Intellectual Property

Misappropriation

Prima Facie Misappropriation:

1) Π made substantial investment of time, money or intellectual effort

2) Δ has appropriated product of Π’s investment

3) Π injured by Δ’s appropriation

4) Good must be a public good (0 MC)

5) Infeasible private enforcement (no way to prevent free-riding)

Defenses:

1) Federal Preemption

2) First amendment freedom of commercial speech

INS v. AP

Classic trade-off between incentives and access cost

Δ (INS) legally copies news AP posts on east coast and prints it on west coast

Majority: Liability for reverse palming-off (misappropriation)

Misappropriation = reaping what one hasn’t sown; Tort of conversion applied to intangible property

Holmes: Wrong, but congress and AP could fix it. No liability if INS disclaims source

Brandeis: No rights to news once released

Modern Importance:

Decision mostly voided by Erie as it was brought on diversity grounds, still exists where it established state doctrine which has not since been

Doctrine still applied to:

Unauthorized broadcast of music group’s phonographic records (Waring – 1937)

Unauthorized recording of opera company’s radio broadcast (Metropolitan Opera Assoc. – 1950)

Unauthorized copying of dress designs (Dior – 1956)

Privacy (ironically first championed by Brandeis), though right to publicity falls more in line with misappropriation than privacy.

Limitations on INS:

1) Admin costs must be able to identify originator and injurious parties

2) Brandeis limit cases to where means are unlawful (but this would basically kill the doctrine)

3) Hand limit to facts of “hot news” cases

• Hand also disfavored INS as it would provide a common law copyright

4) First mover advantage: protection not needed where significant first mover advantages already exist.

• Hand also rejected INS type cases for this reason (ex: Cheney Bro,, Fashion Originates)

5) Cost/Benefit analysis of incentives and access; examples:

• Significant freeriding (ex: following journalistic tips aren’t nearly as freeriding as INS’s copying)

• Standards (see Hubble v. GE) – Access costs are very high here

• Hubble could also be about not giving GE a windfall (wrong incentives)

• However, we still do want to encourage firms to invent a standard

6) Direct competition in primary market requirement

• Ex: NBA v. Motorola. Pager scores, even if misapp won’t threaten NBA’s viability – no undermining of NBA’s primary market

• Further, total consumer satisfaction would be harmed if service not allowed

• NBA also lost because Motorola wasn’t freeriding – it gathered the scores themselves and the NBA didn’t have a property right in the scores

Common Law False Advertising

Advertising

Traditional view: barrier to entry and a waste; tells consumers what to buy instead of letting them decide. Allows firms selling the same thing to differentiate product, gain monopoly, and jack up price.

Errors of view:

Not useful (doesn’t indicate which industries will advertise or do so falsely)

Too Powerful because no evidence of how it changes taste

Empirical evidence indicates lower prices and better entry potential where advertising exists – opposite of what traditional view claimed (ex: eye glasses, drugs, liquor)

Modern Econ view: provides info which makes market more efficient (consumers better off because of)

Includes notations that people are uninformed and there are costs of gaining information

But info only conveyed if it will help a business

While truth helps the public, false advertising harms social welfare

Stigler/Nelson model:

Search characteristics: Much info on what is valuable about good is available pre-purchase (squeeze the

tomato)

But note that not all discernable (ie which chemicals used on tomato)

Experience characteristics: post-experience learning (ex: must watch a movie to really know if you like)

Here advertising (as with recommendations and personal experience) helps gather info you couldn’t otherwise

Credence: Attributes never revealed (or over long time) by actual experience (ex: vitamins, car repair)

Point: Little incentive to give false claim for 1) or 2); high incentive for 3)

Basics

• Common Law UC requires:

1) Injury to Π by Δ conduct

2) Injury caused by something unlawful (not just pure competition)

• Types of False Claims:

• Quality/Nature

• Source or Manufacturer (classic palming off)

• Origin (typically geographic)

• Product Disparagement (false claim about competitor’s product)

• Maybe also allow for non-competitors

• Allow Competitor to sue?

• Yes:

• Often harm to consumers too little for them to care (class action problem); sometimes injunction is the only relief.

• Competitors often have best access to info

• No:

• Consumer (harmed) doesn’t get anything (but still deterrence which justifies)

• Overdeterrence: many suits brought for grey-area advertising where consumers differ in vulnerability

• Suits often used to harass competitor (especially smaller firms)

• FTC would better present suit

Ely-Norris Safe Co. v. Mosler Safe Co.

Originally, common law only allowed action where 1) Palming Off, 2) Defamation, or 3) Disparagement

American Washboard v. Saginaw: Though wrong to sell public spurious goods, NO action unless property rights of Π are involved. These wrongs can only be righted by a public prosecutor or legislature.

Single Source Exception: Action allowed where Δ sells spurious good which only the Π could have sold + evidence that consumer

would have bought from Π had truth been known.

Note: SCOTUS reverses decision on ground that other competitors existed, but exception still stands – this overrules

Washboard where Π was the only seller

Pillsbury Washburn Flour

Single Source Exception applies to geographic locale famous for some quality product

Here court allows injunction where Π flour sellers from famous Minnesota region, Δ from Chicago claims to be from Minn. region

Note: More rationale to allow suit here because consumers would never know of fraud and so no one would/could bring suit

Note: Rule only applies where geographic locale has reputation.

Thus no action allowed against NY based “California Apparel” as no consumer association of Cal with quality

Disparagement (AKA Trade Libel)

Analogous to defamation:

• Defamation: Communication which would harm the reputation of person/business or deter third parties from doing business with it

• Based on:

• Libel Written defamation which is actionable w/o evidence of special damages

• Slander Oral defamation which in only actionable w/ evidence of special damages

• Harm: Consumers buy wrong product due to false information. Thus competitor has to cut prices or spend $ to counter mistruth.

Point: Defamation puts BOP on Δ to show truthfulness, Disparagement puts BOP on Π to show falsity

Also, Defamation allows Strict Liability, Disparagement requires intent or at least some negligence

These distinctions make since considering who has control of information

Requirements:

1) Show falsity of statement

2) Common-law “Actual Malice” by Δ

• Actual Malice = desire to cause injury or knowing or reckless disregard of falsity of statement

3) Special damages resulting from disparagement

Note: Πs usually lose here

Hurlburt v. Gulf Altantic Life Ins Co.

• NO Action where Δ made false/malicious statements to State AG about Π’s product, but where no evidence of lost profits or other harm to company. Only harm was imprisonment of officers which was harm to persons, not the company.

National Refining Co. v. Benzo Motor Fuel Co.

• No Action where Δ made false statements to public about Π’s product, but no evidence of special damages

Lanham Act False Advertising (§43(a))

Activities barred found under

(a)(1)(A) Passing Off - Cause confusion, mistake, deceive, disparage, etc.

(a)(1)(B) False Ads - Misrepresentation as to quality, origin, etc.

Standing to sue limited to competitors

• See LA §45 on Trademark

• Note: Non-direct competitors can also sue, though state does specifically state so

• This includes trade associations, but not licensees of product or employees of harmed company

• Colligan: Parents of students who were sold bum ski deal denied standing as they are not competitors

• Rationale: Courts often use intent of act, but stronger argument is there would be too may suits

• Note: Non-registered TMs can also be protected under section

Standard of Liability is Strict Liability

• More justifiable for facially false statements than inadvertent or negligent ones – but still same standard for all

• Possible disincentive for consumers to take precautions – but NO because consumers usually don’t recover, just the competitor

§43 False Advertising Requirements:

1) Comment Must be ad or promotion

Courts often look at methods by which ads are used in particular businesses to see if applicable

Theatrical Case: Comment at cocktail party found to be an ad since typical in that business to advertise at such parties

2) Comment Must be False and Misleading

3) Materiality

False and misleading to “not insubstantial # of customers”

Who “rely on these claims in their purchasing decision”

Note: This can be presumed, especially where claim is facially false

Injury

Likelihood of injury for Injunction (LA §34)

Actual injury for Damages (LA §35)

False and Misleading Comment

Categories:

1) Facially false

• Claim solid mahogany, but it’s veneer. 100% cotton but not

2) Literally false but NOT misleading

• Hertz, “We have more brand new cars than Avis has cars”. Literally false - Avis owns some cars that are for sale (and

literally you have to count them). But the ad applies to those for rent and so this is probably not misleading. However, your probability of getting a new car still might be lower, but Π didn’t argue this below.

• Old Crow Whiskey (unlikely people will think it’s made from old crows)

3) Literally True, but misleading

• Windows, save up to 50% on energy costs - really only applies to broken windows people, so the real savings aren’t this much.

• Old Jimmi Hendrix band - He was only a small part, later sell with huge picture of him on the cover.

• Kraft American cheese slice contains 5 oz of milk v 2 oz in competitor. Though occasionally a slice has 4.5 oz of milk. Literally true, but is it really misleading (it does have more milk).

Point: If ad classified as literal (2 or 3) then expensive Consumer Survey evidence required (unless Δ behavior is aggregious)

If ad classified as facially false (1) then no Consumer Survey needed (see Uhaul)

J&J Merck (Mylanta v. Tums)

• Δ Ad I: Π is Unsafe Δ is Safe and Healthy

• Δ Ad II: Π is Neutral Δ is Healthy

• Literally True but Misleading: Both ads play off of public misconception that aluminum is unhealthy (Πs product contains Al)

• Note: if ad had added to the misconception then harm

• Consumer survey required. Since survey done poorly (no control group) – no evidence of injury

• Consumer Survey:

• Must be done correctly (control group, not misleading questions, etc.)

• May be possible to show harm by showing % of public with misconception and relation to buying patterns

Ads Claiming Support of Product Tests

• Castrol: Test proves oil moves faster than competitors, but doesn’t substantiate claim in ad that it thereby protects engines better

Liability found

• BASF: Ad claims product “met specifications”, but no industry specifications to meet

Liability found because public would assume standards requirements

Injury (Injunction)

Likelihood of injury Factors

1) Degree of Competition Fewer competitors = Increased likelihood of injury

Higher Market Share = Increased likelihood of injury

Future competition = less likelihood of injury than for Current competition (Ortho)

2) Logical Causal Connection More similar the markets/products = Greater likelihood of injury

Requirement met if direct competition

3) Comparative Ads Ad comparing products = Strong likelihood of injury

Many suits brought here because of easier tie of harm to Π and no free-rider problem

4) Actual Injury Consumer Surveys and Testimony (if allowed by court)

J&J vs. Carter Wallace (Nair) (1980)

Parties compete in shaving market. Δ promotes “Nair w/ Baby Oil”. Π claims purpose of baby oil (moisturize) only effective if applied separately. Δ disagrees. Lower court finds no injury

Appeals Court says nothing about requirements 1-3; Reverses on ground that likelihood of injury (low standard) was met

Likelihood of injury found because of:

Evidence of affect to sales (consumer survey), though NAIR isn’t only competitor

Logical Causal Connection, which is met were competition is direct (as it is here)

Note: Court justifies low injury requirement on public policy ground. This is weak, though because good is an experience good and

consumers will not long be deceived

Ortho (JJ) v. Cosprophar (1994)

Parties are potential competitors (Π product is pending approval).

Court disallows standing because Π isn’t yet in market – thus NO likelihood of injury

Injury (Damages)

Common Law: Project lost sales from Πs previous sales

Lanham Act §35 Cost of Δs ads + Cost of Πs response ads (where reasonable)

Lanham Act §35

• Applies to TMs (registered and unregistered) and False Ads (since 1986)

• Requirements:

1) Causation (though not specifically mentioned in LA)

•  

• Recoveries allowed:

(a)(1) Δ profits

• Π BOP to show Δ profits. Δ BOP to deduct costs of production

• Gross vs. Net profits: FA costs are not deductible as they are unjust.

• Point: FA = lower bound. Even if Δ makes no profit, still assess the cost of the ads

(a)(2) Π damages

• Typically the cost of response ads

(a)(3) Costs of court action

(a)(4) Any other remedy court fashions

Point: Damages here are compensation, not penalty or specific deterrence

Uhaul

• Liability found for mislead ad (note: no survey needed where AGGREGIOUS Δ behavior)

• LA Damages method: Δ profits + Π damages from cost of response ads

Ralston I

Liability found for mislead ad (note: no survey need as TEST was claimed in Δ ads)

Profit ratio Damages method:

Δ has 7:1 sales to ad ratio; 3.5:1 profits to ad ratio

Damages = [ ($ spent on FA) * 3.5] * [Π share of market]

Note: Assumption here that consumers misled would by others products in accordance with market share

Note: Ration method does NOT address causation issue

Ralston II (Appeal of I)

• Only Π damages allowed (NOT Δ profits)

• Rationale: Δ conduct was not willful (basically N standard applied) and so no deterrence needed – just compensate Π

• Point: Δ profits only obtained for willful misconduct

Costs of False Ads:

If ads are “mixed” truth and false, courts tend to label 100% false

Cost of FA measured as:

1) change in sales

2) change in Ad$/Sale$ ratio

3) potential for other good ads

State Statutes

FTC

Fools Standard

Charles of the Ritz v. FTC (2d Cir. 1994)

• The FTC was not "made for the protection of experts, but for the public - that vast multitude which includes the ignorant, the unthinking and the credulous," . . . and the "fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced."

F.T.C. v. Colgate Palmolive Co. (1965)

• Court finds against Δ who advertises via television that its shaving cream could shave sandpaper. Instead of using real sandpaper, the ads used a piece of Plexiglas with sand applied to it.

F.T.C. v. Mary Carter Paint Co. (1965)

• Δ sells paint for [$15.00 per can + 1 can free] in belief that consumers would view its paint as “cheap” if sold for $7.50 per can.

• Court upholds FTC’s cease and desist order on the belief that courts should defer to FTC’s expertise in deciding what is deceptive.

Reasonable Consumer Standard

Heinz W. Kirchner (1963)

• A representation does not become "false and deceptive" merely because it will be unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons to whom the representation is addressed

Warner-Lambert (1975)

FTC evaluates Listerine claim’s from perspective of the “average listener”

Horizon Corp. (1981)

FTC evaluates oral and written claims “in light of the sophistication and understanding of the persons to whom they were directed.”

1983 Statement on Standard applied in FTC §§ 5, 12

To be deceptive the representation, omission or practice must be likely to mislead reasonable consumers

Representations targeted to a specific audience are judged by the effect on a reasonable member of that group

Commission considers the totality of the practice in determining how reasonable consumers are likely to respond

An interpretation will be presumed reasonable if it is the one the respondent intended to convey

Trademarks Basics

Definitions:

Trademark: word, symbol, name or signifier to distinguish goods of firm from those of other firms

• Modern law expands to include basically any distinguishing characteristic (sounds, dress, etc.)

Service mark: TM for service

Trade name: TM used to identify the business instead of the product.

• Same name, etc can serve as both trade name and trade mark

• Cannot be registered under LA, but can be protected by 1) State statutes (Com. Law), or 2) §43(a) unregistered mark protection

Acquisition Theory

Spectrum range: à ---- A) Thinking it up -----B) Register mark ------ C) Token use ------D) Use mark in commerce--- à

A) No system uses

B) Many Foreign Systems

• Potential for Banking

C) Pre-1988 Lanham Act

D) Common Law

Lanham Act Acquisition / Term

1(a) Principle Registry requires Use In Commerce (D)

Notice to other firms (constructive notice)

Incontestability: mark can become incontestable over time, thus no defenses available to infringer

Prohibit importation of goods with similar marks

1(b) Secondary Registry requires bona fide intent to use in next 6 month (up to 2 year extension possible)

Used for marks capable of distinguishing applicants goods, but not able to be registered on primary registry

Often used for descriptive marks trying to acquire secondary meaning

Key: Allows protection of TM rights internationally where marks must be registered

Class: Must also specify which class of goods TM applies to (Cars, Potato Chips, etc)

Note: Selection of class is not exhaustive – courts cay still expand coverage under common law to include similar products (ie – golf balls and golf clubs)

Factors for Inclusion:

1) Closeness of products (golf clubs and balls)

2) Complementary goods (hammers and screwdrivers)

3) A’s Unreasonable delay (laches) in protesting B’s use

4) B’s good/bad faith (whether he knew of or was trying to copy A’s mark)

Term: Indefinitely Renewable with continuance filing every 10 years ($300 + Form)

Purpose of TM protection

Classical response: Identifies or provides info on manufacturer of good (origin or source identification)

Modern (Information) response: TMs reduce information/search costs and allows producers to advertise/improve quality

• Producer benefits:

• 1) Can reap profits of a) advertising and b) improvements in quality of good over other goods

• This is because consumers willing to pay a little more $ in exchange for reduced search costs

• Note: these benefits only go to “good” producers. Makers of shoddy goods would like world with no TMs (or no TM protection)

• Consumer benefits:

• 1) Fixes responsibility: Allows consumer to go after producer for defective goods

• 2) Economize information and search costs:

• Quality assurance based on prior good experiences

• Wariness based on prior bad experiences

• This benefit is based on product consistency

• 3) Provides society with information on worth of different people based on products they own

• Ex: expensive watch of same quality as cheap watch, but serves as a status symbol

• 4) Allows consumers to identify themselves with a product (such as a sports team, etc.)

Alternative response: As with advertising, TMs allow firm to differentiate identical goods and reap monopoly prices

Trademark doctrines based on information theory:

Key: IP rights, though rights in property, are less protected than traditional property rights

1) Mark must be distinctive, not descriptive:

LA §§2; 2(e), 2(f)

Otherwise no reduction in search costs and enforcement resources would be spent where there is no corresponding benefit to society

2) Mark must be attached to good:

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Otherwise no aid to search costs; society no better off than w/o TMs.

Note: This is true even in cases where consumers interested in TM itself (sports, etc), because owner/assignee of TM only has rights within bound of using TM on hats, shirts, other products.

3) Not necessary for consumer to know who is the actual owner/manufacturer behind TM

§ 45 – definition of Trademark: counts, even if “source is unknown”

Ex: Not necessary to know P&G makes Crest

4) TM violation only if likelihood of consumer confusion

Rationale: TM law is a branch of Unfair Competition. “Passing off” is attempt to deceive consumers. Originally only confusion as to manufacturer was actionable – now almost all confusion covered.

5) TM law has expanded greatly

Ex: TM dilution laws - wherein TM holder damaged, even though no confusion. Though no one would assume TM holder made, sanctioned, approved of, etc the use of the TM in that way, the use still damages the holder.

Categories of Trademarks (applicable to trade dress, etc)

1) Fanciful Coined words invented to serve as TM or to identify a product

Ex: Kodak, Jeep, Xerox

2) Arbitrary Common linguistic words, but neither suggest nor describe qualities when used as product TM

Ex: MS Windows, Apple Computer, Crest Toothpaste, Camel Cigarettes

3) Suggestive Doesn’t directly describe good, but suggests purpose of TMed good

Ex: Wall Street Journal, Business Week, Head and Shoulders Shampoo, Coppertone, People Magazine, Mr. Clean

4) Descriptive Describes purpose, function, quality, attribute, etc (ADDITONAL INFO) of TMed good

Ex: Car freshener brand auto deodorizer, vision center eyewear, All-Bran cereal, Paperback books, TV Guide

Point: Provides 2 informations:

1) standard info benefits from TM

2) important characteristics of good (especially helpful with first time users)

Point: Firms chose to use Descriptive marks because of 2) and because often unclear at start

whether mark will be descriptive – once descriptiveness evident it is too costly to change

Test of Deceptively Misdescriptive

1) Mark is misdescriptive of the goods

2) Likelihood of confusion

3) Misdescription is likely to affect a decision to purchase

5) Generic Primarily reference to category instead of a brand name

Ex: golf balls (instead of Nike golf balls)

Note: (1-4) can become generic (and thus lose TM protection) if they gain sufficient dominance

Some who have: Trampoline, Brazier, Escalator, Thermos, Yo-Yo, Aspirin

Some who came close: Kleenex, Velcro, Roller-Blades, Xerox

Note: Generics can sometimes become descriptive (ex: Singer – though here TM lost, then regained descriptiveness)

Range of protection:

• (1-3) Always – though strongest for Fanciful and gets weaker towards Suggestive

• (4) NO initial protection, but possible to acquire protection (though weak) if secondary meaning created.

• Requires cost/benefit analysis – if “secondary meaning” becomes the primary association consumers make then TM protection attaches.

• Deceptively Misdescriptive marks NOT protected even with secondary meaning (§ 2(e)(1))

• Ex: “George Washington Ate Here Restaurant” not protected

• Fair Use Defense: Though initial firm may acquire exclusive TM, other firms may use mark to describe type of good or

service - though NOT in a TM manner (LA § 33(b)(4) and Common Law)

• 5) No TM protection

• Traditional Rationale: granting protection would “impoverish the words of commerce”

• LA rationale:

• §2 – Generic can never be distinctive (as §2 requires)

• §14 – Cancellation of TM for becoming generic

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Point: Balance between 1) Incentives and 2) Barrier to Entry

Landes Model

Defenses to TM infringing cont.

1) Used Fairly defense

2) Comparative Advertising (Coke vs. Pepsi ad)

Descriptive Marks

§2(e)(1) NO registration for marks which are:

• Merely descriptive Registration allowed once secondary meaning showed (§2(f))

• Deceptively mis-descriptive NO registration, even if secondary meaning showed

Kellogg v. National Biscuit (Shredded Wheat)

• Patent expires on NB’s “Shredded Wheat brand” Wheat Biscuit

• Court rejects NB claims rights to:

1) “Shredded Wheat” TM because term is generic, even though NB had spent $17M in ads to create secondary meaning. Even if descriptive, though court would deny protection under the Brandeis Test (Dicta).

• Brandeis Descriptive Test: Protection ONLY if primary TM significance for consumers is the producer, not the product.

• Key: Protection if primary relationship is between [M1 / B1], NOT between [B1, B2, B3,] (M=manufacturer, and B=brand)

• Though good in abstract, Test inadequate in following cases:

A) TM brings different thoughts to different consumers

B) Where Patent expires. Prior to expiration no need for consumers to differentiate brand from manufacturer, but need exists with entry of competitors afterwards. Thus modern manufacturers must spend extra $ in ads to distinguish M from B (loss to society) and may still lose their mark if consumers chose not to distinguish. (as occurred in Thermos)

C) Marketing which promotes a unique product attribute. (See Genesee Brewing Co.)

• Note: At time of decision the expiration of a patent created irrebuttable presumption of a generic term.

LA § 14(3) changes this so that no per se denial of protection where same mark for good and brand

2) Pillow-shape because:

1) Hostitility to patents – patent was to make biscuit in pillow form and since it expired, others can do so now

• Weak argument because often possible to produce many shapes for equal costs and shape can convey information

2) Analytical – form was functional

• Stronger argument in that if different forms cost different amounts (or there are few forms which would function) then competitors at disadvantage and consumers hurt

Shaw v. Time-Life Records

Π produces “Artie Shaw band” record. Δ produces independent recreation of same record (OK under copyright) but doesn’t disclaim that work is not BY Artie Shaw.

Π Alleges passing off

Issue is whether consumers confused as to origin. Yes, Δ needs to use words “Artie Shaw” so consumers know what they’re getting, but they must also indicate that recordings are not original “Artie Shaw”s – must use in a descriptive sense.

Reasonable Persons Test: “Whether persons exercising ‘reasonable intelligence and discrimination’ would be taken in by the similarity”

Alt Test: Look at intent of Δ. If intent was to “palm off” then liability or at least BOP on Δ to show no confusion

Note: Trade dress does NOT provide same independent recreation allowance

Car Freshner v. S.C. Johnson

Π makes little tree car freshners w/ pine scent. Δ makes tree-shaped pine freshener for houses. Δ wins under Fair Use Doctrine

Fair Use Doctrine (same as in copyright)

Rule: Others can use TM so long as used to describe aspects of its goods, provided use was not in bad faith and not as a mark.

Bad faith = intent to violate the law, not just intent to use the IP of another

Court additions:

Fair Use only applies if TM is descriptive

Look at Fair Use solely from Δs perspective

Generic Marks

Genesee Brewing Co. v. Stroh Brewing Co.

• Π adds non-patent good (brown honey) to lager and sells as “Brand X Brown Honey Lager” – wants TM protection

• Incentives v. Access Costs

Benefit for first moving firm is that they can get description in their TM to highlight unique aspect of new product. There is no real way to describe the product w/o saying “Brown Honey”, but if successful, fear that other will profit off of niche Π created.

Risk to competitors is that other firms can’t use same description if they make similar product

Court Rule: party can incorporate description in TM, but may loose TM right if term becomes a competitive necessity

• Note: Rule balances considerations in that first-mover can have protection (especially with requirement that subsequent competitors use distinguishing labels – see Shredded Wheat) and competitor’s hands are not tied

• Note: No need for rule where first-mover is only one in the market (patent, natural monopoly, etc)

Initials as TMs

• Initials must go through same categories as other trademarks. Often term will start of descriptive or generic, but can then take on secondary meaning. Same tradeoffs between info costs and entry barriers as above

Geographic Marks

Definition: Word or symbol which designates a geographic location (city, state, lake, etc)

Common law allowed for:

1) Arbitrary/fictitious/suggestive

• These OK because all consumers associate good w/ producer and not the location (and yet no misinformation)

• Examples: Mars candy bars, Alaska bananas, European health clubs

2) Descriptive, but with secondary meaning

• These OK because descriptive function becomes subordinate in consumers minds to the association of the good with a particular firm

• Examples: American Waltham Watches

Treatment under LA

• Arbitrary/fictitious/suggestive registerable

• §2(e)(2) descriptive geographic marks registerable under §2(f) – secondary meaning

• §2(e)(3) deceptively misdescriptive not registerable under §2(f) – secondary meaning

• Note: Deception only where geographic area has a meaning in consumer’s minds. Thus “Made in Paris” perfume actionable, but not “Maid in Texas” perfume.

• Subsequent entrants:

• Unlike traditional TMs, allowing geographic TMs has the potential cost that subsequent market enterers may have a rational desire to use a TMed geographic term but would be prohibited from doing so; whereas prohibiting firms from using normal arbitrary marks (ie Kodak) doesn’t have such a cost

• General rule: subsequent firms can use the geographic term to inform consumers of their connection with the local, but must also include info to distinguish themselves from firm with TM so as not to confuse consumers. Just look at Δs use here

Nantucket

TTAB Rule: Protection if 1) term not a geographic area w/ commercial activity, OR 2) secondary meaning

Effect: Expensive rule for most applicants because 1) nearly impossible and 2) difficult to show

Flow: Is mark recognized as geographic area with commercial activity?

N) Registerable

Y) Is the firm located in the geographic area?

N) No registration because primarily geographic misdescriptive

Y) Any secondary meaning

N) No registration because primarily geographic descriptive

Y) Registerable

Appeals court additional considerations:

1) Do consumers associate good with the local?

2) Do consumers care about geography for this particular good?

Point: If either question answered no – then mark is not primarily geographic and so it is registerable

Certification Marks

Definition: Term which any firm can use so long as it meets the standards of the owner (often a trade association) or comes from the geographic local set by the owner (See LA §45 Definition)

Cancellation grounds found in LA § 14(5)

1) Owner losses control

2) Owner engages in business with mark

3) Owner permits mark to be used for other uses than to certify