Tuesday, February 12, 2019

Booking.com isn't generic, but might find it hard to prove infringement

Booking.com B.V. v. U.S. Patent & Trademark Office, No. 17-2458 (4th Cir. Feb. 4, 2019)

In some ways, the biggest change in trademark law since the Lanham Act was adopted was the shift of the courts from accepting prophylactic rules to protect competition—limiting the registration/protection of trade dress, territoriality, and numerous other rules—to prioritizing the idea that all interests other than the protection against likely confusion should be considered only in individualized circumstances.  Let putative owners claim a mark, the reasoning goes, and any anticompetitive or speech-suppressing consequences can be dealt with as defenses for individual defendants.  Wal-Mart is the biggest counterforce, and it is about requiring a showing of secondary meaning rather than a prophylactic exclusion from protection. This case about genericity of top-level domains takes the same tack: the biggest reason not to register BOOKING.COM is the power it gives the registrant to credibly threaten competitors like hotelbooking.com even though its rights shouldn’t extend that far.  The majority thinks that case-by-case ajudication will protect potential competitors; the dissent thinks forcing them to litigate is too dangerous.  (It should also be noted that the disappearance of unfair competition as a protection for unregistrable marks plays a role here—while the Fourth Circuit previously recognized that unfair competition can fill in the gaps for marks unregistrable due to lack of US use, the majority seems to think that Booking.com’s only defense against truly deceptive imitation is the protectability of BOOKING.COM as a mark, which is historically untrue.)

Booking.com lets customers book travel and hotel accommodations. It applied for four registrations for the use of BOOKING.COM as a word mark and for stylized versions of the mark with the USPTO. At issue here are Class 43 services, which include online hotel reservation services.  The TTAB affirmed the resulting refusals of registration, concluding that BOOKING.COM was generic for the services because “booking” generically refers to “a reservation or arrangement to buy a travel ticket or stay in a hotel room” or “the act of reserving such travel or accommodation”; “.com” indicates a commercial website; and “consumers would understand the resulting composite BOOKING.COM to primarily refer to an online reservation service for travel, tours, and lodging, which are the services proposed in Booking.com’s applications.” In the alternative, the terms were descriptive and lacked secondary meaning.

Booking.com appealed to the E.D. Va., which reversed and ordered the registration of the marks, but also, following circuit precedent, ordered Booking.com to pay the PTO’s expenses of over $74,000, including a portion of lawyers’ salaries.  (At the end of this opinion, the court expressed some doubt whether this precedent was still good given a conflict with the Federal Circuit interpreting the same language for patents and subsequent Supreme Court precedent on the necessity of explicit statutory language to create departures from the American rule, but it stuck with precedent.  If Booking.com wants to roll the dice on en banc review or even Supreme Court review, it might do well given that signal.)

The district court accepted Booking.com’s new evidence, a Teflon survey indicating that 74.8% of consumers recognized BOOKING.COM as a brand rather than a generic service. It further found that Booking.com established secondary meaning, a ruling that the PTO did not challenge on appeal. 

The court of appeals found that the PTO had the burden of proving genericness, given the harsh consequences of unregistrability. (And a generic term can’t become non-generic, even with subsequent secondary meaning.)  [Note that this creates a real opportunity for arbitrage: if you attempt to register your borderline term, the PTO has to show genericness so if the evidence is in equipoise you get your registration, and then there’s a presumption of validity you can deploy against subsequent genericness challenges, as there wouldn’t be if you didn’t register.  One might think this risk is minimal because the burden of proof so rarely matters—but I think this case might be evidence to the contrary.]

The key question is what booking.com primarily refers to, which depends on public understanding, which can be determined by reference to different sources, including “purchaser testimony, consumer surveys, listings and dictionaries, trade journals, newspapers, and other publications.” The term is considered as a whole, even when it’s a phrase: “the relevant inquiry is the public’s understanding of the entire mark, not its understanding of the mark’s separate components independently.”

Although the district court made several errors of law, it ultimately didn’t err in finding that the PTO failed to meet its burden of showing genericness.  (One such error: the district court wrongly found trademark significance in the fact that a domain name necessarily [in the current configuration of the internet] refers only to a single source.) The key pieces of evidence were the absence of evidence showing public use of “booking.com” as generic—the generic term is “booking site”—and the Teflon survey. The court of appeals also rejected the PTO’s argument that adding the TLD identifier .com to a generic term can never create a non-generic term.

The PTO identified domain names containing booking.com, such as “hotelbooking.com” and “ebooking.com,” as evidence of public understanding of booking.com as a reference to online hotel booking services, but that wasn’t good enough.  Although the inclusion of the proposed mark in longer domain names was evidence, even strong evidence, of genericness, consumer surveys also matter. Anyway, you can book a lot of things, including theater and music tickets, so booking.com might not mean hotel reservation services.  [This is trademark nonsense; hotel booking is a subset of booking services, so it’s totally irrelevant that there might be other things for which booking is also generic.]

“[T]he ultimate inquiry in determining whether a term is generic is what the public understands the proposed mark to mean.” But the survey was better evidence of that than the usage evidence. It’s true that surveys aren’t relevant where a term was “commonly used prior to its association with the products at issue,” in which case the survey can only demonstrate legally useless de facto secondary meaning. But there’s no evidence here that the term was commonly used, making survey evidence relevant.

The PTO argued that, like adding “company,” adding .com can never convert a generic term to nongeneric. Goodyear’s Rubber Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), held that the addition of commercial indicators such as “Company” to terms that merely describe classes of goods could not be trademarked.  But Goodyear predated the Lanham Act by more than half a century and didn’t apply the current primary significance test; the court here declined to adopt a bright line rule. Nor was the mark nothing more than the sum of its generic parts.  The district court erred in finding that .com would itself usually bring source-identifying significance (or at least descriptiveness) to a generic term.  “Such a rule would effectively make any domain name distinctive, which oversteps the focus of our trademark jurisprudence on a mark’s primary significance to the public.” But that primary significance wasn’t necessarily derived by taking the separate dictionary definitions for the component parts and adding them together. Where, as here, the composite term was not previously commonly used, additional evidence like consumer surveys was relevant.  Although other cases have found generic.com terms to be generic (e.g., hotels.com), they’ve considered consumer survey evidence in so doing and declined to create a bright line rule.

The PTO argued that granting registration could prevent other legitimate uses of marks incorporating BOOKING.  But trademark protection wouldn’t “necessarily preclude another company from using, for example, carbooking.com or flightbooking.com.”  [Emphasis added. It just makes such use risky, facilitating the plausible assertion of rights to deter potential competitors or even noncompetitors.]  And “the purported overbreadth of the mark can be addressed in proceedings regarding the scope of the trademark’s protection,” since likely confusion must be shown—“often,” indeed, plaintiffs must show actual confusion.  [News to me!]  And here’s something that might be quoted in many other contexts: “Given that domain names are unique by nature and that the public may understand a domain name as indicating a single site, it may be more difficult for domain name plaintiffs to demonstrate a likelihood of confusion.”  

[Should we be granting lots of registrations that are hard to infringe?  Is there a role for unfair competition instead?]

Judge Wynn’s partial dissent (he concurred on the attorneys’ fees part and much of the legal structure of the analysis) described this as “a problem that Booking.com chose to bring upon itself.”  It chose to operate under a generic domain that described the nature of its services, in order to “attract the wealth of customers who simply search the web for that service.” But it should have had to accept the tradeoff of foregoing “the ability to exclude competitors from using close variants of its domain name.” The majority “allows Booking.com to have its cake and eat it too.”  To Booking.com, such a result was warranted to prevent “unscrupulous competitors [from] prey[ing] on its millions of loyal consumers.” But if competitors were using the terms “booking” and “.com” in ways that might confuse Booking.com’s customers, “this is the peril of attempting to build a brand around a generic term.”

The dissent also wouldn’t have adopted a per se rule against protecting generic.com. But such protections should be rare.  The dissent thought the district court’s legal errors (finding that a TLD like .com “generally” has source significance) infected its weighing of the evidence, leading it to adopt a mistaken presumption of descriptiveness and to require less of Booking.com than the law demanded.  The ultimate result “conflicts with the determination that every other court has reached in cases, like the instant case, involving the registration or enforcement of a proposed mark composed of a generic Secondary Level Domain and a Top Level Domain.”  [So if the PTO wants to try its own luck with cert, there’s that.  I’m not sure it gets a different result at the Supreme Court, though there’s an outside chance of a remand to the district court to do the analysis under the correct legal standard.]

Until now, courts rejected the argument that “generic.com” isn’t generic because consumers don’t explicitly call the relevant class of websites “generic.com” websites.  Until now, courts have indicated that the “rare” circumstances in which a generic TLD will allow a generic term to become protectable involve things like double entendres, e.g., tennis.net.  Rom.com for romantic comedies might also work, but both those are “readily distinguishable from the instant case.”  A correct legal analysis would have focused on whether Booking.com was one of the rare outliers.  Instead, the district court’s faulty analysis “upsets the careful balance the law has struck between assisting consumers to identify the source of goods and preserving the linguistic commons.”

The real interest here is in preserving freedom against the monopolization of language, even if a would-be monopolist briefly convinces consumers that there’s secondary meaning in a generic term. “[N]o matter how much money and effort the user of a generic term has poured into promoting the sale of its merchandise and what success it has achieved in securing public identification, it cannot deprive competing manufacturers of the product of the right to call an article by its name.” Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976).

The PTO correctly pointed out that no grocery business called The Grocery Store could ever receive trademark protection because the name is generic, regardless of secondary meaning. The majority, however, left in place the idea that if consumers recognized an online grocery business called “grocerystore.com,” that business would be entitled to trademark protection. “There is no basis in law or policy for drawing such a distinction.” Online sellers need freedom to use generic terms just as brick and mortar stores do.

The district court concluded that .com was different from Company because only one entity can occupy a .com. But courts have long held that “[t]he commercial impression created by ‘.com’ is similar to the impression created by ‘Corp.’ and ‘Co.’, that is, the association of a commercial entity with the mark.” Any difference came from functionality, and functional features aren’t protectable even with secondary meaning.

Not correcting the district court’s legal errors “will provide Booking.com with a weapon to freeze out potential competitors,” forcing them to bear “the risk of a costly, protracted, and uncertain infringement lawsuit.”  Descriptive fair use wasn’t good enough for competitors using “booking” in their own domain names, given the power to threaten provided by a registration.  [Courts are very likely to accept the argument that use in a domain name is “trademark use,” disqualifying the defendant from descriptive use as a defense.]  Even if the defense remains available, it’s a defense, not an immunity from suit, so not much help.  And the idea that car and flight booking sites would be ok was “optimis[tic],” but even if true, not helpful to competitors who want to use names like hotelbooking.com or ehotelbooking.com, “which likewise describe such competitors’ services ‘as what they are.’” No class of services should be subjected to this monopoly. 

As for the majority’s statement that infringement will be hard to prove, maybe, but protecting booking.com would still chill competition based on the expense and risk of defending a lawsuit.

No comments: