At a time when the health of the U.S. economy and creating and maintaining U.S. manufacturing jobs are top of mind, the “Made in the USA” claim on products resonates among consumers. The claim communicates the entrepreneur’s efforts to create or preserve American jobs. While the value of an origin claim from the U.S. is clear, a product must first clear the legal hurdles to use the coveted “Made in the USA” label. This article addresses the standards for claiming a product as “Made in the USA” under Federal and California law.

Federal Law

The Federal Trade Commission (FTC)  is the agency responsible for policing origin claims in the marketplace.  FTC standards are therefore the primary determinant as to whether or not a claim of US origin has been properly made. The FTC’s regulations distinguish claims of US origin into two categories: unqualified claims and qualified claims, both of which are subject to different requirements.

Unqualified Claims

A product claiming its origin is the US without qualification, such as in the basic “Made in the USA” label, is considered an unqualified claim. Non-explicit, implied claims of US origin like a US flag or map may also be considered an unqualified claim of US origin. Because there is no qualification to the origin claim, consumers assume such a product is made entirely, or nearly entirely, within the United States. The FTC incorporates this consumer assumption into their test for unqualified claims. The agency requires an unqualified claim of US origin to be substantiated with evidence that the product is entirely or virtually entirely made within the US.  The standard is somewhat vague, but there are two requirements that are considered in determining whether an unqualified claim is lawful:

The first requirement is a clear standard.  The second requirement needs some explanation. With regard to factor (i), there is no set percentage threshold of a product’s total manufacturing cost that must be attributable to US parts and processing.  Instead, determinations are made on a case-by-case basis and involve a consideration of foreign versus domestic costs, the nature of the product, and consumer’s expectations. With regard to factor (ii), the earlier in the production process that foreign content is included, the less significant that content is considered to be to consumers. For example, the origin of raw materials in electronics, such as rubber wire coating made from petroleum extracted in Africa, is likely not meaningfully proximal to the final assembled product and may therefore be of little to no importance to the unqualified claim.  When evaluating an origin claim, each factor and relevant circumstance must be carefully taken into consideration to determine whether the product can be labeled “made in the USA” without qualification.

Qualified Claims

A product that does not meet the “all or virtually all” standard must qualify its claim of US origin. These claims are subject to less stringent requirements than those applied to unqualified claims. A qualified origin claim must disclose the extent, amount, or type of constituents in the product that were domestically made in a prominent and clear manner – e.g., “Sheets manufactured in the USA from Indian cotton”.  An accurate description of US and foreign components comprising the product will generally allow for a qualified US origin claim to pass muster.  The language used in the qualified origin claim must be sufficiently accurate to avoid a likelihood to deceive consumers.  Products that are only partly assembled in the USA cannot include a general phrase that suggests that the entire product was “assembled in the USA”.  The unqualified claim must be more specific.  For example, if a computer is assembled in the US from components that were made and assembled overseas (e.g., a hard drive made and assembled in China), the qualified claim should be something like “final assembly in USA”.

While the requirements set forth by the FTC are reasonably comprehensible, they are not the only regulations that must be considered. State laws, while often mirroring the FTC rules, provide further requirements for US origin claims to be used within each state.  This article addresses California as an example.

California Law

The purveyor of products in California with a claim to hail from the US must satisfy both California law and FTC regulations.  In contrast to the FTC, California law takes a singular approach to regulating claims of US origin.  The California standard makes no distinction between qualified and unqualified origin claims.

The governing California statute, Business & Professions Code section 17533.7, applies to products sold in California.  The statute permits a product to use a US origin designation in California, if foreign content represents no more than 5% of the final wholesale value of the product (Bus. & Prof. 17533.7(b)).  This requirement is wholly determinative of the validity of a US origin designation in California with one exception: foreign content can represent up to 10% of the final wholesale value of the product, if some of the parts or content of the product cannot be obtained within the United States.  California’s test is more straightforward than that of the FTC, but both standards must be observed for any products sold in California.  If a business sells goods in multiple states with a claim of US origin, it would potentially have to juggle several standards if the product was not 100% made in the US.  Thus, purveyors of goods should be wary of the particular standards in the markets they serve.

© 2021 Sierra IP Law. The information provided herein is not intended to be legal advice, but merely conveys general information that may be beneficial to the legal professional community, and should not be viewed as a substitute for legal consultation in a particular case.

CASE Act

As part of the Consolidated Appropriations Act for 2021 signed into law on December 27, 2020, the Copyright Alternative in Small-Claims Enforcement (CASE) Act was passed.  The CASE Act establishes a tribunal called the “Copyright Claims Board” (CCB) within the U.S. Copyright Office to handle small-scale claims of copyright infringement. Copyright registrants can use this option to pursue smaller copyright infringement matters in a more streamlined and lower cost process.  The hearings may be conducted electronically, making CASE proceedings attractive and available to many small claimants.

The Board will be made up of three members, and will have two supporting attorneys. At least two Board members must preside at any hearing. Discovery is limited to interrogatories, requests for admissions and production of documents. Any other type of discovery requires a showing of good cause. An accused infringer will have 60 days after service of a claim to “opt out” which will result in dismissal of the claim without prejudice, requiring the claimant to file in District Court. However, there are incentives for both sides to use the CASE system: it should be faster and cheaper for a claimant, and it provides a low limit of potential liability for an accused infringer.

Awards for infringement of a single work are limited to $15,000 (instead of the $150,000 limit in District Court); and awards for infringement of multiple works in a single proceeding are limited to $30,000. The plaintiff can pursue actual or statutory damages up to the monetary limits, but willful infringement is not considered and cannot be used to enhance the damages award.  Attorney fees and costs are generally not available except in cases of bad faith, and in those cases are capped at $5,000 unless the conduct was particularly egregious.

A party can request reconsideration of a CCB decision if the party believes the CCB’s decision includes error.  If the CCB accepts the request, the decision is reviewed for clear error.  A party can seek review of the CCB’s decision with the Register of Copyrights.  The CCB decision is reviewed for abuse of discretion by the Register of Copyrights.  After review by the Register of Copyrights, a party can seek relief from the appropriate district court in very limited circumstances:  where the CCB decision resulted from fraud, corruption, or other misconduct, the CCB exceeded its authority or failed to provide a final judgment, or a default or failure to prosecute judgment was entered resulting from excusable neglect by the party seeking relief.

A CASE claim may be based on a pending copyright application prior to the issuance of a registration.  However, any decision on the claim will not be final until after the registration is obtained.  A CASE claim may not be filed without a copyright application submitted to the US Copyright Office. The CASE system may be attractive to owners of multiple copyrighted works who may be able to avoid the high cost of litigation in District Court. However, this may be restricted since the Register of Copyrights has the authority to place limits on the number of cases that the same claimant may be allowed to bring each year.

PLSA

The Protecting Lawful Streaming Act raises the criminal penalties for illegally streaming copyrighted material from a misdemeanor to a felony for certain defendants.   The felony penalty does not apply to unauthorized streamers in general.  Instead, the felony penalties will apply to a streaming service that is intentionally designed to stream copyrighted works without permission.  The PLSA was drafted to provide stronger penalties to go after bad actors, while sparing unsophisticated and small-time offenders (e.g., a fan live streaming a concert without authorization).

Sierra IP Law will provide further guidance on these laws as they are implemented, and advise and assist its clients in utilizing the new tools provided by the CASE act.  Contact Sierra IP Law for guidance with regarding to copyright matters.

© 2021 Sierra IP Law. The information provided herein is not intended to be legal advice, but merely conveys general information that may be beneficial to the legal professional community, and should not be viewed as a substitute for legal consultation in a particular case.

US Supreme Court finds that the US Trademark Office is Too Restrictive on Registering Domain Names as Trademarks.

PROTECTING DOMAIN NAMES AS TRADEMARKS: 

In the modern commercial world, practically every business sets up a web site, which means that the business must also select a domain name. It is often desirable for the business to select a domain name that is the same as its business name, trademark or service mark, in order to help the consuming public find the products or services of the business on the Internet. The US Supreme Court recently made it a bit easier to register a domain name as a trademark.

Prior to June 30, 2020, the U.S. Patent and Trademark Office (USPTO) did not allow domain names to be registered as trademarks if they contained words that were generic as to the goods or services provided, since generic words cannot function as trademarks. A top-level domain (TLD) suffix such as “.com” or “.net” was also considered generic in the same way as suffixes such as “Co.” or “Inc.” Under this rubric, the USPTO considered that when a generic word is combined with a generic TLD suffix in a domain name, the result was also generic, and therefore not registerable as a trademark. This approach was eliminated on June 30, 2020, in a ruling by the U.S. Supreme Court in the case of US Patent and Trademark Office, et al v. Booking.com B.V.

The Booking.com decision may be better understood after a brief review of trademark principles. A trademark is a word, symbol or device that is used in commerce in connection with goods. (A service mark is used in connection with services, but references in this article to “trademark” are meant to include service marks.) The function of a trademark is to help the consuming public identify the source of particular goods or services. US trademark law recognizes that there is a spectrum of trademark protection ranging from marks that are legally strong to those that are legally weak, and those that cannot be protected at all. Strong trademarks are those which are arbitrary, fanciful or suggestive with respect to the goods or services they are used on. Descriptive terms are usually not entitled to trademark protection, but can become enforceable over time as the public learns to associate the descriptive mark with the source of goods or services provided under the descriptive term (e.g., think American Airlines, National Football League, etc.). Generic terms, on the other hand, are never available as trademarks because they cannot act as source identifiers, since their primary function is to identify classes of goods or services.

In the Booking.com case, the USPTO had concluded that “booking” was a generic term for its services of “making travel reservations” and that the “.com” TLD suffix was also generic since it only served to identify a commercial website. The USPTO therefore concluded that the combination of “Booking.com” was not registrable because the combination was generic or, in the alternative, that it was descriptive without secondary meaning. The USPTO decision was first taken to the District Court, then to the Fourth Circuit Court of Appeals, and finally to the US Supreme Court. In an 8-1 decision authored by Justice Ginsburg, the Supreme Court held that a term styled ‘generic.com’ is a generic name for a class of goods or services only if the term has that (generic) meaning to consumers. Thus, adding a TLD suffix (such as “.com”) to a generic word (such as “bookings” for “making travel reservations”) could be registerable as a trademark under the proper circumstances, and that simply combining a generic term to a TLD suffix alone did not disqualify the combination from being registered. The USPTO argued that a TLD suffix is generic like entity signifiers “Inc.” and “Co.” However, the court found that a TLD suffix is not sufficiently similar to such generic identifiers because each domain name is unique, and (unlike “Inc.” and “Co.”) only one entity can use a particular domain name. Thus, the court found a ‘generic.com’term could convey to consumers an association with a particular website – which is the source identification function of a trademark. However, the decision made note of numerous limitations already in place under trademark law, including a requirement that the domain name overcome any descriptiveness issues (e.g., by establishing secondary meaning). Thus, to register a ‘generic.com’ domain name, it will need to be shown that the domain name has established secondary meaning to overcome descriptiveness issues, and that consumers have come to associate the domain name with the business as the source of the goods or services, instead of simply identifying that class of goods or services. Extensive advertising was submitted in the Booking.com case (e.g., “Booking.com, booking.yeah!”, see https://www.youtube.com/watch?v=tk_pFjr5aV4), helping the court conclude that it had established secondary meaning in the mind of the consumer for the Booking.com mark.

Of course, it is easier to register and enforce trademark rights in terms that are neither generic nor descriptive, so a business owner should avoid selecting generic or descriptive terms for its trademarks, business name, and domain name if that is possible. An effective trademark should not only aid in attracting clients and customers, it should also provide the business with enforceable trademark rights that allow the business to prevent competitors from using confusing similar terms and phrases to promote their businesses. However, if a descriptive or generic term has already been selected for the domain name, the Bookings.com case leaves the door open for the owner of such a term to protect it as a trademark.

Sierra IP Law assists businesses with evaluating their existing or proposed trademarks and service marks, and works with its clients to find effective, enforceable, and registerable marks that will serve them well.  If you have questions about trademarks, visit our trademark FAQ page, general trademark page, and our trademark registration page.

© 2020 Sierra IP Law. The information provided herein is not intended to be legal advice, but merely conveys general information that may be beneficial to the legal professional community, and should not be viewed as a substitute for legal consultation in a particular case.