Consumer Perception Wins the Day: A Case Overview of USPTO v. Booking.com

The following post comes from Ryan Reynolds, a rising 3L at Scalia Law and a Research Assistant at CPIP.

By Ryan Reynolds

Last week, the Supreme Court in USPTO v. Booking.com held that a combination of an otherwise generic term and a generic top-level domain (TLD) may be protected as a trademark so long as consumers perceive it as capable of distinguishing among the members of a class of goods or services and not as a reference to the class itself. The Court rejected the nearly per se rule applied by the United States Patent and Trademark Office (USPTO) that such combinations are necessarily generic.

The Background

Between 2011 and 2012, Booking.com filed four trademark registration applications for the “Booking.com” mark with the USPTO. The USPTO denied the registrations because it found that the mark was generic as applied to online hotel reservation services. On appeal, the Trademark Trial and Appeal Board (TTAB) affirmed the denial. The TTAB analyzed “Booking” and “.com” separately and found the mark generic.

The Lanham Act provides that a trademark is “any word, name, symbol, or device” used by a person in commerce “to identify and distinguish his or her goods . . . from those manufactured or sold by others and to indicate the source of the goods.” Five categories of marks are recognized under the Lanham Act that have varying levels of protection. Fanciful, arbitrary, and suggestive marks receive immediate protection. Descriptive marks only receive protection upon showing secondary meaning, that is, once consumers understand the mark to communicate a single source. Lastly, generic marks can never receive trademark protection. A generic mark does not help a consumer distinguish one good or service from another; it instead merely refers to the common name of the good or service itself. The restriction on generic marks is based on the concern that competitors should have free use of the terms necessary to identify their products or services to consumers.

Having lost at the TTAB, Booking.com then filed suit in the U.S. District Court for the Eastern District of Virginia. The district court applied the primary significance test, which states: “[T]he primary significance of the registered mark to the relevant public . . . shall be the test for determining whether the registered mark has become the generic name of goods or services in connection with which it has been used.” The district court held that “Booking.com” was a descriptive mark that had acquired secondary meaning, based on the perception of the mark by the relevant consuming public. On appeal, the U.S. Court of Appeals for the Fourth Circuit affirmed, finding that “Booking.com” was eligible for trademark protection. The USPTO then petitioned the Supreme Court for a writ of certiorari, which was granted.

The Arguments

The central issue was whether the Lanham Act had legislatively overruled the Supreme Court’s 132-year-old decision in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co. In Goodyear’s, the Court created a per se rule that the addition of an entity designator such as “company” to the end of an otherwise generic mark could not create a valid trademark. The Court reasoned that entity designators do not serve a source-identifying function, but instead only indicate that parties have formed an association to deal in goods or services.

The USPTO contended that, like entity designators, TLDs such as “.com” do not serve a source-identifying function as they only communicate a business’ online presence to the public. Therefore, it argued that Goodyear’s per se rule controlled the case as both lower courts had found “Booking” alone to be generic. It further argued that ruling for Booking.com would cause competitive harm by opening the door to the registration of countless generic marks. It stressed that this harm was heightened by the competitive advantages the internet already grants to Booking.com as the only party that can use its domain name. It argued that, due to these competitive advantages and the opportunity for Booking.com to pursue protection under unfair competition laws, “Booking.com” does not require trademark protection.

In contrast, Booking.com alleged that the Lanham Act had legislatively overruled Goodyear’s through its creation of the primary significance test. It argued that the primary significance test is the exclusive test for all marks to determine genericism, with the Lanham Act creating no special category for domain names as marks. Likewise, Booking.com maintained that the piecemeal analysis by the USPTO of “Booking” and “.com” separately went against the Lanham Act’s directive to assess the mark as a whole for purposes of registration.

Booking.com further contended that the primary significance test reinforces the aims of trademark law by helping consumers navigate the marketplace. By requiring marks to pass both the primary significance test and show secondary meaning in order to receive protection as a descriptive mark, non-source-identifying marks are eliminated. Booking.com also pointed out that the USPTO has inconsistently applied Goodyear’s per se rule by allowing marks similar to “Booking.com” to be registered, and this inconsistency has not caused harm to fair competition in the marketplace. It also warned that the USPTO’s per se rule would usher in a “mass extinction event” for hundreds of registered marks.

 The Ruling

In its opinion affirming the Fourth Circuit’s decision, the Supreme Court rejected the USPTO’s per se rule as to combination terms like “Booking.com.” The majority opinion, authored by Justice Ginsburg and joined by seven other justices, held: “Whether any given ‘generic.com’ term is generic, we hold, depends on whether consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class.”

The majority stated that USPTO’s reliance on Goodyear’s was flawed since it would find terms ineligible for trademark protection even if consumers would understand them to signify source: “That bedrock principle of the Lanham Act is incompatible with an unyielding legal rule that entirely disregards consumer perception.” The majority reasoned that the Court’s decision in Goodyear’s stood only for the proposition that a “compound of generic elements is generic if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.” Thus, the majority held that a consumer could understand “Booking.com” to refer to the source of the goods or services and not merely to describe the website itself.

Addressing the anticompetitive arguments raised by the USPTO, the majority noted that the concern of hindering competitors “attends any descriptive mark” and that the likelihood of confusion and fair use doctrines would “guard against the anticompetitive effects.” Further, the majority rejected the USPTO’s argument that unfair competition laws could provide an adequate remedy for Booking.com, stating that there is “no cause to deny Booking.com the same benefits Congress accorded other marks qualifying as nongeneric.” Lastly, the majority declined to “open the door to cancellation of scores of currently registered marks” due to the inconsistency of the USPTO’s own application of the per se rule for which it argued.

In her brief concurrence, Justice Sotomayor raised two observations. First, she noted her appreciation for the dissent’s skepticism of consumer-survey evidence as an “unreliable indicator of genericness.” Second, she observed that the USPTO may have properly “concluded based on such dictionary and usage evidence, that Booking.com is in fact generic” and that the district court may have erred in concluding otherwise—an issue that was not before the Supreme Court.

In his dissent, Justice Breyer argued in favor of the USPTO’s per se rule, stating that the Lanham Act had not repudiated Goodyear’s and that its “principle is sound as a matter of law and logic.” In addition to tracing many of the same arguments advanced by the USPTO in its briefs, Justice Breyer criticized the “fact-specific” approach established by the majority to determine genericism. He claimed that survey evidence is an unreliable metric of genericness and that there would be little to stop the registration of countless generic marks. Justice Breyer argued that this influx of “generic.com” marks would open the door to potentially serious anticompetitive consequences, and he contended that the Court’s decision may lead to costly litigation that will “no doubt chill others from using variants on the registered mark and privilege established firms over new entrants to the market.”

While the ultimate consequences are not yet known, this decision clearly marks the strong resolution of the Supreme Court that, where genericism is concerned, consumer perception is key.