In re Bilski Decision Redefines Method and Software Patent Scope

The subject matter of what a patent may cover has been on shifting ground since at least as early as the 1972 Supreme Court opinion Gottschalk v. Benson, 409 U.S. 63 (1972), in which a process claim directed to a numerical algorithm was found to comprise unpatentable subject matter because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Since the algorithm was a naturally occurring and preexisting artifact, a finding of patentable subject matter would be tantamount to allowing a patent on an abstract idea, contrary to long held precedent. Unpatentable subject matter was generally identified by the Supreme Court to include "laws of nature, natural phenomena and abstract ideas." Software method patents were found to be patentable if they were somehow associated with a physical machine or a CPU, or if the method could produce a concrete, useful and tangible result.

Additional guidance was found in the decision of Diamond v. Chakrabarty, 447 U.S. 303 (1980), in which a genetically modified living microorganism, an oil spill eating bacterium, was found patentable. Relying on the Committee Reports accompanying the 1952 Patent Act, the Chakrabarty decision noted that Congress intended statutory subject matter to "include anything under the sun that is made by man." The logical conclusion of this holding led to the patenting of a genetically modified mouse (the so-called "Harvard mouse").

The court in State Street Bank & Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), held that any business method may be eligible for protection by a patent if it involves some practical application and "produces a useful, concrete and tangible result."

Long-anticipated decision in In re Bilski recently issued by the Court of Appeals for the Federal Circuit (CAFC) has clarified "the standards applicable in determining whether a claimed method constitutes a statutory 'process' under § 101" and further refined the holding in State Street. The importance of the Bilski decision was underscored by the court's own request (sua sponte without prompting of the parties) that the case be argued before all the judges of the CAFC. In addition, almost forty amicus curiae briefs were filed by attorneys on behalf of "friends of the court" representing the views on the issues of a broad cross-section of industry groups, legal professionals and academics.

The main claim in the Bilski patent application was drawn to a "method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price," and recited several method steps that were admittedly not limited by use in a calculating machine such as a computer. Rejecting all the claims, the Examiner stated that "the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts." The Examiner's rejection was affirmed by the Board of Patent Appeals and Interferences, and appealed to the CAFC by the Applicant.

In defining the scope of patent coverage for the business method claims in Bilski, the CAFC held that a process claim reciting machine or transformation limitations that "impose meaningful limits on the claim's scope" does not require that such limitations themselves be new or non-obvious. The meaning of "meaningful limits" is not the same as "non-obvious limits," and the subject matter requirement may be satisfied by machine or transformation limitations which may themselves be old or obvious. The threshold issue of §101 patent-eligibility having been met, novelty and non-obviousness of the claim as a whole may be satisfied by a novel and non-obvious algorithm in combination with the structural machine or transformation recitations. Thus, any intimation in the Supreme Court decision in the State Street case that found patentable an algorithm or business method that comprised only steps that could be performed mentally (without reference to any physical or transformative function on a physical manifestation) is no longer literally correct.

The drift of the Bilski decision is to render the Federal Circuit more in line with recent Supreme Court precedent. Although it may be easy to meet the requirement of a patent-eligible invention under Section 101, a claim having method steps may be deemed obvious under other section of the patent law, especially the obviousness provisions of 35 USC 103(a). It has been suggested that the next wave of business-method litigation will focus on defining the kind of computerized, structural and/or transformative steps required to meet the threshold of subject matter patentability requirement.

In dissent by several CAFC judges, the majority decision was asserted to have not gone far enough in restricting business-method patents. Given the wide-ranging interest in the case, a petition to the Supreme Court may be granted during this October term ending in June 2009.

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New Domain to Host Contact Information

Two-month sunrise registration period for .tel, a new top-level domain that comes with a turn-key website for publishing contact information, begins December 3, 2008. .tel domains are of interest because they are optimized for use by small-screen mobile devices so as to permit visitors to contact the owner by e-mail, telephone, VoIP, or any other method specified by the owner.

Unlike conventional top-level domains, .tel does not allow the owner to host a website. Instead, owners are granted acccess to a management console enabling them to store information directly in the DNS. Instead of resolving to a website, .tel would resolve to an interactive listing of owner's contact information, which may include unlimited telephone and fax numbers, physical and e-mail addresses, screen names, links to other websites, and search keywords, allowing visitors to contact the owner with a click of a button.

Given the myriad of top-level domains already in existence, brand owners are drifting away from blanket must-own-every-TLD-in-existence acquisition policies, focusing on the standard set of .com, .net and .org complemented by the country-code top-level domains in the countries they do business. Dismissing .tel as the like of .info, .name or .pro likely to fall into obscurity may be a mistake, however. The new platform offers brand owners a turn-key website optimized for mobile devices, providing yet another way of reaching out to customers.

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CTM Fees Expected to Decrease

OHIM is expected to lower the combined official filing and registration fees for a CTM to 1000 Euro, a reduction of almost 40% compared to the current total of 1600 Euro for a mark in three classes. The reduction is expected to come into effect sometime in 2009.
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ECJ Clarifies Dilution under the Trademark Directive

On November 27, 2008 the European Court of Justice ("ECJ") delivered its judgment in Intel v. CPM, outlining the factors that a national court should consider in deciding whether the owner of a reputable trademark is entitled to the special protection under Article 4(4)(a) of Europe's Trademark Directive, which provides for invalidation of a later trademark based on dilution.

Intel, owner of several UK and Community trademarks for INTEL sought to invalidate CPM's UK registration for INTELMARK covering "marketing and telemarketing services" on the basis of the national provisions implementing Article 4(4)(a) of the Directive. Following dismissals at the UK Trade Mark Registry and the High Court, Intel appealed to the Court of Appeal (England and Wales), where it argued, relying on Adidas-Salomon and Adidas Benelux, that the protection of Article 4(4)(a) is appropriate so long as the earlier reputable mark and later mark are so similar that relevant consumers will establish a "link" (or mental association) between the two marks, and that, where the earlier mark is both unique and highly distinctive, virtually any use of an identical or highly similar mark will be detrimental to it. Court of Appeal found that INTEL is unique and has a huge reputation in the United Kingdom for computers and computer-linked goods, that INTELMARK and INTEL are similar, and that the goods and services covered by respective marks are dissimilar. The Court could not determine whether such factual circumstances warrant protection under Article 4(4)(a) and asked the ECJ to advise.

Article 4(4)(a) protects trademarks with a reputation from later registrations of identical or similar marks in connection with goods and services that are not similar to those covered by the earlier registration. This protection is conditioned on the harm to the earlier mark from the use of the later mark that may consist of taking an unfair advantage of, or being detrimental to, the distinctive character or reputation of the earlier mark.

Detriment to the distinctive character (dilution) is caused when a mark's ability to identify the source of the goods and services for which it is registered is weakened by another merchant's use of an identical or similar mark, dispersing earlier mark's identity and hold upon the public mind.

The ECJ confirmed that the "link" referred to in Adidas Solomon is a prerequisite to establishing unfair advantage or detriment required for Article 4(4)(a) to apply, but noted that the existence of such a link alone is not sufficient to establish the harm necessary to trigger the special protection. The Court further noted that to establish said harm, actual and present injury is not required, and that proof of a serious risk that such injury will occur in future is sufficient.

The ECJ then delineated the standards for defining the "relevant public" to be taken into account in determining whether the prerequisite link and/or harm exist. When evaluating earlier mark's distinctiveness and reputation, or establishing detriment thereto, the relevant public is the average consumer of the goods and services covered by the earlier registration, whereas for claims of unfair advantage, relevant public is the average consumer of the goods or services that the later mark covers.

In explaining the requirements for establishing whether there is a "link," the ECJ stated that as a general rule, all relevant factors must be taken into account, including the degree of similarity between the conflicting marks; goods and services provided by the parties and whether there is overlap in their respective consumers; strength of the earlier mark's reputation; distinctiveness of the earlier mark, whether inherent or acquired through use; and existence of the likelihood of confusion.

In considering similarity between the conflicting marks, the more similar they are, the more likely it is that the later mark will bring the earlier mark with a reputation to the mind of the relevant public. The Court noted that when the two marks are identical, this fact alone is insufficient to establish the link, since it is possible that conflicting marks are registered for goods or services in respect of which the relevant sections of the public do not overlap, and the mark with a reputation (properly assessed in relation to the goods and services covered by this earlier registration) is not known to the public targeted by the later mark. Conversely, the strength of the earlier mark's reputation may go beyond the section of the public targeted by the mark, making it possible that the relevant section of the public as regards the goods and services of the later mark will make a connection between the marks, even though the two sections of the public may be wholly distinct. Likewise, the stronger the distinctive character of the earlier mark, the more likely that confronted with a later identical or similar mark, the relevant public will recall the earlier mark. Trademark's ability to identify the source of goods and services for which it is registered is stronger if that mark is unique, meaning it has not been used by anyone for any goods and services other than by the proprietor of the mark to describe the goods and services it markets. The ECJ noted that existence of a likelihood of confusion is not required for Article 4(4)(a) to apply, though its existence automatically establishes the required link. It is up to the national court to determine whether there is a link based on the facts before it, and presence or absence of one or more of these factors does not guarantee a particular finding (unless there is a likelihood of confusion).

As for establishing the second prong of the test, injury, the Court again stated that the assessment must be made globally, taking into account all factors relevant to the circumstances of the case, including the factors relevant to establishing a link. The Court clarified that the existence of a link does not dispense with the requirement of proving injury (or a serious likelihood that it will occur in the future), but that a stronger link makes the injury more likely.

For the purposes of establishing detriment to the distinctive character of a mark, the heart of the issue in Intel, the Court indicated that the earlier mark does not have to be unique, reasoning that a trademark with a reputation necessarily has distinctive character and use of later identical or similar mark may weaken the distinctive character of that earlier mark. The ECJ further noted that the more "unique" the mark is, the greater the likelihood of dilution; and that a first use of the later mark may be sufficient to establish injury under Article 4(4)(a). The Court stated that proving detriment to the distinctive character (dilution) requires evidence of "a change in the economic behavior" of the average consumer of the goods and services for which the earlier mark was registered consequent on the use of the later mark, or "a serious likelihood" that such a change will occur in the future. Whether or not the owner of the later mark draws real commercial benefit from the distinctive character of the earlier mark is immaterial to showing dilution.

Addressing the factual findings submitted by the national court, the ECJ found that the facts that the earlier mark enjoys a huge reputation, that the respective goods of the two marks are dissimilar, and that the earlier mark is unique with respect to any goods or services, do not necessarily imply that there is a "link." Similarly, the ECJ could not ascertain the existence of harm based on the factual findings presented by the national court.

The decision outlined the factors that national courts should consider in determining whether registration of a later mark may be declared invalid pursuant to Article 4(4)(a) of the Directive, helping brand owners better understand what is involved in mounting a successful dilution claim. While the court asserted that a likelihood of confusion need not be proven for a finding of dilution, the now-required evidence of the later mark's impact on the economic behavior of the relevant public may prove to be a significant hurdle for owners of the earlier marks to overcome when proving dilution.

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Fifth Anniversary of the United States and the Madrid Protocol

Trademark owners were first able to request trademark protection in the United States through the International Bureau on November 2, 2003, although it was another year before the first application passed examination. This 5th year anniversary of the United States' adoption of the Madrid System presents the optimal time for owners of such US registrations to review their rights and ensure that all deadlines to maintain them are properly noted. Apart from renewal, the United States has additional trademark maintenance requirements, notably the Declarations and specimens of use are required on the 6th and the 10th anniversaries of registration, as well as every ten years thereafter. These requirements are governed by the provisions of §8 of the Trademark Act, 15 U.S.C. §1058 for a national registration, and under §71, 15 U.S.C. §1141k for an extension of protection through the International Bureau.

Deadlines are calculated from the date protection is extended specifically to the US, not the date of the international registration. In just over a year, the first extensions will enter the period within which to file the 6th year Declaration of Use, and the International Bureau will begin receiving these declarations filed in compliance with §71. It is vital for owners of the international registrations to be aware that the deadlines for the Declarations and specimens of use due every 10 years are not concurrent with the renewal deadlines for the International Registration that are filed directly through the International Bureau. Incorrect calculations of the deadline could result in a registration inadvertently being cancelled. Trademark owners must also be cautious of the fact that the six-month grace period that applies to filings under §8 for US national registrations does not apply to §71 filings for registrations obtained through International Bureau which only enjoy a three-month grace period.

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Fame in Likelihood of Confusion Claims

United States trademark law is intended to prevent consumer confusion. In infringement actions in the courts or oppositions in the USPTO, a senior trademark user usually contends a junior mark is likely to be confused with the senior mark. Ultimate determination of whether there is a likelihood of confusion requires consideration of a number of different factors, one of which looks at the question of fame of the senior mark. In U.S. practice, famous marks are those that are recognized as source indicators by a "significant portion of the relevant consuming public," relevant consuming public being current and potential consumers of a product or service. Famous marks are entitled to a wide scope of protection from confusion. What then is necessary to establish the fame of a mark?

Fame is about brand awareness. Anything that has bearing on and shows brand awareness is relevant to the question of fame and the greater the awareness, the more likely a mark will be considered famous.

Surveys and consumer study data aimed at aided and unaided brand recognition are relevant to the inquiry if available. Studies such as these can quantify awareness and provide support for a claim of fame, although just what constitutes a "significant portion of the relevant consuming public" is not well defined, and survey data is subject to scrutiny for reliability. Thus, though helpful, survey evidence alone is not a prima facie indicator of fame. Additionally, there is no requirement that surveys must be utilized to show fame and many marks have been found famous without any supporting survey evidence.

Beyond surveys, a number of other factors are relevant to the question of fame. Some of these include the duration of use of a mark—the longer a mark has been in use, the greater the number of consumers who have been exposed to it, and may become aware of it. Also, the extent of advertising and promotion of a mark is a relevant consideration and information about the nature of advertisements and promotions, media saturation and marketing expenditures is helpful. Sales and market share data are also important to the analysis since the greater the sales or market share, the greater consumer exposure and possible awareness. Media exposure, recognition and awards from third-parties are considered as well, as they tend to impart neutral recognition.

No one factor is dispositive and the issue is decided on all the facts and the ultimate awareness among the relevant consumer group. What this means to trademark owners is that anything relative to brand awareness—marketing, customer feedback, surveys, investigations, budgets, sales figures—is important to support a claim of fame. If a trademark owner can establish the fame of its mark, the likelihood of confusion analysis tilts decidedly in its favor. Even the owner of a widely-protected famous mark must demonstrate a likelihood of confusion, however. Fame is but one, though weighty, factor in the analysis.

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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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