Enforcement Issues Raised By Geographically Descriptive Marks

How do famous, but geographically descriptive, trademarks impact the ability of second-comers to trade off the fame of the location? For example, your client, Skim Co., wants to start a booking service to receive Internet and telephone traffic to book lodging and other services at the fictitious Emerild Island off the Louisiana coast. After Hurricane Katrina, Emerild Island, Inc. purchased coastal land on Emerild Island for a pittance, built the luxurious Emerild Island Resort and Spa, collected old trains, cars, boats and other debris from the hurricane, and sunk them off the resort. Emerild Island, Inc.'s artificial reef quickly became a beacon for marine life and the tourist trade then followed, drawn mainly by the exciting diving and other amenities available through Emerild Island Resort and Spa, now famous the world over. The sleepy motels, tourist homes and Cajun restaurants in the area are now thriving and a number of dive shops, including Emerild Island Divers, have opened up. Your client wants to obtain the vanity phone number and service mark 1-800-EMERILD, and act as a booking agent for many of the local businesses, including the Resort and Spa. He wants to know if a trademark infringement suit by Emerild Island, Inc. would put him out of business.

You tell your client that the safest course would be to pick a fanciful mark for its new booking business. You advise your client that he will have problems protecting 1-800-EMERILD because of its geographically descriptive nature. 'What about 1-800-GUTLESS,' you suggest. He quickly develops an opinion as to your business sense and concludes the meeting with a request that you deliver a clearance opinion on his 1-800-EMERILD idea.

The District Court Weighs In: Vail Associates, Inc. v. Vend-Tel-Co., Ltd.

The above facts are similar to those in Vail Associates, Inc. v. Vend-Tel-Co., Ltd., 516 F.3d 853 (10th Cir. Feb. 7, 2008). In Vail Associates, a divided Tenth Circuit panel identified several factors that shed light on the use of geographically descriptive terms as trademarks, and the rights of junior users to use them. Plaintiff Vail Associates ('VA') is the owner of both the Vail Ski Resort and a registered service mark for the name 'VAIL.' Id. at 857. In 1989, VA registered the name VAIL for a variety of services related to 'commercial recreational activities and accompanying amenities available in and around the town of Vail, Colorado,' including skiing, hiking, horseback riding, resort hotel and restaurant services, and retail store services in the field of recreational equipment. Id. VA's ski facilities, which include nearby Beaver Creek, are the only place to ski near the town of Vail. There are a variety of independent businesses, including hotels and restaurants, that cater to visitors to the Vail ski slopes. Id.

In 2001, Defendant Vend-Tel-Co ('VTC') obtained a service mark on the vanity phone number 1-800-SKI-VAIL. Id. Vend-Tel-Co operated 23 vanity telephone numbers, all incorporating the word 'Ski.' Id. at 859. The purpose of the 1-800-SKI numbers was to act as a for-profit conduit for directing consumers to ski-related services in Vail, among other places. Calls to the 1-800-SKI-VAIL number were routed to travel agencies. Id. VA sued VTC on the grounds that VTC's use of 'Vail' in combination with 'ski' infringed its VAIL mark, making the use of 1-800-SKI-VAIL a Lanham Act violation. Id. at 857.

VA argued that VTC's use of 1-800-SKI-VAIL would create the likelihood that consumers would confuse the services of VTC with those of VA. Id. Likelihood of confusion is a factual inquiry on which the plaintiff bears the burden of proof. The Vail case was decided by the court after a bench trial. Id. at 857-58. The court concluded there was no likelihood of confusion and Vail Associates appealed. Id.

The Tenth Circuit Decision

On appeal, the Tenth Circuit conducted a thorough examination of the record in light of six non-exhaustive factors for evaluating whether the evidence supported a likelihood of confusion. It adopted the factual findings of the District Court unless they were clearly erroneous. Id. at 858. The likelihood of confusion factors included: 1) evidence of actual confusion; 2) the strength of the contesting mark; 3) the intent of the alleged infringer in adopting the contested mark; 4) the degree of similarity between the marks; 5) the similarity of the parties' services and manner in which they market them; and 6) the degree of care consumers are likely to exercise in purchasing those services. Id. at 863.

The Tenth Circuit found that none of the six factors weighed in favor of VA. Id. at 873, providing the following analysis:

Factor one ' actual confusion. The court found that VA offered little evidence of actual confusion and, perhaps surprisingly, that consumers recognized Vail as a geographic ski destination rather than a specific ski resort.

Factor two ' the strength of the contesting mark. The court found that the geographically descriptive nature of the mark, coupled with its extensive use by third parties in the Vail area, substantially undermined the strength of the VAIL mark.

Factor three ' the alleged infringer's intent in adopting the contested mark. The court found that VA had not proved that the defendant's decision to use 1-800-SKI-VAIL was intended to deceive the public or trade on VA's goodwill rather than to trade on the reputation of the town of Vail as an attractive ski destination.

Factor four ' the degree of similarity between the marks. The court found that VA could have sought the service mark 'Ski Vail,' but did not, and that VA could not compare marks for confusion purposes by truncating marks that incorporate the word 'Vail' to the geographic term alone.

Factor five ' the similarity of the parties' services and manner in which they market them. The court found the parties' services were symbiotic, rather than similar, and that defendant did not pass off its services as the high-end type service offered by VA when it marketed 1-800-SKI-VAIL. Rather, the court found, defendant accurately portrayed its service as a phone number to connect callers to a variety of ski-related services available in the town of Vail.

Factor six ' the degree of care consumers are likely to exercise in purchasing those services. The court found that consumers exercised a great degree of care in purchasing expensive ski excursions to the town of Vail; consequently, there was no likelihood of confusion under this factor. Id. at 863-72.

Majority Opinion

The majority opinion in Vail Associates provides little protection for VA and offers little solace, noting that the law tolerates a certain degree of consumer confusion when such confusion 'flows from the undesirability of allowing anyone to obtain a complete monopoly on use of a descriptive term simply by grabbing it first.' Id. at 873. The court was concerned that ruling in favor of plaintiff would imperil countless numbers of retailers, merchants and innkeepers in and around Vail who used the town's name to promote their wares and services. Id.

The court explicitly noted that the record was replete with evidence that the defendant did not intend to trade on the plaintiff's reputation. Id. at 872. The court viewed VA's claim more as a mechanism to limit access to its competition by squelching 1-800-SKI-VAIL, which was a conduit to such competition. Id. at 873. Under the view of the majority, adopters of a geographically descriptive mark may continuously be subject to dilution of their mark by third parties' use the geographic terms. Vail Associates suggests that adopters of geographically descriptive marks would seemingly have to tolerate some free riding off their goodwill. However, it also suggests that if VTC was intentionally seeking to trade on VA's mark, the outcome might have been different.

Dissent

The dissent in Vail Associates begs the question of whether defendant VTC simply got lucky on the panel of judges that it drew. The dissenting opinion provides sharp disagreement with the majority and finds the district court's opinion to be clearly erroneous in almost every relevant respect, and that all six factors lead to a conclusion that the use of 1-800-SKI-VAIL created a likelihood of confusion.

The dissent stressed factors 3 and 4, finding that VTC's use of the term SKI in connection with VAIL emphasized the secondary meaning for which plaintiff trademarked the VAIL name. Id. at 874-76. In other words, it asserts that the addition of the word 'ski' furthered consumer confusion. The dissent highlighted the point that when one skies in Vail, one associates the experience with skiing at plaintiff's resort. Id. at 876. Under these circumstances, the dissent explained, the trial court erred by not inferring the defendant's intent to trade on the goodwill and reputation of VA. Id. at 875. As to the first factor, the dissent found support in the record that actual confusion existed, because of evidence that consumers often called 1-800-SKI-VAIL for information about grooming and season passes at the Vail Resort ski area. Id. at 878-80. As to factor two, the dissent concluded that VAIL was a strong mark because, inter alia, the name 'Vail' conjures up a mental association with skiing resort services. Id. at 882-84. As to factor five, the dissent found that the parties offered overlapping services to the same pool of consumers, which weighed in favor of a finding of confusion. Id. at 880-81.

Finally, the dissent fundamentally disagreed with the majority's analysis of factor six, emphasizing that the critical concern is not the degree of care exercised at the time of purchasing a ski vacation, but at the time of telephoning 1-800-SKI-VAIL. Id. at 881-82. The dissent found that little care is exercised in dialing a toll-free number and that the resulting 'initial interest confusion' allowed defendants a major advantage over plaintiff in selling any overlapping goods or services. Id. Accordingly, the dissent was very protective of the senior user and suggested a view that under certain facts, or perhaps with certain panels, a different court may shift more of the burden to junior users who desire to use a mark for their primary geographically descriptive purpose.

Lessons from Vail Associates

As set forth in Vail Associates, the law balances the rights of the senior user of a geographically descriptive name with those of later junior users who need to use the geographic name to identify the location of their business, even if the later use competes with the senior user. The law recognizes that generally, the junior user must be allowed to describe its location in some way, even if there is potential harm to the senior user. On the other hand, the junior user
can be required to avoid deceiving the public into believing there is an association with the senior user. Thus, later users may be put to the trouble of taking commercially practicable precautions to prevent their advertisements and uses of the geographic term from confusing the public. See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition ' 14:12 (4 ed. 2008).

The owner of a geographically descriptive mark, like our fictitious Emerild Island, Inc., should have been prepared for friction with local businesses that desire to use the geographic location as part of their business name. For example, when Martha Stewart Living Omnimedia, Inc. sought a trademark for KATONAH for home furnishings, there was outrage from local businesses and the residents of Katonah, NY, which is near where Martha Stewart owned a residence. Businesses feared they would eventually need approval from Martha Stewart's company before making any use of the 'Katonah' name or risk being sued. Would a house wares or glass store feel comfortable opening up their business in Corning, NY, and calling themselves Corning Glasswares?

Conclusion

As can be seen, the strength of a geographically descriptive mark and its ability to dominate a geographic region can be very fact specific, if not fact-finder specific. In that context, the court's analysis in Vail Associates is a good starting point for conducting the appropriate analysis.

Matthew W. Siegal is a partner and Jason M. Sobel is an associate in the Intellectual Property practice group in the New York office of Stroock & Stroock & Lavan LLP. The views expressed herein are their own.

How do famous, but geographically descriptive, trademarks impact the ability of second-comers to trade off the fame of the location? For example, your client, Skim Co., wants to start a booking service to receive Internet and telephone traffic to book lodging and other services at the fictitious Emerild Island off the Louisiana coast. After Hurricane Katrina, Emerild Island, Inc. purchased coastal land on Emerild Island for a pittance, built the luxurious Emerild Island Resort and Spa, collected old trains, cars, boats and other debris from the hurricane, and sunk them off the resort. Emerild Island, Inc.'s artificial reef quickly became a beacon for marine life and the tourist trade then followed, drawn mainly by the exciting diving and other amenities available through Emerild Island Resort and Spa, now famous the world over. The sleepy motels, tourist homes and Cajun restaurants in the area are now thriving and a number of dive shops, including Emerild Island Divers, have opened up. Your client wants to obtain the vanity phone number and service mark 1-800-EMERILD, and act as a booking agent for many of the local businesses, including the Resort and Spa. He wants to know if a trademark infringement suit by Emerild Island, Inc. would put him out of business.

You tell your client that the safest course would be to pick a fanciful mark for its new booking business. You advise your client that he will have problems protecting 1-800-EMERILD because of its geographically descriptive nature. 'What about 1-800-GUTLESS,' you suggest. He quickly develops an opinion as to your business sense and concludes the meeting with a request that you deliver a clearance opinion on his 1-800-EMERILD idea.

The District Court Weighs In: Vail Associates, Inc. v. Vend-Tel-Co., Ltd.

The above facts are similar to those in Vail Associates, Inc. v. Vend-Tel-Co., Ltd. , 516 F.3d 853 (10th Cir. Feb. 7, 2008). In Vail Associates, a divided Tenth Circuit panel identified several factors that shed light on the use of geographically descriptive terms as trademarks, and the rights of junior users to use them. Plaintiff Vail Associates ('VA') is the owner of both the Vail Ski Resort and a registered service mark for the name 'VAIL.' Id. at 857. In 1989, VA registered the name VAIL for a variety of services related to 'commercial recreational activities and accompanying amenities available in and around the town of Vail, Colorado,' including skiing, hiking, horseback riding, resort hotel and restaurant services, and retail store services in the field of recreational equipment. Id. VA's ski facilities, which include nearby Beaver Creek, are the only place to ski near the town of Vail. There are a variety of independent businesses, including hotels and restaurants, that cater to visitors to the Vail ski slopes. Id.

In 2001, Defendant Vend-Tel-Co ('VTC') obtained a service mark on the vanity phone number 1-800-SKI-VAIL. Id. Vend-Tel-Co operated 23 vanity telephone numbers, all incorporating the word 'Ski.' Id. at 859. The purpose of the 1-800-SKI numbers was to act as a for-profit conduit for directing consumers to ski-related services in Vail, among other places. Calls to the 1-800-SKI-VAIL number were routed to travel agencies. Id. VA sued VTC on the grounds that VTC's use of 'Vail' in combination with 'ski' infringed its VAIL mark, making the use of 1-800-SKI-VAIL a Lanham Act violation. Id. at 857.

VA argued that VTC's use of 1-800-SKI-VAIL would create the likelihood that consumers would confuse the services of VTC with those of VA. Id. Likelihood of confusion is a factual inquiry on which the plaintiff bears the burden of proof. The Vail case was decided by the court after a bench trial. Id. at 857-58. The court concluded there was no likelihood of confusion and Vail Associates appealed. Id.

The Tenth Circuit Decision

On appeal, the Tenth Circuit conducted a thorough examination of the record in light of six non-exhaustive factors for evaluating whether the evidence supported a likelihood of confusion. It adopted the factual findings of the District Court unless they were clearly erroneous. Id. at 858. The likelihood of confusion factors included: 1) evidence of actual confusion; 2) the strength of the contesting mark; 3) the intent of the alleged infringer in adopting the contested mark; 4) the degree of similarity between the marks; 5) the similarity of the parties' services and manner in which they market them; and 6) the degree of care consumers are likely to exercise in purchasing those services. Id. at 863.

The Tenth Circuit found that none of the six factors weighed in favor of VA. Id. at 873, providing the following analysis:

Factor one ' actual confusion. The court found that VA offered little evidence of actual confusion and, perhaps surprisingly, that consumers recognized Vail as a geographic ski destination rather than a specific ski resort.

Factor two ' the strength of the contesting mark. The court found that the geographically descriptive nature of the mark, coupled with its extensive use by third parties in the Vail area, substantially undermined the strength of the VAIL mark.

Factor three ' the alleged infringer's intent in adopting the contested mark. The court found that VA had not proved that the defendant's decision to use 1-800-SKI-VAIL was intended to deceive the public or trade on VA's goodwill rather than to trade on the reputation of the town of Vail as an attractive ski destination.

Factor four ' the degree of similarity between the marks. The court found that VA could have sought the service mark 'Ski Vail,' but did not, and that VA could not compare marks for confusion purposes by truncating marks that incorporate the word 'Vail' to the geographic term alone.

Factor five ' the similarity of the parties' services and manner in which they market them. The court found the parties' services were symbiotic, rather than similar, and that defendant did not pass off its services as the high-end type service offered by VA when it marketed 1-800-SKI-VAIL. Rather, the court found, defendant accurately portrayed its service as a phone number to connect callers to a variety of ski-related services available in the town of Vail.

Factor six ' the degree of care consumers are likely to exercise in purchasing those services. The court found that consumers exercised a great degree of care in purchasing expensive ski excursions to the town of Vail; consequently, there was no likelihood of confusion under this factor. Id. at 863-72.

Majority Opinion

The majority opinion in Vail Associates provides little protection for VA and offers little solace, noting that the law tolerates a certain degree of consumer confusion when such confusion 'flows from the undesirability of allowing anyone to obtain a complete monopoly on use of a descriptive term simply by grabbing it first.' Id. at 873. The court was concerned that ruling in favor of plaintiff would imperil countless numbers of retailers, merchants and innkeepers in and around Vail who used the town's name to promote their wares and services. Id.

The court explicitly noted that the record was replete with evidence that the defendant did not intend to trade on the plaintiff's reputation. Id. at 872. The court viewed VA's claim more as a mechanism to limit access to its competition by squelching 1-800-SKI-VAIL, which was a conduit to such competition. Id. at 873. Under the view of the majority, adopters of a geographically descriptive mark may continuously be subject to dilution of their mark by third parties' use the geographic terms. Vail Associates suggests that adopters of geographically descriptive marks would seemingly have to tolerate some free riding off their goodwill. However, it also suggests that if VTC was intentionally seeking to trade on VA's mark, the outcome might have been different.

Dissent

The dissent in Vail Associates begs the question of whether defendant VTC simply got lucky on the panel of judges that it drew. The dissenting opinion provides sharp disagreement with the majority and finds the district court's opinion to be clearly erroneous in almost every relevant respect, and that all six factors lead to a conclusion that the use of 1-800-SKI-VAIL created a likelihood of confusion.

The dissent stressed factors 3 and 4, finding that VTC's use of the term SKI in connection with VAIL emphasized the secondary meaning for which plaintiff trademarked the VAIL name. Id. at 874-76. In other words, it asserts that the addition of the word 'ski' furthered consumer confusion. The dissent highlighted the point that when one skies in Vail, one associates the experience with skiing at plaintiff's resort. Id. at 876. Under these circumstances, the dissent explained, the trial court erred by not inferring the defendant's intent to trade on the goodwill and reputation of VA. Id. at 875. As to the first factor, the dissent found support in the record that actual confusion existed, because of evidence that consumers often called 1-800-SKI-VAIL for information about grooming and season passes at the Vail Resort ski area. Id. at 878-80. As to factor two, the dissent concluded that VAIL was a strong mark because, inter alia, the name 'Vail' conjures up a mental association with skiing resort services. Id. at 882-84. As to factor five, the dissent found that the parties offered overlapping services to the same pool of consumers, which weighed in favor of a finding of confusion. Id. at 880-81.

Finally, the dissent fundamentally disagreed with the majority's analysis of factor six, emphasizing that the critical concern is not the degree of care exercised at the time of purchasing a ski vacation, but at the time of telephoning 1-800-SKI-VAIL. Id. at 881-82. The dissent found that little care is exercised in dialing a toll-free number and that the resulting 'initial interest confusion' allowed defendants a major advantage over plaintiff in selling any overlapping goods or services. Id. Accordingly, the dissent was very protective of the senior user and suggested a view that under certain facts, or perhaps with certain panels, a different court may shift more of the burden to junior users who desire to use a mark for their primary geographically descriptive purpose.

Lessons from Vail Associates

As set forth in Vail Associates, the law balances the rights of the senior user of a geographically descriptive name with those of later junior users who need to use the geographic name to identify the location of their business, even if the later use competes with the senior user. The law recognizes that generally, the junior user must be allowed to describe its location in some way, even if there is potential harm to the senior user. On the other hand, the junior user
can be required to avoid deceiving the public into believing there is an association with the senior user. Thus, later users may be put to the trouble of taking commercially practicable precautions to prevent their advertisements and uses of the geographic term from confusing the public. See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition ' 14:12 (4 ed. 2008).

The owner of a geographically descriptive mark, like our fictitious Emerild Island, Inc., should have been prepared for friction with local businesses that desire to use the geographic location as part of their business name. For example, when Martha Stewart Living Omnimedia, Inc. sought a trademark for KATONAH for home furnishings, there was outrage from local businesses and the residents of Katonah, NY, which is near where Martha Stewart owned a residence. Businesses feared they would eventually need approval from Martha Stewart's company before making any use of the 'Katonah' name or risk being sued. Would a house wares or glass store feel comfortable opening up their business in Corning, NY, and calling themselves Corning Glasswares?

Conclusion

As can be seen, the strength of a geographically descriptive mark and its ability to dominate a geographic region can be very fact specific, if not fact-finder specific. In that context, the court's analysis in Vail Associates is a good starting point for conducting the appropriate analysis.

Matthew W. Siegal is a partner and Jason M. Sobel is an associate in the Intellectual Property practice group in the New York office of Stroock & Stroock & Lavan LLP. The views expressed herein are their own.