Google's AdWords Program Continues to Challenge Trademark Owners and The Courts

The debate over the open sale of trademarks to trigger online advertising at Google has been heating up. Google AdWords allows anyone to bid on keywords that, when searched by others, wins the owner high placement in the search results page based on a combination of factors. This means that your company can bid on the word "shoes," for example, in order to have your footwear company placed prominently among the search results.

But what if you want to use the NIKE trademark to trigger an ad for your footwear website? And what if you don't even sell NIKE shoes? In most instances Google allows any company to bid on keywords and place advertising using another company's trademark.

Courts across the United States have reached different conclusions on whether Google's use of trademarks as AdWords constitutes "trademark use in commerce," a necessary element of a successful trademark infringement lawsuit. The 9th Circuit, which includes Arizona and California, has held that the sale of trademark-protected words in the AdWords program is a "use in commerce" for purposes of federal trademark law. Courts in the 2nd Circuit, which includes New York, have held otherwise, holding that Google's actions are not a "use in commerce" under federal trademark law. The courts have largely accepted Google's contention that there is no trademark use in commerce because any use of the mark is internal only, and Google had never "used the mark" publicly by placing the trademark on any goods, containers, advertisements, or anything else visible to the public.

This split between east and west, or 2nd and 9th circuit, may be changing. Recently, the 2nd Circuit Court of Appeals for New York reversed a lower court's determination on the "use in commerce" issue. In Rescuecom v. Google, the Second Circuit found that selling trademarks as search engine advertising keywords can be a "use in commerce." "What Google is recommending and selling to its advertisers is Rescuecom's trademark," said the Court's ruling. "Google displays, offers, and sells Rescuecom's mark to Google's advertising customers when selling its advertising services."

We haven't seen the end of this issue. Other cases are pending against Google, and Google is said to be liberalizing its policy to permit use of third-party trademarks in some ads themselves. It remains to be seen whether the 2nd Circuit will distinguish a competitor's purchase of trademarks for use in keyword searches from Google's sale of trademarks.

Each case a business may face is unique and may require legal advice. Please consult an attorney about specific concerns in this area. For more information, contact Bradley P. Hartman at bhartman@jsslaw.com or 602.262.5842.

Trademark Fights Take Shape During Tough Economy

As companies fight for new business and look to keep what they already have, protection of a company's core identity is more important than ever.

Words, slogans and designs that you use to identify and distinguish your goods and services from others are eligible for federal registration with the U.S. Patent and Trademark Office (the "PTO"). A federal trademark registration gives a company presumptive ownership and the exclusive right to use the trademark in connection with the goods and services identified in the federal registration. For this reason, it is important to not only protect your brands through federal registration, but to also monitor the trademark registration activities of others.

Three recent cases show the importance of protecting your brand, and monitoring the actions of others:

1. Recently, The Laptop Company, owner of the online shopping service "BongoBing," made a preliminary filing with the PTO in opposition to Microsoft's application for federal registration of the "Bing" trademark for its new search engine. The BongoBing website provides information on products primarily in the home and garden area. The website is designed to look like a search engine, where you can search or "Bongo" for products.

Although The Laptop Company claims trademark rights to BongoBing, it has never filed an application for federal trademark registration. The company has received an extension through December 16, 2009, to formally oppose the registration of "Bing."

2. Oprah Winfrey and her production company, Harpo Productions, Inc., are trying to stake Oprah's exclusive claim to the term "Aha! Moment." Last year, the insurance company Mutual of Omaha filed an application for registration of the slogan "Official Sponsor of the Aha Moment," which became part of a national advertising campaign in February. After the Mutual of Omaha mark was approved by the PTO, it was published for opposition by third parties. When no opposition papers were filed, the PTO issued a Notice of Allowance.

On the same day the Notice of Allowance was issued, Oprah's lawyers sent a "cease and desist" letter to Mutual of Omaha, claiming that the slogan violates Oprah's rights in the "Aha Moment" and demanding that the company cease use of the mark. Not to be outdone, Mutual of Omaha filed a lawsuit in federal court days later, asking a judge to allow the company to use its slogan without interference from Oprah. The litigation is ongoing.

In the meantime, Harpo has filed its own applications for federal registration of "Aha! Moment," one of which (for magazine columns) was published for opposition on September 1, 2009.

3. When consumer electronics retailer giant Best Buy learned that a division of United Technologies known as the "Geek Patrol" was providing the same computer repair services as the Best Buy "Geek Squad," the company went straight to federal court with allegations of trademark infringement, unfair competition, and deceptive trade practices. Best Buy identified an online directory listing for the Geek Squad that stated "GEEK PATROL we can send a Squad of geeks to you" and "WE ARE THE BEST BUY." The lawsuit, filed last month, has resulted in some changes to the Geek Patrol website. Time will tell who ultimately prevails in this real life "geek drama."

Each case a business may face is unique and may require legal advice. Please consult an attorney about specific concerns in this area. For more information, contact Bradley P. Hartman at bhartman@jsslaw.com or 602.262.5842.

Client Alert: Recent Changes to Arizona Foreclosure Law Repealed

On September 4, 2009, Governor Brewer signed House Bill 2008, which repeals Senate Bill 1271 and its changes to the Arizona anti-deficiency statute. The real estate community’s efforts were successful; and the recent changes to the law sought out by the lending industry, signed by Governor Brewer on July 1, 2009, and scheduled to go into effect on September 30, 2009, have been repealed.

As a result of this repeal, property owners (including owners of second homes and investment properties) in the state of Arizona owning qualified real estate (residential property on two and one-half acres or less and utilized for either a single one-family or single two-family dwelling) will continue to receive the protections afforded by Arizona’s anti-deficiency statute.

To view the original client alert, or to recap on the details of SB 1271, view our blog post from August 4th.

If you have any questions or concerns about this change in Arizona’s foreclosure law, contact Brian N. Spector at bspector@jsslaw.com or 602.262.5977.

Tax Client Alert: Deadlines Approaching For Special NOL Carrybacks

Time is running out for many businesses wishing to take advantage of the expanded business loss carryback option included in the 2009 recovery law. Eligible calendar-year corporations have until September 15, 2009 to file the appropriate forms. Eligible individuals have until October 15, 2009 to choose this expanded carryback option.

This carryback provision offers small businesses that lost money in 2008 an excellent way to quickly obtain some much needed cash if the business was profitable in previous years. This option is only available for a limited time, so small businesses should consider it carefully and act before it is too late.

Under the American Recovery and Reinvestment Act (ARRA), enacted in February, many small businesses that had expenses exceeding their income for 2008 can choose to carry the resulting loss back for three, four or five years, instead of the usual two. This means that a business that had a net operating loss (NOL) in 2008 could carry that loss on their books as far back as tax-year 2003. Not only could this mean a special tax refund, but the refund could be larger, because the loss can be spread over as many as five tax years, rather than just two.

This option may be particularly helpful to eligible small businesses with a large loss in 2008. A small business that chooses this option can benefit by:

• Offsetting the loss against income earned in up to five prior tax years,
  
• Getting a refund of taxes paid for up to five prior years,
  
• Using all or part of the loss now, rather than waiting to claim it on future tax returns.

The option is available for an eligible small business (ESB) that has no more than an average of $15 million in gross receipts over a three-year period ending with the 2008 tax year. Unless the appropriate election is made prior to the referenced deadlines, the taxpayers will not be eligible to take advantage of the expanded carryback period.

Many taxpayers are also revisiting whether losses that arose from 2008 taxable transactions generated ordinary losses, or capital losses. Ordinary losses may be eligible for the expanded carryback treatment. Capital losses only can be carried forward to future tax year, and then only can be utilized to offset future capital gains, or, to a very limited extent, the ordinary income of the taxpayer.

Each case a business or individual may face is unique and may require legal advice. If these changes apply to you, or you have other tax related questions, please contact either Jack N. Rudel at jrudel@jsslaw.com or contact Richard C. Smith at rsmith@jsslaw.com.

Inaccurate Listing of Goods in Trademark Registration No Longer Basis For Automatic Cancellation: Federal Circuit Reverses Trademark Offices Stance

The recent Federal Circuit decision in In Re Bose Corporation (No. 2008-1448, Slip Op. August 31, 2009) has changed the prevailing standard for finding fraud on the Trademark Office where an applicant inaccurately identifies goods or services sold under the mark. The BOSE trademark registration had been canceled by the Trademark Trial and Appeal Board (TTAB) for fraud on the Trademark Office because a declaration filed in connection with renewing the registration had listed goods (audio tape recorders and players) that were no longer being made. Bose’s explanation that it thought that shipment of tape players for warranty work met the commerce requirement was rejected as unreasonable, and the TTAB applied its standard that an applicant commits fraud by making a representation that it knows or should know is false.

In reversing, the Federal Circuit held that fraud on the Trademark Office must be shown by clear and convincing evidence of a false statement of material fact made with deceptive intent: “There is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive.” Because direct evidence of intent to deceive is rarely available, fraud may be inferred from indirect and circumstantial evidence, but the inference must be clear and convincing, and must indicate sufficient culpability to require a finding of intent to deceive.

This ruling eliminates what had been a “quick and easy” basis for attacking a trademark registration. Under the prior line of TTAB authorities (now reversed), one slip in the identification of goods could be grounds for cancellation of the entire registration. If a listed item was not in commerce at the time of the declaration, cancellation for fraud was virtually automatic if requested by an adversary. Now the standard is much higher and there will be far fewer cancellations.

Even though the threat of Draconian consequences for an incorrect listing of goods or services in a registration has been minimized, trademark owners are still advised to review their existing registrations carefully for any inaccuracies and to correct them by amendment. In addition, scrupulous accuracy in future statements of use, whenever filed, should be the norm.

Each case a business may face is unique and may require legal advice. Please consult an attorney about specific concerns in this area. For more information, contact Joseph W. Mott at jmott@jsslaw.com or 602.262.5866.

Federal Minimum Wage Increase

Effective July 24, 2009, the federal minimum wage provisions contained in the Fair Labor Standards Act (FLSA) were increased to $7.25 per hour. Please note that many states also have minimum wage laws. In cases where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.

The Fair Labor Standards Act establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

Client Alert: An Important Change Affecting Arizona Foreclosure Law

On July 1, 2009, Governor Brewer signed into law an important change to Arizona’s anti-deficiency statute. Previously, a lender foreclosing a deed of trust on qualified real estate (i.e., residential property of two and one-half acres or less and utilized for either a single one-family or single two-family dwelling) could not bring an action to recover any difference between the amount of its claim and the amount obtained by the foreclosure sale. As a result of the change, the protection now only applies to a foreclosure sale of such residential property that is used by the borrower as a dwelling for at least six consecutive months. The borrower has the burden of proving that.

This change in the law was sought by the lending industry. It was intended to take away the protection previously afforded to those who purchased residential real estate as rental and investment property.

A number of questions already have arisen regarding this change in the law. A few of them and the possible answers are set forth below:

1. Question: To receive protection, must the borrower have used the property for the six consecutive months immediately preceding the foreclosure sale?
   
   Answer: No. The change appears intended to take away protection from borrowers who purchased residential property for speculation and investment. Accordingly, it should not apply to a borrower who, for example, initially lived in the property (for at least six months) but later turned it into a rental or for other reasons moved out. That also is consistent with a plain reading of the statute, which does not specify that the usage must occur immediately prior to the sale.
   
   
2. Question: Are the owners of second (i.e., vacation) homes protected?
   
   Answer: Given the intent behind the change -- to take away protection previously afforded to speculators and investors -- vacation home owners ought to be protected if they can demonstrate that they used the property for six consecutive months. Arguably, usage need not be as a primary residence; it also can be the more sporadic kind associated with a second home. It could be argued that if the legislature wanted to limit protection to one’s primary residence, it could have said that or used the term “resided” instead of “used.”
   
   
3. Question: Does the change apply to owners who purchased and borrowed against property in reliance upon the protection afforded under the old law?
   
   Answer: Yes. The change applies to all foreclosure sales that occur after September 30, 2009 – regardless of when the property was purchased or the loan was made – and, therefore, to sales of property owned by investors who purchased and borrowed in reliance upon the protection afforded under the old law. It remains to be seen whether such owners can successfully challenge the applicability of the change to transactions made in reliance upon the prior law.
   

According to recent newspaper reports, the Arizona Realtors Association and real estate industry lobbyists currently are working to get this change in the law repealed. Time will tell whether those efforts will be successful and/or whether the new law will be clarified to address the above questions.

If you have any questions or concerns about this change in Arizona’s foreclosure law, contact Brian N. Spector at bspector@jsslaw.com or 602.262.5977.


NOTE: On September 4, 2009, Governor Brewer signed House Bill 2008, which repeals Senate Bill 1271 and its changes to the Arizona anti-deficiency statute. Please view our updated blog post explaining these changes.

Jennings Strouss Sponsors the 5th Annual Commercializing Life Sciences Forum: The Art and Science of Valuing a Bioscience Company

Jennings Strouss, is again partnering with ASU Technopolis and other entities to co-sponsor the 5th Annual Commercializing Life Sciences Forum (“Conference”) on September 1, 2009 in Scottsdale, Arizona at ASU’s Skysong campus. This year’s Conference, entitled The Art and Science of Valuing a Bioscience Company, will focus on the challenges of valuing inventions and other key IP held by a bioscience entity from discovery to the mature commercialization stage.

• Session 1: Valuation of Intellectual PropertyPanel Discussion: Determine an appropriate valuation for a technology and its associated IP.
• Session 2: Company Valuation when Attracting InvestmentPanel Discussion: Issues surrounding the funding of an existing company, e.g., maintaining the founder's stake, down rounds, how to avoid setting a valuation that will make it harder to attract additional capital later.
• Session 3: Valuation in an M&A EnvironmentPanel Discussion: How a company is valued when it is being considered for an acquisition.

Other Conference supporters include the Arizona BioIndustry Association, the Mayo Clinic, SunHealth Research Institute, and Arizona Technology Enterprises (AzTE).

For additional information, please visit Jennings Strouss or ASU Technopolis or contact Frank X. Curci.

Save the Date postcard.

Could You be Sued if Your Customer Database is Breached?

In the age of computer hacking and identity theft, more and more attention is being focused on the obligation of businesses to protect the security of personally identifiable information stored on its computers and in its databases.

Most businesses retain electronic records containing personal information about employees, vendors, and customers. Does holding that personal information and data create a duty to conceal and protect that information from others on behalf of the person about whom the data relates? Most courts have held that no implied duty exist. If you properly obtain non-confidential data from your employees, customers or vendors, you have the right to use it. The fact that you know your customer's home address and phone number, for example, does not create a duty to keep that information secure. Indeed, the customer's name, address and phone number may be known to many individuals and businesses.

But some employee, customer and vendor information is more sensitive, and may be delivered to your business under confidentiality agreements or under circumstances sufficient to imply a duty to protect the information from disclosure. For example, social security numbers, bank account information, personal health information provided for insurance purposes, and other sensitive data could be used by others for improper purposes. If it is foreseeable that damages could result from the public disclosure of sensitive personal, financial or health information, a business is wise to protect that information to the greatest extent possible.

• Encrypt. Current laws generally apply only to "unencrypted personal information." All computer data containing sensitive information should be encrypted and opened only with a password to prevent unauthorized access.
  
• Limit. Business policies and practices should limit access to sensitive data to those individuals with a need to use the particular data in the course of their job duties.
  
• Train. Train employees on the need to secure and protect sensitive data from unauthorized access, including personal information as well as company information, such as marketing plans and strategies, product designs, and manufacturing processes. Additionally, train employees on how to spot unauthorized access to sensitive data so that your company can be vigilant in identifying data theft and complying with laws that require prompt notice to impacted individuals. Evidence of employee training can help the company avoid a punitive damages award in the event of unauthorized access.
  
• Monitor. Today's network technologies can help you identify unauthorized data access attempts, such as multiple erroneous password entries, access to the database from an IP address or location outside the company, file modifications that evidence copying or emailing of sensitive data, or after-hours access to a secure database.

If your database is ever breached, the worst thing you can do is ignore the breach and hope that no one will find out or nothing will be used improperly. Be warned that there are state and federal laws that require businesses to take specific actions to promptly notify affected individuals and assist those individuals with protecting their financial records and credit rating.

Each case a business may face is unique and may require legal advice. Please consult an attorney about specific concerns in this area. For more information, contact Bradley P. Hartman at bhartman@jsslaw.com or 602.262.5842.

Use of Celebrity Images in Advertising Has Risks

Clothing retailer American Apparel has agreed to pay Actor/Director Woody Allen $5 million to settle a lawsuit brought by Allen when he was featured in an American Apparel billboard campaign dressed as a Hasidic rabbi from his classic 1997 comedy, "Annie Hall." American Apparel defended the use of Allen's image as a satiric and social statement on a public figure, protected as free speech by the First Amendment to the U.S. Constitution. American Apparel said the billboards were designed to inspire dialogue, not to sell clothing.

Allen's attorneys disagreed, claiming there was no protected speech involved, but rather pure commercial advertisement rooted in the unauthorized use of Allen's image to promote American Apparel. Even though the American Apparel billboards came down within a week of Allen's initial complaint, Allen claimed that was long enough to falsely imply that Allen sponsored, endorsed, or was otherwise associated with American Apparel or its products.

The right of publicity is a person's exclusive right to use, and to prevent the unauthorized use of, his or her name, likeness, or other aspect of his or her persona for commercial gain. To use it without permission allows that celebrity (or any person) to file a claim against the business. The line between commercial speech and free speech may be fuzzy, but the American Apparel billboards seem to have been firmly planted on the commercial side of the line. If you would like to use celebrity images in your own advertising - even the images of deceased celebrities or celebrities lesser known than Woody Allen - it is best to obtain advance and unequivocal permission from the celebrity or the holder of his or her publicity rights. A business owner also would be wise to avoid using in advertisements words, logos, or designs that can be associated with other companies or products, which may raise claims under the federal Lanham Act.

Whether or not American Apparel would have succeeded with its defense will never be known. But we do know that American Apparel learned an expensive lesson: Using celebrities to endorse a product without their permission is going to get a business owner into trouble.

Each case a business may face is unique and may require legal advice. Please consult an attorney about specific concerns in this area. For more information, contact Bradley P. Hartman at bhartman@jsslaw.com or 602.262.5842.