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August 19, 2011 / gavinlaw

How Much is a Trademark Actually Worth? Hidden Value in a Company.

by Tony Guo

Companies often undervalue their trademarks. Last June, Forbes asked Brand Finance to crunch numbers to determine how much certain trademarks are worth.

The Google mark was valued at over 44 billion dollars. Microsoft came in second at a little under 43 billion dollars. Walmart, IBM, Vodafone, Bank of America, and General Electric trademarks were each over 30 billion dollars. Apple, Wells Fargo, and AT&T’s trademarks were slightly under 30 billion dollars.

The value of a trademark lies in customer recognition. Customers that have a good experience with a product save the good-will in the trademark. The trademark is an important piece of information for the customer when he or she wants to replicate the same experience. Trademarks like Apple encompass more than one product. A good experience with the Ipod may convince a customer to buy the iphone or the macbook. Strong trademarks can improve or create sales and serve as the best marketing devices.

August 17, 2011 / gavinlaw

What you need to know about the generic top level domain program: Should you apply for a gTLD?

by Tony Guo

The generic top level domain (gTLD) program allows the creation of new gTLDs in the domain name space. Businesses and organizations interested in having their own dot brand/organization should consider the feasibility of obtaining the gTLD. There may be easier and cheaper alternatives to protecting a brand or trademark.

The application process is lengthy and arduous. Current predictions peg the time from application to ownership between nine and twenty months. But there is reason to believe the application will take longer. No one knows for certain how long a specific application will take. The .XXX gTLD, for example, was proposed in 2000. After facing strong adversity, it was finally approved this year, eleven years later.

The final cost of an application is also an unknown factor. The baseline application cost is 185,000 dollars; however this does not include many of the expenses an applicant faces. The longer the application process takes the greater the expenses. Further, if the gTLD becomes challenged, the costs can easily balloon into millions of dollars. Because this is the first time, it is difficult to predict how much money businesses and organizations will need.

Once an applicant is approved and gains the desired gTLD the applicant must take charge of the internet registry. Applicants can choose to pay someone to run the registry for them. In the large majority of cases, the registry earns more money than operating costs. The .XXX domain is predicted to make two hundred million dollars a year. Most of the money comes from registrants buying the domain name as defensive measures.

Although there is risk in applying, there may be greater risk not applying. The first round of applications begins January 12, 2012 and ends April 12, 2012. There is no set date for the next round of applications. It may be years down the road before businesses or organizations can apply for gTLDs again.

Applications can be objected to for many reasons. Government Advisory Committee (GAC) warnings give an applicant “an indication that the application is seen as potentially sensitive or problematic by one or more governments.” And while a GAC is not a formal warning it is notice to the applicant that the government may object at some stage.

In addition other applicants can make a string contention objection. Although applicants can coexist in the business markets, this does not mean they can coexist in the domain system. String contention is when two or more applicants file an identical or similar gTLD string and the strings create a probability of user confusion.

There are two types of applications, community based and standard. Applications that are community based are given preference. In a community based application the applicants are encouraged to work together. If for some reason they are unable, the gTLD will go to auction. The highest bidder wins the gTLD. Some of the more popular gTLDs are expected to go for millions of dollars if they go to auction.

For community based applications, any member of the specific community may lodge a community objection. In the proposed .bank, any bank may file an objection. Having a closed registry is beneficial for those who do not want to defensively purchase domain names. The cost of defensive purchases (see .XXX for an example) can become very high.

Life as a registry owner is not as glamorous as it first appears. Once an applicant accepts a gTLD they must follow certain guidelines. The registry owner signs a ten year term agreement specifying registry services. It is hard to predict what services should be named because they can evolve in time. Amendment of the services is fairly complex.

Businesses and organizations should carefully weight the costs of obtaining a gTLD with the costs of defensive measures. A well run gTLD can be profitable, but the initial cost creates a difficult barrier.

August 17, 2011 / gavinlaw

Trademark Owners and the New .XXX Top Level Domain

As the fall 2012 launch date approaches for the new top level domain .XXX, trademark owners should carefully consider whether to use the services of a vendor to “block” others from registering their valuable brands in the adult field domain space. In exchange for the payment of a fee, a vendor may block registration of strings matching the brand owner’s existing trademarks for at least the next 10 years. The period during which brand owners can block registrations runs for 50 days starting September 7th. Certain vendors are taking early orders to place brand owners’ blocking requests.

August 16, 2011 / gavinlaw

Bit-Torrent and Open Networks, Powered by the Community

by Tony Guo

TorrentFreak claims that around 200,000 BitTorrent users are in some stage of lawsuit for illegal downloading. Most infringers are expected to settle for around 2,500 dollars and not risk the 100,000-200,000 dollars fine.

From the TorrentFreak statistics it appears users downloading music are much more likely to be caught than users downloading movies or television episodes. There are a few explanations for this. Music is easier to download (fewer megabytes) and is downloaded more frequently than other forms of entertainment.

Supporters of BitTorrent labeled-infringers claim the person downloading the illegal file is often not the person being taken to court. The most common way this occurs is over an open network. A neighbor or complete stranger logs into an open network without a password and begins downloading. The internet address is traced back to the person paying for the internet service. At this stage the rights’ holder sends a letter to the corresponding address.

While it is unfair to hold innocent users accountable, if the burden of proof shifts to the rights’ holder, the rights’ holder faces the impossible task of proving exactly who downloaded what.

Open networks are the most common defense for labeled-infringers who choose not to settle. They present a difficult issue of proof and have strong community implications.

If everyone used open networks in good faith, then open networks are a great idea to increase community productivity. But in this scenario even one infringer can ruin it for everyone.

The future of Bit-Torrent is connected with the future of open networks. If open networks become popular than the defense “someone was downloading over my internet connection” is stronger. On the other hand, in the extreme case that there are no open networks (or that a reasonable person would not install an open network), the defense becomes obsolete.

Bit-Torrent’s heydays are over; however its popularity may depend on the popularity of open networks. Without open networks, the childlike excuse “I didn’t do it, someone else must have done it but I do not know who” loses validity.

The other option for Bit-Torrent is to evolve into something else. Rights’ owners have largely been turned off by the idea of using Bit-Torrent as a means of reaching an audience. The idea has been explored and rejected numerous times.

The future of Bit-Torrent is linked to the future of open networks and both are dependent on the behavior of individual members of the community.

August 8, 2011 / gavinlaw

How to Find Out What the Next Expansion is for Your Favorite Games

by Tony Guo

Before I entered law school, I was an avid fan of World of Warcraft or in nerd WoW. I would spend hours roaming the virtual lands with my elite guild. My guild comprised of my business school roommate, a film student suitemate, the guy down the hall, and several people I honestly have never met. We used our New York University education to increase our guild’s influence across the WoW universe. The business school friend was in charge of the guild’s gold. The film friend was in charge of our battle formations. The guy down the hall was, well, the guy down the hall. Eventually we all stopped playing WoW that year. I gained one valuable skill from my WoW experience: the ability to predict the next expansion of a game. In the gaming community, this ability can impress many people. How did I do this? I used TESS.

TESS is short for Trademark Electronic Search System. On Tess, you can search for trademarks by owner. What happens is gaming companies like Blizzard file for expansion trademarks before release. There is substantial danger in releasing the expansion first and then filing for the trademark. Although trademark squatters are not likely to win, they can delay or make the trademark process more expensive.

WoW’s first expansion, Burning Crusade, was released January 16, 2007. Blizzard filed for the Burning Crusade trademark in May 3, 2005. The “published for opposition” date was January 31, 2006.

WoW’s released its second expansion Wrath of the Lich King on November 13, 2008. The Wrath of the Lich King trademarks were filed on July 28, 2007 (there were three trademarks filed). The “published for opposition” date was January 15, 2008.

WoW’s released its most recent expansion Cataclysm on December 7, 2010. Blizzard filed for three Cataclysm trademarks on June 26, 2009. The “published for opposition” date was September 15, 2009.

Many other gaming companies do what Blizzard does: file for a trademark first then release the expansion. Blizzard takes about a year and a half to go from filing date to releasing date. Blizzard’s announcement that there will be a fourth expansion and its July 28, 2011 filing for the trademark Mist of Pandaria have many speculating that Mist of Panadaria will be the new expansion. I predict that Mist of Pandaria will be the fourth expansion of WoW. The time line matches up and predicts an early 2012 release date.

August 4, 2011 / gavinlaw

Fantastic Four, Captain America, Thor, Iron Man, X-men, the Hulk, and the Avengers: All Products of Work for Hire

by Tony Guo

In a previous blog we discussed the interaction between “work for hire” and copyright laws. The results of a “work for hire” agreement may have unforeseen consequences for the artist. One of the saddest stories in this genre is Jack Kirby’s.

Jack Kirby helped design the Fantastic Four, Captain America, Thor, Iron Man, X-men, the Hulk, and the Avengers for Marvel Comics. He left Marvel over working conditions. Before leaving he created many of Marvel’s most famous superheroes and villains. He created them however under a “work for hire” agreement. The Federal Court denied Kirby’s heirs of any copyrights to his creation at Marvel. The decision by Judge McMahon was a lengthy one. Within the fifty page commentary was the Court’s ruling that Kirby’s superheroes were indeed covered by a “work for hire” agreement.

Judge McMahon was careful with her words and set the moral issue apart from the legal issue: “Contrary to recent press accounts, this case is not about whether Jack Kirby or Stan Lee is the real ‘creator’ of Marvel characters, or whether Kirby (and other freelance artists who created culturally iconic comic book characters for Marvel and other publishers) were treated ‘fairly’ by companies that grew rich off the fruit of their labor.”

The legal issue was not difficult to understand. The burden of proof rested with the plaintiff (Kirby’s heirs) to prove that the creations were not “work for hire.” Unable to meet this bar, Kirby heirs were out of luck. Had Kirby still been alive, there may have been greater media support and pressure for Marvel to settle.

The real issue is the money Kirby’s estate lost. Assuming a 1 percent royalty on all movie productions the breakdown must be unnerving for Kirby’s estate.

Title Gross Date 1 Percent

X Men: 157,299,717 (USA) (19 November 2000) 1.57 million
X 2: 214,948,780 (USA) (21 September 2003) 2.15 million
X-Men Last Stance: 234,360,014 (USA) (24 September 2006) 2.34 million
X-Men Origins: 179,883,016 (USA) (27 September 2009) 1.80 million
X-Men First Class: 144,210,364 (USA) (24 July screen 2011) 1.44 million
Thor: 437,077,239 (Worldwide) (30 June 2011) 4.37 million
Hulk: 245,284,946 (Worldwide) Most Recent 2.45 million
Incredible Hulk: 263,427,551 (Worldwide) Most Recent 2.63 million
Iron Man: 318,298,180 (USA) (28 September 2008) 3.18 million
Iron Man II: 312,057,433 (USA) (15 August 2010) 3.12 million
Fantastic Four: 330,120,875 (Worldwide) Most Recent 3.30 million
FF Silver Surfer: 131,920,333 (USA) (14 October 2007) 1.32 million
Captain America: 65,058,524 (USA) (24 July screen 2011) .65 million
Avengers: ???,???,???

Counting only recent movies (2000 and later), Kirby’s estate could produce its own Marvel movie (we probably know who the villain would be). The most glaring statistic is that Marvel made five X-men movies. Marvel made two Hulk movies (strange considering that first one was a disaster), two Fantastic Four movies, two Iron Man movies, and it would not be surprising if they produced another Thor or Captain America movie.

With copyright power, Kirby’s estate could limit the “dilution” of his characters. With a new Avengers movie on the docket and the recent flood of superhero movies, we can look forward to future movies such as: X-Men Origins Gambit; X-Men Teenage Times; The Really Incredible Hulk; Fantastic Four Galactic’s Revenge; Loki’s Love Story; and Avengers II featuring Spiderman and Wolverine.

August 1, 2011 / gavinlaw

L’Oreal’s Fight Against Ebay, A Sign of Things to Come for Google Adword and the Rosetta Stone Case.

by Tony Guo

The European Court of Justice (ECJ) ruled that if eBay played an “active role” in promoting infringement it could be liable for damages. This decision could influence the Fourth Circuit as it ponders whether the purchase of a trademark as an adword constitutes infringement (the Rosetta Stone case). The ECJ ruled that if eBay intentionally directed users to infringed goods it would be liable for damages. This logic can be extrapolated to the use of Google adword. In Google adword an infringer buys a search term such as Tiffany and redirect searches for this term to its own website. The infringing company would use Tiffany’s famous mark to confuse buyers. The ECJ’s ruling comes as good news for Rosetta Stone.

The rapid expansion of online services has largely outpaced corresponding intellectual protection. Companies like L’Oreal and Rosetta Stone have not stopped fighting. Under L’Oreal’s urging the European Courts are taking a more staunch approach on identifying infringement. European Courts in the past focused on whether the infringer has an “active role.” The Court in the L’Oreal case ruled that an operator infringes “if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the online offers for sale were unlawful and, in the event of it being so aware, failed to act promptly to remove the data concerned from its website or to disable access to them.” The subtle wording is important. Companies like Google and eBay are no longer able to hide under the “I didn’t know” doctrine and now must operate under the “reasonable operator” standard. If the Fourth Circuit uses the “reasonable operator” standard, Google could be in trouble.

L’Oreal was content with the decision and their spokesperson said: “This decision is in line with the position L’Oreal has taken for several years and is applicable in courts throughout the European Union.” More surprising was eBay’s support of the ECJ decision. eBay seemed relieved that some of the vague guidelines were now cleared up. The best result for Rosetta Stone and Goggle may be for the Fourth Circuit to clear up the vague language that surrounds the issue.