Protecting Intellectual Property in a 'Flat' World

Thomas Friedman, a columnist for The New York Times, used the phrase “the world is flat” to describe the more level economic playing field created by globalization. To many, it could be added that “the world is smaller.” Just as airplanes made the world feel smaller geographically, globalization and the Internet have made it feel smaller economically. The Internet has so fundamentally changed the way people do business that it is difficult to remember the days, not too long ago, when similar trademarks could co-exist on similar products and services (if not always happily) in different regions of the country.

Overlapping Territories

Today, even small start-ups need and expect to be able to do business nationally and internationally. As sales territories have expanded, they have increasingly overlapped. For businesses competing for customers in these overlapping territories, the need for brand protection has resulted in the world seeming smaller.

People today educate and entertain themselves on the Internet, but more importantly for businesses, they shop, plan, and inform themselves about products and services. For many businesses, the Internet has opened up the entire world as a customer base. For more traditional brick-and-mortar businesses, including many franchises, it is now often the most important marketing medium, offering a unique opportunity to promote and sell. For many, it is a strict necessity that they do so just to remain competitive.

The Internet makes the world smaller by making many businesses' sales territories (and therefore trademark use) bigger ' vastly bigger. Single-location shops now routinely sell products and services throughout North America and the world. Each such seller must therefore protect its trademark all over this enormous new area. Not only does it make business sense to do so, the law requires it: One must protect a brand, or lose it. The law recognizes that, even with diligent policing efforts, some infringing uses will occur. Although there is no statutory or case law outlining any specific policing steps that must be undertaken to protect a brand, the fact that the trademark owner cannot stop all infringement does not mean it is not obligated to do what it reasonably can.

In addition to the Internet, globalization in general has produced an increased importance attached to brand protection. Due perhaps to customers' recognition that the Internet has produced an increase in infringement, the value of branding has increased as customers seek assurance of the origin of a product or service. Furthermore, the Internet is still largely a visual medium (although becoming less so).

Trademarks, also more visual than aural, acquire an even greater importance on the Internet than in other media.

New Infringements

The Internet does not, of course, change trademark law. Trademark law treats the Internet similarly to other media. But new issues do arise because of the Internet.

Businesses use their trademarks on the Internet, as in other media, to promote and sell their products and services. For businesses that have a trademark in their trade name, it is often desirable to register that name as a domain name. One problem that arises is that many words and symbols that are capable of being trademarked are associated with a wide variety of products and services. Under trademark law, it is perfectly acceptable for one brand name to be attached to a product or service, and a similar name to be attached to a different product or service of another business, if that similar brand name does not result in a likelihood of confusion (which it will not if the products/services are sufficiently different from each other). This is the case regardless of whether either or both of the trademarks is registered.

Naturally, trademark owners want domain names comprised of their marks and as little else as possible. With the limited number of domain name combinations and the prized value of “.com,” it is impossible for all to obtain their desired domain names. Businesses with similar brands will go for similar domain names. This crowded arena naturally results in infringement, both intentional and unintentional.

A simple, but surprisingly common, infringement is the actual use of a competitor's mark (or one confusingly similar) in an advertiser's Web site. Oftentimes, this is accidental. In other instances, advertisers are apparently relying on the general rule that mere use in a domain name does not by itself constitute “use.” However, courts have typically held that using another's mark in a domain name will constitute an infringement. See, e.g., Audi AG v. D'Amato, 341 F. Supp. 2d 734 (E.D. Mich. 2004); Petmeds Express, Inc. v. MedPets.com, Inc., 336 F. Supp. 2d 1213 (S.D. Fla. 2004).

Perhaps the most insidious problem raised by the Internet is the hidden use of another's mark on an advertiser's Web site (meta tagging). At first impression, one could think that if a mark is hidden, it cannot be an infringement. But where another's mark is used, without being seen, to divert customers to a different site than they intended to reach (in the hope that, once there, the customer will stay), courts have generally found infringements. See, e.g., Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999). There have, however, been exceptions. See, Bihari v. Gross, 119 F. Supp. 2d 309 (S.D.N.Y. 2000). The courts that have not find infringement have noted that the diversion could be corrected quickly by the customer (in seconds) who was, in any case, unlikely to be confused. Meta tagging is dangerous for franchises (and all businesses), as it undermines the actual business, not just the brand.

Linking (using a hyperlink that, when clicked, takes the user to another page) and framing (bringing someone else's Web site into the present site) are infringement problems related to meta tagging. Linking may not be a problem if the site to which the user is taken does not result in any confusion. However, at least one court has found infringement where one Web site was seen as causing users to believe it was related to another company. Nissan Motor Co. v. Nissan Computer Corp., 125 S. Ct. 1825 (2005). While a trademark holder might wish to declare framing to be akin to false advertising, it has not yet been directly dealt with by the courts.

Brand Policing

Before the Internet, policing a brand name could be accomplished relatively easily by either the brand owner or a monitoring-service company. Policing efforts included reviews of content and ads on television and in newspapers and magazines. A small amount of infringement may have gone unnoticed, but not enough to endanger the mark. The costs associated with clearing new trademarks and bringing them to market made larger companies acutely aware of the potential costs of infringement that they therefore sought to avoid. As noted, smaller companies typically did regional, not national, business and were consequently less of a threat to a national brand and less aggressive about their own brands. Local infringement was generally more difficult to hide and, therefore, was much less common.

The new global and Internet economy changed this situation dramatically. Monitoring the Internet has now become as important as monitoring other media.

The Internet has dramatically lowered the financial barriers for starting new businesses (the world really is flat). Many new businesses now create the illusion of success and sophistication without committing the resources, as was necessary in the past, to build a brand name. They have “nothing to lose” by infringing on well-established brands. These infringers initially created problems for only the larger, well-established brands, but they have now begun to prey upon smaller brands. In part, infringers realize that smaller brand owners do not have the resources to enforce their rights as aggressively, particularly in distant jurisdictions.

The policing efforts that any particular trademark owner will choose to pursue obviously depend on the business, the available budget, and the value of the brand. Nevertheless, as with many business issues, a small outlay on prevention often produces a large savings in cure. To put it another way, an infringer caught early in the act is more likely to concede quickly and easily. At the least, the most basic act of prevention ' trademark registration ' is more necessary than ever.

Another issue in brand policing is whether to use in-house staff, outsiders, or a combination of both. Though there is usually a cost savings in staying in-house, owners should remember that specialists often produce the best results.

After infringements are discovered (and they usually are), the next set of decisions will involve which infringers to pursue. It is easy to say that every infringer must be pursued to the fullest extent, but less easy, and affordable, to actually do.

International Protection

Internationally, the Madrid Protocol has greatly simplified and reduced the costs of the trademark registration process. Nevertheless, franchisors seeking international brand registration should be aware that it is still a very expensive and time-consuming process (just less so), which, in many cases, requires foreign counsel.

Franchisors and their counsel should be aware that, though the registration process has been simplified, the substantive trademark law of the constituent countries has not changed. Many, if not most, countries have more stringent standards on trademark distinctiveness than the United States. U.S. brand owners can find they have marks, which are easily registered in the U.S., but are not registerable in other countries. This is an unpleasant realization after a considerable expenditure. Of course, even if registration is available, the brand owner fighting foreign infringement is confronting a competitor on unfamiliar ground.

Thomas Friedman, a columnist for The New York Times, used the phrase “the world is flat” to describe the more level economic playing field created by globalization. To many, it could be added that “the world is smaller.” Just as airplanes made the world feel smaller geographically, globalization and the Internet have made it feel smaller economically. The Internet has so fundamentally changed the way people do business that it is difficult to remember the days, not too long ago, when similar trademarks could co-exist on similar products and services (if not always happily) in different regions of the country.

Overlapping Territories

Today, even small start-ups need and expect to be able to do business nationally and internationally. As sales territories have expanded, they have increasingly overlapped. For businesses competing for customers in these overlapping territories, the need for brand protection has resulted in the world seeming smaller.

People today educate and entertain themselves on the Internet, but more importantly for businesses, they shop, plan, and inform themselves about products and services. For many businesses, the Internet has opened up the entire world as a customer base. For more traditional brick-and-mortar businesses, including many franchises, it is now often the most important marketing medium, offering a unique opportunity to promote and sell. For many, it is a strict necessity that they do so just to remain competitive.

The Internet makes the world smaller by making many businesses' sales territories (and therefore trademark use) bigger ' vastly bigger. Single-location shops now routinely sell products and services throughout North America and the world. Each such seller must therefore protect its trademark all over this enormous new area. Not only does it make business sense to do so, the law requires it: One must protect a brand, or lose it. The law recognizes that, even with diligent policing efforts, some infringing uses will occur. Although there is no statutory or case law outlining any specific policing steps that must be undertaken to protect a brand, the fact that the trademark owner cannot stop all infringement does not mean it is not obligated to do what it reasonably can.

In addition to the Internet, globalization in general has produced an increased importance attached to brand protection. Due perhaps to customers' recognition that the Internet has produced an increase in infringement, the value of branding has increased as customers seek assurance of the origin of a product or service. Furthermore, the Internet is still largely a visual medium (although becoming less so).

Trademarks, also more visual than aural, acquire an even greater importance on the Internet than in other media.

New Infringements

The Internet does not, of course, change trademark law. Trademark law treats the Internet similarly to other media. But new issues do arise because of the Internet.

Businesses use their trademarks on the Internet, as in other media, to promote and sell their products and services. For businesses that have a trademark in their trade name, it is often desirable to register that name as a domain name. One problem that arises is that many words and symbols that are capable of being trademarked are associated with a wide variety of products and services. Under trademark law, it is perfectly acceptable for one brand name to be attached to a product or service, and a similar name to be attached to a different product or service of another business, if that similar brand name does not result in a likelihood of confusion (which it will not if the products/services are sufficiently different from each other). This is the case regardless of whether either or both of the trademarks is registered.

Naturally, trademark owners want domain names comprised of their marks and as little else as possible. With the limited number of domain name combinations and the prized value of “.com,” it is impossible for all to obtain their desired domain names. Businesses with similar brands will go for similar domain names. This crowded arena naturally results in infringement, both intentional and unintentional.

A simple, but surprisingly common, infringement is the actual use of a competitor's mark (or one confusingly similar) in an advertiser's Web site. Oftentimes, this is accidental. In other instances, advertisers are apparently relying on the general rule that mere use in a domain name does not by itself constitute “use.” However, courts have typically held that using another's mark in a domain name will constitute an infringement. See, e.g., Audi AG v. D'Amato , 341 F. Supp. 2d 734 (E.D. Mich. 2004); Petmeds Express, Inc. v. MedPets.com, Inc . , 336 F. Supp. 2d 1213 (S.D. Fla. 2004).

Perhaps the most insidious problem raised by the Internet is the hidden use of another's mark on an advertiser's Web site (meta tagging). At first impression, one could think that if a mark is hidden, it cannot be an infringement. But where another's mark is used, without being seen, to divert customers to a different site than they intended to reach (in the hope that, once there, the customer will stay), courts have generally found infringements. See, e.g., Brookfield Communications, Inc. v. West Coast Entertainment Corp . , 174 F.3d 1036 (9th Cir. 1999). There have, however, been exceptions. See, Bihari v. Gross , 119 F. Supp. 2d 309 (S.D.N.Y. 2000). The courts that have not find infringement have noted that the diversion could be corrected quickly by the customer (in seconds) who was, in any case, unlikely to be confused. Meta tagging is dangerous for franchises (and all businesses), as it undermines the actual business, not just the brand.

Linking (using a hyperlink that, when clicked, takes the user to another page) and framing (bringing someone else's Web site into the present site) are infringement problems related to meta tagging. Linking may not be a problem if the site to which the user is taken does not result in any confusion. However, at least one court has found infringement where one Web site was seen as causing users to believe it was related to another company. Nissan Motor Co. v. Nissan Computer Corp . , 125 S. Ct. 1825 (2005). While a trademark holder might wish to declare framing to be akin to false advertising, it has not yet been directly dealt with by the courts.

Brand Policing

Before the Internet, policing a brand name could be accomplished relatively easily by either the brand owner or a monitoring-service company. Policing efforts included reviews of content and ads on television and in newspapers and magazines. A small amount of infringement may have gone unnoticed, but not enough to endanger the mark. The costs associated with clearing new trademarks and bringing them to market made larger companies acutely aware of the potential costs of infringement that they therefore sought to avoid. As noted, smaller companies typically did regional, not national, business and were consequently less of a threat to a national brand and less aggressive about their own brands. Local infringement was generally more difficult to hide and, therefore, was much less common.

The new global and Internet economy changed this situation dramatically. Monitoring the Internet has now become as important as monitoring other media.

The Internet has dramatically lowered the financial barriers for starting new businesses (the world really is flat). Many new businesses now create the illusion of success and sophistication without committing the resources, as was necessary in the past, to build a brand name. They have “nothing to lose” by infringing on well-established brands. These infringers initially created problems for only the larger, well-established brands, but they have now begun to prey upon smaller brands. In part, infringers realize that smaller brand owners do not have the resources to enforce their rights as aggressively, particularly in distant jurisdictions.

The policing efforts that any particular trademark owner will choose to pursue obviously depend on the business, the available budget, and the value of the brand. Nevertheless, as with many business issues, a small outlay on prevention often produces a large savings in cure. To put it another way, an infringer caught early in the act is more likely to concede quickly and easily. At the least, the most basic act of prevention ' trademark registration ' is more necessary than ever.

Another issue in brand policing is whether to use in-house staff, outsiders, or a combination of both. Though there is usually a cost savings in staying in-house, owners should remember that specialists often produce the best results.

After infringements are discovered (and they usually are), the next set of decisions will involve which infringers to pursue. It is easy to say that every infringer must be pursued to the fullest extent, but less easy, and affordable, to actually do.

International Protection

Internationally, the Madrid Protocol has greatly simplified and reduced the costs of the trademark registration process. Nevertheless, franchisors seeking international brand registration should be aware that it is still a very expensive and time-consuming process (just less so), which, in many cases, requires foreign counsel.

Franchisors and their counsel should be aware that, though the registration process has been simplified, the substantive trademark law of the constituent countries has not changed. Many, if not most, countries have more stringent standards on trademark distinctiveness than the United States. U.S. brand owners can find they have marks, which are easily registered in the U.S., but are not registerable in other countries. This is an unpleasant realization after a considerable expenditure. Of course, even if registration is available, the brand owner fighting foreign infringement is confronting a competitor on unfamiliar ground.