By: Kun Zhao, Esq.

Trademark rights are acquired and maintained through continuous use in commerce. Once a trademark owner suspends or stops using the mark in commerce, he is risking losing his right in the mark.

The trademark law, section 45 of Lanham Act, states that “a mark shall be deemed to be “abandoned” when its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for three consecutive years shall be prima facie abandonment.” If the trademark is deemed abandoned, the owner cannot enforce his rights in the mark. The mark will then fall into the public domain and may be appropriated for use by others in the marketplace in accordance with the basic rules of trademark priority. In other words, if the mark is deemed abandoned, the person who registers the mark first or uses the mark first after the abandonment has the priority of using that mark in the marketplace.

There are two criteria for determining whether abandonment has occurred: (1) non-use and (2) intent not to resume use. Three years of non-use creates a rebuttable presumption of abandonment. “Intent not to resume” does not mean “intent never to use” but means “intent not to resume use within the reasonably foreseeable future.” If the owner suspended or stopped using the mark for more than three consecutive years, the owner will have to offer evidence of grounds for the temporary suspension and plans to resume use in the reasonably foreseeable future when the conditions requiring suspension abate to rebut a challenge of abandonment. The evidence of intent to resume use must be within the three year period of non-use. A bare assertion of possible future use is not enough.

The above rules also remind business owners that if the company intends to suspend using the mark for certain reasons, it should properly document the grounds for the suspension and the condition and time frame when the use will be resumed to rebut future challenges from others when asserting the right in the mark to protect company’s hard earned goodwill and mark recognition in the public.

By: Kun Zhao, Esq.

In today’s business climate, recognizable names are extremely valuable. Most businesses are serious about promoting their brands and increasing their publicity. However, many business owners often confuse business entity names and trade names with trademarks. Such concepts are often related but quite different.

Business Entity Names

A business entity name is the legal name registered with the Secretary of State when creating a separate legal entity to operate a business in commerce. One business entity can only have one legal name. When registering a business entity, the Secretary of the State  checks the availability of the legal name for the new entity to make sure that it is distinguishable from the names of other existing business on the records in the office of the Secretary of State. Therefore, the business entity name is a name that identifies a business entity, such as Apple, Inc., Doctor’s Associates, Inc. (owner of Subway franchise) and General Electric Company.

Trade Names

The Secretary of State also allows an individual or business entity to use a name other than its legal name in commerce by registering with the Secretary of State. Such names are called “alternative names,” also known as “trade names.” For example, if one registers a company named ABC, Inc. which operates a seafood restaurant, it would be more appealing to operate the seafood restaurant under the name of “Deep Blue.” If one registers “Deep Blue” with the Secretary of State, then he can use it as the trade name in doing business instead of using “ABC, Inc.” By registering trade names with the Secretary of the State, the public can trace them to ascertain the legal name of the business entity. Therefore, a trade name is basically a substitute of the legal name of a business in commerce.

Trademarks

A trademark is any word, phrase, symbol, design or any combination of those that identifies the source of goods or services. It is often used on goods or services that the business entity provides, such as “GOOGLE” on its digital storage service, “NIKE” on sporting goods, and “Subway, eat fresh” on sandwich wrappers.

Oftentimes business entity names and trade names can be registered as trademarks if they are distinctive and not similar to other trademarks used in the commerce. For example, “Google” may identify Google Inc.’s services for electronic storage of digital media and “Nike” may identify Nike, Inc.’s sporting goods. One business entity can only have one legal name, but can have a number of different trademarks to identify the origin of its products. For example, Google, Inc. owns “YOUTUBE,” “ADWORDS,” “CHROME,” and “G+” to designate various kinds of services.

Business owners should recognize that registering a business entity name or trade name with the Secretary of State does not necessarily mean that one may use the business entity name or trade name freely. The Secretary of the State only makes sure that the business entity name and trade name are distinguishable for the records of existing businesses. However, if there are trademarks out there that are similar or identical to the business entity name or trade name you register, the trademark rights may trump the authorization of use by the Secretary of State.

Therefore, when one chooses and registers a business entity name or trade name, he should take the additional step of ensuring that the name will not infringe any trademark in commerce, especially if he plans on using and registering the business name or trade name as a trademark.

By: Kun Zhao, Esq.

Where an employer’s most valuable assets are trade secrets, such as sensitive technical and commercial information that are not generally known to the public, the employer will often require its employees execute two types of agreements to protect its trade secrets and maintain its competitive edge in the marketplace: (1) a confidentiality/non-disclosure agreement and (2) a non-competition agreement.

The purpose of a confidentiality agreement is to require an employee who receives confidential information not to disclose such information to any other person and to keep it a secret. On the other hand, the purpose of a non-competition agreement is to limit the employee’s actions following termination and to prevent the employee from using resources, knowledge, sensitive trade secrets, and/or leads gained during the employment to directly or indirectly compete with the employer.

While confidentiality agreements are generally enforceable in New Jersey and New York, restrictive covenants on competition, such as a non-competition agreement, are not favored in the law. Under the New Jersey and New York law, only a reasonable non-competition agreement is enforceable by the court.

The reasonableness of a non-competition agreement is to be determined on a case by case basis. In drafting a non-competition agreement to protect its business interests, an employer needs to determine whether (1) the restrictive covenant is necessary to protect its legitimate interests, (2) whether it would cause undue hardship to the employee, and (3) whether it would be injurious to the public.

To be reasonable, employers need to show that they have a legitimate interest in restricting competition, such as protecting confidential business information, protecting its investment in the training of its employee, or protecting its client bases. Beyond that, three additional factors should be considered in determining whether the restrictive covenant is not overbroad: (1) its duration, (2) the geographic limits, and (3) the scope of activities prohibited. Each of these factors must be narrowly tailored to ensure the covenant is no broader than necessary to protect the employer’s interests.

We at Hill Wallack LLP stand ready to assist with any questions and assistance needed in drafting and preparing confidentiality agreements and non-competition agreements to protect your business interests.

By: Kun Zhao, Esq.

With emerging and evolving technologies widely available on the internet, advertising using keyword-triggered online ad programs is becoming increasingly effective. For example, Google Adwords is a very powerful tool in online advertising because it manipulates search results to artificially prioritize an advertiser’s website over other possible results. A simple text ad consists of a hyperlink headline to the advertiser’s website, one or several short lines of descriptive text and the URL of the advertiser’s website. An advertiser purchases the keywords with which it wants its website and the ad to be associated. When someone uses a Google search and the “keyword,” the ad will appear alongside other search results. Similar programs may be used on some most electronic devices and networks, such as smart phones and iPads.

While advertising on the internet, companies may wish to take advantage of their competitors’ widely-known trademarks in the industry. One of the very limited legitimate ways to exploit a competitor’s goodwill is to purchase trademarked terms in search engine keyword advertising on the internet, such as Google Adwords or Microsoft Bing.

The discussion of whether an advertiser can legitimately use a trademarked term as keyword in internet advertising started in Brookfield Commc’ns, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036 (9th Cir. 1999)), where the Ninth Circuit relied on “initial interest confusion doctrine,” holding that non-confusing search results that were listed when a trademarked term was used as a search term infringed upon the plaintiff’s trademark.

After 12 years of evolving case law on trademark infringement involving the internet in the federal courts since Brookfield, the most recent decision in Ninth Circuit has clarified the test in analyzing and determining whether such use implicates trademark infringement. In a recent decision styled Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011), the defendant purchased the plaintiff’s trademark “ActiveBatch” in search engine keyword advertising, which when keyed into many search engines, like Google and Microsoft Bing, produces a results page showing “www.NetworkAutomation.com” as a sponsored link.

In reaching its conclusion, the Ninth Circuit agreed with the Second Circuit in finding that such use is a “use in commerce” under the Lanham Act. However, the Ninth Circuit refused to rigidly apply the “trokia” factors in Brookfield. Instead, it adhered to two long-stated principles as the proper inquiry of trademark infringement in the context of search engine keyword advertising: “the Sleekcraft factors (1) are non-exhaustive, and (2) should be applied flexibly, particularly in the context of Internet commerce.” The Court also emphasized that “because the sine qua non of trademark infringement is consumer confusion, when we examine initial interest confusion, the owner of the mark must demonstrate likely confusion, not mere diversion.”

When analyzing and weighing eight Sleekcraft factors, the Court identified the four most relevant factors to the analysis of the likelihood of confusion in keyword advertising: (1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the consumer; and (4) the labeling and appearance of the advertisements and the surrounding context on the search results page. Noticeably, the Ninth Circuit gave little weight on the factors of “convergent marketing channels” and “degree of care exercised by consumers” as online advertising are so common toady and online commerce becomes commonplace. Finally, because the lower court failed to apply Sleekcraft factors flexibly and wrongly relied on the “Internet troika” instead of these factors, the Ninth Circuit reversed and vacated the preliminary injunction.

This decision is significant because it implies that the purchase and use of trademarked term in search engine keyword advertising does not inherently constitute trademark infringement. It clarifies the test for trademark infringement in cases involving the internet. As to all future internet cases, it indicates that the Court will apply the traditional long stand eight Sleekcraft factors in a flexible manner and in a case specific context.