Merchandising; Cybersquatting;
Indirect Infringement and False
Advertising
Intro to IP – Prof Merges
3.22.2012
Merchandising: “Extension by
Contract”
• Merchandising and basic trademark theory
• What consumer associations are protected by
a “merchandising right”?
• What other benefits follow from such a right?
How does franchising work?
• National headquarters: centralized assets
– Recipes, standard procedures, logos, other
resources
• Local franchise locations
– Owners of real estate, contractual share of
revenue
“Cybersquatting”
• Two different legal regimes deal with this
• Domestic US law: ACPA, 15 USC 1125(d)
– “bad faith”; “legitimate interest”
• International arbitration: ICANN/UDRP –
WIPO-administered arbitration system
Cybersquatting
• Reserving names that are “naturally”
associated with a particular company
• Then, selling these domain names to the
relevant company
• Examples: P&G.com, proctorandgamble.com,
Tide.com, Tide.org, P&Gtide.com, etc.
Domain name registration - basics
• IPNTA 5th ed at 791
• Internet Corporation for Assigned Names and
Numbers (ICANN), non-profit. Coordinates
assignment of domain names by various
entities, which generally allocate domain
names on a first-come, first-served basis for a
modest fee.
Domain names
• General Top-Level Domains
• .COM
• .ORG
• .EDU
ICANN Dispute Resolution Process
UDRP:
(i) your domain name is identical or
confusingly similar to a trademark or
service mark in which the complainant has
rights; and
(ii) you have no rights or legitimate interests
in respect of the domain name; and
(iii) your domain name has been registered
and is being used in bad faith. – P. 874
Cybersquatting and speculation
• Markets and legitimacy
• Crucial role for law in determining and
policing what are legitimate markets
Society determines which
transactions are legitimate, and
which are not
• The existence of a market does not, by itself,
confer legitimacy
(d) Cyberpiracy prevention
(1)(A) A person shall be liable in a civil
action by the owner of a mark, including
a personal name which is protected as a
mark under this section, if, without
regard to the goods or services of the
parties, that person—
(i) has a bad faith intent to profit from
that mark, including a personal name
which is protected as a mark under this
section; and
(ii) registers, traffics in, or uses a domain
name that—
(I) in the case of a mark that is distinctive at
the time of registration of the domain
name, is identical or confusingly similar to
that mark;
(II) in the case of a famous mark that is
famous at the time of registration of the
domain name, is identical or confusingly
similar to or dilutive of that mark ….
Lanham Act § 43(d), 15 USC § 1125(d)
Legitimate use factors
§ 43(d)(1)(B)
(i) In determining whether a person has a bad
faith intent described under subparagraph
(A), a court may consider factors such as, but
not limited to—
(I)the trademark or other intellectual property
rights of the person, if any, in the domain
name;
(II) the extent to which the domain name
consists of the legal name of the person
or a name that is otherwise commonly
used to identify that person;
(III) the person’s prior use, if any, of the
domain name in connection with the
bona fide offering of any goods or
services
(VI) the person’s offer to transfer, sell, or
otherwise assign the domain name to
the mark owner or any third party for
financial gain without having used, or
having an intent to use, the domain
name in the bona fide offering of any
goods or services, or the person’s prior
conduct indicating a pattern of such
conduct
(VIII) the person’s registration or
acquisition of multiple domain names
which the person knows are identical or
confusingly similar to marks of others
that are distinctive at the time of
registration of such domain names, or
dilutive of famous marks of others that
are famous at the time of registration of
such domain names, without regard to
the goods or services of the parties
Peta v. Doughney
• ACPA requirements
• Parody?
PETA arguments
Doughney (I) had no intellectual property right
in peta.org; (II) peta.org is not Doughney’s
name or a name otherwise used to identify
Doughney; (III) Doughney had no prior use of
peta.org in connection with the bona fide
offering of any goods or services; (IV)
Doughney used the PETA Mark in a
commercial manner;
(V) Doughney ‘‘clearly intended to confuse,
mislead and divert internet users into
accessing his web site which contained
information antithetical and therefore
harmful to the goodwill represented by the
PETA Mark’’;
(VI) Doughney made statements on his web site
and in the press recommending that PETA
attempt to ‘‘settle’’ with him and ‘‘make him
an offer’’; (VII) Doughney made false
statements when registering the domain
name; and (VIII) Doughney registered other
domain names that are identical or similar to
the marks or names of other famous people
and organizations.
"Owe no one anything except to
love one another, for he who
loves another has fulfilled the
law." (Romans 13:8)
email us at:
Fallwellcomments@aol.com
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ACPA
• Anti-cybersquatting Protection Act
‘‘The paradigmatic harm that the ACPA was
enacted to eradicate’’ is ‘‘the practice of
cybersquatters registering several hundred
domain names in an effort to sell them to the
legitimate owners of the mark.’’ Lucas
Nursery & Landscaping, Inc. v. Grosse, 359
F.3d 806, 810 (6th Cir. 2004).
Commercial speech
• 1st amendment doctrine
• Controversy: lower 1st amendment
protection?
• Issue dodged here – no TM infringement
liability, no 1st A defense
IPNTA 5th ed 864
[W]e need not resolve that question or
determine whether Sections 32 and 43(a)
apply exclusively to commercial speech
because Reverend Falwell’s claims of
trademark infringement and false
designation fail for a more obvious reason.
The hallmark of such claims is a likelihood of
confusion—and there is no likelihood of
confusion here.
Shields v. Zuccarini – IPNTA 5th p.
869
• ACPA Case
• “Typosquatting” at issue
Joe’s Cartoons site
• http://joecartoon.atom.com/
• Post-Google environment may
be a bit different . . .
John Zuccarini (born c. 1947) is an American businessman who served time in federal
prison for violating the Truth in Domain Names Act. Zuccarini operated a domain
name speculation business. He is reported as owning 5500 domains before his
arrest.
John Zuccarini was charged under "truth in domains" legislation
Domain name speculation
Zuccarini registered thousands of domains that were close misspellings or
"typos" of popular sites such as Cartoon Network and Homestar Runner or
even acquired domains identical to well known brands such as Hot
Wheels. Speculators normally place a pay-per-click web page in place of
the legitimate website visitors expect to find. A PPC page looks similar to a
search engine page but the design additionally blankets the home page
with a copious amount of links that are often related to the subject of the
domain name. Under the normal model of business, the speculator profits
from the money obtained from visitors clicking on these links. However,
Zuccarini deviated from this business convention by redirecting his
audience of largely children to pornographic websites.
John Zuccarini
Domain Name Tasting
• Spin Off on Old Fashioned Act of Cybersquatting
• Domain Name Tasting –Exploits a Loophole in
ICANN’s Domain Name Registration Process
• You can Register Unlimited Domain Names for 5
Days and Return them for a Full Refund.
• “Tasted Names” Infringe and Dilute famous
Trademarks
• Infringing Domain Names are “Parked” on
Temporary Websites Loaded with Ads
36
37
38
Other New Domain Name Abuses
• Domain Name Kiting – Registrars Taste, Park
Domain Name in Bulk and Drop Them. Using
an Automated Process, They Automatically ReRegister Them Again and Again.
• Domain Name Spying – Cybersquatters See
Name You Search and Grab Them Before You
Can Register Them.
39
How Bad is the Problem?
• March 2005 – Nearly 43
million .com and net
domain names
registered.
• Only 2.5 million names
were deleted that same
month.
• In April of 2006, 35
million names
registered.
• Of those names 32.7
million were used again
and again but never
registered permanently!
40
• In April of 2006, only 2 Million Names Were
Actually Purchased, Meaning that over 92%
of all Domain Names Registered Were Part of
Tasting Schemes!
• Of the 32 Million Domain Names Registered
That Month, 50% infringed on the Rights of
Trademark Owners
41
Recent Litigation
• Dotster sued by Neiman Marcus and Bergdorf
Goodman -- case settled
• Over 120 infringing variations of Verizon
trademarks were included as an exhibit to the
Dotster complaint
• March, 2007 – Neiman Marcus sues
Name.Com, another Registrar
• Many new cases from brand owners, including
new Verizon suits
42
They Meant What They Said
• 1999 – Anti-Cybersquatting Consumer
Protection Act.
• Senate Report:
“Specifically, legislation is needed to clarify
the rights of trademark owners with respect
to bad faith, abusive conduct, and to provide
adequate remedies for trademark owners…”
43
44
Indirect Infringement
• Flea Markets
• Online activities
Tiffany v. eBay
• 600 F.3d 93 (2d Cir. 2010)
• Held: eBay not liable here
eBay anti-counterfeiting measures
• Fraud Engine
• Verified Owner’s program
• About Me seller’s webpages
Direct infringement
• Descriptive use
• To describe legitimate goods for resale
• Genuine used Rolex watch . . .
Inwood test, IPNTA 5th Supp.
‘‘[I]f a manufacturer or distributor
intentionally induces another to infringe
a trademark, or if it continues to supply
its product to one whom it knows or has
reason to know is engaging in
trademark infringement, the
manufacturer or distributor is
contributorially responsible for any
harm done as a result of the deceit.’’
Holding
For contributory trademark infringement
liability to lie, a service provider must
have more than a general knowledge or
reason to know that its service is being
used to sell counterfeit goods. Some
contemporary knowledge of which
particular listings are infringing or will
infringe in the future is necessary. [No
liability here.]
False Advertising
• Johnson & Johnson v. Smithkline
Beacham Corp.
(a)(1) Any person who, on or in connection with
any goods or services, or any container for
goods, uses in commerce any word, term,
name, symbol, or device, or any combination
thereof, or any false designation of origin, false
or misleading description of fact, or false or
misleading representation of fact, which…(B) in
commercial advertising or promotion,
misrepresents the nature, characteristics,
qualities, or geographic origin of his or her or
another person’s goods, services, or
commercial activities,
shall be liable in a civil action…. § 43(a)(1)(B)
Facts: “Ingredients” Ad for TUMS
TUMS is ‘‘aluminum free,’’ and that ‘‘only
TUMS helps wipe out heartburn and
gives you calcium you need every day.’’
After the woman is depicted pondering
the virtues of a calcium-based antacid,
the commercial ends with a visual and
verbal statement of the advertisement’s
slogan: ‘‘Calcium rich, aluminum free
TUMS.’’
Ingredients - revised
• Emphasizes that only TUMS has Calcium
• Implies (maybe) that ingredients in
Mylanta are unhealthy – especially
aluminum
• “Pop science” fear of Alzheimer’s
Actionable False Advertising
• Requires EITHER
• Literal falsehood, OR
• Statement that is literally true, but that
would tend to mislead or confuse
consumers
Here: implied falsehood
• Statements about Calcium, and implicit
comparison to Mylanta ingredients, are
of course not literally false
• But what would a literal falsehood look
like?
Literal falsehood
• “Tests prove that . . .” when there have in fact
been NO tests
• See, e.g., Castrol, Inc. v. Quaker State Corp.,
977 F.2d 57, 63 (2d Cir. 1992)
 Tests did not prove that faster lubricating
time at engine startup reduced engine wear
Threshold showing required
• An appreciable number of consumers
received a misleading or confusing
message
• Despite literal truth, the message was
still misleading
Misleading message
Warner-Lambert Co. v. Breathasure, Inc. 204
F.3d 87 (3d Cir. 2000)
Enjoining continued use of “Breathasure”
trademark along with advertising that
implied bad breath could be (better) treated
“at the source” (in the stomach) vs. in the
mouth
2 Final issues
• Disparagement – ads that do not mention
defendant’s product – only criticize or
condemn plaintiff’s product (E.g., “Don’t
shop Safeway!”)
• Standing: No consumer standing, despite
wording of statute. Has been criticized, IPNTA
5th at 888