Can a company purchase a competitor’s trademark as a keyword to help its Internet search results? These are murky legal waters, and contact lens distributor 1-800 Contacts has waded into them again. A frequent litigant over use of its trademarks, 1-800 Contacts just sued the Walgreen drugstore chain in federal district court in Utah. 1-800 Contacts believes consumers are confused when they run a search on variants of 1-800 contacts, and in their results they see a link for Walgreen’s website and contact lens offerings. As of today, I confirmed that Walgreen’s website appeared on the right of the screen in search results for searches under “1-800 Contacts,” and “1-800Contacts” but not under “1 800 Contacts.” When it did appear, it was as a sponsored link.
Whether 1-800 Contacts succeeds will have a lot to do with what viewers of these results think about Walgreen’s relationship to 1-800 Contacts. The law is still not settled when it comes to how trademarks work in the context of Internet search engines, but the major premise of trademark law is that it protects a company’s goodwill and brand identity against competitive confusion. Even though 1-800 Contacts has filed suit in Utah, where the governing case law is favorable and allows a claim based on purchase of a competitor’s trademark, 1-800 Contacts still has to show that consumers are being confused. If the sponsored link is the only basis for confusion, 1-800 Contacts has some problems. I suspect most Internet users are now aware of the difference between organic search results, based upon a search engine’s algorithm, and sponsored links, for which a competitor pays.
There’s another interesting twist. The Complaint implies that though Walgreen itself may have stopped purchasing 1-800 Contact’s trademarks, Walgreen has an obligation to go further and affirmatively purchase “negative keywords” to make sure that its website does not come up in searches for 1-800 Contacts. In effect, that means paying Google not to display the Walgreen’s site when someone searches on certain terms. But Walgreen does not have any control over the algorithm used by Google or other search engines. In responding to 1-800 Contact’s claim, then, it can fairly pose the question: Should a business be required to handicap itself in the market, and in the process, restrict the information that consumers have about an alternative source of products?
--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.
Showing posts with label litigation. Show all posts
Showing posts with label litigation. Show all posts
Thursday, June 10, 2010
Thursday, May 13, 2010
Georgia Senate Sends Restrictive Covenant Law to the Ballot
Readers of the blog know we’ve been following the proposed change in Georgia’s restrictive covenant laws. At the close of this year’s General Assembly, the Senate took the penultimate step toward approval when it voted to send the issue to the ballot. In November, you will see on your ballot a constitutional referendum, which if approved, will enable and trigger the new law.
You will recall that right now, Georgia is one of the most difficult states in which to restrict competitive activity by former employees. The principle is written into our state constitution: any restraint on trade – and these kinds of contracts are considered restraints – are against our public policy. Frequently, what companies thought were carefully drafted agreements come before trial courts on motions to enjoin employees and are then struck down as unenforceable.
Faced with this challenge, the General Assembly proposes to exempt agreements that are consistent with the new law (House Bill 173) from the kinds of contracts that are illegal and void against public policy. Freely negotiated employment agreements designed to protect trade secrets, confidential information and customer relationships would no longer be categorized with “contracts tending to corrupt the legislation or the judiciary” or, perhaps more common “wagering contracts.”
If approved by the voters, the new law will replaces the rigid “geographic scope” test, thereby modernizing restrictive covenant enforcement. Instead of trying to define an employee’s territory based on where the employee physically has done business for the employer, the new law permits a court to accommodate not just geography, but the area where activities are actually conducted. House Bill 173 alternatively allows employers to simply list prohibited competitors instead of a prohibited geographic territory. Thus, employers and employees have more flexibility in negotiating what kinds of post-employment conduct is prohibited, and the employer does not have to worry about constantly having to update the agreement as the business relationship between the parties changes over time. At the same time, the employee is afforded more certainty in the protections negotiated in the event that the agreement has to be enforced.
The proposed definition of “employee” in the new law would extend only to executives, persons with true access to confidential information (such as research and development personnel) and persons with specifically sensitive customer information that is generated from the employee’s tenure with the employer – not every employee. In other words, House Bill 173 is targeted precisely to protect the entrusting of competitively sensitive information by the employer to the employee in exchange for the compensation and benefits attendant to the job.
Moreover, even defined “employees” subject to the new presumptions in favor of restrictive covenant agreements drafted in accordance with House Bill 173 have the legal ability to challenge particular agreements as being overbroad in fact. Unlike the current state of the law where agreements are “good” or “bad” as written and cannot be modified to balance competing interests, the new law gives the courts the ultimate ability to “blue pencil” or “modify” arguably overbroad agreements. Thus, the courts still serve as a check against an employer who has reached too far in fact, but the courts now have to account for the concerns of business as well in evaluating the scope of the restriction sought to be imposed by the employer. At present, lacking the ability to “blue pencil,” courts can only invalidate a restrictive covenant that may reach just beyond what is reasonable.
Businesses drafting restrictive covenants, and the professionals assisting them, will find additional certainty in the bill. For all kinds of prospective restrictive covenants, the Georgia Assembly included presumptions as to the duration of covenants. For covenants provided in the employment context, House Bill 173 states that a period of up to two years is presumptively reasonable. For covenants executed in other situations, the length of the permissible restriction may increase, e.g., for up to three years in a franchise or licensing context and up to five years when covenants are provided in connection with the sale of a business.
If approved by in November, the new law will apply prospectively, that is, to agreements entered after the effective date of HB 173. You can find the text of Georgia House Bill 173 at http://www.legis.ga.gov/legis/2009_10/versions/hb173_HB_173_AP_7.htm and some further discussion of its implications at http://www.agg.com/media/interior/publications/AGG_White_Paper-Georgia_House_Bill_173.pdf.
Andrew 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.
You will recall that right now, Georgia is one of the most difficult states in which to restrict competitive activity by former employees. The principle is written into our state constitution: any restraint on trade – and these kinds of contracts are considered restraints – are against our public policy. Frequently, what companies thought were carefully drafted agreements come before trial courts on motions to enjoin employees and are then struck down as unenforceable.
Faced with this challenge, the General Assembly proposes to exempt agreements that are consistent with the new law (House Bill 173) from the kinds of contracts that are illegal and void against public policy. Freely negotiated employment agreements designed to protect trade secrets, confidential information and customer relationships would no longer be categorized with “contracts tending to corrupt the legislation or the judiciary” or, perhaps more common “wagering contracts.”
If approved by the voters, the new law will replaces the rigid “geographic scope” test, thereby modernizing restrictive covenant enforcement. Instead of trying to define an employee’s territory based on where the employee physically has done business for the employer, the new law permits a court to accommodate not just geography, but the area where activities are actually conducted. House Bill 173 alternatively allows employers to simply list prohibited competitors instead of a prohibited geographic territory. Thus, employers and employees have more flexibility in negotiating what kinds of post-employment conduct is prohibited, and the employer does not have to worry about constantly having to update the agreement as the business relationship between the parties changes over time. At the same time, the employee is afforded more certainty in the protections negotiated in the event that the agreement has to be enforced.
The proposed definition of “employee” in the new law would extend only to executives, persons with true access to confidential information (such as research and development personnel) and persons with specifically sensitive customer information that is generated from the employee’s tenure with the employer – not every employee. In other words, House Bill 173 is targeted precisely to protect the entrusting of competitively sensitive information by the employer to the employee in exchange for the compensation and benefits attendant to the job.
Moreover, even defined “employees” subject to the new presumptions in favor of restrictive covenant agreements drafted in accordance with House Bill 173 have the legal ability to challenge particular agreements as being overbroad in fact. Unlike the current state of the law where agreements are “good” or “bad” as written and cannot be modified to balance competing interests, the new law gives the courts the ultimate ability to “blue pencil” or “modify” arguably overbroad agreements. Thus, the courts still serve as a check against an employer who has reached too far in fact, but the courts now have to account for the concerns of business as well in evaluating the scope of the restriction sought to be imposed by the employer. At present, lacking the ability to “blue pencil,” courts can only invalidate a restrictive covenant that may reach just beyond what is reasonable.
Businesses drafting restrictive covenants, and the professionals assisting them, will find additional certainty in the bill. For all kinds of prospective restrictive covenants, the Georgia Assembly included presumptions as to the duration of covenants. For covenants provided in the employment context, House Bill 173 states that a period of up to two years is presumptively reasonable. For covenants executed in other situations, the length of the permissible restriction may increase, e.g., for up to three years in a franchise or licensing context and up to five years when covenants are provided in connection with the sale of a business.
If approved by in November, the new law will apply prospectively, that is, to agreements entered after the effective date of HB 173. You can find the text of Georgia House Bill 173 at http://www.legis.ga.gov/legis/2009_10/versions/hb173_HB_173_AP_7.htm and some further discussion of its implications at http://www.agg.com/media/interior/publications/AGG_White_Paper-Georgia_House_Bill_173.pdf.
Andrew 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.
Tuesday, November 10, 2009
New Wireless False Advertising Litigation: A Reminder to Look at "The Big Picture"
The battle that broke out last week over the accuracy of Verizon Wireless’ new cell phone coverage campaign is not focused solely on the language of Verizon’s advertisements. It is focused on the images, and specifically, on two coverage maps and the message they convey. In two television pieces and on its website, Verizon uses side-by-side maps of the US with color coding to show 3G coverage. The maps emphasize what Verizon believes is its overwhelming advantage over AT&T in territorial 3G coverage. The ads parody the popular iPhone advertisements with the refrain that to explain spotty AT&T coverage, “there’s a map for that.”
AT&T, locked in competition in its most important quarter of the year, is not laughing. In a lawsuit filed in federal district court in Atlanta, AT&T claims that the maps mislead its customers “into believing that when they are
in the areas depicted by large swaths of white or blank space in AT&T’s ‘3G’ coverage maps, they have no coverage whatsoever.” The lawsuit, at least at this point, is actually fairly narrow. AT&T is not claiming anything in the ads is actually false but believes the overall piece is still misleading. Even though Verizon added the phrase, in small font, “Voice & data services available outside 3G coverage areas,” and even though the map is based on actual coverage data, AT&T suggests that the maps convey the complete absence of coverage in the white areas. It asks the Court, at least in its initial request for a temporary restraining order, to stop Verizon from displaying the maps.
To obtain an injunction where no statement is literally false, AT&T is required to put forward some evidence of deception. Usually in federal advertising cases, that evidence takes the form of consumer focus group or survey data. Here, AT&T offers a survey it says shows a 23.5% level of confusion among wireless customers: Assuming AT&T’s survey is valid and was conducted in accordance with generally accepted survey principles, that data is more than enough to justify a finding of confusion. Verizon has not yet filed its response, but it will be interesting to see the competing testimony and market research on the effect of the advertisements. And certainly, the district court will be looking at more than just deception in making its decision.
We’ll continue to follow the dispute and report on the first round. Argument is scheduled for later this month – though we’re certain AT&T would have preferred an earlier hearing – so we should have some early insight fairly soon. If AT&T loses its early TRO request, its momentum is gone and much of the steam leaves its suit.
Regardless of the outcome, though, the case provides a good reminder: If your company sells products or services in a competitive market, especially head-to-head using comparative advertising, keep your eye on more than just the accuracy of advertising copy. Also look to the advertising’s overall impact and impression, and ask what messages a reasonable customer will take away. For purposes of this kind of competitive advertising review, marketing-savvy businesses should be aware that federal law prohibits not just false, but misleading advertising. Even if the words themselves literally true, they may imply a false message, especially when the advertising piece is considered as a whole.
--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, http://www.agg.com/.
AT&T, locked in competition in its most important quarter of the year, is not laughing. In a lawsuit filed in federal district court in Atlanta, AT&T claims that the maps mislead its customers “into believing that when they are
in the areas depicted by large swaths of white or blank space in AT&T’s ‘3G’ coverage maps, they have no coverage whatsoever.” The lawsuit, at least at this point, is actually fairly narrow. AT&T is not claiming anything in the ads is actually false but believes the overall piece is still misleading. Even though Verizon added the phrase, in small font, “Voice & data services available outside 3G coverage areas,” and even though the map is based on actual coverage data, AT&T suggests that the maps convey the complete absence of coverage in the white areas. It asks the Court, at least in its initial request for a temporary restraining order, to stop Verizon from displaying the maps.
To obtain an injunction where no statement is literally false, AT&T is required to put forward some evidence of deception. Usually in federal advertising cases, that evidence takes the form of consumer focus group or survey data. Here, AT&T offers a survey it says shows a 23.5% level of confusion among wireless customers: Assuming AT&T’s survey is valid and was conducted in accordance with generally accepted survey principles, that data is more than enough to justify a finding of confusion. Verizon has not yet filed its response, but it will be interesting to see the competing testimony and market research on the effect of the advertisements. And certainly, the district court will be looking at more than just deception in making its decision.
We’ll continue to follow the dispute and report on the first round. Argument is scheduled for later this month – though we’re certain AT&T would have preferred an earlier hearing – so we should have some early insight fairly soon. If AT&T loses its early TRO request, its momentum is gone and much of the steam leaves its suit.
Regardless of the outcome, though, the case provides a good reminder: If your company sells products or services in a competitive market, especially head-to-head using comparative advertising, keep your eye on more than just the accuracy of advertising copy. Also look to the advertising’s overall impact and impression, and ask what messages a reasonable customer will take away. For purposes of this kind of competitive advertising review, marketing-savvy businesses should be aware that federal law prohibits not just false, but misleading advertising. Even if the words themselves literally true, they may imply a false message, especially when the advertising piece is considered as a whole.
--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, http://www.agg.com/.
Friday, September 25, 2009
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/.
Wednesday, July 8, 2009
Theft at Goldman Sachs: Even the Biggest Vulnerable to Trade Secret Loss
We just learned that Goldman Sachs, the venerable investment bank and one of the major movers in the U.S. financial markets, suffered a major security breach, one that teaches just how vulnerable companies are to rapid theft and potential devaluation of their trade secret information.
We know of the breach because the United States just lodged criminal charges against a former Goldman employee, a highly paid ($400K per year) programmer and vice-president for equity strategy tasked with developing one of the firm's most sophisticated trading programs. The facts are startling: the programmer, before he left to work for a Chicago firm, transferred computer code directly from Goldman's server to a London-registered computer server in Germany. Goldman makes it money, in part, using programs like this one to execute trades. This program delivered millions of dollars of value every year to the bank. So sophisticated was the program that the United States alleges in the criminal filings that it could be used to "manipulate markets."
The stolen program thus fits consummately the definition of a trade secret. With its theft disclosed, what are Goldman’s next steps?
An unnamed source reports that the investment bank say it has "secured its systems," http://tinyurl.com/m2gctg, but has the damage been done? We do not know where the actual code is now, or whether Goldman and/or the United States have foreclosed any possible future transfer. In the hands of another bank, with the right implementation, the program could be used to devastating effect. We wonder, too, whether Aleynikov (and his new firm if it employed him for any length of time) will be the subject of a civil lawsuit by Goldman to enjoin any work on similar trading models.
Another major question is how Goldman allowed Aleynikov to purloin a "crown jewel" application in the first place. The detection and response systems may have worked well, as one commentator observes in a New York Times piece, http://tinyurl.com/klnn28, but shouldn't an institution as large as Goldman have had controls to flag the export and data transfer of such commercially sensitive code?
For businesses trying to protect their own confidential business information, the story is a caution and reminder that trade secrets are only as valuable as the reasonable precautions taken to prevent their disclosure. For online data, that means, for example, restricted access, password protection, and it may mean, in addition to regular monitoring, firewall and other protocols to limit data transfer.
-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.
We know of the breach because the United States just lodged criminal charges against a former Goldman employee, a highly paid ($400K per year) programmer and vice-president for equity strategy tasked with developing one of the firm's most sophisticated trading programs. The facts are startling: the programmer, before he left to work for a Chicago firm, transferred computer code directly from Goldman's server to a London-registered computer server in Germany. Goldman makes it money, in part, using programs like this one to execute trades. This program delivered millions of dollars of value every year to the bank. So sophisticated was the program that the United States alleges in the criminal filings that it could be used to "manipulate markets."
The stolen program thus fits consummately the definition of a trade secret. With its theft disclosed, what are Goldman’s next steps?
An unnamed source reports that the investment bank say it has "secured its systems," http://tinyurl.com/m2gctg, but has the damage been done? We do not know where the actual code is now, or whether Goldman and/or the United States have foreclosed any possible future transfer. In the hands of another bank, with the right implementation, the program could be used to devastating effect. We wonder, too, whether Aleynikov (and his new firm if it employed him for any length of time) will be the subject of a civil lawsuit by Goldman to enjoin any work on similar trading models.
Another major question is how Goldman allowed Aleynikov to purloin a "crown jewel" application in the first place. The detection and response systems may have worked well, as one commentator observes in a New York Times piece, http://tinyurl.com/klnn28, but shouldn't an institution as large as Goldman have had controls to flag the export and data transfer of such commercially sensitive code?
For businesses trying to protect their own confidential business information, the story is a caution and reminder that trade secrets are only as valuable as the reasonable precautions taken to prevent their disclosure. For online data, that means, for example, restricted access, password protection, and it may mean, in addition to regular monitoring, firewall and other protocols to limit data transfer.
-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.
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