This article is written by Aryan, from the School of Law, Christ University. This article deals with the per se rule and its application in the case of United States Patent and Trademark Office vs. Booking.com B.V., 2020.
Table of Contents
Introduction
The Sherman Antitrust Act, 1890 was enacted to guarantee free trade and positive competition. The Act assumes that the free interplay of the competitive environment will result in the ideal functioning of financial markets. However, in recent times certain agreements or businesses have indulged in harmful trade practices which have resulted in the violation of the aforementioned Act. Such businesses have been termed illegal following the per se rule.
The principle of per se is applied when there is sufficient evidence of trade restraint, and such restraint is held to violate the antitrust laws. This article analyzes the per se rule’s application in a United States’ Supreme Court decision, specifically whether the per se rule applies to a class of items or products that are not unique, as the law states that less distinctive items or products are incompetent for trademark protection. While trademark protection has been granted to products capable of being distinguished from others, the current issue deals with whether a generic term can acquire a trademark and what factors it needs to fulfil to be granted the same. Furthermore, this article also analyzes the role of advertising in the modern day and how it can give rise to unfair competition in the future. Lastly, this article analyzes the role of customers in granting businesses or companies trademark protection and its implications for online businesses.
What is the ‘per se’ rule
According to the per se rule, any act which is in restraint of trade or an agreement that tends to violate antitrust laws and involve anti-competitive practices is generally regarded as illegal or unreasonable. Cases like price-fixing, bid manipulation, collective boycotts, deliberate refusal to trade, and resale price maintenance are anti-competitive and are therefore unlawful. For illustration, if a group of tomato wholesalers in a single market secretly arrange to hoard tomatoes for some time to create demand for the tomatoes and therefore raise its price as per the demand, then it will be considered unlawful as it violates procompetitive behaviour and antitrust laws as per the per se rule.
According to the per se rule, the purported person, on whom the allegations are laid, has the burden of proving that such allegations are false. However, in such cases, a plaintiff merely has to prove that the particular anti-competitive behaviour has occurred apart from the antitrust damage. The plaintiff is under no obligation to prove that the behaviour was competitively unreasonable or had a detrimental impact on the relevant product and geographic markets.
Per se rule infers that if a specific act meets the accepted elements of the rule’s requirements, there is no need for further investigation and all the defences to establish the reasonableness of the act in issue are prohibited. Therefore, when there is ample evidence of unreasonableness in a particular case, the per se rule is applied as it saves both time and money and the given case is not worth the irrationality.
Evolution of ‘per se’ rule
The Sherman Antitrust Act was enacted in 1890. This legislation prohibited all commercial agreements which led to restraint of trade as well as efforts to gain a monopoly. Moreover, it was enacted in response to corporations abusing their dominant position which had severe consequences for shippers, farmers, and other merchants.
However, courts in due time realized that not every restriction is unlawful as even a basic contract between parties can be subjected to trade restraints in some way. The court further decided that it will use one of the three methods to determine whether a restriction is unreasonable under federal antitrust laws. These three methods include-
- The per se rule
- Rule of reason
- The ‘quick look’ rule
A contract or any other agreement which unreasonably restricts trade and comes under the ambit of per se category is evaluated under the rule of reason test. The rule of reason evaluates the majority of antitrust cases and judges consider a range of elements, such as information about the business, if there is a restraint then the past, nature, and impact of such restraint. Taking such factors into consideration the court decides whether such factors impose a restraint in trade or not. The quick look rule is applied when cases have anti-competitive effects of such a high nature that it becomes unnecessary to conduct a full analysis of the case. Unlike the per se rule, where courts have to conduct a thorough examination concerning anti-competitive effects, here the plaintiff just has to prove that he has suffered a market injury. This rule is applied for quick disposal of cases.
Background of the case
Booking.com is a travel company that provides internet booking services for things like flights, rental cars, and hotel bookings under the brand Booking.com, which also acts as the website’s domain name. The company applied to the US Patent and Trademark Office (hereinafter referred to as USPTO) and filed four trademark applications in connection with travel-related services. The Lanham Act, 1946 distinguishes between four types of trademarks which include generic, descriptive, suggestive, and arbitrary. Only arbitrary and suggestive marks are considered distinctive, generic and descriptive marks are never distinctive and hence do not qualify for trademark protection.
In simple terms, the more unique a mark is, the more likely it is to be granted registration. Each of the four applications had its unique features but were all associated with the same term “Booking.com”. The USPTO denied the registration stating that the word “booking” was a generic term (the name of a class of product and services incapable of being distinguished from the goods of others) and Booking.com had failed to demonstrate how their mark had become unique. It is evident that for a product to acquire its name as a trademark has to be unique.
Booking.com sought judicial intervention and appealed to the Trademark Trial and Appeal Board (hereinafter referred to as TTAB). The TTAB upheld the USPTO’s judgment and stated that the customers would interpret booking.com mainly to relate to an internet booking service for travel and trips because according to them the term “Booking.com” is a commercial website that grants travel arrangements. The Board finally concluded that even though Booking.com is a descriptive trademark instead of a generic term, it is still unregistrable because it lacks a secondary meaning, which means that the product failed to achieve significance in the minds of the customers.
Booking.com challenged the TTAB judgment in the United States District Court for the Eastern District of Virginia. The court overturned TTAB’s judgment as per the evidence produced by Booking.com which found that nearly 75 percent of people recognized Booking.com as a specific brand name. The court further said that the word Booking.com is a descriptive trademark and has obtained a secondary meaning in the context of hotel reservation services. Thus, the board concluded that the term “Booking.com” satisfies the distinct criteria for registration and is therefore not generic.
The USPTO filed an appeal with the United States Court of Appeals for the Fourth Circuit, which affirmed the District Court’s judgment. The Appeals Court dismissed the PTO’s argument that the combination of .com with a generic name like Booking.com renders the product or goods to be generic. Further, the court stated that a product can be granted a trademark only if the design, phrase, symbol, or any variation aids in distinguishing one product from other goods and services, and if the consumers are able to identify its distinctiveness, the product will be rendered non-generic, which in this case almost 75 percent people recognized Booking.com as a unique service due to its domain name. The USPTO in November 2019 filed a petition for review with the Supreme Court.
Issues involved
The issues presented before the U.S. Supreme Court were-
- Whether there is a per se rule against trademark protection for a generic.com term.
- Whether adding a generic company name to a generic word does or does not provide trademark recognition.
Court’s observation
The U.S Supreme Court made its decision on 30th June 2020. The Court upheld the Fourth Circuit decision in an 8-1 ruling. It was determined by a majority of the judges that any term that includes generic.com is regarded generic for a particular class of product and services and those products are not eligible for trademark registration. However, if the particular product or service has a secondary meaning attached to them, in that case, it can still be eligible for trademark protection under the law. The Court further stated that in the given case people have recognized Booking.com as a unique service based on the evidence produced before the district court. As a result, Booking.com qualifies for trademark protection under the law.
USPTO opposed the Supreme Court judgment stating that Booking.com would still be unqualified for registration regardless of its unique service and evidence of consumer perception as per the per se rule, which means that when a generic term is paired with a generic internet-domain suffix, such as .com, the final combination is also generic. USPTO claims that the objective test it proposes is based on a common-law concept used in the case Goodyear’s India Rubber Glove v. Goodyear Rubber Co. [128 U.S. 598 (1888)), that a generic company brand added to a generic term does not grant trademark entitlement.
The judges argued that the rule that the USPTO proposal is not supported by USPTO’s previous conduct and they do not have any basis in trademark law to support it. They themselves had not followed the aforementioned prerequisites in the past and have granted trademark registration to services providing art prints such as ART.COM and companies offering dating services such as DATING.COM.
The judges went on to explain that if the USPTO’s current rules and conditions were to be followed, then all previous trademark registrations issued by the USPTO have to be revoked as well. The court further held that in Goodyear’s India Rubber Glove Mfg.Co. v. Goodyear Rubber Co. (1988), it was ruled by the Supreme Court that Goodyear Rubber Company was not worthy of complete ownership because the methods used during those days to manufacture products were known as Goodyear’s invention, and no such process was recognized back then. According to the court, the term “company” intends that the parties have established a partnership or organization to trade in such products, and the word company grants no other protectable meaning. By granting special privileges to Goodyear Rubber Company or Wine Company would infringe everyone’s freedom to trade in such goods, as stated by the Court.
The Court held that the USPTO’s dependence on Goodyear is problematic in another aspect. The USPTO considers Goodyear’s incompetency for trademark protection as a legal issue, irrespective of how the term is understood by consumers. Although, as stated above, whether a term is generic or not, is decided by how the term is understood by the consumers. The product in question is deemed to be generic if the customers are unable to tell the difference between it and other similar goods or services on the market.
The dissenting opinion came from Justice Breyer who opined that since it has been recognized that Booking.com is a generic term and trademark law offers no protection to goods or services which are deemed to be generic. He further stated that even though the court considers adding .com to generic terms like booking can give rise to a trademark, a top-level domain name such as .com cannot recognize and differentiate the source of products and services on its own, it is only a critical element of a web address and simply indicates that owner operates through a website. Justice Breyer considered this decision contrary to trademark policy.
He further said that the Lanham Act of 1946 did change the common law in significant ways. Most importantly it granted a trademark to descriptive marks with secondary meaning. The mental principle that generic terms are not eligible for trademark protection remains unchanged and the majority have seemed to overlook it in the present instance. Moreover, in terms of law and logic, the USPTO did raise a relevant question regarding Goodyear’s principle, and the reasons provided by them do appear rational. Adding a corporate designation neither converts a generic name of a product into a trademark nor grants it the authority to exclude other products.
Justice Breyer criticized the rule of the majority, companies would be able to acquire a trademark simply by prefixing the domain name.com. Such unreasonableness can give rise to unfair competition over the internet in the future as more businesses will rely on it to sell their products and granting a trademark for every such company with the prefix .com will lead to a significant down surge in the economy and the fundamental economic rules we aim to accomplish.
Analyzing the judgment
The US Supreme Court judgment on the United States Patent and Trade Office v. Booking.com (2020), was decided with an 8-1 majority.
The Supreme Court held clearly that even though a product is generic if it acquires a secondary meaning to consumers it would still be eligible for a trademark recognition as Lanham Act (1946) clearly emphasizes that the importance of the registered mark among the public shall be the sole reason to grant or cancel trademark protection. The aforementioned reason was not accepted by the USPTO and the dissenting judge had already argued that as per the Lanham Act (1946), a generic item shall not acquire trademark protection, notwithstanding the consumers’ perception towards the goods.
Since the public significance of the registered mark is the only basis for granting or terminating trademark applications, it is essential to understand the process adopted by the consumers to grant or terminate the same. Most of the time, and in the present case the decision is based mainly on survey results. Consumer surveys are frequently used to see whether people identify a word with a particular source. It is not difficult for a generic term to get customers’ recognition for their goods or products as the investors of a particular product invested a lot of money and efforts in obtaining public recognition mainly through advertising.
The evidence produced by Booking.com before the district court showed that 75 percent of people recognize the Company as a brand name while the remaining 25 percent consider it to be a generic name. Justice Breyer compared such evidence with another such company, washingmachine.com whereby only 33 percent of people considered it a brand. Such a difference in customer identification was recognized because of its heavy investment in advertising by its investors. Washingmachine.com in spite of being more distinctive than Booking.com failed as a brand because it remained unnoticed by most people whether through advertising or any other means. Therefore, spending a lot of money on advertising is imperative to gaining consumer recognition for any product.
Furthermore, in addition to the aforementioned issues, granting trademark protection to such marks will have a consequential impact on the online industry. Owners of short and generic domain names get all the benefits associated with conducting business under a generic name. These benefits exist regardless of trademark regulations. Furthermore, generic names like “Booking.com” are easy to remember, and the owner will spend less time training consumers because their logos instantly convey the essence of the company.
Because Booking.com has already acquired a domain name, no other website will be able to use the same. Such a domain name is also easily identifiable by customers. For illustration, consumers searching for the term booking in a search engine will be taken directly to Booking.com with the assumption of finding hotel booking online at the particular location. It is considered that providing trademark protection to generic.com domain names can confer further advantages to the owners of such marks as they might have the authority to prevent others from using similar domain names. In the present context if any rival uses domain names such as eBooking.com or booker.com can face actions regarding infringement of the trademark.
It is imperative for the courts to strictly adhere to the Lanham Act while deciding cases, as not abiding by the same can allow owners of businesses and products complete monopolistic control over their products. Complete control can be established merely by advertising the product and choosing a common and convenient domain. The outcomes of such actions are more likely to have an impeding effect on online businesses rather than promoting them.
Conclusion
The Supreme Court judgment in the USPTO vs. Booking.com B.V. demonstrates that adding “.com” to the end of the product may render a term generic essentially when the term gains secondary meaning or uniqueness in the public’s view. However, the Supreme Court did not provide criteria for determining which acts will constitute such uniqueness. The most significant consequence of such a decision is that businesses might possess a monopoly of their product as well as profit for investors since they will not be required to spend time educating their consumers.
In contradiction to the preceding ruling, the USPTO has dissented firmly to such judgment believing that wealthy businesses would continue to use the same techniques to get trademark protection in the future. Justice Breyer made a similar argument, stating that such implications can push the economy in an anti-competitive direction.
Therefore the judiciary shall analyze that trademark protection is granted only after following proper procedure of the Lanham Act (1946), and only adhering to such principles can give rise to free and fair trade in the future.
References
- https://www.supremecourt.gov/opinions/19pdf/19-46_8n59.pdf
- https://www.mayerbrown.com/en/perspectives-events/publications/2020/07/domains-as-brands-implications-of-us-patent-and-trademark-office-
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