Compliance on the Web: Are Device Makers Vulnerable?

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

INTO THE INTERNET
Originally Published June 2000

Suzan Onel and Joanne M. Kelly

With the increasing popularity of the Internet and the visibility generated by well-designed, user-friendly home pages on the World Wide Web (commonly known as Web sites), companies in all industries are finding that their Internet presence is becoming an important part of their business development and marketing strategy. These Web sites enable companies to reach customers more easily and less expensively than most traditional marketing methods do. To be most effective as a business tool, a Web site must be carefully reviewed and monitored on a regular basis—particularly if the site is interactive—to minimize potential legal liability. One area of particular concern for Web site owners is copyright and trademark compliance, including trademark implications of Internet domain names.

A periodic Web site audit for copyright and trademark issues can help alleviate potential problems. Effective audits focus on the following three areas: ownership, use, and federal registration. The ownership aspect of the audit focuses on the company's use of others' materials on its Web site, and whether the use is authorized and appropriately referenced. The use aspect of the audit focuses on whether others are using the company's intellectual property inappropriately, and what the company can do to reduce this risk. The third and final aspect of the audit is a determination of whether federal registration of the intellectual property (e.g., the Web site content, design, logos, product name) would be beneficial. Before describing these aspects of a Web site audit, a brief review of U.S. copyright and trademark law may be helpful.

INTELLECTUAL PROPERTY BASICS

A copyright refers to the protection that automatically attaches to any original work of authorship (excluding a government publication) that is fixed in a tangible form. These forms can include literary, musical, scientific, and artistic works, as well as computer programs and Web sites (17 U.S.C. § 102 [1994]). Examples of copyrighted material include books, manuals, musical scores, and paintings. The benefit of a copyright is that it protects the work from unauthorized copying by others. The author must grant permission before anyone else may legally use the original work in a separate publication or Web site. Copyright protection extends for the life of the author plus 70 years or, in the case of a work made for hire (where the author is an organization), the shorter of 95 years from publication or 120 years from the creation of the work (17 U.S.C. § 302 [1994], as amended by the Sonny Bono Copyright Term Extension Act, Public Law 105-298, 112 Statute 2827 [1998]). A copyright cannot be renewed.

No filing is necessary for copyright protection; it is automatic. Federal registration, however, provides additional advantages in the United States, such as the ability to claim statutory damages and to recover attorneys' fees (17 U.S.C. §§ 504, 505 [1994]). Registration of a copyright is also a mandatory prerequisite to bringing an infringement suit in a federal court, and to obtaining certain remedies (17 U.S.C. §§ 411, 412 [1994]).

A trademark is a word, phrase, symbol, or design—or a combination of these—that distinguishes the goods and services of the trademark owner from those of others. Examples include Dr. Scholl's^® and Johnson & Johnson REACH^®. In the United States, trademark rights are developed through use of a trademark and not through registration. Consequently, the first user of a mark is protected against others' unauthorized use of confusingly similar marks. Trademark rights may be further protected by federal or state registration of a mark. A federal registration confers certain benefits on the registrant. Among these benefits are a court's presumption of validity of the mark, the availability of treble damages and attorneys' fees in certain cases, and evidence of use in domain name disputes (15 U.S.C. §§ 1115, 1117 [1994]). A federal trademark registration is valid for 10 years from the date it was issued and can be renewed indefinitely as long as the trademark owner continues to use the mark (15 U.S.C. §§ 1058, 1059 [1994]).

CONDUCTING THE WEB SITE AUDIT

Copyrighted and trademarked material is widely available on the Internet—often with little or no indication of ownership. Unauthorized use of this material by copying, downloading, or linking, however, can result in significant legal consequences.

Ownership of Copyrighted Works. Copyrighted works are among the most accessible materials on the World Wide Web. For example, a defibrillator manufacturer can easily post on its Web site an article, abstract, or editorial on emergency medicine that speaks well of the manufacturer and its product. If the written work is protected by a copyright, however, such action could constitute copyright infringement. Because much of the material on the Internet is protected by copyright, it is relatively easy to run afoul of the law. This situation is further exacerbated because, as of March 1, 1989, U.S. law no longer requires a copyright notice (e.g., ©1999 XYZ Co.) to appear on a work. As a result, an Internet user may be unaware that a given article, drawing, photograph, or musical recording is not available for general copying and use.

The consequences of unauthorized copying are quite substantial—civil penalties can include fines from $500 to $20,000 per copyright violation, and criminal penalties can entail a fine of up to $25,000 or 1 year in prison for a first offense (17 U.S.C. §§ 504(c), 506(a) [1994]; 18 U.S.C. § 2319 [1994]). Moreover, copyright infringement is a strict liability offense; lack of intent to violate another's copyright is not a defense.

Congress enacted the Digital Millennium Copyright Act in 1998. This act extended certain areas of protection for Internet service providers and users against copyright infringement caused by third parties (Public Law No. 105-304, 112 Statute 2860). Among other things, this statute provides that a service provider, such as America Online, shall not be held liable for copyright infringement in situations where a third party (someone posting a message on a bulletin board or in a chat room, for example) places copyrighted material on the provider's site if the provider takes certain steps to monitor the site and to remove infringing material (17 U.S.C. § 512 [1994]). Nevertheless, the reach of this legislation is limited in that the act is not clear whether it also protects Web site owners. It also does not address infringement by the Web site owner itself or its employees.

Despite the broad protection granted to the copyright owner, there are several ways to incorporate a work into a Web site without violating the author's copyright. First, a company may obtain the permission of the copyright owner to reprint the work on its Web site. Many copyright owners will permit this as long as proper attribution is provided (e.g., "Reprinted with permission. ©1999 New England Journal of Medicine") and an agreed-upon royalty is paid.

Second, a company may reproduce a portion of the copyrighted work on its Web site if the reproduction constitutes "fair use." The fair use principle allows a user to copy a small portion of a copyrighted work without the permission of the copyright owner for purposes such as criticism, comment, news reporting, teaching, scholarship, or research (17 U.S.C. § 107 [1994]). A court will consider four factors in determining whether alleged copyright infringement is in fact fair use of the material:

There are no reported cases to date concerning the fair use defense in a commercial Web site context. Given the factors identified previously, however, it is likely that use of more than a brief quote or two from a copyrighted work on a commercial Web site would not meet the fair use standard.

Another method for incorporating copyrighted material into a Web site while avoiding an infringement claim is to gain the owner's permission to provide a link to the material of interest. Such links have become common and have given rise to the use of Web linking agreements. Such agreements may be as short as a page, and typically state that the copyright owner gives permission for a link to be established between its Web site and that of another. Although it may seem overly cautious to ask permission to send readers from one Web site to another, some companies have strict policies regarding control over user access to their Web sites. For example, Ticketmaster brought a lawsuit against Microsoft when Microsoft provided a direct link to the Ticketmaster site without Ticketmaster's permission. The case settled out of court (Ticketmaster Corp. v. Microsoft Corp.).

A related pitfall is the use of electronic frames that allow a user to visit another site without actually leaving the original Web site. When a Web site makes use of frames to display material from another site, the frames may conceal the origin of the second site's material—either inadvertently or deliberately. This can create the impression that the framing site is the owner of the copyright for the framed material. An organization known as TotalNews attempted to circumvent the issue of copyright infringement by using frames to "import" the Web sites of other news organizations to its site (The Washington Post Co. v. Total News Inc.). Several news organizations, including the Washington Post, objected to the manner in which TotalNews ran its Web site. This case also settled out of court. It may be wise to obtain written permission from the organization that owns the site to which a link is to be provided (in any form) in order to avoid misunderstandings.

Ownership of Trademarks. The issue of trademark ownership is important for the same reasons that copyright ownership is important. That is, there is a possibility of significant civil or criminal penalties for inappropriate use. Therefore, a company must be careful before it links its Web site to another site by means of an icon based on a logo (the familiar blue and white IBM logo, for example). If the logo is being used as a trademark and the mark is not appropriately attributed to its owner, the company may be vulnerable to an action for trademark infringement, unfair competition, or dilution. As with copyright-protected material, Web links provide one of the more common ways in which a trademark can be used, or misused, on a Web site.

There are other ways a company may unintentionally find itself violating trademark law. A Web site may use names, slogans, or designs that have been copied from other sources. Their use may constitute trademark infringement, even if those items have been changed somewhat for use on the Web site. For example, use of the term Thermomoscan for a thermometer would likely be challenged by the maker of Thermoscan^®. For these reasons, a company developing a trademark to be used in conjunction with a product or service it provides should determine whether the mark is currently being used by someone else for a similar type of good or service before investing substantial capital in the trademark.

Meta tags represent another use of trademarks in Web sites and should be reviewed. A meta tag is a keyword embedded within the Web site that a search engine will find when directed to search for that word, whether or not the word actually appears in the visible text of the Web site. Meta tags may also be used within a site to generate user-specific advertising. For example, a hemodialysis manufacturer may decide to use its product name, a generic term, and the name of a competitor as meta tags. This would direct a search engine to bring up the manufacturer's Web site, or a banner advertisement for the company, each time one of these terms is searched.

In certain circumstances, the use of a competitor's product name in a meta tag could also be viewed as trademark infringement. For example, the search engine Excite Inc. has been sued by both Estee Lauder Inc. and Playboy Enterprises Inc. for selling those companies' trademarks to other organizations to generate banner ads. Estee Lauder brought its suit against Excite for selling the mark Estee Lauder^® to The Fragrance Counter Inc., a competitor, as a meta tag keyword. When a user searched for "Estee Lauder," a banner ad for The Fragrance Counter appeared (Estee Lauder Inc. v. The Fragrance Counter). Similarly, Playboy Enterprises sued Excite and Netscape Communications Corp., another search engine provider, for selling Playboy^® and Playmate^® as meta tags for adult Web sites (Playboy Enterprises Inc. v. Excite Inc.). The court in the Playboy case refused to grant a preliminary injunction against the search engine's use of the terms "playboy" and "playmate." The court held that the terms were not used as trademarks and that there was no likelihood of confusion by users (55F. Supp. 2d at 1082–1083).

Trademark infringement, like copyright infringement, is a strict liability offense. This means that a lack of intent to infringe is not a defense. Unlike copyright infringement, however, mere use of a trademark does not necessarily constitute infringement. In order to infringe a trademark, the allegedly infringing use must cause either:

In terms of penalties, the trademark owner may obtain an injunction against use of the infringing mark and, if the owner is able to prove knowing and willful infringement, may be able to obtain treble damages and attorneys' fees.

Ownership of Domain Names. One aspect of trademark use and potential infringement that is unique to the Internet is the use of domain names. Registration of a domain name as a trademark may be available if it identifies and distinguishes the owner's goods and services—as long as the owner does not use the domain name merely as an Internet address.

A domain name is the designation given to an "address" on the Internet. Domain names are chosen by their owners and are registered for use on the Internet with an independent, private organization. Until recently, Network Solutions Inc., also known as InterNIC, had a virtual monopoly on domain name registrations.

Typically, selected domain names are closely tied to the company or organization name and/or a popular commodity. For example, Baxter Healthcare Corp. owns the domain name www.baxter.com, and Tambrands Inc., which is the manufacturer of Tampax^®-brand tampons, owns the domain name www.tampax.com. The domain name registrar does not evaluate the propriety of the domain name registration applications. Registrations are simply issued on a first-come, first-served basis. As a result, there have been cases where companies have lost the right to use their own company's trademarks as domain names, at least temporarily, because another, unrelated, individual or company registered the trademarks as domain names first. When this practice is carried out specifically to force some form of financial remuneration, it is known as cybersquatting.

To reduce the risk of cybersquatting, it is important to evaluate company trademarks and domain name choices carefully and move quickly to register the names of choice—protecting the association of the marks with the company. The Internet Corporation for Assigned Names and Numbers (ICANN) Uniform Domain Name Dispute Resolution Policy (ICANN Policy) was adopted August 26, 1999. The text of the policy is available at http://www.icann.org/udrp/udrp-policy-24oct99.htm. A separate document containing the policy's rules is available at http://www.icann.org/udrp/udrp-rules-24oct99.htm.

Under the ICANN policy, any party with rights to a trademark may submit a complaint to an approved domain name dispute resolution provider to attempt to have an infringing domain name canceled or transferred to the complaining party. Although federal, state, or foreign registration of a trademark is no longer required to resolve a domain name dispute, such registration continues to provide the best evidence of prior right to a name. No action will be taken by a domain name registrar to change or deactivate a domain name without the instruction of the domain name holder or the order of a court or arbitral tribunal, or the decision of a dispute resolution provider pursuant to the ICANN policy. Administrative proceedings under the ICANN policy do not preclude litigation. Therefore, it is important to consider carefully the registration of a company's trademarks or product names, as well as commonly used variants, as domain names in order to preclude the registration of these names by others. In addition, any domain names registered by the company should be reviewed to ensure that they do not infringe another's trademarks.

Two federal statutes protect trademark owners against cybersquatters. The most recent is the Anticybersquatting Consumer Protection Act (ACPA). The ACPA imposes civil liability and, in some cases, statutory damages against those who, with a "bad faith intent to profit," register, traffic in, or use any domain name that is identical or confusingly similar to a distinctive or famous trademark owned by another person (Public Law No. 106-113 § 3002, 113 Statute 1501 [November 29, 1999], codified at 15 U.S.C. § 1125(d)). The second statute, the Trademark Dilution Act of 1996, provides an additional means of protection for the owner of a "famous" trademark (15 U.S.C. §§ 1125(c), 1127 [1994]). Under this statute, the owner of a famous mark would be able to bring suit against a domain name registrant for dilution of the owner's mark, whether or not the domain name registrant uses the domain name in connection with goods or services similar to the trademark owner's. For example, the domain name bausch.com could be registered (if it were not already registered) and used to set up a Web site for genealogy studies of families with the name Bausch. Under the Trademark Dilution Act, because the trademark Bausch & Lomb^® is unquestionably famous, the domain name registrant's use of the mark may constitute infringement even though the mark was not being used for anything remotely related to optical products and services. To determine whether a mark is famous, courts look at a variety of factors, including the length of time the mark has been in use, the geographical extent of the mark's use, and the duration and extent of advertising and promotion of the mark (15 U.S.C. § 1125(c)(1) [1994]).

There have been several reported cases involving application of the Trademark Dilution Act to actions by cybersquatters, as well as two recent cases applying both the Trademark Dilution Act and the ACPA. Before enactment of the ACPA, at least two courts held that a cybersquatter's registration of domain names without the trademark owners' permission constituted trademark infringement and dilution under federal law (Panavision International LP v. Toeppen, and Intermatic Inc. v. Toeppen). More recently, courts applying the ACPA to situations involving alleged cybersquatting have differed in their analysis of whether the marks at issue were protected by that statute. In Sporty's Farm LLC v. Sportsman's Market Inc., the U.S. District Court for the Southern District of New York held that the mark Sporty's^®, owned by Sportsman's Market, was inherently distinctive and thus entitled to protection (202 F.3d 489, 497 [2d Cir. Feb. 2, 2000]). The court further held that the domain name holder acted with the "bad faith intent to profit" required by the ACPA (202 F.3d 498–499 [2d Cir. Feb. 2, 2000]).

In contrast, in Cello Holdings LLC v. Lawrence-Dahl Companies, the district court held that the mark "Cello" was neither famous nor distinctive and therefore not entitled to protection under either the ACPA or the Trademark Dilution Act (No. 97-7677, 2000 U.S. Dist. LEXIS 3936 at *20–*23 [S.D.N.Y. Mar. 29, 2000]).

These cases demonstrate that courts are willing to find cybersquatters to be trademark infringers; however, trademark owners still face the prospect of protracted litigation to enforce their rights. For this reason, a company contemplating the development of a new trademark should consider the trademark aspects of Internet domain names in addition to more-Traditional trademark concerns when deciding to use a particular mark.

USE OF INTELLECTUAL PROPERTY BY OTHERS

In addition to assessing ownership of the material to be used on a company's Web site, it is equally important to ensure that others are not inappropriately using the company's intellectual property. Two methods for reducing the potential misuse of a company's intellectual property include regularly monitoring the Internet for unauthorized use, and including notices indicating ownership of the pertinent material.

"Surfing" the Web. Because it is so easy for material to be copied from one site to another, an effective way to reduce the risk of unauthorized use of a company's intellectual property is to monitor or "surf" the Internet on a regular basis for potential infringers. Alternatively, a service can be hired to monitor the Internet for a company on a routine basis—this option is more commonly available for trademarks than for copyrighted material.

Once a potential infringer has been identified, it is important to follow up with some form of communication asserting the company's ownership interest in the material in question. Depending upon the response or the significance of the violation, it may be appropriate to follow this communication with a cease-and-desist letter or a legal complaint.

Notice of Ownership. Potential misuse of intellectual property can also be reduced by placing notices on all material to which a company claims an ownership interest. For example, all written material not intended for general copying or downloading without the company's permission should bear a copyright notice, such as ©1999 XYZ Co. Similarly, all trademarks should include the proper symbol: ^™ for unregistered marks or ^® for federally registered marks.

In addition to these short but conspicuous notices, a longer notice can be provided, either on each page, or via a link, to explain more fully the company's policies regarding copying and distribution of the material on its Web site. It is also prudent to include in the longer notice a blanket statement attributing use of others' materials to the legitimate owners.

Enforcement of Trademark Rights against Cybersquatters. Unlike traditional brick-And-mortar businesses where customers can see or talk to a live person, the inherent risk with the Internet is that customers cannot always be sure of the identity and legitimacy of the person with whom business is being conducted. Therefore, from a legal and commercial perspective, it is critical to aggressively enforce anticybersquatting measures where legitimate trademarks are being infringed or diluted—typically to the detriment of the business and its customers who are being deceived.

By providing proper notices and actively monitoring the Internet for unauthorized use of intellectual property, a company can reduce the risk of competitive injury. It can also reduce the risk that a copyrighted work will fall into the public domain or that a trademark will become generic and, therefore, will no longer be reserved for the company's exclusive use. These are prudent and effective ways to protect intellectual property rights and interests.

FEDERAL REGISTRATION OF INTELLECTUAL PROPERTY

The final item in an intellectual property audit of a Web site is to determine whether to obtain federal registration for any or all of the material incorporated in the site. Federal registration is available for copyrighted works, including the Web site itself, and for trademarks. Copyrights are registered with the Copyright Office of the Library of Congress; trademarks are registered with the U.S. Patent and Trademark Office. Items such as Web links cannot be registered individually, but the selection and arrangement of links, including a separate page of links arranged in a creative way, may be copyrightable.

As mentioned above, neither copyrights nor trademarks need to be registered for legal rights in the material to exist in the United States. Federal registration, however, provides significant procedural advantages to owners of both kinds of intellectual property. It also offers the potential for larger damages and punitive awards. Additionally, for copyright owners, registration is a prerequisite to filing an infringement case in federal instead of state court. For trademark owners, federal registration may also provide advantages in the context of domain name disputes.

CONCLUSION

To benefit fully from the increased visibility a Web site provides, a company must keep in mind issues of copyright and trademark compliance—particularly because misuse could have significant consequences. A good Web site audit focuses on three areas:

If a company regularly reviews its Web site content to ensure that all material has been properly obtained and referenced, it will be better positioned to avoid unnecessary challenges to the site and potential infringement litigation. This strategy should also include, where needed, obtaining permission to use material that was not created by the company. It should also entail using Web links cautiously to avoid inadvertent infringement.

In addition to avoiding unauthorized use of others' material, a company should also monitor the Internet and provide appropriate notices of ownership to protect its intellectual property rights. This activity should include monitoring the unauthorized use of the company's trademarks as Internet domain names.

Finally, by considering federal registration of copyrights and trademarks, including the registration of any related domain names, the company can strengthen its intellectual property rights. Federal registration provides both procedural and substantive advantages to owners of intellectual property.

A company's intellectual property can be one of its most valuable assets and the Internet can enhance its value. This new medium, however, requires awareness of its inherent risks and protective actions to minimize those risks.

Suzan Onel is a senior associate at McKenna & Cuneo LLP, specializing in legal and regulatory issues involving medical devices, food, and dietary supplements, as well as general and Internet-related trademark and copyright issues. Joanne M. Kelly is an associate at McKenna & Cuneo LLP. Kelly's practice includes counseling clients on intellectual property and Internet issues. This article was adapted from a speech given by Onel on the legal issues involved in marketing on the Internet.

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