Sunday, February 17, 2019

Foreign Meaning Matters: Brauneis and Moerland on Trademark's Doctrine of Foreign Equivalents

I was enjoying some siggi's® yogurt, and noticed, just below the trademark name siggi's®, an interesting piece of trivia: "skyr, that's Icelandic for thick yogurt!" You learn something new every day.

Robert Brauneis and Anke Moerland's recent article argues that it would not be good policy to allow the company that distributes siggi's ® yogurt to trademark the name SKYR for yogurt in the United States, even though most people in the United States do not currently know what the word "skyr" means. In short, they argue that when reviewing trademarks for purposes of distinctiveness, the U.S. Patent & Trademark Office (USPTO) and the courts should translate foreign terms that are generic or merely descriptive in their home country, because allowing such marks would cause unexpected harms for competition.

This is a fascinating paper that warrants serious thinking, and perhaps re-thinking, of how trademark law currently treats foreign terms.

What's the harm, we might ask? If a US company wants to sell thick yogurt under the trademark SKYR, and virtually no one in the US knows what SKYR means, surely this should be classified as fanciful (inherently distinctive) and receive strong protection.  At least this would be the answer provided by a typical "doctrine of foreign equivalents" analysis.

The Doctrine of Foreign Equivalents

Trademark law's so-called doctrine of foreign equivalents holds, at least in the Federal Circuit's interpretation, that the meaning of a mark in a non-English language should be considered in assessing distinctiveness, but only "where the ordinary American consumer," including English-only speakers and people proficient in the non-English language present in America, "would stop and translate the mark into English[.]"  See In re Spirits Intern., NV, 563 F. 3d 1347 (Fed. Cir. 2009). Obviously, there is usually going to be at least one native speaker in America who knows the meaning of the foreign term; but there has to be an "appreciable number" of native speaking consumers for their understanding to count. Id. (discussing the doctrine of foreign equivalents in the context of denying registration for geographically deceptively misdescriptive marks); see also Palm Bay Imports v. Veuve Clicquot Ponsardin, 396 F. 3d 1369 (Fed. Cir. 2005).

Therefore, so long as an ordinary American purchaser, including the 40,000 or so Icelanders residing in the United States, would not "ordinarily be expected to translate" skyr into "thick yogurt" there is no problem in granting a US yogurt company trademark rights to sell Skyr® yogurt.

Brauneis and Moerland's Critique

Not so fast, Professors Brauneis and Moerland argue.  Allowing trademarking of such terms can in fact have significant anticompetitive effects by keeping companies from marketing products across borders that incorporate the most efficient words to describe them.

As can be seen from the article's title, "Monopolizing Matratzen in Malaga: The Mistreatment of Distinctiveness of Foreign Terms in EU and US Trademark Law," this article is admirably international, addressing not just US trademark law, but EU law, and cites a plethora of court opinions from across nations. This post, in contrast, is directed primarily at the US situation, and comes from a concededly US-centric perspective.

The authors' central argument is that, in most instances, when someone tries to trademark a foreign term that is generic in the home language (or merely descriptive in the home language), the term should be translated from the foreign language into the domestic language in determining distinctiveness for purposes of protectability, regardless of whether consumers in the domestic country where protection is sought understand the term's meaning.  (Descriptive marks are important too, since under 15 U.S.C. § 1052(e)(1) and (f), they can only be protected with secondary meaning.)

In making their argument, the authors divide potentially trademarked generic/descriptive foreign terms into three categories, which move from least to most controversial.

Category 1: Terms Where Domestic Consumers Know What the Foreign Term Means

The first category of foreign terms they identify consists of foreign terms domestic consumers are likely to understand as the "common word in the foreign language" for a good or service, or as being merely "descriptive" of the good or service. (Brauneis and Moerland, at 3).

This is an uncontroversial category. Take the term BANK. Clearly "bank" is a generic term for "bank" in the English language. But it's also basically a generic term for bank in every other language, since the Spanish, French, German, and even the Japanese have very similar terms for bank. Thus, no one in any of these countries should be allowed to trademark the term "bank" (alone) for a bank. It is generic across the board. The result, and the caveat, is that companies like CITIBANK can use, and even trademark, the term "bank" within more distinctive composite marks, without worrying about likely confusion with a prior mark. Likewise, common French terms like sorbet (sorbet) or baguette (baguette) are so well known in the US, and presumably in other countries, that they would be generic regardless.

Courts in various countries have uniformly refused protection for generic or insufficiently distinctive terms when domestic consumers will quickly stop and translate. (3)

Category 2: "Proto-generic terms"

This is my favorite category, and I completely agree with the authors' conclusions here that what they call "proto-generic" terms should be translated from their foreign language into the domestic language.

The basic idea here is that sometimes "a foreign term may not yet be widely known in a particular market" because it has only recently been introduced into that market. For example, take SKYR.  The Greek yogurt craze got going in only around 2005 thanks to Chobani, and the Icelandic yogurt follow-on is even newer.  So (on concededly minimal evidence) I'd consider SKYR a “proto-generic” foreign term that will, in the next couple years, be recognizable to an appreciable number of US consumers if it's not already.*  Indeed, the authors point to a German case to this effect: SKYR should be translated from Icelandic because German consumers don't yet know its meaning but soon will given the movement of the yogurt market. (6).

* Incidentally, the company that distributes siggi's® operates under the trade name, The Icelandic Milk and Skyr Corporation, a private company based in New York.

The upshot is that, for this category, courts are wrong when they decline to translate from the foreign term, because there will be anticompetitive effects in the not-too-distant future if only one company can market goods under a soon-to-be-generic term. This rule is especially appropriate given that trademark law tends to be forward-looking, assessing not just how the competitive landscape looks today, but how it will look in the future. Examples of this include where courts assess "the likelihood that the prior owner will bridge the gap" in the confusion analysis, and also the Lanham Act's willingness to find that a term is abandoned once it becomes generic, even if it was not born that way.

The authors identify a few opinions taking the erroneous view, but they note that many courts already get this category right. They cite several cases where courts held "proto-generic" foreign terms, such as OTOKOYAMA for Japanese dry sake, should be translated even though US consumers may not quite yet know the meaning. (5-6).  This means a lot of these proto-generic foreign terms (or proto-descriptive terms lacking secondary meaning), will not be eligible.

The Federal Circuit is a more interesting case. (The Federal Circuit's view is important since it has jurisdiction over appeals from rejections by examiners and the Trademark Trial and Appeal Board.) To the extent the Federal Circuit's holding in In re Spirits, mentioned above, suggests that translating foreign terms is required in the distinctiveness analysis only if ordinary American consumers would currently stop and translate the mark into English, this would be wrong. That said, there is room for debate on precisely what the Federal Circuit held in In re Spirits.

The issue in In Re Spirits was whether the term MOSKOVSKAYA, which means "of or from Moscow," was primarily "geographically deceptively misdescriptive" when used to sell vodka not made or sold in Moscow, under 15 U.S.C. § 1052(e)(3). The Federal Circuit affirmed the finding that an "appreciable number" of "ordinary American purchasers," including hundreds of thousands of Russian speakers in the US, would currently understand MOSKOVSKAYA to mean "of or from Moscow." In re Spirits, 563 F.3d. at 1351-1352. The court did not directly hold on the issue of whether future conceptions of a term should be considered. But the court did go on to find MOSKOVSKAYA for vodka that is not made or sold in Moscow was nonetheless a valid trademark, because the deception must also be a "material" factor in consumers' purchasing decisions, and this requires that the "appreciable number" of native speakers also be a "substantial portion of the intended audience." Id. at 1353 (citing In re California Innovations, Inc., 329 F.3d 1334, 1341 (Fed. Cir. 2003).  In this case, the 706,000 Russian speakers only made up one-quarter of one percent of the whole US population in the market for vodka,  which was not "substantial" enough. Id.

In Professors Brauneis and Moerland's view, this holding effectively dispatches with the category of "proto-generic" foreign terms with respect to trademark distinctiveness analysis. If 706,000 people speak Russian in the US today and understand that MOSKOVSKAYA means "of or from Moscow," but this was not seen as sufficient, at least in the context of a § 1052(e)(3) rejection, this effectively says that the doctrine of foreign equivalents does not require a court to assess whether a foreign term whose meaning is known to only a few people now will nonetheless be known to many people in the near future. The authors note that at least "[o]ne scholar has argued that the reasoning of [In re Spirits] requires the distinctiveness of foreign words to be assessed solely on the basis of current domestic consumer understanding." (21) (citing Serge Krimnus, The Doctrine of Foreign Equivalents at Death’s Door, 12 N.C.J.L. & Tech. 159, 161 (2010)).

Another way to see this opinion, however, is that the Federal Circuit was only concerned about correcting how § 1052(e)(3) geographically deceptively misdescriptive rejections are performed, not about distinctiveness rules generally. So, for example, if someone applies to register SKYR (which is not a geographic term at all) for yogurt, this could still be rejected even under In re Spirits as "merely descriptive" without secondary meaning or "generic" for thick yogurt, despite that fact that only 40,000 people currently know the term, and 40,000 is a very small portion of the US yogurt market. The reason is that "materiality" is not at issue for ordinary, non-geographic "merely descriptive" or "primarily geographically descriptive" assessments under § 1052(e)(1) and § 1052(e)(2). So if the question is whether MOSKOVSKAYA is merely descriptive for a restaurant that sells Russian food, this might still be translated into Russian for purposes of assessing whether the term is "merely descriptive" or "primarily geographically descriptive" of the food offerings.

In any case, needless to say, if the Federal Circuit gets the opportunity to speak on this precise point of law in the future, the authors would presumably urge the Federal Circuit to hold that the doctrine of foreign equivalents can be used in distinctiveness assessments, even if ordinary American consumers don't currently know the term's meaning, so long as it is "reasonable to assume that that might be the case in the future." (7) (quoting a Court of Justice of the European Union (CJEU) opinion taking this stance).

Category 3: No One in the Domestic Country Knows What the Term Means, And They Probably Never Will 

The final category is the most controversial. This category consists of foreign generic or descriptive terms that consumers do not understand now, and that they will not likely understand in future.

I am initially skeptical. What is the problem if a German company wants to sell violins in the US using a trademark consisting of the German term for violin, GEIGE, if no one in the US knows what it means? Surely US consumers will just see GEIGE as a highly distinctive mark (fanciful) that identifies a source, not a product, making it protectable under the Lanham Act.  The Federal Circuit would apparently not translate such a term.  See, e.g., Palm Bay Imports, 396 F. 3d at 1377 ("When it is unlikely that an American buyer will translate the foreign mark and will take it as it is, then the doctrine of foreign equivalents will not be applied.").

The authors argue, however, that there is, in fact, a big problem here.  Their explanation is quite artful, and worth quoting in full.
[T]he Spanish-language term for “mattress” is “colchón,” which, unlike the English word, has no relation or similarity to the German term “Matratze.” If Spanish consumers are unlikely ever to make the jump from “colchón” to “Matratze,” how could protecting “Matratzen” as a trademark in Spain have any anticompetitive effects? 
The answer, in one sentence, is that producers that have developed composite-mark branding incorporating the foreign term [in this case, German producers] will find it difficult or impossible to use that branding in the domestic market [here, in Spain, where trademark rights are sought], and that is a significant limitation on competition that will also affect domestic consumers.
(Brauneis and Moerland, 8). The example they give of this problem is where a German company selling mattresses under the composite name MATRATZEN CONCORD wishes to sell into the Spanish market. The German company will be prevented from doing so due to the already-trademarked MATRATZE brand mattress. The Spanish trademark office was fine with it, because the term was highly distinctive to Spanish speaking consumers; but now German companies cannot sell into the US.

Here is an example of the problem the authors have identified that should resonate with yogurt lovers.  Imagine the USPTO permits a US company to obtain a trademark for the term SKYR for thick yogurt. Assume further that "ordinary US consumers" do not currently know what the term skyr means, and almost certainly never will, given the stark difference from the US term for "yogurt."

But then imagine that an Icelandic company wants to sell yogurt under a composite mark that incorporates the Icelandic term for yogurt. The one that I think of is FYNDIO SKYR ("fyndio appears to mean "funny" in Icelandic). Surely, the Icelandic company should be able to call its product, loosely, Funny Yogurt® and be able to sell its Funny Yogurt® in the US too, without changing its name. After all, composite marks incorporating generic terms are exceptionally common. (8-9) ("Consider, for example, CITIBANK, MASTERCARD, NESCAFÉ...and of course MATRATZEN CONCORD.").

But now that SKYR has been trademarked and branded in connection with a US yogurt company, American consumers will see FYNDIO SKYR not as meaning "funny yogurt," but as indicating a source. They will likely see an affiliation with the previously trademarked SKYR, or even believe the source of the two yogurts is the same.

Indeed, as the authors compellingly observe, the fact that US consumers do not know the generic meaning for the foreign term potentially creates even more of a problem than if they did know it, because now the term is highly distinctive! Indeed, "from [America consumers'] point of view, it is a fanciful, newly-coined word[,]" and this "will only increase the likelihood of confusion between two brand names that incorporate the word, and will thus increase the likelihood that the new entrant faces ... anticompetitive burdens." (10).

Note that the problem is not limited only to "composite marks" in the classic sense, like CITIBANK or SURGICENTER. Rather, the authors define "composite-mark branding" quite broadly to include "branding that incorporates two or more words," whether or not separated by a space, "in which at least one of the words is generic or descriptive in the language that the brand initially targets..." (8). This appears to sweep in marks that combine a generic term with a strong brand name, such as TOYOTA TORAKKU. (Torakku means "truck" in Japanese). True, the problem is likely to be more severe for composite marks that combine two generic terms than for marks that include an actual trademark term, since the presence of a strong brand name like Toyota will typically alleviate consumer confusion. But still, if a foreign generic term like TORAKKU becomes protected as a trademark in the United States, there could be anticompetitive problems in this scenario too, if Toyota tried to market a truck called something like TOYOTA TORAKKU.

Objections to Consider

I thought of several questions and objections to the authors' arguments, especially as respects their third category: generic foreign terms that no one in the US is ever going to stop and translate. Each was answered by the authors over email. I'll share each objection and response below.

My first question is, isn't the descriptive fair use defense going to resolve the issue? As effectuated under Lanham Act § 1115(b)(4), use of a term that is another firm’s trademark won’t be infringement if, in relevant part, "the use of the [term] charged to be an infringement is a use, otherwise than as a mark ...of a [term] which is descriptive of and used fairly and in good faith only to describe the goods or services of [defendant.]" Why won't this defense work in the CONCORD MATRATZEN case, where the German term for mattress is being used solely to describe the good sold, or in the FYNDIO SKYR case, where skyr is used only to describe the yogurt?

I am somewhat unsatisfied with the authors' explanation in their article of why descriptive fair use is insufficient to deal with the problem. The authors argue a mere defense is insufficient, because there is a "clear difference between having an acknowledged freedom to use a term ... and having to seek such a freedom through a descriptive fair use [defense,]" which entails "the legal costs of being involved in proceedings in a foreign and possibly unknown legal system." (16). But I feel like that can largely be said any time we give protection to merely descriptive terms that develop secondary meaning, such as FISH FRI. Descriptive fair use is a balancing act. On the one hand, a term that comes to indicate a source to US consumers, like MATRATZEN, will get protection, and on the other hand, a German defendant wishing to use a composite mark like CONCORD MATRATZEN in good faith merely to describe their mattress-related product gets a defense. Why can't this balancing be done in all these cases?

Professor Brauneis provided a pretty compelling response to this point via email, which I'll quote with permission, because it is exceptionally clear and has great images.
Under US law, at least, I think descriptive fair use would be very difficult to invoke as a defense in cases in which the defendant was using the word as part of a composite mark.  In those cases, the defendant will typically be presenting the descriptive or generic word with the same prominence, and in the same font, and so on, as the distinctive portion of the composite mark.  For example, the CAFÉ in NESCAFÉ is presented no differently than the NES: 
and in the MATRATZEN CONCORD logo, the word MATRATZEN is in the same rounded-off font as CONCORD, and is obviously coordinated with it, scaled so that the two words are exactly the same length:  
I think those uses would fare terribly in a descriptive fair use test.  As the Second Circuit has formulated it in, e.g., Kelly-Brown v. Winfrey, 717 F.3d 395 (2013), to mount a successful descriptive fair use defense, a defendant must prove that its use was made "(1) other than as a mark, (2) in a descriptive sense, and (3) in good faith." Id. at 308. As for what "use as a mark" means, the court asks "whether [the defendant was"] using the term 'as a symbol to attract public attention,'" or in an alternative formulation, whether the defendant was "attempting to build an association with consumers between the [term and the defendant]."  Id
Suppose that other companies had managed to register CAFÉ and MATRATZEN as trademarks.  If I were counseling Nescafé or Matratzen Concord, I would warn them that if they used the logos I've pasted in above, they would be running a very high risk of failing the descriptive fair use test, because a court would likely find that they are using the words "café" and "Matratzen" to attract public attention and to build consumer association between those words and the defendant as a source.  First, the words are integrated with the distinctive part of the defendant's mark. Second, they are in a foreign language, and if the defendant's purpose was description, there are perfectly good domestic language words (in English, coffee and mattress) for the defendant to use.  Thus, I'm not as optimistic as you are that descriptive fair use would save the day.
My second objection is actually more of a question. I was uncertain after reading the article whether the authors are also concerned about domestic companies, or just about foreign companies. For example, what if Chobani, a New York-based company founded by a Greek individual, wants to sell Chobani Skyr®? Chobani means "shepherd" in Greek and is a conceptually as well as commercially strong mark. But this composite mark would present a problem for Chobani if SKYR has already been trademarked as a "fanciful" term by another yogurt company. Should Chobani have less of a right to use a generic Icelandic term than an Icelandic company?

Here is Professor Brauneis' response, which I think is a crucial clarification to the scope of their argument.
If the word is "proto-generic," such as (I would argue) SKYR is, then I think domestic companies have to have the same right.  An employee from a US or a German dairy company might have travelled to Iceland, sampled the local product, and decided to introduce it in the US or Germany, and it shouldn't matter that the company involved is not based in Iceland.
This means the authors think Chobani, the New York-based company, should be able to sell Chobani Skyr® in the US, just as much as an Icelandic company should be able to sell Findio Skyr® in the US. Their argument that we should avoid letting companies get trademarks on the generic foreign term is just as much protective of US companies as foreign ones. Note, however, that the descriptive fair use approach would arguably come out differently here, and be less protective of the US company than of the Icelandic one. If we let another company like siggis® trademark SKYR, Chobani would probably have a harder time arguing its use was merely to describe the product than an Icelandic company for whom SKYR actually means yogurt.

This makes sense to me. For proto-generic terms, there is a very real concern that a term will become generic or merely descriptive in the near future even if it isn't now. Given my points earlier about trademark law as forward-looking, I think considering future impacts on competition is appropriate.

Professor Brauneis concedes, however, that
[i]t is a more difficult case if the foreign language term falls into our third category.  Suppose that no one in the US speaks German, and one US firm has for some time been using the word GEIGE as a brand name for its violins. Since English has a perfectly fine word for violins, it is hypothetically unlikely that "geige" will ever gain currency as a term in the US. Now another US firm enters the violin market and wants to call itself GRANITE GEIGEN. Or perhaps a company from China, say, MengXiang, has never been in the German market, but now enters the US market and wants to sell its violins under the band name MENGXIANG GEIGEN. Should there be a different result than if an established German company, like GÖTTINGER GEIGENLADEN, wants to enter the US market? 
For now, I just have to say that I'm not sure about this one. Our rationale, of avoiding burdens on established foreign brands, does not apply when a domestic or a third-country company wants to market goods under a foreign term that is not and likely will not be understood by domestic consumers.  And the existing domestic user of GEIGE for violins has an appealing story about how its existing goodwill is going to be destroyed.  So I will let my co-author solve this :-), or at least see what she has to say.
Professor Moerland got the last word, and suggested that, in principle, other entities, whether from the home market (US) or from Germany or from China, should be able to put products on the market that use a foreign descriptive or generic word, even though it is not from their own country and there is a perfectly acceptable, valid domestic alternative term.  This discussion opens the door to points about international relations and the rights of foreign speakers to use their home language, which I'll leave the authors to tackle another day.


In any case, this was a fantastic article. It was exceptionally clear and engaging, introducing an intellectual mystery and running through the intricacies of an area of law that, in the authors' hands, becomes fascinating. I am especially grateful to the authors for providing such clear and candid responses to my questions, which advanced the discussion and improved the post.

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