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Merchandising; Cybersquatting; Indirect Infringement and False Advertising. Intro to IP – Prof Merges 3.22.2012. Merchandising: “Extension by Contract”. Merchandising and basic trademark theory What consumer associations are protected by a “merchandising right”?

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merchandising cybersquatting indirect infringement and false advertising

Merchandising; Cybersquatting; Indirect Infringement and False Advertising

Intro to IP – Prof Merges


merchandising extension by contract
Merchandising: “Extension by Contract”
  • Merchandising and basic trademark theory
  • What consumer associations are protected by a “merchandising right”?
  • What other benefits follow from such a right?
how does franchising work
How does franchising work?
  • National headquarters: centralized assets
    • Recipes, standard procedures, logos, other resources
  • Local franchise locations
    • Owners of real estate, contractual share of revenue
  • Two different legal regimes deal with this
  • Domestic US law: ACPA, 15 USC 1125(d)
    • “bad faith”; “legitimate interest”
  • International arbitration: ICANN/UDRP – WIPO-administered arbitration system
  • Reserving names that are “naturally” associated with a particular company
  • Then, selling these domain names to the relevant company
  • Examples: P&,,,, P&, etc.
domain name registration basics
Domain name registration - basics
  • IPNTA 5th ed at 791
  • Internet Corporation for Assigned Names and Numbers (ICANN), non-profit. Coordinates assignment of domain names by various entities, which generally allocate domain names on a first-come, first-served basis for a modest fee.
domain names
Domain names
  • General Top-Level Domains
  • .COM
  • .ORG
  • .EDU
icann dispute resolution process
ICANN Dispute Resolution Process


(i) your domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; and

(ii) you have no rights or legitimate interests in respect of the domain name; and

(iii) your domain name has been registered and is being used in bad faith. – P. 874

cybersquatting and speculation
Cybersquatting and speculation
  • Markets and legitimacy
  • Crucial role for law in determining and policing what are legitimate markets
society determines which transactions are legitimate and which are not
Society determines which transactions are legitimate, and which are not
  • The existence of a market does not, by itself, confer legitimacy

(d) Cyberpiracy prevention

(1)(A) A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person—

(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and


(ii) registers, traffics in, or uses a domain name that—

(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;

(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark …. Lanham Act § 43(d), 15 USC § 1125(d)

legitimate use factors
Legitimate use factors

§ 43(d)(1)(B)

(i) In determining whether a person has a bad faith intent described under subparagraph (A), a court may consider factors such as, but not limited to—

  • the trademark or other intellectual property rights of the person, if any, in the domain name;

(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;

(III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services


(VI) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct


(VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties

peta v doughney
Peta v. Doughney
  • ACPA requirements
  • Parody?
peta arguments
PETA arguments

Doughney (I) had no intellectual property right in; (II) is not Doughney’s name or a name otherwise used to identify Doughney; (III) Doughney had no prior use of in connection with the bona fide offering of any goods or services; (IV) Doughney used the PETA Mark in a commercial manner;


(V) Doughney ‘‘clearly intended to confuse, mislead and divert internet users into accessing his web site which contained information antithetical and therefore harmful to the goodwill represented by the PETA Mark’’;


(VI) Doughney made statements on his web site and in the press recommending that PETA attempt to ‘‘settle’’ with him and ‘‘make him an offer’’; (VII) Doughney made false statements when registering the domain name; and (VIII) Doughney registered other domain names that are identical or similar to the marks or names of other famous people and organizations.


"Owe no one anything except to love one another, for he who loves another has fulfilled the law." (Romans 13:8)

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  • Anti-cybersquatting Protection Act

‘‘The paradigmatic harm that the ACPA was enacted to eradicate’’ is ‘‘the practice of cybersquatters registering several hundred domain names in an effort to sell them to the legitimate owners of the mark.’’ Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d 806, 810 (6th Cir. 2004).

commercial speech
Commercial speech
  • 1st amendment doctrine
  • Controversy: lower 1st amendment protection?
  • Issue dodged here – no TM infringement liability, no 1st A defense
ipnta 5 th ed 864
IPNTA 5th ed 864

[W]e need not resolve that question or determine whether Sections 32 and 43(a) apply exclusively to commercial speech because Reverend Falwell’s claims of trademark infringement and false designation fail for a more obvious reason. The hallmark of such claims is a likelihood of confusion—and there is no likelihood of confusion here.

shields v zuccarini ipnta 5 th p 869
Shields v. Zuccarini – IPNTA 5th p. 869
  • ACPA Case
  • “Typosquatting” at issue
joe s cartoons site
Joe’s Cartoons site
  • Post-Google environment may be a bit different . . .

John Zuccarini (born c. 1947) is an American businessman who served time in federal prison for violating the Truth in Domain Names Act. Zuccarini operated a domain name speculation business. He is reported as owning 5500 domains before his arrest.

John Zuccarini was charged under "truth in domains" legislation

Domain name speculation

Zuccarini registered thousands of domains that were close misspellings or "typos" of popular sites such as Cartoon Network and Homestar Runner or even acquired domains identical to well known brands such as Hot Wheels. Speculators normally place a pay-per-click web page in place of the legitimate website visitors expect to find. A PPC page looks similar to a search engine page but the design additionally blankets the home page with a copious amount of links that are often related to the subject of the domain name. Under the normal model of business, the speculator profits from the money obtained from visitors clicking on these links. However, Zuccarini deviated from this business convention by redirecting his audience of largely children to pornographic websites.

domain name tasting
Domain Name Tasting
  • Spin Off on Old Fashioned Act of Cybersquatting
  • Domain Name Tasting –Exploits a Loophole in ICANN’s Domain Name Registration Process
  • You can Register Unlimited Domain Names for 5 Days and Return them for a Full Refund.
  • “Tasted Names” Infringe and Dilute famous Trademarks
  • Infringing Domain Names are “Parked” on Temporary Websites Loaded with Ads


other new domain name abuses
Other New Domain Name Abuses
  • Domain Name Kiting – Registrars Taste, Park Domain Name in Bulk and Drop Them. Using an Automated Process, They Automatically Re-Register Them Again and Again.
  • Domain Name Spying – Cybersquatters See Name You Search and Grab Them Before You Can Register Them.


how bad is the problem
March 2005 – Nearly 43 million .com and net domain names registered.

Only 2.5 million names were deleted that same month.

In April of 2006, 35 million names registered.

Of those names 32.7 million were used again and again but never registered permanently!

How Bad is the Problem?


In April of 2006, only 2 Million Names Were Actually Purchased, Meaning that over 92% of all Domain Names Registered Were Part of Tasting Schemes!
  • Of the 32 Million Domain Names Registered That Month, 50% infringed on the Rights of Trademark Owners


recent litigation
Recent Litigation
  • Dotster sued by Neiman Marcus and Bergdorf Goodman -- case settled
  • Over 120 infringing variations of Verizon trademarks were included as an exhibit to the Dotster complaint
  • March, 2007 – Neiman Marcus sues Name.Com, another Registrar
  • Many new cases from brand owners, including new Verizon suits


they meant what they said
They Meant What They Said
  • 1999 – Anti-Cybersquatting Consumer Protection Act.
  • Senate Report:

“Specifically, legislation is needed to clarify the rights of trademark owners with respect to bad faith, abusive conduct, and to provide adequate remedies for trademark owners…”


indirect infringement
Indirect Infringement
  • Flea Markets
  • Online activities
tiffany v ebay
Tiffany v. eBay
  • 600 F.3d 93 (2d Cir. 2010)
  • Held: eBay not liable here
ebay anti counterfeiting measures
eBay anti-counterfeiting measures
  • Fraud Engine
  • Verified Owner’s program
  • About Me seller’s webpages
direct infringement
Direct infringement
  • Descriptive use
  • To describe legitimate goods for resale
  • Genuine used Rolex watch . . .
inwood test ipnta 5 th supp
Inwood test, IPNTA 5th Supp.

‘‘[I]f a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.’’


For contributory trademark infringement liability to lie, a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary. [No liability here.]

false advertising
False Advertising
  • Johnson & Johnson v. Smithkline Beacham Corp.

(a)(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which…(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action…. § 43(a)(1)(B)

facts ingredients ad for tums
Facts: “Ingredients” Ad for TUMS

TUMS is ‘‘aluminum free,’’ and that ‘‘only TUMS helps wipe out heartburn and gives you calcium you need every day.’’ After the woman is depicted pondering the virtues of a calcium-based antacid, the commercial ends with a visual and verbal statement of the advertisement’s slogan: ‘‘Calcium rich, aluminum free TUMS.’’

ingredients revised
Ingredients - revised
  • Emphasizes that only TUMS has Calcium
  • Implies (maybe) that ingredients in Mylanta are unhealthy – especially aluminum
  • “Pop science” fear of Alzheimer’s
actionable false advertising
Actionable False Advertising
  • Requires EITHER
  • Literal falsehood, OR
  • Statement that is literally true, but that would tend to mislead or confuse consumers
here implied falsehood
Here: implied falsehood
  • Statements about Calcium, and implicit comparison to Mylanta ingredients, are of course not literally false
  • But what would a literal falsehood look like?
literal falsehood
Literal falsehood
  • “Tests prove that . . .” when there have in fact been NO tests
  • See, e.g., Castrol, Inc. v. Quaker State Corp., 977 F.2d 57, 63 (2d Cir. 1992)

 Tests did not prove that faster lubricating time at engine startup reduced engine wear

threshold showing required
Threshold showing required
  • An appreciable number of consumers received a misleading or confusing message
  • Despite literal truth, the message was still misleading
misleading message
Misleading message

Warner-Lambert Co. v. Breathasure, Inc. 204 F.3d 87 (3d Cir. 2000)

Enjoining continued use of “Breathasure” trademark along with advertising that implied bad breath could be (better) treated “at the source” (in the stomach) vs. in the mouth

2 final issues
2 Final issues
  • Disparagement – ads that do not mention defendant’s product – only criticize or condemn plaintiff’s product (E.g., “Don’t shop Safeway!”)
  • Standing: No consumer standing, despite wording of statute. Has been criticized, IPNTA 5th at 888