A new website has launched whose purpose is to connect potential buyers and sellers of trademarks. Trademarks are words, signs or symbols used by businesses as a source identifier of goods and and services. Trademarks are valuable not only for the consumer goodwill they engender (see, MCDONALD’S, GOOGLE, BMW, HBO), but also as a barrier to market entry of similar products (or services) with confusingly similar trademarks.

According to its press release:

USTrademarkExchange.com was launched earlier this month as a dedicated trademark sales portal . . . Owners can list and promote their registered trademarks, while potential buyers including investors can easily search through a variety of available trademarks in one location.”

Sounds like a great idea, right? Hmmm, not so fast. There are a few basic, but important concepts worth noting. When a trademark is assigned (ownership transferred) from one party to another, the purchasor generally succeeds to all of the previous owner’s rights (e.g., dates of first use, etc.). However, a maxim of trademark law states a valid trademark assignment must include the goodwill of the business. What is goodwill?

A trademark stands for a certain standard of quality. The mark symbolized that level of quality that the public has come to associate with the products bearing the mark. That said, an assignee (or purchasor) of a trademark must be sure she has the implements necessary to maintain this quality. If she does not, the trademark becomes separated from its goodwill. When goodwill does not accompany the mark, the assignment may be called an assignment in gross or a naked assignment. Generally speaking, an assignment without goodwill is invalid.

It is too soon to tell how USTrademarkExchange.com intends to handle its trademark assignments and how potential buyers and sellers will see the benefits of their respective bargains. Like many things in life, “an ounce of prevention is worth a pound of cure.” When it comes to assigning or purchasing trademarks, conferring with competent trademark counsel is always a good bet.

PBM Products, LLC, which makes infant formula for big box stores like Kroger, WalMart, Sam’s Club, and Target, sued Mead Johnson, claiming the Enfamil maker made false statements regarding its ENFAMIL baby formula.

Mead Johnson’s new direct mail campaign states ”Enfamil LIPIL’s unique formulation is not available in any store brand.” Worse, the suit claims, defendants display a picture of a blurry rubber ducky, implying that customers who give their babies anything other than Enfamil may endanger their child’s vision and brain development. In fact, PBM claims its product is identical to the defendant’s product, according to the lawsuit, which can be downloaded here.

Mead Johnson has been entangled with PBM in the past (and lost), both in litigation, and through challenges at the National Advertising Division (“NAD”). Mead Johnson has also been before the FTC after failing to comply with the NAD decision. Paul Manning, PBM’s CEO, claims that Mead Johnson has twice before made similar false claims, and in both instances, the court banned the company from making more false advertising claims about its products and forced Mead Johnson to make corrections to its advertising.

This lawsuit seems to be ruffling feathers throughout the regulatory world. NAD, the self-regulatory agency which works with advertisers to correct advertising problems without litigation, made the following statement: “NAD is incredulous that after two compliance proceedings, with the second compliance proceeding making explicit that any noncompliant advertising would result in a referral to the appropriate government agency, that the advertiser would disseminate advertising that clearly does not comply with NAD’s decision.” Might we be headed for a three strikes law for marketing?

Practice Pointer: Marketers must be kept “in check” to make sure they are not going beyond ‘puffing’ to sell a product. Over time, a brand (and worse, a company) will lose credibility in the consumer world if no one believes the claims being made. Moreover, if companies would rather avail themselves of the less expensive and less public venue of self-regulatory proceedings believe self-regulatory decisions will be ignored, they are likely to move towards the state and federal court systems to quiet bad actors. When reviewing advertising, always request evidence for the claims being made. While lawyers cannot dictate what their clients will ultimately do, they can help guide companies toward being good corporate citizens.

One last point. This case underscores the importance of looking at an advertiser’s claims from many perspectives. PBM’s suit is focused on the claim that Mead Johnson is the only formula company with an essential formula. The FTC and NAD appear to be more focused on the issue of whether the formula – whatever it is – actually improves brain development.

Follow Tsan’s Legal Updates on or Subscribe to the Cobalt Blog

Linden Labs, the host of the immensely popular site Second Life, an online virtual world, has been sued in an Arizona district court for trademark infringement and unfair competition. The complaint, filed by Taser International, makers of non-lethal (and sometimes lethal) weapons, claims Linden Labs allows third parties to sell TASER guns inside the virtual world.

Just so we’re clear, no one on Second Life is actively selling real TASER guns; rather Taser is suing Linden (who doesn’t sell anything), for letting people sell virtual (digitally created) guns that look like TASER weapons, and that use the TASER brand. The suit also alleges unfair competition, trade dress infringement, and false designation of origin, among other claims.

For those uninitiated few, users of the Second Life world can use their credit card to buy digital currency (“Linden Dollars”). They can then use that currency to make purchases in Second Life. For instance, if a user would like to dress up his/her avatar in a ball gown, s/he can use the Linden Dollars to shop at a virtual prom store. Similarly, if a user wants “protection” (you know, from digital thugs), s/he can buy a virtual weapon. Linden gets its revenue from a small percentage taken during the currency exchange.

It’s not the first time a company has sued Linden; neither is it the first time a company has sued a hosting site for trademark infringement by third parties (think: Google). It may, however, be the first time a company has sued another company for hosting a site where third parties selling products that aren’t even real. Is it time for a Digital Millennium Trademark Act?

Practice Note: Notwithstanding the fact that there is no DMTMA, companies may want to consider adopting a policy that allows them to stay an arms length away from disputes between users when it comes to trademarks. It’s not a fail-safe method of safe harbor protection, but it may make would-be plaintiffs feel they have an option short of filing a lawsuit, for getting hard-to-find users to stop using their marks.

Follow Tsan’s Legal Updates on or Subscribe to the Cobalt Blog

On the heels of releasing its new advertising guidelines, the FTC is wasting no time in going after individuals and companies it believes have crossed the line in their advertising practices.

Long a thorn in the side of the FTC, the weight loss market is taking the first hit. Last month, the FTC sought injunctive relief against Stella labs, Neutraceuticals International, and their principles (“Defendants”) for false advertising claims related to products it sold containing – or purporting to contain – the ingredient “Hoodia.”

Hoodia is a succulent plant found in parts of Africa, including South Africa, Botswana, and Namibia. No scientific data suggests it is an appetite supplement, but it is colloquially rumored to suppress the appetite of those who chew it. Hoodia is considered endangered by The Convention of International Trade in Endangered Species of Wild Fauna and Flora and thus its import to the U.S. is heavily regulated. According to the complaint, the only country allowed to export authentic Hoodia is South Africa.

The complaint alleges the Defendants supplied their trade customers with advertising documentation stating or implying their products contained authentic Hoodia, further representing that Hoodia caused substantial weight loss, and claiming Hoodia was an effective treatment for obesity. Based upon these representations, trade customers bought the product and resold it to consumers. None of those claims, says the FTC, had been substantiated at the time the statements were made; moreover, all of the claims, now tested, are false.

Notwithstanding the FTC’s issuing of new advertising guidelines, this complaint does not invoke the higher scrutiny contemplated by the new guidelines. These claims fall squarely into the category of false statements. Unless the Defendants can prove either the truth of their representations, or that at the time the representations were made they were true, the court will make quick work of this matter.

Practice Note: We see it all the time: a client tells us its product is scientifically proven to lose weight. It may even show us the proof. When we probe further, we discover that in fact, the evidence is not about its product, but a single ingredient in the product that has been shown to help lose weight, in certain amounts, and under certain circumstances. In fact, the product has not been proven to lose weight at all. Notwithstanding third party evidence supporting weight loss for an ingredient, a company may not glom on to those results when it sells its own product.

Although we believe it’s unlikely, under the new guidelines yet to be enforced, the FTC might well be able to pursue claims against resellers of the product too, particularly if they are paid through an incentive program. While we have seen no cases on this, the rationale is to hold third parties responsible for reselling products using the same false claims without conducting sufficient due diligence to determine whether the claims are accurate. We believe if the FTC did begin to enforce against resellers, the enforcement would begin with claims the reseller clearly knew or should have known were false.

Follow Tsan’s Legal Updates on or Subscribe to the Cobalt Blog

OpBiz, LLC hearts The TTAB, which ruled recently that OpBiz’ application to register HEART for “cocktail lounges, restaurant and bar services” was not confusingly similar to the registration KOKORO for “restaurant service.” In deciding the matter, the TTAB underscored a position it has taken in the past, namely, that the doctrine of foreign equivalents may not apply when the foreign word has more than one meaning. In this case, although the KOKORO registration identified the translation as “heart,” evidence submitted by the Applicant showed the term has multiple meanings. It was not sufficient for the examiner to rely solely on the translation identified in the application.

The case does not present particularly new law, but is a cavalcade of great procedural reminders. First, the Board finds a good deal of evidence otherwise submitted by the examining attorney was not timely filed, holding her to the same rigorous standard to which it holds the applicant (TBMP 1207.01 (2d ed. Rev. 2004)).

Next, in considering whether the evidence can come in under the judicial notice standard, the Board determines that the examiner has not met her burden. Her dictionary references do not rise to the level of online dictionaries for which the Board will take judicial notice (see, eg, In re Hotels.com L.P., 87 USPQ2d 1100, 1103 (TTAB 2008)). The Board also reminds the examining attorney that her Wikipedia submissions are “not proper subject matter for judicial notice because of its inherent lack of trustworthiness” and are not admissible because the applicant had no opportunity to rebut the evidence. ( see, In re IP Carrier Consulting Group, 84 USPQ2d 1028, 1032 (TTAB 2007)).

With the examining attorney’s record fairly gutted, the Board reviewed the issue under both a likelihood of confusion standard (for which confusion is arguably found) and a doctrine of foreign equivalent standard. Because the mark KOKORO has multiple meanings, and the examiner did not submit evidence that Japanese is routinely spoken in U.S. households, the Board ultimately found for Applicant and reversed the decision of the examiner.

Practice Note: In addition to the foregoing, the final lesson here is “Thank Your Paralegal.” As with many TTAB decisions, the case itself does not particularly espouse new law, but the decision nevertheless is worth reading because the Board reminds us how important procedure, protocol, and immaculate record keeping can be to the final decision. The examiner in this case raises the objection that the evidence submitted by applicant in the appeal should not have been considered because it was not filed prior to the appeal. In fact, there was a computer glitch and the evidence was filed, but did not get uploaded to the TDR. A thorough review of the paralegal’s record-keeping convinced the Board of this fact and the evidence submitted was sufficient for the Board to render a decision in favor of the applicant. The Board also found that the Examiner had been negligent in not notifying the Applicant that she had never received the exhibits, notwithstanding the fact that they were referenced in the Office Action Responses.

Follow Tsan’s Legal Updates on or Subscribe to the Cobalt Blog

The Coalinga Recorder and the local namesake high school were vindicated after the Court of Appeals in the Fifth District ruled that the paper’s reprinting of a tirade from a “MySpace” page was not an invasion of the page owner’s privacy. The court found that “the article was available to anyone with Internet access.”

Turns out Cynthia Moreno wanted the world to know how much she despised her home town of Coalinga, a small rural city in the Central Valley area of California. Moreno’s “Ode to Coalinga” was posted on her MySpace page after she graduated high school and was attending UC Berkeley.

Cynthia’s high school principal happened upon it during the Ode’s 6-day reign of terror on her MySpace page and immediately forwarded it to an editor at the Coalinga Recorder. It was subsequently published in the Letters section.

The Ode did not sit well with the local folks who, according to the complaint filed by Moreno and her parents, began their own reign of terror on the Morenos (who still lived in Coalinga), threatening death, and firing shots at the house. Hatred was so fierce, the Moreno family business had to shut down because no one would patronize it. In fact, they had to leave town, and subsequently sued the paper, the parent publisher, and the school district for invasion of privacy and intentional infliction of emotional distress.

In affirming the lower court’s decision to dismiss the “invasion of privacy” portion of the complaint, the Court noted, “Cynthia’s affirmative act made her article available to any person with a computer and, thus, opened it to the public eye. Under these circumstances, no reasonable person would have had an expectation of privacy regarding the published material.” The court found unpersuasive Moreno’s argument that the girl never fully identified herself on the MySpace page in question, noting that her photograph and first name were sufficient to identify her as the author.

Practice Note: Increasingly, we are seeing postings on social networking sites being used in various ways in litigation. We are aware of several cases wherein a party has used a witness’ MySpace or FaceBook postings to impeach testimony. Companies may wish to consider policies regarding employee use of social media. As recently as today, according to CNET news an employee was fired for calling in sick (saying she needed to be in a dark room away from her monitor) and subsequently “FaceBooking” on the computer.

Personal Note: Mama, don’t let your babies grow up to be (irresponsible) Tweeters! In addition to litigation, increasingly, college admissions directors are surfing the Internet to see if there are vast distinctions between what they are reading in applications and the actual person. Social networking is a fine way to stay connected and show one’s unique personality, but parents must teach their children to be responsible about what they post and who they befriend. Children should be advised that digital information doesn’t disappear simply because it’s old, or because they remove it. A screen shot can easily be taken of anyone’s public information, without knowledge of the posting party. What happens in cyberspace really does stay there forever.

Follow Tsan’s Legal Updates on or Subscribe to the Cobalt Blog

By now, most of the world has heard about this: The latest app on the Apple App-Store, which sold for $0.99 invited buyers to “See how long you can endure his or her adorable cries before you just have to find a way to quiet the baby down!” Shake your phone, and the baby stops crying. Almost as soon as it went up, it came down, and for good reason.

Outrage was swift and response was swifter. Apple removed the application from its store. Many bloggers and commentators wondered how such an application could get past the eagle-eye of the computer giant, who claims to review each applet uploaded to the App-Store.

The lessons here extend past the boundaries of good taste, or discussions about the state of moral decay in our society that we think a shaking baby game is funny (this harkens back to the “hot coffee” patch for Grand Theft Auto that allowed game players to rape and murder a prostitute). It underscores the importance of making clear what a company’s obligations are to match their public statements with their legal obligations.

Apple says it reviews each applet that goes into its App-Store, but for what, exactly? The public statement implies a general review for everything from operability to appropriateness. Its actual terms suggest a much more narrow scope of review, limited to profanity and operability. This is actually a reasonable limitation; what is not reasonable is to imply something else. The press seems to think that’s what happened here.

Whether Apple is guilty of giving the wrong impression or merely the victim of a witch-hunt is not important: the lesson for large companies is this: make a “terms of use” policy you can live with, and instruct marketing folks to stay within the lines of that policy.

The attached is a presentation I gave at the Food Marketing Association Legal Conference in San Antonio.

We had a good time and covered lots of topics. At the end of the day, we hit upon a few important take-away pieces of information:

1. The Social Networking/Social Media (“SM”) boom is not going away. People are going to find more ways to communicate digitally, and as the world’s psychographic changes (younger people start coming into adulthood), vendors who don’t assimilate SM into their plans are going to be left behind.
2. Currently, the legal issues are the same ones we’ve been addressing for the past few years with regard to blogging, domain hosting and user-generated content (third party trademark use; defamatory statements, hijacking of profiles, etc.).
3. In the long run, current law is going to require some tweaks, and we’re beginning to see them (be patient):
— The FTC has already come out with new “affiliate marketing/testimonial” guidelines (clear response to “fake” social networking sites).
– Likely change in SM sites will be clear disclosure of company-sponsored social sites (right now, if you get “busted” for fabricating a site, you’ve just got egg on your face). Legislation likely coming relating to origin.
– Affiliate SM sites likely to have to disclose that they have been paid for their testimonials. This is consistent with existing law regarding testimonials, but not currently enforced.
4. As technology advances, a greater burden will be placed on ISPs to protect against access by children; on the flip-side, parents are going to have to take more responsibility for what their kids are doing online.
The sky is not falling (see my last slide of “babies-booze-betamax”):
– People still (generally) make babies the same way, so online social networking will not replace direct communication.
– Young people will quickly learn how to interact, and in a difficult job market, interpersonal skills will separate out those who don’t have them.
– When new technologies are brought forth, some folks imbibe to excess. Much like the steep rise in alcoholism after prohibition, social mores and legislation over time made most folks use alcohol sensibly; the same thing is true for technology.
– Lawyers out there: relax and take a philosophical view: the fear that everything as we know it will change is unfounded (remember, we thought that the BetaMax would make real-time TV and advertising obsolete). Things will change slowly and over time, but companies will be able to get out their message.

Social Media 1

In a huge victory for U.S. copyright owners (including Warner Bros, Sony Music Entertainment, EMI, and Columbia Pictures) in their longstanding battle against The Pirate Bay, the largest BitTorrent file-sharing web site, a court in Stockholm, on Friday, convicted the four site owners to one year in prison and a fine of about $3.5 million for copyright violations. The Court found that the defendants knew that the content being shared was protected by copyright.

With over 20 million reported users and millions of files exchanged every day, The Pirate Bay is one of the most high-profile facilitators of P2P file-sharing on the internet. The Pirate Bay, based in Sweden, was set up in 2003 by the anti-copyright group Piratbyran (“The Piracy Bureau”). The site does not technically host copyrighted content on its servers, but indexes and links to BitTorrent files (music, movies, TV shows, etc.) on its users’ computers. The site is known for its militant (and sometimes humorous) opposition to copyright laws and the Hollywood industry, and has been involved in many lawsuits. Some countries, like Denmark, have banned access to the site altogether. The site was also blocked by Facebook a few weeks ago after The Pirate Bay tried to create a “Share on Facebook” application.

The U.S. film industry, led by the Motion Picture Association of America (MPAA), has worked tirelessly with Swedish authorities to shut down the site since its creation and filed a criminal complaint against The Pirate Bay’s owners in 2004. In 2006, the Swedish police raided The Pirate Bay offices for copyright violations, ceased their servers and shut down the site for a few days. Last year, the four Pirate Bay owners were charged by a Swedish court with “promoting other people’s infringements of copyright laws.”

The defendants have maintained that the site is not illegal under Swedish laws because they do not store copyrighted material on their servers but instead act as a directory for users who wish to exchange files. The defendants say they plan to appeal; in the meantime, the sentences are suspended. Their response to the sentencing is available here (for now!).

On March 16, 2009, Parfums Nina Ricci filed suit against National Entertainment Collectibles Association, Hot Top, and others, for design patent infringement, trade dress infringement, and other common law unfair business practices, stemming from Nina Ricci’s rights in an apple-shaped bottle containing the fragrance “Nina” (the “Nina Bottle”), for which it has a U.S. design patent.

Ricci took the first bite, alleging defendants began marketing their Twilight perfume using an exact replica of the Nina Bottle without Ricci’s permission, thus infringing Ricci’s patent rights and trade dress rights in the bottle. Judging from the pictures above, one of these actors appears to be a rotten apple.

The Nina Bottle, on the right, was the first market entrant and, and Nina Ricci protected its unique apple design with a design patent. It also claims common law trade dress rights in the appearance. A brief online search revealed upwards of 6 other perfume bottles with the apple design, but none (other than the defendant’s) particularly similar to the Nina Bottle.

This suit presents an interesting question regarding the issue of whether one can protect identical intellectual property elements under both patent and trademark. Perry Saidman of Saidman Design Law Group, which specializes in design patents, notes that the prevailing view is that an owner can get design patents for market-entry protection, and later, when secondary meaning attaches, secure trade dress protection for roughly the same configuration. Saidman also commented that the issue of whether an owner can get both patent and trademark protection for a design is ripe for the Supremes, who have thus far side-stepped the issue in other patent cases.

On March 19, 2009, The Hershey Company, et al. filed suit in the Northern District of West Virginia against Reese’s Nursery and Landscaping, alleging federal trademark infringement, false designation of origin, federal trademark dilution, and unfair competition. At issue is the Defendant’s alleged use of the REESE’s trade dress, i.e., “the REESE’S brand name in distinct yellow script letters outlined in brown.”

In its Complaint, Hershey alleges it has used its distinctive trade dress in commerce for “nearly 100 years in connection with REESE’S brand candy.” At the rich, creamy center of this controversy is Hershey’s allegation that Defendant has adopted a business logo that is nearly identical to the Reese’s trade dress.

What really sticks to the roof of Hershey’s mouth is its belief that Defendant adopted its logo in “a deliberate attempt to trade on the valuable trademark rights and substantial goodwill established by Hershey.” Moreover, Hershey contends Defendant has “traded on and profited from the enormous goodwill an d reputation established by Hershey.” Where “the rubber hits the road” in this Complaint, or more aptly, where “the peanut butter meets chocolate,” is the following allegation: Defendant has “continued to use REESE’S trade dress despite previously representing to The Hershey Company that [it] would cease use of the REESE’S trade dress.”

The Defendant has not yet filed a responsive pleading, but a quick review of its website, reveals a new black and white logo.

Practice Note: Although early in the litigation process, there is much to learn from Hershey’s Complaint. First, it appears as though Hershey previously reached out to the Nursery, seeking a modification of its logo. When Defendant’s (likely multiple) assurances that it would modify its logo went unfulfilled, Hershey filed its suit. The lawsuit appears to have gotten the attention of Defendant, as it has now removed color elements from its logo. Time will tell whether this change will satisfy Hershey’s.

Hershey’s Complaint does a nice job of laying out facts necessary to establish that its trade dress is “famous” under the Lanham Act. Finally, the case may negatively impact Hershey’s public image. For example, what was once a legal filing in West Virginia, is now a blogosphere entry, and may be written about by others in less than glowing terms. Some may view this lawsuit as a “big guy v. little guy” case and not feel as fondly for Hershey as they once may have. Moreover, one has to ask how much damage Hershey has really suffered here? To this eye, the Nursery logo reminds me of the Reese’s logo, but I’m not confused as whether the nursery is a business venture of the chocolatier. In fact, it makes me want to walk to my reception desk and pluck a REESE’s peanut butter cup out of our candy dish!

Have you ever had one of those really good soft oatmeal cookies that comes in the pretty red package that looks like this:

Well, the company, Archway Bakeries, LLC, invested a lot of time and money in creating and marketing its trade dress (i.e. the look and feel of it packaging) and was piping hot when it discovered that a competitor, Voortman Cookies Limited, began packaging its cookies like this shortly after Archway filed for bankruptcy:

Prior to Archway’s bankruptcy filing, Voortman’s packaging creating a completely distinct commercial impression and looked like this:

Pulling the plug on Voortman’s activities, Archway and Lance Manufacturing, the company that purchased Archway’s assets (including all intellectual property rights) during the bankruptcy proceeding (collectively “Archway”), filed suit against Voortman for trademark infringement and related claims in Lance Mfg., LLC v. Voortman Cookies (WD NC 3/24/09).

In a bittersweet ruling against Voortman, the North Carolina district court issued a preliminary injunction prohibiting Voortman from advertising, distributing, selling, or offering to sell its cookies in the Voortman packaging. Carefully measuring the arguments, the court found that Archway’s trade unregistered trade dress was: 1) non-functional – i.e. not essential to the use or purpose of the product; and 2) created an overall distinctive impression.

Voortman attempted to stir things up by arguing that the case was moot because it had already ceased using the packaging and had begun production of a modified packaging following a cease and desist letter it received from Lance; however, the court wouldn’t bite. It noted that the allegedly infringing packaging still remained on the shelves and and that Voortman could, at any time, re-release the packaging.

The court also found that Archway was likely to succeed in proving the Voortman packaging was likely to cause confusion with Archway’s packaging. The packages were virtually identical in many respects. Moreover, Archway presented evidence that the Voortman packaging was an intentional copy and nearly identical to its trade dress. In light of the overall evidence, the court found that Archway had made an adequate showing of a likelihood of confusion.

In its narrowly tailored injunction, the court did offer Voortman a nice-sized crumb by refusing to require Voortman to remove, destroy and/or recall the existing packaging from the marketplace. Citing the financial hardship to Voortman and relatively short shelf life of the existing cookies inventory, the court ruled that Voortman could sell-off its remaining inventory in the existing packaging. Voortman fans better get them while they’re hot!

The FTC has, since the 1980’s, been actively involved in regulating endorsement and testimonial advertising that is designed to entice consumers into choosing products based upon “real life” experience (or the promise of success from a reputable source). Its guidelines help define the scope of testimonial and endorsement advertising. They point out, generally, if a single user’s experience is not typical of the average consumer, then a company may not imply that potential buyers of the product will get the same result. Now, the FTC has determined its rules about testimonials and extreme results need to be updated.

In an attempt to keep up with consumer complaints about dishonest advertising, online social networking and other internet venues that reach consumers, according to the Financial Times, the FTC is proposing legislation that could make companies liable for testimonials written by bloggers and parties who receive free samples or other incentives to try products and subsequently write good reviews.

According to Richard Cleland at the FTC, these new updated guidelines are designed to curb the use of terms like “Results Not Typical,” to justify putting up extreme and untested consumer outcomes for products and services. The new guidelines are also designed to hold companies responsible both for encouraging third party testimonial information it knows to be false, or for using spokespersons who have achieved extreme results for products, knowing the results are outrageous.

If the new guidelines are adopted, companies will not only have to consider how they use spokespersons and social networking sites, but also how they develop their “influencer” programs. Influencer programs are those programs designed specifically to attract a certain target market by paying (or giving free samples to) loyal product users in exchange for spreading the word about their personal experience through social networking (both online and offline) groups. At the very least, it’s likely that contracts between companies and third party influencers will see some changes.

Notwithstanding the spotlight that has hit the FTC proposal and the resultant uproar from many companies and marketing associations, there have been other attempts to regulate third party claims about products and services. Law professor and prolific blogger (and Twitter®er), Eric Goldman, has cited to other attempts at third party testimonial regulation.

For instance, points out Goldman, the Florida State Bar treats consumer reviews of attorneys as regulated testimonials. Goldman even remarks on his Technology and Marketing Blog that the SEC’s recent proposed hyperlinking guidelines may contravene 47 U.S.C. 230 which immunizes websites from liability for third party content.

Regardless of what happens in the short term, issues of agency will be important if the FTC truly wishes to hold companies and bloggers liable for third party content. It is impractical (and likely impossible) for companies to police what third parties write about their products. In all likelihood, therefore, the FTC would limit liability to cases where the company links to or endorses information on a third party site, or where the influencer is retained without a contract provision about outlandish statements.

The biggest challenge, depending on how the guidelines are written, may ultimately be to advertisers who use spokespersons with unusual outcomes, who have until this point, gotten by with a disclaimer of “Results Not Typical,” or “Your Results May Vary.” The long running commercials involving Jared, who claims to have lost hundreds of pounds by eating Subway sandwiches, may have seen their last days.

Practice Note: Despite the current feeling about the proposed guideline changes, the sky is not falling. Advertisers have weathered advertising regulation in the past, and at the end of the day, we still manage to get a fair number of commercials (and testimonials) out there. In truth, and regardless of whether there will ever be another Jared to enable Subway to point to a pattern of weight loss, he won’t go away, and the FTC is not going to find liability with companies or bloggers that are generally engaged in appropriate disclosure practice.

This article from the Daily Princetonian reports that the University “grossed roughly $266,000 [in] 2008… for the commercial use of Princeton trademarks and logos.” The University reportedly has over 100 licensing agreements with third parties, which grant limited rights to produce, use and/or sell products under the University’s marks (anything from baseball caps to mugs), in exchange for quality control and a royalty. As it should, the University owns and maintains a number of trademark registrations at the U.S. Patent and Trademark Office.

Practice Note: As Lezlie pointed out in her excellent post last week, a company’s IP is often it’s most valuable asset, especially in these tough economic times. This story is an example of a trademark owner (Princeton in this case) “doing it right.”

Trademarks can be a valuable income-generating asset, if properly maintained and managed. With reasonable policies and proper oversight procedures in place, licensing and co-branding deals represent great opportunities for generating regular revenue, as well as strengthening your client’s brand.

As a starting point, clients may want to keep in mind these basic guidelines to maximize these licensing opportunities:
- Register your marks domestically, as well as in the countries where you intend to do business. Being pro-active about trademark protection saves money and headaches in the long run. Also think about keeping your trademark counsel in the loop of new marketing and branding strategies, to make sure you’re covered;
- Maintain your marks and use them properly and consistently; be practical but don’t be lazy or you may lose rights (and licensing opportunities) over time. Your trademark counsel is there to assist you in this process, for example by talking with your marketing staff about proper trademark use and ways to create strong brands;
- Police your marks consistently, which may include having an enforcement plan in place and following it. If you don’t enforce your trademarks, you may lose rights. A pro-active policy is also a good way to establish your rights without having to send a demand letter every time.
- Explore licensing and royalty-generating opportunities and have those agreements vetted by your intellectual property counsel. Contracts that don’t include certain “magic (legal) words” (for example, quality control provisions) may weaken your rights significantly.

It’s tempting to do, but according to the Federal Circuit, use just ain’t use in commerce until it’s a bona fide offer for sale to the actual intended purchasing public. Theoretical ability to provide the service, brochures that never got sent, and business plans showing intent are not sufficient to establish use.

Aycock Engineering, Inc., founded under a previous name in the 1940’s, was created for the purpose of offering a chartered air transportation service under the mark AIRFLITE. The business plan suggested that the company would need at least 300 air taxi operators in the U.S. to make a go of the enterprise.

In March of 1970, through brochures and letters advertising the AIRFLITE service, Aycock invited all FAA certified air taxi operators to join his AIRFLITE service. In August of 1970, Aycock filed a service mark application to register AIRFLITE, and attached as specimens of use the brochures he used to entice pilots to join his network. Ultimately, in 1974 after a lengthy prosecution fight with the examiner, Aycock’s mark was registered on the Supplemental Register for “[a]rranging for individual reservations for flights on airplanes.”

Aycock continued to market his service to the pilots who would charter his planes, but never actually marketed the service to the general public, notwithstanding his establishment of a customer toll-free number listed on the brochure and a collection of 12 pilots (far short of the 300 the business plan said were necessary to run the service). The evidence did not show that Aycock ever arranged a flight for a passenger.

In 2001, Airflite, Inc. (“Petitioner/Appellee”) filed a petition to cancel Aycock’s registration on the ground of nonuse. The TTAB found that Aycock has failed to offer the services listed in the application and on appeal, the Federal Circuit affirmed.

Although the court addressed numerous factors that led it to affirm the TTAB ruling, its primary focus was on the offer of the service listed in the application. It noted the service was simply not offered to those who would ultimately buy it – the purchasing public. It was not enough to establish a toll-free number and collect pilots to ferry people as intended. Neither was it sufficient to use the mark on the brochure that could eventually go to consumers. The fact that Aycock had never marketed the actual service to the intended consumer was sufficient to establish nonuse of the mark for those services, and subsequently, to cancel his registration.

Practice Note: Many practitioners tell their clients that printing business cards and creating stationery is sufficient to show use in commerce. Still others advise that the creation of brochures that contain a price list are sufficient to establish use. This case suggests (and this firm has always maintained) that there is a distinction between use anywhere and actual bona fide use in commerce. Use in commerce, to be above reproach, must be a bona fide offer for sale of the product for which you are claiming use to the target consumer.

If we didn’t learn the Trademark Trial and Appeal Board was prickly when it comes to procedure from the Blue Man case, we just got another lesson. The Board is handing out some more tough love on counsel. In the precedential decision, Syngenta Crop Protection, Inc. v. Bio-Chek, LLC (Opposition No. 91175091, March 12, 2009), the Board tossed out Opposer’s 2(d) claim on the ground that it had improperly submitted its registration. Without considering its registration for AGROMETER, Opposer was unable to produce sufficient evidence at common law to show priority over applicant’s AGMETER mark, and thus was unable to sustain the 2(d) opposition.

Opposer submitted a photocopy of its licensor’s original registration certificate, dated 2004. A photocopy of a registration certificate may not be adequate proof of the current status of a registered mark. Under Trademark Rule 2.122(d)(2), a trademark registration document submitted should be “issued by the Patent and Trademark Office and show both the current status of and current title to the registration.” The 2004 copy did not confirm the status of the mark in 2007 or 2008.

In addition, Opposer, did not properly introduce the registration, as specified in the Trademark Rules. It did not attach the copy to the opposition; neither did it did not introduce it during testimony; and because applicant never admitted or stipulated to the current ownership and validity of the registration, the registration was not authenticated by waiver.

Because the Board did not consider the registration as prima facie evidence of ownership and first use, the Opposer was forced to rely solely on proof of its prior common law rights, which, the Board established, it had not done sufficient to establish priority.

To make matters worse, the Opposer improperly submitted notices of reliance for some of its documents, such as press releases, internet articles, and sales and marketing materials it wanted to produce. The Board noted that notices of reliance are strictly limited and may be used to introduce only discovery deposition, interrogatory responses, admission or written disclosures of an adverse party, and printed publications or official records. Other evidence must be authenticated by testimony. Accordingly, much of Opposer’s evidence common law evidence was not considered.

As a result of the limited evidence Opposer was allowed to submit, the Board found that it has not established priority and dismissed the case.

Practice Note: This case presents a veritable cavalcade of interesting issues and can serve as a laundry list for what not to do. That said, it’s important to note that even good and careful attorneys can get tripped up on the rules regarding submission of documents and evidence in a TTAB proceeding. There but for the grace of a good associate go any of us.

Non-trademark attorneys, more accustomed to fighting in federal court assume (and tell their clients), that the process at the TTAB mirrors that of federal court proceedings. While the basis of that statement is true, there are myriad distinctions that must be taken into account, as this case illustrates. Counsel should learn those distinctions and advise clients that availing itself of TTAB proceedings is no “walk in the park,” and federal court methods cannot simply be cloned. The good news is, failures by parties work both ways. If your opponent has been sloppy in its submission of evidence, the TTAB has shown that it will not consider it. Careful reading of pleadings, discovery, and motions can be a gold mine for a summary judgment motion.

Procedurally, the Opposer in this case can do what Blue Man Group did in its own matter and appeal the decision in district court. In all likelihood, like Blue Man, it will be able to properly introduce its evidence and – at the very least – establish priority in its mark. Then the question will hinge on confusion.

Finally, this case underscores the importance of a valid federal registration for clients’ important marks. When push comes to shove, a registration, properly introduced, saves time and money, because it is prima facie evidence of a first use date. Moreover, after 5 years of continuous use of the mark after a registration is issued, the mark’s registration becomes incontestable, except under limited circumstances (fraud, abandonment, genericness).

The new logo (shown above next to the old one) is representative of the phone company’s radically new “so very Verizon” campaign.

Further images of the clever campaign are available here.

No word yet on whether the old CAN YOU HEAR ME NOW? tagline will be replaced by the VERY awesome: IS IT HOT IN HERE?

Practice Notes: Rebranding efforts can be effective for companies to update their image and gain new consumers (although they can sometimes backfire, as Tropicana learned recently). Clients should involve their trademark counsel in the rebranding and marketing efforts, so as to assess potential risks (such as likelihood of confusion with existing marks, say, in this case, the SKYPE logo) and protect the new marks, including new trade dress, if applicable.

Tsan’s Comment: Naturally, rebranding efforts that take place on April Fool’s Day and are gone the next day should be suspect (unless you’re introducing New Coke).

Following the trend started by Hyundai Motor Co., and even going one better, automakers Ford are offering a bailout of their own: buy any new car from them between April 1st, and April 30th, and if you get pink-slipped GM will pay your car tab for up to 9 months and up to $500.00; Ford will pay up to $700.00.

But wait! There’s more: If you buy a car, drive it, make payments on it, and then bring it back for a trade-in, GM will credit you for what you own on the car, even if the National Automobile Dealers Association says the value is lower. You also get free On-Star service and a host of other little perks (including a low finance rate).

If you’re looking for a catch, there really isn’t one. So long as the buyer is employed at the time of purchase and the lay-off notice does not pre-date the car purchase (and the employee is not self-employed), the companies are ready to deal.

A similar program was offered by Hyundai this February wherein new car buyers could return their vehicles to Hyundai without further payments due in the event they were laid off within the first year of the purchase. Of course, Hyundai was footing the bill for its promotion: (and getting back the car). In the case of Ford and GM, the tax papers appear to be subsidizing the purchases.

Practice Note: Clients who wish to do “big splash” promotions should remember to review carefully all of the terms and conditions of the promotion, to make certain there are no ways for participants to take advantage of the program. Of primary importance is the institution of an “end date,” so that if there is a problem, the promotion has a limited life. Similarly, for a promotion such as this, there should be a limit on the number of cars one person can purchase. Provisions should be placed in the terms and conditions of the promotion that make clear the program will not be offered if, in the sole discretion of the sponsor, a person is trying to deliberately undermine the intent of the promotion.

Inhale, Inc., makers of hookahs and the INHALE vaporizer believes Oglesby & Butler was smoking something other than tobacco when it adopted the name I-INHALE for its vaporizer product, and Inhale put down its own hookah long enough to file suit in the Central District of California for trademark infringement of its name. Inhale has several federal trademark registrations for INHALE for smoking devices “used by individuals to smoke herbs such as tobacco” (not that anyone remembers).

It took less than 10 days for Oglesby & Butler to come out of its fog and change its name to iolite. After all, looks like Inhale had Oglesby head to rights.

It’s no secret: U.S. and international markets are in deep turmoil. Massive layoffs, historic stock market declines, and institutional failures remind us this no ordinary time. Even while companies look for ways to cut back and streamline institutional costs, now may be the best time to strengthen your intellectual property (IP) portfolio.

Although frequently overlooked, a company’s IP, including its trademarks, copyrights, and patents, is often its most valuable asset. There are several reasons why strengthening an IP portfolio now, even during the recession, not only makes good business sense but may be the key to a company’s future economic growth and recovery:

1. IP Assets May Be A Significant Source Of Revenue During (And After) The Recession.

Licensing or selling of IP assets has always been a way for companies to generate additional revenue. For example, during 2006 Neo-Magic recorded a $3.5 million gain on the sale of its unused patents, representing over 37% of the company’s total yearly revenue. A recent article in the Chicago Tribune reports “amid the recession, a growing number [of companies] are looking to generate cash by selling or licensing their dormant trademarks and patents.” If protected and maintained properly, your IP assets can offer significant revenue now and into the future. In fact, many lending organizations look to a company’s trademark portfolio as a means for determining the foundational strength of the organization.

2. IP Assets Are The Building Blocks To A Flexible Business.

The recession has brought significant restructuring and reorganizing of businesses. Mergers, acquisition, spin-offs, and new business units are a sign of the times, and strong IP portfolios are the building blocks for new business opportunities as companies transform their products and market positions. Perhaps this is why, historically, certain IP filings and litigation tends to increase during times of recessions (click here and here for historical figures). As a business continue to change, adapt and grow, so too must its IP assets.

3. IP Assets Will Set Companies Apart From The Competition.

Brand recognition by consumers not only increases product and service sales, but creates a significant barrier to entry for new competitors. Thus, the strengthening of a brand position in a downturn (through both IP filings and consumer marketing), provides an opportunity for companies to stand out when there is a smaller competitive market. Strong IP assets, such as trademarks, will help ensure brand recognition and differentiate companies from their competition.

4. IP Assets Have A Lifetime That Will Extend Well Beyond The Recession.

Perhaps the only thing we know about this recession is that it will end. Innovation, creation and entrepreneurism will continue to drive our economy forward, and as we emerge into the next profitable market cycle, IP assets will remain one of most valuable company assets. Failure to protect them now may have severe consequences for the future.