Ajankohtaista IPR-alalta

Recognizing IPR related problems arising from the development of the Internet

31.03.2010

The article was originally published in Managing Business Risk, 7th edition (2010), by KoganPage. Text: Ari-Pekka Launne, IP Lawyer, Kolster Oy Ab.

The scene

For any company, no matter whatever its line of business, the new virtual environment creates at least one question: to be or not to be in it. Those who can frankly say that they do not need the Internet at all grow smaller in number all the time. Even if some pilot projects have not succeeded, different kinds of business have at least moved themselves partly on to the web. And it is a fact that already today some businesses exist only on the web. For traditionally thinking IPR society this creates a huge challenge. For the more open-minded the situation is an Eldorado with plenty of opportunities and possibilities.

The first and most fundamental change derives from the fact that traditionally the protection of IPR is territorial while the Internet, in principle, does not recognize national borderlines. The Internet is a technically constructed complex based on agreements governing the system and outlining the technicalities. From a very much simplified point of view, it is only a means of delivering data from one place to another. As such, it ignores, for example, the legislation and international agreements on the IPR. This may well be the actual source of all the problems arising from the data itself.

Secondly, it is necessary to understand that there are several different sectors in which IPR plays a role and risks may exist for businesses. Since the web and practices there are evolving all the time, listing all of them may be impossible. Some may also disappear over time. But in any case, the following deserve to be identified:

• technical issues, including patents, licenses to use equipment and programs needed;
• issues related directly to the Internet as an environment, such as domain name registration, parking, tasting, phishing and slamming;
• use of trademarks in the Internet;
• copyright issues when producing and distributing material on the Internet;
• business related issues, such as relations to the business partners and competitors, business practices and fair competition;
• criminal offences on the Internet, such as sales of counterfeit goods, copyright infringements or frauds.

In some cases obviously, these issues may overlap each other, which only makes this all even more complicated. In the following sections of this chapter, attention is given mainly to trademark and domain name related issues, omitting copyright, patents and designs.

It is worthwhile understanding that one may find oneself as a victim of infringement or conversely, much to one’s own surprise, infringing somebody else’s rights. To avoid being the subject of blame, accepted practices need to be studied and used, and those that are unaccepted need to be understood and avoided.

Domain name related risks

A domain name is an identification label to define a realm of administrative autonomy, authority, or control on the Internet. It is based on the Domain Name System, and always relates to a certain IP address. At the moment these are not considered to be part of IPR but the attitude is certainly moving towards incluision. The needs of brand owners to both promote and protect their brands results in domain names becoming closer to trademarks, although the actual purpose of the two is completely different.

When registering domain names companies once again face the need to reconsider their IPR strategy and to budget the funds for creating and maintaining their domain names portfolio. Depending on the actual needs for the use of the domain names as well as on the needs to prevent others from registering and using certain domain names, the portfolio can in practice comprise of anything from small (from one to several) to large (from several hundreds to thousands of domain names). In both cases there are advantages and disadvantages. But no matter how large the portfolio may be, some of the problems arising from the simple fact that one cannot own them all, will always remain. For example, there are so many different extensions on which to register, and there are different ways of misspelling the domain. Lots of money can be wasted if a clear policy for the choosing of the domain names is not drafted.

Controlling the domain names portfolio and having them renewed in due time is also a task that should be considered carefully. If the company has several hundreds of domain names registered in different extensions and using different service providers for each of these, the mere payment of the invoices from these will be a burdensome job. There are risks relating to domain names that are not renewed in time or that are dropped. Such domain names may end up in the hands of a competitor or third party trying to benefit from the earlier use of the domain name.

It should also be mentioned that in the case where a local presence for a certain extension is required, the company may need the aid of a partner to provide it – again, a situation in which risks may arise. For example, letting the agent or licensee to register the domain name in their own name is one of them. In the event of changes in the business relationship, transfer of the domain name may prove to be extremely difficult. It is advisable to for a partner who can assist in these tasks covering as many extensions at once as possible.

One may ask what are the risks related to NOT registering the domain names available. In short, these can be divided into two: first, cyber squatters registering the domain names and making money by using them and secondly, some other business registering them for its own use. The difference between these two may seem unsubstantial, but in reality there is usually a legitimate interest in the latter. In other words, the cyber squatter makes or tries to make money on the domain name itself, while in the latter case the holder of the domain name runs a legitimate business and makes use of the domain name without infringing the IPR of others. Depending on the nature of their business or of the location, target group and other details, this may or may not affect the fame or reputation of the company using similar domain names.

Why then would the cyber squatter choose a domain name that has some potential fame already in the beginning, as it is somebody’s trademark? The answer is simple; just because of its fame. It relates to the way of valuing the domain names based on the traffic they are able to generate through their use. In the first instance the domain name is free and it can be obtained for a minor amount of money. Since the dominant word in it is a known mark or at least resembles one, it attracts users of the web and starts to generate traffic. This happens when the word is searched in a search engine, when the domain name is used in the address field of the browser or finally, when it is set to point to a pay-per-click web site. As the value of the domain name increases with time, the domain name can then be sold on to a further owner who in turn may try to profit from it, usually in the same way. If they get lucky, the owner of the trade mark may want to purchase the domain name from them instead of going through the dispute resolution process to recover the domain.

Some criminal offences make use of domain names as people sometimes don’t pay enough attention to the actual domain name used by a certain company. Phishing, in other words collecting personal information including user names and passwords of individuals, is a perfect example of this in practice. Misspelling the name of a bank in the e-mail address can go undetected and can lead to loss of money from the account. Surprisingly, a number of people fall to the traps of these criminals, even though the banks expend much effort in warning campaigns. One must emphasize that what is at stake here is the reputation and good will of the banking brands as well as the savings of their clients.

A clear and effective policy in domain name registrations also helps in cases of ‘slamming’. Such a practice has become more usual, and seems to target mainly as victims people unaware of the registration processes of domain names. In this activity a service provider informs a potential customer about an application for registration of (usually several) domain names that resemble the trademark or trade name of the company. A short period of time is allowed to answer the message and registration can then be made in the company’s name. A fee for the expedited process may be collected. The customer can never be sure if the attempt to have the domain name registered by a third party is real, or if the alleged third party even exists. While this activity might not be regarded as completely illegal, it appears to fall into the category of improper business actions.

Hiding behind aliases and anonymity are features of the web that can make it almost impossible to indentify the opposite side. In fact, the Internet society seems to value anonymity so much that it attracts criminals more than in any other field at the moment. In principle the balance of rights and responsibilities is still present, but real life examples show that bringing the infringers to justice may be a task that is deemed to fail. Cases in which the infringer is caught and condemned do exist, usually stimulating the next generation of infringers to develop their schemes further.

These are some the current issues that are present in the Internet and need to be considered by companies when entering the wonderland of the web. There are remedies to battle the problems, but the most important tool appears to be good planning of the strategies and tactics to be used. As always, well begun is half done.

Use of trademarks in the Internet

When discussing the use of trade marks on the Internet the problems and risks seem to relate to the nature of the web as a media and to the relations between the domain names and trademarks. As mentioned above, the Internet recognizes no border lines while traditional registrations of trademarks are done on regional bases. Competition is more global and all the competitors may well have rights to their mark, confusingly similar to each other but protected on different countries or regions. This results in uncertainty in many respects.

The Internet is full of information, which of course can be true or false. One faces this fact when trying to gain information on whether the trademark is actually in use or not, and if so, for which goods or services. While legitimate businesses make use of the possibilities to promote their goods and services in the traditional way by advertizing, offering and selling them, for example through newspapers or other media, some other players may misuse the good faith of the public and competitors for their own benefit. In some cases, it may simply be the intention of a company to benefit from the advertisement of others and to avoid costs relating to the need to be noticed.

A trademark can be used (and misused) on the Internet in many ways. Risks relate not only to old fashioned trademark infringement, but also to the new ways of infringing. In some cases, the new inventive way of exploiting the possibilities of the Internet may actually result in the appearance of a completely new category of infringing actions.

One such elatively new phenomenon is the usof trademarks, or words that may be the trademark of others, as keywords in search engines. On the web, all companies want to be seen and found by their potential customers. They may also want to widen the range of their customers to new areas. Knowing that the people in their target group would usually type a certain word or mark in the search engine, companies bid for the right for their ads to be displayed when such search terms are entered. This is a fast growing business and is likely to continue growing in the future. The problematic question to answer is when does this practice infringe trademark rights, or does it infringe them at all? After all, many of the trademarks are simply words that are descriptive and in everyday use, although they have been registered as trademarks for certain goods or services, for which they have a distinctive character. This question needs to be answered case by case.

An important feature of the web is that the majority of users are not in the business at all, but rather customers or clients of the companies offering their products on the web. On the other hand, most of the IPR is intended for use in business activity, and has no legal effect when its use is private. Little can be done if an individual makes use of a trademark in a distant country, when no business at all is conducted in connection to this usage. While it was stated above that one cannot own everything, it must now be said that one cannot supervise all possible websites and that one needs not to react to everything. Companies should clarify for themselves where the thin line exists.

Conclusions

The Internet has created a field of possibilities and an endless flow of attractive new propositions, but at the same time it is a source of new disputes and challenging new practices. To be successful in this new era of brands and globalization much planning is needed and decisions need to be based on exact information. The key to success lies in a well planned strategy, in the ability to keep to that strategy and, most importantly, in constantly trying to avoid as much as possible of the problems in advance before they appear. When this is not entirely possible, prompt actions are needed in order to limit the consequences to the minimum. In such cases and from time to time, former decisions may need to be reconsidered and amended. But one thing is for sure: these matters are here to stay, and the new will continue to evolve as the world, the Internet and global business life improve.