McProblem in Malaysia

Admit it. You have done it. Whether describing the “McMansion” recently purchased by a family member, dreaming of breaking the chains that bind you to your “McJob,” or bemoaning the “McWorld” we live in, we are guilty of tacking on the prefix “Mc” to regular words, for the sake of evoking associations with our favorite fast food restaurant chain. “McWords,” so dubbed by Wikipedia.com, have infiltrated our vernacular, and are now even common place on our favorite television shows – did you see McDreamy and McSteamy in last nights’ season premier of Grey’s Anatomy?

We owe this phenomenon to the outstanding marketing and promotion work done by the McDonald’s Corporation (“McDonald’s”) to build a brand and create a unifying concept that identifies products and services associated with its Company. McDonald’s has invested heavily in a significant portfolio of “Mc” trademarks used by the company to identify products, services and concepts within their organization. We encounter many of these “McTerms” all too often while scanning the menu in the drive-thru -- McNugget, McFlurry, McGriddle, McCafe’ and Big Mac, to name a few. Did you know, however, that McDonald’s has registered the term McMobile for a McDonald’s computer software program used in sales and marketing, McD for an all-purpose cleaning product, and McDTV for use on television programming offered by the company? Clearly, the company is committed to building its “McBrand” through the use of trademarks bearing the “Mc” prefix.

You may or may not know, but creating such a unifying concept has significant implications and potential benefits under trademark law in the United States. It provides a means for obtaining a broader scope of trademark protection than would ordinarily be afforded to a trademark owner. A recent legal decision from Malaysia underscores the significance of this broader scope of protection in the U.S., protections apparently not available to trademark owners in certain other destinations around the world.

Recent Legal Decision in Malaysia

Specifically, McDonald’s recently lost a legal dispute with a restaurant owner in Malaysia who named his restaurant “McCurry.” As the name implies, the restaurant owner adopted a western-style fast-food ambience to serve traditional Indian and Malaysian dishes to its customers. McDonald’s, in an effort to protect their brand, sued the restaurant owner in 2001, and an eight-year battle ensued. In 2006, McDonald’s won its case in the lower court, but the restaurant owner appealed. In April of this year, Malaysia’s highest court overturned the lower court decision. (For more information on McDonald’s Malaysian legal battle, see online.wsj.com/article/SB125240245264591953.html). This decision appears to open the McDonald’s brand to attack, by allowing other companies to utilize the “Mc” prefix on their goods and services in Malaysia. This result demonstrates the importance of the doctrine of a “family of marks” in the United States, and the protection that doctrine provides to business owners and trademark holders alike.

Protection of the McFamily of Marks

In trademark parlance, a portfolio of trademarks that utilize a unifying prefix or common term is known as a “family of marks.” A “family of marks” is a group of marks having a recognizable common characteristic, wherein the marks are composed and used in such a way that the public associates not only the individual marks, but the common characteristic of the family, with the trademark owner. The “family of marks rule” recognizes that a family of marks may have a synergistic quality that is greater than the sum of each mark, considered on an individual basis. Because the consuming public associates the recognizable common characteristic of the family with the trademark user, the trademark user has established secondary meaning in the common feature of its multiple marks, in its respective channels of trade. Thus, they may have the ability to preclude others from using this feature, even if the trademark used by that third party is not otherwise confusingly similar to the trademark owner’s mark. It is this additional scope of protection, in the common feature, only enjoyed by owners of a family of trademarks.

In the case of McDonald’s, courts have recognized, acknowledged and enforced the “McFamily” of marks against others who have attempted to usurp the goodwill and brand recognition built by the company. McDonald’s has successfully opposed registration and use of the trademarks “McPretzel” and “McDugal’s McPretzels” by a company in the business of selling frozen pretzel products, and they have obtained a judgment for trademark infringement and an injunction against a restaurant going by the name “McBagel.” J & J Snack Foods Corp. v. McDonald’s Corp., 932 F.2d 1460 (Fed. Cir. 1991); McDonald’s Corp. v. McBagels, Inc., 649 F.Supp. 1268 (S.D.N.Y. 1986). Even on non-food items and services, in wholly unrelated channels of trade, McDonald’s has successfully protected their family of marks. McDonald’s obtained an injunction preventing a dentist’s use of the term “McDental” for his practice, and they successfully defended a case whereby a large hotel conglomerate sought a declaratory judgment stating that the use of the term “McSleep Inn” for a hotel chain did not constitute trademark infringement. McDonald’s Corp. v. Druck and Gerner, D.D.S., P.C., 814 F. Supp. 1127 (N.D.N.Y 1993); Quality Inns International, Inc. v. McDonald’s Corp., 695 F.Supp. 198 (D. Mar. 1988). Trademarks such as “McDental” and “McSleep” were not necessarily similar to any mark registered by McDonald’s, but the court nonetheless held that use of these marks constituted trademark infringement on account of their use of the well-known “Mc” prefix.

While these cases make it clear that McDonald’s enjoys a significant scope of trademark protection in the United States, beyond the protections enjoyed on each individual mark, the recent Malaysia outcome demonstrates that this does not appear to be the case in other parts of the world.

What this Means for Trademark Holders

If you or your company is building a portfolio of trademarks, and is considering the adoption of additional marks, it may be beneficial to consider use of a unifying characteristic for each and every one of your marks. Successful use of a common characteristic could lead to the development of a “family of marks,” thereby providing an increased scope of trademark protection in the marketplace, not necessarily enjoyed by your competitors. And, you may just become the next household phenomenon in the process.

- Devin Gordon, devin.gordon@agg.com

Arnall Golden Gregory LLP serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.

Trade Secret Licensing Arrangements Require Vigilance

A technology license agreement can link competitors in unexpected, and, from the standpoint of technology protection, potentially dangerous ways. Whether your company licenses its technology to a direct competitor, licenses to a supplier who may integrate back into your industry, or licenses to a company who may decides to expand its market, a written agreement should define the trade secrets and critically, should protect them for so long as they have value. A recently decided dispute between plastics manufacturers illustrates the point.

Industrial concern NOVA Chemical took a license on a Styrofoam-type manufacturing process, Piocelan, from Japanese plastics company Sekisui. After extensive negotiation and the exchange of multiple drafts, the two companies hammered out a licensing agreement for the Piocelan process. Except for an Asian markets carve-out, the agreement gave NOVA an exclusive right to use the process and provided for NOVA to Sekisui’s secret technical information and certain patent rights for time periods that NOVA would elect.

When, in 2002, NOVA rolled out a competing product in Asia, Sekisui cried foul. NOVA filed suit to clarify that the agreement had been terminated and that it was entitled not only to sell in Asia, but to use any information that Sekisui had disclosed to it under the agreement. Sekisui argued that the actual term of the license was perpetual, because its subject matter concerned trade secrets, which have no fixed life. The agreement, however, contained no restriction on use of the supposedly secret information beyond the term of the license.

Alert readers will see the red flag waving – as did the trial court. Despite Sekisui’s claims that disclosure would harm it, the court saw no intent to extend the term of the agreement past either five or ten years, and saw no provision in the agreement requiring NOVA to keep the information secret past the term. How, wondered the Court, could Sekisui claim trade secret protection when it did not restrict the use of the Piocelan information in any manner after ten years?

Under NOVA’s reading of the Agreement, with which a trial court and now the court of appeals have agreed, NOVA was obligated not to disclose the Sekisui information only for the length of the license, either a five- or ten-year period, depending on what license term NOVA chose. Sekisui lost out, and NOVA can sell the product anywhere in the world, and use as much of the information provided to it under the expired license as it may wish.

The lesson? In negotiating technology license arrangements, assume the worst case scenario: direct competition by your contract partner. With this forethought, Sekisui’s result should absolutely have been avoided. The law of trade secrets is commercially practical, recognizing the need for such licensing arrangements. Simply because a license expires, the underlying trade secrets do not necessarily expire as well. But in order for the trade secret owner to maintain ownership, with the licensee obtaining rights only to temporary use, and for the trade secrets to survive, appropriate drafting is necessary. A specific commitment to maintain the trade secrets in confidence, enforceable through injunctive relief, must form part of the consideration. It must also be spelled out in the agreement’s terms.


--Andrew Flake

Andrew B. Flake is a partner in the Litigation Group at Arnall Golden Gregory LLP (andrew.flake@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, www.agg.com.