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1/24/2011
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No One Owns 'The Cloud'

Companies should think twice about pursuing trademarks around the term 'cloud computing,' as market saturation is making product differentiation increasingly difficult.

Michael JustusJulia MathesonCloud computing stands to transform business and personal technology, but the phrase "cloud computing" raises legal issues for brand owners looking to exploit it as a trademark or brand name.

As with any marketing revolution -- we saw it with green or eco-friendly products, referred to as "green washing" -- trademark issues are never far behind. There's a similar washing effect with the cloud. Since 2007, over 500 trademark applications have been filed with the U.S. Patent and Trademark Office (PTO) to register marks containing the term "cloud" for computer-related goods and services.

The cloud's surge in popularity raises the question of whether any one person or entity should be able to own exclusive rights to the term. The PTO answered that in 2008 in response to Dell's application to register "cloud computing" for a variety of its services, though the word "cloud" did not actually appear in the application's description of services.

After initially approving the mark for publication, the PTO reversed its decision, in part on industry outcry, and the application was eventually abandoned. The PTO issued a notice citing applicability of the basic trademark law principle requiring refusal of marks that are "merely descriptive" of the goods and services with which they are used. One rationale for a "merely descriptive" refusal is the need for others in an industry to use the term freely to describe their products and services. That's now clearly the case with the cloud.

The PTO's notice included an advisory stating that the "cloud computing" mark "appears to be generic in connection with the identified services and, therefore, incapable of functioning as a source-identifier" for such services. That was essentially the death knell for "cloud computing" marks that lack other distinctive elements because generic terms, without more, are never entitled to registration.

The Trademark Trial and Appeal Board (TTAB) cleared the issue further in a recent case regarding registrability of the mark "always available" for cloud-related services. The TTAB affirmed the PTO examiner's refusal of the mark on descriptiveness grounds because the term "always available" is commonly used to describe cloud computing and related services that are always accessible to the user. As such, the "always available" mark was merely descriptive of the applied-for computing and was not entitled to registration. This case serves as clear confirmation that even if a trademark doesn't include the term "cloud," the cloud's reputation nevertheless precedes it. The PTO is now fully attuned to the cloud and its inherent characteristics, and will refuse registration of marks that are merely descriptive of typical cloud services.

What does this mean for IT professionals and brand owners? It suggests that investments in the development and introduction of "cloud" trademarks may not pay off for several reasons.

For one thing, "cloud" marks will only become harder to register, which may make them less valuable to brand owners. This is due to the cloud washing effect. In fact, now that "cloud computing" has been recognized by the PTO as a generic term in the industry, "cloud" marks will be registrable only if they include other distinctive matter, for example, the "house mark," or main brand name, of the brand owner or other distinctive terms. And even if the compound mark is ultimately registrable, the mark owner would have no rights in the cloud portion of the mark.

Also, market saturation makes enforcement challenging. Regardless of whether registration is obtained, if brand owners choose to forge ahead with use of a cloud-marked product or service, it will be increasingly difficult for the brand owner to enforce its rights in the mark due tothe crowded field of other cloud-mark users. Any rights a brand owner may enjoy in such a mark will necessarily be narrow and hard to enforce.

And product differentiation may no longer be meaningful. The dramatic increase in the number of PTO applications for "cloud" marks suggests that consumers are experiencing too much "cloud" noise to be able to differentiate among brands. Marks that share this now generic term have become so ubiquitous that they may no longer be capable of identifying something unique in the market.

In the end, brand owners should keep their feet on the ground, and think twice about the merits of adopting "cloud" marks going forward. As in the rest of the trademark world, while development of a unique brand may cost more at the outset, the long-term payoff in consumer recognition, goodwill, and distinctiveness can offset the up-front costs. For brand owners fortunate or savvy enough to land a truly distinctive brand, the sun will shine through the clouds.

Julia Anne Matheson and Michael R. Justus are lawyers with Finnegan, a law firm specializing in intellectual property.

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