College Football, Cookies, and Finding a Balance in Trademark Protection

College football season is upon us.  This weekend, a lot of eyes will by on my alma mater as they take on Penn State in its first game in the wake of the recent scandal.  A lot of eyes will be glued to TV sets and filling the stands in stadiums across the country. And that means huge licensing money, especially for high-profile teams.   According to the Collegiate Licensing Company, collegiate licensing is a market currently valued at $2.7 billion a year.

With this much money at stake, it’s not surprising that universities are going to great lengths to make sure the valuable brands that underlie their sports teams are protected.  But as readers of this blog know, there have been numerous accounts in the media over the last few years of “trademark bullying” — instances where brand owners are seen as going too far in protecting their rights and risk alienating potential customers.

So where do we draw the line between good enforcement and “bullying”?  As with most legal questions, there’s often a lot of grey area, but I think consumers themselves provide a nice feedback loop.  (Which perhaps lines up with or could be explained by a consumer theory of trademark law.)

The University of Alabama came under fire recently after it sent a cease and desist letter to a local bakery demanding that it stop making cakes and other desserts bearing the university’s logos.  After a widespread show of support for the bakery, Mary’s Cakes & Pastries, the university changed its tune and (get this!) apologized to the bakery for sending the letter.

This might leave some lawyers scratching their heads, but marketing and PR folks would see this as a no-brainer.  Why would you want to alienate the very people you’re hoping will fill the stands each fall and buy your official merchandise?

I think it’s fair to draw a distinction between the Alabama cookies dispute and, say, an instance where someone is selling knockoff t-shirts that compete unfairly with officially-licensed merchandise.  But what about the “zone of expansion” argument and the “duty to police”?  Even though I think Alabama did the right thing from a PR standpoint, would they have an argument that baked goods are a market to which they’re likely to expand or that they can’t acquiesce to the bakery’s use for fear of losing their rights?  Should they?

Those are the thoughts to chew on.  But, thankfully, what could have been another story of trademark bullying had a happy ending.

 

 

 

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The Terrible Towel and Naked Licensing

It’s football season once again in Pittsburgh, and on the heels of a much-too-close victory in Indianapolis, I will kick off Steelers blogging season at PTL.  My off-season wasn’t nearly as colorful as the Steelers’ (I didn’t even get an invite to be on Dancing With the Stars, let alone win it— though, in hindsight, it may have had something to do with my lack of star-status and/or dancing skills).

I recently had a great conversation about the trademark rights in the Terrible Towel at breakfast with my former professor, Michael Madison.  He has some excellent analysis over at Madisonian about the possible naked licensing issues involving the Towel.

I’ve blogged on the the Towel in the past, but here’s the quick background for those unfamiliar with the Towel’s origins.

Myron Cope, a Pittsburgh sports announcer known as the “voice of the Pittsburgh Steelers” for many years, is credited with inventing the Terrible Towel.   Cope assigned the Terrible Towel trademark to the Allegheny Valley School (AVS), a Pittsburgh-area institution specializing in intellectual developmental disabilities that has cared for Cope’s son, Danny, who has severe autism.  Proceeds of the Terrible Towel’s sales benefit the School.

I suspect that a lot of non-Pittsburghers reading this post might  not have known that back story, but that virtually everyone reading this post associates that Towel with the Steelers.

And that is precisely the problem here, from a trademark doctrine standpoint.

When consumers associate the mark with the licensee (the Steelers) and not the licensor/owner (AVS), it creates a risk of “naked licensing” and a possible forfeiture of the owner’s rights in the mark.  For a nice general overview of naked licensing in the context of a recent Ninth Circuit decision, check out Jim Singer’s post from last winter.

It’s tempting to simply say “OK, so consumers think the Towel comes from the Steelers and not the AVS– so what?”.  From a practical standpoint, it’s probably not a big deal.  People buy the towels (we’ve got one at my house), they wave them at games, and the school gets money.  Everyone wins.

But this scenario does raise an interesting question about the internal architecture of trademark law– why the statutory language says what it says and what the purpose(s) of trademark law is/are (e.g., protecting investments in marketing, preventing consumer confusion, etc.)

I agree with Professor Madison that one of the fundamental purposes of trademark law is consumer protection.   A quick look at some of the language in two historic trademark decisions provides some support for this position.

From Dawn Donut Company, Inc. v. Hart’s Food Stores, Inc. (1959):

“If the licensor is not compelled to take some reasonable steps to prevent misuses of his trademark in the hands of others the public will be deprived of its most effective protection against misleading uses of a trademark. The public is hardly in a position to uncover deceptive uses of a trademark before they occur and will be at best slow to detect them after they happen. Thus, unless the licensor exercises supervision and control over the operations of its licensees the risk that the public will be unwittingly deceived will be increased and this is precisely what the Act is in part designed to prevent. See Sen. Report No. 1333, 79th Cong., 2d Sess. (1946). Clearly the only effective way to protect the public where a trademark is used by licensees is to place on the licensor the affirmative duty of policing in a reasonable manner the activities of his licensees.”  (Emphasis mine.)

And from Taco Cabana International, Inc. v. Two Pesos, Inc. (1991): 

“The purpose of the quality-control requirement is to prevent the public deception that would ensue from variant quality standards under the same mark or dress. Where the particular circumstances of the licensing arrangement persuade us that the public will not be deceived, we need not elevate form over substance and require the same policing rigor appropriate to more formal licensing and franchising transactions.”  (Emphasis mine.)

It’s hard to imagine a public outcry when Towel wavers “find out” that the Steelers are not the the “real” source of the Towels.  But it is important for trademark owners to exercise care to avoid “naked licensing” when entering into a licensing deal.

Trademark law recognizes the value of providing flexibility for licensees/licensors and relieving them of statutory formalities (where possible), but it must do so while remaining grounded on one of its key commitments — to prevent consumer confusion in the marketplace.

Updated October 5, 2011: 

Considering Bernard Schneider’s comment below and having done a bit more digging into the “naked licensing” doctrine, I think I should try to flesh out my thoughts a bit more here.

The license between AVS and the Steelers for the Terrible Towel is not a “naked license.”

There are a couple of reasons for this.  First, AVS “does controls the nature and quality of goods sold by the Pittsburgh Steelers under its trademarks. [AVS] periodically examines those goods and has the right under its license agreement to demand quality enhancements if necessary (See first comment below).

Second, there’s the “inurement” doctrine.  As Prof. Madison explains in an update to his post:

The Lanham Act provides, in connection with registration, that use of a mark by a “related” company “inures to the benefit” of the mark owner (registrant).  […]  The public policy behind the “inurement” rule closely parallels the public policy behind the “naked licensing” rule:  so long as consumers get a consistent product/service experience associated with the mark, then consumers are not deceived.  The mark is valid; actual ownership of the mark is, for this purpose, not relevant.

[…]

If the AVS and the Steelers have a licensing relationship that in fact grants the AVS the power to monitor and control the quality of goods produced under the TT mark, then the consumer goodwill associated with the TT inures to the benefit of the AVS.

I think these two doctrines (quality control and inurement) square with a consumer-protective theory of trademark law.  If consumers are confused as to the “real” source (i.e., the record owner of a particular trademark), a close relationship between licensor and licensee and the presence of quality-control mechanisms should obviate any theoretical harm to consumers.

Put differently, these doctrines make sure that consumers get what they think they’re getting.

It’s interesting to try to unpack the statutory language of the Lanham Act and try to puzzle out trademark law’s key functions in society.  And I think there’s good evidence to suggest that consumer protection is a big part of it.

But it’s also important for brand owners to have a clear set of rules that allow them to enter into licensing relationships freely in order to capitalize their brands (and, in the case of the Terrible Towel– for an incredibly good purpose).

And as the Steelers wrestle with injury problems as they prepare for this week’s home game against Tennessee, one thing’s for sure.  Come Sunday afternoon, Heinz Field will look a little something like this:

USPTO Releases Study on Trademark Bullies

The U.S. Patent and Trademark Office recently released the results of its mandated study on trademark bullies.

Senator Patrick Leahy (D-VT) introduced a bill, The Trademark Law Technical and Conforming Amendment Act Of 2010 (S. 2968), that called for a mandatory study by the Deparment of Commerce to examine whether large corporations are using trademark law to harrass smaller businessses by exaggerating their scope of their trademark rights.

Under the USPTO's Scrutiny?

Michael Atkins sums it up nicely and adds his two cents: 

The PTO responded in part by concluding there might not be a problem with trademark bullies after all.

[…]

Nonetheless, the PTO goes on to say: “However, to the extent small businesses are disproportionately adversely affected by such tactics because they lack the funds to hire counsel to defend against them, we believe the Federal Government can undertake the following actions:

1. Engage the private sector about providing fee or low-cost legal advice to small businesses via pro bono programs and intellectual property rights clinics;
2. Engage the private sector about offering continuing legal education programs focused on trademark policing measures and tactics;
3. Enhance Federal agency educational outreach programs by identifying resources that enable small businesses to further their understanding of trademark rights, enforcement measures, and available resources for protecting and enforcing trademarks.”

These suggestions are fine, but what about addressing the problem through the market? I can’t say with certainty it would solve the problem, but what I think is needed is serious study about whether the Lanham Act should make an award of attorney’s fees to the prevailing party routine, rather than limiting an award to “exceptional” cases.

Mike raises an interesting point.  A shift to a true “loser pays” system might be a good way at deterring trademark bullies from proceeding with questionable litigation.

But what about cease-and-desist letters?  In many cases, the accused infringer will back down before litigation begins.  Knowing this, a mark owner could send out letter, hoping for a quick settlement.  If the accused infringer dug in its heels in response to what might be a shaky claim, the mark owner could simply walk away, risking little (other than the possibility of the accused infringer trying to get a declaratory judgment).  This, too, is a real instance of trademark bullying.  So how do we get this practice to stop?

The study touches on (but unfortunately leaves out of its recommendations) what I think the true problem is here:

Mark owners may, however, sometimes be too zealous and end up overreaching.  Sometimes

they may have an over-inflated view of the strength of the mark and thus the scope of their rights

(e.g., they consider their mark famous when it may not actually qualify as famous).  Other

times, they mistakenly believe that to preserve the strength of their mark they must object to

every third-party use of the same or similar mark, no matter whether such uses may be fair uses or

otherwise non-infringing. They may lose sight of the fact that the effectiveness of enforcement is

not measured by how frequently they enforce, but rather by the effect that taking or failing to take

action has in the marketplace. “The real question is public perception of plaintiff’s mark, not a

battle count of how often it has sued others.”

There’s no doubt that the duty to police one’s mark is important.  If trademark rights are essentially about distinctiveness and source indication, it makes sense to ask mark owners to take steps to weed out potentially confusing marks.  But sometimes this duty starts to look more like a bind.  Last spring, I bloggedabout a Minnesota nonprofit that was sued by LEGO Group for use of the name “Project Legos”:

And, although it’s hard to see LEGO coming off as anything other than Goliath, the Star Tribune does touch on an interesting point that’s always at issue in David versus Goliath cases– the obligation of mark owners to take measures to diligently protect their mark.  According to Dean Karau of Minneapolis law firm Fredrikson & Byron, who is quoted in the story, “If LEGO doesn’t take steps to enforce its trademark rights when it learns about a possible infringement […] that fact could be used against them in a future litigation with a larger, more well-heeled entity.”

So maybe we need to rethink the way we ask mark owners to think about their trademarks.  A more nuanced version of the duty to police would take into account the concerns underlying the duty to police (preserving a mark’s integrity, etc.) and balance these against the social good of preventing trademark bullying.

How, exactly, we craft this doctrine is probably best left to judges, law professors, and the USPTO itself– and not to young attorneys like your humble blogger.   In the meantime, however, as I’ve noted before, I still see public relations concerns as one of the best gatekeepers in terms of preventing trademark bullying.

Fast Food for Thought

Here’s another one via Jack Greiner. According to the Los Angeles Times, officials in Santa Clara County, California have passed an ordinance that prohibits restaurants from offering toys and other promotions along with meals that fail to meet nutritional guidelines adopted by the county Board of Supervisors.

This raises two questions.  First, does the inclusion of a toy or promotion in a kid’s meal constitute “speech?”  And second, if so, is this restriction on speech constitutional under the First Amendment?

As to the first question, the answer is probably “yes.”  When a restaurant selects a toy or series of toys to include in its kid’s meals, it constitutes a form of advertising.  Most advertising constitutes “commercial speech” under the First Amendment, which means that a court considering the constitutionality of the Santa Clara County law would apply the Central Hudson test:

Under Central Hudson, a government restriction on advertisements or other commercial speech is permissible only on a showing that (1) the advertising is misleading, (2) the government interest in regulation is substantial, (3) the regulation directly advances that interest, and (4) the regulation is not more extensive than necessary.

Under this test, the restaurants affected by this ordinance would probably prevail in making the argument for its unconstitutionality.

Public Enemy Number One?

So, ultimately, the question really comes down to whether a kid’s meal toy is a form of speech.  Although my initial hunch is that it is a form of speech, namely advertising, I imagine there are good arguments on the other side.  In any case, it will be interesting to see where this goes.  Although the founding fathers may never have envisioned the “Hamburglar” as the focus of serious constitutional inquiry, we may see courts wrestling with these issues in the future.

The Property Rights Debate Behind the Pittsburgh Parking Chair

In Pittsburgh (and in Baltimore, and Philadelphia, and Boston, just to name a few), it works something like this.  First, you spend the an hour or so shoveling the freshly fallen snow (if you’re lucky) or the hardened, impossibly heavy slush (if you’re not so lucky) to carve out a parking space for your car.  Then, when you need to leave the spot, you take an item– perhaps a chair, but trashcans, traffic cones (I’m still puzzled as to how so many of my neighbors just have these lying around at their homes), and even ladders will suffice– to place in the spot as a way of claiming it while you are away.  When you return, your spot is (generally) still there.

This logo (via wearpittsburgh) captures the sentiment nicely, and in a tasteful black and gold, might I add.

How and why, exactly, does it work this way?  You don’t have to be a lawyer or a property law scholar to know that a street parking space is public property and cannot be converted into private property through the strategic placement of a lawn chair.  But, legal niceties notwithstanding, the custom of recognizing “claimed” parking spots is alive in well in a number of Northeastern cities.  There’s even a Wikipedia entry on the “Parking Chair.”

But there’s debate to be had.  Prof. Michael Madison has a nice summation of both sides of the debate (“pro-chair” and “anti-chair“).  The pro-chair argument basically tracks the argument for the traditional labor theory of value, famously articulated by John Locke.  This argument says “I shoveled the spot; now it’s mine.”  Adding to that argument, you could argue that without the resulting property right people wouldn’t have an incentive to shovel out parking spaces.  The anti-chair argument basically says that people are going to shovel out parking spots no matter what, so there is no need to provide an incentive to do so.  Prof. Madison focuses on the nasty self-help remedies (e.g., keying someone’s car or heaping snow on top of it when they “steal” a parking spot that was previously claimed) as one factor that favors the anti-chair camp.

So who’s right?  Boston has attempted a compromise somewhere in the middle, which I think makes sense, at least in theory.  The rule in Boston is that you can keep a spot once you shovel it out and mark it, but you only get to keep it for 48 hours.  The Boston Rule agrees with the pro-chair camp’s basic point– people won’t shovel out spots (or at least as thoroughly) if you don’t give them some sort of expectation that the spot will be there when they come back.  But the Boston Rule (again, at least in theory, because no one in Boston seems to be following it, according to the article) also recognizes that, unless people have to give up their spaces at some point, the city will remain filled with mounds of snow where decent parking spots used to exist.  This is a great argument from an economic efficiency standpoint– and it’s probably the best argument for the anti-chair camp.

In any event, the parable of the parking chair offers a couple of important lessons.  First, property rights matter.  No matter how you shape them in terms of breadth and scope, property rights at some basic level are essential to getting things done, be it the creation of a parking space or the development of intellectual property.  Second, custom is sometimes more powerful than law.  Many of us will take a calculated risk when the risk that’s being taken is only a parking ticket.  But how many of us in, in Pittsburgh or in Boston, really want to take the risk of moving some guy’s carefully-placed lawn chair?