Mutton Busting in the Trademark Rodeo: How New Markets and New Media Emphasize Relevance of Trademark Protection
I just returned from what literally was my first rodeo. In this case, it was the Houston Livestock Show and Rodeo, billed as the largest rodeo in the world, complete with deep fried cookie dough and bacon, steer wrestling and bull riding, and mutton busting (more on that later). What does all of this have to do with trademark law? For starters, the term “brand” is said to originate from livestock owners imprinting their herds with hot branding iron to show the symbols of their respective ranches.
More recently, however, as new products, business lines, and market trends emerge and develop, trademark law is starting to resemble the rough-and-tumble world of Western settlers of the 1800s, who moved to stake their claims to new land on the frontier. Smart phone apps, craft beer, and electronic cigarettes are just a few examples of products that have exploded onto the market but that would have been irrelevant just a few years ago. According to one recent article, the number of craft breweries has more than doubled in the last ten years and the overall production of craft beer has almost quadrupled, resulting in an estimated 5,000 federal trademark applications filed in 2015 in connection with beer alone. See Michael D. Kanach & Daniel J. Christopherson, “Trademarks in the Golden Age of Craft Beer”, Landslide, November/December 2015. Even for products that have been around for a while, such as clothing, there are trends and customer preferences driving new trademarks, such as the market for “southern” products like Southern Tide®, Southern Marsh®, Southern Proper®, and Southern Fried Cotton®.
Clients are constantly on the lookout for new business lines and hoping to capitalize on new trends. This article describes what in-house counsel should know about trademark law to help clients navigate the issues.
Trademarks – The Basics
A mark is generally any word, phrase, symbol, or other device that identifies the business that offers goods or services. Technically speaking, a “trademark” is used for goods and a “service mark” is used for services, but for present purposes the words can be used interchangeably. Trademarks serve to protect consumers from confusion in the marketplace about who is selling what, and trademark owners can sue to prevent others from using words, symbols, or devices that are likely to be confused with the owners’ trademarks. “[A] trademark not only protects the goodwill represented by particular marks, but also allows consumers readily to recognize products and their source, preventing consumer confusion between products and between sources of products.” George & Co., LLC v. Imagination Entm’t Ltd., 575 F.3d 383, 392-93 (4th Cir. 2009) (citations omitted).
Of course, to bring such a claim, the owner must establish that it actually has a valid and protectable trademark. To serve as a trademark, the word, phrase, symbol, or other device must be sufficiently distinctive so that it fulfills the traditional trademark functions of distinguishing the owner’s goods from those of others and identifying the source of the goods. See Retail Servs. v. Freebies Publ’g, 364 F.3d 535, 538 (4th Cir. 2004). The distinctiveness of trademarks is evaluated on a sliding scale where so-called “arbitrary” or “fanciful” marks have the highest amount of distinctiveness, and receive the greatest degree of protection. For example, not too long ago, a person going to the “Apple Store” would have presumably been shopping for fruit. Not so now, because “Apple” – an arbitrary word that originally had nothing to do with computers – was used as the brand name for all the devices that we now see every day in our lives. This kind of arbitrary trademark is highly distinctive and very capable of protection as a trademark.
On the opposite end of the spectrum are generic terms – orange juice or milk – which necessarily must be used to describe the product and therefore are not capable of trademark protection. In the middle are “suggestive” and “descriptive” marks. Suggestive marks have some level of distinctiveness because they connote, without describing, some aspect of the product. Examples of “suggestive” marks might be Coppertone® for sunscreen. Descriptive marks, however, are not inherently distinctive because they merely describe the goods and services, but over time can acquire distinctiveness in the public eye. See, e.g., Retail Servs., 364 F.3d at 539. Examples of marks that arguably were descriptive but have acquired distinctiveness over time are COCA-COLA and GENERAL MOTORS. In fact, The Coca-Cola Company has been involved in recent battles over the registration of ZERO in connection with its beverage names, a term it argues has acquired distinctiveness in the marketplace, but one other companies claim is merely descriptive. See, e.g., “Coca-Cola Fights for ‘Zero’ Trademark Rights,” http://www.nasdaq.com/article/cocacola-fights-for-zero-trademark-rights-20160209-01397, February 9, 2016.
Common Law Rights from Use, But Enhanced Protection from Registration
Even if the word, phrase, symbol, or other device has enough distinctiveness to serve as a trademark, the owner must still actually use the trademark to acquire rights. A frequent misconception among businesspeople and attorneys is that a person must file an application with government to “trademark” a phrase. This is not the case, at least in the United States, because trademarks exist at common law based on their actual use in connection with the owner’s goods and services.
Very valuable benefits may be gained through registering trademarks at the U.S. Patent & Trademark Office. One of the best benefits is that the owner puts the public on notice of its claim to a mark, which may deter others from adopting a confusingly similar term. Another important benefit, especially for growing businesses, is that a registration allows an owner to have a nationwide claim to the mark even though its initial use may have only occurred in one part of the country. Common law users must instead rely on proving actual use and market penetration in all the various areas where they actually sell their goods and services.
Furthermore, a substantial benefit derives from the ability to file “intent to use” applications. Although trademark rights are based on use of the mark, an owner who is not yet using the mark may still file an “intent to use” application for a mark it has a bona fide intention to use. There are some restrictions on these applications, and the owner must ultimately use the mark for the application to mature into a registration, but these intent-to-use applications allow an owner to stake a claim to a mark even before it is actually used, which can be immensely beneficial if there is a “race” to claim trademark rights.
Risks Remain When Seeking a Registration, But May Be Worth It
Even with these benefits, applying to register a mark is not without risk. For example, in the trademark registration process, the trademark examiner will refuse registration of a mark if he or she concludes the mark is likely to be confused with other registered marks on file with the Trademark Office. Similarly, even if the examiner allows the mark, third parties can oppose the registration of the trademark for various reasons, and these oppositions might result in litigation, rebranding, and additional cost. Therefore, the application process itself can occasionally create uncertainty and disputes about trademarks where none would have existed had the application not been filed in the first place. Yet, the complement to this risk is the reward of a federal registration with all its various benefits and rights. Moreover, an examiner’s decision to allow a mark to register despite the presence of similar marks, coupled with the absence of successful third party opposition to a registration, can be very persuasive in responding to later challenges that the mark is likely to cause confusion in the marketplace.
How then, does this apply to the emerging products and markets mentioned above? Perhaps the best takeaway is that where a new product or market is emerging, competitors will likely move quickly to file trademark applications for all the new good phrases and terms relevant to that business. Some businesses may be content to rely on common law uses, especially if their products are already being sold nationwide, if they have already secured a domain name registration, or if they are unwilling to commit funds to trademark protection in what could be a passing fad. However, merely relying on common law use may not always be the best course, because proving the existence of common law rights in all the relevant markets can be challenging, not to mention expensive. This is especially true because the traditional legal tests for proving these rights derive from a time when markets were much different than they are today, meaning that they are not always a good fit for our changing economy.
For example, many business owners obtain internet domain name registrations as their first step toward staking a claim to a name. This may not always be sufficient to establish common law trademark rights if the domain name is not sufficiently in use, if consumers are not associating the domain name with the business, or if the business has not sufficiently penetrated the market. Furthermore, although owners were previously content to worry about the .com, .net, and .org, there will soon be hundreds of new top level domains swarming the internet, including .beer, .wine, .insurance, .bank, .law, and .cars, just to name one of the many, and not to mention some of the brand specific domains like .bmw, .aarp, and .norton. See ICANN, New Generic Top-Level Domains, https://newgtlds.icann.org/en/. And although businesses are gaining tremendous market penetration and visibility using social media and online advertising, the law is not always able to keep up with these developments, nor are the social media platforms all in agreement on how to handle them. These situations often put trademark owners in precarious positions. Trademark registrations may not cure these problems, but they can provide an advantage over relying solely on common law rights and may ultimately save the company in the long run.
Considering all of these issues and the potential for trademark disputes in an uncertain legal world, perhaps the rodeo is not such a bad analogy. After all, “mutton busting,” mentioned above, is the creative rodeo sport of having a toddler cling to the back of a racing sheep to see how long he or she can hang on, much like adult competitors do with bucking broncos or bulls (though hopefully the sheep are less dangerous). In this area of trademark law, we may all feel like we are just hanging on for the ride as long as we can, but at least the trademark registration system may offer one way to stake claims to trademark rights.
Published March 2016 by the Association of Corporate Counsel
This article and the information within do not constitute legal advice. It is also not a substitute for legal or other professional advice. Users should consult their own legal counsel for advice regarding laws, regulations, and procedures.