“You’re driving over the ocean in the Florida Keys when suddenly you get a hankering for a slice of pizza. Unfortunately, there is no toll booth in sight. What will you do?”
Some of you might remember an article I wrote several years ago that began this way. I was alluding to the strange case of a state turnpike authority that was suing a pizzeria for trademark infringement. Here is a very belated update on that case.
The New Jersey Turnpike Authority filed a federal lawsuit against Jersey Boardwalk, a Florida pizzeria, for trademark infringement. It claimed the pizzeria’s mark was so similar to its mark that people were likely to mistakenly assume the pizza restaurant was connected in some way with the New Jersey Turnpike Authority. It accused the pizzeria of trading on the good will of the New Jersey Turnpike Authority. It sought an injunction, compensatory damages, and treble damages, claiming trademark infringement, dilution, and unfair competition.
The court ultimately dismissed the lawsuit on jurisdictional grounds. The court noted that the pizzeria does not have any stores in New Jersey. It had only made sales to a handful of New Jersey customers, and they were online sales. These contacts with New Jersey were “too attenuated to put the Defendants on notice that they would be subject to a trademark infringement suit in New Jersey,” the court ruled.
Nor did the company’s use of the word “Jersey” amount to purposeful availment of the privilege of doing business in New Jersey. Using the name of a state to conjure consumer interest in nostalgia or exoticism is not what “purposeful availment” of a state’s services or resources means, for purposes of Due Process analysis.
Years before this litigation, the Turnpike Authority had filed an opposition to the pizzeria’s application to register its mark. The United States Trademark Trials and Appeals Board (TTAB) dismissed the Turnpike Authority’s opposition to the pizzeria’s registration of the trademark for restaurant services.
After the registration certificate was issued, the Turnpike Authority filed a petition to cancel it. The U.S. TTAB denied the petition . The Board found that the Turnpike Authority failed to establish likelihood of confusion with its registered trademark for highway maintenance and information services. The Board did not believe that consumers would expect restaurant and highway maintenance services to come from the same source.
It is one of those kinds of cases that can make you simultaneously scratch and shake your head.
Minting and selling digital tokens can raise copyright issues, trademark issues, or both. I talked about copyright issues in a previous post. In this article, I outline the trademark aspects of digital tokens.
Blockchains and digital tokens
You can find a quick explanation of what blockchains and digital tokens (fungible and non-fungible) are in this article.
People use digital tokens for various reasons, including:
Cryptocurrency. Fungible tokens are used for this purpose.
Authentication. Some companies use NFTs as an authentication system for their customers, especially for high-end or luxury goods.
Advertising/Publicity. Companies sometimes distribute collectibles or other branded merchandise as a way of increasing brand awareness. NFTs offer one more way of doing that.
Revenue. Non-fungible tokens (NFTs) increasingly are sold at auctions. Sometimes a decent profit can be made this way.
A trademark is something that operates as an identifier of the source or origin of a product or service, distinguishing a particular product or service from those marketed by other people or companies.
Many kinds of things can serve as trademarks. Words, letters, symbols, logos, sounds, motions, colors, trade dress (product packaging or design), architecture, etc. – and combinations of them – can potentially serve as trademarks, provided they operate as such.
Functional aspects of a product, packaging or other trade dress cannot be claimed as trademarks. This includes both utilitarian and aesthetic functionality. The presence of a drive-through window cannot be claimed as a fast food company’s trademark. Why not? Because it is not just ornamental; it serves a useful function. The orange flavor of a beverage or chewable tablet cannot be claimed as a trademark because it enhances the consumer’s enjoyment (or tolerance) of the product. That is to say, it serves an aesthetic function. You get the idea.
Trademark protection for digital tokens
Like an identifier of any other product or service, an identifier of the source or origin of an NFT or other digital token may be protected as a trademark, provided it operates as trademark, is distinctive, is nonfunctional, and is not likely to cause consumer confusion.
There are people and companies whose only business is dealing in digital products and services. In addition, a growing number of owners of existing trademarks for non-digital products (such as shoes, books, clothing, and so on) are now marketing digital goods, as well.
For a list of major brands that have filed NFT trademark applications in the United States, check out this Trademark Tote Board.
Some examples of companies that have filed for trademark protection of identifiers of NFTs include Nike, Converse, Mattel, Lion’s Gate, Estee Lauder Cosmetics, Kiss Catalog Ltd. Famous personalities (or their representatives), such as Kobe Bryant and Jay-Z are also filing trademark applications. The New York Stock Exchange has filed an application to register “NYSE” as a trademark for a marketplace for the trading of NFTs.
The most common classes in which digital tokens and services related to them are registered are IC 9 (downloadable software and media); IC 35 (business services), IC 36 (financial, banking, and real estate services), and IC 42 (scientific and technical services). This is not an exhaustive list.
In the United States, a trademark arises by operation of law when a valid mark is used in commerce as a trademark. By “valid mark,” I mean a mark that meets the requirements for one in the United States. It must be distinctive, nonfunctional, not likely to cause confusion about the source or origin of a product or service, and it must be used in commerce as a source identifier.
In this case, a Florida resident marketed and offered for sale digital tokens corresponding to a digital currency. He registered “jrrtoken.com” as a domain name for the conduct of this business. J.R.R. Tolkien’s estate filed a UDRP claim challenging this registration. The estate owns the trademark in “J.R. R. Tolkien,” which is registered as a trademark in both the U.K. and the U.S. The website of this domain name resolved to a website at “thetokenofpower.com.” That website included images of wizards, including one which the panel found looked like Gandalf from The Hobbit, and the phrase, “The One Token That Rules Them All.”
The panel found that “jrrtoken,” although not identical, is confusingly similar to “J R R Tolkien,” noting that “[w]hen viewed quickly, the disputed domain name and the . . . trademark look similar.”
The panel concluded that the name was selected for the purpose of creating a false and misleading association with J. R. R. Tolkien and profiting from the author’s reputation and goodwill.
Using a trademark in parody is a protected fair use. The panel here, however, did not regard the use to be parody. It found nothing humorous or funny in the domain name. It was “just a domain name chosen due to its similarities with the Complainant’s trademarks to take commercial advantage of its evocation.” The website was “clearly a commercial venture, which is clever but not humorous.”
Finding that the registration was in bad faith, the panel ordered the domain name transferred to the Tolkien estate.
Nike v. StockX
This month, Nike, Inc. filed a complaint in federal court against StockX, LLC for trademark infringement, dilution and other causes of action allegedly arising out of StockX’s alleged unauthorized use of Nike trademarks to mint NFTs. StockX allegedly claims its NFTs represent physical Nike products that it stores in its vault.
This case demonstrates the importance of the distinction between an NFT and the product it represents. The first sale doctrine normally protects a reseller from trademark infringement liability. For example, if you legally purchase a pair of Nike brand shoes, then you are entitled to resell them at a garage sale without incurring trademark infringement liability. If StockX legally purchased Nike products and is reselling them without altering the labels on them, then the first sale doctrine might shelter the company from trademark infringement liability. Tokens, however, are not shoes.
It is sometimes possible for two different companies to use the same (or substantially similar) marks to market different kinds of goods or services. For example, one company may use DELTA to market airline services; another may use it to market faucets; and still another may use it to market electronics. The same mark, however, generally cannot be used to market the same, similar or related goods or services.
What is a “related” product or service? Basically, it is a product or service that a consumer could reasonably expect a company to expand into selling. For example, a consumer could reasonably expect a company that currently only sells computers to expand into the market for printers and other computer peripherals as well. Even if a company is currently only selling computers, you should expect to be sued for trademark infringement if you use their trademark to sell peripherals.
Expect courts to be called upon to decide whether consumers could reasonably expect a company to expand into the NFT market. That might be easier for the court in the Nike case to determine, if Nike establishes that it made its intention to move into the NFT market publicly known. It might not be as easy for a court to decide this question in other cases. Expect to see a lot more companies announcing their entry, or intention to enter, into the digital token market.
It should be noted that it is not always safe to use an existing company’s trademark even for completely different, unrelated goods. If the trademark is famous, then using it in a way that blurs its distinctiveness or tarnishes its reputation is also unlawful. This is known as “dilution.”
If you have a great idea for an NFT using characters or other trademarks that someone else owns, consider obtaining a license to use the trademarks. True, you might have to share profits with the trademark owner, but that could be a small price to pay compared to how much you stand to lose if you are hauled into court for violating trademark rights.
Most people are familiar with a few gTLDs (generic top level domains). The gTLDs .com, .net, .biz, .info, .edu and .gov come to mind. The list of available gTLDs has grown considerably over the past few years, however. Now there are literally hundreds of them. (View the full list here.) Some examples: .food, .auction, .dog, .beer.
The United States Trademark Office denied an application to register that gTLD as a trademark. The Federal Circuit Court of Appeals just affirmed that decision. The case is Vox Populi Registry, Ltd., No. 2021-1496 (Fed. Cir., February 2, 2022).
Vox is the domain registry operator for the .SUCKS gTLD. The company filed two trademark applications with the USPTO. One was for the standard character mark .SUCKS in Class 42 (computer and scientific services) for “[d]omain registry operator services related to the gTLD in the mark” and in Class 45 (personal and legal services) for “[d]omain name registration services featuring the gTLD in the mark” as well as “registration of domain names for identification of users on a global computer network featuring the gTLD in the mark.” The other application was for the stylized form of the mark, as shown in the illustration accompanying this article.
The examining attorney refused both applications, on the ground that they failed to operate as trademarks, i.e., as source identifiers. The TTAB agreed, finding that consumers will perceive “.sucks” as merely one of several gTLDs that are used in domain names, not as a source identifier.
Concerning the claim in the stylized form, the Board concluded that although the pixelated font resembling how letters were displayed on early LED screens is not common today, it is not sufficiently distinctive to qualify for trademark protection in this case.
Vox appealed the part of the decision relating to the stylized font to the Federal Circuit Court of Appeals. The court affirmed.
The standard character mark
Under the Lanham Act, a service mark may be registered only if it functions to “identify and distinguish the services of one person . . . from the services of others and to indicate the source of the services.” 15 U.S.C. § 1127. Matter that merely conveys general information about a product or service generally does not function as a source identifier.
In this case, the court held that substantial evidence supported the Board’s finding that consumers will view this standard character mark as only a non-source identifying part of a domain name rather than as a trademark. The court pointed to specimens from Vox’s website that treated domain names ending in “.sucks” as products. rather than as identifier of Vox’s services. Consumers are likely to see gTLDs as part of domain names, not as identifiers of domain name registry operators.
The stylized design
Design or stylization can sometimes make an otherwise unregistrable mark registrable, provide the stylization creates an impression on consumers that is distinct from the words or letters themselves. Here, the Board determined that because of the ubiquity of the font in the early days of computing, consumers would view the pixelated lettering as ordinary rather than as a source identifier.
It appears that Vox did not claim that the stylized presentation of .SUCKS had acquired distinctiveness. If it had done so – and if it could present persuasive evidence of acquired distinctiveness – then the stylized mark might have been registrable.
Does this decision mean that a gTLD can never serve as a trademark? No. To give just one example, AMAZON is both a gTLD and a trademark. The import of the case is only that a gTLD is not likely to be registrable as a service mark for a domain name registry service, where consumers are more likely to see it as simply being a part of a domain name, not as an identifier of a particular domain registry service.
Not many people are aware that tucked into the 5,593-page Act are two major pieces of intellectual property legislation: the Copyright Alternative in Small-Claims Enforcement Act and the Trademark Modernization Act. Since the TM Act just went into effect, it seems appropriate to address it first.
The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020. Most people have heard of the provisions relating to COVID-19, such as rental and other kinds of financial assistance, and Title XIV of Division FF of Section 2 (COVID-19 Consumer Protection Act). Most people are probably also aware that it contains the usual annual appropriations for things like the promotion of women’s interests. Not as many people are aware, however, that tucked into the 5,593-page Act are two major pieces of intellectual property legislation: the Copyright Alternative in Small-Claims Enforcement Act (“the CASE Act of 2020”) and the Trademark Modernization Act (“the TM Act of 2020.”) I will be talking about the CASE Act in later articles. Since the TM Act just went into effect, it seems appropriate to address it first.
Injunctions against infringement
In order to obtain an injunction, it is necessary to convince a court that you will suffer irreparable harm unless the court issues one. That can be difficult – and expensive – to do.
Historically, courts relieved some of the burden on trademark owners by applying a rebuttable presumption of irreparable harm upon a showing of likelihood of confusion. The United States Supreme Court, however, disrupted that practice in some circuits in 2006. In eBay, Inc. v. MercExchange, 547 U.S. 388 (2006), the Court held that an injunction against patent infringement cannot be granted unless the plaintiff makes an evidentiary showing that irreparable harm will ensue unless an injunction is granted. A split in the circuits resulted with respect to the question whether the requirement also applies to injunctions against trademark infringement. Some courts continued to apply the presumption; others did not.
The TM Act resolves the split. Now, 15 U.S.C. § 1116(a) requires courts in all jurisdictions to apply a rebuttable presumption of irreparable harm upon a finding of likelihood of confusion with a federally registered trademark, when an injunction is sought under the Lanham Act. In the case of a motion for a preliminary injunction or TRO, the presumption arises upon a showing of likelihood of success on the merits of an infringement claim brought under the Lanham Act.
The rebuttable presumption applies not only to infringement claims, but also to claims for injunctive relief with respect to false advertising, unfair competition, trademark dilution, or cyberpiracy under Section 43 of the Lanham Act.
By codifying this rebuttable presumption in the Lanham Act, the TMA removes uncertainty in the law and makes it easier for trademark owners to establish entitlement to injunctive relief.
Throwing out unused trademarks
If you’ve ever conducted a trademark search at the USPTO website, you’ve probably noticed an overabundance of registrations. In many cases, a trademark is registered in more categories of products and services than is really needed. Trademarks are often registered for good or services that either never have been used, or are not current being used, in connection with the mark. The TM Act provides new ways of clearing some of them out.
The TM Act makes non-use a grounds for cancellation of a trademark registration. Cancellation of a trademark upon proof of abandonment is not new. The ability to remove unused goods or services from the coverage of the registration is. Moreover, an expungement does not require proof that the registrant has stopped using the mark since it was registered. To the contrary, it allows claims that a trademark has never been used (or has never been used for specified goods or services) to be made.
It is now possible to initiate a proceeding (called an “expungement”) to cancel a registration or narrow the categories of goods and services on the grounds of non-use.
Anyone may file an expungement petition. It may be brought between three and ten years after the registration. Until December 27, 2023, petitions to expunge trademarks may be brought with respect to registrations that are more than three years old, even if they are more than 10 years old. Thereafter, a petition may be brought only if the registration is between three and 10 years old.
The TM Act also makes it possible to petition the Trademark Office to reexamine the registration of a trademark. Under the TM Act, it will now be possible to seek the cancellation of a trademark on the grounds of that it was not actually used in commerce prior to the registration date. There is a 5-year limitations period for filing such a petition, measured from the date of issuance of the registration.
Who may initiate a proceeding
Anyone may initiate a proceeding. In addition, the USPTO may commence one on its own initiative. The filing fee is $400 per class of goods or services.
The director’s determination with respect to an expungement or reexamination petition may be appealed. A party seeking to challenge the determination must first seek review from the Trademark Trials and Appeals Board (TTAB). Further review may then be sought from the Federal Circuit court of appeals.
Madrid Protocol registrations
A foreign or Madrid Protocol registration under Sections 44(e) or 66 cannot be cancelled on this new ground of non-use if the nonuse was due to special circumstances excusing the non-use.
Office Action response deadlines
Currently, trademark applicants have six months to respond to an Office Action. The TM Act authorizes the USPTO to specify a shorter time period.
The USPTO has announced that people (other than Madrid Section 66(a) applicants) will have three months, instead of six, to respond to office actions. For $125, you can request a 3-month extension. This shorter time period, however, will not be implemented until December 1, 2022.
Third-party evidence in examinations
Finally, the Act facilitates the submission and consideration of evidence submitted by third parties during the examination process. In the past, opponents of an application for registration typically initiated an opposition proceeding to contest a registration application. Under the new provisions, we are likely to see more attempts to forestall registration even before the application is published for opposition.
The Law Office of Tom James
Need help with a trademark matter? Whether it’s an application to register a trademark, an expungement or re-examination petition, an opposition proceeding, or an appeal, Cokato Minnesota attorney Thomas James at the Tom James Law Office can help you.
Take my course on Trademark Law
Enroll in attorney Tom James’s 90-minute on-demand course, “Trademark Law: Key Concepts” at Udemy to learn the basics of U.S. trademark law.