Tag Archives: Practice Tips

Google & Trademark Genericide – Be Sure to Ask the Right Question

Genericide.  

It sounds like something you might put on your lawn to kill weeds. But in the world of brands and marketing, genericide is a killer of trademarks. It is what happens when a trademark becomes the common (generic) word for a product or service itself and is no longer protectable under trademark law.

Countless articles tell the stories of how trademarks lost their ability to distinguish the source of goods because they became generic. Examples include CELLOPHANE, LANOLIN, ESCALATOR, THERMOS, and ASPIRIN. See INTA’s Practical Tips on Avoiding Genericide.  

Genericide is one reason companies police how others use their trademarks. It is also a reason that companies create branding and trademark usage guidelines, like these for Intel, Apple, and Symantec. See also, A Guide to Proper Trademark Use.

Some guidelines, like those of Symantec, go beyond what to do, and explain why:

Proper usage aids consumers who depend upon Symantec’s goods and services and helps prevent Symantec Trademarks from losing their distinctiveness and becoming generic.

They may even explain what not to do:

Trademarks are adjectives and should be followed by the generic term they modify, such as “software” or “product”. Never use a trademark as a noun, a verb, or in the possessive form.

With all of this focus on how marks lose their distinctiveness by becoming generic, you may be thinking:

What is the deal with GOOGLE?

People seldom say, “Try searching for [whatever] using the Google search engine.” People instinctively shorten things and say, “Try googling it.” But shouldn’t that lead to Google becoming generic and incapable of serving as a trademark?

Not necessarily, said the Ninth Circuit Court of Appeal in Elliott v. Google, Inc., No. 15-15809, 2017 U.S. App. LEXIS 8583 (9th Cir. May 16, 2017). There is more to it. You have to ask the right question, and that is the TAKE-AWAY at the end of this article.

Initially, explained the court, the mere fact that the public sometimes uses a trademark as the name for a unique product does not immediately render the mark generic. Rather, a trademark only becomes generic when the “primary significance of the registered mark to the relevant public” is as the name for a particular type of good or service irrespective of its source.

Courts make that determination by applying the “who-are-you/what-are-you” test:

If the relevant public primarily understands a mark as describing “who” a particular good or service is, or where it comes from, then the mark is still valid. But if the relevant public primarily understands a mark as describing “what” the particular good or service is, then the mark has become generic. In sum, we ask whether “the primary significance of the term in the minds of the consuming public is [now] the product [and not] the producer.”

In Elliott v. Google, seeking show that Google had become generic, Elliott focused on how google often is used as a verb. [Well-known dictionaries define google as a verb.] The Ninth Circuit court, however, found Elliott’s claim to be flawed for two reasons: (1) a claim of genericide must always relate to a particular type of good or service; and (2) use as a verb does not automatically constitute generic use.

Genericide Must Relate to a Particular Type of Good or Service

Relation to a particular type of good or service, the court said, is infused throughout several sections of the Lanham Act (federal trademark law). A mark can be canceled if it “becomes the generic name for the goods or services . . . for which it is registered.” “If the registered mark becomes the generic name for less than all of the goods or services for which it is registered, a petition to cancel the registration for only those goods or services may be filed.” The relevant question under the primary significance test is “whether the registered mark has become the generic name of [certain] goods or services.”  15 U.S.C. § 1064(3).

The court then added that such a relation requirement is necessary to maintain the viability of arbitrary marks as a protectable trademark category. In other words:

If there were no requirement that a claim of genericide relate to a particular type of good, then a mark like IVORY, which is “arbitrary as applied to soap,” could be cancelled outright because it is “generic when used to describe a product made from the tusks of elephants.”

Trademark law recognizes that a term may be unprotectable with regard to one type of good, and protectable with regard to another type of good. Thus, the court said the very existence of arbitrary marks as a valid trademark category supports the conclusion that a claim of genericide must relate to a particular type of good or service.

Use as a Verb Does Not Automatically Constitute Generic Use

Moving to the second point, the court said a trademark may be used as a verb, or even as a noun, without becoming generic. In connection with Lanham Act amendments, the court noted the following from a Senate Report:

A trademark can serve a dual function—that of [naming] a product while at the same time indicating its source. Admittedly, if a product is unique, it is more likely that the trademark adopted and used to identify that product will be used as if it were the identifying name of that product. But this is not conclusive of whether the mark is generic.

In this way, the court said Congress has “instructed us that a speaker might use a trademark as a noun and still use the term in a source-identifying trademark sense.” That was the case in Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250 (9th Cir. 1982), where Coca-Cola had sued a restaurant (Overland) for trademark infringement, and Overland countered that COKE was generic, claiming that customers ordered “coke” only in a generic (“soda”) sense. The court rejected that argument, noting that the mere fact customers ordered “a coke,” i.e., used the mark as a noun, failed to show “what . . . customers [were] thinking,” or whether they had a particular source in mind.

To accept Elliott’s argument, the court said, would require “evidence regarding the customers’ inner thought processes.” The court explained further in a footnote:

We acknowledge that if a trademark is used as an adjective, it will typically be easier to prove that the trademark is performing a source-identifying function. If a speaker asks for “a Kleenex tissue,” it is quite clear that the speaker has a particular brand in mind. But we will not assume that a speaker has no brand in mind simply because he or she uses the trademark as a noun and asks for “a Kleenex.” Instead, the party bearing the burden of proof must offer evidence to support a finding of generic use.

Relating it to Google, the court said that just as a customer might use the noun “coke” with no particular cola beverage in mind, or with a Coca-Cola beverage in mind, an internet user might use the verb “google” with no particular search engine in mind, or with the Google search engine in mind.

While Elliott had amassed a mountain of evidence ranging from expert surveys to dictionaries, it all focused on the public using “google” as a verb, and did not show evidence of “google” being a generic name for internet search engines.

Elliott also argued there is no efficient alternative for the word “google” as a name for “the act” of searching the internet regardless of the search engine used. But the court convincingly disposed of that argument:

Elliott must show that there is no way to describe “internet search engines” without calling them “googles.” Because not a single competitor calls its search engine “a google,” and because members of the consuming public recognize and refer to different “internet search engines,” Elliott has not shown that there is no available substitute for the word “google” as a generic term.

THE TAKE-AWAY

Ultimately, Elliott lost by focusing on the wrong question. Elliott focused on whether the relevant public primarily uses the word “google” as a verb, when the real question was:

…whether the primary significance of the word “google” to the relevant public is as a generic name for internet search engines or as a mark identifying the Google search engine in particular. 

BONUS TIP FOR IP LITIGATORS

The opinion includes analysis of several consumer surveys offered by Elliott. The court noted that consumer surveys may be used to support a claim of genericide “so long as they are conducted according to accepted principles.”

Two of Elliott’s consumer surveys, however, were excluded because they were not conducted according to accepted principles:

Specifically, these surveys were designed and conducted by Elliott’s counsel, who is not qualified to design or interpret surveys… [and, even] if the surveys were admitted, Elliott’s counsel would need to withdraw in order to offer testimony on the survey results.

For the latter point, the court cited Ariz. R. Sup. Ct. 42, E.R. 3.7 (“A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness . . . .”); see also Model Rules of Professional Conduct 3.7.

In California, see Rule of Professional Conduct 5-210 Member as Witness; but also see proposed California Rule 3.7 Lawyer as Witness (On March 30, 2017, the State Bar submitted the proposed rules to the California Supreme Court).

 

 

Sedlik’s Multiplier & Actual Damages for Copyright Infringement

Sedlik’s Multiplier – an acceptable use of a multiplier as part of calculating fair market value to account for factors such as exclusivity or rarity when determining actual damages under the Copyright Act.

Using an electron microscope, in the mid-1990s, photographer Andrew Paul Leonard created colorized stem cell images from cell samples he obtained from doctors, scientists, and researchers.  Leonard built a profitable business licensing rare stem cell images, and received a range of fees for different types of licenses.  One appeared on the cover of TIME.

Defendant Stemtech sells nutritional supplements through thousands of distributors. Stemtech contacted Leonard about licensing his stem cell images, because as Stemtech employees explained, “using these images was important to Stemtech’s business.”  Stemtech declined to license Leonard’s image for website use because “the price was too high,” but chose to license an image for use twice in its internal magazine.

Leonard sued Stemtech for copyright infringement in Delaware federal district court when he discovered that Stemtech had vastly exceeded the scope of the license.  Because Leonard had not registered his copyright sufficiently in advance to seek statutory damages, he had to prove actual damages under the Copyright statute.  See 17 U.S.C. §504 Remedies for infringement: Damages and profits.  At trial, the jury awarded Leonard $1.6 million in actual damages.

Stemtech appealed to the Third Circuit Court of Appeals, arguing among other things, that the award of actual damages was grossly excessive and that the district court improperly allowed the testimony of Leonard’s damages expert, Jeff Sedlik.  The Third Circuit rejected Stemtech’s arguments, and sent the case back to the district court to determine whether interest should be added as well.  See Leonard v. Stemtech, __ F.3d ___, 2016 WL 4446560, at *1 (3d Cir. Aug. 24, 2016).

[There is some good discussion of secondary infringement, including application of and distinctions between contributory infringement liability and vicarious liability.]

This post focuses on the Third Circuit’s discussion of methods for calculating actual damages under the Copyright Act, its review the District Court’s decision to permit Leonard’s damages expert to testify, and its evaluation of whether the $1.6 million dollar award was grossly excessive.

Methods for Calculating Actual Damages under the Copyright Act [§ 504(b)]

The Copyright Act allows a copyright owner to recover actual damages resulting from infringement.  It usually involves determining the loss in fair market value of the copyright, measured by the profits lost due to the infringement or by the value of the use of the copyrighted work to the infringer.  The primary measure is the injury to the market value of the copyrighted work at the time of the infringement.  Case law describes two permissible methods for determining damages:

(1) calculating the fair market value of the licensing fees the owner was entitled to charge for such use;

or

(2) calculating damages based on the plaintiff’s own past licensing fees.

The District Court’s Decision to Permit Leonard’s Damages Expert to Testify

Leonard hired a photography expert, Jeff Sedlik, to provide testimony regarding Leonard’s actual damages.  Stemtech filed a motion to exclude Sedlik’s testimony (a Daubert motion).  The district court, denied Stemtech’s motion because:  (1) Sedlik’s method for calculating actual damages using fair market value, as opposed to past licensing history, was reliable; (2) there was a sufficient factual basis for his calculation; and (3) there was a fit between the facts of the case and Sedlik’s damages calculation.

The Third Circuit agreed.  Sedlik had adopted a recognized method – the fair market value approach.  Stemtech’s disagreements with Sedlik’s calculation methodology and assumptions about which images and uses were similar to those of Leonard, went to the weight the jury may give Sedlik’s expert testimony, but were not reasons to keep the information from the jury.

Excessiveness of the $1.6 Million Damage Award by the Jury

The Third Circuit noted that courts will respect a jury verdict unless it is so grossly excessive that it shocks the judicial conscience, or it relies on an impermissible basis.

The Third Circuit examined Sedlik’s expert damages opinion, breaking it down as follows:

  • Sedlik surveyed four stock photo agencies to obtain image licensing rates for uses similar to the infringing uses.  These fees factored in the image size, form of media, size of audience, geographical scope, placement, number of appearances, and length of the license.
  • Sedlik averaged the quotes provided by the agencies and arrived at benchmark license fees for each usage, in the range of $1,277.10 to $2,569.46. Sedlik then assigned an applicable fee to each of the 92 unauthorized usages, and calculated the sum of those fees to arrive a fair market value of $215,767.65 in total.
  • Sedlik then adjusted the benchmark amount to account for scarcity—the rarity of stem cell images—and exclusivity—that is, how Stemtech’s extensive use would be akin to an exclusive license that would eliminate or reduce licensing revenue from other sources and/or decrease the value of Leonard’s work.
  • This adjustment to the benchmark took the form of a “premium” or multiplier of three to five times the benchmark for scarcity, and a multiplier of 3.75 to 8.75 times the benchmark for exclusivity of Leonard’s images during the infringement period.  That yielded an actual damages range of $1.4 million to nearly $3 million.

Stemtech argued that Sedlik’s use of multipliers effectively resulted in a jury award that included punitive damages.  Since punitive damages are not an available remedy under the Copyright Act (i.e., an impermissible basis), Stemtech argued, the jury’s award was excessive.

In rejecting Stemtech’s argument, the Third Circuit distinguished Sedlik’s multiplier from case law finding multipliers to be impermissibly punitive.

The Third Circuit first recognized case law rejecting punitive multipliers because “[t]he value of what was illegally taken is not determined by multiplying it,” and where a multiplier amounts to a “fee for unauthorized usage” over and above what “would otherwise represent a fair and reasonable licensing fee for the infringed material.”

Sedlik’s multiplier, the court held, was different.  It was not related to unauthorized use of the images (it was not an “infringer’s penalty”).  Rather, it was part of calculating fair market value.  The sum calculated from the stock photo agency rates did not represent a full calculation of the fair market value of Leonard’s images because the stock agency rates yielded a benchmark that did not account for scarcity and exclusivity.  Sedlik’s multipliers reflected a premium that, according to Sedlik, the market would find acceptable given the scarcity and exclusivity of the images as compared to the images for which he had secured rates for comparative purposes.  The fair market value calculation was complete only after those additional factors (scarcity and exclusivity) were applied.

Because “Stemtech presented no evidence or methodology to cast doubt on the use of multipliers to account for factors relevant to a final fair market value,” neither the district court nor the jury had any basis to discount Sedlik’s testimony.  And without evidence that the scarcity and exclusivity multipliers were punitive as opposed to being valid factors for calculating fair market value, the Third Circuit could not say the jury’s verdict was based on an improper consideration.

Nor could the Third Circuit conclude that the jury’s verdict was grossly excessive.  Unrebutted expert testimony provided a basis for a fair market value that included a benchmark for similar but less unique images, and a range for a premium reflecting the rarity of Leonard’s image and its unusually widespread use in Stemtech’s materials. Sedlik provided a multiplier of three to five times the benchmark for scarcity and 3.75 to 8.75 times for exclusivity, and jury returned a verdict of $1.6 million, which was at the lower end of Sedlik’s range.

Accordingly, because the jury’s damages award was tethered to the record, and Stemtech presented no alternative calculations, the damages award could not be reversed as excessive.

THE TAKE-AWAYS

A damages expert may use multiplier as part of calculating fair market value to account for factors such as exclusivity or rarity, as long as it is not essentially a “fee for unauthorized usage.”

Whether the stock agency rates were truly comparable to Leonard’s images, whether the stock photos were actually licensed by paid customers at those rates, whether taking an average of selected licensing rates was reliable, whether issues like scarcity and exclusivity (or either of them) were already taken into account in the stock photo rates, or whether the market would find premiums for scarcity and exclusivity acceptable – those were all issues Stemtech was free explore when cross-examining Sedlik, or with Stemtech’s own expert (if it had one).  Yet, Sedlik’s testimony went largely unrebutted.  Stemtech did not cross-examine Sedlik about his use of these premiums and Stemtech did not present its own expert to rebut Sedlik’s opinions.

Stemtech instead relied heavily on its ability to exclude Sedlik’s expert damages testimony.  As a back-up, it sought to convince the court (and jury) that license fees Leonard actually charged his clients over fifteen years and the fees that Leonard quoted Stemtech were the only viable measures of Leonard’s actual damages.

According to the Third Circuit, however, Stemtech had cited “no authority requiring the use of this method as opposed to the fair market value approach, and case law on this subject supports using the fair market value.”

Ultimately, Stemtech made three key decisions:  (1) to rely on its ability to have the Sedlik expert opinions excluded, (2) to rely on Leonard’s past licensing history as the only method of calculating Leonard’s actual damages, and (3) to proceed without its own damages expert to counter Sedlik’s methodology and opinions.

Combined, these decisions amounted to an all-or-nothing damages strategy, which proved perilous when the jury chose “all.”

The “Top” Copyright and Trademark Articles Collection

Here’s a collection of links to “Top” articles discussing tips, benefits, traps, warnings, distinctions, myths, and explanations of copyrights and trademarks:

Top 10 Benefits of Trademark Registration

The Top Ten Mistakes Made by Trademark Owners

Top Ten Trademark Tips for Every Business

Missing the Mark: The Top 10 Trademark Mistakes in Advertising Campaigns

Top 7 Costly Mistakes to Avoid with Trademarks

Top Ten Most Important Trademark Cases

Top Ten Copyright Myths

The Top 10 of Copyright

Top Ten IP Concerns When Working With Independent Contractors

Top Ten (Actually Eleven) Copyright And Trademark Tips For Nonprofits

Top Ten Intellectual Property (IP) Law Traps

Top 10 Things Every Artist Needs to Know About Copyright and Trademark

 

[Matterhorn image courtesy of  Pixabay -under Creative Commons CC0]

Trademark Refresher:  What is a Family of Marks?

A family of marks is a group of marks (e.g., MCNUGGETS, MCSKILLET, MCCAFE, MCGRIDDLES) having a recognizable formative common characteristic (e.g., MC), wherein the marks are composed and used in such a way that the public associates not only the individual marks, but the common characteristic of the family, with the trademark owner (e.g., McDonalds Corp).

Simply using a series of similar marks, however, does not of itself establish the existence of a family of marks.  Courts and the USPTO consider the use, advertisement, and distinctiveness of the marks, as well as how the common feature contributes to the purchasing public’s recognition of the marks as being of common origin.  To demonstrate such recognition, an owner must show that the marks comprising the family have been advertised or used in everyday sales activities in such a way so as to create common exposure and recognition of common ownership based on the common feature.

As parenthetically indicated above, a well-known example is the McDonald’s Corporation family of “MC” marks, which include MCNUGGETS, MCSKILLET, MCCAFE, MCGRIDDLES and so on.  McDonald’s has successfully opposed attempts by others to register “MC” marks over the years and it actively pursues perceived infringers of its family of “MC” marks.  See McDonald’s Corp. v. McSweet, LLC, 112 USPQ2d 1268 (TTAB 2014) (59-page TTAB decision sustaining McDonald’s opposition to MCSWEET for pickled gourmet vegetables based on dilution and likelihood of confusion with the “MC” family of marks).

PRACTICE TIPS

A trademark owner does not need to own trademark rights in the formative common feature itself (e.g., “MC”) in order to establish rights to a family based on the common feature.  J & J Snack Foods Corp. v. McDonald’s Corp., 932 F.2d 1460, 1463 (Fed. Cir. 1991).

The common feature, however, must be distinctive and not generic or “merely descriptive” of the goods or services.  Note that a descriptive term is not “merely descriptive” if it has acquired distinctiveness (aka “secondary meaning”) through extensive use and advertising.  Thus, a descriptive term can serve as a common feature for a mark family if there is a strong showing of secondary meaning (acquired distinctiveness) in the descriptive common feature.  See, e.g., Spraying Systems Co. v. Delavan, Inc., 975 F.2d 387, 395 (7th Cir. 1992) (refusing to recognize a family of “–JET” marks for agricultural spray nozzles); see also, Miller’s Ale House, Inc. v. Boynton Carolina Ale House, LLC, 745 F. Supp. 2d 1359 (S.D. Fla. 2010) (“To the extent Miller’s is claiming trademark rights in a family of marks with “ALE HOUSE” as a common surname, a determination that the “ALE HOUSE” surname is generic would be fatal to the entire mark.”)

Finally, for a good resource on arguing family of marks in the context of USPTO trademark registration or Trademark Trial and Appeal Board proceedings, go here.

(photo: Thank you William A. Ling for permission to use his zebra-family photo.)