Feature

From the Inside: In-House Counsel Look at the Issues

©2017. Published in Landslide, Vol. 10, No. 2, November/December 2017, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Landslide® magazine notes appreciation to Donika Pentcheva, patent attorney at PayPal Inc., for helping to coordinate the questions and answers for this article.

A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.

—Wayne Gretzky

Six in-house counsel weigh in on where their “IP pucks” and challenges are now and will be in the future: Michael Graham, Expedia Inc.; Jolene Yee, Delicato Family Vineyards; Amy Pena, Lions Club International; Brian Marquez, Tampico Beverages Inc.; Nick Valenziano, Goodyear Tire & Rubber Company; and Ryan Beadle, JR Motorsports.

Identifying where the issues are and how to handle them varies for these companies and their in-house attorneys, but there are some common themes.

Trademark Protection, Use, and Infringement

Maintaining trademark registrations and responding to potentially infringing actions tend to be the biggest issues that Tampico Beverages handles on a regular basis, notes Marquez. This company has licensees in over 50 countries around the world. Lions Club International, which operates in over 200 countries, faces similar challenges.

In Goodyear’s case, one of its biggest challenges is determining how best to effectively use limited resources against many trademark threats and risks, says Valenziano. “Trademark litigation is costly and unpredictable, and while lawsuits are undoubtedly necessary at times, flexibility, prioritization, and creativity are likewise required in a world of finite resources. Being efficient and attacking problems in a way that aligns with the overall business objectives and strategy is a must. Something we have had success with, which would not necessarily leap to mind as a way to protect trademark rights, is the company’s trademark licensing program. Through this program, we have marketed dozens of different products around the world under our primary GOODYEAR brand, and, in doing so, expanded the scope of our trademark rights. These expanded rights create a bulwark around the rights relating to the company’s core products, while promoting the brand and generating revenue at the same time. In essence, we are able to tap into the power of the brand to help it protect itself, and we do so at a profit.”

According to Graham of Expedia, the changing relationship of trademarks to domain names is a big challenge. “The use of trademarks as keywords in bidding for increased search engine traffic is pressing on the boundaries of trademark protection,” he says. He notes that keywords as such do not constitute trademark use that would be actionable under present law, but that the use of the same words in paid advertisements linked by keywords can constitute actionable use. “Navigating this area of trademark commerce that has been created by and is a major source of income for the search engines is a big issue.”

Tampico Beverages faces a challenge with respect to trademark registration and protection in developing markets, such as Africa. “In some jurisdictions, the lengthy registration process results in a level of uncertainty at a critical time when we are trying to introduce our brand and, usually, establishing a new relationship with a local licensee,” notes Marquez. In these markets the company has found that the ability to take action against possible infringement is often very limited.

Delicato has had to build on the idea of trying to create distinctive brands in a mature wine industry. Yee says that it is a continuing challenge to ensure that the company’s brands do not create confusion in the marketplace with increased brand compression. Because these brands also reach across alcohol beverage, when her company launches a wine brand it also has to look at beer, cider, and spirits, thus creating a “complicated web of potential enforcement issues.”

Counterfeiting

To Beadle of JR Motorsports, counterfeiting is a huge problem. “Leveraging social media marketing and crowdfunding by platforms like Teespring, SunFrog, TeeSeason, Teecity, and Blancamata to allow independent users to custom design ‘their ideas’ into merchandise,” he says, “It’s like playing whack-a-mole.”

Beadle also sees tensions that arise between an athlete and a team when the athlete goes out into the market to sell his or her personal services, for example in an endorsement deal. There is often a disconnect on what rights the athlete is able to offer potential partners, such as rights to his or her likeness in plain clothes versus in the team uniform. This can be a particularly sensitive issue for NASCAR where its teams rely so much on sponsorship revenue and where drivers need to be cognizant of the possibility of keeping this source of revenue.

Global Protection

Global marketing programs are of increasing importance to companies, but increased globalization presents its own issues. Even a company like Expedia, which has always conducted worldwide clearance searches for trademarks, is increasing these efforts now as it develops new global advertising campaigns with a concurrent increase in costs and analyses.

Some marks—in particular those for taglines—may better serve brands like Expedia when they are not in a single language, but are in local languages in major markets. Searching these variations and referencing the specific trademark laws that may affect a company’s ability to register and protect localized taglines pose particular issues. Aiming for localized taglines in countries “that use idiosyncratic scripts or characters and in which the use of transliterations can lead to the creation of trademarks with similar sounds but widely different meanings” presents a challenge, says Graham.

A key aim for Lions Club International is maintaining sufficient protections where it operates for the protection of its members around the world. The company is constantly adding new URLs for the use of its digital marketing and membership campaigns.

The big challenge for Expedia is its distinctive position as a global online company: its goods and services are marketed under its trademarks worldwide and are provided almost exclusively online. “The result is that our trademarks are targeted by domain name speculators, competitors seeking to attract traffic looking for us online by brand, online fraudsters engaged in phishing, pharming, distribution of malware, and other fraudulent and destructive activities,” Graham says. And these activities can take place anywhere in the world and in any of the more than 1,200 top-level domain registries. As Expedia’s legal team gauges how to handle infringement, there are increases in both logistical and financial issues.

Copyright and User-Generated Content

This area, particularly photographs, is a big area for all these companies. Increasing demand for photographs in social media and the online marketing environments means increased danger in avoiding the use of images copyrighted by third parties. “We use clear guidelines and strict adherence to DMCA notice and takedown and similar safe harbors worldwide,” says Graham of Expedia. “However, the increasing number of copyright trolling law firms and organizations that indiscriminately challenge sites on which their clients’ images are found are creating a new set of problems.” He emphasizes the importance of keeping good records on image origin and source, using clear and enforceable warranties and indemnification provisions, and quickly taking down allegedly infringing images.

Alternative Dispute Resolution

Alternative dispute resolution (ADR) is not in and of itself a key mechanism for these companies, but aspects of this process penetrate the companies’ business.

For example, Tampico Beverages usually has an ADR clause in its agreements. According to Yee of Delicato, even though the wine industry has exploded, its industry is still small enough to engender a tendency to try resolving disputes before anything reaches litigation. More often than not her company is able to find a solution prior to ever reaching a stage where ADR would be necessary

Expedia has seen ADR come into play for the company in the establishment of administrative processes, such as ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP) established in connection with domain name challenges. Graham acknowledges that this is a far less expensive means of challenging domain names.

Valenziano says that in some of Goodyear’s IP-related contracts, the company has specific obligations for senior business managers from each party to conduct a series of meetings prior to the institution of litigation. This is effective in getting management to carefully evaluate the issues and to avoid rash decision-making.

Alternative Fee Arrangements and Outside Counsel

In dealing with its trademark projects in international markets, Tampico Beverages requests a budget to which some firms respond with flat fee proposals, a structure that has worked well.

Lions Club International has consolidated its entire trademark portfolio with one firm, which also manages international counsel. Previously, the company had several different firms handling matters throughout the world. It now has consistent representation, and counsel manages to keep fees down. Although not an alternative fee arrangement per se, this practice has reduced the company’s overall spending and has given a much more unified approach to trademark registration and protection.

Yee of Delicato notes that even though law firms have been talking about alternative fee arrangements for years, in reality they are rarely used. Yee’s company uses a few firms that have limited flat fee offerings, but for the most part its outside counsel still report billable hours.

Expedia uses flat fees extensively in connection with trademark clearance and registration work, as well as domain name registration and UDRP and Uniform Rapid Suspension System (URS) challenges. While this process has been very successful in making fees predictable and reasonable, Graham says that challenges remain in ensuring that all the parties understand and agree what work will be included in the standard fees.

The Internet and Brexit

The continued development of marketing, selling, and communicating via the Internet are among pressing issues for Goodyear. “The Internet expansion necessarily forces prioritization as well as flexibility in how Goodyear approaches trademark encroachment. As the world grows smaller, multijurisdictional clearance becomes the norm, and the sheer volume and availability of information along with the vast number of voices in the marketplace make risk evaluation more challenging and time-consuming than ever,” says Valenziano.

The upcoming Brexit implementation will also present its own set of challenges, particularly with respect to increased costs.

Changes in US IP Law

According to Goodyear’s Valenziano, the United States accession to the Madrid Protocol has had a clear impact on the company in the last 10 years, particularly in the area of trademark clearance. The Madrid system encourages applicants to extend protection to more countries than they otherwise might have sought, and it results in US registration specifications covering long lists of goods/services, many of which will never be marketed under a subject trademark because evidence of use is not required to obtain a registration. Accordingly, there are a good number of registrations for marks that will never be used in the United States on the identified goods/services. Illusory marks make trademark clearance searches that much more complicated.

With patent law, cases such as Alice have narrowed the patentability of computer software and code, and business practices have also affected the approach to patent and patent licensing, notes Graham of Expedia. The rationale behind the decision was that monopolizing basic tools of scientific and technological work through grant of a patent might tend to impede innovation more than tend to promote it. In Expedia’s experience, “there is sufficient uncertainty in what can be protected, making it difficult to establish clear guidelines for its businesses and developers.” Graham adds that his company has moved away from having either defensive or offensive approaches to patenting software and systems, and the company’s focus now is on the importance of the software and systems to the business. Expedia also adjusted both its business and its employees’ expectations about obtaining patents in their names and now foresees greater time and greater cost for obtaining patents.