Strong trademarks curb legal challenges, costs

Trademarks can become hugely valuable in the marketplace as a company brands its name and products. Once a company establishes a trademark, it must police that mark, sometimes in court.

Trademark infringement lawsuits typically arise when it appears that consumers might be confused by two similar marks. Trademarks, based on words that can be uncertain or nuanced, represent a fascinating and psychologically rich legal terrain.

“The most inherently distinctive marks are called arbitrary or fanciful,” said Ross Jones, partner with Merrill Arnone & Jones, LLP, based in Santa Rosa. “They are considered the strongest marks.”

The next strongest mark is suggestive, also distinctive. Descriptive marks are not inherently distinctive.

“Where a lot of fights come into play is trying to distinguish between something which is suggestive,” which courts consider inherently distinctive, and descriptive marks, said Jones, who practices business law. Courts have difficulty drawing a line between these categories; infringement lawsuits may result.

Different federal circuit courts often apply trademark law differently, he said. The Ninth Circuit, which had jurisdiction over the White Oak Winery case [see story p.1], applies the “imagination test,” Jones said. How much imagination does it take for you to look at a product or service and connect it to the company’s trademark?

For example, a suntan lotion named After Tan was deemed descriptive by the court, he said, while Coppertone was considered suggestive and, therefore, a stronger, distinctive mark.

White oak wood is used by cooperages to make barrels. But the Ninth Circuit judge who heard the White Oak Winery case saw the trademark as suggestive, having strong secondary meaning derived from long use.

“It’s more evocative,” Jones said. “You imagine white oak as a place or a state of mind or a feeling. That’s the argument I would make in favor of the mark being suggestive.”

The winery had also registered the trademark, another factor in its favor.

Descriptive marks can be registered by the U.S. Patent and Trademark Office if the applicant shows evidence of significant secondary meaning, perhaps by presenting consumer surveys or affidavits showing awareness of the link between a product and its source. Five continuous years of use of a mark can be considered evidence of secondary meaning by acquired distinctiveness. The trademark office has discretion.

Some companies submit evidence of marketing expenditures as proof that a trademark has secondary meaning, Jones said. Such evidence is unconvincing, as the money may not have created an association in consumers’ minds between a brand and a company. “What if your marketing was really ineffective?” Jones said.

“The test of trademark infringement is likelihood of confusion,” Jones said. Would a consumer, looking at competing marks, confuse one with another in terms of connecting the trademark to the source of the product or service?

Generic phrases and words used in their ordinary meaning can never be registered as trademarks, Jones said. Coffee cup, for example, could not be registered for a product that would hold liquids, no matter how much money a company has spent on marketing.

“The trademark office and a court are never going to accept that I have exclusive use” of coffee cup, he said.

However, if Coffee Cup Computers were used as a trademark, that would be considered distinctive, just as Apple Computers was.

“If I try to trademark Apple for an apple, it’s never going to happen,” Jones said.

In trademark law, brands and names are not looked at in a vacuum, but as they specifically relate to goods and services in the marketplace. For there to be confusion, competing brands would have to be considered by a court to be used for the same or closely related products. Delta, the airline, competes sans confusion with Delta Dental and Delta plumbing fixtures.

“All three of those are registered marks,” Jones said.

None is infringing because the goods and services don’t overlap.

“No consumer is going to go into the hardware store, pick up a faucet and say, ‘I wonder if I can get an airline ticket from them,’” he said.

After a trademark is registered, it must be published for opposition to provide a 30-day window when it can be challenged by other companies. Some companies subscribe to “trademark watch” services that look for possible confusion in registered marks, notifying subscribers to take action. The holder of a trademark is responsible for policing its use in the marketplace.

“Many companies that have limited budgets will choose not to subscribe to a trademark watch service,” Jones said.

Such services, if notifying a company’s attorney, can lead to legal fees even if no action is taken. Some companies wait to respond to trademark infringement by litigating in the federal court system, where injunctions can be sought to stop infringement “before it mushrooms into a genuinely damaging situation,” he said.

Sometimes a company with an established mark sees a tiny startup use the same or a similar mark that might be infringing, but chooses not to go after the startup to save costs.

“There’s no real loss of business, no dilution of goodwill,” Jones said.

Until damages appear, the company may simply keep an eye on the infringement.

“Perhaps this company will shrivel up and die,” he said. That would save the costs of litigation.

Some companies send a cease-and-desist letter to companies infringing on their marks, but such a letter can be tricky. If the infringer doesn’t stop using the confusing mark, the company with the infringed mark must sue or it will be perceived that the concern has faded.

For those that choose to do nothing for a few years, especially if the infringing company writes back and denies it, the advantage will shift to the infringer, Jones said. He advises clients not to write such letters unless they plan to follow up.

Trademark rights in the U.S. go to the first user of the mark - the “senior user” - not necessarily the first company to register the mark. Other countries differ in this application of law and place priority on registration.

The use of surnames as trademarks can be unpredictable. McDonald’s, for example, became so famous that its mark would prevail over that of someone named McDonald.

“McDonald’s has grown to the size that the consuming public would think it was affiliated,” Jones said.

And the chain could claim dilution of its famous trademark, even if the name is used differently, say, for a grocery.

Jones has seen local companies try to use names with the word “depot” in them and encounter opposition from Home Depot. The home-improvement retailer has become so well known that any business name with a word preceding “depot” is considered infringement, Jones said.

“You have a different set of rules that apply if you can show that something is a famous mark,” he said.

Few companies pass that stringent test.

Famous trademarks can grow so popular and overused that they become generic and then lose their protected status. Velcro Industries fights that trend with its hook-and-loop fasteners.

“They insist that it’s called a Velcro-brand fastener,” Jones said.

Xerox does the same with Xerox-brand copiers. But aspirin, cellophane and escalator are former brands that went generic.

“You can ultimately become so famous that you are a victim of your own success and lose your trademark,” Jones said. “[The brand] becomes a substitute for a product or good not associated with a particular company.”

A court would make such a determination.

In choosing trademarks for products or services, companies tend to see their marketing folks prefer descriptive marks that are easier for consumers to link to their goods. But such descriptive marks are less distinctive, and usually harder to defend against similar competing marks. In effect, each company chooses whether to spend more money marketing a strong mark - fanciful, arbitrary or at least suggestive - or more money on legal services to police and defend a weaker descriptive mark.

“That internal conversation is very common,” Jones said. “All I can do is lay out the legal landscape.”