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Legal Reality: Discussing Intangibles

Legal Reality: Discussing Intangibles

July 28, 2014
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" A domain name is a contract right. It does not confer any rights other than the right to use the domain name.  "

We live in an age of unprecedented consumer access to a nearly limitless amount of content. As a result, sellers of goods and services have been challenged like never before to find ways to reach new customers amid the relentless deluge of information. And as the competition for eyes and ears has intensified, so has the importance of effective branding and brand building.

For more than two decades, as an attorney and business consultant, I have helped a wide variety of companies develop, exploit and protect their brands. While the process of effective branding and brand building is by its nature always unique for each company, one critical element is common to virtually every branding and brand-building program: the acquisition and effective use of trademark rights.

To help our readers gain a better understanding of how important trademark rights are, I asked attorney Anna Vradenburgh, one of the country’s preeminent trademark attorneys to do the following interview in which we discuss how companies can effectively create, protect and exploit valuable trademark rights as a part of an effective brand-building program.

Piccionelli: Good afternoon Anna. XBIZ World and I want to thank you for providing us with this interview about the very important topic of trademark rights.

Vradenburgh: Thank you, Greg. I am grateful for the privilege of doing an interview with you for XBIZ World.

Piccionelli: Alright then, let’s jump right in. How would you describe your area of the law?

Vradenburgh: I focus primarily on trademark matters, including the obtaining of domestic and foreign trademark registrations and the enforcement of trademark rights. My practice also includes domain name matters and copyright matters.

Piccionelli: You have been practicing in these areas for quite a while.

Vradenburgh: A bit over 20 years now.

Piccionelli: It is my privilege to say that we have worked together throughout most of those years and I know that you have represented a very large number major entertainment and technology companies. Can you give me an estimate of how many trademark and trademark related matters you have been involved in?

Vradenburgh: Over the years, well in excess of 500-600 or so trademark related matters. Of these, I have filed about 450 trademark applications, of which I would estimate that maybe 90 percent or more have proceeded to issuance of a registered trademark.

Some of the other types of trademark related issues have included defending clients against third parties opposing a particular application, or registration.

I have also handled a number of trademark application appeals.

This is when a trademark application has been refused by the U.S. Patent and Trademark Office, what we call the USPTO for short. Some of the appeals involved cases that were initially prosecuted by other attorneys.

I also do quite a bit of trademark and domain name dispute resolution and a large number of trademark licensing agreements.

Piccionelli: It sounds like you pretty much cover the gamut of legal matters involving trademarks.

Vradenburgh: Pretty much.

Piccionelli: Well then, before we get into some details about how the trademark rights acquisition and enforcement you do benefits your clients, would you mind answering a few basic questions about trademarks?

Vradenburgh: No, fire away.

Piccionelli: OK, can you tell us just what is a trademark and what are trademark rights?

Vradenburgh: A trademark is any word, symbol, logo, device and/or sound, or combination thereof that is used in interstate commerce in association with a particular good or service. Some examples of trademarks are Google, Walmart, Apple and IBM. Trademark rights allow a trademark owner the right to use the trademark in association with the specified goods or services to the exclusion of others.

Piccionelli: Sometimes a business name can be a trademark and sometimes not, right?

Vradenburgh: Yes, that is correct. This is because the business name might also be used in association with the goods or services. For instance, Coca-Cola is used on a product and it is also the name of the company.

The important thing to remember is that for a name to be a trademark there has to be a trademark “use.”

Basically this means that the trademark is used on or in association with the goods or services in interstate commerce, for example, on the product or product packaging, and that the good or service is available to the consumer.

Piccionelli: Is there a difference between a trademark and a service mark?

Vradenburgh: A trademark typically references a word, symbol, logo that is associated with a particular good, while a service mark is associated with a service. In practical terms however, service marks are sometimes interchangeably referred to as trademarks.

Piccionelli: What is trade dress?

Vradenburgh: Generally speaking, trade dress is the visual appearance of a product design or shape, or its packaging, that signifies the source of the product to consumers. It is essentially the “look and feel” of a product or its packaging but the concept can also apply to the look and feel of a webpage or a brick and mortar establishment. Apple, for example, has registered its trade dress in the look and feel of its stores. The registration describes the trade dress as including long white tables placed parallel to each other in two rows extending from the front of the store to the back, leading up to an oblong table at the back of the store, set below video screens mounted on the back wall. The registration actually includes many more items, but I can’t recall all of them. Basically, it is a general description of the layout of the store. To register trade dress you must prove that the trade dress has acquired distinctiveness, that is, it is well recognized. Apple was able to obtain this registration because they could prove a lot of consumer recognition of this layout.

Piccionelli: Why are trademark rights so important?

Vradenburgh: Trademarks are basically identifiers that are intended to help consumers identify goods and services, and associate consumer expectations with those goods or services. Thus, trademarks are brands that help consumers identify the quality of goods or services among other similar goods or services. The goodwill of a trademark is simply what consumers believe about a brand, that is, the quality of a brand, and it can be good or bad. Further, the goodwill of a mark can change over time if the quality of the goods or services changes. Thus, trademarks are important because it allows companies, or any provider of a good or service, to distinguish their good or service in the marketplace, and provides identifiers for consumers to find those brands. It is important for providers to provide consistent quality in their goods or services so that consumer expectations of those goods or services remain consistent. For example, Jiffy peanut butter and Skippy peanut butter seem to have very distinct followings in the marketplace, where a consumer of Jiffy would not likely be a consumer of Skippy. This seems to be true regarding Apple computers and PCs at this point in time. Because a trademark owner must protect the consumer’s perception of its brand, it is important that unrelated third parties do not use similar marks on similar goods or services, especially if those third party goods or services are inferior. Trademark rights provide a trademark owner with the ability to police the use of a mark. It provides the owner with the power of the courts to prevent unrelated third parties from using a mark that is confusingly similar to the trademark owner’s trademark on similar goods and services.

Piccionelli: Are trademark rights particularly important for certain types of companies?

Vradenburgh: Trademark rights are extremely important for anyone offering a good or service in the marketplace. Trademarks can help a company carve out a niche in the marketplace by creating the consumer goodwill in the brand. If the company is first to the marketplace, that company has a distinct advantage over newcomers entering the marketplace, and a trademark will help immediately identify the brand that consumers know. This is important at helping to maintain market share as newcomers must demonstrate that their brand is as good as the “original,” and overcome the consumer habit of purchasing what they know. Oftentimes, the most valuable asset for a company is the trademark, and when the company and its assets are sold, it can play a substantial part in the valuation. For example, recently, a number of companies were acquired by MindGeek, formerly known as Manwin. In reality, you could say that MindGeek was acquiring brands, and thus, increasing its market share.

Piccionelli: Trademarks are a valuable form of intellectual property. In some cases quite valuable. It is true, isn’t it, that trademarks can attain valuations of millions or even billions of dollars, as is the case with the Coca-Cola trademark, supposedly the most valuable trademark in the world.

Vradenburgh: Yes, a number of trademarks, Coca-Cola being one, are currently valued in the tens of billions of dollars. Some of the other multibillion-dollar marks are Apple, IBM, Google, Microsoft, and Walmart, to name just a few of dozens of high value trademarks. Interestingly, however, the Coca-Cola trademark is no longer number one in value. I believe Google may have that spot at the moment.

Piccionelli: I know trademark assets can be a big part of the valuation of a company in a sale of its assets.

Vradenburgh: Yes. A trademark is an intangible property right, which means it can be bought, sold and licensed. Interestingly, unlike the reputation of a particular person, which cannot be legally transferred, a trademark and its reputation (or goodwill) is an asset that can acquire value depending upon its reputation. The value of a company’s trademarks is often a critical component in the calculation of the valuation of company, much like the companies’ other property assets, such as its inventory, real property, receivables and the like.

Piccionelli: I know that recently the value of Digital Playground’s trademarks, including its brand name, and other valuable trademarks such as Jesse Jane and Virtual Sex were important components in its sale to Manwin (now known as MindGeek). You were the attorney that successfully prosecuted their marks weren’t you?

Vradenburgh: Yes. I assisted Digital Playground in acquiring most, if not all, of their trademarks. The most difficult one, of course, was Virtual Sex, which was considered descriptive. However, because of the enormous success of the Virtual Sex brand, we were able to overcome the USPTO’s refusal to grant registration and we eventually did get the mark registered. It was a long process, probably one of the longest and hardest fought, but it was one of the trademarks I am most proud of having been involved in its acquisition.

Piccionelli: Trademark rights can be obtained merely by the use of a trademark, in association with a good or service in commerce, even without registration, correct?

Vradenburgh: Yes. What you are describing is the acquisition of what are called common law trademark rights. Very simply, use of a trademark in interstate commerce in association with a good or service will start to create enforceable common law trademark rights in the trademark for those goods or services. To help effectuate the acquisition of such rights I advise clients to use the common law symbol “TM” or “SM” to place others on notice that they consider the associated word, phrase or logo to be a trademark.

Piccionelli: Please explain the difference between common law trademark rights versus registered trademark rights in the U.S.

Vradenburgh: Common law trademark rights are unregistered rights. They protect the trademark owner only in the geographical region where the trademark is used. The use cannot simply be nominal use, however, it must be continuous and consistent use. The amount of use depends upon a number of factors, including for example, the type of product, and the actual market for that product. If you rely upon common law rights, you must prove your use to defend your rights against another party. In contrast, a registered mark provides nation wide, all 50 states, priority of rights. The uncontested priority date is the date of filing. Once registered, the trademark owner is deemed to have rights in all 50 states, even if he is only using the mark in two or three states. Thus, if a third party commences use of a mark after the filing date of your application, your registration should defeat his use, whereas if you are relying on common law rights, you would need to prove the extent of your use. If there is no overlapping use, it is possible that territories are divided based on geographic location.

A further advantage to a registration is that in the event of an infringement action in federal court, the registrant of a trademark could be entitled to treble damages for willful infringement, and in extraordinary cases, they may also be awarded attorneys’ fees.

Piccionelli: Can you tell our readers a bit about the process of obtaining trademark rights protection through registration?

Vradenburgh: Trademark rights can also be obtained in the U.S. through the process of federal or state registration of the mark. If you are using a mark on the Internet, or in multiple states, I recommend seeking federal registration, which provides a priority of rights throughout all 50 states once registered. To commence the process, you need to file an application. By filing an application, a party secures a recognized date of first use, that is, the filing date of the application. All other earlier claimed use must ultimately be proven. Once the application is filed, it goes through an examination. If there are no problems with the application, the application will publish, and assuming no third party oppositions to the mark, it will proceed to registration after publication.

Unfortunately, most of the time there is an “office action” by the registering body, such as the USPTO. The office action sets forth the reasons as to why the application is refused. Some of these reasons are simple to resolve, such as an issue regarding the identification of the goods or services. Other issues are more problematic and could potentially bar the registration of the mark, such as, a refusal that the mark is merely descriptive, or that the mark is likely to cause confusion with another pending or registered mark. When you receive an office action there is a limited time in which to respond. If you fail to file a response, the application will be abandoned.

Piccionelli: If a company receives a trademark registration, does that registration protect the mark with regard to any goods or services the company offers?

Vradenburgh: A registration protects a company’s use of the mark with respect to the identified goods or services listed in the registration throughout the U.S. regardless of whether the company specifically used the mark in a particular geographic area. It provides a claim of priority of use as of the filing date of the application in all 50 states. This is one of the benefits of a registration. It does not however protect you as to all goods or services. Use of the mark on goods or services beyond those listed in the registration can create common law rights as to the goods or services not listed in the registration.

Thus, one can always create common law trademark rights by using a trademark; however, it cannot be assumed that the registration will provide nationwide priority of rights for that mark on those goods or services. In stark contrast, trademark rights that are obtained via common law use, that is, without a registration, only pertain to the geographical location where the mark has been used in association with the particular good or service.

Piccionelli: Companies and lay persons can register a trademark online at USPTO.gov, and they can also go to Legal Zoom as well. What is your opinion is regarding self-registering one’s trademarks?

Vradenburgh: The perceived advantages are obviously lower costs than filing through a law firm or with attorney assistance. That said, the biggest disadvantage is that you have no attorney assistance in the process. Although the application for trademark registration appears to be a relatively straightforward process, there are many ways for an applicant to err due to lack of understanding of the applicable law. For instance, it is important to understand how the mark is being used and to properly identify the goods or services. Errors in this area can, and often does, result in a refusal to allow the trademark registration or an allowance that does not grant all the trademark rights that the applicant could have potentially obtained.

Additionally, trademark registrations resulting from applications filed by non-attorneys often have issues regarding the ownership of marks that have resulted from applications filed in the wrong name, or by an entity that didn’t actually use the mark in commerce. Worse still, are trademark ownership problems resulting from applications filed by an entity that does not exist or that did not actually exist at the time of the filing.

Also, another issue that seems to frequently occur regarding self-filed applications is the notion that once an application is filed with the USPTO, the process is completed. Unfortunately, this erroneous belief is far from the truth. As stated above, the trademark application goes through an examination process that more often than not results in initial rejection by the USPTO. Such rejection is communicated in writing to the applicant with a notice that the failure to address the grounds of rejection will result in abandonment of the application. I have taken over a number of cases and revived applications that have in fact gone abandoned because the trademark owner didn’t realize the communication from the Trademark Office required a response. In some instances, however, revival is not possible because the applicant acted too late. As a result the party must refile the application. Needless to say, in these instances, the savings realized by filing the application without legal assistance is lost.

By the way, it is not only lay people who create problems for themselves by attempting to register trademarks without qualified legal assistance; it is also a problem that results from filings by inexperienced attorneys that either do not practice trademark law or file far too few trademarks to effectively provide trademark application assistance the client. On numerous occasions I have taken over trademark application matters or have been engaged to assist another attorney to resolve a trademark registration problem that was created solely because of inexperience.

Piccionelli: What are the kinds of things that can be registered as trademarks or services marks?

Vradenburgh: Trademarks can be words, phrases, symbols or designs, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods or services of one party from those of others. Sounds can also be trademarks. For example, the unique sound of a Harley motorcycle is registered. Also, I assume you recall the case we worked on together involving the mark “Ready to Rumble.” In that instance, the phrase was considered a trademark. Recently, incidentally, a sound mark was filed for the actual wrestling announcement and is currently pending in the Trademark Office.

Piccionelli: Is every word, phrase or logo capable of being registered?

Vradenburgh: While it is possible that a word, a phrase or a logo might be capable of registration, the Trademark Office has, for lack of a better term, a set of criteria that the mark must meet to be registered. Some of the reasons a mark might not be registrable is because it is confusingly similar with a mark that is pending to be registered, or is already registered, the mark is considered generic (it answers the question ‘what am I’), descriptive (it describes the goods or services to which it is associated), or it is considered immoral and/scandalous. It is always possible to try and argue against these refusals, but for example, it is highly doubtful that you could ever (at least at this time) register a trademark containing the F word. At the present time, the Trademark Office considers that word vulgar, and thus, proposed trademarks containing that word are refused as being immoral and scandalous.

Piccionelli: Do you have any advice for selecting a trademark?

Vradenburgh: Pick a strong mark, that is one that is fanciful or arbitrary in nature as it pertains to the goods or services., Google for a search engine and Xerox for copy machines are good examples of fanciful marks. Marks that are more descriptive, which is the typical type of a mark that people select, believing that the consumer will more easily recall the mark, are difficult to establish and enforce due to the fact that everyone defends against the infringing use of the mark by claiming it is being used in its descriptive manner. My advice would be for you to select an arbitrary or fanciful mark, that is, one that has no meaning, for example, Google, or Xerox. Any trademark, however, can become descriptive and possibly generic if the public begins to adopt the mark and use it to identify the goods, and not a specific source for the goods. For example, “Google it,” a very common turn of phrase, places the mark at risk for becoming generic for searching or search engines. Some might recall the campaign program many years ago in which Xerox actively attempted to correct the public into using its trademark properly; that is, from saying “please make me a xerox” to “please make me a copy” or “please make me Xerox copy,” the last meaning “please make me a copy on a Xerox copy machine.” Google will likely have to conduct such a campaign in the future to protect its mark.

Piccionelli: Federal registration of a trademark in the U.S. does not confer trademark rights outside of the U.S., correct?

Vradenburgh: That is correct. A U.S. trademark registration is only enforceable in the U.S.. You must obtain a foreign trademark registration in every foreign country in which you want to enforce registered trademark rights. Common law rights can be created in foreign jurisdictions, but each country must be viewed in light of that country’s law, which is beyond the scope of this answer.

Piccionelli: How important are international registrations?

Vradenburgh: Given that we are now in a very global marketplace, with so much of a typical company’s marketing being done via the Internet, it is very important, if not crucial for a company to protect its marks in all its major foreign markets. If a company doesn’t effectively protect its trademark in a foreign country in which it does business, it may find that someone else, maybe even a competitor, has lawfully registered the mark in that country. As a result the company may be legally prevented from offering its products or services in that country under its own trademark.

Piccionelli: I think that will be some sobering information for a lot of our readers who do business literally around the world. In that regard it’s good to know that you do quite a bit of international trademark registration. I know this because you handle all of our firm’s international trademark registrations.

Vradenburgh: Yes I do. With the assistance of foreign associates I prosecute a lot of foreign registrations. As with U. S. trademarks, foreign trademarks are jurisdictionally bound, meaning a Canadian registration is only good in Canada. One of the questions I am often asked is where to file. The “where” to file is dependent upon the market place for your product. Even if you believe you are worldwide, your market place is probably concentrated in certain areas. My advice to companies doing business offshore is that they should start by registering in the markets where they do the most business, and then add new applications as the company enters new marketplaces, unless of course, funding the trademark registrations is not an issue.

Piccionelli: I imagine that dating sites are a good example of companies that can benefit from international registrations. Have you found that to be the case, and do you represent many dating sites or dating companies?

Vradenburgh: Yes, dating is a big area these days. I have watched many clients transition into the dating area. In recent years I have filed in excess of 30 or 40 dating marks. Sometimes trademark registration in the online dating area can pose significant challenges, however. This is because the providers of the dating service want the name to be descriptive or generic for the type of dating involved. But as I have previously stated, marks that are generic or descriptive cannot be registered on the USPTO’s principal register. Because of this rule, one of the more difficult federal trademark registrations I obtained was Date.com, for dating services. The application was initially rejected on the ground that the mark was descriptive.

Piccionelli: Trademark rights also touch on a number of other areas, such as domain name rights. How is a domain name different from a trademark?

Vradenburgh: A domain name is a contract right. It does not confer any rights other than the right to use the domain name. In contrast, as we discussed earlier, trademarks are intangible property rights that are created through use of a logo, word, sound, etc., in association with a good or service. Because trademark rights are property rights, a domain name that is similar or identical to a trademark could be problematic if that trademark was in use prior to the registration of the domain name.

Piccionelli: Before purchasing a domain name, I advise clients to conduct a trademark search. Do you agree, and if so, how extensive should that search be?

Vradenburgh: It is always a good idea to conduct a trademark search, even if it is a simple search for a similar or identical word in the Trademark Office at USPTO.gov. However, it is also good to conduct an Internet search to see if others are using the term, and if so, on what types of goods or services.

If you intend to invest a lot of money into a website with a particular domain name, it might be wise to conduct a more thorough search through a searching company. These types of searches are equally useful when you want to register a trademark as well, especially if you intend to build your business or brand around the mark.

If you would like to contact Anna Vradenburgh for further information or consultation regarding the topics discussed in this article, you can reach her at (818) 488-8146 or at amv@eclipsegrp.com.

This article is for educational purposes only and is not intended to be, nor should it be considered to be, legal advice.

Gregory A. Piccionelli is an entertainment and Internet attorney and free speech advocate. He can be reached at (818) 201-3955 or greg@piccionellisarno.com.


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