Trademarks in Cyberspace

by Peter J. Bezek  and Darla Anderson*

Imagine that you're General Counsel for a five-year old company that designs products for the computer industry. From its inception, your company-Design Works-has had a website on the Internet at the domain name www.designworks.com. To further ensure that potential customers searching the Internet will find the company's website, its metatags include the words "design works." (Metatags, the computer code that describes a website's contents, are used by Internet search engines to locate websites responsive to search requests). The website also repeatedly includes the statement, "Design Works' management team was once part of the Hewlett Packard Design Team."

All is going well for Design Works until you receive a letter from The Works, Inc. demanding that you transfer the domain name "designworks.com" to The Works, and that Design Works stop using the words "design works" in its metatags. The Works is not one of your competitors; instead, it offers a full range of advertising and promotional services from designing printed material (print ads, brochures, etc.) to constructing websites to creating television commercials. It also markets its service through a website. The Works claims that it has a right to designworks.com because it has a registered trademark for the words DESIGN WORKS. Adding to your troubles is an email you just received from Hewlett Packard's legal department demanding that Design Works delete from its website any references to Hewlett Packard, including the reference to the owners once being part of its design teams. So, what do you do?

This scenario provides a good illustration of how trademark laws can affect a company's Internet activities. Unfortunately, most companies only become aware of these laws when they receive notice from a trademark owner that their activities infringe upon the owner's trademark rights. Design Works now faces three trademark issues that companies typically encounter as a result of their website:

1. Can a company's domain name be the same or similar words as another company's trademark?

2. Can a company use words in its website metatags that are also other companies' trademarks?

3. Can a company use other companies' trademarks in its website (as content) without violating those companies' trademark rights?

Trademark Basics

Before taking a closer look at these three Internet trademark issues, let's review the basic terms and principles of trademark law. A trademark is a word, phrase, symbol, design, or combination of those items, that identifies and distinguishes a company's products or services from those sold by other companies[1]. (While our examples will involve word trademarks because most Internet trademark issues involve word trademarks, these issues exist with other types of trademark, including those comprising a design, logo, or other symbol). A trademark indicates the source of products or services. For example, consumers seeing the trademark AMAZON.COM connect it immediately to its source-Amazon.com, Inc.-and to the products and services offered by that company-the books, CDs, videos, and other products sold on its website.

A trademark gives its owner the right to use that trademark only in connection with the owner's specific products or services. A trademark does not give its owner exclusive rights in the words comprising the trademark. (In other words, a trademark owner cannot prevent others from using those words for all purposes). Thus, common names (or generic terms) for products or services can never be trademarks for those products or services because those common names must are available for everyone's use to describe those products or services. An example of a generic term that could not be a trademark is SCREENWIPE for computer screen wipes. While the word SEATS may be a generic term for chairs or bleachers, it is not generic when used as a trademark for a reservation service. Because a trademark owner's rights in the trademark are connected to the products or services on which the trademark is used, the same trademark or terms can be used by more than one company selling different products or services. Toyota Motor Corporation was thus allowed to keep LEXUS as a trademark for its luxury automobiles despite Mead Data Central Inc. having the trademark LEXIS for its computerized legal research.

A trademark that easily distinguishes its associated products or services because it is unique and distinctive is a "strong" trademark. Conversely, a weak trademark is one that is neither distinctive nor unique. Companies that select and use distinctive trademarks benefit from the broad protection given to strong trademarks; on the other hand, weak trademarks are entitled to little, if any, protection.

The weakest trademarks are descriptive marks-marks that tell us something about the product or service by describing its characteristics, uses, qualities, or other associated aspects. For example, "Internet Toy Store" could not be a trademark for a website that sells toys because "Internet Toy Store" explains where the store is located (the Internet) and what it sells (toys). Descriptive words acquire distinctiveness (and can then be trademarked) only when consumers associate the descriptive words with the particular products or services. This consumer association is called "secondary meaning." Put another way, the public must associate a particular product or service with the word that serves as the trademark. Generally, this secondary meaning or distinctiveness develops over time as the trademark owner uses the trademark with a particular product or service. Because it takes considerable time and money to develop trademark rights in descriptive words, it is not wise to choose a "descriptive word" trademark.

The strongest word trademarks are coined words, which are invented specifically to be trademarks (KODAK cameras, ACURA cars, or XEROX photocopiers). Arbitrary trademarks are those using common words that have no relationship to the products or services for which they act as trademarks (AMAZON.COM for an online store selling books, CDs, and videos, and APPLE computers). The next strongest marks are suggestive trademarks, which suggest a quality or characteristic of the product (SUNKIST oranges, LONDON FOG raincoats, and COPPERTONE suntan lotion).

A company acquires ownership in a trademark if it is the first to actually use the trademark in the sale of its products or services in interstate commerce[2]. A company that just uses the trademark develops "common law" trademark rights in those geographic locations where the company uses the trademark. Registering the trademark with the United States Patent and Trademark Office (PTO) gives the company additional benefits and rights-including the right to use the trademark nationwide, even if the trademark is currently used in just a few states[3]. Trademark rights can last indefinitely as long as the trademark owner continues to use the trademark to identify its products and services[4].

The first to use a trademark, the "senior" user, has the right to stop "junior" users from using the same or similar trademarks that are likely to cause consumers to confuse those trademarks with the senior user's trademark. The trademark owner of a famous trademark can also stop another company's use of the same trademark even in connection with non-competitive and unrelated products or services if that use dilutes (or lessens) the distinctive quality of the famous trademark because of "blurring," which occurs when the famous trademark loses its power to identify and distinguish the products or services of the senior user. The recently enacted Anticybersquatting Consumer Protection Act (ACPA) provides trademark owners with another legal weapon to protect their trademarks against Internet activities involving their trademarks. The ACPA allows a trademark owner in some circumstances to obtain another company's domain name.

Domain Names

Given what you now know about trademark law, would you advise Design Works that it should be able to keep its domain name, designworks.com, in a dispute with The Works? Or would you advise your company to transfer designworks.com to The Works because it has a registered trademark in DESIGN WORKS? Your answer depends on several factors, including the rights that each company has in the trademark DESIGN WORKS.

This Design Works/The Works dispute points to the inherent conflict between domain names and trademarks. Again, more than one company can use the same trademark if each is using the trademark on different products or services and consumers are not likely to be confused by the multiple uses. However, each domain name, which is the Internet address for websites, is unique. Domain names consist of two parts: the top-level domain, which is the suffix (.com) and a secondary level domain, which is the remainder of the address ("designworks"). The secondary level domain is usually the company's trademark, the company name, or some word associated with the domain name owner or its products. While there are other top-level domains (.org for non-profit organizations; .edu for educational institutions; .net for networks, and .gov for governmental agencies), ".com" has the most stature for commercial business and is the preferred top-level domain name for businesses. Unlike trademarks, only one company can use the "designworks.com" domain name.

The trademark/domain name conflict is further enhanced by the fact that domain names are registered on a first-come, first-served basis through organizations governed by the Internet Corporation for Assigned Names and Numbers (ICANN)[5]. The registering organizations (registrars) do not determine whether a requested domain name conflicts with a trademark owned by someone other than requestor for the domain name. Registrars only register the domain name.

Comparing Trademark Rights

The trademark rights that Design Works and The Works each have in DESIGN WORKS are significant in determining which company is entitled to the designworks.com domain name. While Design Works has a common law trademark in DESIGN WORKS because it has used that trademark in connection with its design services for the last five years, The Works has a registered trademark in DESIGN WORKS. If The Works had used the trademark and had obtained the trademark registration before Design Works ever started using DESIGN WORKS as its trademark and domain name, The Works would have superior rights in the trademark DESIGN WORKS.

In such circumstances, The Works would claim basic trademark infringement- Design Works' use of designworks.com infringes on The Works' trademark in DESIGN WORKS. To win on its claim, The Works must establish that the designworks.com domain name is likely to confuse consumers into believing a connection exists between The Works and Design Works. Courts determine whether a "likelihood of consumer confusion" exists by comparing the similarities of the two trademarks, the two companies' products or services (whether those products or services are competitive, related, or unrelated), and the companies' marketing channel; and by determining the strength of the senior user's trademark, whether consumers have been actually confused, and the junior user's reasons for selecting its trademark. The Works' contention that there would be a likelihood of consumer confusion (and therefore trademark infringement) by Design Works uses of its domain name is supported by three factors:

• The domain name (designworks.com) is identical to The Works' registered trademark (DESIGN WORKS).

• The Works has a "strong" trademark. The Works has used its registered trademark for some time. DESIGN WORKS would be classified as a "suggestive" trademark because it suggests a quality or characteristic of the advertising and promotional services offered by The Works-that good design would "work" in advertising and promotion and that the company offers the "works" (all services) with respect to design services.

• The companies market their services through the same marketing channel, the Internet.

Design Works' argument that there is no likelihood of consumer confusion is premised on the fact that its services (computer product design) are different from those offered by The Works (advertising services). Generally in trademark infringement actions, related services are more likely than unrelated services to confuse the public. However, courts have recognized that even dissimilar Internet services can potentially confuse the public because of the nature of the Internet; an Internet user is more likely to assume a common sponsorship when trademarks used at different websites are similar. Finally, the trend in domain name disputes is to favor trademark owners with senior rights. Under these circumstances and given its strong rights in the trademark DESIGN WORKS, The Works is in an excellent position to obtain the designworks.com domain name.

The result is more uncertain if both The Works and Design Works each have rights in the trademark DESIGN WORKS, and neither company has superior rights. Suppose that The Works just started using the trademark DESIGN WORKS at the same time as (or even shortly after) Design Works began using the DESIGN WORKS trademark and the designworks.com domain name, and that The Works obtained its trademark registration in DESIGN WORKS only four years ago. The two companies' trademark rights in DESIGN WORKS could co-exist because each uses the trademark in connection with different services (computer product design services vs. advertising and promotional services). While each has valid trademark rights in the trademark DESIGN WORKS, Design Works was first to obtain the domain name "designworks.com." When both companies involved in the dispute have legitimate rights in the trademark and neither is clearly superior to the other, then the company that first obtained the domain name is generally allowed to keep the domain name.

However, if The Works had a famous or well-known trademark, it would have an additional basis for claiming designworks.com. The owner of a famous trademark can prevent uses of that trademark that "dilute" its distinctive quality, even though the junior user uses the trademark with different products or services. A famous or well-known trademark must be easily recognized by consumers as indicating the well-known brand or source. Generally, owners of famous trademarks can use dilution to stop others from using the domain names that are identical or similar to their famous marks. However, famous trademarks composed of ordinary words are examined more closely. Recognizing the Internet's role as a method of communication, courts are reluctant to grant monopoly rights in trademarks-even famous trademarks-composed of common words.

Domain Name Owner's Reason for Selecting the Domain Name

The domain name owner's reason for selecting a particular domain name is another significant factor in determining rights to domain names. A company that obtains a domain name for valid business purposes is in a better position to keep that domain name than a company that knowingly selects the domain name for improper purposes or for "bad faith" reasons. These "bad-faith" reasons include selecting the domain name of a competitor to harm that competitor and cybersquatting-or the obtaining a domain name similar to a well-known trademark to then sell it to the trademark owner. Because domain name registrars do not determine whether a requested domain name is related to existing trademarks, anyone can simply and inexpensively register well-known trademarks or company names as domain names. The trademark owner is prevented from using the domain name that is identical to its trademark because the cybersquatter owns the domain name, although the trademark owner can purchase the domain name from the cybersquatter.

Two procedures are available to a trademark owner to stop the use of domain name that was obtained for improper purposes: the administrative proceeding established by ICANN, and a lawsuit based on the Anticybersquatting Consumer Protection Act (ACPA). Both remedies allow for the transfer of the domain name to the trademark owner.

In passing the ACPA, Congress recognized that stopping cybersquatting was difficult under current trademark laws. Under the ACPA, a court can order the forfeiture or cancellation of a domain name or the transfer of the domain name to the trademark owner if (1) the trademark is famous or distinctive, (2) the domain name is "identical or confusingly similar to" the trademark, and (3) the domain name owner acted with a bad faith intent to profit from the use of the trademark by using the domain name.

More specifically, to the claim that Design Works acted with in bad faith intent by registering and using designworks.com, The Works would have to show the following:

Design Works intended to divert consumers from The Works' website to a site accessible at designworks.com for the purpose of harming the goodwill represented by The Works trademark. Design Works diverted these consumers either for commercial gain or to tarnish or disparage the trademark by creating likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the website.

• Design Works offered to sell the domain name to The Works without ever having legitimately offered any products or services at that domain name.

• Design Works provided false and misleading information when it applied for the designworks.com domain name.

• Design Works registered or acquired multiple domain names that it knew were identical or confusingly similar to trademarks or others.

A domain name owner that reasonably believes its use of the domain name is lawful does not meet the "bad faith intent to profit" standard set by the ACPA. In the case of Design Works, it could easily believe that its use of the domain name is proper because that domain name is also its company name and the trademark under which Design Works' services are sold. The reasonableness of this belief is enhanced because The Works uses the trademark DESIGN WORKS for different services and it appears that Design Works did not know of The Works' trademark when it selected the domain name. The ACPA recognizes that the domain name owner's trademark or intellectual property rights in the domain name and the domain name owners use of the domain name in connection with its products or services before registering the domain name are significant to oppose a finding of the "bad faith intent to profit."

The Works would not prevail with a claim under the ACPA because Design Works used the designworks.com domain name to legitimately conduct its business. Design Works did not try to sell the domain name to The Works or act like a cybersquatter in trying to sell other domain names. Thus, Design Works does not have the bad faith intent to profit from The Works' trademark.

The ACPA implicitly encourages trademark owners to select a distinctive trademark. Insofar as the ACPA applies only when famous or distinctive trademarks are involved. Although most businesses will not have a famous or well-known trademark, which takes time and money to develop, a company can easily obtain a distinctive trademark by selecting carefully coined, arbitrary, or even suggestive trademarks, which are inherently distinctive. Prior to the ACPA, a company might select a distinctive trademark because it was easier to protect and held greater value for the company; the ACPA provides yet another reason to select a distinctive trademark.

In addition to pursuing litigation, a trademark owner can also use the arbitration procedures established by ICANN to recover a domain name. The Uniform Dispute Resolution Policy (UDRP) applies to all domain name owners, who agree to be bound by the policy as a condition of being allowed to register a domain name. The policy creates an arbitration proceeding in which a one- or three-member panel decides who is entitled to the domain name. The trademark owner must establish that the domain name is identical or confusingly similar to the trademark, the domain name owner has no rights or legitimate interest of the domain name, and the domain name was registered and is being used in bad faith. The dispute resolution panel can impose such remedies as transferring the domain name to the trademark owner, allowing the domain name owner to keep the domain name, or canceling the domain name.

The UDRP is not a viable option for The Works because Design Works did not register or use designworks.com in bad faith; indeed, it had a legitimate interest in the words "design works." For other trademark owners, however, the UDRP can be useful because the domain name owner must participate in arbitration proceeding or lose the domain name by default, and because these proceedings are quicker and often cheaper than a court action. In typical disputes, the panel does not require a hearing, but rather bases its decision on the written arguments and evidence presented by the parties. The panel, whose costs are paid by the entity instituting the action, must render its decision within fourteen days of being appointed. The UDRP has no appeal process; a party dissatisfied with a panel's decision must pursue a court action.

In sum, Design Works could keep its domain name if its rights in the trademark DESIGN WORKS were comparable to The Works' trademark rights and it obtained that domain name for a legitimate reason. However, The Works would have a strong claim to the designworks.com domain name if The Works could establish it has superior trademark rights in DESIGN WORKS, or if that trademark were famous, or if Design Works obtained the domain name to cybersquat or to compete unfairly with The Works.

Metatags

The Works complained about Design Works' use of the words "design works" in its website metatags and demanded that deletion. Should Design Works be allowed to use "design works" in its metatags even if The Works' trademark is DESIGN WORKS? When can a company use words in its website metatags that are also another company's trademarks without violating the trademark owner's rights? Again the answer depends on the website owner's reasons for using the trademarks its metatags.

Metatags pose a different issue than domain names because metatags are invisible to the consumer and do not directly influence the consumer. Metatags, in HTML [6]format describe the website's contents either through keywords relating to its contents or through an actual description of its contents. The Internet search engines that consumers rely upon for search requests examine website metatags to determine which websites correspond to the search terms entered. The search engine displays a request-matching list of websites ranked according to the relative frequency that key words or phrases appear in the metatags.

A company could divert consumers to its website by including its competitor's trademark in its metatags. Consumers searching for the competitor's trademark would be given information on both companies. Although consumers who access both websites may not be confused into believing the two companies are connected, consumers may be lured from the trademark owner's site to the other company's website. Using a competitor's trademarks in metatags for this purpose trades off of the trademark owner's acquired goodwill. Design Works would not be allowed to use "design works" in its metatags if its aim is to trick Internet users into visiting its website instead of The Works' website.

However, Design Works could use The Works' trademark in its metatags if the language accurately described the website contents or referred to Design Works' trademark. Thus, another company's trademark can be used in metatags if the language identifies fairly the contents of the website. Design Works uses the words "design works" in its metatags to identify the contents of its website and to serve as relevant keywords. "Design works" are also the company's business name and the trademark under which it offers its services. This use of 'design works" in Design Works metatags would be allowed even though the words are also The Works' trademark.

Other companies' trademarks can be used in metatags are when they describe the products or services offered by the website owner, or when the website owner uses the trademarks in good faith to index or catalog the contents of the website. For example, a former Playboy model and Playmate of the Year was allowed to use "playboy" and "playmate" in her metatags because the words referenced her identity. Another acceptable metatags use of another company's trademarks could occur in describing (accurately) the contents of a website even one critical of the trademark owner. A dissatisfied client-who posted websites critical of an interior designer was allowed to use the designer's name and trademark in the metatags of the websites because the trademark used in the metatags identified fairly the website contents, which provided very negative information and opinions about the designer[7].

Design Works can use words in its metatags that are The Works' trademark when such language accurately identities the website contents of Design Works, and the company is not trying to divert potential customers from The Works' website.

Website Content

The last issue Design Works faces is Hewlett Packard's objection to the statement that the "Design Works' management team was once part of the Hewlett Packard Design Team"; Hewlett Packard did not authorize Design Works to use its famous trademark, HEWLETT PACKARD, on Design Works' website. The question raised by this reference to Hewlett Packard is this: Under what circumstances can a trademark be used on another company's website without infringing or otherwise violating the trademark owner's rights in its trademark?

Design Works can use another company's trademark, such as HEWLETT PACKARD, if it makes "fair use" of that trademark by using it descriptively in the sense of describing a person or place or to describing an attribute of a product or service. The reference to HEWLETT PACKARD in Design Works' website provides accurate historical information about Design Works' management and further identifies the company's management team.

Design Works' situation is similar to that of a former Playboy Playmate, who accurately identified herself as Playmate of the Year for 1981 on her website. Playboy objected to her website use of its famous trademarks (PLAYBOY, PLAYMATE and PLAYMATE OF THE YEAR) in her reference to being a former Playmate of the Year. Her use, however, was held not to infringe on the Playboy's trademarks because she identified herself accurately and could not otherwise identify as the Playmate of the Year without resorting to absurd descriptions. That she had placed disclaimers on her website stating that her website was not endorsed, sanctioned, or approved by Playboy was significant in finding she did not violate Playboy's trademark rights.

Design Works should be allowed to keep the Hewlett Packard reference, which merely identifies the company's management team. Design Works could strengthen its position if it included a disclaimer on its website stating that Design Works is not related to, or sponsored by Hewlett Packard.

In short, a company can use another's trademark on its website if such use is fair in that it is used to describe a product or service or to identify a person.

Conclusion

Companies conducting business through Internet websites must recognize how trademark law can significant affect their domain name, website metatags, and website content. While a company's domain name can be the same as another company's trademark, the domain name owner must have trademark rights in the words comprising the domain name and it must select the domain name for legitimate business reasons. Using another company's trademark in your website metatags or on the site itself is allowed when that use is a fair use because it accurately describes the website contents or the products or services offered by the company at that website.

* Darla Anderson is a sole practitioner specializing in intellectual property and Internet law. Peter J. Bezek is managing partner of Foley & Bezek LLP a Santa Barbara law firm specializing in commercial business litigation including Internet and patent/trademark litigation, lender liability, business competition and lost profit cases. Foley & Bezek, LLP and the Law Offices of Darla Anderson have partnered on several intellectual property litigation cases.