In April this year Apple released their newest product – the Apple Watch. Only a few months after the release date a petition was filed in a Milan court accusing Apple of violating the iWatch trade mark. You may recall that in 2012 the tech giant agreed to pay $60m to Chinese firm Proview to settle a dispute involving rights to the “iPad” name. Now another high-profile dispute is on its way.
On 26 June an Irish software development company Probendi filed an urgent procedure concerning Apple’s use of the name owned by them – iWatch. Although their “iDevices” have been very popular, Apple did not use this name for their watch. It seems they have learnt their lesson from 2012 because their innovative watch is in fact called ‘Apple watch’. They probably knew this name was already owned by another company. The problem is not, therefore, in the name of the product.
Apple has, however, used the ‘iWatch’ name in another way. In our blog Bidding on competitors’ trademark in Adwords we wrote about Adwords and trade mark infringement. Both issues seem relevant in this dispute as well. It is a fact that Apple paid for Google AdWords to use the term ‘iWatch’. When users search for iWatch on Google, they are directed to Apple’s store even though this was not the actual name of this product. As Probendi’s petition claimed, “Apple has systematically used iWatch wording on Google search engine in order to direct customers to its own website advertising Apple Watch.”
While Apple managed to settle with the Chinese company Proview and buy out the rights in the ‘iPad’ name, it is more likely than not that they will not succeed to do this with Probendi.
Probendi co-founder and CEO Daniele Di Salvo said the company had warned Apple against using this term.
It is expected that the Irish company will take full advantage of its registered trade mark. Di Salvo said his company plans to develop their own ‘smart watch’ which will run on Android and have a touchscreen display too. It is not difficult to guess what its name would be. Probendi’s iWatch will benefit from all must-have features and undercut the Apple Watch in price.
Bloomberg reports about an audit conducted by Barzano & Zanardo valuing the iWatch trademark at €87 million ($97 million) – significantly more than the $60 million Apple paid Proview.
Many companies have tried to challenge Google or its advisers over trademark use but more often than not these actions have been unsuccessful. Google’s policy terms for its ad service states that trade mark complaints are dealt with on a case-by-case basis and that certain restrictions may be enforced. Probendi’s lawyer has said no action was taken by either Apple or Google following their requests and objections.
It is fascinating to explore how powerful the right branding strategy could be – out of curiosity I asked a number of my friends what they thought the name of Apple’s watch was. Unsurprisingly, all of them were convinced it was ‘iWatch’. That’s the power of strong intellectual property and excellent marketing strategy.
Even though Apple tried not to repeat the mistake from 2012, Techradar summarise the issue by saying that “Apple is being sued for not using the iWatch name”. We will be expecting more information on 11 November when the hearing Is scheduled.
So far when you type ‘iWatch’ into Google search, the top result will be an ad for the Apple Watch followed by link to the Apple’s website.
Although household name brands invariably have distinctive visual identities – for example, Coca-Cola’s bottle shape, and Nike’s swoosh – the primary sign through which any brand is identified is its name.
It is worth thinking about your name carefully given that it is what you will be using to answer the phone, and to promote and advertise your business. It’s also what your customers will use to recommend your product or service.
This quote, from Oscar Wilde’s The Importance of Being Earnest, demonstrates just how much faith can be placed in a name alone.
“It had always been a girlish dream of mine to love someone whose name was Ernest. There is something in that name that seems to inspire absolute confidence.”
Undoubtedly, a name can evoke certain reactions and emotional responses. It can give customers an idea or feeling about your business from the outset, before they have even experienced working with you. Therefore, choosing a name for your brand is an important task that should not be taken lightly. Here are 8 points to bear in mind:
1. Choose an appropriate name
The name you decide to brand your company under should be well thought-out in order to ensure you pick the name that suits what your product or service is trying to do. When choosing a name, think: what is unique about the brand I am trying to create? Who is my target audience? How do I want to make people feel?
2. Find a name that people will easily associate with your product or service
The big household names that have built such solid reputations have generally based their brand on something they believe suits that which they are trying to create.
Talking about Google’s name, co-founder Page stated in Business Week, “We spent a lot of time on the name … because we figured that it would be important for people to be able to remember it” Google’s search engine was originally called BackRub, but the company decided the name was unsuitable, and Google was then settled on. The name originated as a play on the word ‘googol’, a mathematical term for the number 1.0 × 10100, to reflect the search engine’s ability to sort through a seemingly infinite amount of information on the web.
‘Apple’ is similarly not just a name given to the tech-giant without any forethought. Apple is currently the world’s most valued brand, and is known for its sleek designs and good-quality products and the very name of the company helps to create this image. In Jobs’ biography, written by Walter Isaacson, he explained that he was coming back from an apple orchard when he thought the name sounded ‘fun, spirited, and non-intimidating’. Steve Wozniak, Apple’s co-founder, in his book iWoz: Computer Geek to Cult Icon explained that “We both tried to come up with technical-sounding names, but we couldn’t think of any good ones. Apple was so much better, better than any other name we could think of”. And like the name itself, the company and the brand became much more innovative and forward-thinking than previous technical companies.
3. Make sure your name translates into other markets
Not only should a name accurately reflect your business, but it must also be something that works in different countries as well. There are many examples of company owners who have not realised that their chosen name in one country might have a completely different meaning in the next. For example, Chevrolet launched its Chevy Nova car in Spain under the same name, which translates as ‘Does not go’. American Airlines advertised the luxurious aspect of flying business class to its Mexican customers by focusing on the leather seats, using the slogan ‘Fly in Leather’, which translates as ‘Vuelo en Cuero’ in Spanish. The Spanish dictionary neglected to inform American Airlines that the phrase ‘en cuero’ is a slang term for ‘in the nude’. Unsurprisingly, there was little demand for mile-high naturism among Mexico’s business flyers. The beer-maker Coors discovered that its slogan, ‘Turn it loose’, translated into Spanish as ‘Suffer from diarrhoea’.
4. Get legal title to your brand by registering your trademark
The name does much more than carry the goodwill of the brand. Some people equate trademarks with goodwill, but they’re not the same thing. Goodwill is a term used by accountants to refer to the customer base a business develops.
Trademarks can protect goodwill, but they do far more than that. The reason you need a trademark isn’t to protect your goodwill, which is protected anyway, but because a trademark is a tool to capture the economic potential in your business. When you register a trademark you get legal title to your name so you are better placed to control use of the name by third parties. You can then monetise the business by granting licences, and extend the brand to other goods and services if you are successful.
5. Be aware of the value an appropriate trademark creates
As the business develops and expands, so its name will increase in value, and evoke a reaction in its target consumer which then enables the brand to charge a premium for its product or service. For example, people are willing to pay significantly more for an item of clothing made by Louis Vuitton than they would pay for a similar-looking item made by an unknown designer. The value of one item of clothing over the other is purely down to the name and so the brand is what adds that extra value.
6. Bear in mind that the name could be a most valuable asset, but only if you choose well
Also, when a company is being sold it is the brand, as well as the goodwill associated with the name, that the purchaser is buying into. Therefore, it is important to begin any project by realising that the name you choose for it is potentially one of the most valuable assets the business will generate if it succeeds. It should be treated as such and appropriately protected.
7. If the name you like is not legally available find another
A name must be protected. Given that the value of a brand lies in its name, it’s no good to just focus on coming up with a catchy, memorable name if this name is not protected. If, once you have conceived a name and have gone on to have designs and branding produced, someone claims you are infringing on their trademark, nobody is going to care that the name is ‘just perfect’ for you. For a name to really be perfect for your business, it must be legally available, and hence be suitable from both a marketing and a legal perspective.
8. Do your research before you start using a name
Apple v. Apple Corps – Although Jobs decided that Apple was the most suitable name for his company and that it would work well from a marketing perspective, the name has proved less suitable from a legal perspective. Apple Inc was locked into legal disputes from 1978 to 2006 over the name with Apple Corps, the record company owned by the Beatles.
Once the initial dispute was settled by agreeing that Apple could use the name on the basis that it would not expand into the music industry, there were problems on several subsequent occasions when Apple’s business expanded to cover the iTunes store and the iPod product. The dispute caused several losses for Apple, first preventing it from launching a computer with recording software installed on it, and then leading to the Beatles’ music initially not appearing on the iTunes music store.
The dispute has now been resolved between the two companies, with Apple buying the rights to use the name in all industry sectors and allowing Apple Corps a licence to the name. However, this resolution should not be seen as something most businesses could achieve. The process proved extremely costly and time-consuming. Such problems would have forced less well-resourced companies to rebrand. This is why the legal aspect of names should never be lost sight of.
Names are an important way in which the law protects a business against various unfair practices that tend to arise when a business succeeds. So, make sure the name you have invested so much time and effort in creating and around which you have built your good reputation, is one that can remain exclusively yours.
A recent case, Smartflash LLC v. Apple Inc, which Apple described as a prime example of why the US patent system is flawed, saw the company ordered to pay over $532.9 million in damages.
Smartflash LLC, a Texas-based entity, sued Apple in May 2013 on the grounds that Apple had infringed 3 of its patents in their iTunes software. According to The New York Times, Smartflash alleged that Apple’s software infringed on Smartflash’s “patents related to access and storage of downloaded songs, videos and games.” The U.S. District Court for the District of Texas (Tyler) found Apple to have used Smartflash’s patents, and done so wilfully.
According to Bloomberg Apple issued a statement that the plaintiff does not create products, provide jobs and has a limited U.S. presence. So, Apple effectively sees Smartflash as a patent troll.
What is a patent troll?
Trolls are entities that do not make or sell anything but exist solely so as to exploit rights in patents that they often obtain from another company. They are disliked because they control essential facilities and make demands of those who use them.
The dividing line between being a patent troll, which has an expressly negative connotation, and an entity that enforces its patents as a legitimate business model, is that trolls do not manufacture products where the patent is used. So, the patent is not related to something inside its core competency.
The IPKat notes that this can be a difficult distinction to make as it is common within certain industries for companies to hold patents that are not directly related to a product that they produce.
Also, one way in which patent trolls arguably have a socially useful function is outlined by Steven Rubin, a New York Intellectual Property lawyer. He argues that cases initiated by patent trolls are part of a business model that results in creating an environment favourable to innovation. By licensing their patents to trolls, inventors are able to enlist the help of these entities to fight the bigger players like Microsoft in order to defend their patents.
According to Rubin, “most inventors barely have enough money to file for a patent application. Even if the inventor can afford to get the patent to grant, patent litigation is exorbitantly costly, frequently requiring millions of dollars to fund. Individual inventors, and even small or medium-sized companies, cannot afford such fees without another company to finance the litigation or at least to license or buy the patent…The inventor may never realise any benefit from his toils.”
On the other hand, an example of the negative impact a patent troll can have is illustrated by the activities of Lodsys who obtained a portfolio of patents from Intellectual Ventures, and began targeting small App developers a few years ago about patent infringement.
In 2011, Electronic Frontier Foundation reported on Lodsys’s claims against App developers. Even though the developers were often using technology which Apple or Google required them to use to develop Apps on the Apple or Android platforms, small developers were being targeted by Lodsys rather than Apple or Google. The Lodsys litigation was not ultimately successful for the patent troll. Nevertheless, it had a significant impact on the industry, and caused a lot of anxiety within the developer community.
Need for reform
A related problem that creates an unsatisfactory situation is the high damages awarded in patent cases. It means that patent litigation has a dampening effect on innovation, and this has led to demands in the USA to reform the patent system.
The challenges facing innovators under the current patent regime, and the broken nature of the patent system is discussed in the “Defend Innovation” whitepaper. This advocates measures for policymakers to fix the system.
Patent trolling while it exists in Europe, is far less prevalent than in the United States, possibly because in the UK there is a real disincentive to litigation as the losing party has to pay the costs of the other side
So as The National Law Review, points out it is not necessarily that the forum is more accepting of such cases in the United States, but that there are few ramifications for patent trolls who file a lawsuit and then are not successful in litigation. The general rule in the United States is that each party pays for their own litigation costs.
Approach to patenting
All this raises the question of what people’s purpose is in filing patents. Generally, people file patents for both offensive and defensive purposes.
Patents used offensively may result in licensing revenue and, sometimes, in damages awards from litigation, such as happens for “patent trolls”.
Most patents are used defensively or for portfolio padding.
Patents used defensively are aimed at making it less attractive for a competitor to sue. For example, if you infringe a competitor’s patents and they also infringe yours, litigation may be pointless as both sides would have to spend a large amount on legal fees and would achieve only a small sum, if anything by way of monetary damages
Patent padding is used for marketing purposes so a company can claim that it is more innovative than its competitors in a given market.
Reuters reports that despite the moves to reform this area over the past year, patent litigation is on the rise, and Apple failed in its attempt to have the case dismissed earlier in the year. It did its utmost to avoid litigation altogether by arguing that the plaintiff’s inventions were both too basic to be patented and that other patents, previously filed, exist and cover the same technology.
Smartflash had originally sought $852 million. Apple conceded that the damages calculation was flawed and that at best, $4.5 million should be paid, yet the jury decided that the appropriate damages award should be $532.9 million.
We often hear about the importance of patent protection for innovations. Patents can be one of the most valuable type of intellectual property a business can own.
However, in practice, it is difficult to predict the value patent protection brings to a business. It can take many years to secure a patent from the research and development phase through to the grant of rights. So, there is some unpredictability before a product finally makes it to market.
However, as Apple recently demonstrated, patent protection not only helps your business to grow, but it can also impact the industry as a whole. Apple were recently awarded a patent for an action camera. When the news went public GoPro’s shares tumbled 10% due to the potential increase in competition in a field in which they were largely dominant.
Fifth Avenue Apple Store (Image courtesy of Wikimedia)
Trademarks can protect more than just a brand name or logo. Chocolate maker Cadbury successfully trademarked the shade of purple associated with the brand, while Coca-Cola famously managed to secure a trademark over its iconic Coke bottle. But, in typical ‘think different’ fashion, Apple has now gone a step further, and legitimately trademarked the physical layout of its popular retail stores.
Although not the first instance of a shop interior being granted a trademark, the news has attracted a lot of attention. The U.S Patent and Trademark Office twice rejected Apple’s efforts to trademark the store layout, before finally accepting a “distinctive design and layout” after additional documentation was submitted.
The stores are known for their sleek and uncluttered look. Apple reportedly spends an average of $10 million launching each individual store, usually located in carefully selected upmarket districts. Attention to detail is taken very seriously- the sandstone flooring is imported directly from Florence, while the late Steve Jobs even patented the minimalist glass staircases himself.
Apple’s new trademark covers the trade dress, and overall visual appearance of its stores in the United States. This encompasses elements of the store design, such as the “rectangular tables arranged in a line in the middle of the store” and “multi-tiered shelving along the rear walls”.
With so much investment to ensure the overall quality and unique identity of the Apple Stores, one can understand why Apple is so keen to prevent anyone else mimicking its stores. Competitor Microsoft recently launched its own retail store strategy, while Google has also unveiled plans to open retail stores in California. In fact, Microsoft reportedly acquired a trademark for its own stores in 2011, which covered “a retail store with four curved tabletops at the front and rear side walls and a rectangular band displaying changing video images on the walls”.
Another obvious reason behind Apple’s move is to protect itself against the cheap ‘copy-cat’ stores popping up in China. These stores are deliberately conceived to fool customers into thinking the traders are selling official Apple merchandise. Indeed, many of their customers may have never set foot in an authentic Apple store, and would be unaware they were buying false products.
But while this argument is valid, proving a passing-off claim is often much harder and more expensive without an established and watertight trademark. With an army of handsomely paid corporate lawyers, Apple is leaving nothing to chance.
Many business owners and company directors are calling for legal reform, to further assist businesses to protect their carefully nurtured brands without resorting to costly litigation. However, some fear that companies would soon monopolise combinations of fairly simple features. IPKat points out, that UK law is far stricter when granting trade dress, as the test requires a mark to be “truly distinctive”.
For the Apple Store layout to acquire a trademark or trade dress in the UK, Apple would have to demonstrate the stores were so unique and distinctive that the public would easily associate the store designs with the Apple brand. Clearly, for most businesses, attempts to secure a trade dress will not be viable. And as the law currently stands, it is difficult to protect distinctive features of a shop layout without engaging the expensive litigation route.
In the high street, distinctive stores can be beneficial. Customers are able to immediately identify store branding and associate particular shopping experiences with particular stores. Therefore, as branding becomes increasingly important, the expansion of legal protection over unique in- shop experiences is likely to be sought out. But until it becomes easier to protect others from copying the interiors of a retail business, the easiest option for most business will be to rely on printing their trademarked brand names or logos on various surfaces throughout the store to act as identifiers which are protected against copying.
Key to Apple’s surging popularity have been the ease of use of its products and software, and seamless integration between its devices and services.
Arguably unique in the personal computer industry, Apple exercises strict controls over every element of its product line. This control over both the hardware and software used in its computers, peripherals and devices has enabled the company to ensure a consistent user experience worldwide, and to avoid compatibility issues which have in the past plagued other platforms.
However, this monopoly also means less choice for consumers. Often, PC users choose to buy their own commodity hardware, put it together and install their operating system of choice. The motivations for this are varied: some users are searching for bleeding edge performance; others are looking for value; and some simply enjoy the experience of building their own PC.
In the past a number of businesses have established themselves as alternative Mac hardware vendors – typically selling cheaper PCs tailored to be compatible with Apple’s OS X. A recent example of such a business, fighting Apple in the courts for the right to do so, is Psystar.
Some would argue that Apple are shooting themselves in the foot by preventing other vendors from selling compatible packages that might increase the user base of OS X, sell more copies of the operating system and, possibly, sell more devices developed to integrate with that operating system. However, Apple differs from companies like Microsoft in that it is arguably a hardware business. Allowing hardware competitors into the marketplace to increase software sales is not good business sense for the company. Particularly as the strength of Apple’s brand depends upon its ability to exercise strict controls over the user experience – “It just works”.
So, Apple’s software licence for OS X imposes significant restrictions on licensees. A recent US ruling highlights the utility of software licences in enabling developers to control how their work is used. At issue was whether the US first sale doctrine applied such that a purchaser could sell on Apple’s software as they saw fit – think buying a car and selling it on second hand. The court found, unsurprisingly, that customers are not buying the software itself – they do not own the software after they buy a disc holding a copy of OS X, or download it – they are merely granted a licence to use it subject to a range of restrictions. The terms of the licence they are granted preclude its use on other hardware.
This is bad news for Psystar but, as Groklaw points out, good news for proponents of Open Source Software. It affirms the (albeit widely accepted) presumption that a US purchaser of open source software is not entitled by way of the first sale doctrine to resell it on their own terms and thereby circumvent an open source licence.
Last year, Google introduced its ‘Google Instant Search’, a new feature that displays suggested results as soon as you start typing your search phrase. The service also sports improved ‘predictive’ search queries – much like predictive text on mobile phones – for example when you start to type ‘Apple’ into Google, it may suggest ‘apple store’, ‘apple trailers’ and ‘apple TV’.
The aim is to save users’ time, and supply results faster than before. All well and good for consumers, but how does it affect businesses?
One impact is that it is likely to change the way people search. A key idea behind instant search is to help users formulate a better, more accurate search term for what they are looking for by giving them feedback on the fly. This affects the terms users might otherwise search for, and has implications for SEO.
Andy Beal from Marketing Pilgrim, highlighted how, with Google Instant, searchers don’t have to commit to any search query. The way people carry out research will change as there is no longer a need to follow the traditional ‘search and then refine’ process.
A likely knock on effect is that fewer people will scroll down the first page, instead focusing on the top few results, and simply refining their search as they type if what they are looking for does not rank highly.
In a blog post, optimum7.com describes it as ‘the death of the second page’ – SEO has become more important then ever. Keyword research needs to be thorough, and long tail keywords are now much more beneficial.
Reputation Damaging Predictions
Another major implication Google’s predictive search is to do with online reputation. The experience of some businesses is that bad press can lead to negative predictions when searchers type their company name into Google, potentially causing lasting damage to their reputation. There have even been instances of legal action brought against Google to remove certain suggestions.
A blog piece by Danny Sullivan in search engine land highlighted some of these. One case involved a request that the French word for scam (arnaque) not appear after the name of a long distance learning company. Google appears to have complied with this request however, as noted by Sullivan, this change was not global as both ‘arnaque paypal’ and ‘arnaque groupon’ appear as suggestions when typing ‘arnaque into Google.
I decided to carry out some searches myself to find other suggestions which might leave businesses in a bad light, and noticed that when typing in ‘Treyarch’, the name of an American video developer company, the word ‘sucks’ appears as a suggestion. I also found a complaint in Google’s help forum that Google’s predictive search was hurting a client’s reputation as the words ‘scam’ ‘fake’ and ‘forgery’ appeared after the company’s name.
Google predictive search makes it even more important to monitor online reputation. As search technology develops, and new features emerge, businesses will need to be ever more vigilant in terms of their SEO strategy to ensure they are able to manage their risk and maintain a positive online reputation.
Along with the introduction of digital music purchases, came the rise of DRM restricting how it could be used. With traditional media, music was generally freely playable and transferable, but over the past decade we have seen more and more restrictions imposed on consumers, controlling which portable device music is played on, how many computers it can be used with, and how long you have access to it. As a result of these restrictions, many people no longer feel as if they really “own” the music they purchase. Even an act as simple as buying a different MP3 player could entail having to repurchase your whole music library.
iTunes, the largest seller of digital music online, introduced FairPlay, a DRM scheme, into its delivery system at the request of record labels in their efforts to discourage piracy. This initially meant that music purchased from the store could only be played on Apple products, and only on 3 different computers. Even now, if you want to put protected music on an MP3 player that does not run Apple software, you simply can’t do so without first circumventing the protection.
My daughter told me that after losing her iPod and deciding to use her phone for music temporarily, she was very frustrated to find that half her music could not be transferred due to the DRM. This discouraged her from downloading songs through iTunes, and after discovering that Amazon provide DRM-free music, often for a cheaper price, she stopped purchasing music from iTunes altogether.
Undoubtedly, the restrictions put in place by DRM can leave buyers who have paid good money for their music feeling bitter as a result of being limited to only using their music in a certain way.
Amazon in 2007 started selling DRM-free downloads of music, partly to compete with the iTunes service. Amazon convinced big music labels such as Sony BMG and Warner to allow their music to be sold without protection in an effort to combat Apple’s near-monopoly over the market, which some argued was stifling competition and leading to less choice for consumers.
DRM-free tracks, while unrestricted in their use, generally include watermarks identifying the buyer. This allows tracing of the source of music shared illegally over peer-to-peer networks or similar. This way customers are not limited in the use of their music, while at the same time offering some degree of accountability to satisfy publishers.
Apple followed suit and dispensed with DRM protected music with the iTunes Plus service, but at a cost. To upgrade your music library to DRM-free music means 20p per song, and requires that you convert all of your music, or none of it.
Arguably, DRM served mostly to frustrate customers, leaving them feeling cheated. And while for now it appears that DRM has failed, in the case of the music industry, that is not to say that it will not resurface in future as the battle between the recording industry and piracy rages on. Even now FairPlay is used to protect iPhone applications, and electronic books, and only time will tell if a consumer backlash will lead to the restrictions placed on other types of media being lifted.