Branding Strategy Insider

ICANN Changes: The Impact For Brand Owners

 
As the Wall Street Journal noted this week, "the dot-com era is over."  

They weren't kidding. That's because the organization that governs the online domain name system - ICANN - voted this week to launch a new application process allowing for an unlimited number of new top-level domains reflecting everything from cities ("dot.Dallas) to brand names ("dot.McDonald's").  The new system arrives "despite lingering doubts and objections from many trademark owners and brand managers," notes Janet Satterthwaite, a trademark and domain name attorrney at law firm Venable in Washington.

"This new system is stirring considerable controversy, first because many believe that ICANN has failed to justify the sheer need for new top-level domain names," she notes, especially given the significant costs and potential for confusion and even chicanery with so many new business addresses created for banks, retailers and merchants. 

Trademark and Brand Naming Q & A

Choosing a new trademark is a thorny task for many companies. So we asked Tara Benson, Esq., a seasoned intellectual property attorney, for her thoughts on how to avoid the most common pitfalls. Benson is a senior member of the trademark practice group at Giordano, Halleran & Ciesla, P.C. During her career, she has handled trademark work for such clients as Tazo Teas and Amazon.com; and also served as in-house counsel for Library Video Company/Schlessinger Media, the leading distributor and producer of educational media.

Q: Tara, it often seems that tension between marketing and legal departments is the start of trademark troubles. Do you agree?

Absolutely. In my experience, marketing departments often gravitate towards a mark which describes the product or service. Descriptive marks ensure that the customer can easily identify the product. Unfortunately, descriptive marks will not likely win the right to be registered and probably don’t do much to distinguish your product in the marketplace.

Q: So does that mean you should avoid descriptive marks at every turn?

In short, yes, it is best to avoid them whenever possible. The strongest marks (and those that are able to achieve trademark protection) are fanciful, arbitrary or suggestive marks. A fanciful mark is a word, which has no meaning aside from its use as a trademark, such as Kodak or Exxon, while arbitrary marks are existing words with meanings that are generally unrelated to the product with which they are used, such as Apple for computers. Finally, suggestive marks are those which suggest the identity of a product, but do not merely describe the product (e.g. Coppertone for suntan lotion). It is important that a marketing department be aware of these necessary qualities while brainstorming names for new products or services.

Q: Do clients become emotionally attached to names they are considering?

Yes, often companies will create an internal development name for a product or service. Sometimes people will become so attached to this development name that they are not willing to part with it once the product or service is ready to be launched. Falling in love with an internal development name prior to completing a full trademark search and legal review is one of the most common problems which companies encounter. I always stress the importance of completing a trademark review on a mark before company employees become too attached to a name.

Brand Protection in a Global Market

 
Not long ago, brand owners could take comfort in the intrinsic barriers hampering black marketers. While most large cities have places known by its dwellers to be sources of cheap goods of dubious origin, consumers have to consciously decide to explore these markets in addition to or in lieu of conventional establishments. Canal Street in New York’s Chinatown is a well-known example. The street is lined with densely packed shops offering watches, purses, and other luxury items at prices that are corruptively low. Until relatively recently, these markets did not pose a significant threat to brand owners. The remote locations of these markets created a sufficient bulwark to market entry. As a result, brand owners knowingly conceded that a small percentage of its would-be buyers bought cheap knock-offs instead.

Many brand owners justified their tolerance of these bazaars on the belief that someone shopping for a twenty-dollar Rolex watch is not even a would-be customer. This customer is simply looking for a cheap gimmick or perhaps his or her economic reality precludes any possibility of buying a genuine product for several thousand dollars more. Brand owners were also untroubled because the knock-offs were so obviously inferior to the genuine goods they sought to mimic. While a Gucci purse may have looked just like a Gucci purse from across a dimly lit cocktail lounge, a casual glance in an unobstructed environment could quickly distinguish the two. Because such a terse inspection could expose these products as feeble imitations, brand owners concluded that no real threat existed.

Times have changed. Customers looking for bargains found in the black or gray market now have the ability to virtually browse anywhere there is an Internet connection. Equally vexing for brand owners is the modern difficulty of spotting illegitimate products. Indeed, the obstacles that were once sufficient to relieve concern for brand owners have been removed. The gray and black market economies have enjoyed incredible growth extending their reaches from Canal Street to our laptops.

Global Trademark Strategy Q&A

How do you overhaul and reorganize more than 3,000 trademark registrations owned by an $11 billion global corporation?

That was the question faced by Ingersoll-Rand several years ago when it sized up its trademark situation.

Ingersoll-Rand, founded in 1905, was long known for its tools and machinery, which carved the faces on Mount Rushmore. The company now is a diversified company that makes refrigeration equipment (under brands ThermoKing, Hussmann); compact vehicles such as small loaders, excavators and golf cars (under brands Bobcat, Club Car); locks and security systems (under brands Schlage, Kryptonite); construction equipment such as pavers, compactors, portable compressors; and industrial equipment such as generators, turbines.

“We were spending millions of dollars on ongoing trademark maintenance,” according to Anand Chaturvedi, a marketing manager in Ingersoll-Rand Construction Technologies, who spearheaded the company-wide overhaul. “It had become a symbol of pride that managers would register a name to immortalize a product feature. Over the years, this diluted the brand equity of strategic brands and led to mass confusion among customers.”

Inside Bait and Switch Advertising

According to the U.S. Federal Trade Commission Bait advertising is an alluring but insincere offer to sell a product or service which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser. The primary aim of a bait advertisement is to obtain leads as to persons interested in buying merchandise of the type so advertised.

No advertisement containing an offer to sell a product should be published when the offer is not a bona fide effort to sell the advertised product.

Initial offer

    (a) No statement or illustration should be used in any advertisement which creates a false impression of the grade, quality, make, value, currency of model, size, color, usability, or origin of the product offered, or which may otherwise misrepresent the product in such a manner that later, on disclosure of the true facts, the purchaser may be switched from the advertised product to another.

    (b) Even though the true facts are subsequently made known to the buyer, the law is violated if the first contact or interview is secured by deception.

Protecting Your Brand: Copyright Law

While organizations don’t often pursue this protection, logos are typically protectable by copyright law. Make sure your organization, and not an outside person or agency, owns the copyright to your brand’s logo.

Advertising/marketing agencies will often include an assignment of rights, titles and interests (including copyright interests) to their clients in their letters of agreement.  While trademark infringement requires proof of “confusing similarity,” copyright infringement requires proof of “substantial similarity.”

Online legal interpretation is evolving, but in general, organizations whose brands are strong and well known (“famous brands”) can legally defend their names and other marks against unauthorized use in domain names and <META> tags.  (Playboy (unsuccessfully) and Estee Lauder (successfully) sued other sites for using their brand’s names or slogans in their site’s meta-tags.)

Other online legal issues include the following:

•    cybersquatting – people who register and warehouse domain names that are other party’s marks
•    for-pay search engines selling marks as keywords to businesses that don’t own the marks
•    spammers who use other mark’s e-mail addresses as return addresses for their solicitations.

Special Problems: Organizations that License and Franchise their Marks

Protecting Your Brand: Trade Dress

Trade dress is a second form of legal protection for a brand - Trademarks being the first.  Trade dress is a brand’s distinctive aesthetic design features (package or product design).  To be protectable, trade dress must be non-functional and distinctive (or, have acquired a “secondary meaning,” that is, source identifying characteristics).  The more non-functional differentiating features one can build into a product and its packaging, the more likely it will be that infringement can be proved.

It is easy for a competitor to say, “I developed this very similar product independently” when it is fairly generic (such as a birthday card with a floral design the says simply “happy birthday”).  It is more difficult to convince a courtroom of that when your product has many of the same random non-functional elements as a competitor’s products (a line of cards of an unusual size that open from the top with rounded edges printed on green tinted recycled paper, all at 99 cents and all addressing the theme of friendship).  For a competitor to develop a similar line of cards with similar features independently is highly unlikely. It points to copying.

To protect its trademarks and trade dress, a company must constantly be watchful for and strenuously defend against infringement.  For instance, Apple has filed several lawsuits to defend its iMac against knock-offs. Trademark rights can be enforced through lawsuits at a state or federal level. Proving infringement requires proof that the infringer had second use of the mark and that the second user’s mark is confusingly similar to the senior party’s mark.

Branding and Trademark Law

While the best defense against copycat competitors is to stay ahead of them with a continuous stream of innovative, highly differentiated, and superior products and services, it is equally important to seek as much legal protection as possible for your brand.

Trademark Law
As a brand steward, you must be aware of the laws under which legal protection is available.  First, trademark law protects a brand’s identity.  That is, it protects names, titles, taglines, slogans, logos, other designs, product shapes, sounds, smells, colors or any other features that distinguish one source of products or services from another. Trademarks that protect services are often called service marks (“SM”).  There are also “collective membership marks” (Boy Scouts of America) and “certification marks” (UL approved).

Trademarks, like brands, build in strength over time.  The test for trademark infringement is “confusing similarity.”  Put another way, if the average consumer believes both products to have come from the same source, there is infringement. Obviously, the more a consumer is familiar with a particular brand, the more defendable its mark.  That’s why it behooves a company to do the following:

•choose a distinctive mark, including a “coined” name. (brand names range from generic and descriptive to suggestive and arbitrary or fanciful (“coined”).  Obviously it takes longer to build meaning for “coined” names, but they are also more distinctive and easiest to protect legally.  Kodak, Xerox, and Exxon fall in that category.  Suggestive marks are the next most protectable.  Examples include Coppertone, Duracell, and Lestoil.  Even common words can be used as trademarks as long as they are not used descriptively.  These common words/phrases are also suggestive marks: Amazon (big), Road Runner (fast) and Apple (different, offbeat).  Descriptive marks are not protectable unless the brand creates a secondary meaning for the word.  Examples include Weight Watchers, Rollerblade, and Wite-out.  Generic marks, such as Shredded Wheat and Super Glue, are not protectable at all.)

Godin on Trademark*

What every entrepreneur, geek, brand manager and marketer needs to know about trademarks...

If you Google "generic trademarks", you'll find a list on Wikipedia that includes, "aspirin, bikini, brassiere, cola, crock pot, dry ice, escalator, granola, heroin, hula hoop, jungle gym, kiwi fruit, pilates exercise system, trampoline, videotape, Webster's dictionary, yo-yo, and zipper". Each of these trademarks was worth many millions of dollars, and then, poof, it belonged to everyone.

Some people are worried about this. Jeroen send me a note and asked me to riff about it... it even has a name: genericide.

In 1999, I invented a trademark and wrote a book about it. Yahoo still owns the trademark in Permission Marketing®, but a quick search will show you more than a million matches for the expression. What's going on?

I had to make a decision. I could have pushed the world to call the ideas I wrote about, "Permission-based Marketing". Or, I could have been really flexible and encouraged people to call the approach the same thing I did. I figured it was better to be the coiner of a phrase used by millions than to have a little corner of the world all to myself.

And that's part of the paradox of a trademark.

Branding And Trade Secrets

Trade secrets are an often overlooked form of brand protection.  Trade secrets are simply information, techniques, procedures, codes, patterns, plans, processes, formula, prototypes, etc., that are developed confidentially and that are kept confidential.  This even includes customer lists and instructional methods.  The Coca-Cola syrup formulation is an example of a trade secret. (The added value of this approach from a brand perspective is that it often creates a mystique that has its own cache.)

Sometimes it is better to keep something a trade secret than to patent it.  In some industries, companies routinely watch for competitors' new patents and then try to design around them.  Non-compete and nondisclosure agreements are important, but not infallible, in protecting trade secrets.  The Economic Espionage Act of 1996 protects trade secrets against theft.  Information is legally considered to be a trade secret if an organization can show that it took reasonable measure to keep the information secret and that there is economic value to the information not being made public.

A business can protect its trade secrets in the following ways:

•Share confidential information only on a “need to know” basis.
•Limit the number of employees exposed to trade secrets. Always inform employees exposed to those trade secrets that (a) they are being exposed to secrets and (b) the importance of keeping the secrets secret.
•Mark all confidential documents “confidential – no copies allowed.”   For added security, number each copy and keep a log of which numbered copy was given to which employee.
•Use access logs for trade secrets.
•Require anyone (employees, suppliers, customers, consultants and other business partners) who might come in contact with trade secrets to sign confidentiality and non-disclosure agreements before the relationship begins.