumstances” excusing the period of nonuse.56

52. Hiland Potato Chip Co. v. Culbro Corp., 216 U.S.P.Q. (BNA) 352 (1981) (holding that plaintiff’s complaint alleged statutory trademark infringement, common law trademark infringement, and unfair competition by defendants in respect to the trademark “Kitty Clover” in a trade area encompassing most of Missouri, a small portion of Kansas, and all of Arkansas). 53. Burgess v. Gilman, 475 F. Supp. 2d 1051 (D. Nev. 2007) (noting that government’s assignment of service marks “Mustang Ranch,” “World Famous Mustang Ranch,” and “World Famous Mustang Ranch Brothel,” in connection with prostitution services, did not constitute an involuntary abandonment of the marks, where assignee not only purchased the service marks, but also the buildings, parlor, bar, and hot tubs that were an important part of the atmosphere or aura of the prostitution business). 54. 15 U.S.C. § 1127; Major League Baseball Properties, Inc. v. Sed Non Olet Denarius, Ltd., 817 F. Supp. 1103 (S.D.N.Y. 1993), vacated, 859 F. Supp. 80 (S.D.N.Y. 1994) (deciding that Los Angeles Dodgers abandoned use of mark “Brooklyn Dodgers” in the absence of showing of intent to resume commercial use of mark within two years after baseball team left Brooklyn in 1958 or at any time within ensuing quarter-century and forfeited right to exclude restaurant owners from using mark for restaurants). 55. Major League Baseball Properties, 817 F. Supp. at 43. 56. P. A. B. Produits et Appareils de Beaute v. Satinine Societa in Nome Collettivo Di S.A., 570 F.2d 328, 334 (C.C.P.A. 1978) (illustrative case in which a trademark registrant appealed from a decision of the TTAB granting a petition to cancel the mark “PAB” for women’s cosmetics without adequate notice).

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In other circuits, the prima facie showing shifts the burden of persuasion to the mark holder to show an intent to resume use. In these circuits, once one shows a three-year period of nonuse of the mark, the trademark owner then bears the burden of proving that it has an intent to resume use of the mark in order to win on the issue of abandonment. The Fifth Circuit has enunciated a standard for determining whether a mark owner has an intent to resume use: an “intent to resume” requires the registered owner of the mark to have plans to resume commercial use of the mark.57 If the trademark owner cannot prove that it has plans to resume commercial use of the mark, the court will find that it has no intent to resume use of the mark, and the court will thus deem the mark abandoned. An owner cannot reverse or cure abandonment simply by using the mark again. Instead, the mark is treated as though it were a new mark that the owner can register anew.

H. Genericization Generic terms are not protectable by trademark law.58 A term that was at one time distinctive may lose its distinctiveness and become generic over time. This process is known as genericization. Courts recognize that genericization may occur in one of two ways: (1) when the trademark is misused by the public, such as when the brand name is used to refer to a type of product as opposed to its source; and (2) when a trademark owner fails to maintain active use of its mark or to enforce its rights in the

57. Exxon Corp. v. Humble Expl. Co., 695 F.2d 96, 102 (5th Cir. 1983). Humble Exploration appealed from an order of the district court enjoining its use of “Hum- ble” as a trade name. The main issue on appeal was whether the district court erred in finding that Exxon had not abandoned the use of the trademark HUMBLE. Be- cause the court found that the limited arranged sales of HUMBLE products as part of Exxon’s trademark maintenance program were insufficient uses to avoid prima facie abandonment, it reversed and remanded to the district court for a determination of Exxon’s intent to resume use of the trademark. 58. See Section III.C, supra.

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mark, such as through an infringement action.59 A mark is only legally deemed generic by a court. Examples of once-trademarked terms that have become generic include aspirin,60 cellophane,61 and zipper.62 The question of whether a mark is, or has become, generic is generally one of fact.63 Types of evidence that a court may consider include: (1) dictionary definitions; (2) generic use of the term by competitors and other persons in the trade; (3) plaintiff’s own generic use; (4) generic use in the media; and (5) consumer surveys.64 Typically, the widespread use of a mark

59. Horizon Mills Corp. v. QVC, Inc., 161 F. Supp. 2d 208, 213 (S.D.N.Y. 2001) (holding that women’s clothing manufacturer’s “Slinky” mark was not historically generic term at time it was adopted but descriptive one that, with sufficient secondary meaning, could be protectable as trademark). 60. Bayer Co. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921) (holding that where a drug manufactured by plaintiff and furnished to manufacturing chemists was sold by them under a trade name with nothing to indicate that it was manufactured by plaintiff, the fact that the same drug was on the market under another name did not entitle plaintiff to relief on the theory that the trade name referred only to the drug manufactured by it, where there was no evidence that buyers knew the different names referred to the same drug). 61. DuPont Cellophane Co. v. Waxed Prods. Co., 85 F.2d 75 (2nd Cir.), cert. denied, 299 U.S. 601, 57 S. Ct. 194, 81 L. Ed. 443 (1936) (in suit for infringement of trademark “Cellophane,” evidence established that ordinarily term signified transparent cellulose film rather than article of manufacture of trademark owner, and hence dealer in such film of manufacture other than that of trademark owner would be required only to designate maker of film in advertising and in filling orders for “Cellophane.”) 62. B.F. Goodrich Co. v. Closgard Wardrobe Co., 37 F.2d 436 (C.C.P.A. 1930) (application by the Closgard Wardrobe Company for registration of trademark “zipper” for wardrobe bags, wherein the B.F. Goodrich Company filed an opposition stating that it had obtained “zipper” as a trademark for “boots made of rubber and fabric”). 63. Bristol-Myers Squibb Co. v. McNeil-P.P.C. Inc., 973 F.2d 1033, 1039 (2d Cir.1992) (manufacturer of “Excedrin PM” brought action for trademark and trade dress infringement by competitor that manufactured “Tylenol PM”; held that initial classification of mark to determine eligibility for protection is question of fact left to determination of district court; “PM” designator was descriptive mark and was not entitled to trademark protection without showing of secondary meaning, and no likelihood of confusion existed between the two products). 64. Pilates Inc. v. Current Concepts, 20 F. Supp. 2d 286 (S.D.N.Y. 2000) (media usage of trademark “PILATES,” in connection with exercise method and associated equipment, weighed heavily in favor of determination that mark had become generic rather than serving as identifier of source of exercise method; survey of 775 newspaper

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to describe a product or service alone is not enough to render it generic.65 Likewise, a term is not deemed generic merely because it may have some significance to the public as the name of an article.66 For due diligence purposes, it is important for the buyer to understand what steps a seller takes to prevent genericization. Owners must actively campaign and monitor the mark to avoid or cause cessation of any misuse of the mark. For example, trademark owners may request web page authors, dictionary editors, and/or the general public to stop using their trademark incor- rectly and to begin using it properly by sending notices when they see improper usage. One successful example of preventing genericization of a trademark is Xerox. Xerox has expended large sums of money in marketing and advertising to prevent the misuse of its trademark so as to avoid losing it. The owners of the Xerox trademark have launched print ads that advise consumers that they cannot “Xerox” a document, but they can “copy it” on a Xerox brand copy machine. Another way trademark owners have attempted to prevent the loss of their mark to genericization is by including the word “brand” after their trademark. For example,

and magazine articles revealed 81 percent misidentifying source or identifying no source, and book and television shows used term simply to identify exercises); In re Reed Elsevier Prop. Inc., 482 F.3d 1376, 1378 (Fed. Cir. 2007) (mark “LAWYERS.COM,” used by operator of website providing online interactive database, was “generic” and thus could not be registered with the USPTO; although operator attempted to disclaim purpose of information exchange regarding lawyers, in order to more narrowly define genus of services at issue, such exchange was inextricably intertwined with its claimed service of providing information exchange about the law, legal news, and legal services). 65. Marks v. Polaroid Corp., 129 F. Supp. 243, 270 (D. Mass. 1955), aff’d, 237 F.2d 428 (1st Cir. 1956) (registered trademark “Polaroid” used in connection with patented synthetic light-polarized system was not rendered invalid for loss of distinctiveness among trade and consuming public through generic use). 66. Kraft Foods Holdings, Inc. v. Helm, 205 F. Supp. 2d 942, 946–47 (N.D. Ill. 2002) (trademark “Velveeta,” used in connection with sale of cheese products, was fanciful mark entitled to highest level of trademark protection, for purpose of issuing preliminary injunction in trademark dilution case involving use of mark “King VelVeeda” by operator of sexually explicit Internet websites, despite claim that “Velveeta” had acquired alternate meaning as name for unwanted website messages, and become generic and unprotectable).

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Johnson & Johnson changed its ad campaign from, “I am stuck on Band-Aids, ’cause Band-Aid’s stuck on me,” to “I am stuck on Band-Aid brand, ’cause Band-Aid’s stuck on me.”

IV. Are There Others Using the Trademark?

As with copyright, trademark holders must closely monitor the exploitation of their trademarks for two reasons: (1) to ensure that others are not infringing on the trademark, and (2) to ensure that the trademark owner can use and market its trademarks in a way that does not infringe on others’ rights.

A. Freedom-to-Operate Opinion Freedom to operate (FTO) is the ability of a company to develop, make, and market products without legal liabilities to third parties (e.g., other rights holders). Before developing new trademarks, it is important to establish that the work does not infringe on any other entity’s marks. An FTO opinion is legal advice rendered by a law firm to its client concerning activities that would avoid infringement of any third party’s existing trademark. FTO opinions are most frequently sought in the context of patents, where the research and development costs of new products are immense, but trademark holders may also seek an FTO opinion before undertaking an expensive endeavor. In contrast to a noninfringement opinion, which is typically directed to a specific work, an FTO opinion is broader in scope and addresses the potential for infringement by any trademarks, whether registered or just in use. An FTO opinion is generally sought at the beginning of product development or brand launch when a company is considering the costs and benefits of a new project. Ideally, the FTO opinion will conclude that there are no relevant marks that would impact the launch, and therefore the client is “free to operate” without undue risk of infringement. Alternatively, if the opinion concludes that a company’s product may infringe on others’ marks, the

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company will have a roadmap to evaluate the costs of obtaining licenses so that it becomes free to operate. Buyer’s counsel should request disclosure of all FTO opinions belonging to the seller so the buyer can assess the viability of the seller’s marks.

1. Rights Clearance Drafting an FTO opinion requires performing a rights clearance search. Trademark clearance searches typically occur in two stages: a preliminary search and a comprehensive search. The key steps to each are as follows.

Preliminary search Preliminary trademark searches are typically used to identify obvious conflicts with existing marks before pursu- ing a more expensive, thorough search from a vendor. Companies with limited budgets may choose to perform only a preliminary search. For due diligence purposes, it is important to understand what the seller’s standard practices are in terms of using preliminary searches. If the seller limits its clearance searches to preliminary searches only, there may be a greater need for the buyer to conduct its own searches on the buyer’s marks. Preliminary searches may be done relatively quickly and inex- pensively. They typically involve searches primarily of free online databases, including the USPTO’s online database. Depending on the circumstances, preliminary searches sometimes also involve searches of certain limited, fee-based databases. With advances in technology, free databases are becoming more comprehensive. However, fee-based databases tend to be both more reliable and more comprehensive. For example, fee-based databases typically are more effective at handling differences in spelling and foreign translations. Preliminary searches are effective primarily for ruling out candidate marks that are clearly unavailable. However, because of their limited scope, counsel should not rely on preliminary search results to draw any definitive conclusions on the availability of the candidate mark for use or registration. For example, basic preliminary searches typically do not identify

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the many types of phonetic, spelling, and structural variations covered by full U.S. searches. They also do not typically cover common law (unregistered) marks and names, other than what a cur- sory check of the Internet might reflect. The following are several free-of-charge services that may be used in a preliminary search: • The USPTO’s online database of federal trademark applications and registrations, searchable online using its Trademark Electronic Search System (TESS) • General Internet searches • Domain name WHOIS databases • State trademark registries and secretary of state databases, typically accessible online • Trade publications • Business directories

Full trademark search If the preliminary search results do not elim- inate a candidate mark, as a best practice counsel should conduct a full U.S. trademark search. Full U.S. searches are available from several outside search vendors. These vendors include:

• SAEGIS (through Thomson Compumark) • Corsearch Advantage Screening • ActiveIP Screening Platform (through Corporation Service Company) Analysis of a full search report gives the client a more complete understanding of the availability of the proposed mark for use or registration and a better sense of potential risks. It also can provide a basis for defending the client’s good faith adoption of the mark in the event of a legal challenge. Sources for full searches typically include the free services named earlier, as well as the fee-charging vendors. Even full searches are not completely reliable. Some relevant marks may not appear in a search report and the analysis often requires some level of subjectivity. Therefore, remember that even after one has analyzed a full search report and come to a favorable

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conclusion, some risk is always present when adopting or extend- ing use of a trademark. Reasons relevant marks may not appear in a full search report include: • Some common law marks may not be included in any of the sources searched by the search agency. • Recently filed applications may not appear in the search report owing to processing delays. • Applications filed on the basis of a foreign application or registration may obtain an effective filing date that is up to six months earlier than the actual filing date under certain international treaties, including the Paris Convention. Contents of a full search report Once seller has disclosed all of its search reports to buyer’s counsel, buyer’s counsel should review the reports to understand the validity of seller’s marks. Contents of the report should include the following: • Upfront section. The opening section of the report usually describes the specific mark and the applicable products and services. It will describe the scope of the search. • Federal references. This section should explain the results of the search of federal sources, such as the USPTO register. References included in the federal registration section of a search report generally merit more attention than those appearing only in other sections because the owners of those references have spent resources to obtain a federal registration. Special attention should be paid to the use status of the mark (for example, if the mark has been canceled or abandoned). • State references. The state trademark registration section shows results from searches of state trademark registries, which will reveal state trademark registrations, including current and expired registrations, and (where the state trademark process includes them) trade name registrations. • Common law marks. This section includes a discussion of any common law marks that may conflict with the searched mark.

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• Business names. This includes results from searches of (among other databases) the American Business Directory and Dun’s Market Identifiers. • Domain name registrations. This section includes results from searches of WHOIS databases of domain name registrars accredited by the Internet Corporation for Assigned Names and Numbers (ICANN). • Internet references. This includes Internet search results for the searched term and very close variations.

2. Analyzing a Search Report After conducting a search, counsel must analyze the results to draft an FTO opinion. Counsel should perform the following checks based on the search results: • Conflicts check. Throughout the search and clearance process, counsel should be sensitive to potential conflicts of interest. If a reference mark is owned by another client of the reviewer or by a client of the reviewer’s law firm, counsel may be ethically precluded from issuing an opinion on the risks posed by that mark or potential ways to mitigate the risks. This can be a particular problem for lawyers in large firms with broad client bases. • Similar marks. The first step in analyzing trademark search results is to review the full search report and identify, or tag, each search result (reference or reference mark) that is similar to the candidate mark. Counsel should focus on similarities in sight and appearance, pronuncia- tion, rhyme, meaning or connotation, and commercial impression. • Marks owned by competitors. Counsel should also specifically note any marks owned by any entity that the client has identified as a competitor. • Marks covering unrelated goods and services. Further consideration is typically unnecessary for marks covering goods or services totally unrelated to the proposed use of

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the candidate mark, because consumer confusion between marks used in unrelated fields is generally not likely. However, counsel should tag any reference if there is reason to believe it covers a mark that is or may be famous. Famous marks may be protected well beyond a particular industry or activity under dilution laws.

3. Reliance on FTO Opinions as a Defense to Willful Infringement Courts generally have not found an affirmative duty to conduct a search before adopting and using a mark. However, a formal opinion concerning potential trademark infringement can constitute good faith and weigh against a willful infringement finding.67 That said, trademark searches are generally subject to discovery in litigation. Therefore, evidence that a company did a search that it ignored could be used to support a finding of willful infringement. In contrast, FTO opinions are protected by the attorney‑client privilege unless waived.

V. Trademark Monitoring

A. Monitoring Methods When conducting due diligence, it is important to learn how the seller monitors and protects its IP, including trademarks. As discussed in other chapters,68 important questions to keep in mind include: (1) Has the seller registered its trademarks in every country in which it operates? (2) To what extent does the seller perform due diligence before applying for new trademarks? The following list defines terms that are key to understanding how the seller protects its IP. Cease-and-desist letters: Cease-and-desist letters are notifications sent to potential infringers to cease and desist

67. Sports Auth. v. Prime Hosp. Corp., 89 F3d 955 (2d Cir 1996). 68. See Chapter 5 (Copyright Due Diligence).

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the allegedly infringing activity. Assess whether the seller routinely sends out cease-and-desist letters, or uses them more sparingly. Dilution: Trademark monitoring does not simply involve looking for other parties that are directly using the seller’s trademark in their marketing of a competing product; one must also ensure that no uses are diluting the seller’s trademark. Thus, it is important to identify uses of the seller’s trademark that could have diluting effects, such as use of the trademark in a disparaging context. Former employees: Former employees carry with them a wealth of confidential information. As such, understanding the seller’s relationships with former employees is helpful in identifying potential sources of information leaks. Key questions to consider include: (1) Has the seller ever experienced loss of trade secret protection or unauthorized disclosure or use of a trade secret by a current or former employee? (2) Has any key current or former employee left to join a competitor? (3) Does the seller have enforce- able confidentiality or noncompete agreements with these employees? and (4) Does the seller monitor the activities of these employees to ensure that no unauthorized disclosure or use of the target’s or its competitor’s trade secrets is made? Freedom-to-operate (FTO) opinion: Freedom to operate is the legal ability that a company has to develop, make, and market products without legal liabilities to third parties (e.g., other trademark holders). The procedure for assessing whether or not the product process possesses FTO is called the FTO analysis. An FTO opinion is a document that a company commissions prior to entering a business endeavor in which the risks of liability are identified. Genericization: Occurs when a trademark that is associated with a particular brand acquires such market domi- nance or mind share that the primary meaning of the trademarked term becomes the product or service itself

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rather than an indication of source for the product or service. This dilutes the value of the trademark and may destroy it entirely. Examples include aspirin, dry ice, and kerosene. IP designations: Symbols that IP owners use to mark their products as having the protection of a trademark, copyright, or patent. These include the TM symbol for unregistered trademarks and the ® symbol for a registered trademark. It is important to understand the extent to which the seller employs IP designations. Social media policy: Policing includes monitoring trademark use by the company and its employees. Proper trademark use by the company itself is the first step to ensuring that third parties and the public respect the company’s trademark rights. Diligence investiga- tions should determine whether the seller has trademark guidelines for employees and educates them on the importance of proper trademark use, which should include policies on how to represent any trademarks on social media. For example, the social media policy should require employees to use the registration mark for all registered marks. Trademark search: The primary strategy for a trademark holder to monitor uses of its own trademarks is the same as the approach for identifying whether it is free to use the trademark in the first place: a trademark search. A search can help trademark holders to spot uses of similar and/or identical marks in commerce. TESS: The USPTO hosts an automated trademark search database called the Trademark Electronic Search System (TESS). The online TESS allows one to search for trademarks using a number of different variables. One can enter simple terms, browse trademarks via category or class, and even input search terms for image results. This allows a trademark holder to spot any trademark applications for marks similar to the one it is trying to protect.

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Watch service: A watch service monitors IP use. Watch services are typically third-party organizations, including law firms, that can be hired to monitor trademark, patent, and copyright infringement on behalf of their clients. A watch service may be hired for just one geographic region in which the seller may not have much expertise.

B. Licensing An important step in monitoring the buyer’s use is to demand a list of outstanding licenses that the seller has in place with other parties. These should include both licenses for which the seller is the licensor, and for which the seller is the licensee. The following are notable terms to be aware of in IP licensing agreements: Assignment: A transfer of IP ownership from the original IP owner to another individual or entity. In contrast to a license, an assignment transfers the entirety of the original owner’s interest. Exclusivity: An exclusivity clause indicates that the license has been exclusively granted to one party. The licensor may not then license the IP to another user. Field of use: A “field of use” provision in an IP license allows the licensor to place restrictions on the scope of use of the IP. For example, a field of use provision in a trademark license may limit a manufacturer’s exploitation of the trademark to manufacturing dolls but not backpacks. Governing law: The governing law provision identifies the jurisdiction whose law will apply to any conflicts that may arise from the license. A governing law provision may be useful when the parties are located in different jurisdictions. For example, if a licensor is an American company, and the licensee is a Japanese company, the parties may explicitly note that the U.S. Lanham Act applies. Indemnification: An indemnification clause typically requires the licensee to indemnify the licensor for any damages caused by the licensee’s misuse of the licensed IP. Indemnification may also cover attorneys’ fees.

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Most Favored Nation (MFN): Also called a Most Favored Customer provision, this clause is used when the licensor agrees to give the licensee the best terms it makes available to any other licensee. A typical example of such a provision states: “All of the benefits and terms granted by licensor herein are at least as favorable as the benefits and terms granted by licensor to any previous buyer licensee.” Right of first refusal (ROFR): Similar to an MFN, an ROFR is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party. Royalty: A royalty, or payment to the licensee, may be negotiated between rights holder and the licensee. A royalty can be as simple as a fixed amount of money for each copy of a book or compact disc sold by the business. Termination: Licenses often have a termination provision that sets out the rights of each party to terminate the agreement. For purposes of due diligence, understanding these terms is necessary to find which licenses are still in effect. It is important to note any formal steps that must be taken to effectuate a termination. For instance, termination clauses typically provide for a notice period. Territory: Because trademark is territorially bound, a license may define the territory, or geographic region, where the license applies.

VI. Marketing the Product: Does the Trademark Cover What Is Sold or Provided?

A. Registration Considerations When registering a trademark, one should think not only about the product or service one is currently providing but also about future uses and how this product or service will be marketed and/ or sold. For example, a designer who plans to sell apparel via

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e-commerce should register his or her trademark in the clothing class as well as the retail and online store services classes. How- ever, just because the product or service will be marketed does not mean that marketing services are being provided, and therefore the marketing class should not be included in the trademark application. URLs, social media handles, hashtags, and catch- phrases should also be taken into consideration. If clothing is being registered, it may be useful to consider registering in other classes (e.g., such as handbags) if there is intent to expand to that area. Do not register in classes that you do not intend to use in the near future because you will not be entitled to protection. Similarly, registered marks that are “in use” should actually be used, as further discussed later in this section. Once the registrant has chosen in which of the 45 classes to register the trademark, the USPTO requires the registrant to provide an identification of the goods or services in the federal trademark application. For example, for the clothing class you cannot simply write “clothing”; rather, you must identify with particularity the type of clothing (e.g., dresses, blouses, trousers, and so on). The description should be complete, although it is often difficult to find the right balance between being broad but accurate—while remembering that the identification cannot be broadened after the application is filed. The identification should not be so narrow that you give up trademark protection, but also not so broad that the trademark will fall into other classes and be rejected by the USPTO. The registrant should make a list of goods or services that are (or are intended to be) sold or provided (a spreadsheet is useful), and this list should be maintained by the company for purposes of due diligence. Also, for purposes of due diligence in contemplation of filing additional trademarks, goods or services that fail to be included in the description on the trademark application should also be kept on record. The USPTO Acceptable Identification of Goods and Services Manual provides a list of pre-approved descriptions that can be selected, but often the description needed is not provided in the manual, so the registrant will need to draft its own.

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Going back to the original example, if you are a designer making and selling apparel online, it may be helpful to look at what other similarly situated designers with a strong established business have done. You can use the Trademark Electronic Search System of the USPTO website to search other registered marks. In most instances, you can simply click on “Basic Word Mark Search,” type in the trademark, and hit “Submit Query” to get a list of the marks, which can be clicked on to view the corresponding class and description that has been registered. Not only will this be helpful in drafting a description, but it may also help you identify additional classes that you might not have considered otherwise.

B. Geographic Considerations Another important initial consideration is geographical scope. Where are you (or where will you be) marketing and selling or providing this product or service? In some instances, the Trade- mark Trial and Appeal Board has allowed two identical trademarks to coexist because each was limited to its own distant and distinct geographic area.69 If you think you may want to expand your business to other jurisdictions, it may be helpful to market your product or service in a broad range of geographic areas. In addition to domestic geographic considerations, registrants should also do their due diligence in registering in other countries (as discussed in the Section IX of this chapter and briefly touched upon later in this section). A spreadsheet should also be kept on

69. Boi Na Braza LLC v. Terra Sul Corp. a/k/a Churrascaria Boi Na Brasa, Con- current Use No. 94002525 (Mar. 26, 2014) [precedential] (plaintiff registered two marks for the term “BOI NA BRAZA” for restaurant services; defendant petitioned to cancel the word mark for “BOI NA BRAZA,” based on priority of use of its mark “BOI NA BRASA” for restaurant services and other related services. The board granted nationwide rights to plaintiff, who was the first to file for a registration, and the party to expand, but the later user of the trademark. The board geographically restricted defendant’s rights to New York and New Jersey, although defendant was the first user of the mark (only in New Jersey), but late to file for a registration and did not expand outside New Jersey for 18 years. The board included New York in defendant’s territory, because it considered that area within defendant’s zone of natural expansion.).

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which geographic locations the trademarks are registered in as well as where they are being marketed.

C. Failure to Register All Necessary Classes At the end of the day, you can always file additional trademark applications—and this is often necessary, which is why, when you search a trademark on TESS, the search usually yields multiple results. However, in some cases there may be a problem. For example, if a registrant selling clothing in the United States fails to register its trademark in China (a first-to-file jurisdiction as opposed to first use in the United States) and someone else registers it, then it would be very difficult to get those rights back. Nevertheless, if marketing has been successful in regions such as the European Union (EU), it is likely that a trademark owner can prove that registration of a trademark by someone else was done in bad faith, depending on the class registrations. The Official Guidelines of the EU International Patent Office (IPO) released the following passage, which in part explains how the EU sepa- rates particular classes while identifying others together: Likewise, luxury goods such as glasses (Class 9) and jewellery (Class 14) are considered to be dissimilar to clothing, footwear and headgear [emphasis added]. The nature and the main purpose of these goods are different. The main function of clothing is to dress the human body whilst the main purpose of glasses is to improve eyesight, and jewels are worn for personal adornment. They do not have the same distribution channels and they are neither in competition nor complementary.70 In most cases, trademark rights do not extend to protect every product or service. For example, if a company only uses the

70. Decisions of 30/05/2011, R 0106/2007-4, OPSEVEN2/SEVEN, § 14; 12/09/2008, R 0274/2008-1, Penalty/PENALTY, § 20; 05/10/2011, R 0227/2011-2, OCTOPUSSY/ OCTOPUSSY ET AL, § 23-26. This legal opinion was confirmed by the European Gen- eral Court (judgment of March 24, 2010, T-364/08).

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trademark “Warbucks” for selling trash bags, then the company cannot enjoin someone else from using “Warbucks” for selling a dissimilar good such as automobiles. This is because the consumer would not expect the trash bag company to also sell automobiles. As similarly noted earlier with regard to geographic considerations, trademark rights are given only in relation to the specific goods or services for which a mark is actually in use and the “natural zone of expansion,” which can also be applied to a new line of product or service. Therefore, trademark rights will extend to cover instances in which someone uses your trademark or something similar to your trademark for goods or services that are the same or similar to those of yours. Finally, the exception is that, if you have done exceptionally well with your marketing and your mark has become so famous that consumers are likely to believe that even the most dissimilar products are somehow associated with, or licensed by, your company, you might have an infringement claim or a dilution claim. However, this extension of rights is granted only to a few truly famous marks, such as Coca-Cola. It is extremely helpful to exercise due diligence in marketing the product to add value and additional protection to your trademark.

D. Why the Trademark Does Not Have to Literally Describe the Product or Service Apple, the multi-billion‑dollar computer company, may be the best example of why a mark that describes or conveys the product is not always the best mark. Like fanciful and coined, arbitrary trademarks enjoy the broadest scope of protection but require a high level of successful marketing to inform consumers that, in the example of Apple, the product they are purchasing is an electronic and not a piece of fruit. In contrast, a suggestive mark such as “Microsoft” may lead a consumer to more quickly identify the product but still requires some higher-level marketing. Finally, descriptive marks are less protectable and require less to inform consumers about what they are purchasing. For example, International Business Machines (IBM), which has now taken on

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secondary meaning, is exactly what it says it is. However, in order to gain recognition and arguably to have the mark take on secondary meaning, IBM’s use in marketing continuously persuaded consumers to place it above competitors. Again, the lesson here is that marketing will add great value to your trademark.

E. Due Diligence in Protecting Your Trademark through Marketing When marketing the product or service, it is imperative to use the trademark in such a way that you are actually protecting the trademark and continually keeping it “in use” so that it is not abandoned. For example, if the company Sunkist wants to continuously use its mark, it is important to place a sticker bearing the Sunkist trademark on all oranges sold. To go back to an earlier point, if Sunkist decides to register an additional trademark application so that it can market and sell juice machines, a consumer would likely expect this product to also be associated with the company. The trademark should not be used in a descriptive way, either by the trademark holder or by any other person, because it may lead to the trademark becoming generic and being canceled. For example, ”aspirin” is now generic and no longer a registered trademark, and trademarks such as Band-Aid and Kleenex are at risk of becoming generic and being canceled. Another way to ensure that you are enforcing your trademark rights is to make sure to use TM, SM, or ® on the product or service when it is used so that others are prevented from raising a defense that they were unaware that you owned the mark. As mentioned previously in this chapter, ® cannot be used until the USPTO has actually approved the mark. This is one area where, again, spreadsheets can be useful to keep track of pending and approved trademark applications. As discussed throughout this section, it is useful to do a general search for your trademark to see if it is used in other classes or in other countries, and then to keep track of that data as well. You should also research the actual use of your list of

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trademarks to determine if the actual use corresponds with the applications and registrations. For example, if a U.S. registration includes ten classes of goods but you can only identify actual use in four classes, recognize that six classes of the registration will be canceled at the next maintenance filing. If a European Union registration exists but products or services have not been sold or provided there for seven years, the registration is subject to cancellation by any third party that raises the nonuse issue. If a trademark is marketed properly, it will increase the value of the intellectual property because it may serve as evidence that will bear on other issues that have been discussed throughout this chapter, such as, inter alia, consumer confusion, dilution, and/or secondary meaning. If a consumer is used to seeing a product marketed in a certain way and there is a competing product that could be infringing, marketing materials may come into play as proof that this is how the company wanted consumers to view the product and that a competing trademark was registered in bad faith. It is also important to have a spreadsheet of all licensing deals so that a brand manager can monitor how a licensee is marketing the products and/or services, and whether the marketing comports with the licensing agreement and the actual trademark that has been licensed. Finally, though it may be obvious, the most important rule when marketing a product or service is to use the trademark exactly as it was registered and the way the specimen was uploaded to the application. Otherwise, your mark may be placed at risk of abandonment.

VII. Internet Domain Names

A. Domain Name Registration and Ownership 1. Basic Terminology: Domains A domain name is a name used to represent an Internet Protocol (IP) address. Multiple basic “levels” of domain names exist. Top- level domains (TLDs), the highest hierarchical level in the domain

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name system, are the suffixes that originally identified the type of organization associated with the IP address, or the country of origin of the user of the domain name (e.g., .com, .gov, .co.uk, etc.).71 Second-level domains are more specific domain names, used to identify a particular website or owner (e.g., mcdonalds.com, columbia.edu).72 Each top-level domain includes many second- level domains (for example, the .edu top-level domain includes columbia.edu, nyu.edu, and myriad others). Top-level domains are either sponsored or unsponsored. Unsponsored domains operate under general policies established for the global Internet community through the Internet Corpo- ration for Assigned Names and Numbers (ICANN).73 Sponsored TLDs are “specialized TLDs” operated by a sponsor that repre- sents a limited community associated with the TLD and that has the responsibility for maintaining the domain.74 For example, the “.gov” top-level domain is a sponsored TLD administered by the General Services Administration, an independent agency of the U.S. government.75 Before 2012, the Internet used twenty-two generic top-level domains (.com, net, .biz, etc.).76 However, in 2012, ICANN77

71. Jennifer R. Dupre, A Solution to the Problem? Trademark Infringement and Dilution by Domain Names: Bringing the Cyberworld in Line with the “Real” World, 87 Trademark Rep. 613 (1997). 72. Joseph P. Liu, Legitimacy and Authority in Internet Coordination: A Domain Name Case Study, 74 Ind. L.J. 587, 591 (1999). 73. See Internet Corporation for Assigned Names and Numbers (ICANN), Top-Level Domains (gTLDs), https://archive.icann.org/en/tlds/. 74. Id. 75. 41 C.F.R. § 102-173.35 (noting the role of the General Services Administration in administering .gov domain names). See also id. § 102-173.30 (“Registration in the dot-gov domain is available to official governmental organizations in the United States including Federal, State, and local governments, and Native Sovereign Nations”). 76. Brandon Marsh, ICANN’t Help Myself: Beneficial Adjustments to the New Ge- neric Top-Level Domain Name Expansion Process, 95 J. Pat. & Trademark Off. Soc’y 195, 195 (2013). 77. ICANN is a nonprofit organization that administers changes of domain name policy under contract with the Department of Commerce. A. Michael Froomkin, Wrong Turn in Cyberspace: Using ICANN to Route around the APA and the Constitution, 50 Duke L.J. 17, 20 (2000).

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implemented a generic top-level domain (gTLD) expansion system, which allows for a potentially unlimited number of generic top-level domains. Under this program, any organization can apply for the right to operate its own new gTLD registries, which represent new domain name suffixes (e.g., .xyz, .jewelry, .cafe).78

2. Registration of Domain Names Registration of a second-level domain (hereinafter referred to as domain name) is handled by an ICANN-accredited registrar or the resellers associated with those registrars.79 The registrar will check whether the domain is available and then offer it to the applicant.80 Once the domain name is registered to the applicant, the applicant holds an intangible property right in the domain name itself.81 However, the ownership of a domain name includes no rights “separate and apart” from those stipulated in the owner’s contract with the registry.82 The owner is bound by the terms and conditions of the registrar with which it registers the domain name, which can include a code of conduct or terms indemnifying the registrar against any action associated with the use of the domain name. The registrant will also pay registration fees to the registrar.83

78. Marsh, supra note 76. For an overview of the new gTLD program, and an overview of the procedures for applying for a gTLD, see ICANN, New Generic Top-Level Domains: About the Program, https://newgtlds.icann.org/en/about/program. 79. ICANN WHOIS, Domain Name Registration Process, https://whois.icann .org/en/domain-name-registration-process (“In order to reserve a domain, a registrant must register it with one of almost a thousand ICANN-accredited registrars”). For a list of ICANN-accredited registrars, see ICANN, ICANN-Accredited Registrars, https:// www.icann.org/registrar-reports/accredited-list.html. 80. ICANN WHOIS, Domain Name Registration Process, https://whois.icann.org/ en/domain-name-registration-process. 81. Kremen v. Cohen, 337 F.3d 1024, 1030 (9th Cir. 2002) (noting that ownership of a domain name constitutes an “intangible property right”). 82. Network Sols., Inc. v. Umbro Int’l, Inc., 259 Va. 759, 770 (2000) (noting that contractual rights with the registrar define the domain name owner’s property rights, and that “a domain name registration is the product of a contract for services between the registrar and the registrant”); see also Dorer v. Arel, 60 F. Supp. 2d 558, 561 (E.D. Va. 1999). 83. Network Sols., Inc. v. Umbro Int’l, Inc., 259 Va. 759 (2000).

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Each registrar contributes to the WHOIS service, which is a free, publicly available directory containing the contact and technical information of registered domain name holders.84 It is important at this stage to ensure that the intended owner of the domain name is listed as the owner of the domain name on the applications. In some cases, site developers or hosts hired to handle domain name registration list themselves as the domain name owners, which makes it more difficult for the actual owners to change hosts.85 The owner of a domain name will typically have to renew that domain name periodically to prevent expiration, unless the owner has signed up for automatic renewal with the registrar.86 Regis- trars are required to send renewal reminders thirty and five days before the expiration of a domain name.87 A domain name owner can elect to renew with the original registrar or can switch to a new registrar that may offer better renewal terms.88

3. Obtaining a Domain Name and Due Diligence Proper due diligence on domain names must include several steps to investigate domain name assets. Some of these steps are discussed in this section. Confirming ownership of the domain name: As mentioned earlier, some domain names are held in the name of a web developer or an employee of the site. The practitioner should confirm, using the WHOIS database89 and copies of the domain name registration application, that the seller or licensor properly

84. ICANN WHOIS, WHOIS Primer, https://whois.icann.org/en/primer. 85. Alan S. Gutterman, Business Transactions Solutions § 129:72 (February 2018 Update). 86. ICANNnews, How Do I Renew My Domain Name?, Youtube, https://www .youtube.com/watch?v=umt3uZmOaAY&feature=youtu.be. 87. ICANN, About Not Receiving Renewal Reminders, https://www.icann.org/ resources/pages/reminders-2013-05-03-en. 88. ICANNnews, supra note 86. 89. There are several online services that allow users to search the WHOIS database and its history. See, e.g., DomainTools, http://domaintools.com/; domainIQ, https://www.domainiq.com/.

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owns the domain names. The practitioner may also want to check the history of the domain name ownership, through the WHOIS database, to ensure that the domain name registration has not been recently transferred. Confirming ownership of the website: If the transfer also involves the transfer of a website along with a domain name, the practitioner should also seek to determine the ownership of the copyright in the website itself. If the seller or licensor of the website outsourced the creation of the site to a web developer, it is possible that the developer retains copyright in the work completed. The developer may have transferred the copyright to the client in a written assignment, or the client may be using the site under an express or implied license from the web developer. Because these licenses are not always automatically transfer- rable, the buyer or licensee may need to acquire the copyright owner’s consent before using the site and the underlying copyright. Additionally, the buyer or licensee should investigate other potential legal agreements arising from the linking, co-branding, or other relationships with other sites. Determining the registrar’s requirements for transfer: Different registrars will have different rules governing the transfer of domain name rights. The practitioner should understand the process of transferring ownership of each domain name by investigating which registrar registered the original domain name application, and the specific rules of that registrar. Determining renewal requirements: The practitioner will also want to investigate when the domains to be acquired will have to be renewed with their registrars.

B. Domain Names and Trademarks The system of domain names intersects with trademark law in a number of ways.90 Domain names can act as a trademark if they

90. John H. Rees, Protecting Your Brand in a Complicated Internet Landscape, Bus. L. Today 1, 1 (Aug. 2016) (“In the online business world, trademarks and domain names have become irrevocably connected”).

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can identify a product or service on the Internet. The USPTO has published an examination guide that provides guidelines on the rules for registering domain names as trademarks.91 The ease of registering a domain name creates the possibility that individuals and speculators will obtain ownership of domain names that overlap with trademarks used by established busi- nesses.92 The new ICANN gTLD program, which exponentially increases the number of possible domain names (e.g., mcdonalds. xys, mcdonalds.burger, etc.), will exacerbate the problem of cyber squatting, which is the registration of trademarked domain names by parties other than the trademark owner.93 The risks of cyber squatting for trademark owners include pharming or spoofing (in which a fraudulent website is set up and malicious code is used to direct unsuspecting Web users to the fraudulent website), loss of goodwill (domain names that resemble trademarks may go to blank or poorly created websites, which leads to a loss of goodwill if customers accidentally access these websites), or tarnishment (the use of websites with domain names similar to trademarks to discourage or tarnish the brand associated with the trademark).94 Trademark owners can take several defensive actions to deal with cybersquatting. The trademark owner should consider registering all of the owner’s core trademark assets as second-level domain names whenever possible. The trademark owner can also register federally registered trademarks in the Trademark Clearinghouse (TDCH), a service that will watch for requests to register domain names that are identical to trademarks already registered in the clearinghouse.95 The TDCH will notify the

91. See U.S. Patent and Trademark Office, Examination Guide No. 2-99 (Sept. 1999). 92. See, e.g., Joshua Quittner, Billions Registered, Wired.com (Oct. 1, 1994, 12:00 pm), https://www.wired.com/1994/10/mcdonalds/ (describing how a Wired.com re- porter registered the domain “mcdonalds.com” before McDonalds Corporation did, in 1994). 93. Rees, Protecting Your Brand, supra note 90, at 2. 94. Id. 95. Id. at 4. See also Trademark Clearinghouse, http://www.trademark-clearinghouse .com/.

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applicant that the requested domain includes a federally registered trademark, and if the applicant proceeds with the registration, TDCH will notify the trademark owner of the registration.96 Registering a trademark with the TDCH also allows the trademark owner priority when a new top-level domain is launched through the ICANN’s gTLD program (e.g., .burger), so that the trademark owner can acquire the domain associated with its trademark without competing with speculators (e.g., McDonalds Corporation will have a priority right to register mcdonalds.burger). The trademark owner can also use the Uniform Domain Name Dispute Resolution Policy, which is a dispute resolution mechanism for forcing the transfer of a domain name to the trademark owner if the infringing domain name is registered and used in bad faith.97 The dispute resolution mechanism takes the form of an arbitration at an organization such as the World Intellectual Property Organization (WIPO).98 The trademark owner can also consider other dispute resolution options.99 The trademark owner can also pursue the registrant of the infringing domain name in court. Conflicts before 1999 were resolved in court using the Federal Trademark Dilution Act (FTDA).100 Additionally, the federal Anti-Cybersquatting Protec- tion Act (ACPA)101 provides the trademark owner with a cause of action in cases of domain name registrants with a bad-faith intent to profit from the brand owner’s trademark and registries.

96. Rees, Protecting Your Brand, supra note 90, at 4. 97. Id. 98. Id. 99. For example, Uniform Rapid Suspension offers a lower-cost, faster path to relief for rights holders, but only results in the suspension, rather than the transfer, of the use of the problematic domain name. See ICANN, Uniform Rapid Suspension (URS), https://www.icann.org/resources/pages/urs-2014-01-09-en. 100. Lanham Act § 43(c)(1), 15 U.S.C. § 1125(c)(1) (2006). Congress revised the FTDA in 2006 with the Trademark Dilution Revision Act of 2006 (TDRA) Pub. L. No. 109-312, 120 Stat. 1730 (2006). 101. See Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) (2006). For an overview of ACPA case law, see Darryl C. Wilson, Battle Galactica: Recent Advantages and Retreats in the Struggle for the Preservation of Trademark Rights on the Internet, 12 J. High Tech. L. 1, at § II.B (2011).

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VIII. Special Considerations Regarding Trademark Infringement Procedure

A. Trademark Infringement Procedure When conducting due diligence on a seller’s trademarks, the buyer should identify all pending litigation involving the seller. The buyer should also evaluate the merits of the cases to determine potential exposure. In general, an infringement of a trademark may give rise to causes of action on several legal grounds. As discussed previously, a trademark need not be registered with the USPTO to be subject to protection.102 Trademark protection also arises from state regulations and common law.103 Therefore, a trademark action can stem from a violation of state, federal, or common law. Federal violations of the Lanham Act include a Section 32(a) violation for federal trademark infringement, under 15 U.S.C. § 1114(i); and Section 43(a) and 44 violations for federal unfair competition, under 15 U.S.C. §§ 1125‑1126. Both registered marks and unregistered marks receive protection based on the same rationale: to protect consumers from a “likelihood of confusion” as to a product’s source and quality.

1. Elements of a Trademark Infringement Action The elements of a trademark infringement or unfair competition action arising from trademark infringement are: (1) that the plaintiff possesses a mark; (2) that the defendant used the mark; (3) that the defendant’s use of the mark occurred “in commerce”; (4) that the defendant used the mark “in connection with the sale, offering for sale, distribution, or advertising” of goods or services; and (5) that the defendant used the mark in a manner likely to confuse consumers.104 Often, there is no dispute over the first three elements of the action.

102. See Section V, supra. 103. Id. 104. People for Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 364 (4th Cir. 2001) (holding that infringer committed trademark infringement in bad faith under ACPA by using “PETA” trademark in domain name peta.org, in a commercial manner, intending to confuse, mislead, and divert Internet users into accessing his website).

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Though it is typically clear when a party has used a mark in connection with the sale of goods or services, parties may encounter some dispute when the allegedly wrongful activity did not involve the direct sale, distribution, or advertising of any goods or services. In fact, this element is satisfied when the infringing party prevented consumers from using or obtaining the plaintiff’s goods or services. For example, in People for Ethical Treatment of Animals v. Doughney, the Fourth Circuit held that the defendant used PETA’s mark in connection with goods or services simply by constructing a website that directed users away from PETA’s official website.105

2. Likelihood of Confusion The most challenging and disputed element of an infringement action is whether defendants’ use of the protected mark caused a “likelihood of confusion” among “ordinary consumers” as to the source or sponsorship of the goods.106 To determine whether a likelihood of confusion exists, a court should not consider “how closely a fragment of a given use duplicates the trademark,” but must instead consider “whether the use in its entirety creates a likelihood of confusion.”107 Courts look to a number of factors to gauge likelihood of confusion. Although the factors differ somewhat among circuits, they

105. Id.; see also OBH, Inc. v. Spotlight Magazine, Inc., 86 F. Supp. 2d 176 (W.D.N.Y. 2000) (holding that Internet website operator’s use of “thebuffalonews.com” as domain name for site used to parody and criticize The Buffalo News newspaper was likely to cause consumer confusion, for purpose of obtaining preliminary injunction in newspaper’s trademark infringement suit); Planned Parenthood Fed’n of Am., v. Bucci, 42 U.S.P.Q.2d 1430, 1997 WL 133313 (S.D.N.Y. 1997) (granting Planned Parenthood a preliminary injunction against Richard Bucci from doing business as Catholic Radio, from using the domain name “plannedparenthood.com,” and from identifying his website on the Internet under the name “www.plannedparenthood.com”). 106. Anheuser-Busch, Inc. v. L & L Wings, Inc., 962 F.2d 316, 318 (4th Cir. 1992) (citing 2 J. McCarthy, Trademarks and Unfair Competition § 23:28 (2d ed.1984); holding that T-shirt advertising a beach, which adapted the general format of a trademarked beer label without mentioning name of beer and parodied phrases on the label advertising beer, did not infringe manufacturer’s trademark on grounds that beach T-shirt represented an attempt to draw on “commercial magnitude” of trademark). 107. Id. at 319.

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typically include: (1) the strength of the protected mark, including secondary meaning; (2) similarity between the original mark and the allegedly infringing mark; (3) the similarity or proximity of the competing products; (4) evidence of consumers’ actual confusion as to the source; (5) the sophistication of the audience; and (6) the defendant’s intentions.108 The likelihood-of-confusion test is fact specific, with each element evaluated by the factfinder. Different jurisdictions may also weigh some factors more heavily than others. For example, the Third Circuit has held, in a trade dress case, that the first Lapp factor—the degree of similarity between the plaintiff’s trade dress and the allegedly infringing trade dress—is the most important factor in a likelihood-of-confusion analysis, especially where the goods are directly competing.109 An appellate court may reverse a

108. See, e.g., AMF v. Sleekcraft Boats, 599 F.2d 341, 348 (9th Cir. 1979) (identifying the Ninth Circuit factors for likelihood of confusion: strength of the mark, proximity of the goods, similarity of the marks, evidence of actual confusion, marketing channels used, type of goods and the degree of care likely to be exercised by a purchaser, alleged infringer’s intent in selecting the mark, and likelihood of expansion of the product lines); Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983) (identifying Third Circuit factors for likelihood of confusion: “1) the degree of similarity between the owner’s mark and the alleged infringing mark; (2) the strength of the owner’s mark; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time the defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark; (6) the evidence of actual confusion; (7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through the same media; (8) the extent to which the targets of the parties’ sales efforts are the same; (9) the relationship of the goods in the minds of consumers because of the similarity of function; (10) other facts suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant’s market, or that he is likely to expand into that market”); Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792 (9th Cir. 2003) (First Amendment fair use defense case). 109. McNeil Nutritionals LLC v. Heartland Sweeteners LLC, 511 F.3d 350 (3d Cir. 2007) (a finding of similarities in trade dress, including color scheme, between national-brand artificial sweetener and private-label sweetener marketed under two store brands, did not clearly weigh in favor of finding likelihood of confusion, and thus national-brand marketer had not shown likelihood of success required for preliminary injunction in its Lanham Act trade dress infringement action; store brands were well known to shoppers in those stores, store names were represented prominently on their respective packages by distinctive design elements, and store brands’ product name placement differed from national brand’s).

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district court’s likelihood-of-confusion analysis when the relevant factors are not properly set forth or weighed.110 This section briefly discusses each of the six factors previously identified. Strength of the mark: To determine the strength of a mark, courts look to (1) the inherent features of the mark contributing to its distinctiveness or conceptual strength and (2) the factual evidence of the mark’s commercial strength or of marketplace recognition of the mark.111 The distinctiveness of a mark also plays a role in its strength; arbitrary or fanciful marks may be stronger than descriptive marks that have obtained secondary meaning. Similarity of the marks: Marks are confusingly similar “if ordinary consumers would likely conclude that [the two products] share a common source, affiliation, connection or sponsorship.”112 The proper test is not a side-by-side comparison but rather whether the marks create the same overall impression when viewed separately.113 Overall impression is created by the sight, sound, and meaning of the mark.114 Product similarity: When ruling on the factor of product similarity, a court looks at “how similar, or closely related, the

110. Sabinsa Corp. v. Creative Compounds, LLC., 609 F.3d 175, 183 (3d Cir. 2010) (holding that competitor’s use of the mark “Forsthin” was likely to create confusion in the marketplace when compared to supplier’s “ForsLean” mark). See also Kos Pharms. v. Andrx Corp., 369 F.3d 700, 711–12 (3d Cir. 2004) (relevant “confusion” for purpose of determining whether “Advicor” trademark for prescription anticholesterol drug was being infringed by competitor’s use of “Altocor” mark for similar drug was not merely whether prescriptions were likely to be misfilled; source-of-origin confusion was also relevant). 111. See A&H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d 198, 221 (3d Cir. 2000). 112. Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 477 (3d Cir. 1994) (considering relationship of goods in peat moss manufacturer’s trademark infringement and unfair competition action against fertilizer manufacturer, question was whether consumer who bought peat moss manufacturer’s product could reasonably assume that manufacturer had expanded its offerings to include fertilizer or, as would be more likely in case of reverse confusion, whether consumer who bought or sought advertising for fertilizer manufacturer’s product could reasonably assume that same source also offered peat moss manufacturer’s product that consumer saw in stores). 113. Kos, 369 F.3d at 713. 114. See A & H Sportswear, 237 F.3d at 217.

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products are.”115 If the products “fall under the same general product category but operate in distinct niches,” they will probably not be closely related.116 “The question is whether the consumer might . . . reasonably conclude that one company would offer both of these related products.”117 Evidence of actual confusion: Courts recognize that evidence of actual confusion is frequently difficult to find. As a result, most courts have determined that demonstration of actual confusion is not necessary to achieve a likelihood of success.118 Evidence of actual confusion is nevertheless highly probative of a likelihood of confusion.119 Sophistication of the audience: “When consumers exercise heightened care in evaluating the relevant products before making purchasing decisions, courts have found there is not a strong likelihood of confusion. Where the relevant products are expensive, or the buyer class consists of sophisticated or profes- sional purchasers, courts have generally not found Lanham Act violations.”120 However, where the group of buyers is a combination

115. Kos, 369 F.3d at 723. 116. Checkpoint Sys., Inc. v. Check Point Software Techs., 269 F.3d 270, 288 (3d Cir. 2001) (holding that the district court did not clearly err in finding that parties’ products were unrelated even though both fell under the broader category of “corpo- rate security,” where plaintiff focused on physical security and defendant focused on information and computer security). 117. Fisons Horticulture, 30 F.3d at 481. 118. See id. at 472. 119. 1-800 Contacts Inc. v. Lens.com Inc., 722 F.3d 1229 (10th Cir. 2013) (Internet advertising by competitor’s affiliates was unlikely to cause initial-interest confusion among consumers seeking retailer’s contact lenses, and thus there was no trademark infringement under Lanham Act as result of affiliates’ use of advertising in which search engine displayed competitor’s ad when consumers searched using keywords similar to retailer’s registered “1800CONTACTS” service mark; fewer than 1 percent of consumers searching with challenged keywords clicked on competitor’s ad). 120. Checkpoint Sys., 269 F.3d at 284 (holding that no likelihood of direct marketplace confusion existed in computer software company’s use of term “checkpoint” in the marketing of its products; although term “checkpoint” was registered trademark of physical article security provider and there was initial-interest confusion, consumers exercised heightened degree of care in evaluating the products and making purchasing decisions, and there was no evidence of actual customer confusion).

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of professionals and ordinary consumers, the class as a whole is not held to the higher standard of care. Expensive items are often purchased with a higher standard of care. Intent of the defendant: Although evidence of a defendant’s intent is not a prerequisite for finding a Lanham Act violation, such evidence weighs heavily in favor of finding a likelihood of confusion. In evaluating this factor, courts must look at whether the defendant chose the mark to intentionally confuse consumers, and thereby capitalize on the senior user’s goodwill, and whether the defendant gave adequate care to investigating its proposed mark.121 “[A] defendant’s mere intent to copy, without more, is not sufficiently probative of the defendant’s success in causing confusion to weigh such a finding in the plaintiff’s favor; rather, defendant’s intent will indicate a likelihood of confusion only if an intent to confuse consumers is demonstrated via purposeful manipulation of the junior mark to resemble the senior’s.”122 For additional guidance with regard to a particular jurisdiction, model jury instructions provide some insight. For example, the following instructions from the Ninth Circuit discuss how the factfinder should consider each factor: (1) Strength or Weakness of the Plaintiff’s Mark. The more the consuming public recognizes the plaintiff’s trademark as an indication of origin of the plaintiff’s goods, the more likely it is that consumers would be confused about the source of the defendant’s goods if the defendant uses a similar mark. (2) Defendant’s Use of the Mark. If the defendant and plaintiff use their trademarks on the same, related, or complementary kinds of goods[,] there may be a greater likelihood of confusion about the source of the goods than otherwise.

121. See Kos, 369 F.3d at 721. 122. A & H Sportswear, 237 F.3d at 225–6.

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(3) Similarity of Plaintiff’s and Defendant’s Marks. If the overall impression created by the plaintiff’s trademark in the marketplace is similar to that created by the defendant’s trademark in [appearance,] [sound,] [or] [meaning], there is a greater chance [that consumers are likely to be confused by defendant’s use of a mark] [of likelihood of confusion]. [Similarities in appearance, sound, or meaning weigh more heavily than differences in finding that marks are similar.] (4) Actual Confusion. If use by the defendant of the plaintiff’s trademark has led to instances of actual confusion, this strongly suggests a likelihood of confusion. However, actual confusion is not required for a finding of likelihood of confusion. Even if actual confusion did not occur [or has not yet occurred], the defendant’s use of the trademark may still be likely to cause confusion. As you consider whether the trademark used by the defendant creates for consumers a likelihood of confusion with the plaintiff’s trademark, you should weigh any instances of actual confusion against the opportunities for such confusion. If the instances of actual confusion have been relatively frequent, you may find that there has been substantial actual confusion. If, by contrast, there is a very large volume of sales, but only a few isolated instances of actual confusion[,] you may find that there has not been substantial actual confusion. (5) Defendant’s Intent. Knowing use by [the] defendant of the plaintiff’s trademark to identify similar goods may strongly show an intent to derive benefit from the reputation of the plaintiff’s mark, suggesting an intent to cause a likelihood of confusion. On the other hand, even in the absence of proof that the defendant acted knowingly, the use of plaintiff’s trademark to identify similar goods may indicate a likelihood of confusion.

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(6) Marketing/Advertising Channels. If the plaintiff’s and defendant’s [goods] [services] are likely to be sold in the same or similar stores or outlets, or advertised in similar media, this may increase the likelihood of confusion. (7) Consumer’s Degree of Care. The more sophisticated the potential buyers of the goods or the more costly the goods, the more careful and discriminating the reasonably prudent purchaser exercising ordinary caution may be. They may be less likely to be confused by similarities in the plaintiff’s and defendant’s trademarks. (8) Product Line Expansion. When the parties’ products differ, you may consider how likely the plaintiff is to begin selling the products for which the defendant is using the plaintiff’s trademark. If there is a strong possibility of expanding into the other party’s market, there is a greater likelihood of confusion.123

B. Trademark Dilution In addition to bringing an action for infringement, owners of trademarks can also bring an action for trademark dilution under either federal or state law. In order for a plaintiff to establish a dilution action, it must establish the following three elements: (1) show that its mark is famous; (2) that the defendant used the mark in commerce, and (3) that the use can cause dilution of the famous mark.124

123. Ninth Circuit Court of Appeals, Manual of Model Civil Jury Instructions 15:16, http://www3.ce9.uscourts.gov/jury-instructions/node/244. 124. See Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 879 (9th Cir. 1999) (holding that “Avery” and “Dennison” trademarks used by seller of office products were not “famous,” and thus were not entitled to protection from dilution under federal or California law, notwithstanding evidence of extensive advertising and sales, allegedly international operations, and consumer awareness, as mark was not shown to be more than merely distinctive, seller and defendant user of marks did not have overlapping channels of trade, and there was widespread use of mark by third parties).

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The first consideration is fame. As previously discussed in Section III.D, a dilution claim can be brought only if the mark is famous.125 In deciding whether a mark is famous, the Federal Dilution Act lists eight nonexclusive considerations for courts to consider: (1) the degree of inherent or acquired distinctiveness;126 (2) the duration and extent of use; (3) the amount of advertising and publicity; (4) the geographic extent of the market; (5) the channels of trade; (6) the degree of recognition in trading areas; (7) any use of similar marks by third parties; (8) whether the mark is registered.127 Under state law, a mark need not be famous in order to be potentially diluted. Instead, a dilution claim is available if: (1) the mark has “selling power” or, in other words, a distinctive quality; and (2) the two marks are substantially similar.128 The use-in-commerce analysis is similar to commercial use elsewhere in trademark actions. Typically, it requires use in connection with the sale or marketing of a good or service. In other words, the defendant must be “capitalizing on its trademark status.”129 The Ninth Circuit has found that an example of use that did not rise to commercial use was where a defendant purchased a domain name for the purpose of cybersquatting. The court reasoned that such cybersquatting, however, was not use of

125. The Federal Trademark Dilution Act offers a dilution action “only to those marks which are both truly distinctive and famous, and therefore most likely to be adversely affected by dilution.” S. Rep. No. 100-515, at 42. 126. See Section III.C for further discussion. 127. 15 U.S.C. § 1125(c). 128. Mead Data Cent., Inc. v. Toyota Motor Sales, U.S.A., 875 F.2d 1026 (2d Cir. 1989) (holding that under New York law, automobile manufacturer’s use of mark “Lexus,” for its new luxury automobile, did not dilute mark “Lexis” used by company providing computerized legal research service; marks were not substantially similar, products did not compete with each other, and “Lexis” mark was not strong outside of market for company’s services). 129. Panavision Int’l Ltd. P’ship v. Toeppen, 141 F.3d 1316, 1325 (9th Cir. 1998) (owner of marks “Panavision” and “Panaflex” brought action against defendant; held that defendant was subject to specific jurisdiction in California; defendant’s registration of plaintiff’s marks in his Internet domain names was “commercial use” under dilution statutes, and defendant’s registration of marks diluted those marks).

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the “trademarks qua trademarks as required by the caselaw to establish commercial use.”130 Finally, dilution itself may occur by either tarnishment or blurring. Proof of actual dilution must exist for this element to be met.131 Dilution by tarnishment occurs where use of the secondary mark would negatively affect consumers’ view of the senior mark. Typical examples include situations in which a licensee sells an inferior version of the licensed product, using the licensor’s trademark. In one case, Ben & Jerry’s asserted a dilution claim against the producers of an adult movie series entitled Ben & Cherry’s.132 Dilution by blurring occurs where the defendant’s use of the mark would diminish the uniqueness of the mark. An example is where a defendant adopts the use of a famous trademark—Coca-Cola, Xerox—and applies it to a completely unrelated good.133 A key distinction between dilution actions and infringement actions is that likelihood of confusion is not necessary to establish a dilution claim. However, courts recognize some parallels between the infringement factors and the dilution factors.134

C. Fair Use Defense Defenses to a trademark action are similar to defenses in the copy right context. One important defense is fair use. The Lanham Act

130. Avery Dennison Corp., 189 F.3d at 880. 131. Prior to enactment of the FTDRA, courts had split on whether the owners of famous marks had to prove “actual” dilution, or merely a “likelihood” of dilution. In 2003, the Supreme Court resolved the split in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003), holding that proof of actual dilution was required. Speaking to concerns about the expense of “often unreliable” consumer surveys and other means of demonstrating actual dilution, the Court held that such direct evidence “will not be necessary if actual dilution can reliably be proved through circumstantial evidence.” 132. Ben & Jerry’s Homemade Inc. v. Rodax Distribs., Inc, No. 12-06734 (S.D.N.Y. 2012). The parties settled shortly after the case was filed. 133. See Perfumebay Inc. v. eBay, Inc., 506 F.3d 1165 (9th Cir. 2007) (holding that the use of “Perfumebay” diluted the eBay trademark); compare Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 559 F. Supp. 2d 472 (S.D.N.Y. 2008) (holding that owner failed to demonstrate a likelihood of dilution by either blurring or tarnishment). 134. See Avery Dennison Corp., 189 F.3d at 879.

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contains a statutory fair use provision. However, because of the narrow scope of the statutory provision, three additional, common law categories have been created by courts in which use of another’s trademark may be considered fair use. These are nominative fair use, comparative advertising as fair use, and parody as fair use.

1. Statutory Fair Use The statutory fair use clause allows use of a trademark “which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin.”135 A prototypical example of statutory fair use is “where the defendant has used the plaintiff’s mark to describe the defendant’s own product.”136 The Supreme Court has recognized statutory fair use as a viable defense even where likelihood of confusion exists.137 However, the Supreme Court left the door open to such consideration by saying that its holding does not preclude a court from considering the extent of any likelihood of confusion in assessing whether a defendant’s use was objectively fair.138 A defense of statutory fair use may fail where the trademark is used too prominently. For example, in Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947 (7th Cir. 1992), the owner

135. 15 U.S.C. § 1115(b)(4). 136. New Kids on the Block v. News Am. Publ’g Inc., 971 F.2d 302, 308 (9th Cir. 1992) (fact that polls using musical group’s trademark were conducted by newspapers with established track record of polling readers and reporting results as part of later news stories barred claims by musical group for commercial and common law misap- propriation under California law); see also Zatarains, Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d 786 (5th Cir. 1983) (holding that the term “Fish-Fri,” which was name under which plaintiff’s coating mix was marketed, was a descriptive term that had acquired a secondary meaning in the New Orleans area and was therefore entitled to trademark protection; however, defendants were entitled to fair use of the term “fish- fry” to describe a characteristic of their goods). 137. KP Permanent Make‐Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111 (2004) (“It is only when a plaintiff has shown likely confusion by a preponderance of the evidence that a defendant could have any need of an affirmative defense”). 138. On remand, the Ninth Circuit Court of Appeals held that “the degree of customer confusion remains a factor in evaluating fair use.” KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 609 (9th Cir. 2005).

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of several incontestable registrations for the mark THIRST‐AID, for a variety of beverage products and syrups, sued Quaker Oats for its use of the phrase “Gatorade is Thirst Aid for That Deep Down Body Thirst” in advertising and promotion. The Seventh Circuit found that Quaker Oats used THIRST‐AID as an “attention‐getting symbol,” which often appeared more prominently and in larger type than the obvious trademark GATORADE, and therefore did not fall under the protection of statutory fair use.

2. Nominative Fair Use Nominative fair use, in contrast to statutory fair use, occurs “where the defendant uses a trademark to describe the plaintiff’s product, rather than its own.”139 A defendant may use a nominative fair use defense if the following three criteria are met: “First, the product or service in question must be one not readily identi- fiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.”140 For example, in New Kids on the Block, the Ninth Circuit held that there was nominative fair use of the “New Kids on the Block” trademark where a newspaper held a write-in quiz that asked, “[a newspaper] had printed a poll saying New Kids on the Block are pop’s hottest group. Which of the five is your fave? Or are they a turn off?”141 Whereas the Ninth Circuit applies the nominative fair use standard liberally, other circuits have gradually come to recognize this defense as well. Most recently, the Third Circuit created

139. New Kids on the Block, 971 F.2d at 308; see also Century 21 Real Estate Corp. v. Lendingtree, Inc., 425 F.3d 211 (3d Cir. 2005) (holding that changes made by operator of Internet real estate referral network to allegedly infringing language on its website did not moot trademark infringement action brought by real estate companies referred to in the website; modified language was still potentially infringing because it still referenced the companies’ marks, and finding of mootness would have permitted operator to return to its old ways after the threat of a lawsuit had passed). 140. New Kids on the Block, 971 F.2d at 308. 141. Id.

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a two‐step approach to the nominative fair use analysis. First, a plaintiff must establish that confusion is likely through the application of an abbreviated likelihood-of-confusion test. Sec- ond, the defendant would have the opportunity to establish nominative fair use based on a variation on the New Kids three‐part test.142

3. Comparative Advertising as Fair Use As in the nominative fair use cases just discussed, comparative advertising involves cases in which a trademark of a competitor is used to refer to a competitor’s goods. Because comparative advertising is generally an obvious comparison of competing products (for example, “8 out of 10 doctors surveyed prefer X brand toothpaste to Y brand toothpaste”), there is little likelihood of confusion as to the source of the ad. Because there would be no likelihood of confusion, comparative advertising, in and of itself, is generally not actionable.143 Comparative advertising that is a parody may, however, result in a penalty when the advertising casts false light on the competitor’s product. For example, in Wendy’s Inter- national, Inc.,144 Wendy’s sued a competing fast food company for portraying a satirical Wendy character in its ads. Although the court found the commercials to be inoffensive, entertaining, and

142. Century 21 Real Estate Corp., 425 F.3d at 211 (establishing the following three elements for nominative fair use: 1. Is the use of plaintiff’s mark necessary to describe (1) plaintiff’s product or service and (2) defendant’s product or service? 2. Is only so much of the plaintiff’s mark used as is necessary to describe plaintiff’s products or services? 3. Does the defendant’s conduct or language reflect the true and accurate relationship between plaintiff and defendant’s products or services?). 143. See, e.g., Cumberland Packing Corp. v. Monsanto Co., 32 F. Supp. 2d 561 (E.D.N.Y. 1999) (holding that artificial sweetener manufacturer’s use of competitor’s trademark on its box of saccharin-based sweetener did not give rise to likelihood of confusion as to parties’ products, for purposes of application for preliminary injunction based on claims for trademark infringement and false designation of origin; name of manufacturer’s product appeared in letters vastly larger and more prominent than name of competitor’s product, and competitor’s trademark appeared with a comparative advertisement stating “Compare’N Save!” and then, “same sweetener as [competitor’s] at a SWEETER PRICE”). 144. Wendy’s International, Inc. v. Big Bite, Inc., 576 F. Supp. 816 (S.D. Ohio 1983).

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light‐hearted spoofs, it reluctantly issued a preliminary injunction because Wendy’s had met its burden of “showing that the disputed advertisement ‘tend[s] to create a false impression.’”145 Given Big Bite’s motives, “a strong inference of probable confusion arises, and all doubts are resolved against the defendant.”146

4. Parody Defense As with copyright, courts recognize the importance of parody for artistic endeavor. “Parody is a humorous form of social com- mentary and literary criticism that dates back as far as Greek antiquity.”147 However, as with copyright, the defendant’s mere assertion that the allegedly infringing work is a satire will not mean that the use is automatically fair and noninfringing. Courts must determine if the work is in fact a parody and therefore protected by the fair use defense. Courts typically apply the parody defense to trademark infringement cases in the case where a trademark “transcend[s] [its] identifying purpose” to “enter public discourse and become an integral part of our vocabulary.”148 “Where a mark assumes such cultural significance, First Amendment protections come into play.”149

145. Id. at 822. 146. Id. 147. LL Bean, Inc. v. Drake Publ’g Inc., 811 F.2d 26, 28 (1st Cir.), cert. denied, 483 U.S. 1013 (1987) (deciding that application of Maine’s antidilution statute to magazine’s noncommercial parody of trademark violated the First Amendment; magazine had not used mark to identify or market goods or services but solely to identify owner of trademark as object of its parody). 148. Mattel v. MCA Records, 296 F.3d 894, 900 (9th Cir. 2002) (holding that music companies’ use of “Barbie” mark in song was not an infringement of toy manufacturer’s trademark associated with doll; use of mark in song title was relevant to the underlying work (namely, the song itself), song was about manufacturer’s doll and the values band claimed she represented, song title did not explicitly mislead as to the source of the work, and the only indication that toy manufacturer might have been associated with the song was use of “Barbie” in the title). 149. Mattel v. Walking Mountain Prods., 353 F.3d 792 (9th Cir. 2003) (holding that commercial artist’s use of toy manufacturer’s “Barbie” mark in titles of parodic photographs and on his website was not diluting; parody was noncommercial speech protected by First Amendment).

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Courts accordingly apply a balancing test to establish the parody defense.150 Under that test, an infringement exists where “the public interest in avoiding consumer confusion outweighs the public interest in free expression.”151 If the likelihood of confusion does not outweigh the public interest in free expression, then the work may be protected by the parody defense. For example, the Ninth Circuit found that a photographer who took photos of Barbie dolls in untraditional poses was commenting on the Barbie product, and thus no consumer would confuse his photographs as originating from Mattel, the owner of the Bar- bie trademark.152 Therefore, the photographer did not infringe on Mattel’s trademark. Finally, defenses available in other torts are also available in copyright infringement actions. They include: (1) the three- year statute of limitations;153 (2) res judicata and collateral estoppel; (3) unclean hands; (4) laches; (5) de minimis use; and (6) estoppel.

D. Remedies for Violations of the Lanham Act The Lanham Act provides for both injunctive relief and money damages, as well as attorneys’ fees and costs. Specific penalties depend on whether infringement was willful and other technical requirements.154 When conducting or reviewing any trademark litigation that a seller company might be involved in, it

150. Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989) (holding that title of movie “Ginger and Fred” gave no explicit indication that Ginger Rogers endorsed the film or had role in producing it, and thus was not false advertising of sponsorship or endorsement in violation of Lanham Act; in context of allegedly misleading titles of movies using celebrity’s name, balance of public interest in avoiding consumer confusion against public interest in free expression will normally not support application of Lanham Act unless title has no artistic relevance to underlying work whatsoever or, if it has some artistic relevance, unless title explicitly misleads as to source or content of work). 151. Id.; see also Walking Mountain Prods., 353 F.3d at 792 (adopting Second Circuit’s balancing test for the Ninth Circuit). 152. Walking Mountain Prods., 353 F.3d at 810. 153. 17 U.S.C. § 507. 154. 15 U.S.C. § 1114.

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is important to assess the potential liability that any lawsuits expose the company to.

1. Injunctions As with copyright violations, a federal court may grant temporary and final injunctions in order to prevent and restrain trademark infringement.155 These injunctions may be temporary, preliminary, permanent, or final, depending on the stage of litigation.156 Typically, a plaintiff may seek a temporary restraining order (TRO) when it first brings the action. Courts can decide whether to issue TROs on an ex parte basis. A plaintiff may also move for a preliminary injunction pursuant to the Federal Rules of Civil Procedure to request an injunction before the court has entered a final judgment.157 Finally, a court may enter a permanent injunction at the end of the litigation. To determine whether an injunction is necessary, courts perform a four-step inquiry. First, they must assess the likelihood of success on the merits, or whether the plaintiff has established a case of trademark infringement depending on the factors identified in Section VIII.A. Second, they must look at irreparable harm. Irreparable harm is typically nonmonetary harm, or harm that cannot be remedied by money alone.158 Third, courts consider the irreparable harm to the defendant. Finally, they must consider how the injunction affects the public interest.159 Establishment of irreparable harm requires an actual showing of irreparable harm. For many years, a prima facie case of copyright infringement established a presumption of irreparable

155. 15 U.S.C. § 1114(2). 156. Fed. R. Civ. P. 65. 157. Plaintiffs must also post a bond when they request a TRO or a preliminary injunction in case the injunction was improperly entered and the defendant is damaged. 158. Universal Athletic Sales Co. v. Salkeld, 340 F. Supp. 899 (W.D. Pa. 1972), vacated, 511 F.2d 904 (3d Cir. 1975) (holding that evidence established that defen dants’ material was copied from plaintiff’s copyrighted wall charts and coaches’ train- ing manuals illustrating use of plaintiff’s gymnasium exercising equipment). 159. Id.

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harm.160 However, in 2006, in eBay Inc. v. MercExchange, LLC,161 the Supreme Court held that courts must apply this four-factor test to cases of patent infringement, thereby raising the bar for injunctions in the patent context. Since then, several courts of appeals have used the eBay decision to hold that there is no presumption of irreparable harm upon a prima facie showing of a trademark infringement.162

2. Money Damages Section 35 of the Lanham Act, 15 U.S.C. § 1117, provides monetary remedies for trademark infringement, unfair competition, and willful trademark dilution. Subsection 1117(a) allows for the recovery of a defendant’s profits, any damages sustained by the plaintiff, costs of the action, and, “in exceptional cases,” the plaintiff’s attorney fees. Subsection 1117(b) applies with respect to violations that involve the intentional use of a known counterfeit mark, and provides for treble damages and attorney’s fees “unless the court finds extenuating circumstances.” The use of counterfeit marks calls for greater damages.163 The Lanham Act defines a counterfeit mark as, in relevant part,

160. See, e.g., Apple Computer Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3d Cir. 1983) (holding that even without presumption of irreparable harm generally applied in copyright infringement actions, jeopardy to copyright holder’s investment and competitive position caused by competitor’s wholesale copying of many of copyright holder’s key computer operating programs would satisfy requirement of irreparable harm needed to support preliminary injunction). 161. eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006). 162. Ferring Pharms., Inc. v. Watson Pharms., Inc., 765 F.3d 205 (3d Cir. 2014) (“Because a presumption of irreparable harm deviates from the traditional principles of equity, which require a movant to demonstrate irreparable harm, we hold that there is no presumption of irreparable harm afforded to parties seeking injunctive relief in Lanham Act cases”); Perfect 10, Inc. v. Google, Inc., 653 F.3d 976, 980–81 (9th Cir. 2011) (reasoning that the Supreme Court intended that the propriety of injunctive relief in copyright cases “be evaluated on a case-by-case basis in accord with traditional equitable principles and without the aid of presumptions or a ‘thumb on the scale’ in favor of issuing such relief”); Salinger v. Colting, 607 F.3d 68, 76 (2d Cir. 2010) (holding that eBay abrogated the presumption of irreparable harm in copyright cases). 163. 15 U.S.C. § 1117(c).

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a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered.164 The Lanham Act allows a plaintiff to seek statutory damages instead of actual damages in the case of counterfeiting. The option to recover statutory damages was provided in light of a recognition that counterfeiters’ records are frequently “nonexistent, inad- equate, or deceptively kept[,] . . . making proving actual damages in these cases extremely difficult if not impossible.”165 The ability to elect statutory damages also provides an extra incentive for a trademark holder to pursue infringement litigation. A successful plaintiff may elect to recover statutory damages “at any time before final judgment is rendered by the trial court.”166 Statutory damages for counterfeiting are to amount to not less than $1,000 nor more than $200,000 per counterfeit mark, per type of goods or services sold, offered for sale, or distributed, “as the court considers just.”167 If the court finds that the use of the counterfeit mark was willful, then the damages ceiling is raised to $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed. The Lanham Act provides courts with no guidance as to how they should arrive at an appropriate figure within the wide ranges for awards, other than that the award may be determined “as the court considers just.” In the absence of guidance, many courts consider the same factors that courts have considered in determining appropriate statutory damages awards for copyright infringement under the Copyright Act, including: (1) expenses saved and profits reaped by the defendant; (2) revenue lost by

164. 15 U.S.C. § 1116(d)(1)(B)(i). 165. S. Rep. No. 104-177, at 10 (1995). 166. 15 U.S.C. § 1117(c). 167. Id.

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the plaintiff; (3) the value of the trademark; (4) the deterrent effect on others besides the defendant; (5) whether the defendant’s conduct was innocent or willful; (6) whether the defendant cooperated in providing records from which to assess the value of the infringing product; and (7) the potential for discouraging the defendant.168 The Lanham Act authorizes higher awards for willful infringement using counterfeit marks, yet the statute does not define “willful.” However, the case law defines willfulness as counterfeiting with knowledge. “Willful blindness” or reckless disregard for a trademark holder’s interest can also result in a higher award.169 Willfulness may be inferred from many circumstances, such as a defendant’s continued marketing of counterfeit marked merchandise despite receiving a cease-and-desist letter, or a sophisticated operation and familiarity with the industry such that the defendant must have known the merchandise at issue to bear counterfeit marks. Courts also have held that willfulness may be inferred when a defendant defaults in litigation in which the plaintiff pled willfulness.170 As a general matter, courts appear most likely to award at the top of the applicable range when there is evidence of a large and sophisticated counterfeiting operation that has infringed marks that are nationally well known or that are associated with “luxury brands.” Still, infringement of nonluxury brands may also yield substantial statutory awards. As may be expected in light

168. 17 U.S.C. § 504(c). 169. See, e.g., Phillip Morris USA v. Liu, 489 F. Supp. 2d 1119, 1123 (C.D. Cal. 2007) (award of statutory damages in amount of $2 million was warranted for infringer’s willful importation of counterfeit cigarettes that infringed two trademarks, because there was need to deter infringer, and other counterfeiters, from violating valid trademarks, to compensate trademark holder for damage caused by infringer’s actions, and to punish infringer for his willful violation of trademarks). 170. See, e.g., Phillip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003) (holding that defendant willfully infringed plaintiff’s trademark on plaintiff’s allegations of willful infringement and defendant’s failure to participate in any way in the litigation); Tiffany, Inc. v. Luban, 282 F. Supp. 2d 123, 124 (S.D.N.Y. 2003) (“By virtue of the default, the [defaulting party’s] infringement is deemed willful”).

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of the broad damages ranges and the lack of statutory guidance regarding how to determine awards, statutory damages may differ greatly in different cases with facts that seem similar.

3. Attorney’s Fees The Lanham Act provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”171 Those who recover treble damages under § 1117(b) have an automatic right to recover attorney fees “unless the court finds extenuating circumstances.” Until recently, though, there was debate172 among courts as to whether plaintiffs who recover statutory damages under subsection 1117(c) could also recover attorney’s fees. Today, most courts find that the election of statutory damages does not automatically preclude the recovery of attorney fees. Typically, courts have interpreted an “exceptional case” as one in which the defendant acted maliciously, deliberately, willfully, or in bad faith.173 Some courts are now pointedly reas- sessing the issue of when a case is exceptional in light of the Supreme Court’s 2014 opinion in Octane Fitness.174 In that case, the Supreme Court interpreted § 285 of the Patent Act175—a

171. 15 U.S.C. § 1117(a)(3). 172. See K & N Eng’g, Inc. v. Bulat, 510 F.3d 1079 (9th Cir. 2007) (holding that attorney fees under subsection 1117(b) are not available when a plaintiff elects to recover statutory damages under subsection 1117(c)); compare Louis Vuitton Malletier S.A. v. Ly, 676 F.3d 83, 109 (2d Cir. 2012) (holding that an award of attorney fees may accompany an award of statutory damages pursuant to subsection 1117(c)); see also Chloe SAS v. Sawabeh Info. Servs. Co., No. CV 11-04147 GAF, 2014 U.S. Dist. LEXIS 60188, at *30–31 (C.D. Cal. Mar. 18, 2014) (noting consistency of Louis Vuitton decision with K & N decision and awarding plaintiffs recovery of statutory damages under subsection 1117(c) and attorney fees under subsection 1117(a) as well). 173. See, e.g., Louis Vuitton, 676 F.3d at 109 (holding that a prerequisite to finding a case to be sufficiently “exceptional” to warrant an award of attorney fees is that the infringement was willful or in bad faith); Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1409 (9th Cir. 1993) (“[A] trademark case is exceptional . . . when the infringement is malicious, fraudulent, deliberate or willful”); AARP v. Sycle, No. 13-0608, 2014 U.S. Dist. LEXIS 6001, at 18 (D.D.C. Jan. 17, 2014) (noting that the court has defined “exceptional cases” as those “involving willful or bad-faith conduct”). 174. Octane Fitness, LLC v. ICON Health & Fitness, 134 S. Ct. 1749 (2014). 175. 35 U.S.C. § 285.

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fee-shifting provision that contains language the Court noted is “identical” to that in the Lanham Act—and held that an “exceptional case” for purposes of the Patent Act is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated.”176 The Supreme Court stated that “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” A few courts have since discussed the applicability of the Octane Fitness holding to trademark infringement cases, with some noting that Octane Fitness does not change the standard,177 some finding that the new standard is more lenient,178 and still others finding that it is more strict.179

IX. International Trademark Framework

The international framework for the registration and protection of trademark assets is complicated and requires a close examination of both domestic and international trademark law. Trademark law, like other categories of intellectual property law, is typically defined within national boundaries: different sets of substantive and procedural laws governing registration, maintenance,

176. Octane Fitness, 134 S. Ct. at 1756. 177. See, e.g., Apple, Inc. v. Samsung Elecs. Co., Ltd., 2014 U.S. Dist. LEXIS 117494, at 53 n.1 (N.D. Cal. Aug. 20, 2014) (opining that the Ninth Circuit’s way of determining what constitutes an “exceptional case” under the Lanham Act continues to apply after Octane Fitness). 178. Romag Fasteners, Inc. v. Fossil, Inc., 2014 U.S. Dist. LEXIS 113061, at 15 (D. Conn. Aug. 14, 2014) (declining to apply Octane Fitness to award attorney fees with respect to trademark infringement claims in a case that involved both patent and trademark infringement, despite finding that case was “exceptional” under the “more lenient” Patent Act standard announced in Octane Fitness). 179. BMW of N. Am. v. Cuhadar, 2014 U.S. Dist. LEXIS 112365, at 11 (M.D. Fla. 2014), adopted by 2014 U.S. Dist. LEXIS 112369 (M.D. Fla. July 10, 2014) (finding that the Octane Fitness standard differs from the willful/fraudulent standard and denying plaintiffs’ request for attorney fees despite finding of willful infringement, when case did not “stand out from others sufficient to find it to be ‘uncommon’ and thus exceptional”).

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enforcement, assignability, and infringement apply in different jurisdictions. In other words, “the use or registration of a mark in one country [has] no bearing on the ability, or inability, of the trademark owner to protect the same trademark in another country.”180 However, trademark law has benefited from continued international efforts that seek to harmonize different national trademark regimes in order to facilitate global commerce and the seamless use of trademarks across national boundaries.181 Most international treaties that seek to harmonize the global trademark framework require signatory countries to bring their national laws into compliance with certain procedural or substantive standards. An examination of international trademark issues should be informed by an examination of the international agreements to which different countries are signatories. These international treaties and protocols impose substantive and procedural requirements and limitations on national trademark law and simplify legal requirements, enforcement, registration, and maintenance of trademarks in many countries. The practitioner should seek to understand the specific requirements of the relevant local laws in order to fully compre- hend the implications of trademark-related transactions.182 These local requirements may be influenced by the aforementioned international agreements, but a knowledge of the intricacies of each local system is still necessary to understand the scope of trademark protection and the procedural requirements for

180. James E. Darnton, The Coming of Age of the Global Trademark: The Effect of TRIPS on the Well-Known Marks Exception to the Principle of Territoriality, 20 Mich. St. U. Coll. L. Int’l. L. Rev. 11, 12 (2011‑2012). 181. Graeme B. Dinwoodie, Essay: The Integration of International and Domestic Property Lawmaking, 23 Col-VLA J. L. & Arts 305, 308 (1999) (describing the harmonization of trademark laws as the “dominant impulse” for international lawmaking initiatives). 182. For an overview of existing national regimes of trademark law, see Graeme Dinwoodie, International Trademark Protection (2017).

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registration, maintenance, and assignability that apply in each jurisdiction. The following are some examples of the variations in trademark law that may exist across jurisdictions. Registrability of a mark: Some countries may have more stringent standards for registrability of trademarks than the United States. The types of trademarks protected vary significantly from country to country; for example, some countries only recognize visual signs and deny protection for numbers, sounds, or scent marks.183 International agreements may also impose minimum requirements for trademark protection or require countries to protect marks filed in foreign jurisdictions that would not otherwise meet domestic registrability standards. Need for registration: Although the United States affords some common law trademark rights even without a federal registration, most countries do not offer trademark protection without an accompanying registration at the national trademark office.184 Use requirements: Different jurisdictions may require the demonstration of the use of a trademark as a condition for validity. For example, the United States, the Philippines, and Cambodia require the holder to demonstrate use during the life cycle of a trademark.185 Most other countries do not require such a demonstration, but may make trademarks vulnerable to cancellation by an inter- ested third party if the third party can prove that the mark was not used for a certain period of time. The specific contours of each country’s use requirements, including the amount of use required to meet the requirement, also vary widely across jurisdictions.

183. Lanning G. Bryer, International Trademark Association, Trademarks in Business Transactions (Dec. 2014), at 1, http://www.inta.org/trademarkadministration/Documents/Bryer_TMs_in_Business_Transactions.pdf. 184. Christie Baty Hudgins, International Trademark Filing and Prosecu- tion, AIPLA, at 1, http://www.aipla.org/learningcenter/library/papers/bootcamps/ 2011tmbootcamp/2011%20TMBC/Hudgins_Paper.pdf. 185. WIPO, Use Requirement in Certain Madrid System Members, http://www .wipo.int/madrid/en/news/2016/news_0006.html (March 20, 2016).

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Postregistration requirements: The term of trademark registration, and the applicable date from which to calculate the term of trademark protection, also varies from country to country.186 Additionally, the requirements for renewing a trademark vary from country to country: some countries allow a simple renewal application, whereas other countries impose more stringent requirements for renewal applications.187 Licensing and assignability: Some jurisdictions require that assignments of trademark rights, or agreements to license trademarks, be recorded at the national trademark office. Addi- tionally, some jurisdictions place restrictions on a holder’s ability to assign a trademark “in gross,” or without the accompanying goodwill associated with the trademark.188 Product description requirements: Although the USPTO requires applicants to identify goods and services associated with trademarks in detailed terms, other countries may allow broader descriptions of goods and services to suffice for registration.189 Extent of trademark scrutiny: Different jurisdictions apply different levels of scrutiny to submitted trademark applications. Many trademark offices, including the USPTO, will examine trademark applications to determine whether the mark is too similar to a previously registered mark to merit registration.190 However, other countries instruct their offices simply to review applications for adherence to formal requirements and rely on third parties to oppose registration on the basis of similar prior registered marks.191 Accordingly, only some countries use opposition proceedings to allow third parties to attempt to block a registration application.192

186. Hudgins at 9. 187. Id. 188. See Section IX.C, infra. 189. Hudgins at 3. 190. Id. at 6. 191. Id. 192. Id.

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Relevance of international treaties: A large body of international treaties, agreements, and protocols binds many countries to certain substantive and procedural requirements. These agreements may significantly affect the protections awarded to foreign trademark holders under national trademark law.193 Addi- tionally, the applicability of certain international agreements (e.g., the Madrid Protocol and the European Union Trade Mark system, discussed later in this section) may provide shortcuts to trademark registration through the use of unified or centralized and distributed registration systems.194

A. International Trademark Agreements 1. Paris Convention and Principles of International Trademark Law The Paris Convention for the Protection of Industrial Property,195 passed in 1883, outlined basic principles of international trademark law that remain relevant today. The Paris Convention outlined the National Treatment Principle, which holds that member states are not allowed to discriminate between their nationals and the nationals of other member states in terms of trademark protection: Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant to nationals; all without prejudice to the rights specially provided for by this convention. Consequently, they shall have the same protection as the latter, and the

193. See Section IX.A, infra. 194. See Section IX.B, infra (discussing the Madrid Protocol and associated agreements). 195. Paris Convention for the Protection of Industrial Property, opened for sig- nature Mar. 20, 1883, as amended at Stockholm, July 14, 1967, 21 U.S.T. 1630, 828 U.N.T.S. 305.

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same legal remedy against any infringement of their rights, provided that the conditions and formalities im- posed upon nationals are complied with.196 The Paris Convention also outlined the Principle of Indepen- dence of Rights, which holds that “trademark rights granted in one member state are independent of trademark rights in all other member states.”197 The operation of this principle affirms that a trademark owner is “subject exclusively” to the national law in each country in which protection is desired.198 There are two notable exceptions to the Principle of Indepen- dence of Rights. First, Article 4 of the Paris Convention guarantees that within six months of the first trademark application in a member state, the applicant can file to register the same trademark in other member states using the priority date of the initial application.199 Second, Article 6quinquies provides that a trademark properly registered in its country of origin shall be registered in other member countries “as such.”200 Because different jurisdictions have different rules on what types of marks can be trademarked (e.g., some countries prohibit the registration of numbers and letters, whereas some countries allow such marks), this provision guarantees that a trademark holder can use a trademark asset in the same form in all member countries under the Paris Convention.201

196. Id., at art. 2 (21 U.S.T. at 1631, 828 U.N.T.S. at 313). Also see Joanna Schmidt- Szalewski, The International Protection of Trademarks after the TRIPS Agreement, 9 Duke J. Corp. & Int’l L. 189, 193‑94 (1998). 197. Timothy W. Blakely, Beyond the International Harmonization of Trademark Law: The Community Trade Mark as a Model of Unitary Transnational Trademark Pro- tection, 149 U. Pa. L. Rev. 309, 314 (2000). See also Schmidt-Szalewski, supra note 200; Inge Govaere, The Use and Abuse of Intellectual Property Rights in E.C. Law 31 (1996). 198. Schmidt-Szalewski, supra note 200, at 194. 199. Paris Convention, supra note 199, art. 4C. Note that this exception does not apply to service marks under the Paris convention. See G.H.C. Bodenhausen, Guide D’Application de la Convention de Paris Pour la Protection de la Propriété Industrielle 37 (1969). 200. Paris Convention, supra note 199, at art.6quinquies. 201. Schmidt-Szalewski, supra note 200 at 195.

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2. Acquisition and Content of Rights Under the Paris Convention The Paris Convention also outlines basic rules that all member states are required to implement through national law. Here is a brief listing of some relevant Paris Convention rules on the acquisition and content of trademark rights. Protection of well-known marks: The Paris Convention guarantees that “well-known” marks benefit from extended protection.202 For further explanation of the “well-known” marks doctrine, see Section IX.A.4. Service and collective marks: Paris Convention member countries have an obligation to protect service and collective marks, even if member countries do not provide for registration of these marks.203 The Paris Convention does not require that member countries must register service marks. Specific mention of trademark registration: Member states are prohibited from requiring that a product bear a “specific mention” of trademark registration as a prerequisite to trademark protection.204 Use requirement: Under the Paris Convention, member states may require that the holder of the trademark actually use the trademark.205 A member state may withdraw the trademark right if the holder does not use the trademark within a reasonable period of time and does not have a valid reason for the disuse.206

3. TRIPS Agreement The Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS),207 which entered into force in 1995, is the “most complete

202. Paris Convention, supra note 199, at art. 6bis. 203. Id. at arts. 6sexies, 7bis. 204. Id. at art. 5-D. 205. Id. at art. 5-C(1). 206. Id. 207. Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, 108 Stat. 4809, 1869 U.N.T.S. 299 [hereinafter TRIPS].

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international treaty” on intellectual property.208 TRIPS reasserts the principles of national treatment and independence of rights,209 and also includes a most favored nation clause, which guarantees that “[a]ll advantages, favours, privileges or immunities granted by a [m]ember to citizens of any other country will be, immediately and without further conditions[,] extended to all other members.”210 TRIPS includes several procedural requirements to ensure that member states implement procedures for the acquisition of rights that are reasonable, equitable, and not “unnecessarily complicated and costly” or lengthy.211 The TRIPS agreement also sets out other minimal rules of protection for trademarks.212 TRIPS requires all members to comply with the requirements of the Paris Convention, including the provisions on the protection of trademarks, even if the members are not themselves bound by the Paris Convention itself.213 Some relevant provisions of the TRIPS Agreement are as follows: Reasons for refusal: Under TRIPS, member countries are only allowed to refuse protection for trademarks “to the extent that the grounds do not conflict with the provisions of the Paris Convention.”214 Broadly, this provision allows the denial of protection if (a) registration would infringe on the prior rights of third parties,215 (b) if the mark is “devoid of any distinctive character or consists exclusively

208. Schmidt-Szalewski, supra note 200. 209. TRIPS, supra note 211 at arts. 3, 4. 210. TRIPS, supra note 211 at art. 4. 211. TRIPS, supra note 211 at arts. 62(1), 41(2). 212. Schmidt-Szalewski, supra note 200, at 191. TRIPS guarantees that all member states will introduce procedures to allow for “efficient action” against any infringement of intellectual property rights (TRIPS, supra note 211, at art. 41(1)), and obligates member states to create means to prevent further infringement of those rights (id.) 213. TRIPS, supra note 211, at art. 2. 214. Schmidt-Szalewski, supra note 200, at 207; see also TRIPS, supra note 211, at art. 15(2). 215. Paris Convention, supra note 199, at art. 6quinquies(B)(1).

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of descriptive terms,”216 or (c) if the mark is “contrary to ac- cepted principles of morality or public order” or if the mark may deceive the public.217 Right to authorize the use of the trademark: TRIPS does not provide a complete set of rules on licensing and assignment of trademarks, instead leaving it to member countries to create rules on these practices.218 Member countries may, through legislation, impose licensing practices that restrict competition, have adverse effects on trade, or impede the transfer or dissemination of technology,219 as long as those restrictions do not violate the principle of national treatment by discriminating against foreign licensees.220 However, TRIPS does require that member states not subject trademarks to compulsory licenses.221 For additional detail on rules relevant to the assignment of trademarks, see Section IX.C.

4. Well-Known Marks Exception to the Territoriality Principle Some global brand names that are “well-known” may be entitled to protection in a country even if the mark is not used or registered in that country.222 This well-known marks doctrine223 was

216. Schmidt-Szalewski, supra note 200, at 207; see also Paris Convention, supra note 199, at art. 6quinquies(B)(2). 217. Paris Convention, supra note 199, at art. 6quinquies(B)(3). 218. TRIPS, supra note 211, at art. 21. 219. Schmidt-Szalewski, supra note 200, at 211; see also TRIPS, supra note 211, at art. 40(1). 220. TRIPS, supra note 211, at art. 3. 221. Id. 222. See 5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competi- tion § 29:61. 223. For an example of international case law regarding the determination of “well-known” marks, see McDonald’s Corp. v. Joburgers Drive-Inn Rest. (Pty.) Ltd. 1997 (1) SA 1 (SCA) (S. Afr.); Whirlpool Corp. v. N.R. Dongre, (1994) 56DLT 304; 1995 (32) DRJ 318 (India).

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included in the TRIPS agreement, which also included provisions for identifying a “well-known mark” and determining when such a mark exists.224 Under TRIPS, a mark qualifies for protection under the well- known-marks doctrine as long as it is known by “the relevant sector of the public.”225 The World Intellectual Property Organiza- tion has provided additional guidance on the evidentiary requirements for well-known marks.226 Additionally, TRIPS expands the protection for well-known marks to dissimilar goods, as long as “(1) the third party’s use of that trademark on dissimilar goods would indicate a connection between those goods or services, and (2) the interests of the owner of the well-known trademark are likely to be damaged by such use.”227

5. European Union Trade Mark System The European Union (EU) has implemented the European Union Trade Mark (EUTM) system (previously known as the Community

224. The “well-known” marks doctrine was also incorporated into an earlier international agreement, the Paris Convention for the Protection of Industrial Property. Paris Convention for the Protection of Industrial Property, March 20, 1883, 21 U.S.T. 1583 828 U.N.T.S. 305 (as revised at Stockholm on July 14, 1967). Article 6bis of the Paris Convention provides: [T]he countries of the Union” may “refuse” or “cancel the registration, and [] prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. See Paris Convention, supra note 199, at art. 6bis; see also McCarthy, supra note 226 at §§ 29‑62. A current list of the members of the Paris Convention can be found at http://www.wipo.int/treaties/en/ShowResults.jsp?country_id=ALL&start_ year=ANY&end_y. 225. TRIPS, supra note 211, at art. 16(2). 226. See WIPO & Paris Union for the Protection of Industrial Property, Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks (WIPO Doc. 833(E), Sept. 29, 1999), http://www.wipo.int/edocs/pubdocs/en/marks/833/ pub833.pdf . 227. TRIPS, supra note 211, at art. 16(3).

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Trade Mark System228 or CTM), which acts as a unitary trademark law for the European Union.229 In the EU, the European Union Trade Mark system overlaps with national trademark protection. In other words, “there are two types of registered trademarks in Europe—those that are registered nationally and have only national effect and those that are registered at a[n EU] level and have EU-wide effect.”230 Trademarks registered at the EU level are referred to as European Union trade marks (EUTMs). The EUTM system creates significant benefits for U.S. trademark holders. Using the EUTM framework, a holder can obtain EU-wide protection for a mark without filing individual trademark applications in each member state. Trademarks under the EUTM system must only be placed in genuine use in at least one EU member state within five years of successful registration in order to maintain ownership.231 Additionally, EUTM rights can be enforced across the EU in a single legal action, which eliminates the need to enforce a trademark in each country within which the infringement occurs.232

228. Office for Harmonization in the Internal Market, Trade Marks in the European Union, https://oami.europa.eu/ohimportal/en/trade-marks-in-the-european- union. See also Council Regulation 207/2009, of 26 February 2009 on the Community Trade Mark, 2009 O.J. (L 78). The Community Trade Mark system is administered by the Office for Harmonization in the Internal Market (OHIM), recently renamed the European Intellectual Property Office. See Julie Bak, OHIM: The European Commu- nity Trademark’s PTO, 19 J. Contemp. Legal Issues 416, 418 (2010); OHIM, EU Intel- lectual Property Office—New Name for the EU’s Largest Intellectual Property Agency (OHIM press release, Dec. 24, 2015), https://euipo.europa.eu/tunnel-web/secure/ webdav/guest/document_library/contentPdfs/about_ohim/press_releases/LR/opt_1/ OHIM_trade_mark_reform_pr_en.pdf. 229. Timothy W. Blakely, Beyond the International Harmonization of Trademark Law: The Community Trade Mark as a Model of Unitary Transnational Trademark Protection, 149 U. Pa. L. Rev. 309, 311 (2000). 230. Trevor Cook, European Union Trademark Law and Its Proposed Revision, 18 J. Intell. Prop. Rights 283, 283 (2013). 231. See Emily Bolton, Defining Genuine Use Requirements of Community Trade Marks in Light of an Expanding European Union, http://www.wipo.int/edocs/mdocs/ mdocs/en/wipo_ipr_ge_11/wipo_ipr_ge_11_topic3.pdf. 232. Bruce A. McDonald, International Trademark Registration and the Madrid Protocol, in International Trademarks and Copyrights: Enforcement and Management 118 (John T. Masterson, ed., 2004).

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B. International Trademark Registration and Maintenance The Madrid Agreement,233 the Trademark Registration Treaty,234 the Madrid Protocol,235 and the Trademark Law Treaty236 are international agreements that facilitate the procedural aspects of trademark registration in member countries. Under these agreements, a trademark holder can obtain multiple trademark registrations among all the treaty’s member nations with one application (and one filing fee).237 Interna- tional registration of a trademark under the Madrid Agree- ment is the legal equivalent of national registration in the listed member countries.238 Under the Madrid Protocol,239 a trademark holder applies to the International Bureau of the World Intellectual Property Organiza- tion (WIPO) in Geneva for international trademark protection, listing the member states in which it seeks to protect the trademark.240 Typically, the applicant will file an application with WIPO through a national trademark office such as the USPTO, although the

233. Madrid Agreement Concerning the International Registration of Marks, Apr. 14, 1891, as revised July 14, 1967, 828 U.N.T.S. 389 [hereinafter Madrid Agreement]. 234. Trademark Registration Treaty, June 12, 1973, Hein’s No. KAV 2310, 63 Trademark Rep. 640 (1973). 235. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, adopted June 12, 1973, as last revised Oct. 1, 1985, in 3 Manual of Industrial Property Conventions (1965) [hereinafter Madrid Protocol]. 236. Trademark Law Treaty, adopted Oct. 27, 1994, 9 Industrial Property Laws and Treaties text 3-010,001 (Jan. 1995). 237. Christine Park, Seeing Color: Implications of the European Union’s New Common Practice for Transatlantic Trademark Registration by United States Trade- mark Holders, 39 Seattle U.L. Rev. 641, 650 (2016). 238. Bruce A. McDonald, International Trademark Registration and the Madrid Protocol, in International Trademarks and Copyrights: Enforcement and Management 117 (John T. Masterson, ed., 2004). 239. For a detailed explanation of the requirements for and procedure of international registration under the Madrid Protocol, see John M. Murphy, Demystifying the Madrid Protocol, 2 Nw. J. Tech. & Intell. Prop. 1 (2004). 240. Timothy W. Blakely, Beyond the International Harmonization of Trademark Law: The Community Trade Mark as a Model of Unitary Transnational Trademark Protection, 149 U. Pa. L. Rev. 309, 316 (2000).

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applicant is free to file directly with WIPO.241 The applicant must base the international application on a pending application or registration for the same mark in the applicant’s country of origin.242 WIPO will then distribute the international application to the listed member states, which must then treat the international application as a national application.243 Member countries reserve the right to refuse protection within an initial one-year period.244 International registrations must be renewed every ten years.245 Additionally, for the first five years following the date of the international registration at WIPO, the validity of the international registration depends on the validity of the basic application or registration.246 Therefore, if the underlying national application is refused, canceled, or limited, the international registration will also be canceled or limited.247 In the event that an international registration is canceled for this reason, the applicant can transform the international registration into national applications that benefit from the same priority date as the international registration.248 Importantly, the structure of these agreements is not an international trademark protection regime: it simply provides an expe- dited procedure for the registration of marks in multiple member

241. Lanning G. Bryer, International Trademark Association, Trademarks in Business Transactions (Dec. 2014), at 1, http://www.inta.org/trademarkadministration/ Documents/Bryer_TMs_in_Business_Transactions.pdf. 242. WIPO, Guide to the International Registration of Marks Under the Madrid Agreement and the Madrid Protocol (2016), at § B.II.1.01, http://www.wipo.int/export/ sites/www/madrid/en/guide/pdf/guide.pdf. The Madrid Protocol defines “country of origin” as any Madrid Protocol member country in which the applicant has a “real and effective industrial or commercial establishment, or, in the absence thereof, the country in which it has its domicile, or if neither of these, the country of which the applicant is a national.” See Bryer, supra note 245, at 3. 243. Bryer, supra note 245, at 3. 244. Id. 245. Madrid Protocol, supra note 239, at art. 7. 246. Madrid Protocol, supra note 239, at art. 6(3). In some cases, the validity of the international registration may continue to be vulnerable beyond the five-year window after the international registration. See John M. Murphy, Demystifying the Madrid Protocol, 2 Nw. J. Tech. & Intell. Prop. 1, 8 (2004). 247. Murphy, supra note 250, at 8. 248. Madrid Protocol, supra note 239, at art. 9quinqies.

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countries, in order to avoid the process of filing for trademark protection in each country separately. The Madrid Protocol currently has ninety-two member countries.249 The United States became a member of the Madrid Protocol in 2002.250 Notably, one of the key benefits of the structure of the international registration framework put into place by the Madrid Protocol (and the aforementioned agreements) is the ability for a trademark holder to assign a trademark with respect to only some of the designated countries.251 Unlike the unitary model of the EUTM system, a holder can elect to assign the trademark in an individual country.252 For additional detail on rules relevant to the assignment of trademarks, see Section IX.C. Holders of an international registration may also assign the international registration itself and record that assignment at WIPO, as long as both the assignor and the assignee are parties to the same treaty.253 WIPO will also record license agreements, changes of names, and other administrative adjustments to an international registration.254

C. International Rules for Assignment of Trademarks Different jurisdictions have different rules regarding the recordation of trademark assignment and licensing agreements at the national trademark office. Countries may require a written instrument as evidence of the assignment, signatures of both

249. WIPO, Members of the Madrid Union (Oct. 15, 2015), http://www.wipo.int/ export/sites/www/treaties/en/documents/pdf/madrid_marks.pdf. 250. H.R. 2215, 107th Cong. (2002) (codified at 15 U.S.C. §§ 1141–1141n (2012)); see also International Trademark Association (INTA), United States Joins the Madrid Protocol, https://www.inta.org/INTABulletin/Pages/UnitedStatesJoinstheMadridPro- tocol.aspx. 251. Bruce A. McDonald, International Trademark Registration and the Madrid Protocol, in International Trademarks and Copyrights: Enforcement and Management 118 (John T. Masterson, ed., 2004). 252. In the EU’s EUTM/CTM system, a trademark cannot be transferred with respect to only a part of the territory covered. See McDonald, supra note 255, at 118. 253. McDonald, supra note 255, at 120. 254. Common Regulations under the Madrid Agreement Concerning the Inter- national Registration of Marks and the Protocol Relating to that Agreement, Apr. 1, 2002, at rule 24; Madrid Protocol, supra note 239, at art. 9bis.

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parties filed at the relevant administrative body, and notariza- tion or authentication of the assignment.255 Additionally, some jurisdictions require that assignments be filed with the relevant administrative body within a certain time frame after execution of the assignment or license.256 Importantly, because some jurisdictions do not require the recordation or registration of an assignment of a trademark right, it may be impossible to determine if a trademark in one of these jurisdictions has been assigned based solely on trademark filings. In these cases, a chain-of-title search may be necessary to determine the ownership of the rights at issue. Assignment in gross. Different countries also implement different rules regarding whether a trademark can be assigned “in gross.”257 Because trademarks are essentially mechanisms to identify products, some jurisdictions, like the United States,258 prohibit the assignment of trademarks without the goodwill that accompanies the trademark, in an effort to prevent consumer confusion.259 It is not always clear what constitutes the transfer of the “goodwill” associated with a particular mark.260 Under the Paris Convention and the TRIPS agreement, member countries are allowed to set their own policy regarding

255. Lanning G. Bryer, International Trademark Association, Trademarks in Business Transactions (Dec. 2014), at 1, http://www.inta.org/trademarkadministration/Documents/Bryer_TMs_in_Business_Transactions.pdf. 256. Id. 257. See generally Irene Caliboli, Trademark Assignment with Goodwill: A Con- cept Whose Time Has Gone, 57 Fla. L. Rev. 771 (2005) (“[T]rademark law has tradition- ally discouraged the use of a mark on substantially dissimilar products by expressly requiring that trademarks are assigned “with the goodwill” of the business to which they refer”). For a historical overview of the “assignment in gross” issue, see generally 2 Stephen P. Padas, Patents, Trademarks, and Related Rights: National and Interna- tional Protection § 617 (1975). 258. See 15 U.S.C. § 1060 (“[T]rademark assignments without associated goodwill may be invalid and can lead to the cancellation of the assigned mark if a mark is used to misrepresent the source of the marked products”). 259. Caliboli, supra note 261, at 773. 260. See generally Caliboli, supra note 261, (providing an analysis of the distinction between “goodwill” and “business”).

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assignments of trademarks without associated goodwill.261 Under TRIPS, member countries are prohibited from requiring trademark owners to transfer their marks with the associated business.262 However, this provision does not necessarily prevent member countries from requiring the accompanying transfer of some “goodwill,” although the interpretation of this provision of the TRIPS agreement is not yet settled.263 Article 11 of the Trade- mark Law Treaty also sets requirements for how national trademark offices must deal with requests for recordation of changes in trademark ownership.264 An increasing number of countries do allow assignment of marks with only minimal requirements, and do not prohibit assignment in gross.265 The practitioner should investigate the applicable national law to determine the legal standards sur- rounding trademark transfers.

261. Paris Convention, supra note 199, at art. 6quarter. See also Caliboli, supra note 261, at 817‑18 (“[D]omestic policies forbidding assignment in gross could not penalize trademark owners transferring their mark without the goodwill in those jurisdictions where domestic rules allowed for such transfers”). 262. TRIPS, supra note 211, at art. 21. 263. Caliboli, supra note 261, at 822 n.272 (noting that one interpretation of the TRIPS agreement reads the prohibition on the requirement of an accompanying business transfer as a prohibition on the requirement of an accompanying transfer of the “material basis of activity,” but allowing the prohibition of trademark transfers without an accompanying transfer of some “intangible basis of the activity”). 264. Trademark Law Treaty, at art. 11. 265. See Susan Barbieri Montgomery & Richard J. Taylor, Key Issues, in World- wide Trademark Transfers: Law and Practice 1 (Susan Barbieri Montgomery & Rich- ard J. Taylor eds., 1995) (noting that “an ever decreasing minority of countries impose some form of [goodwill] requirement” on trademark transfers); Caliboli, supra note 261, at 820.

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