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Companies need to keep eye on Web to protect their brand

Despite an increase in legal remedies, cybersquatters and other online infringers continue to proliferate, according to local legal analysts.

Through the years, lawmakers have passed legislation governing the rights of website owners, including the Uniform Domain-Name Dispute-Resolution Policy (commonly known as the UDRP) and the Anticybersquatting Consumer Protection Act (ACPA).

But the practice of creating a domain name with a misspelled version of a popular site to generate traffic and ad revenue remains problematic.

“Cybersquatters are still a common problem,” said Palo Alto attorney James Chadwick, a partner with Sheppard Mullin Richter & Hampton. “It’s pretty ubiquitous. Any site that’s successful is going to generate some cybersquatting.”

San Diego’s Lisa Martens, a trademark attorney for Fish & Richardson, said companies should register as many variations of their name as possible, even adding derogatory terms, to block potential squatters and gripe sites.

“The reality is you can think of misspellings and variations but cybersquatters can think of another variation,” Martens said. “Your company has to be vigilant about ones that come along that infringe or dilute the brand or just try to generate revenue through ‘click through’ fees. The burden is on the brand owner to take action.”

While brand owners can bring an action to get the misspelled site transferred to them, it takes time -- often 60 days according to Martens -- during which time the misspelled site continues to collect “click through” revenue.

Beni Surpin, a San Diego partner in the intellectual property practice of Sheppard Mullin, said getting a trademark is another way to make it more difficult for cybersquatters to take a domain name.

Companies also have to be aware of competitors using ad words on search engines to divert Web traffic. In this area, the law is indecisive.

It’s not clear whether you can bid on another company’s trademark, Martens said. Google (Nasdaq: GOOG) allows the practice, leaving it up to individual companies to decide if the consumer is confused about which is paid content and which is not.

But San Diego’s Michael Fuller, an IP partner with Knobbe Martens Olson & Bear, said sites like Google don’t want people collecting off the use of trademark names.

“Through technology, they’re trying to screen out the abuse while still allowing people who can advertise to advertise,” he said, adding, “I think the brand-name holder wants a little more control over its name and over scammers and people they don’t want representing their product.”

The use of metadata -- or hidden information in a website’s program text -- is another way competitors are driving traffic to their site. The more a certain term appears, the more likely it’ll jump to the top of a search. Some websites include trademark names in their metadata.

Search engines are beginning to help reduce this practice by indexing the sites in the order of how many people view the site and not how often the name appears.

“Search services are getting more sophisticated in how they index their sites,” Fuller said.

Another online problem is when people try to benefit from a brand’s good name by copying the look and feel of a website.

Fish’s Martens said companies can use a copyright infringement claim as an inexpensive way to stop the practice.

“Many clients are concerned,” she said. “They spend a lot of money developing a website, so they want to protect it against someone ripping it off. Typically you send a cease-and-desist letter, and they stop infringing.”

Some companies have built up an incredible amount of goodwill through their Web properties, which is based on excellent customer service, and they want it protected.

“There are retail businesses online where the user experience is very important and gets recognized by the buying public as a good experience,” said Carl Kukkonen, a member of Mintz Levin Cohn Ferris Glovsky and Popeo’s IP practice in San Diego.

“With regard to many online infringement issues, it’s just a matter of enforceability being extremely difficult. Going to trial and trying to enforce rights is really expensive.”

Trying to quantify damages or the ability to recoup money from an infringer -- who may be a student without financial resources -- can be difficult, Kukkonen added.

Cloud computing, file-sharing websites or sites that post copyrighted material -- like YouTube -- are creating more avenues for copyright infringement.

“Licensing agreements may have to be redrafted to address that issue in the next few years,” Sheppard Mullin’s Surpin said. “Even if someone is using software as a service concept, they’d still have to generate revenue for the licensor, otherwise you’re disincentivizing software makers from inventing more programs if they don’t get royalties.”

The increased number of online auction sites has generated another problem -- the trade and sale of counterfeit goods.

In a recent decision out of the Southern District of New York, the court adopted a regiment for imposing secondary liability for trademark infringement. Tiffany & Co. (NYSE: TIF) sued eBay (Nasdaq: EBAY), claiming the online auction site was enabling people to engage in trademark infringement, allowing them to sell counterfeit goods over the Internet, and not doing enough to prevent it.

The court ruled that for secondary liability, a company has to have knowledge of a specific instance of trademark infringement and do nothing about it.

“But just knowing that it happens isn’t enough,” Chadwick of Sheppard Mullin said.

The court granted eBay’s motion to dismiss the case.

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