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Reforming Trademark Law to Reflect the Internet Economy

The protections granted under intellectual property law were originated first and foremost to advance the cause of science and thereby society. This goal was explicitly codified in Article I of the United States Constitution, stating that to "promote the progress of science and the useful arts," Congress may grant "authors and inventors the exclusive right to their respective writings and discoveries."

Only as a secondary and indirect result were intellectual property rights protected to reward businesses and inventors. However, the soaring value of intellectual property has resulted in businesses becoming increasingly zealous and litigious in guarding their intellectual property. This has ironically resulted in intellectual property law, and the rights it grants, becoming more of a hindrance than a spur to societal and scientific advancement.

While true in all areas of intellectual property, this is particularly the case in trademark law. Yet trademark law has deviated from its origins of societal advancement and consumer protection and has now become an impediment to the formation of new businesses and ideas. Trademark law should be reformed to coincide with new marketplace realities and changed consumer perceptions caused by the advent of the Internet.

Anglo-American trademark law originated in the middle ages as a preventative means to deter the "palming off" of goods upon unsuspecting consumers. As early as the thirteenth century, statutes were passed in England designed to protect the public by preventing the sale of goods that counterfeited the insignia of the medieval guilds, which used quality control measures.

Over the centuries, trademarks have become increasingly valuable corporate assets. For example, the trademark "COCA-COLA" was recently estimated to have a value of over seventy billion dollars.

The great value of a company's trademarks has resulted in companies using litigation, or the threat of litigation, in order to protect their trademarks. Consequently, a large body of trademark law and precedent has developed which lays out the many factors courts should turn to when considering a case of trademark infringement. Much of the case law that courts still rely upon was formulated several decades ago and is no longer reflective of the rapid changes undergone in the marketplace and in consumers' perceptions in the Internet economy.

For example, when determining whether a trademark should be registered, the United States Patent and Trademark Office ("USTPO") still relies heavily upon the seminal case of In re E.I. DuPont de Nemours & Co., 476 F.2d 1357 (1973). This case, decided by the United States Court of Customs and Patent Appeals, set forth a multi-factor test that courts and the USPTO use to examine whether a likelihood of consumer confusion, and consequently trademark infringement, exists.

In the almost thirty years since this case was decided, several revolutionary transformations ushered in by the Internet have changed the way consumers view trademarks and how trademarks function. New guidelines that reflect these changes desperately need to be implemented, again making trademark law an impetus and not an obstacle for societal growth.

The greatest change has been the exponential increase in the number of trademarks over time. In 1960, the USPTO received approximately 18,000 applications for trademarks, with this figure increasing to 42,000 by 1982. By 2000, the USPTO received nearly 300,000 trademark applications. See USPTO Annual Reports. However, these large increases only hint at the level of increased trademark usage, for courts have held that Internet domain names can both act as and carry the same liability as other trademarks. By September 2001, over 24 million domain names that end in .com had been registered. See http://www.siliconvalley.com/docs/news/svfront/009828.htm. The number of domain names will continue to proliferate with the recent opening of new top level domains including .aero, .biz, .coop, .info, .museum, .name, and .pro, and the expanded use of the over 200 country codes such as .uk (United Kingdom) and .fr (France).

This exponential growth in the number of trademarks and domain names has made consumers increasingly aware of subtle distinctions between trademarks. This lessens the likelihood that consumers will find two similar trademarks or domain names to be confusingly similar. Instead, consumers now view trademarks, and particularly domain names, as analogous to phone numbers. For like a phone number where one wrong digit will result in a different person being contacted, small differences in domain names will lead to a different domain name and company. As an example, consumers now realize that typing in www.homes.com will take them to a different company than typing in www.ehomes.com.

The courts, using precedents established before the explosive growth in the number of trademarks and domain names, have not mirrored consumers' increasing sophistication and ability to distinguish subtle differences in trademarks. As a result, courts are granting current trademark owners too much protection and thereby impeding the formation of other trademarks that can coexist in the marketplace without consumer confusion occurring. Except for very strong trademarks or obvious attempts at trademark infringement, courts should only find a likelihood of consumer confusion when the marks are identical or very nearly so. This would again root trademark law in its origins of protecting consumers and not businesses.

Courts should further limit their findings of trademark infringement to identical or nearly identical trademarks because the new marketplace no longer allows for many of the factors that once lessened the likelihood of infringement. For example, trademark infringement could only occur if two marks competed in the same geographical territory. If the same trademark was used to market a similar product by one company in California and another company in New York, no consumer confusion and consequent trademark infringement would result because the trademarks were used in different marketplaces. Now, the Internet makes all domain names and any other trademarks posted on the web to be accessible by over six billion consumers. Should one trademark owner be able to prevent businesses around the globe from using any similar variations of the trademark? Such a result would hurt consumers through less competition and greater litigation, but is allowed under current precedents in trademark law.

Additionally, the Internet has also negated another factor that previously lessened the possibility of trademark infringement, the channels of trade that a product is being marketed. For example, if a trademark were used to market two similar products, but one product was distributed to large wholesalers and the other product to high-end retailers, then there would be little likelihood that consumer confusion will result. However, many courts, including the influential 9th Circuit Court of Appeals, have held that all trademarks used on the Internet are considered to be in the same channel of trade regardless of what consumer group the product is marketed to.

Thus, the worldwide nature of the Internet coupled with courts' holding that marketing on the Internet is only one channel of trade, has increased the likelihood of a court finding trademark infringement more so than in the past. This greater protection for trademarks has paradoxically come at a time when savvy consumers require less protection than ever.

Trademark law should be reformed to better reflect new marketplace realities and changed consumer perceptions as discussed throughout this article. Until then, trademark law will ironically continue to run counter to its origins of societal advancement and consumer protection.


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