The Goldilocks Dilemma Five Rules to Enforce Your Trademarks

The Goldilocks Dilemma: Five Rules to Enforce Your Trademarks

Calibrating the response to a potential trademark infringement can be a delicate balance worthy of Goldilocks.

Calibrating the response to a potential trademark infringement can be a delicate balance worthy of Goldilocks.

Don’t worry, major corporations — including the owners of some of the most well known brands — are also finding it difficult to navigate. No one wants to be called a “bully,” but it can be equally dangerous getting a reputation as a “softy.” Outlined below are five guidelines to help navigate your trademark enforcement strategies:

1. Too Soft – The Consequence of Inadequate Control: Abandonment Through Naked Licensing

The owner of a mark has a duty to police its trademarks. The first place to do so is when entering agreements, allowing others to use your trademarks.

Trademarks are source-indicators and are meant to signify consistency and predictability for consumers. If a trademark owner enters into a license agreement with a third-party to use its marks, it must ensure that the licensees meet necessary standards and quality control measures or risk misleading consumers. Failure to impose these standards upon licensees is deemed a “naked license” and can result in loss of rights in the trademark.

Such was the case with Eva’s Bridal franchises in Chicago when the owners sold a franchise to a third party for $10 and received an annual royalty for the right to use the "Eva's Bridal" name and marks. When the agreement expired, the third party continued to use the mark without paying the royalty. The Federal Court found that the original owner of the trademark had abandoned all rights in the mark by engaging in naked licensing — allowing use of the mark without exercising "reasonable control over the nature and quality of the goods, services, or business on which the mark is used by the licensee."

By failing to require the Eva's Bridal store to be operated in any particular manner, nor retaining any power of supervision over conducting business, the mark was free for use by the third party without payment. This was the case even though the original owner stated that it never doubted the high standards of the third party and it had no reason to superintend any aspects of defendants' business.

Quick Fix: When granting a license allowing others to use your marks, be sure to include adequate quality control measures. Conversely, if you are the licensee of a mark that does not include these measures, you may not need to pay any royalties.

Genericide

2. Too Soft – The Consequence of Improper Usage: Abandonment Through “Genericide”

A trademark owner’s dream is for the mark to be well known, but if consumers begin to refer to everyrelevant product/service by the mark, it could mean the end of it. This is known as “genericide” – when consumers think the trademark is the generic name of the product or service.

For example, have you ever needed a BAND-AID and asked for an adhesive bandage instead? Or asked for a Kleenex, even if you may be grabbing a Puffs or store-brand tissue? After gaining so much notoriety, the owners of these trademarks worked tirelessly to ensure that their brands do not become “generic” and lose the goodwill and rights in these valuable marks.

However, not everyone has been successful in maintaining their rights. The owners of the following trademarks lost rights due to genericide: Aspirin, Cellophane, Escalator, Thermos and Zipper.

Quick Fix: The easiest way to avoid this problem is to never use a trademark as a noun. Always use a trademark as an adjective modifying a noun: “BAND-AID brand adhesive bandages” or “Kleenex facial tissues.”

Unauthorized Use

3. Too Soft – The Consequence of Unauthorized Use: Dilution of Rights

Traditional trademark infringement occurs when an unauthorized third party creates a likelihood of confusion with a distinctive or protectable mark. Typically confusion occurs when another uses an identical or similar trademark in connection with identical or similar goods/services. However, once your trademark is deemed famous, it is afforded broader protection under U.S. Federal law through what is known as “dilution.” The owner of a famous mark can bring an action against any use of a mark that dilutes the distinctive quality of that mark, either through "blurring" or "tarnishment" of that mark.

Blurring occurs when a mark is identified with dissimilar goods. For example, Kodak brand bicycles. Though it is unlikely that many consumers would be confused and believe the film manufacturer makes, endorses or sponsors bicycles, this use dilutes the distinctive quality of the famous mark.

Tarnishment occurs when the mark’s reputation is harmed, typically by associating it with inferior or unseemly goods/services. In a famous example from the early days of the Internet, the owner of the CANDY LAND trademark (for use in connection with children’s board games) was able to preliminarily enjoin the use of the same mark in connection with an adult Internet domain name <candyland.com>.

Quick Fix: Regularly conduct Internet searches for your famous trademarks. It is more difficult to search for dilution, but in the course of conducting regular searches of your famous marks, broaden the scope to unrelated goods/services and remember significant subjective analysis of any results may be required.

Bullying

4. Too Harsh – The Consequence of Overzealous Trademark Protection: Loss of Goodwill by Bullying

Trademark bullying describes a situation in which a trademark owner (typically a large, resource-rich corporation) seeks to prevent others from using trademarks that could potentially cut into the market share of the trademark owner. Typically, a bully sends a “cease and desist” letter threatening litigation against a user of a mark that is wholly operating within the bounds of trademark law. Though the receiver is not infringing, the receiving companies are often small competitors that cannot afford protracted litigation so they often abandon use the mark (even ceasing operations) rather than assert their rights and fight back.

However, an inexpensive solution has been to post the overly aggressive cease and desist letters on the Internet, publicly shaming the aggressive trademark owner and often resulting in a loss of goodwill and public embarrassment. Moreover, by posting these letters online, the recipients are garnering public support and increasingly relying on crowdfunding to help finance the defense. Worse, overly-aggressive trademark owners risk unfavorable court decisions and even liability for abuse of process, both of which can negatively impact the strength of the trademark.

For example, in 2006, Hansen’s Beverage Company, the owner of the Monster trademark used in connection with energy drinks, attempted to enforce its rights against a mom and pop Vermont-based brewery using “Vermonster” as a trademark for beer. Instead of capitulating, the brewery fought back, using the Internet to garner public support. Ultimately the parties settled and the Vermont brewery sells Vermonster beer to this day.

Quick Fix: Because bullying is limited to instances in which the alleged infringement or dilution is outside of any reasonable interpretation of trademark law and far exceeds the mark owners’ rights, it is important to understand the scope of your rights before objecting to another’s use.

Balance

5. Just Right – Search, Research and Never Bluff

Regularly conduct searches of your trademarks and carefully research any potentially objectionable uses of confusingly similar or identical marks. Consider the best methods available to enforce your trademarks. If you decide to send a cease and desist letter, ensure it is fully supported and has the proper tone. Be prepared to carry out any threats of suit or risk creating a record (which would be fully discoverable in litigation and may be posted publicly on the Internet) that can hinder your ability to enforce your marks in the future.

Moral of the Story: Always remember Goldilocks and seek a careful balance in your enforcement measures.

Jordan A. Arnot is an associate of Partridge IP Law, a Chicago-based law and IP strategy firm. Arnot is a published writer on Intellectual Property issues with recent articles in the Journal of Art, Technology and IP Law and the Partridge IP Law blog.

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