April 13, 2007

You’ve most likely heard the buzz about “Utah” and “trademarks,” but you may not know the details regarding the new law in Utah. In summary, the Utah legislature recently approved a new law by unanimous vote (the Trademark Protection Act), which was then signed into law on March 19, 2007. This Act provides for the initiation of a trademark registry that aims to “prevent rival advertisers from capturing the attention of people who type a search query on another company or its products” according to the Yahoo! news article (link below). Under the Act, companies may create an “electronic” trademark and prevent their competitors from using those trademarks in electronic commerce.

According to the legislation itself (S.B. 236, link below), a “new type of mark” is established, “called an electronic registration mark, that may not be used to trigger advertising for a competitor and creates a database for use in administering marks.” It also “defines terms; addresses the fees for an electronic registration mark; [and] prohibits the use of a registered electronic registration mark to trigger advertising for a business, goods, or services of the same class as those represented by the electronic registration mark.” Furthermore, “[a]n electronic registration mark is valid for one year from the day on which the electronic registration mark is registered; [r]egistration of an electronic registration mark may be renewed annually by paying the fee for renewing an electronic registration mark described in Section 70-3a-203,” [a]n electronic registration mark that is not renewed reverts to a trademark and expires five years after the day on which the mark was originally certified unless renewed under [the applicable] Subsection; and [a]ny existing trademark or service mark that otherwise qualifies for registration as an electronic registration mark may be converted to an electronic registration mark by paying the electronic registration mark fee under Section 70-3a-203.” Provisions for civil liability of users of the electronic trademark without permission are also provided, as well as details regarding the creation of a searchable electronic trademark database.

An example of one company, 1 800 Contacts Inc., may benefit from this Act as it is noted that this company, located in Utah, has taken at least one internet advertiser to court for unauthorized use of its company name in advertising. According to the Utah Senate Majority Whip, Republican Dan Eastman of Bountiful, "[y]ou put 1 800 Contacts into Google and you get 47 different contact lens makers.” There does not appear to be a carve-out in the law that would allow otherwise legal advertising practices to continue, like for example allowing Subway restaurants to continue to advertise that it has X number of sandwiches with less fat than a McDonald’s Big Mac during its comparative advertising campaigns. It is noted that a number of search engines, including Google, allow companies to “bid” on the right to use another company’s product or brand names in its own advertising, noting that the higher the bid, the closer to the “top” of the list the advertisement will appear on a search results webpage.

On The Senate Site blog (the “Unofficial Voice of the Utah Senate Majority”), Matthew Prince, an Adjunct Professor of Law at the John Marshall Law School, responds to recent commentary by Eric Goldman, a Professor at the Santa Clara University of Law, regarding the constitutionality of this new Act. While not personally taking any “side” on this debate, I will highlight some of the arguments for and against this new Act.

Prof. Goldman starts his article by stating that “no legislature has passed more [censored] Internet laws than Utah's,” and references prior Utah internet laws regarding digital signatures, access limits to pornographic websites, and laws preventing certain e-mails to children. He then references the 2004 Spyware Control Act, amended in 2005 “to merge it with trademark law,” which was subsequently rejected by the Second Circuit in 1-800 Contacts, Inc. v. WhenU.com, Inc. According to Goldman, Utah’s Trademark Protection Act “creates a new intellectual property right called an "electronic registration mark," defined as a "word, term, or name that represents a business, goods, or a service,” and that “[t]his definition may be broad enough to protect domain names even if the domain names are otherwise generic or unprotectable under TM law.” Goldman concludes his article after a detailed description of why he does not support the legislation with the statement that “keywords are a uniquely empowering tool to enable consumers to express their interests more accurately, concisely and cheaply than other alternatives, which in turn enables intermediaries like search engines to cater to their informational interests,” which results in “lower search costs for consumers, which in turn creates big social welfare payoffs by making more socially beneficial matches between consumers and producers. So as a matter of social policy, we should be encouraging the use of keywords, not banning it.”

Prof. Prince takes an opposing viewpoint, explaining why Prof. Goldman’s view that this new law “may be a violation of the so-called Dormant Commerce Clause” is “wrong.” First, Prince notes that there has been no allegations that the Act discriminates against out-of-state businesses, so critics are focusing on the Dormant Commerce Clause. However, Prince notes that critics “are likely wrong for two fundamental reasons,” namely that (1) no burden was created by the statute that would “unduly burden” interstate commerce, and (2) “in order to violate the Dormant Commerce Clause a statute must not be authorized by Congress or be a traditional state police power. Regarding this latter point, Prince notes that not only is the right of state to pass their own legislation on trademarks recognized by history, but that the Lanham Act itself also permits it. Prince further notes that “given the Lanham Act’s clear designation, overwhelming precedent, and the traditional history of state trademarks, the Commerce Clause analysis would likely never come into play.” Prince concludes his discussion by stating that “[t]he best ideas rise to the federal level,” and that “I don’t know whether the Utah Trademark Protection Act will rise to this level, but the level of attention it has drawn from trademark holders and search engines alike indicates that this is at least an issue that warrants discussion.”

Again, I take no stance either way on the Act, but I do encourage interested persons to read the Act, as well as the commentary (including the two viewpoints discussed herein) to form your own opinion. I do agree with Prof. Prince in that “this is at least an issue that warrants discussion,” so it will be interesting to see how the Act works, or fails to work, in practice.

Utah Trademark Protection Act: LINK
Yahoo! News Article: LINK
Eric Goldman’s Blog Article: LINK
1-800 Contacts, Inc. v. WhenU.com, Inc. Appellate Decision: LINK
The Senate Site (Utah) Blog Entry (by Matthew Prince): LINK

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Mark Reichel
Reichel IP LLC

I am a patent attorney with Reichel IP LLC, where I concentrate my practice on patent drafting and prosecution, trademarks, and general intellectual property matters. I currently focus on the preparation and prosecution of medical device and other life sciences patent applications, and being actively involved in a number of local not-for-profit organizations.

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