Does the newness of internet technology excuse a company from using a competitor’s trademark as a keyword for a sponsored ad link to lure customers to its internet pages?  Apparently not.  In Rosetta Stone Ltd v. Google Inc., (4th Cir., No. 10-2007, 4/9/12), the Fourth Circuit Court of Appeals overturned the special internet trademark rules imposed by a District Court and clarified that the likelihood of confusion analysis within the internet context should follow traditional trademark standards. 

Maker of the now famous foreign language learning products, Rosetta Stone, complained that Google was allowing Rosetta Stone competitors to use its federally registered trademarks as key words that triggered the competitors advertisements to appear on the internet when the trademark was entered as a search term on Google’s search engine.  Google had included several Rosetta Stone trademarks, including “language library,”  “global traveler” and “Rosetta Stone,” in its AdWords sponsored advertisement program. Rosetta Stone alleged that Google’s sale of its trademarks to unrelated third parties for use in sponsored advertising caused consumers to follow the unaffiliated sponsored link advertisements based on the mistaken belief that the associated links/websites were owned by or affiliated with Rosetta Stone when, in fact, they are not.  The Eastern District of Virginia Court (Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010), granted Google’s motion for summary judgment holding in part that “no reasonable trier of fact could find that Google’s practice of auctioning Rosetta Stone’s trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stone’s products…”  The Court also found that the use of the marks as search engine keywords was protected under the functionality defense as the keywords served an indexing function to pull up the advertisements. 

In reversing this decision, the Fourth Circuit pushed aside the District Court’s internet based analysis and held that the case raised triable issues of fact under traditional likelihood of confusion principles.  The Court explained that evidence of actual confusion – in house studies of confusion, expert reports and survey evidence – was not properly considered on this issue.   The Court also reversed the district court’s approval of a functionality defense emphatically stating that: “it is irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark.”  “Clearly, there is nothing functional about Rosetta Stone’s use of its own mark; use of the words “Rosetta Stone” is not essential for the functioning of its language-learning products, which would operate no differently if Rosetta Stone had branded its product ‘SPHINX’ instead of ‘ROSETTA STONE.’”

Similarly, the appellate court also reversed the District Court’s grant of summary judgment and dismissal of Rosetta Stone’s dilution claim finding that the lower court had improperly applied Louis Vuitton Malletier S.A. v. Haute Diggity Dog LLC, 507 F.3d 252 (4th Cir. 2007).  The District Court had dismissed the claims because Rosetta Stone failed to present evidence to show that Google was using the trademarks to identify its own goods and services and failed to demonstrate that Google’s use was likely to impair the distinctiveness or reputation of the Rosetta Stone trademarks.   The Fourth Circuit rejected both of these contentions, holding that the trademark statue (15 U.S.C. §1125(c)(3)(A)) requires Google—not Rosetta Stone—to establish as a defense that it made fair use of the trademarks in a manner other than as an identifier of source. “Thus, the district court erroneously required Rosetta Stone to demonstrate that Google was using the ROSETTA STONE mark as a source identifier for Google’s own products.” The appeals court further held that the district court mistakenly read the Haute Diggity Dog decision to require proof of actual economic loss or reputational injury, rather than a likelihood of dilution.

Stephen E. Noona is the head of Kaufman & Canoles’ Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group.  In his 26 years of practice, he has been counsel in hundreds of intellectual property cases in federal courts across the nation, including over ninety (90) patent cases in the Eastern District and is Fellow in the American College of Trial Lawyers. He regularly appears before the judges in all four Divisions of the Eastern District on intellectual property matters.  -Stephen E. Noona

The question of whether the owner of a trademark can prevent its use as a “keyword” by Google and other Internet search engines has been in play ever since the search engine providers found effective ways to turn “sponsored links” and “sponsored ads” into major revenue streams.  Court opinions dealing with this question delve into numerous legal theories invoked by trademark owners to try to stop search engine providers from selling their trademarks as keywords that, in effect, point consumers to advertisements by their competitors when the consumers enter the trademark as a term to be searched.  The fundamental issue has always been, and remains, whether  trademark law provides a remedy to these trademark owners in cases where their marks are used only as keywords and do not actually appear in the sponsored ads.

Over the years the legal pendulum has swung from side to side on this question, with some court decisions being more favorable to the search engines’ position that keyword advertising does not violate trademark rights, and others being more favorable to the opposite position of the trademark owners.  The most recent decision addressing the question was issued by the U.S. Court of Appeals for the Fourth Circuit on April 9, 2012, and moved the pendulum back in the direction of the trademark owners.  In this case, the owner of the Rosetta Stone trademark was objecting to Google’s sale of that and other trademarks as keywords leading to sponsored link advertisements by other parties.  The lower court had ruled in favor of Google, but the Appeals Court reversed its ruling on the questions of whether Google’s keyword advertising program might involve direct infringement, contributory infringement or dilution of Rosetta Stone’s rights in its trademarks.  The case has been sent back to the lower court for further consideration of these issues. 

This decision by the Court of Appeals for the Fourth Circuit in favor of Rosetta Stone will likely give encouragement to other trademark owners who might want to challenge use of their trademarks in keyword advertising programs of Google and other search engine providers.  However, it bears mentioning that other recent court decisions have been more favorable to the position of the search engine providers than the Fourth Circuit’s decision in the Rosetta Stone case.  Of particular note is a March 8, 2011 decision by the United States Court of Appeals for the Ninth Circuit, which emphasized the growing sophistication of Internet users, their consequent ability to recognize sponsored ads for what they are and, therefore, the decreasing likelihood that such ads will create customer confusion as to the source of the goods or services promoted by the ads.

The court decisions mentioned above are Rosetta Stone Ltd.  v. Google, Inc. (Fourth Circuit, April 9, 2012), and Network Automation, Inc. v. Advanced Systems Concepts, Inc. (Ninth Circuit, March 8, 2011).  They are not the first and will not be the last to give conflicting judicial guidance on the legality of Internet keyword advertising programs.
–Robert E. Smartschan

In advising clients about whether a prospective mark is available – i.e., whether it can but used without infringing another’s rights – trademark lawyers seldom give unqualified advice.  One mark infringes another if it is likely to cause confusion or mistake as to origin or source among an appreciable segment of consumers exercising ordinary care for purchases of the type.  Judging whether a likelihood of confusion exists is a subjective judgment that calls on the trademark lawyer to “read the minds” of consumers as they may encounter the marks in the future.  People differ, of course, so the task also calls for reading minds having very different perspectives.  In addition, since the prospective mark is not yet in use, by definition the judgment is speculative and made with incomplete information about how consumers might encounter the marks. 

None of us can read minds.  Thus, courts, Patent and Trademark Office examiners, and attorneys look to surrogate factors to assess the potential for confusion.  Different federal courts use different lists of factors.  The PTO and its appellate court, the Federal Circuit, use a 13-item list known as the DuPont factors, and they have adopted many rules-of-thumb for analyzing each factor.  There is no formula for weighing the factors, although usually the similarity of the marks (in sight, sound and meaning) as well as the relatedness of goods or services sold under the marks are the first and most important.  Others include the similarity of trade channels, the care typically used in purchasing goods of the type, the “distinctiveness” and fame of the first-used mark, the number of similar marks already in use, the duration of concurrent use, any evidence of actual (as opposed to likely) confusion, and more.  The legal analysis involves many judgment calls.  Despite review by experienced lawyers applying the list of factors and the rules of thumb, often there is much room for differences of opinion, a fact illustrated by the abundance of office actions by PTO examiners and cases decided by the Trademark Trial and Appeal Board (TTAB).

When some similar marks are registered or in use with somewhat related goods, the question becomes how close is too close.   Then, the “strength” of a mark can matter.  There are two dimensions to mark strength or weakness.  The first dimension is conceptual and focuses on a mark’s “distinctiveness.”  If the prior mark stands out because it says little about the product (think MONSTER or AMAZON), it is viewed as strong and they owner can be entitled to prevent use of similar marks with even less related goods or services. By contrast, highly suggestive marks, while protectable, have a smaller scope of enforceable rights.  The second dimension is empirical and focuses on the actual number of somewhat similar marks already in use with somewhat related products.  For example, marks that use prefixes or suffixes like “tech,” “dura,” “info” or “deluxe” are very common and generally considered weak.  In that situation, as with highly suggestive terms, the logic is that, with multiple users of somewhat similar marks, all must be co-existing without confusion and that consumers have learned to distinguish them based on relatively small differences.  Obviously, it is better to own a strong rather than weak mark, and when selecting a mark it is particularly important to avoid another’s strong mark. 

When the PTO or another user alleges that a client’s mark is likely to cause confusion, one often counters by arguing the other’s mark is weak,  by pointing to the mild suggestiveness of the other’s mark and/or the fact that there are several rather similar marks already un use with related products. 

Because the marks otherwise are fairly similar, and because it is hard to know how consumers are actually reacting to the marks, it usually is hard to persuade the PTO or a court that another’s mark is so weak that confusion is unlikely.  Yet, a recent decision by the TTAB illustrates the powerful role a marks weakness can sometimes play.  Hartz Hotel Services had applied to register GRAND HOTELS NYC for hotel services, and the PTO examiner refused the application based on a prior registration of GRAND HOTEL for, you guessed it, hotel services.  With virtually identical marks and identical services, normally there would be no doubt but that confusion is likely.  Yet, in March 2012 the TTAB held that the addition of the geographically descriptive NYC was sufficient to distinguish GRAND HOTEL NYC, as a whole, from GRAND HOTEL and as a result that confusion was not likely.  Go figure.

The Board’s reasoning turned on both dimensions of mark weakness.  HOTELS is a generic term for the services and so not in itself protectable.  GRAND is “highly suggestive,” it found, a none-too-subtle hint about the hotel’s size and elegance.  In addition, the suggestion was very common in the marketplace:  the applicant pointed to multiple registrations and unregistered users of other uses of GRAND and/or GRAND HOTEL with hotel services having minor, often geographic additional terms (THE GRAND HOTEL AT MOUNTAINEER, ANCHORAGE GRAND, FORT LAUDERDALE GRANDE HOTEL, MGM GRAND HOTEL & CASINO, PENSACOLA GRAND HOTEL and several others).  They appeared to be co-existing, and the PTO evidently thought them different enough to allow concurrent registration of several.  The marks were almost identical, but in context different enough to avoid confusion.

While Hartz Hotel Services won, the decision also illustrates the legal and business shortcomings of weak marks.  The TTAB concluded that all of these marks were highly suggestive and, while legally protectable, so weak that “the scope of protection to which the cited registration is entitled is quite limited.”  Hartz thus can “own” GRAND HOTEL NYC as a mark, but (like all the others) its mark is so weak that it cannot prevent others from using very similar but nonidentical names with the same services.  In a business that deals with travelers, Hartz also faces the challenge of competing and building a reputation for itself with a name that is so similar to so many others in different locations.  One has to wonder whether the victory was worth the fight. 

Chris Mugel practices intellectual property law from the Richmond, Virginia office of Kaufman & Canoles.  –Christopher J. Mugel

Software providers are generally loathe to provide warranties, but at a minimum, a software provider should warrant that the software will perform in accordance with specifications agreed upon by the parties and the documentation that provided to you, be free from errors and defects that materially affect the performance of the software, and will not infringe the rights of any third parties.  The term of the warranty with respect to performance should take into account the length of the installation period before the software is used in a live setting or not commence until you are using the software in a live setting.  Otherwise, you run the risk of having the warranty period expire before the software is operational or shortly thereafter.  –Nicole J. Harrell

As explained in a prior blog post, the Internet Corporation for Assigned Names and Numbers (“ICANN”) is making available new generic top-level domains which include different types of words in different languages.  ICANN will continue to accept applications through April 12, 2012.  ICANN recently announced that its target date to release the list of applications for new generic top-level domains is April 30, 2012.  To the extent that ICANN receives an overwhelming number of applications, this target release date may be postponed.

For additional information on these new generic top-level domains, visit  http://newgtlds.icann.org. –Kristan B. Burch

As a general rule, federal government contractors can expect that they will not have liability for infringement of U.S. patents for things done in performance of their contract obligations to the U.S. government.  This immunity arises under Section 1498 of Title 28 of the U.S. Code, which serves to shift the burden of liability for infringement of patents occurring in the course of performance under government contracts to the U.S. government.  The pertinent statutory language is:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

Since it was initially filed in 1996, the case of Zoltek Corp. v United States has cast doubt on the efficacy of this statute to shield contractors from claims for infringement of U.S. patents, if the infringing activity occurs outside the United States.  This issue has remained in play through multiple decisions by the Court of Federal Claims and the Court of Appeals for the Federal Circuit, the latest of which was handed down on March 14, 2012.  In this decision the Federal Circuit overruled earlier decisions by it and the Court of Federal Claims to the effect that 28 U.S.C. 1498 does not make the government responsible for patent infringement liability arising from actions of federal contractors outside the U.S., and that the contractors can be sued for infringement arising from those actions.  In doing so the Federal Circuit resolved a seeming conflict between various statutory provisions to rule that the statutory language quoted above amounts to a waiver of sovereign immunity by the government for patent infringement by federal contractors performing within the scope of their contracts, even if some of the infringing activities occur outside of the United States.  It will not be surprising if this latest Federal Circuit decision in the Zoltek case is appealed to the Supreme Court; but, at least for now, this Federal Circuit ruling has improved the situation for federal contractors. –Robert E. Smartschan

What constitutes patentable subject matter has been a question of keen interest to the courts in recent years.  The most recent chapter came on March 20, 2012 with the Supreme Court’s unanimous decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc.  

Two well established principles of patent law are that: (1) patent law cannot be used to claim laws of nature, natural phenomena and abstract ideas; and (2) patent law can be used to claim inventive ways of applying laws of nature.  Mayo examines the uneasy intersection of these two principles in the setting of a diagnostic method for determining the proper dosage of thiopurine drugs for treating autoimmune diseases.

Physicians found it difficult to determine proper dosages of drugs like thiopurine because different patients metabolized medicines at different rates.  As a result, the same dosage in different people could be ineffective in one but cause side effects in another.   Prometheus was the exclusive licensee of a patented method for determining the proper dosage of the drug by measuring the levels of metabolites in patients’ blood.   It was known that the level of metabolites in blood affected the ability to metabolize a drug and thus the effectiveness of drugs.  Prometheus’ patent taught a method for measuring metabolite levels and, based on refined measurements of the correlation, set thresholds where dosages would be either too high or too low.  Mayo used a similar method and Prometheus sued.  The district court held that the patent claimed an unpatentable law of nature, but the Federal Circuit reversed.

The Supreme Court agreed with the district court in deciding that the patent claimed a law of nature and nothing more, or at least not enough more.   It concluded that the relationship between the concentration of metabolites in blood and a drug’s effectiveness was a law of nature, and indeed one that was known.  While the patent did set forth an application of the law of nature, a method for determining proper dosages based on measurements of metabolites, the method “consist[ed] of well-understood, routine, conventional activity already engaged in by the scientific community; and these steps . . . are not sufficient to transform unpatentable natural correlations into patentable applications of those regularities.”

The method for applying the law of nature consisted of measuring levels of metabolite, refining the measurement of the correlation and applying the results to determine when a dosage is too high or low, and adjusting the dosage accordingly.  This application of the principle, it concluded, was no more than routine scientific analysis and thus was not inventive enough to be a patentable application. 

The case has prompted numerous amicus briefs on both sides of the issue, focusing mostly on whether limits on the patentability of methods for applying natural laws either foreclosed the free use of natural laws by everyone or properly encouraged the more detailed understanding and application of those laws.   The Court’s comments on those arguments may be helpful to future applicants.  First, while courts properly consider whether a method of application is “transformative”, transformation is only one indicator of patentability.  Second, it reasoned that something is no less a law of nature because it, like the correlation between metabolites and dosage effect, is relatively “narrow.”  Even if applying a narrowly-defined natural law may not foreclose much from the public domain, the courts are not in a good position to distinguish the importance or reach of different natural laws.  It also rejected the government’s argument that any method with additional steps necessarily transforms and therefore should be patentable, countering that such an expansive view would negate the broad principle that natural phenomena are in the public domain. 

Chris Mugel practices intellectual property law from the Richmond, Virginia office of Kaufman & Canoles.  –Christopher J. Mugel

In previous posts, we have explained that violating the dilution provisions of the Federal Trademark laws is difficult and only available to the uber-famous.  As living proof of this point, the Federal Circuit recently denied such protection to the iconic Coach® brand.  Without a doubt, Coach® is one of the most famous American high fashion, handbag manufacturers, ubiquitously present in nearly all high fashion magazines and annually selling billions of dollars of Coach® branded products.  Yet, even with this type of fame, the company could not avail itself of the anti-dilution provisions of the Trademark Dilution Revision Act of 2006 (“TDRA”), 15 U.S.C. § 1125(c), to block the registration of the mark “coach” by Triumph Learning who made and marketed test preparation materials under that name. 

Dilution claims are the stepchildren of the trademark world because, by their very nature, the claims do not involve products that compete.  Rather, the claims are based on a claim that a noncompeting use intrinsically devalues the strength of the brand.  As such, courts have struggled to limit its use.   In Coach Servs., Inc. v. Triumph Learning LLC, No. 2011-1129, 2012 WL 540069 (Fed. Cir. Feb. 21, 2012), the Federal Circuit held that to take advantage of the TDRA, the mark had to not only be famous but, since it’s mark was based on a common word with other ordinary uses, the mark holder had to establish that the ordinary “uses of the mark are now eclipsed by the owner’s use of the mark . . .  in almost any context” and that the mark has become “a household name.”   Despite its extensive sales and ubiquity, a multitude of registered trademarks, extensive survey evidence, and even two Second Circuit decisions finding the mark famous, the Federal Circuit held that Coach had not shown that its use of the Coach mark had become a household name that eclipsed the other, ordinary uses of “coach.”   In the end, the Court may be signaling just how careful it will be with extending trademark protection beyond the confines of competition. 

Stephen E. Noona is the head of Kaufman & Canoles’ Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group.  In his 24 years of practice, he has been counsel in hundreds of intellectual property cases in federal courts across the nation, including over ninety (90) patent cases in the Eastern District and is Fellow in the American College of Trial Lawyers. He regularly appears before the judges in all four Divisions of the Eastern District on intellectual property matters.  –Stephen E. Noona

Recent articles and scholarly studies point to a significant increase in trade secret litigation.  Most notably, two studies by attorneys at the law firm O’Melveny & Meyers, published in the Gonzaga Law Review in 2009 and 2010, analyzed trends in trade secret litigation in federal and state courts.  The studies found that the frequency of trade secret litigation has been “growing exponentially” in federal courts and more modestly in state courts, but in both venues at rates greater than those for litigation generally.  According to a February 1, 2012 Business Week article, four of the ten largest intellectual property verdicts in 2011 were trade secret cases.  These included a $2.3 billion verdict (subsequently reduced to slightly under $1 billion) in an action brought by St. Jude Medical, Inc. against an ex-employee and a Chinese company he founded.  Admittedly, the verdict may be more of a message than a remedy:  since the defendants are overseas, the judgment may not be collectable.

The Business Week article speculates that the growth in litigation is being fueled by a number of trends: hard economic times and the employee mobility that accompanies them; the growing reliance on trade secrets to protect innovation; and the increasing ease of misappropriation brought by technology and economic arrangements such as outsourcing.

The Gonzaga Law Review studies came to some noteworthy conclusions about the characteristics of trade secret litigation, including the following: 

• The bulk of cases involve claims against ex-employees or business partners – those known to the plaintiff.
• Despite the proliferation of trade secret litigation, defendants prevail at trial more often than plaintiffs, and they also succeed more often than plaintiffs on appeal.
• Statistically, at least, it is somewhat more difficult to prevail on a trade secret claim in state court than in federal courts.

Chris Mugel practices intellectual property law from the Richmond, Virginia office of Kaufman & Canoles.  –Christopher J. Mugel

Changes to U.S. patent laws enacted at the end of last year will eventually change our system from one that awards patent rights in an invention to the first inventor(s) in cases where the same invention is created by more than one inventor or group of joint inventors acting independently of each other, to one in which those rights will be awarded to the first legitimate inventor or group of joint inventors to file an application to patent the invention with the U.S. Patent and Trademark Office.  As with all rules, this new one will be subject to certain exceptions.  The most interesting of those is an exception based on the new law’s treatment of public disclosures made prior to filing of a patent application.  The pertinent language from Section 102(b)(1) of the new law which follows will apply to U.S. Patent applications filed on or after March 16, 2013:

A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention . . . . if

A.  The disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

B.  The subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

The upshot of this statutory language is that if an inventor makes a public disclosure of his or her invention within the one-year period preceding filing of a U.S. patent application on the invention, that disclosure will not cause any problems for that particular inventor’s U.S. patent application.  This preserves the one-year grace period for filing of U.S. patent applications that existed under prior law, but only with regard to public disclosures by the inventor who files the application.  However, because the new law limits availability of this grace period only to the inventor who made the public disclosure, someone else who independently came up with the same invention and was the first to file a patent application on it would not be entitled to a patent, because public disclosure by the other inventor would be “prior art” against this application.  In such a case, the inventor who made the public disclosure would be the one entitled to the patent, even though his or her patent application is filed later than the one filed by the other independent inventor.

One might conclude from this that public disclosure of invention details at the earliest possible time – even before one is ready to file a patent application – will be desirable strategy under the new law, because it could preempt others who independently are working on the same invention from wrapping up patent rights in it by filing first.  However, loss of foreign patent rights and other potential consequences of such early disclosure make this a questionable conclusion.  Under the new law, as under the old, it will remain prudent to file your U.S. patent application — which in many cases will be a provisional application — before any publication or other detailed disclosure with regard to your invention. –Robert E. Smartschan