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New Internet Scheme Presents Threats to Trademark Owners
Advertising dollars have long been migrating from more traditional media to the Internet. While no doubt manifestation of sound business decisions, this phenomenon has unfortunately been accompanied by new means of trademark infringement. As a result, trademark owners have found that they must be especially vigilant due to consistent and nuanced efforts to profit by using their viable brand names on the Internet. Two common threats to trademark owners, cybersquatting (the registration of an Internet domain name using the trademark (or a common misspelling of it) of another), and phishing (the illegal use of a similar domain name or an incorporation of a registered trademark to draw Internet traffic), were discussed in the January 13, 2009, issue of the Intellectual Property Update.
A new and increasingly common threat, the “click farm” has arisen out of an advertising technique utilizing click-on advertisements. The basic structure of this practice, often facilitated through pay per click service providers such as Google, Yahoo! and Microsoft, allows a website operator to obtain a fee from the advertiser when customers to the website click on posted advertisements. This generally legal and accepted form of advertisement becomes a matter for concern when click farmers use another’s registered trademark or a common misspelling of it in the click-on ad so as to garner more clicks and thereby increase revenue. The question is whether this use of a mark constitutes trademark infringement and, if so, whether the trademark holder’s interest is protected by traditional trademark infringement laws.
There is strong reason to believe that the law in place today will protect against click farmers who use a mark without its holder’s permission. Trademark law protects both the consumer and the trademark holder by reducing confusion as to the source of the good. Traditionally, protection is afforded through an action for infringement. To prove infringement, a valid trademark holder must show that the infringer used the mark in commerce in connection with the sale of goods, and that that use caused a likelihood of confusion. Click farming websites, which are sites with multiple click-on ads, will likely meet the “in commerce” element for a trademark infringement action because the whole point of the click farm is to generate revenue from the advertising industry when the ads are clicked upon. Click farming sites will also meet the “likelihood of confusion” element of an infringement action. Typically confusion occurs at the point of sale. However, with the Internet, and especially in the case of cybersquatting, the idea of “initial interest confusion” has come into being. Initial interest confusion is confusion that creates initial interest in the product, though that confusion is dispelled before purchase. In this instance, it can be argued that the use of the trademark in the ad caused the consumer to initially click on the ad. Initial interest confusion has succeeded in sustaining an infringement action, even when the infringer is not competing with the trademark holder in a similar product market. This is because it impermissibly capitalizes on the goodwill associated with a mark.
Trademark holders should continue to protect the goodwill that they have created around their marks by keeping abreast of new legal issues affecting the mark, especially those created by rapidly evolving Internet pratices.
Contact for more information: Gretchen A.M. Eck
FTC Implements Blogging Disclosure Rules
Not long after individuals started using social media to share their opinions on even the most obscure persons, places and things, did some marketers start to influence opinion by means of ”seeded” posts, encouraging Facebook “fans,” blog posts, tweets, and other testimonials about products. Reacting to this development and the onslaught of other new methods of manipulating public opinion, the Federal Trade Commission (FTC) recently implemented long-discussed rules controlling what advertisers (and their blog and tweet posters) must do to ensure that their endorsements and testimonials comply with the FTC Act. The FTC last updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising in 1980.
In a nutshell, “advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as ’results not typical‘ – the revised Guides no longer contain this safe harbor.” FTC Press Release, Oct. 5, 2009.
Advertisers and posters must concede and describe the atypical results and discuss the “expected results” in detail. Posters and advertisers can be liable for claims about a product that were not experienced personally by the former and substantiated by the latter. Celebrities endorsing a product outside of a traditional commercial or print ad — such as on a talk show or in press interviews — must disclose their relationship to any product, service or location they endorse. Such individuals’ mentions of favorite hotels and restaurants could therefore be impacted. Further, employees who tweet or blog about how great a new service or product of their employer is must disclose that they are a paid employee of the employer. The rules apply to beltway lobbyists as well. Companies funding studies must now disclose financial ties to studies they commission by research institutes.
The intent of the new Guides is, of course, to protect consumers from deceptive marketing. If a poster or tweeter receives compensation or a free product, combined with an expectation of a positive review, the content of the Facebook entry, blog post or tweet must include a disclosure. Doing so within the 140 character limit of a tweet may prove especially difficult.
While advertisers and posters have the same technical liability under the Guides, the FTC’s focus will be on the advertiser. It will likely take numerous complaints against a blog for the FTC to investigate. Many bloggers or Facebook users have an “about” page; if free products or compensation are common, then that page should be updated as to compensation policies and specific past freebies or payments disclosed.
In the end, fawning blog posts and ads for such things as “washboard abs in three weeks” may be things of the past. They no doubt will soon be replaced by more small-print disclosures.
Contact for more information: Christopher J. Borders
U.S. Customs and Border Protection for Registered Trademarks
Many people believe that the only way to protect their trademark rights in the United States is to register their trademarks with the U.S. Patent and Trademark Office (USPTO). Although doing so is a very effective step to protect brand and trademark rights, trademark holders should take one further step to prevent against the unauthorized use of their trademarks.
In order to fulfill its statutory, regulatory and treaty-based obligations of preventing the importation of merchandise which violates certain trademark and trade name rights which have been registered with the USPTO, the U.S. Customs and Border Protections (CBP) is vested with the authority to exclude from entry, detain, and/or seize violative trademarked goods. To most effectively provide protection against such violative imports, the CBP has established an intellectual property rights enforcement regime, which offers rights holders a two-tiered enforcement option.
The first tier is for trademark owners to record their marks that have been placed on the Principal Register with the CBP to assist that agency in its efforts to prevent importation of goods that infringe the registered trademarks. The recordation database includes information related to the owner of the marks, product information and any images associated with these registered mark (e.g. design components).
The second tier is the CBP’s enforcement process. CBP officers monitor imports to prevent the importation of goods bearing infringing marks and can access the recordation database at each of the 317 ports of entry. In addition to CBP officers’ proactive monitoring of all incoming goods into the country, a trademark holder can provide the CBP with information relative to the importation of infringing imports so that the CBP can prevent such importation.
In light of the proliferation of counterfeit and infringing goods being introduced into the U.S., trademark owners should be aware of this additional protection. The recordation can be done online by providing the necessary documentation related to the registered mark. The cost is $190 per U.S. trademark registration.
Contact for more information: Kourtney A. Mulcahy
New Local Patent Rules Now in Effect in the Northern District of Illinois
On October 1, 2009, new local patent rules enacted by the U.S. District Court for the Northern District of Illinois became effective. Notably, the rules govern cases already pending in the court, and allow the presiding judge, in his or her discretion, to apply them in part or in full to earlier filed cases. Although these new rules are similar to the local patent rules in other patent-heavy districts — such as the Northern District of California and the Eastern District of Texas — there are some significant differences that are unique to the Illinois rules.
Northern District of Illinois Chief Judge James F. Holderman has indicated that the rules are not built around speed, as is the case in some other districts, but instead are intended to promote uniformity in patent litigation within the district. However, some IP attorneys within the district are concerned about the aggressive nature of the rules’ scheduling requirements. Similarly, Northern District of Illinois Judge Matthew F. Kennelly, who served as the chair of the committee that drafted the rules, recently commented at a Chicago Intellectual Property Alliance luncheon that the rules arose out of an intent to limit the amount of discovery that is common in a patent case, to reduce the time to trial, and to thereby reduce costs to the litigants. Following is a brief summary of some of the new rules’ more notable provisions.
Generally, the new local rules provide a pleading-to-trial framework and a set of scheduling deadlines beginning with initial disclosures, extending through discovery, and ending with a trial that should begin approximately 24 months after a case is filed. The initial discovery proceedings are set up to move rather quickly.
New Initial Disclosures have been added to the normal Federal Rules of Civil Procedure Rule 26(a)(1) disclosures, which are due 14 days after an Answer is filed. Initial Infringement contentions must be filed by the plaintiff 14 days later. Thereafter, a defendant has 14 days to review the infringement contentions and to respond with non-infringement and invalidity contentions of its own. Neither the Northern District of California nor the Eastern District of Texas requires a defendant to file such contentions. An initial response to the non-infringement and invalidity contentions is due in another 14 days. By comparison, the Northern District of California and the Eastern District of Texas allow the defendant 45 days from the service of initial invalidity contentions, making the new Illinois rules substantially more aggressive. After some additional time to further clarify the issues through discovery, the case proceeds to a Markman hearing. Although the new local rules do allow for a stay of other fact discovery during the claim construction period, the requirements shorten the timing for many other discovery requirements, add new requirements and push many other procedures up in the proceedings. The Markman briefing is different as well. The Northern District of California and the Eastern District of Texas follow a more traditional format for Markman briefing, with the patent holder filing the opening and reply claim construction briefs and the accused infringer filing the response brief. Under the Illinois rules, however, the accused infringer is to provide the opening and reply claim construction briefs, and the patent holder files the response brief. This rule seems to favor accused infringers. Similarly, claim construction occurs much later in Illinois, approximately 38 weeks after the start of litigation, as compared to approximately 19-24 weeks in other federal districts. The rules also change expert disclosures, reports, and attempt to significantly limit expert depositions.
Intellectual property owners should note and become acquainted with these rule changes. Although the intent of the new rules is to reduce the length of litigation and to allow infringement decisions to be made more quickly, they also have the potential to increase costs, or at least to front-load the cost of litigation in patent cases. Given the speed at which discovery is set to occur under these new rules, patent owners contemplating litigation in the Northern District of Illinois will likely have to perform greater amounts of due diligence and litigation preparation before filing than they might be used to in the federal courts.
Contact for more information: Daniel L. Farris
This newsletter has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.
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