Intersport Wins Right to Use MARCH MADNESS on Mobile Programming

The NCAA has had great success in enforcing its trademark rights in MARCH MADNESS, a mark that has a contentious history of ownership. In 2003, the NCAA successfully stopped a sports marketing group from using the mark, and fended off allegations that the mark is generic. The present case involves Intersport, a Chicago-based company that, at one time, co-owned the mark with the Illinois High School Association (IHSA). In 1995, however, the IHSA was involved in a dispute with the NCAA over use of the term, at which time Intersport assigned its share of the rights in MARCH MADNESS to IHSA, in return for royalties. In that same arrangement, Intersport was licensed to use the mark in connection with the broadcast of its coaches' shows. Specifically, the license was granted for use (1) "in connection with entertainment services, namely the presentation of athletic and entertainment personalities in a panel forum; and" (2) "to advertise, promote, and sell publications, videos and media broadcasts in connection with" item (1). Eventually, MARCH MADNESS became co-owned by the IHSA and NCAA, through the entity March Madness Athletic Association (MMAA). The license agreement with Intersport was also assigned to the MMAA.

In recent years, Intersport sought to use the mark on mobile phone programming, which would include analysis, scores and highlights related to the NCAA tournament, as well as coaches' shows. The NCAA objected to Intersport's intended use of the mark on mobile programming and asked Intersport to limit its use to television shows, stating that NCAA would consider airing shows on wireless devices to be outside the scope of the licensing agreement. Intersport responded by filing suit and requesting judgment on its right to use the mark on mobile programming, pursuant to the terms of its licensing agreement. (Intersport, Inc. vs. National Collegiate Athletic Association and March Madness Athletic Association, L.L.C.) Intersport's CEO, Charles Besser, has expressed that the intent was to confirm that the license included the right to distribute content using the mark MARCH MADNESS on any platform, not just on shows produced on television networks. The NCAA, in turn, claimed that Intersport actually had a very narrow license extending only to a specific range of broadcast distribution as it would have been defined at the time the agreement was executed in 1995, and not extending to distribution on mobile devices. The Circuit Court ruled for Intersport, finding that the license agreement was unambiguous. Although federal law clearly defines "media broadcasts" as those requiring distribution by television or radio, the wording "video" includes any type of visual production and is not limited to specific platforms of distribution.

On appeal the NCAA argued that Intersport's shows still do not qualify as "selling videos" as defined in the licensing agreement, and that videos should be construed as defined in 1995, which requires "a physical object in the hand of the end user." These arguments were unsuccessful, and the Appellate Court affirmed the Circuit Court's ruling. The test is whether or not the use could "reasonably be said to fall within the medium as described in the license." This test dictates that if the new use is not "completely unknown" at the time the license was executed, the burden is on the licensor to ensure the exclusion. Following this test, the appeals court found that the definition of "video" has evolved since inception and does not mandate storage in a physical device. Furthermore, it was foreseeable in 1995 that video could be distributed on mobile wireless devices and it was incumbent on the licensor to explicitly limit "video" if intended. Furthermore, as the license is "perpetual" but has no clause on future technology, the terms should be interpreted broadly. The decision certainly raises questions on extent of the overlap between video and broadcast programming and mobile phone technology, and whether they are moving toward melding into one and the same.

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Orphan Works Adopted by Congress

On March 13, 2008, House Subcommittee on Courts, the Internet and Intellectual Property held a hearing on the issue of orphan works to collect testimony from the interested parties before introducing new legislation to address the issue. It is expected that the new bill will be similar to the "Orphan Works Act of 2006" which was proposed but never enacted in the last Congress.

Orphan works are copyrighted works whose copyright holders cannot be identified or located. When a particular work becomes orphaned, the uncertainty surrounding its ownership stalls future use of that work by discouraging subsequent creators and users from incorporating the work in new creative efforts, or from making such works available to the public for fear of a copyright violation. Without locating the copyright holder of a work, users cannot obtain a license to use the work, which leaves them with the sole option of using the work in the limited manner permitted by the fair use and first sale doctrines.

"Orphan Works Act of 2006" permitted use of orphaned works, but gave legitimate copyright holders who resurfaced the right to bring an action for "reasonable compensation" against a "qualifying user"—a user who had conducted a good faith, reasonably-diligent search for the copyright owner before commencing use of the work. The Bill defined "reasonable compensation" as the amount "a reasonable willing buyer and a reasonable willing seller in the positions of the owner and user would have agreed to at the time the use commenced." Injunctive relief was limited to cases where users have not added significant new expression.

Under the Bill, a copyright owner would only be able to recover statutory damages against new unauthorized users whose use commenced after the owner resurfaced, or as a result of subsequent uses by the original user. The Bill also included a safe-harbor provision for certain noncommercial uses where the user ceased infringement immediately after receiving a notice of a claim.

Visual artists had argued against the Bill because unlike written content, their works often do not contain copyright information and may be incorrectly perceived as orphans. The Bill, they argued, placed on visual artists the burden to identify their works if they wish to avoid forfeiting their rights. Another argument against the proposed legislation was grounded in perception of the legislation as an incentive to drum up excuses for failing to find the copyright owner. Critics argued that unscrupulous users would exploit the loophole by "attempting" to locate the copyright owner and using the work with the satisfaction of knowing that, if caught, they would only be liable for small "reasonable compensation." (Under current law, copyright owners who have registered their works prior to infringement or within three months of publication may collect substantial statutory damages.)

New Legislation is expected to address concerns of the visual artists and other opponents of the prior Bill. In a recent statement, Marybeth Peters, the Register of Copyrights, has indicated that the new legislation will likely include search criteria incorporating "best practices," as judged by the relevant copyright community, to evaluate when a user has made a "diligent" search for the copyright owner. Thus, a user looking to find the owner of a sound recording would look to the recording industry for guidance. The Copyright Office has also stated that it is aware of several companies developing technology for matching users to owners, which could further ease and clarify the search process.

While it is probable the legislation will receive the support it did during the 109th Congressional session, it is yet to be seen whether the new bill will alleviate the concerns of visual artists, and pass into law.

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The Writers' Strike: What has Changed

The Writers Guild of America (WGA) ended its fourteen-week strike after successfully negotiating a new Minimum Basic Agreement (MBA) which increases minimum rates paid to writers, and covers—for the first time— "new media." The three-year contract, ratified by 93.6% of the 4,060 votes cast in Los Angeles and New York, is expected to make it easier for Guild members to maintain a steady stream of income as the digital download becomes the new DVD. In order to comprehend the effect of this conclusion, however, it is important to understand the background leading up to this fight over residuals and the role of the WGA.

The key policy behind copyright law is to maintain an incentive to create by compensating creators for the success of their work. This incentive comes in the form of royalties, payments made to an author of a copyrighted work each time the work is copied, distributed, performed, aired, or displayed. In the film industry, however, an interesting framework developed over the years. The nature of screenwriting, similar to song-writing, is that the author realistically only creates a commercially-successful script once every few years. The norm used to be that a producer would pay a flat fee to the screenwriter to develop the script into a film. The fee typically would represent a license to utilize the work in some way, while the writer would retain the copyright. This situation was negative for both the writer and the producer. For the producers, the most efficient way to exploit a work is to own the copyright. Most producers are not interested in even looking at a screenplay if the writer is unwilling to assign the copyright. Otherwise, the producer will be at risk of violating the writer's derivative rights. At the same time, the writer faced the choice of actually getting a script sold, or dealing with an upfront fee that was not commensurate with the long term value of the script, as realized from years of reruns and profits from home distribution. Writers were losing incentive to write because they could no longer afford the sporadic income from receiving a flat fee once every few years.

To remedy this situation, the WGA exists as a labor union representing professional writers in film, television and radio in contract negotiations with producers. Membership is gained once a writer receives a certain amount of credit for being employed by a MBA signatory production company. Members can only write for producers who are signatories to the MBA, which includes most well-known producers. All contracts between member writers and signatory production companies are governed by the MBA in that they must meet all of its minimum requirements. Regardless of whether a script is commissioned or not, the writer is deemed an employee and his script a work-made-for-hire. This benefits producers because they no longer have to worry about violating the rights of the original author of the script. The writers, in exchange for giving up their copyright, receive credit for their contribution to the film, a pension, health benefits, and residual payments. Residual payments are akin to royalty payments. Residuals replaced royalties because, by statute, only an author of a copyrighted work can receive royalties, and under this new scenario, writers are employees rather than authors. Residuals differ from royalties in that residuals are contractual, and only compensate for continued exploitation of the script. A writer does not receive residuals when the script is theatrically released; residuals are only paid for subsequent use, whether in reruns, on DVDs, in foreign markets, or on the internet.

One of the major changes brought about with the new MBA concerns the residuals, which the WGA is in charge of monitoring, distributing, and collecting on behalf of member writers. The MBA at any point in time sets the residual rate at a minimum amount that must be paid by the production studios to the writers taking into consideration the profits studios realize from exploiting the film, for instance, in movie theaters and on TV. Standard language in production contracts includes provisions ensuring the studios receive rights in any and all "new media, now known or yet undeveloped, throughout the universe." This means that the studio is not required to get permission from the writer to distribute the end-product each time a new form of media develops. As new media has developed, however, the WGA has found itself wanting to re-negotiate the residual rate in the MBA, to compensate for the increased profits studios were taking in due to new technology. For example, in the 1990s, the "new media" was DVDs. Home distribution being one of the largest profit generators, the WGA argued for a doubling of the residual rate, but to no avail. Production companies successfully argued that income from DVDs was necessary to offset the rising costs of manufacturing the DVDs. Today, on the other hand, the "new media" is the internet with little to no production cost. By striking, the writers sought to ensure the residual rate they received was in fair proportion to the amount actually being earned from home distribution using this new technology. While the studios argued that it was too speculative to estimate how much profit internet distribution would actually generate, the writers won in the end. The fact that the writers were part of a union, one comprised of members whose skills could not so easily be out-sourced, gave them some bargaining power. As the writers' strike continued and the viewing audience shrank, production companies realized they would not be able to maintain their advertisement rates.

Now, member writers will share in the profits from re-airing their content online and via cellular technology. They already received residuals for DVDs, at 0.3% of the distributor's gross receipts. Under the new 2008 Minimum Basic Agreement, member writers will also receive 1.2% of distributor's gross receipts for download "rentals" (where the consumer pays for time-limited access to the media) and 0.65-0.7% of receipts for download purchases. The member writers will also receive 2% of distributor's gross receipts for ad-supporting streaming of television programs and feature films, but only after a seventeen-day window during which no residuals are paid. Also new to the 2008 MBA are "separated rights." As part of the minimum contract requirements, members who write material specifically intended for internet programs now automatically retain a portion of the rights, enabling them to adapt the material into other forms, such as plays or novels, and requiring producers to obtain permission to do the same.

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Trademark Rights in Kosovo

The Kosovo Patent and Trademarks Office has announced that the term for revalidation of existing Serbian rights in Kosovo will expire on October 1, 2008. Kosovo is not expected to join the Madrid Agreement or Protocol in the near future since WIPO can only accept members of the UN.
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UDRP—Not for Correcting Administrative Errors

A recent UDRP decision denying transfer of a company's domain name from a former employee illustrates the importance of properly maintaining the Registrant and contact details, along with the prudence of having more than one person administering corporation's domain name portfolio. In the National Arbitration Forum decision of Hennion & Walsh, Inc. v. Robert Isom, FA1118409 (2008), the company's domain name, hennionandwalsh.com, was registered by the firm's computer operator (Respondent), whose responsibilities included construction and maintenance of the firm's website. When registering the domain name with Registrar Network Solutions, the employee mistakenly used his name as the Registrant, while also setting password protection on the account. Upon leaving the company's employ, the employee did not leave the password or answer to the security question, nor did he remember them. Since the employee was the only person who previously knew the password or security question, the company was unable to make any changes to its website through Network Solutions. Network Solutions would only permit access to the website if Respondent renounced his interest in the domain name. Although the employee was being cooperative, Network Solutions required the filing of a UDRP for Respondent to officially renounce his rights to the domain name.

In the UDRP decision, the Panelist easily found that Complainant had established that the domain name was identical and/or confusingly similar to the common-law mark of HENNION AND WALSH, along with finding that the Respondent did not have rights or legitimate interests in the hennionandwalsh.com domain name. The claim was denied, however, based on the third element of a UDRP—due to lack of registration and use in "bad faith." Since the Respondent had "mistakenly" registered the domain name in his own name, and was Complainant's employee at the time, there was no bad faith at the time of registration. In addition, the Respondent had not accessed the account since leaving the company, nor ever claimed any personal interest in the domain name. The Panelist held that the Complainant simply wanted to correct its administrative failures through the UDRP, which the UDRP was not designed to do.

This decision provides a lesson of the unnecessary risks and expense that can occur when domain names are allowed to be registered in an individual employee's name, along with the account only accessible by the "key" employee. It is not unusual for employees in positions of responsibility to leave a company, with not all of them as amicable as in the present case. If there had been additional oversight of the domain name portfolio, with contact information resolving to a domain-name-specific email account such as domains@mycompany.com, then this scenario and the attendant "handcuffing" of the company website may have been avoided.

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Diligently Proceed with Discovery

The National Football League is well known for its vigorous protection of its crest logo design, registered in the U.S. Trademark Office in connection with a variety of goods. As such, it was no surprise when the NFL opposed an application for registration of the SPORTS SKIRTS and Crest Logo mark for motorcycle fender side cover panels. As the end of the discovery period in National Football League v. DNH Management, LLC approached, the NFL filed a motion to extend discovery.

While Trademark Trial and Appeal Board rules require that the moving party show good cause for seeking an extension of time, the TTAB usually grants such motions liberally, "so long as the moving party has not been guilty of negligence or bad faith and the privilege of extensions is not abused." In the present case, the NFL filed its motion 12 days before the scheduled end of discovery and had taken no discovery during the allotted discovery period. In denying the NFL's motion, the TTAB acknowledged that there was no evidence of bad faith by the NFL and that the request was the first such request. Nevertheless, the TTAB determined that the NFL did "not made the minimum showing necessary to establish good cause to support an extension of the discovery period for any length of time." The NFL claimed its delay in proceeding with discovery was due to settlement negotiations between the parties. However, in its brief, DNH Management admitted that it never had any interest in settlement, never responded to the NFL's efforts at communication, and at no point during the discovery period engaged in or encouraged any settlement discussions. The TTAB supported its denial of the NFL's request by stating that the NFL should have "reasonably concluded" that it needed to move forward with discovery in the absence of any movement on settlement negotiations. "Clearly, the opposers' claimed need for an extension of discovery is the product solely of opposers' unwarranted delay in initiating discovery." While this decision does not touch on motions to extend discovery that are filed jointly or filed with consent, it is a clear reminder that the TTAB will do its part to keep pending disputes moving towards resolution.

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NSI Front Running Domain Names

In an active beginning to 2008 on the domain name front, Network Solutions created an uproar in the domain name community when it began a practice that it claimed was a customer protection measure, but many in the industry considered to be "front running" by the registrar. Front running occurs when one conducts a domain name availability search but does not immediately register the domain name, and the domain name is then registered by somebody else within minutes or hours after the search. Front runners get access to search terms through registries, Spyware, or through ISPs. They then attempt to make money through pay-per-click ads, or by reselling the domain name at a higher price.

Network Solutions has admitted that it "reserves" domain names that have been searched for availability through its homepage and not immediately purchased. Network Solutions then holds the reserved domains during the 5-day grace period for payment, while precluding the availability of the domain name through other registrars, including lower-priced registrars. The name is not placed on reserve for the particular searcher, and is available for anyone to register. If the domain name is not registered during the 5-day period, it is then released back to availability through any registrar. The concern is that any company conducting an availability search relating to a new trademark or desired domain name may be vulnerable if it uses Network Solutions to check availability and does not immediately register the name.

Front running and domain name tasting have become pervasive in the domain name industry. Domain name tasting is when a domain name is registered and the attendant website is populated with pay-per-click advertising. If the site does not generate enough revenue during the 5-day Add Grace Period (AGP), the domain name is deleted without any payment. Registrars who provide bulk registrations for registrants whose business model is based on tasting, have deleted as many as 95.5% of the domains within the AGP. Tens of millions of domains are registered and deleted each month through tasting.

In an attempt to combat the domain name registration abuses of front running and tasting, ICANN, the governing organization for domain names, has voted to make its registrar-level transaction fee of $0.20 for domain name registrations non-refundable, discontinuing the current practice of refunding the fee for "tasted" domains.

When the .ORG registry instituted a five-cent surcharge for registrars that dropped more than 90 percent of their registered domains after the AGP, the percentage of deletions dropped from more than 90 percent to less than 30 percent. The .BIZ and .INFO registries have proposed similar plans for resolving the AGP issue, but many in the industry are still waiting for VeriSign, the registry for .COM, to address these abuses.

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Pilot PPH Program to Include Canada and Korea

On January 14, 2008, the USPTO announced the expansion of its pilot cooperation program to include the patent offices of Canada and the Republic of Korea. The program first began with the Japanese Patent Office in July 2006, was expanded to the United Kingdom Intellectual Property Office in September 2007, and building on the initial success of these pilots, the Patent Prosecution Highway (PPH) has been expanded to include two additional offices. The program permits member offices to take into account the work done on a corresponding application, that is an application in which the disclosure and claims are for the most part identical, and to use the search results and examination strategy. For example, an applicant that has filed corresponding applications in at least two offices involved in the program, can use the search and examination results of a first application that has been acted on by one of the offices which has determined that the claims are allowable, to have the corresponding application receive expedited treatment by the second and subsequent offices, including an examination out of turn by the second office.

The pilot PPH program takes effect on 28 January 2008 and will continue for one year. The program can be extended for another year if insufficient data have been compiled to judge its effectiveness. Also, monitoring of the program is required as any participating country office may cancel its participation before the first year is completed, that is, before January 2009, for any reason, although the major one of concern is that an excessive number of applicants will petition for the PPH and so overwhelm the patent office of a favored second application country.

To take advantage of the PPH program, a second filed application in a participating PPH country must meet the following requirements (simplified somewhat for this explanation):

1) The application must be a Paris convention application based on a country application of one of the countries taking part in the pilot program, or be a PCT application based on a country application of one of the participating countries.

2) The application in the first filed country has at least one claim that is indicated to be allowable and the claims of the second filed application are identical or can be amended to be identical to the allowable claim(s).

3) Examination has not yet begun in the office of the second filed application.

4) The Applicant must file a request with a petition to make special in the office of the second filed application, together with any applicable fee.

5) The Applicant must submit all office actions that are relevant to patentability from the file wrapper history of the first filed application.

6) In the USPTO, applicant must file an information disclosure statement citing all the references that were cited in the application prosecution in first filed office.

Additional procedural requirements must be met, for example, electronic filing of the petition and supporting documents. This pilot PPH program appears to be driven by the offices' desire to spread the work for a series of multiple country applications having identical claims, and so make the process of examination easier by building on the work of each other's examining corps. One obvious drawback to this program is the loss of an independent examination by other offices. Such independent search and examination often develops pertinent art that when addressed in the course of an application prosecution, renders claims of a scope more likely to withstand a subsequent validity attack.

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iTunes into Movie Retail

Apple has expanded its ever-growing entertainment empire beyond television shows to offer digital downloads of full-length motion pictures through its iTunes store. iTunes now offers over 75 movies, and it is expected that current offerings will swell within the next year. The same controversial Digital Rights Management (DRM) rules that have long been applicable to iTunes music offerings, known as FairPlay, will also apply.

FairPlay controls copyright-protected music and videos by limiting the number of computers consumers can use to play the content and by restricting copying. DRM is intended to protect copyright holders, but has faced controversy, as many argue the limitations it imposes on the use of legitimately-acquired content do not match fair use rights granted by copyright law – DRM thwarts the legal copying as well as the illegal copying.

It is exactly this controversy that lead iTunes and EMI group to offer the entire EMI music catalog free from DRM for a higher price last April, which leaves many wondering about the prospects of DRM-free movies being offered. According to Apple Chief Executive Steve Jobs, the likely answer is no – unlike music industry with its history of using the DRM-free CD format, video has never been distributed DRM-free. Rather, video content has always been regulated by the Content Scramble System (CSS) to prevent copying.

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USPTO, Trademarks in Review

The Trademark Trial and Appeal Board ("TTAB") at the U.S. Patent and Trademark Office ("USPTO") had a busy year in 2007. Of the more notable accomplishments, changes to the TTAB Rules of Practice updated the rules to complement recent amendments to the discovery rules of the Federal Rules of Civil Procedure and amended other procedural rules that can easily catch the unknowing TTAB litigant off-guard. Fraud on the USPTO for statements made in trademark applications also reappeared on the TTAB's docket in 2007 as did defining a "bona fide intent to use" a trademark in commerce. The TTAB is also setting the groundwork for changes to treatment of trademarks comprising surnames.

1. Changes to TTAB Rules of Practice

The rules changes originally proposed in January, 2006, went into effect on November 1, 2007 (with the TTAB's standard Protective Order having been imposed in all cases without a protective order as of August 31, 2007). The initial proposal was widely chastised by law firms, individual practitioners, and intellectual property organizations as too drastic. Eventually, the USPTO and various intellectual property organizations met to discuss the proposed changes and the USPTO redrafted its rules package to reflect the comments and concerns of the trademark bar. The TTAB adopted the "disclosure model" of the Federal Rules of Civil Procedure with hopes of increasing the efficiency of commencing proceedings and the efficiency of discovery and pre-trial information exchange. In contrast to previous rule that did not require service of the original pleading on the defendant, plaintiffs must now attempt service of the original pleading on the defendant at the current address(es) listed in USPTO records. Parties now also have the option of submitting a pleaded registration in the form of photocopies of the registration and assignment history from the USPTO databases, as opposed to submitting a USPTO status-and-title copy. The key component to the "disclosure model" is the requirement that the parties engage in a discovery conference early in the proceeding. The TTAB's wrinkle to this requirement is that either party may request that a TTAB representative participates in the discovery conference, which may affect the demeanor and tone of the conference to prevent the TTAB representative, most often the TTAB attorney assigned to manage the matter, from holding one party in a negative light.

2. Fraud on the USPTO

The TTAB's decision in Hurley Int'l. LLC v. Volta returned the issue of fraud into the limelight. The TTAB has consistently sustained a charge of fraud when a trademark applicant or registrant falsely claims use of the mark in connection with the designated goods or services. This rule has been applied in a "strict liability" sense, without consideration of the actual subjective intent or innocence of the applicant or registrant. Hurley did not alter the TTAB's existing rule on fraud, but in a footnote suggested that if the identification of goods or services is corrected before publication of the application, a false statement regarding use is not fraud. This language appears to take the punch out of the idea of strict liability, but was mentioned in dicta in two additional TTAB cases decided in 2007, Hachette Filipacchi Presse v. Elle Belle and Kipling Apparel Corp. v. Rich.

3. Defining a Bona Fide Intent to Use

In Intel Corp. v. Emeny, the TTAB examined in an opposition proceeding whether the applicant had a bona fide intent to use the applied-for trademark at the time the application was filed. The TTAB confirmed that a bona fide intent should be an objective showing of "evidence in the form of real life facts measured by the actions of the applicant, not by the applicant's later arguments about his subjective state of mind." The applicant in this case produced no evidence of any business or marketing plans involving the mark, no evidence of any specific planning to use the mark, and no evidence of ever having promoted or sold any goods under the mark. Based on this lack of evidence, the TTAB concluded that the applicant failed to produce an "objective" showing of an intent to use the applied-for trademark. It is also likely that the applicant's admission that he filed the application to "make sure that nobody else [can] take advantage of those marks" weighed in the TTAB's decision.

4. Trademarks Comprising Surnames

When trademark examiners review marks that are also surnames, they take into account (i) the rareness of the name at issue, (ii) whether the name has any other meaning, (iii) whether anyone associated with the applicant has the surname; and (iv) whether the applied-for mark has the "look and feel" of a surname. In a rarely-seen concurring opinion, in In re Joint Stock Company "Baik" the relevance of the "look and feel" factor has been addressed. The opinion noted that "the purpose behind prohibiting registration of marks that are primarily merely surnames is not to protect the public from exposure to surnames ... [but] to keep surnames available for people who wish to use their own surnames in their businesses ..." The look and feel of a surname has nothing to do with the stated prohibition on registration of surnames. A concurring opinion in In re Marriott Int'l, Inc. further expanded on the concurring opinion in "Baik" by emphasizing that the "rareness" factor is of primary significance in the surname analysis and that the remaining factors come into play once the USPTO has established its prima facie case. Even focusing on the "rareness" factor would require additional jurisprudence establishing benchmarks for determining when this factor is met.

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2007 Year in Review for International Trademark Practice

The year 2007 has seen a number of developments in trademark practice worldwide, both administratively, and in the courts. A few notable events are:

Canada

The Canadian Trademarks Office will no longer require disclaimers of the majority of descriptive material. A voluntary disclaimer will still be accepted.

Canada has also enacted practice changes in Opposition proceedings. Among several administrative changes, there were significant increases of the time limits for filing counterstatements, and for filing and serving both the opponent's and applicant's evidence.

China

Earlier this year, the Beijing First Intermediate People's Court ruled that a manufacturer, retailer, and shopping center where infringing goods had been sold were all liable for infringement. The case was brought by the French company La Chemise Lacoste based on its mark LACOSTE and the crocodile image. The manufacturer in China had registered a similar crocodile image, accompanied by additional Chinese characters. When the garments were actually made, however, the wording was obscured by using a thread that was identical to the color of the garment, leaving only the crocodile mark visible. As a result of that modification, the court found that the trademark registrant/manufacturer was liable for infringement, along with the retailer and the shopping center in which the retailer was located, for failure to ensure the authenticity of goods being sold. While the LACOSTE mark has been deemed "well-known," the decision was made on the basis of the similarity of the subject mark to the infringer's mark, as it was used, and not necessarily on the basis of the extra protection provided for "well-known" trademarks.

European Union

Bulgaria and Romania have joined the European Union at the beginning of the year, and existing Community rights were automatically valid in the new member states.

The community trademarks office has instituted some procedural changes meant to streamline the opposition process. Admissibility checks now involve ensuring that the opposition is based on at least one valid trademark right. Formerly, if an opponent based the opposition on several rights, if just one was found to be insufficient, a deficiency letter would issue, delaying the proceedings significantly. A decision on costs will be automatically made unless the office is advised otherwise, which also allows for the disposition of files more promptly, while still allowing the parties to reach an agreement on costs, if they choose to do so. Finally, all second requests for a suspension of proceedings will be issued for one year, rather than for two months, with the option by either party to end the suspension.

India

India sought to strengthen customs enforcement at its borders with the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. The rules allow a right holder to record its rights with the relevant customs authorities, and enable an intellectual property right owner to request that customs officials temporarily hold suspected counterfeit goods. These new initiatives conform to the TRIPS Agreement.

Iraq

Trademark applicants that are seeking protection of rights in Iraq are no longer required to sign the boycott declaration to obtain registration. This change came into effect on July 22, 2007, and it is expected that many of the applications that have been pending for a number of years should now be processed.

Montenegro

Montenegro is now a separate jurisdiction from Serbia, for trademark registration purposes. International trademarks filed before June 3, 2006, the date of Montenegro's independence, required a request for continuation of protection to be filed though WIPO. Those registered between June 3, 2006, and December 4, 2006, require revalidation within 6 months from the date the Montenegro Trademark Office begins operations. National marks filed in Serbia, pending at the time the Montenegro office opens also require revalidation within six months. National rights that are already registered in Serbia will be automatically recognized as being valid in Montenegro, provided that they are still effective as of the inaugural date of the Montenegro Intellectual Property Office.

Singapore

Singapore has amended its filing system to accept multi-class applications.

United Kingdom

As of October 1, 2007, applications are only examined on absolute grounds. Any objections for relative grounds must be made by trademark owners during the opposition period. This new approach is similar to the examination procedure used for Community Trademarks, and should allow the examination process in the UK to become significantly faster.

Patents in 2007

The overriding theme on the US patent front is one of change. The US Supreme Court's involvement in the patent field has become even more prevalent, with two major decisions coming down that affect the practice of patent law in the US. In MedImmune v. Genentech, the US Supreme Court held that a licensee of a patent is not held to the doctrine previously know as "licensee estoppel" and could insulate itself from damages while simultaneously seeking a declaratory judgment of patent invalidity. Federal jurisdiction in a declaratory judgment action requires that the party seeking a ruling of patent invalidity have a reasonable apprehension of impending litigation, something that previous holding said was lacking when there was a license, and thus was prohibited by the actual-case-or-controversy requirement of the US Constitution. The decision has implications beyond the patent field, in that any licensee may now attack the underlying rights found in a contract or other license without jeopardizing its position in respect of an agreement made with the opposing party.

In another change in direction, the Supreme Court has revised the standard of obviousness, one of the criteria by which patents are judged worthy of grant. In KSR Int'l v. Teleflex, Inc., the Supreme Court rejected the rigid and formalistic analysis of the issue of obviousness, rejecting the requirement added in numerous decisions by the appellate court reviewing all patent cases, the US Court of Appeals for the Federal Circuit (CAFC). In order to combine references, KSR held that the U.S. Patent and Trademark Office (USPTO), and by implication defendants in a patent infringement litigation, need no longer rely on a reference or specific reasoning that provides a "teaching, suggestion or incentive" to combine references that show the invention, albeit in separate documents. The Supreme Court advocates that common sense should also guide the validity determination of a patent. As a result, patents can be more easily found to be obvious or invalid, thus accelerating the swing of the pendulum back toward a regime of more restrictive granting and enforcement of patents.

In this decision, and in the USPTO actions discussed below, the federal courts and agencies are succumbing to the general criticism that it is too easy to obtain a patent, and also to hold hostage an accused infringer, when the invention perhaps is not something which was patentable. To quote the opinion, "as progress beginning from higher levels of achievement is expected in the normal course, the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of the useful arts." (Slip opinion page 24).

Another major change was a proposal by the USPTO to implement several rule changes first promulgated by the USPTO in January of 2006. These proposed rules were viewed with trepidation by the patent bar, as they would have severely restricted the number of claims and continuation applications that patentees could rely on in prosecution of their applications, among other requirements. As a result of two lawsuits, The US District Court in the Northern District of Virginia issued an injunction to the USPTO enjoining the implementation of the entire proposed rule change package just prior to its November 1, 2007 effective date. The suits are still pending, and more guidance will be forthcoming from the Court in the next few months. Any final decision will certainly be appealed by the losing side to the CAFC, and perhaps to the Supreme Court.

On the foreign patent application prose¬cution front, the European Community has entered into a treaty (the London Agreement) that will permit grant of a European Patent in only one language, with only the claims requiring translation to make it effective in a particular member state. This should substantially reduce the costs of obtaining patent protection in the European Community for EPO applications filed after the effective date of the treaty, expected to transpire sometime in spring 2008.

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Domain Names 2007 Year in Review Highlights

As 2007 comes to a close, the increased use and misuse of domain names has been fodder for numerous news reports, lawsuits, and the need for vigilant protection of a company's valuable trademarks through registration and enforcement in the ever growing list of gTlds, country code domains, and IDNs. Some of the many highlights of domain name developments that occurred or were reported in 2007 include:

• Sunrise period for registration of .ASIA domain names begins for trademark owners.
• ICANN begins testing of Internationalized Domain Names (IDNs) for gTLDs, represented by local language characters using scripts beyond ASCII characters, for 11 languages: Arabic, Persian, Chinese (simplified and traditional), Russian, Hindi, Greek, Korean, Yiddish, Japanese and Tamil. Comments are currently being accepted regarding the possible introduction of ccTLDs as IDNs, i.e. for the two-letter country codes currently used on the Internet to be provided in a non-Western alphabet.
• The Generic Names Supporting Organization, a committee of ICANN, preserves the public access to WHOIS information, while agreeing to initiate further studies regarding the legitimate uses and abuses of WHOIS data.
• Dell files suit against registrars BelguimDomains, CapitalDomains, DomainDoorman, and various alleged shell-registrants acting as fronts for the registrars, in an attempt to curtail "tasting" of domain names that are similar to or typos of Dell trademarks. In a novel attack on the cybersquatting activity, Dell characterizes the activity as counterfeiting, thereby potentially exposing the registrars and registrants to damages of up to one million dollars per violation, rather than a maximum of $100,000 per domain under federal cybersquatting laws.
• The Public Interest Registry, which manages the .ORG top-level name, attempts to combat domain name tasting by imposing a five-cent surcharge for registrars that deleted or dropped more than 90 percent of their registered domains after the five-day grace period for payment of registration fees. The change in policy resulted in the percentage of .ORG registered domain names that were dropped after the five-day grace period decreasing from nearly 92 percent to less than 30 percent.
• The National Arbitration Forum (NAF), one of the two main forums for bringing a UDRP action, amends its supplemental rules to allow a complainant to make arguments and present evidence in a UDRP complaint, when the complainant has reason to believe that a number of domain names are registered to a single entity or person, but under different aliases. This will allow a complainant to proceed against more than one listed registrant in the same UDRP complaint, if the linking of the alleged aliases can be proven.
• ccTLDs continue to grow in numbers, accounting for 36% of global domain name registrations. The largest ccTLD remains .de (Germany) in terms of total base of domain name registrations, as it approaches 12 million registrations, with .cn (China) and .uk (United Kingdom) as the next largest ccTLDs. These three ccTLDs, combined, account for 45% of all ccTLDs. The top ccTLDs with the largest growth include .cn, .ru (Russia), .de, .uk, .nl (Netherlands) and .eu (European Union).

With the continued increase of domain name registrations in new gTLDs and IDNs, the increase in popularity of ccTLDs, along with the always changing landscape of cybersquatting activity, there will continue to be a strong need for companies to strategize their domain name registration activities, while vigilantly monitoring and protecting their brands from domain name abuse in 2008.

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Dell Trying to Take a Bite Out of Domain Name Tasting

In a recently-unsealed lawsuit relating to domain name tasting, Dell, Inc. has sued three registrars, along with other defendants, in Federal Court in Florida, alleging that the registrars, through various shell companies and individuals, have registered and profited from nearly 1,100 domain names that were "confusingly similar" to Dell's trademarks. The named registrars are Belguimdomains, Capitoldomains, and Domaindoorman. Dell has alleged that the registrars created numerous shell registrants who acted as fronts for the registrars, and registered various domain names that are similar to Dell's trademarks, along with domain names related to well-known trademarks of other corporations.

When "tasting" a domain name, a registrant is able to take advantage of the ICANN policy that allows the registrant to hold a domain name for up to five days before committing to purchase it. Many registrants who monetize the Internet by posting keyword-generated shopping-mall-type websites will test a domain name for its "click-through" value and return any domains that are not profitable within the five-day trial period. By registering thousands or millions of domains at a time, "tasting" has turned into big business for some registrants and registrars, and at the expense of many corporations who own valuable trademarks. Dell has alleged that the Defendants have perpetuated the "tasting" by cycling the infringing names from one registrar to the next, while holding onto the domains indefinitely and not having to pay for them.

Although lawsuits relating to cybersquatting or typosquatting of domain names are not new, what is unique about this suit is Dell's attempt to characterize the activity as "counterfeiting" of the trademarks. If successful on the counterfeiting count, Dell could recover damages up to one million dollars per violation, as opposed to a maximum of $100,000 per domain under federal cybersquatting laws.

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Coalition of French Auction Houses Take Action Against eBay

The regulatory authority for auction houses in France, the Council of Sales, has taken action against eBay.fr, arguing that it should be held to the same standards as traditional auction houses, to ensure that it does not enable the sale of counterfeit goods. This is one of the more recent examples of actions against eBay regarding counterfeits, the most high-profile of which may be the pending lawsuit by Tiffany & Company, accusing eBay of allowing the sale of counterfeit merchandise. Traditional French auction houses require a special permit to do business, and the Council of Sales is arguing that eBay should be held to the same requirements to protect consumers. EBay's position is that it is not a traditional auctioneer, but merely provides the platform to connect buyers and sellers, acting as an "auction broker."
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Design Infringement Is a Matter of Appearance

To determine whether an accused product infringes a design patent, a two-part test is applied. The two parts are the "ordinary observer" test and the "point of novelty" test. The tests have been treated as being complementary, so that if an ordinary observer would consider the two designs as essentially the same, the second test would be applied to determine whether the accused device appropriates the point of novelty that distinguishes the patented item from the prior art. This second test is somewhat in conflict with the general proposition that a claimed invention should be viewed taking into account all of the claim limitations together and focusing on the overall design, rather than on any particular element that may be considered "the invention."

This two-part test was applied in a recent case (Egyptian Goddess, Inc vs. Swisa, Inc.) by the U.S. Court of Appeals for the Federal Circuit (CAFC), sitting in as three-judge panel in Washington, D.C. (The CAFC has jurisdiction over all patent-related issues in cases that are brought in any U.S. District Court.) The CAFC affirmed the U.S. District Court for the Northern District of Texas ruling that granted summary judgment against the patent owner because of failure to meet the "point of novelty" test. The CAFC found that the combination of elements that was asserted as comprising the "point of novelty" did not rise to a non-trivial advance over the prior art, and that no reasonable jury could conclude that it did; and held the accused design did not infringe as a matter of law. In a strongly-worded dissenting opinion, Judge Dyk disagrees with the holding for several reasons, the most cogent being that the point of novelty, as applied, is directed to raising a "non-obviousness" issue in the "point of novelty" test in contravention of the statutory presumption of validity of a patent. There is also the inherent difficulty in making a determination in a design case of what constitutes a non-trivial advance over the prior art at the point of novelty.

In a per curiam order, the CAFC has granted a petition for rehearing by an en banc panel of all thirteen members of the CAFC. This procedural step by an appellate court is usually resorted to when the court intends to clarify a point of law in a decisive way. The case will be re-argued before the full court, and the CAFC has requested the parties, and any interested amicus curiae, to brief specific questions as follows:

1) Should "point of novelty" be a test for infringement of design patent?

2) If so,

(a) should the court adopt the non-trivial advance test adopted by the panel majority in this case;

(b) should the point of novelty test be part of the patentee's burden on infringement or should it be an available defense;

(c) should a design patentee, in defining a point of novelty, be permitted to divide closely-related or ornamentally-integrated features of the patented design to match features contained in an accused design;

(d) should it be permissible to find more than one "point of novelty" in a patented design; and

(e) should the overall appearance of a design be permitted to be a point of novelty?

3) Should claim construction apply to design patents, and, if so, what role should that construction play in the infringement analysis?...

The decision of the en banc panel is expected sometime in the new year. Whatever the outcome, the CAFC will advance the understanding of design patents and their enforcement.

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China Proposes Substantial Revision of its Trademark Law

A draft amendment to the PRC Trademark Law would do away with relative examination and recognize rights based exclusively on bona fide prior use. The first change would mean that the office would no longer examine new applications against conflicting prior rights so that the onus would now fall on trademark owners to keep the register free of overlapping unrelated third party rights by means of oppositions. The second change would result in China moving closer to the United States model, where a prior user could potentially trump a later applicant. While there is clearly some equity to this approach in that it may become harder for pirates to usurp a mark by winning out in foot race to the trademark office, it will also create some uncertainty as applicants will, to some extent, be at the mercy of unscrupulous opponents who may manufacture evidence of prior use for the purposes of winning priority contest.

Other changes will include facilitating the filing of multi-class applications, extending time frames for responding to official actions and filing oppositions, and doing away entirely with the obligation to record licenses. The new law is still at a preliminary stage and it remains to be seen how much actually makes it on the statue book.

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USPTO: Court Challenge to New Rules Delays Implementation

In a clear indication of the controversial nature of the new rules announced in August, the U.S. District Court for Northern Virginia issued a preliminary injunction enjoining the USPTO from implementing the new "final" rules just one day before they were to become effective on November 1, 2007.

The challenge to the new rules by SmithKline Beecham Corporation and Mr. Triantafyllos Tafas is primarily based on the argument that the USPTO has overstepped its rule-making authority and that the final rules cannot be implemented without a change in the US patent law by the US Congress. Other arguments allege that the retroactive effect of the new rules deprives applicants of the rights they had at the time of filing, and that the new rule changes are arbitrary and capricious.

In response, the USPTO asserts that the new rules do not eliminate any existing rights, but merely up the requirements for their assertion; and that the plaintiffs are not actually asserting any rights, but complaining about unmet expectations. The court held that the evidence did not show the USPTO rules to be arbitrary or capricious at this preliminary stage of the proceedings.

The preliminary injunction is meant to retain the status quo until the District Court has had time to hear and evaluate all the evidence, and make a final ruling on the issue. The USPTO may revise the final rules to remove the most egregious and controversial provisions; it may also appeal the preliminary injunction.

In accordance with the District Court ruling, the USPTO has directed its Examiners to follow the existing rules until further notice.

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Montenegro Update

Under the newly-announced transitional provisions, designs, patents and nationally-filed trademarks (not including International Registrations) already issued to registration in Serbia & Montenegro (or in the former Yugoslavia) will be automatically extended to Montenegro provided that they are still effective as of the inaugural date of the Montenegro Intellectual Property Office, which is expected to be in December of 2007. No formal revalidation will be required in these circumstances, and right holders would simply continue to renew or pay maintenance taxes on their rights in Montenegro in accordance with the existing schedule. The only rights that will need to be revalidated are International Registrations filed under the Madrid Agreement designating Serbia or Yugoslavia and all applications still pending as of inaugural date.
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Where's Leo? (Stoller that is)

Leo Stoller had made a name for himself in trademark circles as a self-proclaimed "intellectual property entrepreneur." Stoller, through his companies Rentamark.com, Stealth Industries Inc., S Industries, Inc., Sentra Sporting Goods U.S.A., and Central Mfg. Co. or in his own name, has claimed rights to an extensive catalog of allegedly famous trademarks and vigorously asserted those rights against people and companies that adopted similar or identical marks. Stoller's claimed inventory of marks included STEALTH, SENTRA, DARK STAR, AIR FRAME, TRIANA, STRADAVERIUS, HAVOC, CHESTNUT, TRILLIUM, FIRE POWER, LOVE YOUR BODY, and many others.

Stoller's modus operandi usually included sending a cease-and-desist letter, threatening infringement actions against those who did not license their use of the subject trademark. The cease-and-desist letter often appeared to be printed on generic letterhead with the trademark in which Stoller claimed rights inserted as appropriate. In later versions of his standard cease-and-desist letter, Stoller would brazenly write that settlement negotiations and pre-filing discovery or exchange of information was a fruitless exercise. In his eyes, license and litigation were the only choices. Stoller was able to maintain this business model because license fees are often far less than the cost of defending against the potential litigation.

Throughout his "intellectual property entrepreneur" career, Stoller managed to ruffle the feathers of not only the alleged trademark infringers he pursued, but the courts and administrative bodies before which he prosecuted his claim when he failed to secure a license. The weak link of Stoller's business model was that frequently, he had no interest or protectible rights in the trademarks he asserted against others, rendering his claims entirely baseless, vexatious and wasteful of time and money. Most if not all of his trademark registrations were supported by documents alleging use of these marks that were at best suspect and Stoller often prolonged litigation in bad faith to the ire of the litigants and courts. These activities got Stoller into much hot water. In recent years, the Trademark Trial & Appeal Board at the U.S. Trademark Office has vacated Stoller's pending requests for extensions of time to oppose published trademarks and prohibited Stoller from filing any additional extensions for a period of two (2) years extending until July 2008. Once this suspension is lifted, Stoller can only file extension through an attorney. The federal court for the Northern District of Illinois went a step further and precluded him from filing any further lawsuits without first obtaining leave from the Court.

So what is next for Leo? This past August, the bankruptcy court in the Northern District of Illinois approved the sale of Stoller's trademark assets, whatever they may be, to the Society for the Prevention of Trademark Abuse, LLC, an entity set up for the sole purpose of acquiring Stoller's assets and rescinding or modifying any license agreements based on unfounded claims. Stoller continues to fight, filing appeals where ever he can and posting notices on his blog to potential purchasers or licensors of marks from the SPTA, that title to these assets may be sufficiently clouded. So the battle rages on...

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The England and Wales Appellate Court casts doubt on "Miracle" in a bottle

L'Oreal SA & Ors. V. Bellure NV & Ors. [2007] EWCA Civ 968 (October 10, 2007)

The Court of Appeal (CA) responded unfavorably to trial court's pro-trademark decision in L'Oreal v. Bellure. The trial court Judge held that the use of L'Oreal's trademarks in comparison lists of L'Oreal's perfumes and inexpensive smell-alike fragrances constituted infringement. The trial court Judge further held that the similar packaging and containers of the smell-alike perfumes infringed L'Oreal's trademarks for the perfumes Miracle and Tresor. The Court of Appeal was critical of the trial court's holdings but stayed its holding pending the response to a series of questions submitted to the European Court of Justice (ECJ).

First, the CA questioned whether the lists comparing L'Oreal's perfumes to perfumes of smell-alike merchants infringed L'Oreal's trademarks if L'Oreal did not suffer any economic or reputation damage. The CA asked the ECJ to answer this question; the CA also expressed that it did not think this was infringement. The CA found that the comparison lists were essentially descriptive, providing an honest description of the smell-alikes. Additionally, as the CA put it, "consumers are not stupid," given the gaping disparity in pricing and different marketing channels, no consumer would buy a smell-alike fragrance expecting the quality of a L'Oreal fragrance.

The CA then had to determine whether smell-alike merchants' use of packaging and containers similar to those used by L'Oreal's was infringement. The CA questioned whether it is fair for smell-alike merchants to get a "free ride" on the extensive advertising and promotion of L'Oreal perfumes. This "free ride" is presumed when a purchase is influenced by customer's mental association of the smell-alike perfume with L'Oreal perfume.

The evidence indicated that smell-alikes packaged and bottled similarly to respective original perfumes sold for a slightly higher price, and the CA asked whether the smell-alike merchants were taking an "unfair advantage" proscribed by the statute, when they used packaging and containers that were similar to those used by L'Oreal, even if there was no harm to L'Oreal's sales and reputation. While the CA left this determination to the ECJ, the CA did not see this use as unfair if L'Oreal experienced no harm.

Although the answers by the ECJ could alter this outcome, the CA makes it clear that trademark owners will find it difficult to keep their marks off comparison lists absent a showing of injury to reputation or economic harm.

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