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Protecting Green Products in Today's Business Environment, Contributed by Albert B. Chen and Matthew F. Abbott, Kramer Levin Naftalis & Frankel, LLP

Thursday, August 11, 2011

By Albert B. Chen and Matthew F. Abbott, Kramer Levin Naftalis & Frankel, LLP

 

With the world facing a global climate change that has and will continue to alter life on our planet as we know it, companies have increasingly taken the initiative to develop products that will help reduce climate change and its impact on our environment. These products are often labeled as “green,” “clean,” or “renewable” (collectively referred to as “Green Products”) to promote their environmental benefits.

Innovators of green technology should be aware of how the laws of the United States function to regulate and protect the manufacturing and sales of their Green Products. As a practical matter, the incentive to innovate and develop Green Products would be stifled if a copycat competitor could simply make and sell knockoffs of an originator’s Green Product. Thus, Green Product originators should protect their innovations under U.S. patent laws when possible.

The brand name and/or trademark used with a Green Product may also be very valuable. Consumers may come to expect a certain quality or benefit associated with a brand name. There would be no incentive to maintain the high quality of a brand if a copycat competitor can simply sell a much lower quality and cheaper product under the same name. Thus, companies should strive to adopt trademarks that are protectable, as well as communicative of the product’s green qualities, and should seek protection of their Green Product trademarks under U.S. trademark laws.

Additionally, innovators should also be aware of various guides promulgated by the Federal Trade Commission (“FTC”) concerning any environmental or “green” promotion of their products to avoid potential action by the FTC or third parties.

Protecting the Green Invention
A patent is a right granted by the United States Patent and Trademark Office ("USPTO") to an inventor “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.”1

To obtain this right, an inventor must file a patent application with the USPTO. The patent application includes a “specification” which, among other things, “contains a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise and exact terms as to enable any person skilled in the art to which it pertains . . . to make and use the same . . .”2 The patent application also includes “claims” which define “the subject matter which the applicant regards as his invention.”3

Normally, patent applications are examined in the order that they are filed and currently it takes an average of about 26.5 months before a new application is examined and acted upon by the USPTO.4 A patent application is typically pending for an average of 33.9 months before it issues into a patent.5

To encourage the development of Green Products, in December 2009 the USPTO established a Green Technology Pilot Program under which a patent application that pertains to “environmental quality, energy conservation, development of renewable energy resources or greenhouse gas emission reduction” may be given a special status so it will be examined out of turn ahead of other patent applications.6 This Green Technology Pilot Program is currently limited to 3,000 qualifying green technology patent applications and, unless it is extended, will expire December 31, 2011.7 As of March 2011, 2,696 applications had been filed under this program, 1,390 of which were granted, and 216 published as issued patents.8 Notwithstanding these statistics, at least one author has criticized the program as being ineffective and failing to promote innovation as a result of its imposition of certain restrictions on eligibility, such as limiting the number of independent claims in eligible applications, and by excluding provisional applications, reexaminations and design applications.9

After a patent application is granted by the USPTO, the issued patent generally has an effective life of twenty years from the earliest filing date claimed in the patent.10 The issued patent may be enforced against infringers in the United States Federal Courts or before the International Trade Commission (“ITC”). Frequently, a plaintiff will commence actions in both forums simultaneously. Each forum has its own distinct rules and procedures.

The number of U.S. patents directed to green technologies (“Green Patents”) has grown annually, hitting an all-time high in 2010 with over 1800 Green Patents issued to over 700 entities.11 These Green Patents are directed to various clean or renewable energy technologies (e.g., solar, wind, hybrid/electric vehicles, fuel cells, hydroelectric, tidal/wave, geothermal, biomass/biofuels, etc.).12 The automotive industry dominated the Green Patents field in 2010, with General Motors claiming the top spot for Green Patents, and five other automobile companies also landing in the top ten.13

Over the past decade, green technology has become a recognizable sector of the economy, and many Green Products, particularly in the field of solar power, hybrid vehicles and energy-efficient lighting (e.g., light-emitting diodes or LED), have achieved substantial market penetration. Correspondingly, litigation concerning Green Products has increased, both in the U.S. Federal Courts and before the ITC, including litigations brought by non-practicing entities (NPEs). NPEs are individuals or companies which do not manufacture or sell products, but which seek to generate revenue through patent licensing. In particular, patent litigation has been initiated by NPEs in regard to hybrid vehicle technology, “smart grid” technology and LED technology.14

A Green Patent owner may file a patent infringement suit in the U.S. District Courts, and may win damages and possibly an injunction. On the other hand, Green Patent owners who prevail in an ITC proceeding cannot win damages, but rather may secure an exclusion order which prohibits the importation of the infringing products into the United States.

Protecting the Green Brand
A trademark is a word, phrase, symbol, or design that a company uses to identify its goods and services, and to distinguish them from the goods or services of others. As the public learns to associate a particular trademark with a product and its source, the trademark is imbued with goodwill, or a reputation, earned by consumer’s reaction to the product. For example, the “swoosh” trademark used on sneakers indicates to consumers that the source of the sneakers is Nike and signals that the sneakers will be of the quality which consumers have come to associate with the trademark/brand.

While a company may develop rights in a trademark merely by using it in association with its goods or services in the marketplace, significant protections are obtained by registering a trademark with the USPTO. These include legal presumptions of ownership and the validity of the trademark, the exclusive right to use the mark nationwide, a basis for a federal suit for trademark infringement, and the ability to file the registration with U.S. Customs to prevent importation of counterfeit goods. Without a federal registration, trademark rights are limited to geography and scope of the reputation of the trademark. To obtain a federal registration, the trademark owner must file an application with the USPTO that describes the goods and services with which the trademark is used, as well as evidence of such use. It may take about a year or more for a registration to issue.15 Unlike a patent, a trademark registration will not expire as long as the owner continues to use the trademark in commerce and files the appropriate post-registration documents.

Whereas a patent prevents a competitor from manufacturing or selling a patented product, trademark rights can be used by the trademark owner to prevent a competitor from using its trademark, or a confusingly similar word, phrase, symbol, or design in connection with the same or a similar product, irrespective of whether that product is covered by a patent or not. As such, if possible, a Green Product innovator would be prudent to seek both patent and trademark protection for its Green Product.

The degree of protection afforded by a trademark depends on its distinctiveness. This issue of distinctiveness is particularly significant in the field of Green Products, as many of the terms used to indicate environmentally friendly characteristics, e.g. “green,” “clean,” “eco-,“ “enviro-,“ etc. (the “Green Terms”), are so immediately identified with those qualities that standing alone they have become legally incapable of providing the distinctiveness required for registration.

Generally, trademark law only protects words, phrases, symbols, or designs which are fanciful or made up terms such as ADIDAS for sneakers, arbitrary or unrelated terms such as FOSSIL for watches, and suggestive terms such as THE NORTH FACE for outerwear. Words or designs that merely describe a characteristic, quality, or purpose of the product with which they are used are not protectable or registrable unless they acquire distinctiveness through long-term use, such as HOMEGOODS for use with a store that sells products for the home. Terms that are a generic name for the product, such as jeans or cotton, are never protectable. When a trademark contains terms that are both distinctive and descriptive or generic, the USPTO may permit a registration to issue if the owner “disclaims” any rights in the descriptive or generic terms apart from the trademark in its entirety. Thus, to build a strong and protectable brand, it is important to adopt trademarks containing at least one term that is distinctive and protectable.

More than 6000 such “Green Marks” were filed in 2009 alone.16 It is important to note that the USPTO does not permit the registration for Green Marks that are “merely descriptive or deceptively misdescriptive” of the associated goods.17 A Green Mark is “considered merely descriptive if it describes an ingredient, quality, characteristic, function, feature, purpose, or use of the specified goods or services.”18 Rather, the Green Mark needs to be fanciful, arbitrary, or suggestive of the associated goods or services in order for it to be accorded a federal registration with the USPTO. Consequently, a frequent issue that applicants of Green Marks need to address is whether the Green Mark is “suggestive” of the applicant’s goods or services, or only “merely descriptive.”19

To a reasonable consumer, many Green Marks may appear to be suggestive of environmental benefits associated with particular goods or services. However, due to the widespread use of words like “green”, “eco,” or “clean”, etc. as describing goods that are beneficial to the environment, the USPTO is rejecting more Green Mark applications as “descriptive” or “generic.”20 Additionally, the USPTO is likely to require a disclaimer of the word “Green” in a Green Mark, as the word “Green” (or its equivalent) would by itself be generic or merely descriptive.21

Once approved by the USPTO, a Green Mark is published for opposition. Any competitor may file an opposition to the registration of the Green Mark with the USPTO’s Trademark Trial and Appeal Board (“TTAB”) within thirty days after the approval of the Green Mark is published by the USPTO.22

Should the application for a Green Mark survive examination and opposition, the Green Mark will become registered. However, a Green Mark may still become the subject of a cancellation proceeding in which a third party can claim that the Green Mark is deceptive or misleading.23

As with other trademarks, litigations concerning Green Marks sometimes arise when a competitor uses a Green Mark in a manner which is likely to cause confusion among consumers.24 Ultimately, such litigations benefit the consumers as they tend to maintain and enforce the qualities which consumers expect with Green Products.

Protecting the Green Marketing Claims
Under the Federal Trade Commission Act (FTCA), 15 U.S.C. §§ 41-58, the Federal Trade Commission (FTC) considers whether marketing claims constitute "unfair or deceptive acts or practices in or affecting commerce.”25 The FTC first determines whether a claim is likely to mislead a reasonable consumer. If the FTC finds in the affirmative, it then determines whether the claim was material to the consumer's decision to purchase or use the product or service.26 If so, the FTC will likely determine that the company making the marketing claim has violated the FTC Act. Even where a claim is not found to be misleading, the FTC can still find a violation of the FTC Act if the company cannot substantiate its marketing claim with reliable evidence.27

In 1992, the FTC first issued its “Green Guides,” which establish permissible guidelines for determining whether green marketing claims constitute “unfair or deceptive acts.” The FTC revised the Green Guides in 1996 and 1998, and is currently in the process of revising them again.28 The Green Guides are a response to “greenwashing,”29 where a company’s marketing practices create a false or misleading perception that the company’s products or policies are environmentally friendly.30 Indeed, the problem of “greenwashing” is so significant that in 2010, the environmental marketing agency TerraChoice found that over 95 percent of the 5,000+ “green” home and family consumer products that claimed to offer an environmental benefit were guilty of committing one or more of the seven “Sins of Greenwashing.”31

The Green Guidelines are administrative interpretations that do not carry the force and effect of law.32 However, the FTC may review green marketing claims that it deems deceptive under the Green Guidelines, and order a company to cease and correct its marketing practices.33 Between 1990 and 2000, the FTC brought 37 cases involving environmental marketing claims.34 Although it brought no cases between 2000 and 2008, the FTC brought seven additional cases in 200935and is again revising the Guidelines, suggesting a renewed focus on enforcement. Consumers themselves have brought individual and class action lawsuits against Green Product distributors for deceptive advertising of environmental benefits under state and federal consumer protection or false advertising statutes.36

The Green Guidelines are set out in the Code of Federal Regulations.37 They generally require that (1) qualifications and disclosures be clearly indicated; (2) distinctions should be made between environmental benefits of products, packages and services; (3) environmental attributes shall not be overstated; (4) comparative claims should be clear and substantiated; 38 and (5) unsubstantiated general environmental benefit claims should not be made. Additionally, the Guidelines set out specific requirements for advertising claims concerning certain product attributes, such as: (1) degradability/biodegradability/ photodegradibility; (2) compostability; (3) recyclability; (4) consisting of recycled content; (5) refillability; and (6) ozone safety.39

The proposed revisions to the Green Guidelines strengthen the requirements for certain previously addressed types of claims, including degradability, compostability, recyclability, ozone safety, “free-of”/non-toxic claims, and general environmental benefit claims. Additionally, the proposed revisions add new standards for use of renewable materials, renewable energy, carbon offsets, and use of certifications and seals of approval in advertising and packaging.40 The FTC is still considering these revisions and has not yet issued them. Companies promoting Green Products would be prudent to familiarize themselves with the existing Green Guides, and stay alert for further FTC revisions.

* * * *

As the recognition of the impact of mankind’s activities on the global climate grows, it is clear that Green Products are becoming more and more important to the sustainability of our planet. Patent and trademark laws can be used to help ensure that the incentive to develop and bring Green Products to market remains strong. Furthermore, false advertising laws and “Green Guides” can be used to help make sure that the claimed quality and environmental benefits of Green Products are real and being met. Being informed on how Green Products may be protected in all three legal fields (patent, trademark, and advertising) is not only a prudent and practical business decision, but a necessary one.

Albert B. Chen is a Special Counsel with the firm of Kramer Levin Naftalis and Frankel, LLP. Mr. Chen's practice focuses on patent law, including patent prosecution, interference, and litigation. He is also a LEED Green Associate, and has a passion for clean technology and the environment.

Matthew F. Abbott is an associate at Kramer Levin Naftalis & Frankel LLP. His practice primarily involves litigation matters, focusing on intellectual property as well as general commercial disputes in the areas of patent, trademark and false advertising law.

Disclaimer
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