TRADEMARK, UNFAIR COMPETITION & CONSUMER PROTECTION - FALL 2006
Course Syllabus and Supplementary Materials
Peter B. Maggs
This course is scheduled to meet on Mondays, Tuesdays, and Wednesdays from in 11:00 to 11:50 in Room F.
The materials for this course are: (1) Maggs & Schechter, Trademark and Unfair Competition Law, Cases and Comments, 6th Edition (2002) and (2) Schechter, Selected Statutes on Intellectual Property (latest available edition).
Whenever the casebook or a case mentions a section of a statute or of the Restatement of Unfair Competition, you should study the text of the section printed in Selected Statutes. When you have time, you should read not just the sections mentioned, but the complete statutes in which the sections appear.
Grades in this course will be based entirely upon the final examination. The exam will be completely open book. You may use a computer to type your final exam. You also will be able to access materials on your hard disk during the examination, unless there is a change in law school examination rules between now and the time of the examination. You may not connect to the law school network nor the Internet during the examination, except to the extent necessary to turn in your examination..
If you take a makeup or late exam you should know: (1) your anonymity may be compromised, since I must start grading the bulk of the exams immediately to meet grading deadlines and (2) support by the law school computer staff may not be available.
This syllabus, some old exams from this course, and some information about me may be found at my World Wide Web site:
http://www.uiuc.edu/ph/www/p-maggs/
You can generally find me in my office, Room 120, on the first floor of the faculty office wing, when I am not either teaching this class or my other class, Contracts (Monday 9:00 to 9:50 & 4:00 to 4:50, Tuesday 9.00 to 9:50; Wednesday 9:00 to 9:50), or at a faculty or committee meeting (unpredictable times).
You can send me email through the law school computer system or through the Internet; I check and reply to my email regularly.
My email address is: p-maggs@uiuc.edu
My office telephone is: 333-6711.
COURSE OUTLINE AND ASSIGNMENTS
(Generally we will cover one the “units” below in each class. Page numbers refer to pages in the casebook. Case names, e.g. “Microsoft,” “California Innovations” are references to cases in the “Supplementary Materials” below.)
(My thanks to my coauthor, Professor Roger Schechter of George Washington University, for sharing his syllabus and supplementary materials.)
UNIT TOPIC PAGES
1. The Right to Compete. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-13; Res. § 1
2. Interference With Contractual Relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-25
3. Protection of Unregistered Trademarks. . . . . . . . . . . . . . . . . . . . . . . .26-40, Res. §§ 9-12; 18-19
4. Registration of Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41-57
5. Problem Trademarks: Factually Informative Marks, Generic Terms. . . . . . . . . . .58-69; Res. §15
6. Generic Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69-88, Microsoft
7. Descriptive Marks; Secondary Meaning. . . . . . . . . . . . . . . . . . . . . . . . . . 88-103, Res. §§ 13-14
8. Descriptive Marks, Incontestability, Suggestive Marks. . . . . . . . . . . . . . . . . . . . . . . . . . .103-118
9. Personal Names, Geographic Descriptions, Factually Inaccurate Marks. . . . . . . . . . . . . .118-132
10. False, Deceptive, and Misleading Marks. . . . . . . . . . . . . . . . . .132-143, California Innovations
11. Confusing Marks; Immoral, Scandalous, and Disparaging Marks. . . . . . 169-178, Pro-Football
12. Packaging and Configuration of Goods; Distinctiveness. . . . . . . . . . . . . . . . 179-208, Res. § 16
13. Trade Dress Functionality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 208-227, Res. § 17, Talking Rain
14. Aesthetic Functionality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .227-249
15. Functionality, State Law Protection of Configuration of Goods. . . . . . . . . . . . . . . . . . . 249-268
16. Infringement, Likelihood of Confusion . . . . . . . . . . . . . . . . . . . . . . . . . . .269-285, Res. § 20-23
17. Reverse Likelihood of Confusion . . . . . . . . . . . . . . . . . . . . 285-297, Peaceable Planet, Dastar
18. Promotional Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297-310
19. Geographically Remote Uses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310-326, Res. § 19
20. Contributory & Vicarious Infringement . . . . . . . . . . . . . . . . . . . . . . . . . 326-334, Res. §§ 26-27
21. Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .334-342, Moseley, Trademark Act §43(c)
22. Dilution (continued). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .354-381
23. Dilution (continued further). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .381-398
24. Genuine Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411-434, Res. § 24
25. Comparative Advertising; Use for Comment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .436-454
26. Parody. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455-478
27. Parody; Fair Use. . . . . . . . . . . . . . . . . . . . . . . . . . . 479-490, Res. § 28, KP Permanent Makeup
28. Domain Names. . . . . . . . . . . . . . . . . . . .543-565, Trademark Act § 43(d), Interactive Products
29. Domain Names; Dispute Resolution. . . . . . . . . . . . . . . . . . . . . 565-592, Bosley Medical Group
30. Other Internet Trademark Issues. . . . . . . . . . . . .593-602, Playboy v. Netscape, 1-800 Contacts
31. Right of Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .613-632, Res. §§ 46-49
32. Right of Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632-661
33.Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .670-677, 683-690, 696-701
Res. §§ 39-44
Uniform Trade Secrets Act (in Selected Statutes)
Economic Espionage Act (in Selected Statutes)
34. Trade Secrets; Misappropriation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 729-743
35. Misappropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .743-765
36. Competitor Remedies for False Advertising Under §43(a). . . . . . . . . . . . .766-791, Res. §§ 2-3
37. False Advertising, Disparagement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .791- 812
38. Federal Trade Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .865-889
39. Federal Trade Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .890-918
40. Federal Trade Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .918-932, 937-951
42. Federal Trade Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .951-970
SUPPLEMENTARY MATERIALS
MICROSOFT CORPORATION, v. LINDOWS.COM, INC.
United States District Court, Western District of Washington, 2002.
2002 U.S. Dist. LEXIS 24616; 64 U.S.P.Q.2D 1397.
COUGHENOUR, CHIEF DISTRICT JUDGE:
Microsoft Corporation, the world's leading producer of personal computer operating systems, alleges that Lindows.com's use of a "copy cat" trade name which differs by only one letter from Microsoft's senior Windows mark violates trademark law because Lindows.com is trading off of the goodwill of the Windows trademark, causing confusion among prospective purchasers of Windows products and diluting the ability of Microsoft's famous trademark to distinguish its products from those of other producers. * * * Presently before the Court, is Microsoft's Motion for Preliminary Injunction based on its Lanham Act claims.
FACTS
I. Computer Terminology and Brief History of Windows-based Operating Systems
This case involves two competing operating system products: Microsoft Windows and Lindows OS. An operating system is essentially the command center of a personal computer, controlling the allocation and use of computer resources (such as central processing unit time and main memory and disk space) and supporting the functions of software programs, or applications, that perform specific tasks such as wordprocessing. * * * When software developers write software applications, they rely on pre-fabricated blocks of programming code contained within a specific operating system, and as a result, an application written for a specific operating system generally cannot be run on another operating system. See Microsoft I, 84 F. Supp. 2d at 12-13, 20. Software applications' lack of cross-operating system compatibility presents a major obstacle to entry into the operating system market, see id. at 19-22 (describing applications barrier to entry), and provides the primary motivation for developing the Lindows OS product, * * *
The personal computer revolution that took place in the late 1970s and early 1980s is a captivating story in its own right, but most of it is beyond the scope of this Order. It suffices to note that during this time period a number of now familiar companies were fiercely competing to develop and market computers for use by individual consumers. Microsoft, Apple, IBM, Xerox and several other companies were at the core of this rapid development of technology. The period also saw the development of several user interfaces that featured overlapping windows, including Xerox's Smalltalk software and Apple's Lisa and Macintosh operating systems. In the early 1980s, IBM, which had previously produced large mainframe computers, entered the competition with its Personal Computer, or PC. In doing so, it entered a business relationship with two companies that have since become synonymous with computer technology: Intel and Microsoft. Intel provided the microprocessor chips for IBM's original PC, and Microsoft supplied the system software known as MS-DOS, an acronym for Microsoft Disk Operating System. Microsoft's MS-DOS employed a character-based, non-graphical user interface that required the user to type specific commands in order to perform tasks such as launching applications and copying files.
With the early commercial success and user popularity of the Apple Macintosh's windows-based computer graphics, it became clear to the industry that windowing programs were destined to become the standard on every personal computer. This intensified the competition and led to what some commentators dubbed the "window wars." * * * Although Microsoft's business partnership with IBM resulted in the pre-installation of MS-DOS on approximately 40% of personal computers sold by late 1983, * * * the company aggressively joined the window wars with the announcement in November 1983 that it was developing Windows, a window manager GUI [Graphical User Interface] designed to run on the IBM Personal Computer and IBM PC-compatible computers. Microsoft experienced several delays with its production of Windows, and it was not released to consumers until 1985, in the form of Microsoft Windows 1.0. * * * Microsoft's early Windows software was not a full integration of the operating system and GUI, but rather operated "on top" of MS-DOS as a "shell" and extended its graphical capabilities. * * *
While Microsoft made an early entry into the market for windows-based user interfaces, it is undisputed that several other companies had developed interfaces with an overlapping windows feature prior to the 1985 release of Windows 1.0. Although at that time the computer industry may not have referred to a GUI's windowing capability by using the term "windows" with the same uniformity as it does today, both the trade press and general publications often referred to this revolutionary feature of personal computers as some variant of "window." * * * Following the advent of Microsoft Windows 1.0, the computer industry continued to use "windows" and "windowing" to refer to portions of a computer's graphical screen dedicated to different programs running simultaneously or partitioned in window-like boxes.
II. Microsoft Windows
Since Microsoft's release of its first version of Windows in 1985, the company has developed nine updated versions of the system software, culminating in the release of Microsoft Windows XP in 2001. 2. After ten years of developing and marketing Windows as an extension of the underlying MS-DOS operating system, Microsoft combined both functions into one product in the August 1995 release of Microsoft Windows 95. Windows 95 was greeted with immediate and immense success, selling approximately 15 million copies in the first four months of its release. The company's success with its Windows products has continued to the present day, and it now occupies a dominant position in the worldwide market for Intel-compatible PC operating systems with a greater than 90% share of the market. * * *
Ever since 1983 when Microsoft first announced the development of window manager software to extend the graphical capabilities of MS-DOS, it has promoted, sold and licensed the product and its progeny under the Windows name. As with its popular software applications Word, Excel and Office, Microsoft combines its corporate name with the specific Windows version, such as Microsoft Windows NT 4.0 or Microsoft Windows 2000. Microsoft has adhered to this branding strategy for each of the ten versions of Windows it has released.
III. Registration of the Windows Trademark
Microsoft applied for registration of its Windows trademark in August of 1990, and on January 10, 1995, the United States Patent and Trademark Office ("USPTO") issued U.S. Trademark Registration No. 1,872,264. Microsoft has also successfully registered the Windows mark for several other uses besides its operating system software. The initial registration attempt, although ultimately successful, was not as straightforward as a reader of Microsoft's Summary Judgment Memorandum might be led to believe. In fact, the initial registration attempt was rejected by the USPTO in February of 1993. In a thirty-one page Final Action dated February 17, 1993, the USPTO rejected registration of the Windows mark because it found that:
the term Windows is widely used, both by the public, consumers, and the relevant industry, to name a class of goods or a type of software, that is, a genus of goods, referred to as windows programs, or windowing software. The term Windows was in existence, and known, prior to adoption by the applicant. Since the term is a generic designation for the applicant's goods, then, no amount of evidence of de facto secondary meaning can render the term registrable.
Office Action of February 17, 1993 at 30 (Harris Decl. Ex. A, at MS000588) (emphasis in original). In a supplemental communication on February 22, 1993, the USPTO clarified a technicality from the February 17 action and reiterated its rejection of the registration attempt:
The applicant submitted sufficient evidence to present a prima facie claim of acquired distinctiveness of the mark. However, the claim of acquired distinctiveness must be refused, for the reasons stated in the Office action, namely (1) the term Windows is a generic term for a particular type of software including the applicant's goods, and (2) the evidence demonstrates that the applicant's use of the term is not exclusive. That is the term is used generically by the public and throughout the relevant industry.
Final Office Action of February 22, 1993 (Harris Decl. Ex. A, at MS000557)
The USPTO's rejection of Microsoft's registration of the Windows mark was supported by a Letter of Protest with numerous accompanying documents from Borland International, a company that had several registration applications pending for computer product trademarks containing the word "windows." After the February 22 Final Office Action, Microsoft submitted a Request for Reconsideration in August 1993 containing a thorough review of the legal arguments in the USPTO's Final Office Action, a review of the Letter of Protest's materials and a survey showing that 67% of relevant consumers identified Windows as a brand name. Microsoft also obtained Borland's pending trademark applications for approximately $ 1 million in the Fall of 1993. Borland, which had vigorously challenged Microsoft's prior attempt at registering the Windows mark, filed no protest letter in Microsoft's renewed registration efforts. In early 1995, the USPTO approved registration of the Windows trademark with no analysis or explanation for its reversal of the original decision to refuse registration.
Despite Microsoft's successful 1995 registration of the Windows trademark, many companies unaffiliated with Microsoft continue to use either the term "windows" or some portion of the term, such as "win" or "window". The use of all or part of "windows" indicates either the incorporation of graphical windows as part of the user interface or compatibility with the Windows operating system. Although Microsoft has taken efforts to enforce certain uses of its Windows trademark, it has not prevented literally hundreds of trademarks, domain names and products from incorporating all or a portion of "windows" in their names.
IV. Promotion and Sales of Microsoft Windows
Microsoft has enjoyed considerable success from the sale of Windows, receiving more than $ 36.5 billion in revenues from Windows products between fiscal years 1992 and 2001 and $ 21.7 billion in the past three fiscal years alone. During that same nine year period Microsoft issued more than 677 million licenses for its Windows products and currently has an installed user base of approximately 380 million, making it the operating system used on over 90% of the Intel-compatible personal computers in the world. The company's dominance in the operating system market is due in part to the substantial expenditures made in promoting Windows products. Since it announced the first Windows product in 1983, Microsoft has spent over a billion dollars in marketing and promotion, including over $ 200 million in fiscal year 2002 for the launch of Microsoft Windows XP.
Microsoft distributes its Windows products through a variety of channels, but the vast majority are sold directly to companies such as Dell Computer Corporation and Compaq Computer Corporation, which are known as original equipment manufacturers ("OEMs"). The OEM typically manufacturers the personal computer and installs a copy of Windows before selling the package to the consumer for a single price. * * * In addition to OEMs, Microsoft licenses Windows and Windows upgrades to corporate customers and distributes the same products directly to individual retail consumers through retail and mail order outlets and via the Internet. In 2002, approximately 5% of all Windows licenses were sold through retail outlets, including Microsoft's online store.
V. Lindows.com and Lindows OS
Lindows.com was founded in July 2001 by Michael Robertson, who also is the founder and former CEO of MP3.com, Inc. The company is developing an operating system called Lindows OS which is based on the Linux operating system and has the ability to run software applications developed for both the Linux and Windows operating systems. Lindows OS will also feature a GUI that resembles the overlapping windows GUI of Microsoft Windows. Linux is an "open-source" operating system that was created and is continuously updated by a corps of freelance software developers. The majority of Linux's ten to fifteen million users merely employ the operating system to run servers, not personal computers. Because software applications typically can only be run on the operating system for which they are written, Lindows OS presents a notable development in the computer industry and a potential means of broadening consumer options.
Lindows.com plans to release its first commercial version of Lindows OS to consumers sometime in 2002. According to Robertson, Lindows OS will be available either by downloading the software directly from Lindows.com servers or by placing an order for a CD-ROM containing the software from the company's web site--www.lindows.com. The website also indicates that the company has considered selling Lindows OS through OEM and retail channels. * * *
The web site plays a critical role in Lindows.com's planned distribution of the Lindows operating system, and it figures prominently in the company's promotional and marketing efforts. At its web site, Lindows.com prominently displays its corporate and product logos, provides links to press reports regarding its Lindows OS product and invites visitors to subscribe to a newsletter mailing list and to email the site directly. The web site also encourages visitors to link their websites to the www.lindows.com site by displaying one of several Lindows.com banner advertisements.. Finally, the Court takes judicial notice that the Lindows.com web site, which at the inception of this litigation contained no disclaimer regarding its affiliation with Microsoft, now includes the following statement at the bottom of the pages of its web site: "Lindows.com is not endorsed by or affiliated with Microsoft Corporation in any way."
VI. Microsoft's Requested Remedies
Microsoft's suit under three sections of the Lanham Act and Washington's Unfair Business Practices statute seeks both injunctive and monetary relief. * * *
PRELIMINARY INJUNCTION
* * *
I. Probability of Success on the Merits
A. Validity of the Mark
Prior to reaching the merits of the three federal trademark causes of action, the Court must determine whether the Windows trademark is a valid, protectable mark. If the term lacks sufficient distinctiveness so that it is generic, "it cannot be the subject of trademark protection under any circumstances." Filipino Yellow Pages, Inc. v. Asian Journal Publ'ns, 198 F.3d 1143, 1146 (9th Cir. 1999) * * *
1. Categories of Distinctiveness
The degree of distinctiveness of a mark is directly related to the breadth of the protection it can command, and trademark law has identified and prioritized four categories of terms with respect to their distinctiveness. In order of decreasing protection, marks can be (1) arbitrary or fanciful, (2) suggestive, (3) descriptive or (4) generic. * * *
The lines of demarcation between these four categories are not always clear, but in the present case, the parties have focused exclusively on whether the mark is generic or descriptive. This particular distinction has proved particularly nettlesome for courts, as "the difference between a generic mark and the weakest of descriptive marks may be almost imperceptible." Filipino Yellow Pages, 198 F.3d at 1151 n.5. Because the parties have presented compelling arguments that the Windows mark is generic and that it has acquired secondary meaning, drawing the line properly in this case is far more critical than in cases involving marks that are generic and lack secondary meaning. See, e.g., id.; Surgicenters, 601 F.2d at 1017-18.
2. Burden of Proof
* * * A party challenging a registered mark must show by a preponderance of the evidence that it is invalid. * * *
3. Legal Standard for Finding a Mark Generic
"A generic term is one that refers to the genus of which the particular product is a species." Comm. for Idaho's High Desert, Inc. v. Yost, 92 F.3d 814, 821 (9th Cir. 1996) (quoting Park ' N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194, 83 L. Ed. 2d 582, 105 S. Ct. 658(1985)). In other words, when a trademark's primary significance is to describe the type of product rather than the producer or source, the mark is a generic term. See Filipino Yellow Pages, 198 F.3d at 1147 (quoting Anti-Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 304 (9th Cir. 1979)). The Lanham Act itself contains a test for genericness: "The primary significance of the . . . mark to the relevant public . . . shall be the test for determining whether the . . . mark has become the generic name of goods or services on or in connection with which it has been used." 15 U.S.C. § 1064(3)(emphasis added).
The Ninth Circuit has "often relied" upon the "who-are-you/ what-are-you" test in determining whether a term is generic. Filipino Yellow Pages, 198 F.3d at 1147. If a mark answers the buyer's question "Who are you?" "Where do you come from?" then the mark is valid because a buyer understands it to refer only to a particular source of the goods or services. See id.; Surgicenters, 601 F.2d at 1016. On the other hand, when a mark answers the buyer's "What are you?" question, the mark is generic and invalid because it is identified with all such goods or services regardless of their producers. See id.; see also 2 McCarthy § 12:1.
The various embodiments of the test for genericness indicate that a specific subset of all possible consumers, "the relevant public," is the proper focus of the Court's inquiry. See, e.g., Yost, 92 F.3d at 821(affirming district court's identification of the "relevant public"); Surgicenters, 601 F.2d at 1017 (identifying "consuming public"). In the present case, Microsoft's Windows trademark is used to identify "graphical operating environment" computer programs and related items such as instruction manuals. As noted above, Microsoft Windows is designed to run only on Intel-compatible personal computers and is the operating system installed on over 90% of these machines. Thus, the Court finds that the relevant consuming public for the goods associated with the contested trademark consists of all owners and users of Intel-compatible personal computers.
Lindows.com's Evidence of Genericness
Whether a trademark is generic is a question of fact. Yost, 92 F.3d at 821. A court may rely on a variety of evidence in determining the validity of a mark, including competitors' use, plaintiff's use, dictionary definitions, media usage, testimony of persons in the trade and consumer surveys. The evidence may relate to the time period of the alleged infringement or dilution or to the time when the mark's proponent introduced its designation onto the market. Here, Lindows.com has presented evidence in five of the six categories, omitting only consumer surveys, to support its claim that the Windows trademark is generic.
a. Media Usage
A term's appearance as a generic name in both the general and trade press can serve as an indication that the consuming public perceives the term to be generic. See Surgicenters, 601 F.2d at 1017 n.17; see also Murphy Door Bed Co. v. Interior Sleep Sys., 874 F.2d 95, 101 (2d Cir. 1989). Lindows.com provided press reports from the early 1980s that referred to "window wars" and described "windows" as a favorite "buzzword" of the computer industry. Making a highly accurate forecast about the rapidly changing computer market, Business Week predicted that "windowing programs" would become a standard feature of every personal computer. In addition, advertisements for computer programs containing overlapping windows graphical displays also referred to "windows" generically in the decade preceding Microsoft's successful registration of the trademark. Both the advertisements and press articles show that the consuming public associated the term "window(s)" with a graphical feature of a computer's user interface or software application rather than with Microsoft's product prior to Windows' release in 1985 and still considered it to have some generic meaning at the time of the trademark's registration with the USPTO.
Although the widespread use of Windows products in recent years has resulted in their frequent mention by the media, this Court's search of the LexisNexis database revealed that the generic use of the term continues to appear in the press. * * *
b. Dictionary Definitions
The use of a term in dictionaries is also indicative of the public's perception of the term's meaning. The Ninth Circuit has placed significant weight on a term's dictionary definition but has been careful to emphasize that such evidence on its own is not determinative. See Filipino Yellow Pages, 198 F.3d at 1148 (quoting Surgicenters, 601 F.2d at 1015 n.11) ("While not determinative, dictionary definitions are relevant and often persuasive in determining how a term is understood by the consuming public, the ultimate test of whether a trademark is generic."). Both computer-specific and general dictionaries from the early 1980s to the present contained definitions of "window(s)" indicating it was understood by the public to have the generic meaning offered by Lindows.com. See Charles J. Sippl, Computer Dictionary 554 (4th ed. 1985) (Harris Decl. Ex. A, at MS000621) (defining "window" as "[a] software device, used in multiprocessing environments, that allows a terminal to be used to run several processes at once. The terminal screen is divided up into several windows ...."); Microsoft Computer Dictionary 481 (4th ed. 1999) (Harris Decl. Ex. D) ("window n. In applications and graphical interfaces, a portion of the screen that can contain its own document or message. In window-based programs, the screen can be divided into several windows, each of which has its own boundaries and can contain a different document (or another view into the same document)"); The Random House Dictionary of the English Language 2177 (2d ed. 1987) ("window ... n ... 11. Computers. a section of a display screen that can be created for viewing information from another part of a file or from another file").
c. Microsoft's Use of the Term
The way in which a party claiming trademark protection uses the term is also relevant to a determination of the mark's validity. See Surgicenters, 601 F.2d at 1017 n.19 (letters by Surgicenter founder recognizing the term was used in a generic sense). There is indirect evidence that Microsoft considered Windows to be generic at the time it began using the trademark. When Microsoft first released Windows in 1985, it referred to its new GUI not as "Windows" but as "Microsoft Windows 1.0." This suggests that in order to distinguish the product name from the generic class of GUI products in the market, Microsoft needed to add the company name trademark to the product name. See 2 McCarthy § 12:26 (discussing the importance of creating a generic name in addition to the trademarked brand name); see also Harley-Davidson, Inc. v. Grottanelli, 164 F.3d 806, 809 (2d Cir. 1999) ("Honda hog" as the combination of a tradename adjective with a generic name for motorcycles to create uniqueness). It is also telling that despite Microsoft's investment of hundreds of millions of dollars in promoting its Windows products and the widespread recognition and popularity of Windows in the world market for Intel-compatible personal computer operating systems, the company continues to market Windows using a logo containing both "Microsoft," "Windows" and a version-specific suffix. * * * The Court recognizes that this evidence is not nearly as strong as Dr. Reed's admissions in Surgicenters, but it is nonetheless relevant to drawing an inference regarding Microsoft's own understanding that its Windows mark might be generic.
d. Competitor's Use of the Term
The Ninth Circuit has accepted evidence of third party competitors' use of the contested term to determine whether it is generic. See Stuhlbarg, 240 F.3d at 840 (terms at issue were "widely used by third parties in the safe industry"). In its defense of a copyright suit brought by Apple Computer, Microsoft successfully argued that several companies had introduced user interfaces featuring overlapping windows prior to Microsoft's announcement of its Windows product. See Apple, 799 F. Supp. at 1017, 1024, 1027; * * * Microsoft Windows' dominance in the modern computing environment makes it easy to describe these graphical features as "windows" in hindsight, but Lindows.com's evidence makes clear that the same term was used by the industry and the press during the early development of this now-standard feature. * * *
Widespread public use of a term has also been relied upon by at least one court to rebut the presumption of validity and as well as to find the term generic. See 555-1212.com., 157 F. Supp. 2d at 1088-90 (relying on declaration that 555-1212 phone number had been used for many years to denote telephone directory services). Here, Lindows.com presents literally hundreds of computer products, software companies and trademarks that incorporate the term "windows" or a variants such as "win" or "window" in their name to support its argument that the term has taken on a second generic meaning--compatibility of software applications with the Windows operating system. * * * While this use of "windows" does refer to the type of product rather than the source, the Court finds the evidence less probative than the direct competitors' use of the windows term in the early 1980s because use of the term as an indicator of compatibility may still preserve the distinctiveness of the dominant product. There is no evidence that purchasers of WinAmp and similarly named products have ceased to associate the Windows operating system with Microsoft. Further, the "compatibility" use of a trademark could lead to a substantial weakening of trademark protection because it would effectively immunize products trading off the goodwill of a mark under the guise that they complement or are compatible with the senior mark.
Nonetheless, the sheer volume of windows-related uses in the computer industry is notable. Microsoft is correct that its decision not to prosecute all the users of its marks, is not an indication of abandonment of the mark. See Wallpaper Mfrs. v. Crown Wallcovering Corp., 680 F.2d 755, 766 (C.C.P.A. 1982). Rather, the ubiquity of "windows" variants in the computer market may tend to show the mark is generic, as "distinctiveness can be lost by failing to take action against infringers. If there are numerous products in the marketplace bearing the alleged mark, purchasers may learn to ignore the 'mark' as a source of identification." Id.,
e. Testimony of Persons in the Trade
With an admonition regarding the suspect impartiality of people associated with the trademark holder, Professor McCarthy states that the "understanding of those who are familiar with the marketplace usage of the designation in question can be helpful evidence on the genericness issue." 2 McCarthy § 12:13 (citing Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59 F.3d 902, 910 (9th Cir. 1995)). Lindows.com relies heavily on the declaration of John Dvorak, a long-time professional commentator on the computer industry. According to his declaration, the term "windows" and its variants have been used by the computer industry for two different generic meanings. First, the term "refer[s] to portions of the graphical screen dedicated to different programs running simultaneously or partitioned in window-like boxes." A more recently adopted meaning uses "windows" to "suggest compatibility with the dominant Microsoft operating system platform."
4. Conclusion for Rebuttal Evidence
[T]he Court finds that Lindows.com has met its burden of proof in rebutting the validity of the Windows trademark and thus the "presumption drops out of the case."
5. Microsoft's Arguments for Validity
Microsoft counters Lindows.com's evidence of genericness with only sparse support for its claim that Windows falls into a protectable category. See 555-1212.com, 157 F. Supp. 2d at 1089 (describing shift in burden to the trademark's proponent). Aside from disagreeing with Lindows.com's application of trademark law and attempting to distinguish the cases upon which it relies, Microsoft supplies minimal affirmative evidence to support its claim that Windows is non-generic. Rather, it repeatedly asserts that Windows is a descriptive mark that has acquired secondary meaning and is thus protectable under the Lanham Act.
a. Microsoft's Evidence
The Court first turns to the evidence submitted by Microsoft consisting primarily of several consumer surveys that show a high degree of recognition of the Windows brand among the consuming public. Consumer surveys are a common means of supporting or challenging the validity of a trademark. See 2 McCarthy § 12:14. To be effective, "the survey must be directed at the issue of consumer perception as to the significance and meaning of the designation in issue. A survey that merely tests for consumer awareness of the designation is irrelevant." Id. (quoting Stuhlbarg, 240 F.3d at 840). The Ninth Circuit has emphasized that a trial court may consider factors such as "survey design, nature of the questions asked, and the experience and reputation of the surveyor" in determining the weight to accord a survey. Stuhlbarg, 240 F.3d at 840 (citing E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1292-93 (9th Cir. 1992)). * * *
In support of its Motion for Preliminary Injunction, Microsoft submitted the Declaration of Bobbie Oglesby, the current Director of Branding for Microsoft and the former Brand Manager for Windows. The first survey mentioned was conducted for Microsoft in 1999 and shows that 93% of personal computer users recognized the Windows brand. No exhibits are attached to demonstrate the methodology or explain the survey design, and without such a foundation, the Court has no alternative but to ascribe a bare minimum of weight to the result. The next survey described by the Oglesby Declaration was conducted by Landor Associates. Landor surveyed "on-line" consumers in early 2001 and concluded that Windows was the No. 1 brand overall and No.3 in distinctiveness. The Declaration attaches a copy of the ImagePower brand survey results which displays the top twenty "Marks of Distinction" in ten countries as published in the July 2001 issue of Wired Magazine. Based on the one page exhibit, it is impossible for the Court to analyze the Declaration's assertion that "Windows ranked No. 1 overall" because the submitted evidence lacks meaningful information about survey methodology. Accordingly, the Court finds it to be of little probative value in showing that Windows is a protectable trademark. The final survey mentioned in the Oglesby Declaration was also conducted by Landor Associates in 2001 and showed that "in the United States, almost 80% of the general public is aware of the Window (sic) brand." As discussed in Stuhlbarg, such "consumer awareness" surveys merely "beg[] the question." 240 F.3d at 840. The Court therefore declines to give any substantial weight to this survey, or the others described in the Oglesby Declaration.
Finally, Microsoft's Reply Memorandum includes a copy of the survey conducted for it by IntelliQuest in 1993. This survey is completely substantiated and explained by Peter Zandan, who supervised and designed the questionnaire. The purpose of the survey was to determine if consumers who had purchased computer software in the past 12 months or were likely to purchase software in the next three months recognized "Windows" primarily as the product of a single company rather than the name of a type of product put out by more than one company. The result of this survey indicated that 100% of respondents were familiar with "windows" in the computer context and that approximately 67% of the relevant consumer population identified "Windows" as the "brand name of a product put out by one company." The IntelliQuest survey is due far more weight by the Court than the three surveys discussed above because it is supported by exhibits demonstrating the survey's methodology, questions and design.
Nonetheless, the 1993 survey's probative value is limited by the fact that it was taken approximately fourteen years after the introduction of Xerox's Smalltalk software which pioneered the overlapping windows feature of user interfaces and ten years after Microsoft first announced its Windows product. Lindows.com has submitted a substantial volume of evidence in support of the generic use of "windows" by the computer industry and the press in the early 1980s. This evidence predates the IntelliQuest survey by at least ten years and raises significant questions about the genericness of the term even before Microsoft announced Windows in 1983. A particularly high burden rests on the holder of the trademark who is advancing an argument that the mark has been "reclaimed from the public domain by a change in consumer usage over a long period of time." 2 McCarthy § 12:30-12:32 (discussing the Singer and Goodyear cases). * * * As Lindows.com's evidence shows, the term "windows" retains at least some generic meaning today, suggesting that Microsoft has not completely reclaimed the term from the public domain
.
b. Microsoft's Other Arguments
In addition to the four surveys, Microsoft's Reply Memorandum attempts to rebut several of the legal arguments and distinguish the case law upon which Lindows.com relied to advance its claim that Windows is generic. * * *
Microsoft * * * disagrees with Lindows.com's application of the "who-are-you/ what-are-you" test for genericness. Arguing that "windows" does not represent the genus of operating system software because no consumer would go to a store and ask for "a windows" when she wants an operating system, * * * Although "windows" does not answer the "what are you" question persuasively, this is not dispositive, as the Ninth Circuit has not held that it is the exclusive test for genericness. See Filipino Yellow Pages, 198 F.3d at 1147 ("what-are-you" test is "often relied upon").
The difficulty in applying the "what-are-you" test is that it favors an affirmative response for nouns rather than adjectives. As noted by Professor McCarthy, the "part of speech" test does not accurately describe the case law results. See 2 McCarthy § 12:10. Thus, a generic adjective can exist if it names the most important feature or purpose of a product. Id. (citing the Matchbox toy vehicles example). * * * In short, the "what are you" test does not provide a conclusive answer to the Court's inquiry into whether Windows is generic or descriptive.
As the Court mentioned earlier, there is only a fine line separating generic and descriptive marks--those which either name a thing or describe a thing. Yet, merely arguing that because a term describes some aspect of a thing it must be descriptive, and hence non-generic, grossly "misunderstands and oversimplifies the inquiry at stake for trademark purposes." Mil-Mar Shoe Co. v. Shonac Corp., 75 F.3d 1153, 1158 (7th Cir. 1996) (finding "Warehouse Shoes" to be generic by focusing on dictionary definitions and third party use). "Assuming that any element of description within a mark automatically precludes that mark from being found to be generic is factually and legally inaccurate ...." Id. at 1157. The proper focus of an inquiry into a mark's distinctiveness is whether it is a "kind, sort, genus or subcategory" as opposed to whether it "convey[s] a quality or characteristic of a product." Henri's Food Prods. Co. v. Tasty Snacks, Inc., 817 F.2d, 1303, 1306 (7th Cir. 1987). In Henri's Food Products, the Seventh Circuit addressed whether "tasty" (or "tas-tee") was generic and concluded it was not because it "merely describes the quality of salad dressing." Id. To demonstrate the proper distinctiveness analysis, the court contrasted "French dressing" with "tasty salad dressing." Clearly, "French" represented a kind, subtype or category of dressing, while "tasty" did not. Much like the "French dressing" example, "windows" does not describe a quality of software applications, but rather signifies a "kind, sort, genus or subcategory."
* * *
B. Conclusion as to Validity
The volume of evidence required to show, or disprove, the validity of a trademark is not well-suited to the early stages of litigation such as this motion for preliminary injunctive relief. Given the urgency of Microsoft's request for equitable relief, the Court need not at this time make a conclusive determination as to whether the Windows mark is in fact generic. Rather, the Court's role in deciding a motion for preliminary injunction is to evaluate the limited record before it and make a determination regarding the moving party's probability of success on the merits. Because the validity of the Windows mark is a threshold issue upon which all subsequent analysis of dilution, infringement and unfair competition depends, the Court finds that the compelling arguments made by both parties leave it weighing two roughly equal bodies of evidentiary support. As a result, the Court concludes that, at most, Microsoft has raised serious questions about the validity of its trademark, but has fallen short of showing probable success. * * *
* * *
CONCLUSION
A protectable trademark is the cornerstone upon which a successful action under the Lanham Act is built. Lindows.com has presented sufficient evidence to rebut the presumption of validity of the Windows mark. Analysis of Microsoft's affirmative evidence in support of validity yields at most the conclusion that Microsoft has only raised serious questions about the merits of its case. The Court also finds that the balance of hardships does not tip sharply in favor of Microsoft.
It is necessary to emphasize that, at this nascent stage in the litigation, the Court's determination that there are serious questions regarding whether Windows is a non-generic name and thus eligible for the protections of federal trademark law is not a conclusive finding that the trademark is invalid. Rather, the procedural posture of the motion for preliminary injunction merely indicates that the moving party has failed to make a sufficient showing of likelihood of success on the merits. This finding, in conjunction with the Court's determination that the balance of hardships does not sharply favor Microsoft, requires the Court to DENY the motion.
Note
On May 13, 2002, the Court denied Microsoft’s motion for reconsideration and held that it had applied the correct legal standard for genericness in ruling on the motion for a preliminary injunction. See, 2002 U.S. Dist. Lexis 26307, 66 U.S.P.Q.2d 1371 (W.D. Wash. 2002). Eventually Microsoft succesfully brought ex parte actions agains Lindows in foreign countries. On July 19, 2004, the parties settled all litigation between them. Lindows agreed to change its name to “Linspire” and reportedly received $20 million from Microsoft.
< http://news.com.com/Microsoft+pays+to+end+Lindows+suits/2100-1016_3-5274944.html>
In re CALIFORNIA INNOVATIONS, INC.
United States Court of Appeals, Federal Circuit, 2003.
329 F.3d 1334, 66 U.S.P.Q.2d 1853.
Rehearing and Rehearing En Banc Denied, Aug. 20, 2003.
RADER, Circuit Judge.
California Innovations, Inc. (CA Innovations), a Canadian-based corporation, appeals the Trademark Trial and Appeal Board's refusal to register its mark--CALIFORNIA INNOVATIONS. Citing section 2(e)(3) of the Lanham Act, 15 U.S.C. § 1052(e)(3) (2000), the Board concluded that the mark was primarily geographically deceptively misdescriptive. Because the Board applied an outdated standard in its analysis under § 1052(e)(3), this court vacates the Board's decision and remands.
I.
CA Innovations filed an intent-to-use trademark application, Serial No. 74/650,703, on March 23, 1995, for the composite mark CALIFORNIA INNOVATIONS and Design. The application sought registration for the following goods:
automobile visor organizers, namely, holders for personal effects, and automobile trunk organizers for automotive accessories in International Class 12; backpacks in International Class 18; thermal insulated bags for food and beverages, thermal insulated tote bags for food or beverages, and thermal insulated wraps for cans to keep the containers cold or hot in International Class 21; and nylon, vinyl, polyester and/or leather bags for storage and storage pouches in International Class 22.
* * * The mark was published for opposition on September 29, 1998. No opposition was ever filed.
In July 1999, the PTO reasserted jurisdiction over the application under 37 C.F.R. § 2.84(a) and refused registration under § 1052(e)(3), concluding that the mark was primarily geographically deceptively misdescriptive. Applicant filed a timely notice for reconsideration with the PTO and a notice of appeal to the Board in November 2000. After the PTO refused to reconsider its decision, CA Innovations renewed its appeal to the Board. On February 20, 2002, the Board upheld the PTO's refusal to register applicant's mark and concluded that the mark was primarily geographically deceptively misdescriptive.
This court reviews the Board's "legal conclusions, such as its interpretations of the Lanham Act," without deference. In re Hiromichi Wada, 194 F.3d 1297, 1299, 52 USPQ2d 1539, 1540 (Fed.Cir.1999). Under a proper legal standard, the Board's determination of geographic misdescription is a factual finding. See In re Compagnie Generale Maritime, 993 F.2d 841, 845, 26 USPQ2d 1652, 1654 (Fed.Cir.1993). This court upholds the Board's factual findings "unless they are unsupported by substantial evidence." Recot, Inc. v. M.C. Becton, 214 F.3d 1322, 1327, 54 USPQ2d 1894, 1897 (Fed.Cir.2000). This court has jurisdiction over this petition for review under 15 U.S.C. § 1071 (2000).
II.
The Lanham Act addresses geographical marks in three categories. The first category, § 1052(a), identifies geographically deceptive marks:
No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it--(a) Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.
15 U.S.C. § 1052(a) (2000) (emphasis added).
Although not expressly addressing geographical marks, § 1052(a) has traditionally been used to reject geographic marks that materially deceive the public. A mark found to be deceptive under § 1052(a) cannot receive protection under the Lanham Act. To deny a geographic mark protection under § 1052(a), the PTO must establish that (1) the mark misrepresents or misdescribes the goods, (2) the public would likely believe the misrepresentation, and (3) the misrepresentation would materially affect the public's decision to purchase the goods. See In re Budge Mfg. Co., 857 F.2d 773, 775, 8 USPQ2d 1259, 1260 (Fed.Cir.1988). This test's central point of analysis is materiality because that finding shows that the misdescription deceived the consumer. See In re House of Windsor, 221 USPQ 53, 56-57, 1983 WL 51833 (TTAB 1983).
The other two categories of geographic marks are (1) "primarily geographically descriptive" marks and (2) "primarily geographically deceptively misdescriptive" marks under § 1052(e). The North American Free Trade Agreement, see North American Free Trade Agreement, Dec. 17, 1992, art. 1712, 32 I.L.M. 605, 698 [hereinafter NAFTA], as implemented by the NAFTA Implementation Act in 1993, see NAFTA Implementation Act, Pub. L. No. 103- 182, 107 Stat. 2057 (1993), has recently changed these two categories. Before the NAFTA changes, § 1052(e) and (f) stated:
No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it--
(e) Consists of a mark which ...
(2) when used on or in connection with the goods of the applicant is primarily geographically descriptive or deceptively misdescriptive of them.
* * * * * *
(f) Except as expressly excluded in paragraphs (a)-(d) of this section, nothing in this chapter shall prevent the registration of a mark used by the applicant which has become distinctive of the applicant's goods in commerce.
15 U.S.C. § 1052(e)(2) and (f) (1988). The law treated these two categories of geographic marks identically. * * * Upon a showing of acquired distinctiveness, these marks could qualify for the principal register.
Thus, in contrast to the permanent loss of registration rights imposed on deceptive marks under § 1052(a), pre-NAFTA § 1052(e)(2) only required a temporary denial of registration on the principal register. Upon a showing of distinctiveness, these marks could acquire a place on the principal register. In re Dial-A-Mattress Operating Corp., 240 F.3d 1341, 1347, 57 USPQ2d 1807, 1812 (Fed.Cir.2001). * * *
In the pre-NAFTA era, the focus on distinctiveness overshadowed the deceptiveness aspect of § 1052(e)(2) and made it quite easy for the PTO to deny registration on the principal register to geographically deceptively misdescriptive marks under § 1052(e)(2). On the other hand, the deception requirement of § 1052(a) protected against fraud and could not be overlooked. Therefore, the PTO had significantly more difficulty denying registration based on that higher standard. See generally Andrew P. Vance, Can't Get There From Here: How NAFTA and GATT Have Reduced Protection for Geographical Trademarks, 26 Brook. J. Int'l L. 1097 (2001).
Before NAFTA, in In re Nantucket, 209 USPQ 868, 870, 1981 WL 48122 (TTAB 1981), the Board used a three-prong test to detect either primarily geographically descriptive or deceptively misdescriptive marks. Under the Board's test, the only substantive inquiry was whether the mark conveyed primarily a geographical connotation. On appeal in In re Nantucket, this court's predecessor rejected that test:
The board's test rests mechanistically on the one question of whether the mark is recognizable, at least to some large segment of the public, as the name of a geographical area. NANTUCKET is such. That ends the board's test. Once it is found that the mark is the name of a known place, i.e., that it has "a readily recognizable geographic meaning," the next question, whether applicant's goods do or do not come from that place, becomes irrelevant under the board's test, for if they do, the mark is "primarily geographically descriptive"; if they don't, the mark is "primarily geographically deceptively misdescriptive." Either way, the result is the same, for the mark must be denied registration on the principal register unless resort can be had to § 2(f).
In re Nantucket, Inc., 677 F.2d 95, 97-98 (CCPA 1982). Thus In re Nantucket, for the first time, set forth a goods-place association requirement. Id. at 99-100. In other words, this court required a geographically deceptively misdescriptive mark to have more than merely a primary geographic connotation. Specifically, the public must also associate the goods in question with the place identified by the mark--the goods-place association requirement. However, this court did not require a showing that the goods-place association was material to the consumer's decision before rejection under § 1052(e).
In In re Loew's Theatres, Inc., 769 F.2d 764, 767-69 (Fed.Cir.1985), this court expressly permitted a goods-place association without any showing that the place is "well-known" or "noted" for the goods in question. The Loew's court explained: "[I]f the place is noted for the particular goods, a mark for such goods which do not originate there is likely to be deceptive under § 2(a) and not registrable under any circumstances." Id. at 768, n. 6. Clarifying that pre-NAFTA § 1052(e)(2) does not require a "well-known" place, this court noted:
The PTO's burden is simply to establish that there is a reasonable predicate for its conclusion that the public would be likely to make the particular goods/place association on which it relies.... The issue is not the fame or exclusivity of the place name, but the likelihood that a particular place will be associated with particular goods.
As noted, the Lanham Act itself does not expressly require different tests for geographically misleading marks. In order to implement the Lanham Act prior to the NAFTA amendments, the PTO used a low standard to reject marks for geographically deceptive misdescriptiveness under pre-NAFTA § 1052(e), which was relatively simple to meet. In contrast, the PTO required a much more demanding finding to reject for geographical deception under § 1052(a). This distinction was justified because rejection under subsection (a) was final, while rejection under pre-NAFTA subsection (e)(2) was only temporary, until the applicant could show that the mark had become distinctive. The more drastic consequence establishes the propriety of the elevated materiality test in the context of a permanent ban on registration under § 1052(a).
NAFTA and its implementing legislation obliterated the distinction between geographically deceptive marks and primarily geographically deceptively misdescriptive marks. Article 1712 of NAFTA provides:
1. Each party [United States, Mexico, Canada] shall provide, in respect of geographical indications, the legal means for interested persons to prevent:
(a) the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a territory, region or locality other than the true place of origin, in a manner that misleads the public as to the geographical origin of the good. . . .
See NAFTA, Dec. 17, 1992, art. 1712, 32 I.L.M. 605, 698. This treaty shifts the emphasis for geographically descriptive marks to prevention of any public deception. Accordingly, the NAFTA Act amended § 1052(e) to read:
No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it--
(e) Consists of a mark which (1) when used on or in connection with the goods of the applicant is merely descriptive or deceptively misdescriptive of them, (2) when used on or in connection with the goods of the applicant is primarily geographically descriptive of them, except as indications of regional origin may be registrable under section 4 [15 USCS § 1054], (3) when used on or in connection with the goods of the applicant is primarily geographically deceptively misdescriptive of them, (4) is primarily merely a surname, or (5) comprises any matter that, as a whole, is functional.
(f) Except as expressly excluded in subsections (a), (b), (c), (d), (e)(3), and (e)(5) of this section, nothing herein shall prevent the registration of a mark used by the applicant which has become distinctive of the applicant's goods in commerce.
15 U.S.C. § 1052(e)-(f) (2000).
Recognizing the new emphasis on prevention of public deception, the NAFTA amendments split the categories of geographically descriptive and geographically deceptively misdescriptive into two subsections (subsections (e)(2) and (e)(3) respectively). Under the amended Lanham Act, subsection (e)(3)--geographically deceptive misdescription--could no longer acquire distinctiveness under subsection (f). Accordingly, marks determined to be primarily geographically deceptively misdescriptive are permanently denied registration, as are deceptive marks under § 1052(a).
Thus, § 1052 no longer treats geographically deceptively misdescriptive marks differently from geographically deceptive marks. Like geographically deceptive marks, the analysis for primarily geographically deceptively misdescriptive marks under § 1052(e)(3) focuses on deception of, or fraud on, the consumer. The classifications under the new § 1052 clarify that these two deceptive categories both receive permanent rejection. Accordingly, the test for rejecting a deceptively misdescriptive mark is no longer simple lack of distinctiveness, but the higher showing of deceptiveness.
The legislative history of the NAFTA Act confirms the change in standard for geographically deceptively misdescriptive marks. In a congressional record statement, which appears to be the equivalent of a committee report, the Senate Judiciary Committee acknowledges the new standard for these marks:
[T]he bill creates a distinction in subsection 2(e) of the Trademark Act between geographically "descriptive" and "misdescriptive" marks and amends subsections 2(f) and 23(a) of the Act to preclude registration of "primarily geographically deceptively misdescriptive" marks on the principal and supplemental registers, respectively. The law as it relates to "primarily geographically descriptive" marks would remain unchanged.
139 Cong. Rec. S 16,092 (1993).
The amended Lanham Act gives geographically deceptively misdescriptive marks the same treatment as geographically deceptive marks under § 1052(a). Because both of these categories are subject to permanent denial of registration, the PTO may not simply rely on lack of distinctiveness to deny registration, but must make the more difficult showing of public deception. In other words, by placing geographically deceptively misdescriptive marks under subsection (e)(3) in the same fatal circumstances as deceptive marks under subsection (a), the NAFTA Act also elevated the standards for identifying those deceptive marks.
Before NAFTA, the PTO identified and denied registration to a primarily geographically deceptively misdescriptive mark with a showing that (1) the primary significance of the mark was a generally known geographic location, and (2) "the public was likely to believe the mark identified the place from which the goods originate and that the goods did not come from there." In re Loew's, 769 F.2d at 768. The second prong of the test represents the "goods-place association" between the mark and the goods at issue. This test raised an inference of deception based on the likelihood of a goods-place association that did not reflect the actual origin of the goods. A mere inference, however, is not enough to establish the deceptiveness that brings the harsh consequence of non-registrability under the amended Lanham Act. As noted, NAFTA and the amended Lanham Act place an emphasis on actual misleading of the public.
Therefore, the relatively easy burden of showing a naked goods- place association without proof that the association is material to the consumer's decision is no longer justified, because marks rejected under § 1052(e)(3) can no longer obtain registration through acquired distinctiveness under § 1052(f). To ensure a showing of deceptiveness and misleading before imposing the penalty of non-registrability, the PTO may not deny registration without a showing that the goods-place association made by the consumer is material to the consumer's decision to purchase those goods. This addition of a materiality inquiry equates this test with the elevated standard applied under § 1052(a). See House of Windsor, 221 USPQ at 56-57 (establishing "a 'materiality' test to distinguish marks that fall within the proscription of Section 2(e)(2) from those that fall also within the proscription of Section 2(a)"). This also properly reflects the presence of the deceptiveness criterion often overlooked in the "primarily geographically deceptively misdescriptive" provision of the statute.
The shift in emphasis in the standard to identify primarily geographically deceptively misdescriptive marks under § 1052(e)(3) will bring that section into harmony with § 1052(a). Both sections involve proof of deception with the consequence of non-registrability. The adherence to the pre-NAFTA standard designed to focus on distinctiveness would almost read the term "deceptively" out of § 1052(e)(3), which is the term that the NAFTA amendments to the Lanham Act has reemphasized. Accordingly, under the amended Lanham Act, both subsection (a) and subsection (e)(3) share a similar legal standard.
Since the NAFTA amendments, this court has dealt with two cases involving § 1052(e)(3). Wada, 194 F.3d 1297; In re Save Venice New York, Inc., 259 F.3d 1346, 59 USPQ2d 1778 (Fed.Cir.2001). Although neither of those cases explores the effect of the NAFTA Act on the test for determining geographically deceptive misdescription, both cases satisfy the new NAFTA standard. "[I]f there is evidence that goods like applicant's or goods related to applicant's are a principal product of the geographical area named by the mark, then the deception will most likely be found material and the mark, therefore, deceptive." House of Windsor, 221 USPQ at 57. "[I]f the place is noted for the particular goods, a mark for such goods which do not originate there is likely to be deceptive under § 2(a) and not registrable under any circumstances." Loew's Theatres, 769 F.2d at 768, n. 6.
In Save Venice, this court affirmed the Board's refusal to register applicant's marks "THE VENICE COLLECTION" and "SAVE VENICE, INC." because of the "substantial evidence available showing that Venice, Italy is known for glass, lace, art objects, jewelry, cotton and silk textiles, printing and publishing." 259 F.3d at 1354 (emphasis added). Although the court in Save Venice did not expressly address the materiality issue, because it was not officially recognized in this context, the court emphasized that "all of the applicant's goods are associated with traditional Venetian products." Id. at 1350 (emphasis added). The court in Save Venice concluded that the public would mistakenly believe they were purchasing "traditional Venetian products" because the applicant's products were "indistinguishable" from the pro