The Collision of the Internet and Trademark Law

A version of this article was published in The Maryland Bar Bulletin, March 2008 issue.

Through the Internet, a local business enjoys world-wide presence.  Technolocal!  Trademark rights extend only to where a company conducts its business.  Logical.  A company using its trademark on the Internet may be surprised that it is unable to stop a distant user from adopting a similar name. Illogical?

The Internet has bollixed up trademark law.  As communication shrinks the world, some of the more rigid rules of trademark law have had to accommodate this globalization.  Mail order catalogs, phone solicitations and television network advertising all broadened a company’s territorial scope.  As the newest form of globalization, the Internet more frequently and more severely creates challenges to trademark laws’ notion of territoriality.

Two leading cases structure a Maryland analysis about trademark use by a would-be infringer in a distant territory.  And where else but trademark law are you going to find cases referred to as “Dawn Donut” and “What-A-Burger?”   Dawn Donut Co. v. Hart’s Food Stores, Inc, 267 F.2d 358 (2nd  Cir. 1959)  initially developed the prevailing view and is the namesake of the current analysis, while What-A-Burger of Virginia, Inc. v. Whataburger, Inc. of Corpus Christi, Texas, 357 F.3d 441 (4th Cir 2004) solidifies the rule for the Fourth Circuit.

Generally, a company only can establish protectable trademark rights in a territory when the company has customers in that territory or has shipped goods into that territory.  Merely having a webpage accessible on all computers throughout the United States is insufficient to establish trademark rights in all areas of the country.  If a company provides services only to people living in the Mid-Atlantic area, then it cannot stop someone from using the same name on the West Coast even if the company’s use and Internet presence predates the West Coast use.  If the company actually provides services out west, then that provision of services creates its “date of first use” to be measured against a newcomer.  The same analysis is used for goods, and depends on when the company shipped goods into the region in dispute.

Federal registration helps the registrant, but does not afford the expansive or immediate rights in this situation as one may expect.  It is true that federal registration provides nationwide protection for trademarks.  But be clear that that protection is only potential, and not necessarily immediate, against a subsequent user.  The Dawn Donut theory dictates that a federal registrant has power to stop a later infringing user only if the parties are operating in the same territory. 

The greatest benefit to registration is that the registrant can have trademark priority in areas where the registrant did not initially begin operations.  Registration allows migration.  The twist, however, is that the registrant can only stop the use in a territory where the registrant is actually using the mark.  It is an easy solution when the newcomer enters the registrant’s territory: the registrant wins and can stop the infringement.  The registrant, however, cannot reach out to a territory in which the registrant is not operating and stop an infringing use.  Only when the registrant is actually using the mark in the distant territory can the registrant stop the infringing use.

This is where the Internet comes into play.  The question becomes whether Internet presence is significant enough to be construed as a use, as opposed to mere advertising.  A number of factors could show that an entity is actually using the mark through its Internet page, including the volume of sales in the area, growth trends, distribution to locations in the area and specific targeting of sales efforts to customers in the territory.  The more a web page is used to facilitate specific sales activities, the more likely it creates a presence in a territory for the purposes of a trademark analysis and the more likely a registrant can stop the distant infringing distant.

  The Internet also raises the question of whether a distant infringer’s Internet webpage, which advertises its goods or services provided far away, is in the local territory so as to allow the local user to stop that page and solicitation altogether.  The same factors are relevant here.  If a website of another is merely an advertisement for services unattainable (or hard to attain) in the region, then the proprietor of the website might not be using the mark in the region, and no infringement exists.

Although the Internet provides many benefits, promoting a clear analysis in trademark infringement cases is not among them. Technological, logical or illogical?