By Matt Massari
Trademarks and their accompanying goodwill are of tremendous importance to any company and are often a business’ most valuable asset. Some business owners, in a rush to form a company or get their products to market, devise names in a hurry and do not clear them for trademark purposes. Conducting trademark due diligence and analyzing the potential legal risks for a given mark in advance may save a business from future surprise via a cease and desist letter or infringement lawsuit.
About a year ago American fast-food giant McDonald’s Corp. lost an eight-year battle to prevent a family-run Kuala Lumpur restaurant from calling itself “McCurry,” after Malaysia’s top court said the Indian-food restaurant could use the prefix “Mc” in its name – in Malaysia. Here in the U.S., other businesses have not been as successful in defending their trademark rights against the fast-food restaurant chain.
In 1988 Quality Inns was planning to open a new chain of economy hotels under the name “McSleep.” After McDonald’s demanded that Quality Inns not use the name because it infringed, the hotel company filed a lawsuit in federal court seeking a declaratory judgment that “McSleep” did not infringe McDonald’s trademarks. Eventually, McDonald’s prevailed. The court’s opinion noted that the prefix “Mc” added to a generic word has acquired secondary meaning, so that in the eyes of the public it means McDonald’s, and therefore the name “McSleep” infringed on McDonald’s trademarks. Quality Inns Int’l v. McDonald’s Corp. 695 F. Supp. 198 (D. Md. 1988).
From the early 1960’s to the mid 1980’s, Norman McDonald ran a small “Country Drive-Inn” restaurant in Philpot, Kentucky, called simply “McDonald’s Hamburgers; Country Drive-Inn,” which at the time also had a gas station and convenience store. As a play on the McDonald’s franchise, Norman also included a couple of lit “golden arches.” McDonald’s the restaurant chain forced Norman to remove the arches and add the full Norman McDonald’s name to his sign so customers would not be confused into thinking the restaurant was affiliated with the McDonald’s restaurant chain.
In 1994, McDonald’s successfully forced Elizabeth McCaughey of the San Francisco Bay Area to change the name of her coffee shop McCoffee, which had operated under that name for 17 years.
What do all of these legal disputes mean for businesses and entrepreneurs seeking to build a strong and lasting brand for their goods and services? Choose trademarks wisely and analyze potential risks before you begin using them in commerce!
Many businesses feel that they can benefit from borrowing or otherwise misusing the trademarks of famous brands. Companies that have invested substantial amounts of time and money into creating and maintaining a positive brand image are likely to fight any dilution or eventual loss of their trademark by using lawsuits against offending companies. These lawsuits are often costly for both parties, and of course, larger and established companies, such as McDonald’s, are often better positioned to fight them.
Under the Federal Trademark Dilution Revision Act:
[T]he owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury. 15 U.S.C. § 1125(c)(1).
Often, it may not be easy for a business owner to tell whether a potential mark will offend a famous trademark owner, particularly if the business owner does not consider the owner of the famous mark to be a competitor.
In 2007, a Sacramento, California-based company doing business under the trademark “Nikepal” lost its trademark in a lawsuit filed by athletic shoe and apparel company NIKE, Inc. Nike Inc., v. Nikepal International, Inc. 2:09 CV 1468 (E.D. Cir. 2007). Although the two companies did not directly compete in the shoe and apparel industry (Nikepal provided services and products to analytical, environmental, and scientific laboratories), survey evidence determined that a significant number of Nikepal’s potential laboratory customers actually associated NIKE with NIKEPAL. NIKE prevailed under the law since its mark is distinctive, was widely famous by the time Nikepal began using its mark in 1998, and was likely to be diluted by the Nikepal mark. The court explained that by preventing dilution of NIKE, the public can continue to rely on the NIKE mark serving its source designating function.
In short, businesses must consider whether their mark could be accused of offending a famous trademark owner, and should avoid any use of famous marks or slogans by using “clever” word combinations or alterations. Except in very narrow and limited circumstances, federal law provides owners of famous trademarks with broad legal protection, since consumers widely rely on those marks when choosing goods and services.