Bush Signs Bill Strengthening Anti-Counterfeiting Efforts

On October 13, 2008, President Bush signed into law the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act of 2008 (S 3325), which enhances penalties for infringement and counterfeiting and creates a high-level post to oversee and manage the protection of intellectual property.

The Act amends the Copyright Act by nixing copyright registration as a prerequisite to bringing a criminal action for infringement and allowing the owner of a copyright to bring a civil action regardless of whether the registration certificate involved contains any inaccurate information, unless such errors were made knowingly. The Act expands the remedies for copyright infringement to include not only the impoundment of infringing items, but also providing for the forfeiture of any property used to commit or facilitate the commission of a criminal offense involving copyrighted works. Exportation of unauthorized copies of protected works is now codified as infringement, whereas before only importation of such goods was addressed.

Further, the PRO-IP Act amends the Trademark Act by increasing statutory damages in counterfeiting cases from up to $100,000 per counterfeit mark per type of goods sold to up to $200,000, and in the case of willful counterfeiting, up to $2,000,000. In addition, the Trademark Act will now allow for treble profits or damages for intentional counterfeiting.

The PRO-IP Act creates an Intellectual Property Enforcement Coordinator (IPEC) to serve as part of the Executive Branch. The IPEC replaces the National Intellectual Property Law Enforcement Coordination Council, the group formerly responsible for coordinating US and International IP enforcement efforts, which was co-chaired by the USPTO Director. The IPEC would chair a new committee, comprised of other Senate-confirmed officials, for example, from the DOJ and USPTO, responsible for developing a "Joint Strategic Plan" to fight piracy and counterfeiting. In addition, the PRO-IP Act increases the resources available to federal and local law enforcement officials to combat counterfeiting, and adds ten FBI Agents to the Computer Crime and Intellectual Property Division of the Criminal Division of the Department of Justice.

The bill is largely favored by industry and media leaders who cite the economic contribution brought about by increased enforcement efforts as well as the Act's ability to strengthen the incentives for creativity. Supporters also praise it as a message to those seeking to harm consumers through piracy of goods such as pharmaceuticals and auto parts.

Consumer groups, on the other hand, are concerned that the PRO-IP Act uses public resources to protect private interests and interferes with the separation of powers principle by using legislation to alter the composition of the Executive branch. In addition, opponents are concerned that the Act's impound provision will result in unfair treatment of non-infringing third parties, for example, by punishing parents of children who illegally download music by seizing their home computers.

Passage of the PRO-IP Act comes shortly after the European Council, on September 26, 2008, adopted a resolution to establish a European Observatory on Counterfeiting intended to measure and analyze the problem of rising counterfeiting and piracy in Europe.

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Accelerated Case Resolution in USPTO Trademark Proceedings

As the number of trademark oppositions and contested proceedings in the USPTO has increased, so have the length of time required to resolve disputes and associated costs. Historically, resolution of a trademark opposition in the Trademark Trial and Appeal Board ("TTAB") can take upwards of two years from initial petition to final determination. Recent rule changes in the TTAB, however, could considerably shorten the time and lower the expenses related to an opposition or a cancellation proceeding for parties that take advantage of an Accelerated Case Resolution ("ACR") program.

The new ACR provisions let parties to TTAB proceedings opt-in to an accelerated discovery and briefing schedule that significantly compresses the time needed to resolve a contested matter. After discovery, parties submit their evidence, as obtained during discovery or by stipulation, and brief their cases, much like submitting motions for summary judgment; though, where summary judgment may be denied because of the presence of disputed facts, the ACR process allows the TTAB to resolve questions of fact based on the evidence submitted. Thus, ACR allows resolution on the merits of a case without going through the time and expense of a trial.

Because ACR is a fast-track process, it applies best to cases where the issues are quite clear and where extensive discovery is not required. The new TTAB rules require that all opposition and cancellation litigants must at least discuss and consider applicability of ACR to their cases during the initial discovery conference. ACR is available throughout discovery but the later in the process, the less likely it would be beneficial. Though generally the decision to adopt ACR lies with the litigants, the rules have a provision allowing the TTAB to mandate ACR on a case if the Board feels it is proper.

ACR is still relatively new and the benefits are just beginning to be realized. It may not be the best option for every TTAB proceeding, but due to the time and resource savings available it is an option that should be considered.

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ICANN Releases gTLD Applicant Guidebook for Public Comment

The Internet Corporation for Assigned Names and Numbers (ICANN) has released a Draft Applicant Guidebook relating to its plans for the expansion of gTLDs (generic top-level domains) by allowing alternatives to the familiar .COM, .ORG, .BIZ, etc., such as .YOURCOMPANYNAME. The guidebook provides a draft proposal for the application process and guidelines that will attach to any public or private organization wanting to register a string of letters as a gTLD. The guidebook has been released for a public comment period through December 8, 2008. Potential applicants may review the Draft Guidebook at ICANN's website at www.icann.org, noting that the guidebook remains subject to further consultation and revision. The final applicant guidebook is anticipated to be released in the first half of 2009, with the application process for new gTLDs likely beginning in the second half of 2009.

The guidebook covers the gamut of topics for the new gTLDs, including the application process, evaluation procedures, dispute resolution procedures, string contention procedures, registry requirements, and terms and conditions. Application fees for a new gTLD, such as .paris or .apple, will likely be around $185,000 for an initial review. While the number of gTLDs has previously been limited to 21 domain name suffixes, such as .com, .org, .net, .gov, .asia, along with approximately 250 different ccTLDs (country code top-level domains), the new proposal will allow any public or private organization from anywhere in the world to register any string of letters as a gTLD.

Although a company can create their own gTLD, of likely greater concern will be the protection against infringement of their trademarks in the top level (e.g., .COM, .MICROSOFT), and in the second level (e.g., MICROSOFT.com, APPLE.nyc) of domain names. ICANN has recognized the importance of ensuring that the rights of trademark holders should be protected from abusive registration and infringement, and has therefore provided requirements for new registries to protect rights holders. However, ICANN declined to recommend any universal rights protection mechanism.

At the top-level, ICANN will implement an objection-based process for dispute resolution that will enable rights holders to assert that proposed gTLD strings would infringe their legal rights. The new gTLD registry agreements will also provide for post-delegation dispute mechanisms to address claims of infringement that might arise after a new gTLD is delegated and begins operation.

At the second-level, ICANN will require new gTLDs to describe in their applications a proposed Rights Protection Mechanism, with the mechanism being published to the community at the time the applications are made public. Examples of prior rights mechanisms that have proved successful are sunrise processes wherein rights holders have the opportunity to register domain names prior to opening up registration to the public. The rights protection mechanisms will also be subject to authentication and third party challenges. Each new gTLD will also be required to ensure that all second-level domain name registrations will be subject to the Uniform Domain Name Dispute Policy (UDRP).

As ICANN takes comments from its various constituencies, now is the opportunity to review the proposal and voice any concerns that may impact a company's valuable trademark rights.

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Board Clarifies Requirements for Sanctions for Failure to Disclose

In its most recent decision citable as precedent, Kairos Institute of Sound Healing, LLC v. Doolittle Gardens, LLC, Opposition No. 91181945 (October 17, 2008), the TTAB denied the applicant's request to dismiss an opposition for the opposer's failure to timely provide its initial disclosures.

The applicant asserted that the proper remedy was the entire dismissal of the opposition, under Trademark Rule 2.120 (g)(1). The opposer responded that the failure to disclose was not intentional, and eventually did provide the disclosures, albeit after the deadline.

The Board pointed out that Rule 2.120 (g)(1) refers to a situation in which a party's failure to provide disclosures follows an order by the Board "affirming or reiterating the party's obligation to make such disclosures." The case at issue had not yet reached the point where the Board issued an order compelling the opposer to make its disclosures.

On the other hand, Rule 2.120(g)(2) does allow sanctions to be given when a party fails to provide the required disclosures, but only when that party confirms that the disclosures will not be made. Since no such statement was made by the opposer in this case, Rule 2.120(g)(2) did not apply. Similarly, Rule 2.120(g)(1) was not applicable because the Board had not yet made any order compelling the disclosures.

In so ruling, the Board made clear that neither the Rules themselves, nor the scheduling order issued but the Board setting the parties' deadlines (including the deadline for disclosures) is sufficient to trigger sanctions under Rule 2.120(g)(1). Rather, a motion to compel is the appropriate remedy, and must be made before the Board will issue an order that, if not complied with, will invoke the provisions of Rule 2.120(g)(1). In this case, the applicant would only have needed to have a motion to compel granted by the Board, which, if not complied with by the opposer, would have enabled the applicant to move for sanctions.

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KISS Your Mark Goodbye

The Trademark Trial and Appeal Board (TTAB) ultimately refused registration for SIMMONS COMICS GROUP for "comic books," holding that Applicant failed to show Gene Simmons, Applicant's proprietor, rose to the status of "historical figure" under Section 2(e)(4) of the Trademark Act in In re Gene Simmons Comics Group, Serial No. 78905279 (September 19, 2008)(TTAB). The Board affirmed that "Simmons" was a common surname and thus incapable of functioning as a trademark.

Under Section 2(e)(4), a term is primarily a surname if, when viewed in relation to the goods/services for which registration is sought, its primary significance to the consuming public is that of a surname. The factors considered in arriving at this conclusion are 1) the degree of the surname's rareness; 2) whether anyone connected with the applicant has that surname; 3) whether the term has any recognized meaning other than that of a surname; and 4) whether the term has the "look and feel" of a surname. See In re United Distillers plc, 56 USPQ2d 1120 (TTAB 2000).

The Board examined each factor, finding that "Simmons" was, in fact, a very common surname ranking 92nd in frequency out of more than 89,000 surnames listed with the United States Census Bureau. Moreover, Gene Simmons was the principal and sole shareholder of the applicant, a fact that also weighed heavily in favor of the mark's "surname" status. The Board also concluded that "Simmons" had the overall "look and feel" of a surname as no other plausible connection to the term existed.

Applicant argued in favor of the mark's significance due to Gene Simmons's status as a world-renowned bass player for the band Kiss. To support its argument, Applicant presented additional prior registrations incorporating Mr. Simmons's name, namely, SIMMONS BOOKS & Design, and registrations for GENE SIMMONS TONGUE and GENE SIMMONS TONGUE & Design (Reg. Nos. 2983582, 2762627, and 2738269, respectively). In addition, Applicant pointed the Board to the Gene Simmons's Wikipedia page which chronicled Mr. Simmons's status as a rock musician, actor, and reality TV star via the "Gene Simmons Family Jewels" show airing, albeit briefly, on the A&E network. Thus, according to Applicant, consumers would not perceive the mark as merely a surname because of its connection to Gene Simmons as a famous, historical figure.

The Board disagreed with both propositions, first discounting Applicant's additional registrations as failing to demonstrate a consumer association for "Simmons" on "comic books" to Gene Simmons. Second, the board disagreed that Gene Simmons rose to the status of "historical figure," noting that "decisions concerning historical names draw a line between names which are so widely recognized that they are almost exclusively associated in terms of their commercial impressions with the historical figures, and names which are semi-historical in character."

The Board gave examples of DA VINCI, SOUSA, and M.C. ESCHER, all marks which provided the needed distinct, exclusive connection to a historical or semi-historical figure. According to the Board, the evidence for "Simmons" failed to show that the mark would be associated exclusively with Gene Simmons. Applicant's evidence demonstrated that Gene Simmons was famous, but only in relation to the band Kiss. Moreover, Applicant had failed to show that "Simmons" could accomplish even that connection to the band without the inclusion of "Gene." Thus, the Board concluded that the four-prong test under Section 2(e)(4) of the Trademark Act had been met, refusing registration for SIMMONS COMICS GROUP on the basis of "Simmons" being a common surname.

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The Double Hurdle — A Must for Product Configuration Registration in In re Pelco Products Inc.

In a recent product configuration case, In re Pelco Products, Inc. (TTAB September 19, 2008), the Trademark Trial and Appeal Board (TTAB) denied registration to Applicant's mark, a design consisting of, "brackets made of metal for attaching traffic signals to mast arms," in Class 006, pictured below. Even though Applicant's design ultimately overcame the functionality barrier, Applicant's proof of acquired distinctiveness fell decidedly short according to the Board.

Applicant, Pelco Products, Inc., filed its application under Section 2(f) of the Trademark Act, based on acquired distinctiveness, and alleged June 1994 as a date of first use in commerce. The Examining Attorney refused registration, claiming that the mark was functional under Section 2(e)(5) of the Trademark Act and that Applicant's proof of acquired distinctiveness was insufficient. As registration of this product configuration required hurdling both the functionality and acquired distinctiveness barriers, the Board addressed each issue in turn.

Functionality: The Board applied the four-prong test set forth in Valu Engineering Inc. v. Rexnord Corp., 278 F.3d 1268 (Fed. Cir. 2002) in its functionality analysis. The Board asked whether (1) a utility patent existed outlining the utilitarian advantages of the design, (2) advertising existed describing the design's function, (3) competitors had functionally equivalent designs available to them, and (4) the design resulted from comparatively simple or cheap method of manufacturing the product.

Applicant's design overcame the functionality hurdle. The utility patents proffered by the Examining Attorney failed to demonstrate that design's shape had "practical or functional value." Applicant's advertising did not publicize the utilitarian function of the specific design subject to the registration analysis. Other third party designs existed that appeared to function "equally well," thus applicant's design did not cause it to function better in the marketplace, and neither party truly established whether Applicant's design resulted from a cheaper or simpler manufacturing method, thus making this fourth prong neutral. Taken in aggregate, the Examining Attorney failed to meet its burden of proving functionality and the Section 2(e)(5) refusal was reversed.

Distinctiveness: Though Applicant overcame the functionality barrier, Applicant failed to meet its burden in proving acquired distinctiveness. The Board first noted that product configuration, like color, is incapable of being inherently distinctive, as stated by the Supreme Court in Wal-Mark Stores, Inc. v. Samara Bros., (529 U.S. 205) (2000). Moreover, as Applicant's basis for registration was 2(f), the Trademark Act accepts a lack of inherent distinctiveness as an established fact. Thus, Applicant was required to prove that the mark had obtained a sufficient level of acquired distinctiveness to support registration. The Board also noted that Applicant's burden to prove so was, "heavier in this case because it involves product configurations." In re Ennco Display Systems, Inc., 56 USPQ2d 1279, 1283 (TTAB 2000).

The Board examined Applicant's advertising figures, sales figures, declarations from 16 distributors and installers, advertising figures, and noted Applicant's claim of over 20 years of continuous use of this design in the marketplace. However, the Board concluded that such was not enough to meet the heavy acquired distinctiveness burden. None of the evidence illustrated that consumers viewed Applicant's design as an indicator of source. The Board also noted that, in 20 years of marketing and sales, Applicant neither encouraged customers to consider the design as its trademark, nor established that such "look for" advertising was unnecessary in industry practice. The Board thus affirmed the refusal to register on the ground that Applicant's design was not inherently distinctive and lacks acquired distinctiveness.

While this decision stresses the inherent difficulty in obtaining registration for product configuration, it also offers some suggestions, noting that careful advertising and marketing strategies, such as the "look for" method, may make the road to registration more easily attainable for product configuration or design applicants.

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Lukewarm Response to Latest Stab at Patent Reform

Senate Minority Whip Jon Kyl (Democrat, Arizona) introduced a bill on September 25, 2008 intended to overhaul the patent system in an ongoing battle between several large industry groups. The Kyl Patent Reform Act of 2008 proposes to reform the USPTO operations in the patent system and patent enforcement procedures. It is substantially different from the bill sponsored earlier in the Session by Judiciary Chairman Patrick Leahy (D-Vermont) and Sen. Orrin Hatch, (R-Utah). Neither bill is given much chance of passage either before the November 2008 election or in any lame duck Congressional session that may be called following the election of a new President.

Addressing many of the objections by critics of the Leahy bill language and the new rules that were instituted by the US Patent Office, presently under consideration on appeal to the Court of Appeals for the Federal Circuit, the bill has deleted portions of the prior bill that many in the patent community considered onerous and overreacting to the dire backlog situation. These include mandatory applicant quality controls, limitations on the number of claims, continuations and RCEs, among others. Parenthetically, the USPTO, anticipating the Federal Circuit overturning a District Court order enjoining the implementation of those rules, has posted on its website that should the order be lifted by the appellate court, an effective date of the rules will be announced. The major shift in the bill language is in making the applicant search report and analysis voluntary instead of mandatory. The Kyl bill also changes the "inequitable conduct" doctrine that would require large monetary fines to be assessed against an applicant who fails to comply with the disclosure of material information during prosecution. Unlike previously proposed legislation, the Kyl bill would address allegations of misconduct administratively rather than through the courts.

Additional provisions would permit individuals to challenge issued patents through a first window of nine months after the grant of a patent or issuance of a reissue patent, and during a limited second window in certain instances. The USPTO reaction to the introduction of the bill by Senator Kyl was lukewarm, but most probably is irrelevant in view of the expected change of administration following the swearing in of a new President in January 2009. Though the bill will most likely not be considered by the full Senate this session, it is presented as an alternative to the "non-partisan" pending in the Judiciary Committee. The ground of battle for the final push for patent reform in the next Congressional Session has been laid, and the Kyl bill will provide a rallying point to those industry groups, such as chemical and pharmaceutical, that have strongly resisted the new rules and legislative attempts to limit the traditional persecution of applications.

An update on the Patent Reform issue is expected early in 2009.

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The Birth of Whois.de

On September 1, 2008, EuroDNS, in partnership with Sedo, a domain-name brokerage, announced the launch of WHOIS services for the .de domains at www.whois.de. WHOIS services are public websites designed to provide domain-specific information, such as who owns a particular domain name, when it was registered, and the associated IP addresses. In addition to providing ownership information, whois.de also delivers real-time availability information for identical name in more than 50 top-level domains, including names available for acquisition in the aftermarket.
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Stepped Up Zero Tolerance to Counterfeits in EU

On September 26, 2008, the European Council adopted a resolution introduced by the French EU Presidency to establish a European Observatory on Counterfeiting intended to measure and analyze the rising counterfeiting and piracy problem in Europe. According to a press release from the International Chamber of Commerce, the goals of the Observatory, set to meet twice a year, will be:

• To develop an annual report identifying the primary sources of counterfeiting and piracy in Europe, the primary countries used for transit of counterfeit goods, and the internet sites found to be selling counterfeit products into Europe;
• Examine the efficiency of each EU member country's policy in enforcing intellectual property rights;
• Develop tools to enable effective communication and cooperation between customs officials and brand owners; and
• Educate the public about counterfeiting and piracy

The Observatory will bring together European public and private sector leaders to share intelligence and help build key partnerships between enforcers and industry, improve coordination between member states, and build a robust legal framework with "zero-tolerance" approach to counterfeiting. In addition, it plans to work with personnel in the tourism industry to publicize the dangers associated with purchasing fake goods while abroad.

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Patent Fee Increase to Take Effect October 2, 2008

In an announcement promulgated in the Federal Register on August 14, 2008, the U.S. Patent and Trademark Office has announced an increase in its filing and prosecution fees to take into account increases in the cost of doing business. Selected fees will increase by about 2-4 percent, effective October 2, 2008.
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In re Yale Sportswear Corporation: Sweating the Details in a Case where "Degree" Equals Separation

On July 3rd, 2008, the Trademark Trial and Appeal Board upheld the refusal to register UPPER 90 on clothing, concluding that Applicant's drawing of the mark was not a substantially exact representation of the mark as used. In its statement of use, Applicant depicted its mark as UPPER 90° with the obvious inclusion of the degree symbol. The Board ultimately held that this addition created a distinct and separate commercial impression when compared to the mark as depicted in the application.

Trademark Rule 2.51(b) requires that "the drawing of the mark must be a substantially exact representation of the mark as used on or in connection with the goods and/or services." To determine whether the drawing and use meet the "substantially exact" standard, the Board must examine whether the drawing of the mark and the mark as used in commerce are interchangeable, or whether, in the alternative, the marks create distinct and separate commercial impressions, in which case registration must be refused.

Applicant argued that the degree symbol did not affect the overall impression of the mark. Consumers purchasing the goods, namely, those who play or coach soccer, would know that "Upper 90" refers to an area of the goal that is difficult to guard whether or not the degree symbol was present.

The Board disagreed. As the Applicant failed to limit its application to a specific class of consumers, in this case, soccer aficionados, consumers of its "clothing," and related goods could be anyone. Examining the mark itself, the Board reasoned that the inclusion of the degree symbol modified "90," altering the pronunciation, look, and clearly indicating an intended meaning of "ninety degrees." Without the degree symbol, it was unclear what the "90" in UPPER 90 inferred. Thus, as UPPER 90 could not be severed from the degree symbol without altering the meaning, pronunciation, and to some extent, the appearance of the mark, the Board concluded that two separate marks had been created. The Board refused registration as Applicant's drawing and use were far from "substantially exact."

This is clearly a case where small changes mean the world. The Board noted that the presence of the ° symbol was, on its face only a small alteration, however an alteration rich in reference. While the overall appearance of the mark may not have been altered to the extent it wandered sufficiently from "substantially exact," the remaining factors in trademark analysis—meaning and sound—appeared violently altered in the Board's opinion.

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Internet Radio Royalty Battle Continues

While the future of internet radio companies such as Pandora and Last.fm faces growing uncertainty, the battle between webcasters and the recording industry has again come to a head as Congress met recently to discuss the appropriate royalty structure for digital radio.

Last March, the Copyright Royalty Board rejected arguments from both sides, ruling that internet broadcasters would be required to pay each time they played a song for each user who heard it, at a predetermined rate based on a "willing buyer, willing seller" standard, set to increase annually over the next four years. In just the first year, royalties paid as a result of this formula by Pandora, for example, accounted for over 70% of its revenue, threatening to run the internet radio company out of business.

Before the 2007 decision, internet radio companies were treated the same as terrestrial radio broadcasters. They were only required to pay composers of songs by purchasing blanket public performance licenses from ASCAP and BMI. The 2007 change was to account for the argument set forth by the recording industry that internet play is a "substitute" for purchase of the actual recording, diminishing the amount of income an artist might otherwise receive. Digital broadcasters counter that their services in fact result in increased sales, and without dependence on record companies. When a user searches an artist he likes on Pandora, he is instantly led to stations that play songs by similar artists, creating additional artist exposure and generating music sales as a result.

In light of the detrimental effect the new standard has had on internet radio and the interest in accommodating new technological mediums, the recent hearing in Congress discussed two new bills addressing the royalty rates. The PERFORM Act, favored by musicians, would get rid of the "willing buyer, willing seller" standard and subject all radio services, including satellite and cable, to the same "fair market value" standard, based on what value would have been received had the author been able to license the work in the marketplace. The Internet Radio Equality Act, on the other hand, backed by webcasters, would lower internet radio royalties to 7.5% of revenue, and adopt a standard based on Section 801b of the Copyright, evaluating such factors as maximizing availability to the public while maintaining a fair return to authors, for all future proceedings. The 801b standard is the same used to compensate authors when recording companies pay for use of a composition to make a recording, so webcasters argue the same standard should be used in this case. While there are clear differences between the two proposals, the debate has created a glimmer of hope that a resolution could be found in that the recording industry has not ruled out use of the 801b standard over a "fair market value" standard, insisting, however, that the 801b standard be tweaked to reflect current market realities.

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US Paperless Copyrights

In July 2008, the US Copyright Office has implemented the next significant phase toward reaching its goal of a paperless office, and has begun accepting online applications for copyright registrations. Inducements to use the online filing system include a lower filing fee ($35 for a basic claim, as opposed to $45 for a paper filing), an earlier effective date of registration, and the ability to upload files electronically directly into the US Copyright Office files. Initially, the types of copyright filings are limited to basic claims to copyright for literary-, visual arts-, and performing arts works, including books, motion pictures, sound recordings and single serials. Basic claims are defined as either a single work, multiple unpublished works if they are by the same author(s) and owned by the same claimant, or multiple published works if they are all first published together in the same publication on the same date and owned by the same claimant.
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Psystar No Apple

On July 3, 2008, Apple sued Psystar, a Florida corporation, alleging copyright-, trademark- and trade dress infringement, unfair competition and breach of contract. The lawsuit comes after Psystar launched its Open Computer, a PC pre-loaded with Apple's operating system and marketed as a low-cost alternative to Apple's hardware. The complaint charges Psystar with misappropriating Apple's software and damaging Apple's reputation. Apple also claims that Psystar's OpenServ server illegally uses Apple's Mac OS X Server Edition and that it wrongfully gives the impression that Psytar is affiliated with Apple.

While the lawsuit was anticipated immediately after Psystar began selling its products in April, the recourse Apple is requesting was not—among the requests is a total recall on all Open Computer and OpenServ systems.

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For eBay a Tale of Two Legal Systems: the Best of Times and the Worst of Times

Two recent trademark decisions regarding eBay's online initiatives to track counterfeit products stand in stark contrast to one another and highlight contradictory views about who should bear the burden of tracking online trademark infringement. A United States federal judge ruled on July 14 that eBay is not responsible for monitoring the sale of counterfeit goods, and that its current procedures for tracking infringement are reasonable. A French Court of Appeals, on the other hand, fined eBay $61 million in June for selling counterfeit Louis Vuitton and Dior products.

On June 18, 2004, Tiffany and Company ("Tiffany") sued eBay, claiming eBay was liable for trademark infringement, false advertising, unfair competition, and direct and contributory trademark dilution by allowing the sale of counterfeit jewelry on its online auction. Tiffany alleged that it, along with other large designer labels, loses $30 billion annually to online sales of knockoff products. Both Plaintiff and Defendant attempted to prove the inadequacy of other's anti-counterfeiting measures. Tiffany claimed that eBay's $20 million annual anti-counterfeiting budget is insufficient, while eBay claimed that the $14 million Tiffany spends annually to prevent trademark infringement (0.1 percent of its annual revenue) is also insufficient. EBay also pointed out that it maintains a staff of 250 full-time employees responsible solely for tracking trademark infringement, and that through its VeRO (Verified Rights Owner) Program, owners can point out listings selling counterfeit goods which eBay then removes.

A New York judge ruled in favor of eBay on every single count, asserting that trademark owners, not websites, are primarily responsible for protecting their rights. In its June decision, which Tiffany requested the New York Federal Court to recognize before issuing its decision, the French Court of Appeals ruled differently. The Tribunal de Commerce in Paris awarded Louis Vuitton and Christian Dior Couture €38.6 million in damages ($61 million), for eBay's sales of counterfeit products and urged eBay to institute a global solution to the problem of counterfeit products.

A possible explanation for the different outcomes is that the ultra fashion-conscious French culture might simply be more sympathetic to designer labels combating online trademark infringement. France and the United States are both attempting to police internet activity and protect intellectual property, but they fundamentally disagree as to what is realistic and who can effectively achieve these goals.

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Ignorantia Excusat

In an unanticipated development for the music industry, a Texas Court recently overruled a motion for summary judgment filed by the Recording Industry Association for America ("RIAA"). Representing five well-known recording companies, including Sony BMG Music Entertainment, the RIAA filed a complaint in January, 2007 against a college-aged defendant, seeking damages for 39 claims of copyright infringement. The infringed material included files downloaded from Kazaa, a popular website used to download and share music files.

The defendant admitted to downloading copyrighted material, but claimed to be unaware that downloading the files was illegal. The Copyright Act's minimum statutory damage award per claim is $750, but if a defendant is unaware or has no reason to believe that a certain activity constitutes illegal file sharing or downloading, she may claim an ‘innocent infringement' defense under 17 USC 504(c)(2), which could reduce the statutory damages to $200 per claim. The defendant then has the burden of proving lack of knowledge at trial. While notice of copyrights on the cover of a CD bars use of the defense when the copied material is the CD itself, the question remains whether the defense applies when the material in question is only portions of the CD downloaded online.

The defendant signed an affidavit stating that she did not know file sharing on Kazaa was illegal because Kazaa did not inform her that its files were stolen copyrighted materials. She also pointed to her age at the time of the offense, sixteen, and lack of technical knowledge as proof of innocent infringement. RIAA argued that she could have easily found out the music was stolen, as the defendant admitted to owning CDs with notices of copyrights, and referenced a Seventh Circuit decision holding that the innocent infringer defense does not apply if a defendant could have easily found out the work in question was copyrighted.

Construing all evidence in a light most favorable to the non-moving party, the defendant, the Court denied RIAA's motion for summary judgment. The parties must now advise the Court whether they plan to settle or proceed to trial.

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China To Overhaul Its Patent Laws

The Chinese Patent Office, formally known as the State Intellectual Property office (SIPO) has announced the expected implementation of its patent law amendment sometime in early 2009. The amendment was approved by the State Council and is being sent to the Standing Committee of the National People's Congress for final approval.

The Amendment to Patent Law (in its present draft) is intended to increase the threshold of patent grant, thereby raising the bar as to what is considered patentable, to add new provisions encouraging the promotion and utilization of patented technologies, to strengthen the protection of patent rights, and to prevent rights abuse by patent owners by balancing the patent owner's and public interests.

Some proposed changes have been fought by foreign companies doing business in China. For example, the amended law will treat inventions made in China by foreign companies conducting research in China as having been locally invented, thereby requiring a first filing in China for all such inventions, irrespective of the ownership or foreign citizenship of the company or its parent. The United States has similar provisions for US inventions, which require a license before any foreign or PCT counterpart applications can be filed.

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Apple Stew

Apple Inc.'s January 16th Notice of Opposition to New York City's trademark application for the GreeNYC apple-shaped logo is currently attracting harsh criticism and stirring much debate.

The opposed trademark is intended for New York City's new campaign to raise environmental awareness, and it is starting to appear on everything from hybrid gasoline-electric taxicabs to recyclable grocery bags.

Apple points out in its opposition that it has extensively used and advertised the Apple logo since at least 1977, and that today Apple is one of the best-known and most valuable brands in the world. On a local level, since 2002 Apple has opened three retail stores in Manhattan which are quickly becoming popular tourist attractions. Due to the allegedly similar appearance and commercial impressions of the two marks, the similarity of goods and services, the likelihood of confusion and risk of dilution of the Apple logo's distinctiveness, Apple believes it will be damaged by the issuance of the applicant's trademark.

No doubt this is not the last dispute that will arise in the Go-Green craze. The word "green" appeared in 2400 trademark applications in 2007, doubling the number of its appearances in 2006 and becoming the most popular word in all 2007 applications.

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Catalogs as Specimens of Use

In a recent non-precedential decision the TTAB once again ruled against the use of catalogs as an acceptable specimen of use in connection with goods. The ruling of In re U.S. Tsubaki, Inc. distinguished prior decisions in which use of catalogs as specimens of use had been allowed, stating that, since the specimen included "no sales form, no pricing information, no offers to accept orders, and no special instructions for placing orders anywhere on the specimen", it did not qualify as a point of sale display.

The specimen submitted by the applicant, Tsubaki, was a page from a catalog, containing a photograph of the goods (roller chains and power transmission components), the trademark, and the applicant's phone number and domain name. The sticking point was whether or not the specimen included the information a consumer would need to order the goods, thereby removing it from the realm of mere advertisement, into the acceptable format of "point of sale displays." In addition to the requirement that a catalog contain a photograph of the goods and display the mark near the goods, it must also include "an offer to accept orders or instructions on how to place an order." TMEP§904.03(h) (5th ed. 2007).

The applicant argued that the specimen did include a contact number that was used by customers to place orders. Furthermore, in quoting a 2007 TTAB decision the applicant argued that its goods are not the type that would make an order form suitable. In re Valenite Inc., 83 USPQ2d 1345 (TTAB 2007). Rather, consumers knew it was necessary to place orders over the phone where technical assistance can be provided to ensure the correct selection, so detailed ordering instructions were unnecessary. The board rejected this argument.

In support of its ruling, the board distinguished the Valenite ruling. In Valenite, the applicant also sought registration for a mark in connection with highly technical goods, "tools for power operated metal cutting machines." In that case, the board accepted a catalog page when the applicant was able to successfully show that its business was not one in which order forms were suitable by submitting a declaration attesting that the selection of the appropriate product would require significant technical assistance and consultation. Consequently, the combination of the technical information on the website and the customer service number were found to be a suitable invitation and to contain sufficient information to allow consumers to purchase the goods. In the present case, however, the Board found that there was no evidence that order forms were not appropriate or that customers "know that orders are placed over the phone." First, unlike in Valenite, there was no evidence about the manner in which relevant customers typically purchase chains to support conclusory statements in the applicant's brief. Secondly, the specimen did not contain technical information or specification sheets, while the specimen in Valenite did contain such information. Third, the board found that the catalog page was more akin to a "fact sheet, catalog page, or brochure" rather than a point of sale display. This particular catalog page did not contain any pricing information and, in line with a prior decision In re MediaShare Corp, the board found that the specimen did not constitute a point of sale display. 43 USPQ2d at 1306.

While not citable as precedent, this recent decision does explain USPTO examination standards for acceptable specimens and clarifies circumstances in which a catalog is considered acceptable proof of use.

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After the Land Rushes, a Deluge

At its recent Board meeting, the Internet Corporation for Assigned Names and Numbers (ICANN) approved the creation of additional gTLDs (generic top-level domains), potentially allowing anyone who meets the requirements to operate a gTLD.

The number of TLDs has previously been limited to 21 gTLDs, such as .com, .org, .net, .gov, .asia, along with approximately 250 different ccTLDs (country-code top-level domains). The new proposal will allow any public or private organization to register any string of letters as a gTLD.

This expansion has the potential for allowing companies to register their brands as gTLDs, such as .msn for Microsoft, or .mac for Apple. It is also likely that a number of cities will operate gTLDs, such as .berlin, .paris, or .nyc. Although trademarks will not be automatically reserved, an objection-based mechanism for trademark owners to argue for protection will be considered. In addition to objections based on rights infringement or confusing similarity of the gTLD name, objections will likely also be available against a gTLD name based on moral judgments. Disputes will be resolved through a yet to be determined independent dispute resolution provider, or an auction for competing applications. Even non-contentious gTLD applications will have to pass through application, evaluation, delegation and approval phases.

It is anticipated that the final version of the implementation plan will be published in early 2009, with applications for new names being available in mid-2009. The cost for applying for a new gTLD has not been set, but is expected to range from $100,000 to $500,000. Any business or organization applying must also prove that it is capable of managing a gTLD or can reach an agreement with a company that will.

Whether the expansion of gTLDs will have a positive or negative effect on the use of the internet is open to great debate. Previous expansion of the gTLD space to include such suffixes as .biz and .travel, has had limited success in drawing internet users away from the .com space. It remains to be seen if these new niche gTLDs will succeed in attracting direct internet traffic, or whether they will be primarily reachable through search engine listings. Corporations will need to strategically plan the extent of their offensive and defensive domain name acquisitions, and to continue policing their rights against infringing and cyber-squatting activity on the internet.

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