Monthly Archives: October 2014

Luxury Retailers Fight Counterfeiting on Alibaba – the World’s Largest eCommerce Site

The September IPO of Chinese eCommerce network Alibaba was heralded with great fanfare. Western retailers saw exceptional promise – the ability to sell their goods directly to China’s burgeoning middle class.  Unfortunately, that promise comes with a cautionary warning as allegations of counterfeit goods on the Alibaba website surface in the news.

Let’s rewind a few months back to early July 2014.  Italian luxury label Gucci, and Paris-based Kering SA, which owns the major luxury brands Yves Saint Laurent, Bottega Veneta, and Balenciaga, filed a complaint in federal court in New York against Alibaba Holding Group, Ltd., alleging that the ecommerce site was allowing “an army of counterfeiters to sell their illegal wares throughout the world.”

The luxury brands alleged that not only was Alibaba turning a blind eye to the widespread sale of knockoff bags and accessories on its member sites, it was, in fact, turning massive profits from those sales.   The complaint, which is in excess of a 140 pages, alleges that Alibaba was assisting merchants in selling the counterfeit goods.  The activity referenced in the complaint included selling the use of trademarked keywords, such as, “GUCCI”, to counterfeit merchants to allow them to obtain preferred search placement, and the offering of alternate search terms in order to direct users to counterfeit products.  For example, the complaint alleges that a user typing in the search term GUCCI is offered search terms such as ‘cucci’, ‘guchi’ and ‘guchi bags’, which direct users to merchants selling counterfeit products.  This is but one of a myriad of affirmative actions allegedly taken by Alibaba to assist the counterfeiters.  In addition to any alleged activities by Alibaba, the complaint also alleges that some of the merchants were so bold as to even tout the fact that the products were ‘replicas’ or ‘as good as the original.’

Then, just two weeks later, in what might be considered a surprising turn of events, and in advance of the IPO, the lawsuit was withdrawn without prejudice.  The Wall Street Journal reported that Alibaba and Gucci issued a joint press release saying that the parties had begun “constructive dialogue.” As the details have not been made public, it is unknown what caused the luxury brands to dismiss this lawsuit, especially given the overwhelming allegations of blatant and coordinated infringements. Although purely speculation, Alibaba may have made promises to curtail activities that were viewed as vicarious infringements to address an issue that might have negatively affected their IPO.

However, despite the dismissal of the lawsuit, Alibaba still appears to be incurring the ire of western companies as a result of its activities.  In a recent article, the New York Times reported that American sneaker manufacturer New Balance had initial success selling its genuine goods on Alibaba site Tmall, which contributed to soaring demand in China for the popular running shoes.   However, as with other brand owners, New Balance complained that it began experiencing increasing problems controlling counterfeits on the Alibaba network of sites.  According to the New York Times, “Alibaba does not make it easy for New Balance to remove counterfeits from its sites.” Indeed, despite the hundreds of thousands of counterfeit New Balance products available on the sites, the site required the company to identify each problematic listing.  Said a New Balance representative, “Alibaba knows this remains a huge issue.”

Since the IPO,  a quick search for GUCCI on Alibaba.com still returns listings of what might be counterfeiters, and offerings of alternate search terms, including ‘cucci’, ‘guchi’ and ‘guchi bags’.  Whether Alibaba curbs activities that have been the subject of numerous complaints by western companies remains to be seen, as does whether a new infringement suit is brought by other brand owners, like New Balance, or whether Gucci et al., refiles its suit.  In any event, as the Chinese market for western products continues to grow, it is clear that much will need to change before sites like Alibaba will no longer be the target of claims that they provide assistance to counterfeiters.

Attorney Anna M. Vradenburgh counsels and represents clients facing trademark, copyright, patent and other intellectual property issues, providing expert advice regarding intellectual property protection, exploitation and rights enforcement.

Ms. Vradenburgh can be contacted at :

The Eclipse Group

6345 Balboa Blvd, Suite 325,

Encino, California 91316

(818) 488-8146

www.EclipseGrp.com

Data Privacy in the European Union – American Companies Beware

Many US-based companies collect cookies, location data, ISP identities, and other information pertaining to website users and their computers without giving much consideration to consumer privacy rules.  However, anyone who operates a global website or engages with customer data on a global scale should be aware of the stringency of data privacy protection in the European Union (EU), including impending changes in consumer privacy laws known as the General Data Protection Regulation (GDPR).

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Currently, the European Union has some of the world’s strongest data privacy protections.  Privacy rights are included in the European Union’s Charter of Fundamental Rights.  Those rights protect a wide spectrum of information including names, photographs, addresses, credit card numbers, ISPs, and the like.

However, without final centralized government action, the law for companies operating in Europe is currently murky.  For example, in 2012, a court in France ruled that Twitter, a US-based company, was required to reveal French user identities, where users had posted hate speech.  Twitter fought that ruling, but ultimately revealed the identification of the users to French prosecutors in compliance with a law enforcement request.  Conversely, a German regulatory body, the Unabhaengiges Landeszentrum fuer Datenschutz (ULD, Office of the Data Protection Commissioner) Schleswig-Holstein, Independent State Center for Data Privacy (ULD), ruled that Facebook Inc. (USA) as well Facebook Ltd. (Ireland) could not require users to register their real names in accordance with the German Telemedia Act (“TMG”), ruling that German data protection laws applied to the company, even though it was based in the US.

In an attempt to resolve these conflicting laws, the European Commission has spent the last several years drafting and debating a single EU regulation known as the General Data Protection Regulation (GDPR), which would apply to all 27 EU member nations.  The European Parliament approved the law in draft format in March 2014.  While it has yet to be finalized, experts predict that the new rules could be approved as early as the end of 2014.  The proposed regulation would give EU regulators authority to impose penalties of up to 1 million Euros or up to 2% of global annual revenues of a company, and up to 100 million Euros for negligent data breaches.  Companies with more than 250 employees will be required to appoint Data Protection Officers.  Companies would be given two years from the law’s passage to achieve full compliance.

Here in the US, data protection laws exist, but there is no overarching law as in the EU.  Further, in attempting to comply with US laws, companies may find themselves in conflict with foreign laws in jurisdictions in which they are doing business.  For instance, it is prohibited to transfer personal data from the EU to a non-EU country which does not have adequate protection for personal information in place.  Many commentators have opined that EU lawmakers are not convinced that the US provides the same level of protection as EU laws or are even adequate to fundamentally protect privacy as viewed from the EU’s perspective.  This raises the question of how a US company that only seeks to comply with U.S. privacy laws can legally collect personal data from EU customers.

To attempt to address the thorny problem presented by the dissimilarity of treatment of online privacy under EU and American law, the U.S. Department of Commerce in consultation with the European Commission developed a “safe harbor” framework, the so-called “Safe Harbor principals” (See http://www.export.gov/safeharbor/eu/eg_main_018475.asp) that require, for example, notice to users about the purpose for which it collects and uses information, how to contact the website regarding complaints, and an option to choose whether the information is disseminated to third parties.  But notwithstanding the Safe Harbor provisions, the bottom line is that there simply is no comprehensive solution to the problem of incompatible legal treatment of online privacy by the EU and the United States.

If your American based company is operating its website globally, it may be time to seriously consider your policies regarding data privacy and protection.  Because of the size of the problem of dissimilar treatment of online privacy by many different countries, the scope of this article cannot even begin to address the number or complexity of issues that arise with respect to data and privacy protection on global networks like the Internet.  But, regardless of the magnitude of the problem, one simple bit of advice is universally applicable, if you are operating in a particular geographical marketplace, it will always be wise to acquire competent legal assistance to help you become familiar and compliant with the privacy laws applicable to that jurisdiction.

If you have questions about customer data privacy, you need an attorney who understands your needs and can help you protect your rights.  Anna Vradenburgh is a well-respected, business-minded attorney with expertise in trademark issues with extensive experience prosecuting domestic and foreign trademarks.  In addition to her prosecution practice, Anna also assists clients in the selection and use of trademarks and represents clients in trademark opposition matters, domain name dispute matters, and before the federal Trademark Trial and Appeals Board.  Anna can also assist your company in licensing maters, including drafting and negotiation of trademark licensing agreements.  For more information visit the Eclipse Law Group website, or contact Anna at (818) 488-8146.

Reservation of Trademark Rights Requires A Bona Fide Intent to Use

While many countries issue trademark registrations with a broad description of goods and services, and without evidence of use of the mark on any of the identified goods and services, to obtain a trademark registration in the United States, an applicant must ultimately provide evidence of use of the trademark in association with the goods and services identified in the applicant’s trademark application.

Although the United States Patent and Trademark Office (USPTO) requires that trademark applicants provide evidence of use of the mark on the goods and services identified in the application, the USPTO allows applicants to file a trademark application based either on actual and current use in interstate commerce, or upon a declaration that the applicant has a bona fide intent to use the trademark in interstate commerce in association with the identified goods and services.  This latter type of application is known as an intent-to-use (ITU) application.

Because an ITU application is not based on use of a mark, applicants tend to include broad descriptions of goods and services in the initial filing.  While doing so is not improper per se, it is important for applicants to remember that they must actually have a bona fide intent to use the mark on the identified goods and services at the time of filing.

While the USPTO may not typically question an applicant’s declared intent to use a mark with specified goods and services, third parties may not be so willing to believe the applicant’s declaration of a bona fide intent to use the mark in association with the listed goods or services.  Indeed, a recent opinion from the Trademark Trial and Appeal Board (TTAB) demonstrates that this declaration, alone, may not be sufficient to overcome a challenge from a third party that the applicant lacked a bona fide intent to use the mark on the goods and services at the time of filing.   In Lincoln National Corp v. Anderson, 100 USPQ2d 1271 (TTAB 2014), the TTAB sustained two oppositions to register the mark FUTURE, finding that the applicant lacked a bona fide intent to use the mark for specific services.

In this case, applicant Kent G. Anderson, a colorful trademark applicant, filed two ITU applications to register the mark “FUTURE.”  Between the applications, Mr. Anderson listed goods and services in 19 different classes for literally hundreds of varying and somewhat unrelated goods and services, including, for example, insurance agency brokerages, electronic credit card transactions, leasing shopping mall space, and for goods ranging from candy to electronic consumer products to shoes.   An opposition against each of Mr. Anderson’s applications was filed by the plaintiff, Lincoln National, collectively challenging his Class 35 services, for in part, shopping malls, franchising, and data processing services, and the Class 36 services, which included banking, insurance and financial services.  Lincoln National based its challenges on the claim that the applicant did not have a bona fide intent to use the mark on the services in these classes at the time of filing the applications.

Trademark Act Section 1(b)(1) (“Section 1(b)”) provides, in pertinent part, that “[a] person who has a bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce may request registration of its trademark on the principal register….” In its discussion, the Board reiterated the standard for bona fide intention to use a mark, namely, “the determination of whether an applicant has a bona fide intention to use the mark in commerce is to be a fair, objective determination based upon all of the circumstances.”  The Board then noted that the requirement that an applicant have a bona fide intent to use the mark must be read in conjunction with the definition of ‘use in commerce’, wherein ‘use in commerce’ is defined as use “in the ordinary course of trade, and not made merely to reserve a right in a mark.”

In evaluating Mr. Anderson’s intent to use the mark with respect to the challenged services, the TTAB noted that while the applicant had “idealistic hopes for forming a futuristic company,” had created a website that described his plans for the future, and had produced letters he had written to a variety of companies, including Ferrari, Proctor & Gamble, and Kellogg’s, outlining his visions for the future, these actions alone were insufficient to demonstrate intent to use the mark in connection with the described services.  For example, none of the letters actually identified any of the services, and each were merely discussions about general ideas and hopes for a FUTURE project.  The Board noted that Mr. Anderson was a sole proprietor without any knowledge of many of the areas included in his trademark applications, and specifically admitted in depositions that he lacked the funding, connections, know how, and even the desire to undertake business ventures associated with the challenged services identified in the trademark applications.

As a result of its findings, the TTAB found that the applicant failed to demonstrate a bona fide intent to use the “FUTURE” mark, sustaining oppositions to register the mark for the challenged services, stating that the applications were void ab initio as to Classes 35 and 361.  In other words, the TTAB held that bona fide intent to use must be based on tangible evidence-capital, business plans, distribution contracts, concrete partnerships-and may not exist merely in the head of the applicant.

To support its conclusion, the Board looked to the legislative history of Section 1(b), 15 U.S.C. Section 1051(b) et seq., and noted that included in the objective circumstances which may cast doubt or even disprove the bona fide nature of the intent was “an excessive number of intent to use applications in relation to the number of products that the applicant…[was actually] likely to introduce under the applied for marks during the pendency of the applications.”  Accordingly, the Board concluded that Mr. Anderson, “in filing the application, was merely attempting to reserve a general right in the [FUTURE] mark for potential use on some undetermined goods or services at some indefinite time in the future.”

This case is a reminder that, although the Trademark Office allows a liberal filing of goods and services based upon the intent to use a mark, that intent must be demonstrable, if challenged.  Thus, as a practical matter, although it is acceptable to list many unrelated and disparate goods and services in an ITU application, it might be more prudent to limit the goods and services to those that are reasonably likely to be transformed from merely an intent to use, to actual use in commerce.

If you have questions about filing a trademark application, you need an experienced trademark attorney.  Anna Vradenburgh is a well-respected, business-minded expert in trademark issues with extensive experience prosecuting domestic and foreign trademarks.  In addition to her prosecution practice, Anna also assists clients in the selection and use of trademarks and represents clients in trademark opposition matters, domain name dispute matters, and before the federal Trademark Trial and Appeals Board.  Anna can also assist your company in licensing maters, including drafting and negotiation of trademark licensing agreements.  For more information visit the Eclipse Law Group website, or contact Anna directly at (818) 488-8146.

1This decision did not affect any of the remaining goods and services.  Thus, the entire applications were not void ab initio, only the applications as to Classes 35 and 36.