MODERATOR: What are the most cost-effective means of protecting a company's trademark?
GAMBREL: Most business owners are aware that it is possible to register a trademark, either on the state or the federal level. Federal registration is the most cost-effective way of protecting a trademark. However, many business owners don't think about conducting trademark availability searches before adopting a trademark. By conducting a trademark availability search, a business owner can determine not only whether there are prior federal or state registrants, but also whether there are prior common law users of the proposed or similar marks, and anticipate future conflicts. [see Trademark Basics below]
MODERATOR: Is there a way that you can throw out a figure for a fairly simple federal registration, what kind of investment am I looking at?
GAMBREL: The federal government charges a filing fee for trademark applications, the amount of which depends on the number of classes of goods or services that the application covers. Whenever a business applies to register a trademark, it must identify the goods or services for which it uses, or intends to use, the trademark. There are 45 internationally recognized classes of goods and services into which the applicant's goods and services may be classified. The filing fee is the number of classes covered by the application, multiplied by a government filing fee of $325 (or $275 for TEAS Plus applications), in most cases. It may be more or less, depending on the manner in which the application is filed. Attorneys' fees for preparing and filing a federal application are usually between $300 and $400, regardless of the number of classes covered. For a typical application, therefore, the cost will be between $600 and $700 for a single class, plus $325 (or $275 for TEAS Plus applications) for each additional class.
SCHAEFF: In addition, there are typically costs associated with prosecuting the application. Oftentimes, the biggest factor is time more than money. On average, I tell clients it's going to run $1,000 to $2,000 and take a year to 18 months.
GAMBREL: That's right. There are various stages to prosecution that trademark counsel can explain to prospective applicants. For example, if one files an application before using the trademark, the applicant must file proof of use of the trademark during prosecution, which will tack at least a few months onto the pendency of the application. But Joe's estimate is pretty typical.
ROESCH: Kim talked about searches and searches can definitely cost more than application fees. And in some respects, they're more important.
SCHAEFF: Absolutely. The worst thing in the world for a business is to invest a huge amount of money in advertising a new product and find out six months, nine months, a year down the road that somebody else has prior rights and they've got to go and change their name. That's a hideous business situation.
MODERATOR: Did I understand you correctly in that use trumps registration?
GAMBREL: Yes. In fact, federal registration is supposed to reflect the status of use of a trademark. All other things being equal, the first person to use a trademark to identify goods or services is the owner of that trademark in connection with those goods or services. In the absence of a federal trademark registration, those rights extend to the geographical area in which the trademark owner is using the trademark. So, if someone begins to use a trademark without a federal registration, for example, for dry cleaning services in the Tri-State area, then that person will have common law trademark rights to whatever trademark he or she uses in connection with those services in Southwestern Ohio, Southeastern Indiana and/or Northwestern Kentucky, whatever geographical area in which he or she does business and advertises. If that person obtains a federal trademark registration, the registration creates a presumption that the owner possesses the exclusive right to use that mark throughout the United States. But, in order to defend those rights, the registrant must be able to establish that it is using the trademark. If the owner of a federal registration wishes to pursue someone at a remote location— for example, in Southern California— for trademark infringement, the trademark owner must either have an ongoing business in California or the ability and imminent means of establishing a business in California.
However, one of the great things about a federal registration is that it cuts off the ability of innocent junior users without notice— persons who may coincidentally adopt a mark similar to a federally registered mark— to establish rights of their own in a remote geographical location. So, anyone who decides to use a mark that has been federally registered by another can be enjoined from using it as soon as the federal registrant expands into the junior user's territory. Also, while prior users may challenge a federal trademark registration for a period of up to five years after it issues, after the fifth anniversary of the registration, that's no longer possible. The registration becomes incontestable except on very limited grounds.
To the extent possible, a business owner needs to know whether his or her chosen trademark is available and will infringe upon someone else's rights before he or she begins to use the trademark or files a federal trademark application. But, five years after the registration issues, the owner no longer has to worry about it anymore— provided that he or she continues to use the trademark.
MODERATOR: So how could legal counsel help clients identify urgent issues and prioritize their efforts in this field?
GAMBREL: A lot of business owners don't know where to start when it comes to building a trademark portfolio. A trademark attorney can help them to prioritize. If a company doesn't own any trademark registrations, counsel can conduct an audit of its product lines, collateral materials and website— to help identify the most valuable trademarks and the trademarks that will be easiest to protect.
Many business owners don't even think about trademarks until they run into a conflict. That's the point at which they begin to consider registering their trademarks, after they figure out how to deal with the conflict they've encountered. Trademark counsel can help to formulate a federal registration strategy based on the importance of a business' various trademarks. Obviously, if there's an urgent conflict, counsel will help the client to deal with that first, then help him or her to avoid similar conflicts in the future by conducting availability searches, and getting the company's trademarks registered. Trademark counsel can also conduct trademark availability searches, not just to determine the availability of the client's trademark, but to help detect common law users who may be passing under the company's radar and infringing upon the rights of the company.
There are also watch services that trademark counsel use regularly to monitor the federal register for applications that may be of interest to a company or resources for unregistered trademarks— the Internet, domain names registries, and similar sources of information.
MODERATOR: Are there generally things that business owners cannot trademark?
GAMBREL: Yes. There are designations; terms and phrases, that people can use in connection with their goods and services that are not susceptible to protection. Generic terms, which identify goods and services, per se, and which competitors need to use in order to identify competitive goods or services, cannot be registered. For example, if you sell apples, you can't appropriate the word "apple" as a brand name for fruit. But, if you're selling computers, you can appropriate it because it's an arbitrary trademark as applied to those goods, without generic or descriptive significance.
There is a continuum of protectability with respect to trademarks. There are generic terms, which can never be appropriated, and there are descriptive terms, which seem like they ought to be available for everyone to use because they immediately convey some information about the nature or quality of goods or services. One cannot appropriate a descriptive term, either, if one's competitors need to use it to describe their products or services.
Descriptive terms may be protected after they've been used for an extended period of time, provided the user is the only one using that particular descriptive term, and the public comes to associate it exclusively with a single source for goods or services. Terms and phrases that are immediately protectable as trademarks include suggestive terms, like "polar" for ice cream, which suggest a characteristic of a product or service, but don't state it explicitly. Also, arbitrary terms, such as Apple for computers, are immediately protectable because, even though they are words in one language or another, they have no descriptive meaning as applied to the goods or services for which they are used. Fanciful or coined terms, like "Xerox", are also inherently protectable. There are other kinds of designations that can't be registered, such as national and Olympic symbols, and matter deemed to be scandalous, but those are pretty narrow categories.
SCHAEFF: We can't register "Doug Bolton" for restaurant services. Unless you consent, of course.
MODERATOR: So people's names are off limits, in general?
ROESCH: Not exactly. If you actually were doing business and opened a restaurant called Doug Bolton's, and you wanted to register your name and you consented and had proof that the restaurant was only associated with you, you could get that registered, but there can be a rejection based on words that are primarily a surname.
MODERATOR: Is there any time when you've recommended to any of your clients that they not pursue or register a trademark?
GAMBREL: There are times when it's just not cost-effective. An example would be short-term trademarks. If a business plans to use a trademark only for a six-month promotion, there's no point in investing in a federal trademark application that takes a year or more to prosecute. To maintain the federal registration, and to assert continuing rights to the mark, the business owner would have to continue to use the trademark. Before the sixth anniversary of a federal trademark registration and before every tenth anniversary thereafter, the registrant must prove use of the trademark to maintain the registration. There are also occasions where a client has been using a trademark, perhaps for a long time, and hasn't registered it, and find that they won't be able to because there's a prior federal registration that will block their way. In that case, it simply doesn't make sense to file the application. Depending upon the circumstances it may or may not be prudent for the client to change the trademark, but we would advise against wasting money attempting to do something that can't be accomplished.
ROESCH: And the same thing might be true with the descriptive marks Kim talked about earlier. I wouldn't want to tell a client to perhaps waste money at the trademark office if I knew for sure they were going to get a descriptiveness rejection, or if there was a likelihood of confusion rejection.
MODERATOR: What are the risks of putting trademark issues on the back burner?
GAMBREL: If you don't conduct a trademark availability search, you miss an opportunity to discover people who may be using conflicting trademarks. As a result, you might make a substantial investment in the trademark, the packaging, the collateral, and the goodwill that the public comes to associate between that mark and your business, only to encounter someone with superior rights who insists that you change the trademark years later. When a trademark user encounters another business with superior rights to the trademark— maybe two, three or more years down the road— it can be very costly to adopt a new trademark.
Failing to register your trademarks means you miss the opportunity of gaining the priority date you get when you file the trademark application. Many businesses think of a trademark months or even years before they launch. By filing the federal trademark application in the beginning, you effectively reserve that trademark while you're gearing up to do business under it. Plus, you'll miss the opportunity of gaining an incontestable trademark right if you don't possess a federal trademark registration for your mark.
MODERATOR: What are the economic considerations in maintaining a global trademark portfolio? Based on your earlier comments, that sounds like a pretty surmountable challenge.
ROESCH: It's an expensive proposition. And the economics have to be considered as you go forward, looking at what countries you want to file in, what marks you want to file, in which countries and in what classes, like Kim was talking about, based on what kinds of goods and services are you going to use. The trademark lawyer has to be aligned with the marketing people and you have to have some strategic discussions about where you think you're going to expand, where you think you're going to be selling these goods or services, and how important is it— as Kim said, if there's a seasonal or short-lived trademark, you don't want to go filing all over the world on something like that. But if you have a major launch, you've got a new product coming out, and you know you're going to be selling it in the European Union, you're going to want to make sure you're covered in the EU. If you're going to source it in China or Korea, you're going to want to make sure that you have protection in those markets because those are countries that are known to cause problems for trademark owners. So it's very important for counsel to sit down with the business person and make sure they know where the business people are going with their products and their services.
Earlier, when Kim spoke about trademark rights, she indicated that in the United States your trademark rights are based on use. But in many foreign countries, it's based on your filing. Although Kim was talking about getting an intent to use application in the U.S., in most other countries, the first to file is the one who gets the rights. So if The Coca-Cola Company isn't the first one to file in Bangladesh and somebody else does, The Coca-Cola Company has to go and buy the trademark from that person.
MODERATOR: You referenced the Koreas. Would you like to talk about China, Brazil and India, and maybe Russia as the "brick" countries that seem to be the ones people talk about expanding into the most?
ROESCH: It's true that many businesses source their products from those countries, but it's also true that you'll find entities over there basically ripping off trademarks once they see it. So if you don't get protection, if you're not the first to file in those countries, you're going to find yourself at the mercy of others who rushed out to the trademark office. Basically, you're going to have to go and buy the marks from somebody else. I bet every one of us has had to go on behalf of a client and try to negotiate to buy rights from somebody else who filed in one of the countries you mentioned. It's not unusual, especially in South America, for distributors to think they own trademarks and they go off and file and they're not the manufacturer. They just happen to be able to distribute the products in that market.
SCHAEFF: So if the trademark owner is not vigilant, it leads to all sorts of problems including having to have separate trademarks for different markets, which can generate all sorts of unhappy costs or, the situation where you have to go back and attempt to purchase the trademark rights from someone who really didn't generate the reputation in that particular trademark or in that territory. Lynda is absolutely right. Talk to your marketing department to find out where those products are going to be sold.
MODERATOR: Are there other economic considerations, other than just getting aligned with the market?
ROESCH: Actually, there are. Kim talked about incontestability and that comes after a period of time. In many countries, you have to file renewals at periodic intervals. If you're not using the marks— especially in this day and age— in the U.S. you can't keep them. It's not a vault system. In other countries, if you're not using the mark and you don't have any chance in the foreseeable future that you're going to use the mark, you might want to get out of paying because the tax or the renewal fees can be very expensive. For example, Portugal is one country that is very expensive. If you're not using your mark and you don't think you're going to use it in the next five years, there's no reason to keep it if you're looking to cut costs. That's another instance where you need to be talking with the business people and say, are you going to keep selling these products in these markets, and if you're not, there's no reason to maintain the marks.
MODERATOR: The next few questions are geared toward filing. How do you decide what to file, and then how do you decide whether to use Madrid, CTM or individual countries?
ROESCH: I'm really big on talking to the marketing and business people to make sure that you're in step with them in terms of their needs and the protection that the trademark system can offer. If you have a limited budget, look at where your biggest markets are, or where the chance of counterfeits and rip-offs are going to be and focus on those countries first. Then look at the next level to to determine where you think you need protection. If you have money left over, then look at the rest of the world.
MODERATOR: Kim, you referenced, the Madrid Protocol, and then of course the individual countries. I'm not familiar with CTM. Could you touch on that?
GAMBREL: "CTM" stands for Community Trade Mark, as in the European Community. It's possible to register a trademark in the European Community as a whole, rather than registering it on a country-by-country basis. As with anything, when it comes to economies of scale and trademarks, there's a tradeoff involved. If you apply to register a trademark in the European Community and there's a problem in one country, that application is going to fail, and you'll have to revert to registering the mark on a country-by-country basis, which is an expensive bit of backpedaling. But, many of our clients have great success with European Community Trademark applications. One of the greatest advantages is that OHIM, the Office for Harmonization in the Internal Market, which administers CTM's, does not refuse registration to marks over similar, previously registered marks, as do most national trademark offices. If you file in the U.S., and in many other countries, the Trademark Office may refuse the application over a previously registered, confusingly similar mark. And you can imagine that perception of what is "confusingly similar" really varies from country to country. Of course, some think that the perception of the U.S. Trademark Office is largely logical, and that the perception of foreign trademark offices is often illogical. When you file for a CTM, however, the administering authority doesn't make that judgment. They leave it up to every prior applicant or registrant or trademark owner in Europe to oppose your application when it's published. Because you don't face the possibility of refusal over prior registrations at the European Community level, it's more convenient and less expensive to register marks at that level. At $1,000 to $2,000 per country, it will cost at least $25,000 to $50,000 to register a mark on a country-by-country basis throughout the European Community. It costs about $6,000 to file a European Community-wide application. If you file an International Application and seek protection in the European Community, you can cut the cost to around $4,000.
SCHAEFF: Yes, there's tremendous cost benefits if you file a Community Trade Mark application. I can't recall the last time I filed a national application in a European country.
ROESCH: To go even further, many clients that had national applications started filing CTM applications once the CTM was instituted. Those got approved, and now they're letting all their national registrations lapse because there's no reason to keep them. We weren't sure that was going to be the case initially, but time has shown that CTM marks are all that you really need in Europe. There are outliers that don't participate in the CTM—Switzerland or Norway. These are countries that you would still have to file individually in Europe.
SCHAEFF: But there are others that come on every year, it seems like, and if you have a CTM registration that's 10 years old, as a new country comes on, it automatically extends to that country. So there's that benefit as well. There are some additional benefits, too, that are really technical trademark type things, so we won't go into those here. But the European Community Trade Mark registration is a great deal.
MODERATOR: Even if you are looking at not covering all 28 countries?
SCHAEFF: If you're interested in Germany, France, Italy and England, let's say, it's going to be cheaper to secure a Community Trade Mark registration than it would have been to file in those individual countries. Plus, after the registration issues, presuming that it does, you've got coverage in all those other countries that you may want to expand use into.
GAMBREL: And it is a common market. So even if you're only selling goods into one of those countries, you can reasonably anticipate that your goods are going to wind up traveling into other countries.
MODERATOR: You sound like you have confidence in the U.S. Trademark Office. Do you have equal confidence in the CTM?
GAMBREL: In general, yes. We've had very good fortune with OHIM. Plus, it's often easier to register a mark in Europe than it is here, because the client is not obliged to prove that it is using a mark before it receives its registration.
ROESCH: Yes, and there's no substantive examination. It's just left up to the competitors to file an opposition or object. Oftentimes that's a cost-benefits analysis as well because those can be expensive propositions.
MODERATOR: Switching gears, how serious is counterfeiting in the United States?
ROESCH: It's quite serious. In past years, it was basically money that was funneled to the Mafia. Today, that money goes to terrorist organizations. It's just a lot easier, quicker and cleaner way for terrorist organizations to get their hands on money, as opposed to the drug trade. And the value is surprising. The amount of counterfeiting that goes on is enormous. Walking down the street, you can see the watches and the purses. Go to the flea market and you see it. It's a serious business. And sometimes, in prescription drug cases, it can be fatal. So it is significant.
MODERATOR: And they're everywhere. They're on eBay. On the Internet.
ROESCH: They are on your corner, on the Internet and in stores, too. Most consumers don't realize that it's counterfeit, but it is. Some counterfeits are so good, it's hard for even the manufacturer to tell. They've developed all kinds of ways to detect counterfeiters like placing holograms and package seals on products, but there's always somebody who can duplicate the technology. Nothing surpasses the engineering capability of somebody who wants to counterfeit.
MODERATOR: So what are trademark owners to do about this issue?
ROESCH: Vigilance. You've got to be on the lookout. Look on the Internet. As Kim said, there are watch services that will monitor the Internet and auction sites for you.
SCHAEFF: You have to police your marks.
GAMBREL: Register your mark with the U.S. Customs if you're concerned about imports. The federal government will actually screen imports that feature use of registered trademarks.
ROESCH: Customs is an enormous benefit. If you have a registered trademark, record it at Customs. I get letters from Customs' ports a couple times each year saying, "your client has a trademark registration for X, Y, Z and somebody is coming in with it – is this your client's?" And it usually isn't.
MODERATOR: Is the problem worse in the United States than in other countries because of the opportunity here or is it worse overseas because the regulations, customs' offices, etc. aren't as vigilant?
SCHAEFF: I think it's a universal problem. The more wealthy a country is, the more likely you'll see counterfeit goods.
ROESCH: It's a lot easier to counterfeit in China. The flea markets in China are just full of counterfeit goods. It's hard for me to say that the U.S. is worse than China.
SCHAEFF: If a movie opens on a Wednesday in the United States, you're likely to see DVD's for sale in China by the weekend. And the quality can be first-rate.
ROESCH: That's right. Owners have to be vigilant and take action when they find counterfeits. They have to go to court and get seizure orders to go in and raid— to pull the counterfeits off the shelf.
MODERATOR: Have any of your Southwestern Ohio-based clients had to deal with the counterfeiting issue and was it vigilance that surfaced it and how were you able to rectify it?
ROESCH: We have had instances where the marshals have had to go in and pull the product off. It can be dangerous, too, sometimes. There's a reason why those guys wear a bulletproof vest. So, yes, even in Southwest Ohio we've had people go in and pull product off the shelf. We've had to take action in Florida and New York, as well, for a client that was based here.
There was a big raid in Monroe, where I think collegiate licensing people and a couple other brand owners went in with the federal marshals and they pulled items off the shelves— like Nike shoes and others.
MODERATOR: So was it just vigilance?
ROESCH: Yes. The client knew what was going. In one instance, a consumer said I bought these items, and I don't think they're right. The consumer notified the client and it turned out the products were counterfeit, so we tracked them down and found them. That was in Florida.
MODERATOR: What is the best avenue to fight counterfeiting? Is there a different answer than just vigilance?
ROESCH: I think recording at Customs is one of the most cost-effective avenues. Actually spending the money a couple times to make sure that counterfeiters know you'll come after them. There's always somebody that wants to do it. At least if you take one out, you've started to chip away at the problem.
MODERATOR: And with U.S. Customs, is that a single filing?
ROESCH: Yes.
MODERATOR: So you don't have to file in every port?
ROESCH: No. You can file with the federal government on the Internet, actually.
MODERATOR: Is that a pretty simple and straightforward process?
ROESCH: Yes, it is a very simple and straightforward process and it does work. But you need a federal trademark registration. That is a prerequisite.
MODERATOR: How do you monitor third party uses for infringement?
ROESCH: One way is using the watch services Kim mentioned. But, clients' employees often will be the best eyes and ears. They see what's out there on the shelves. If there's anything close to eating their market share, they bring it to the legal people's attention and the client, or to the outside counsel.
MODERATOR: Aren't so many of those, though, in such small quantities that they don't rise to that level?
ROESCH: It's true, there are some that are in small quantities, and you have to pick and choose. Sometimes sending a cease and desist letter can solve your problem and the other side will stop. But sometimes you have to threaten litigation. Sometimes you actually have to file. In most instances, it will settle. But sometimes you actually have to go through the full, long litigation.
GAMBREL: Many of our clients monitor the Internet themselves. They routinely do trademark searches on the Internet to see what they turn up. And sometimes you will find de minimis users on the Internet, just like they might anywhere else. However, the online users are using an international medium to take advantage of the client's trademark. In terms of cost-effectiveness, stopping uses that are present on the Internet is very important to a lot of our clients, and they do a lot of that monitoring themselves.
MODERATOR: So, how do you monitor for inappropriate trademark uses on the Internet?
GAMBREL: Google.
ROESCH: That's true. We have clients who have IT people monitor usage. Or, they subscribe to clip services. Dinsmore subscribes to watch services, but there are clip services as well that will do the work for you.
There are infringements, but there are also inappropriate uses when somebody starts using your trademark and tries to make it generic. When a trademark becomes too successful, it can become generic, and you can lose your rights so you have to watch for that as well. As Kim said, they want to watch how people are using their marks. They even want to see how their distributors are using them to make sure that they are using them as a trademark and not as a noun, and that they're using the appropriate trademark symbol when they sell the product.
SCHAEFF: The classic example is probably Xerox. For years, photocopying and the term "Xerox" were almost synonymous in people's minds. Xerox will often send notices to authors who misuse the term "Xerox" or some variation in an article or the like. Their fear is that if the term Xerox or variations of it – Xeroxing, etc. – comes to mean to consumers the act of photocopying, then their trademark becomes generic and anyone can use it.
ROESCH: They had a wonderful ad campaign that was "Xerox has two R's in it." The R in the middle and R in the circle at the end of it. That was my favorite.
SCHAEFF: The point of that advertising was simply to reinforce in consumers' minds that the term "Xerox" is not a synonym for photocopying, but rather, Xerox is a trademark that identifies a particular company's products.
MODERATOR: Speaking of the use of the R with the circle, is that something you recommend to your clients that they use, or is that really just totally subjective?
ROESCH: No, it's not subjective. You're not supposed to use it until the mark actually registers. Once it does register, you want to use the symbol so you can put the rest of the world on notice that you actually have the registration for all of the reasons Kim talked about earlier.
MODERATOR: But I see brands that don't use the R with the circle. And I'm assuming that they are federally registered.
ROESCH: Well, sometimes you will notice at the bottom of the package "such-and-so is a federally registered trademark." So they will put the notice somewhere on the package and it is a really good idea. Do you have to? No. But it's a good idea and you can defeat some people who say, "Oh, I had no idea it was registered."
GAMBREL: Anyone can use a TM symbol— that little TM or SM that you see to the upper right of trademarks in print. You don't have to own a registration to use that. If you claim trademark rights in something, you're free to use the TM or SM whenever you use or promote the trademark.
SCHAEFF: The encircled R is strictly restricted for trademarks that have been federally registered and technically, it could be false advertising if you utilize the R in the circle when you don't own a federal registration.
MODERATOR: Has there been any recent case law that is either disturbing to you or helping you in your practice in the trademark area?
ROESCH: Over the past few years, we've seen the Supreme Court focus on the principles of competition in the trademark area, and while a trademark can give you exclusive rights to use that mark on certain goods, it does not prohibit competition. The Supreme Court has made it quite clear that you're not going to be able to use trademarks to stop or stifle competition. So they basically said that although packaging could qualify as a trademark, it's going to be very hard to show that you have a trademark in a package design. I think we've seen a movement by the Supreme Court to say competition is part of the American system, and while we appreciate the value of trademarks, we're not going to value trademarks over competition in every instance. I'm not saying they don't respect trademarks. They do. But it's not a given just because you have a registered trademark that you're going to win your case.
MODERATOR: Does the Victoria's Secret case bother you? I mean, it has special significance for you because you were involved in the anti-dilution legislation at the initial drafting stage, correct?
ROESCH: It does.
SCHAEFF: You're all familiar with Victoria's Secret, a chain of stores that sells intimate women's apparel. Well, several years ago, a little store opened up called Victor's Secret. Later on, it was called Victor's Little Secret...and litigation ensued. The owners of the Victoria's Secret trademark asserted trademark infringement on two bases. First, was traditional trademark infringement, likelihood of confusion— are people likely to be confused into believing that two users of the same or similar trademark are either the same company or are otherwise related. Victoria's Secret failed on that basis. The trial court held that no one who walked into Victor's Little Secret would be possibly confused into believing that this operation was affiliated in any way with Victoria's Secret stores.
The other basis was dilution. Some states recognized a cause of action for what's called dilution. Dilution is a theory that protects very strong, famous trademarks from dilution by tarnishment or blurring. The infringers were located in Kentucky, which did not have a state dilution law. Fortunately for Victoria's Secret, Congress had recently passed an amendment to the Trademark Act providing protection from dilution. So the owners of the Victoria's Secret trademark alleged that the designation Victor's Little Secret diluted the famous Victoria's Secret trademark.
Victoria's Secret lost on the likelihood of confusion theory at the trial level. Victoria's Secret won on the dilution theory, but that decision was reversed on appeal. The court of appeals recognized that "Victoria's Secret" was a famous trademark, but that the narrow language of the federal dilution statute didn't cover this situation. The case was appealed to the Supreme Court and Victoria's Secret lost again. As a result of that case, the federal anti- dilution legislation was amended. The language was changed to avoid the problem the Supreme Court found.
MODERATOR: Has there been any further amendments to the trademark laws recently?
SCHAEFF: The Victoria's Secret trademark case came back to the trial court recently, which found in favor of Victoria's Secret. So the revised anti-dilution statute worked. The Court of Appeals for the Sixth Circuit just affirmed the district court's decision and found that Victor's Little Secret infringed through dilution under the revised dilution statute.
ROESCH: The amended dilution statute is much more narrow, and it really says only those very famous trademarks would be entitled to dilution protection. You can see where the Supreme Court didn't want to give all trademarks dilution protection. That was pretty clear.
SCHAEFF: Yes, the Supreme Court's decision on the original language, which was six or seven years ago, had the trademark community up in arms.
MODERATOR: If the powers that be are trying to make sure that you can't use a trademark to stifle competition, and there's a proliferation of generic products, how can you use a trademark to gain a competitive advantage?
ROESCH: To the extent that a trademark represents a symbol of quality and the goodwill of a product, there is an advantage. Look at this scenario: When a consumer buys a Coca-Cola soft drink, they understand Coca-Cola represents a certain taste, a certain quality, a certain amount of carbonation. They come to rely on that and that's what they want. Now, The Coca-Cola Company is not really in any danger of losing its trademark, although from time to time people have tried to say its perhaps generic. The Coca-Cola Company can still go after anybody who tries to use the Coke trademark to sell the Big K colas or generic cola products. So, it's not that you can't protect the value of that mark, but they're saying that those marks are not quite as strong. Like Champion, or ultra, platinum, gold, those kind of marks – or a product design they think is necessary for others to use in order to compete successfully in the marketplace.
Obviously if you could use Coca-Cola you'd be a lot more successful than if you used Kroger cola, but to be honest, generics have come a long, long way and Kroger now has, Private Selection, and it's a good brand. Many people have switched to what we would have called generics in the past, but are now actually branded private labels. Those labels in the past used to play off and use the same color and shape as the labels of the brand, but you don't see that as much these days. Those brands don't need to do that anymore because they found their own place.
SCHAEFF: You still see that in the grocery stores. And in the drug stores it's even worse. You'll see a name brand shampoo and right next to it will be the drug store equivalent that will be in very similar packaging, have a similar label and utilize the same colors. So, if that is confusing to consumers, or is likely to confuse consumers, then the name brand owner has a cause of action against the drug store in question. Although that always gets to be tricky when you sue your customers. So that's a concern.
ROESCH: Not a good business practice, generally. Consumers have gotten more and more savvy about the private label brands.
SCHAEFF: That's right. I mean, you go into the grocery or the drug store now, you expect to see private label drug store brands sitting right next to the name brand on the shelves. And because they're sitting there, you're in a position to directly compare the two and make your choice. Typically, the store brand is going to be significantly cheaper than the other brand.
MODERATOR: Anything else like that keeping you all up at night?
ROESCH: The trademark office will be conducting a study of trademark bullying, examining the extent to which small businesses would be harmed by litigation tactics of corporations which seek to enforce their trademark rights beyond a reasonable interpretation of those rights. This is another illustration of this perception that owners of trademarks are these big, bad people that use their marks to clobber the small guy, prevent competition and prevent prices from being driven down. It'll be interesting to see what comes out of that study. I don't know how they're going to do it, but that piece of legislation just passed – the Trademark Technical and Conforming Amendment Act of 2010.
MODERATOR: The term "gray goods" did not come up in this conversation, but I noticed you're addressing those in an upcoming talk. Is that related at all to trademarks?
SCHAEFF: Actually, it's a variation of that. It's copyright gray goods. Gray goods are products manufactured by or under the auspices of the true trademark owner, but sold abroad. When those products are imported into the United States without the trademark owner's permission, the trademark owner finds he's in the unhappy position of competing with himself. Sometimes trademark owners will sell products abroad under the same trademark they use in the United States but perhaps the formulation will be different, perhaps the size or weight will be different, or there will be other characteristics that are different. So people may be confused, they may be unpleasantly surprised when they purchase an imported gray good product at the store and they find it has different characteristics than the trademark product they were expecting. So, that, in short, is what gray goods are, and I think in the trademark field, the issue has pretty well resolved itself.
Under U.S. law, a trademark owner controls his product until he makes a first sale. When he sells it, he loses the ability to control what happens to the product. If you buy a black Chevrolet Impala, you could pry off the Impala name, paint it green, put some fire decals on the side and, at your leisure, resell it. That's not a problem for General Motors or for you. But it's a different problem when products are imported and sold in grocery stores or drug stores or dollar stores. That's typically where they go. The Supreme Court has recently agreed to hear a case on the gray goods issue, but in a slightly different context. It has to do with copyright.
MODERATOR: Are you frequently engaged to research and determine the value of a trademark for your clients or is that a different service professional?
SCHAEFF: There are a couple different ways to go about valuing a trademark because it's an intangible asset. Oftentimes it becomes an accounting issue. The trademark represents the goodwill or reputation that it produces and the product with which it's associated. There are a number of interesting and sophisticated considerations that go into placing a value on a particular trademark. Shakespeare said, "A rose by any other name would smell as sweet" but I don't think you're going to convince The Coca-Cola Company that the Coca-Cola trademark is any other name. The Coca-Cola trademark and trademarks of other companies are listed on the books of the companies at just outrageous sums. They're extremely valuable. In some cases, a trademark is a company's most important asset.
ROESCH: And they are often pledged as security for refinancing. I have actually used firms that specialize in valuing trademarks, not just accounting firms. We had a client who wanted to sell a business. The business really was the use of this trademark and the royalties from the trademark. We hired a company out of Chicago to value it because it was so unique.
SCHAEFF: Another way to value it is, what is a purchaser willing to pay for the trademark? So you would affix a value to it. With a licensing program, for example, you could calculate the value based on the string of royalties, etc. But now we're back to accounting.
TRADEMARK BASICS FOR BUSINESSES
How to Protect Your Trademark
It is possible to register a trademark on either the state or the federal level, but federal registration is the most cost-effective way of protecting a trademark. Unlike a state registration, a federal registration constitutes evidence of the trademark owner's exclusive right to use a mark throughout the United States. Ownership of a federal registration also cuts off the ability of remotely located, new users to develop rights inconsistent with those of the trademark registrant. The federal registrant also acquires immunity to certain challenges after a period of five years.
In preparation for filing a federal trademark application, trademark owners should also conduct a trademark availability search, which will help the trademark owner to determine whether there are prior federal or state registrants, or prior common law users of the proposed or similar marks, and to anticipate future conflicts. A trademark availability search can disclose potential impediments to the use and registration of a trademark before a great deal of money is invested in packaging, collateral materials and advance promotion of the trademark. A search will also provide insight into the strength and registrability of a proposed trademark.
Federal registration is not a prerequisite to trademark ownership, however. Rights to a trademark arise from use of a trademark in commerce in connection with goods and services, but extends only to the geographical area in which the mark is used and promoted. A trademark availability search can yield important information that impacts prospective trademark use, whether or not the user intends to register the mark.
Trademark Registration Costs
It costs about $650 to file a federal trademark application, including typical attorneys' fees and government filing fees for a single class of goods and services. (Each class incurs a government filing fee of $325 or $275 for TEAS Plus applications.) A state registration can be procured for about $250, but does not afford the advantages of a federal registration, as discussed above. A state registration doesn't serve as evidence of the registrant's exclusive rights to use a mark, which must be proven by evidence of use and priority in the absence of a federal registration. A state registration may serve as a public record of a claim to trademark rights, but beyond that, it's not very useful.
What if I Have a Global Business?
Trademark registrations are effective only in the countries in which they are issued, so foreign trademark applications must be filed to gain protection abroad. Registering trademarks abroad can be expensive on a country-by-country basis, but there are some cost-effective means for building an international trademark portfolio. For example, marks may be registered for the entire European Community with a single application Also, the U.S. is a signatory to the Madrid Protocol, which provides for the filing of International trademark applications with WIPO (World Intellectual Property Organization), under which protection may be extended to other Madrid Protocol countries. An international applicantion may be filed by any U.S. company that has also applied to register its mark in the U.S. Most of the member states to which protection may be extended are located in Europe, with a fair number in the Far East, and elsewhere throughout the world. Israel will become a member in September 2010. However, no Latin American countries are members and neither is Canada. But for Europe and many other countries, the Madrid Protocol affords a much less expensive option than applying to register a mark on a country-by-country basis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
