Trademarks Take On New Importance in Internet Era…Even for Snack Foods?

Under the headline “Trademarks Take On New Importance in Internet Era,” the New York Times today reports on a trademark dispute between snack food behemoth Frito-Lay and a serial entrepreneur over the registrability of the mark PRETZEL CRISPS.  The headline is a bit misleading, as one would expect this article to discuss the reasons why trademarks are more important in this age of Internet search rather than a dispute involving off-line snack food brands.  Regardless, this article warrants a discussion of fundamental principles of trademark law.

The first question courts will always ask in a dispute involving a trademark is whether the name a party seeks to protect is in fact entitled to such protection under the law.  There are five categories of trademarks according to their protectability: (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; and (5) fanciful. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 602 (9th Cir. 2005). “The latter three categories are deemed inherently distinctive and are automatically entitled to protection because they naturally ‘serve[ ] to identify a particular source of a product . . . .’ ” Id. (quoting Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992)). Descriptive marks “define a particular characteristic of the product in a way that does not require any exercise of the imagination.” Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625, 632 (9th Cir. 2005). A descriptive mark can receive trademark protection if it has acquired distinctiveness by establishing “secondary meaning” in the marketplace. Filipino Yellow Pages, Inc. v. Asian Journal Publ’ns, Inc., 198 F.3d 1143, 1147 (9th Cir. 1999). “Generic marks give the general name of the product; they embrace an entire class of products.” Kendall-Jackson Winery, Ltd. v. E. & J. Gallo Winery, 150 F.3d 1042, 1047 n.8 (9th Cir. 1998). “Generic marks are not capable of receiving protection because they identify the product, rather than the product’s source.” KP Permanent Make-Up, 408 F.3d at 602.

In the PRETZEL CRISPS dispute cited in the NY Times article, Frito-Lay seeks to cancel a trademark registration in the U.S. supplementary register and oppose trademark applications that were conditionally approved by the U.S. Patent and Trademark Office for registration in the primary register.  The trademark applicant Princeton Vanguard, LLC (“Applicant”) seeks registration of its mark in connection with “pretzel crackers.”   Last year, Frito Lay filed a motion for summary judgment requesting the Trademark Trial and Appeals Board (“TTAB”) to rule that, as a matter of law, the trademark PRETZEL CRISPS is generic for “pretzel crackers” and is therefore not entitled to registration.

To prove its claim that the trademark is generic, Frito-Lay must show that the mark refers to the class, genus or category of goods on which it is used.  In other words, it must show that that terms “pretzel crisps” that compose the mark refers to the goods “pretzel crackers.” While this might be the case in the United Kingdom, I am not aware of the term crisps being used specifically to describe the genus of goods synonymous with crackers or chips in the United States.  The Applicant provided substantial evidence, including expert surveys, to support its position that American consumers did not view the mark as referring to the genus of pretzel cracker products.  The Board agreed with the Applicant and denied Frito-Lay’s motion.  This decision leaves the trial of this case primarily on the issue of whether the mark has “secondary meaning.”

To determine whether a descriptive mark has secondary meaning, a finder of fact considers: “(1) whether actual purchasers of the product bearing the claimed trademark associate the trademark with the producer, (2) the degree and manner of advertising under the claimed trademark, (3) the length and manner of use of the claimed trademark, and (4) whether use of the claimed trademark has been exclusive.” Levi Strauss, 778 F.2d at 1358 (quoting Transgo, Inc. v. AJAC Transmission Parts Corp., 768 F.2d 1001, 1015 (9th Cir. 1985)) (alteration omitted).  While the Applicant has provided a preview of its “secondary meaning” case when it opposed Frito-Lay’s summary judgment motion, the substantive case has not yet apparently been submitted to the Board.

While the PREZEL CRISP case is not ground breaking trademark precedent, the parties recently engaged in discovery disputes over the unresolved scope and duties of providing “electronically stored information” or ESI, a topic ripe for a separate blog post.

 

 

Patrick E. Guevara is a senior associate and represents small and mid-sized businesses and entrepreneurs in the Tri-Valley, the Greater San Francisco Bay Area, and the Central Valley in the areas of intellectual property, trademarks, copyrights, employment, real estate, and immigration.

 

California Participated in the Multi-Billion Dollar Settlement Over Wrongful Foreclosures

In a press release today, California Attorney General Kamala Harris announced California’s participation in a nationwide settlement with the top five mortgage banks (Bank of America, Wells Fargo, Chase, CitiBank, and Ally) over wrongful foreclosures, robo-signing, and other mortgage servicing misconduct.

Calfornia’s settlement is valued at $18 billion.  Unlike past mortgage crisis relief programs, the five banks have purportedly agreed to make principal reductions for California homeowners of at least $12 billion total.   AG Harris also noted that the California settlement is unique from “the larger multistate agreement, which is enforceable in a federal court in Washington, D.C.,” in that the AG can enforce the settlement agreement in California state court.  Also, the settlement does not include mortgage loans owned by the government sponsored enterprises (“GSEs”) Freddie Mac and Fannie Mae, which make up around 60% of residential mortgages nationwide.

AG Harris also took this opportunity to announce that she will propose “a comprehensive legislative agenda to protect homeowners in the mortgage market…including a single point of contact for mortgage-holders and an end to the unfair and confusing system of dual-track foreclosures.”  These proposals are very relevant to the foreclosure cases I have recently worked on.

In a case before a federal court in San Francisco entitled Sohal v. Freddie Mac, we recently defeated the banks’ motion to dismiss.  The primary issue was whether the foreclosing party, which sold the mortgage to Freddie Mac and merely acted as a servicer, had the standing and authority to foreclose on the property.  Freddie Mac and Fannie Mae do not service loans so the point of contact of the loans they own are the servicers, who also typically originated the mortgage.  While there have been numerous problems in dealing with the servicer, I don’t think a single point of contact will resolve the problem.  The problem lies in the tangled web of  ”back-end” contracts from the securitization of the mortgages.  Servicers do not make the actual decisions.  They have to obtain consent from the “investors.”  Any proposed legislation should, instead, focus on properly define the roles, rights, and obligations of all parties in the transaction, including the originator, the servicer, the fictional “nominee” MERS, and the “investors.”

We also have a wrongful foreclosure action in state court involving dual-track.  It’s not necessarily confusing.  However, from the borrower’s point of view, it is certainly unfair that the lender can sue for foreclosure and at the same time go forward with a non-judicial foreclosure sale.  The primary advantage for the lender (in addition to forcing the borrower to incur additional attorneys fees to deal with both proceedings) is that the lender can request the Court to appoint a receiver to collect rents if there is an assignment of rents.  California’s nearly century old non-judicial foreclosure scheme was intended by the legislature to provide a streamlined process while balancing the interests of both the lender and borrower.  The trend has been and continues to be in favor of lenders.  Courts are unlikely to reverse this trend, so ultimately it will be up to legislative action to re-balance California’s foreclosure scheme.  With the public backlash and the revitalized momentum of the recent settlements, foreclosure law should have very interesting year or two.

Sales Commissions Must Be In Writing By January 1, 2013

Last Fall, Governor Brown signed AB 1396 amending California Labor Code section 2751.  The new law states:

(a)  By January 1, 2013, whenever an employer enters into a contract of employment with an employee for services to be rendered within this state and the contemplated method of payment of the employee involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.

(b)  The employer shall give a signed copy of the contract to every employee who is a party thereto and shall obtain a signed receipt for the contract from each employee. In the case of a contract that expires and where the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.

(c)  As used in this section, “commissions” has the meaning set forth in Section 204.1.  “Commissions” does not include short-term productivity bonuses such as are paid to retail clerks; and it does not include bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

According to California Labor Code section 204.1, commissions are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.”

The California Court of Appeal, Second District, clarified that compensation will be considered “commissions” if:

  • the employees are “involved principally in selling a product or service, not making a product or rendering the service”; and
  • “the amount of their compensation [is] a percent of the price of the product or service.”

Keyes Motors v. DLSE, 197 Cal.App.3d 557, 565 (1987).

If an employee’s compensation meets the Keyes test, then the employer must meet the following requirements of Section 2751 by January 1, 2013:

  • Commission Agreements must be in writing
  • The agreement must contain the method of computation and payment
  • Employee must receive copy of signed agreement
  • Employee must sign a receipt acknowledging he or she received the signed copy

This new law reaffirms California’s well-established rule that the right of an employee to commissions are governed by the terms of the contract for compensation. See Steinhebel v. Los Angeles Times, 24 Cal.App.4th 696, 705 (2005).  Thus, it is important for employers to regularly review their sales commission agreements and consult legal counsel, if necessary, to ensure that commission computation and payment terms are clear and that they have complied with section 2751.

 

CAN EMPLOYERS MONITOR EMPLOYEE ELECTRONIC COMMUNICATIONS IN THE WORKPLACE?

The use of the internet, email, text messages, and cell phones are rampant in the workplace because of good reason.  As the US moves ever closer to an information worker/service type of economy, the convenience and speed of electronic communications increase the efficiency and productivity of employees, and any business without these tools is at a severe competitive disadvantage. 

Risks

On the downside, the use of the electronic devises can actually result in a loss of efficiency due to employees’ use employer-provided devices for personal, non-work-related use during work hours.  Employees might use the web to visit pornographic websites or disburse inappropriate materials via company email, and therefore expose employers to legal liability for permitting a hostile work environment due to harassment or defamation. Further, the unscrupulous employee could expose the employer’s trade secrets, proprietary and confidential information, or engage in inappropriate contact with competitors or customers. Continue reading ‘CAN EMPLOYERS MONITOR EMPLOYEE ELECTRONIC COMMUNICATIONS IN THE WORKPLACE?’

UNLICENCED CONTRACTORS IN CALIFORNIA

California requires that all contractors, including specialty contractors such as fencing, roofing, tiling, painting, solar, landscaping, and insulation contractors, be licensed by the Contractor State License Board (“CSLB”).  Specifically, “It is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more in labor and materials. Continue reading ‘UNLICENCED CONTRACTORS IN CALIFORNIA’



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