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Microsoft Corp. recently agreed to pay Lindows Inc., $20 million to settlethe parties’ ongoing trademark infringement litigation, thus avoiding a trialthat could have resulted in the invalidation of Microsoft’s federal trademarkregistration for “Windows.” The settlement leaves unresolved thequestion whether Microsoft has protectable rights in one of the world’s mostwell-known brands. Since announcing its first Windows computer operating system products in 1983,Microsoft has spent over $1 billion to promote and market the Windows brand andgenerated tens of billions of dollars in sales of Windows products. Nonetheless, the U.S. Patent and Trademark Office initially rejected thesoftware maker’s application to obtain a federal trademark registration forWindows. In a Feb. 17, 1993, communication to Microsoft, the agency’s examiningattorney denied registration on the grounds that Windows was the common genericdesignation of Microsoft’s products and that it was “widely used, both bythe public, consumers, and the relevant industry, to name a class of goods or atype of software, that is, a genus of goods, referred to as Windows programs, orwindowing software.” [FOOTNOTE 1] The examining attorney further observed that Windows was known and in use priorto Microsoft’s adoption of the term as a trademark. However, after Microsoftsubmitted additional arguments and evidence, including a survey showing that 67percent of relevant consumers identified Windows as a brand name, the agencyreversed itself without explanation and granted Microsoft a registration forWindows in 1995. In July 2001, a small software company called Lindows announced that it wasdeveloping the “Lindows OS” computer operating system, based on thefree open-source software Linux. The company claimed that Lindows OS wouldcompete with Microsoft Windows and have the ability to run software applicationsdeveloped for both the Linux and Windows operating systems. Microsoft filed suit against Lindows in the U.S. District Court for the WesternDistrict of Washington in December 2001, alleging that the company’s use ofLindows in connection with software and other computer products infringed anddiluted Microsoft’s rights in its Windows mark. Despite the renown of the Windows mark and the obvious similarities between theterms Windows and Lindows, Chief Judge John C. Coughenour denied Microsoft’smotion for preliminary injunction in March 2002 and questioned the validity ofMicrosoft’s trademark registration. The court found a crucial threshold issue tobe whether Microsoft’s Windows mark was an unprotectable “generic”mark or a weak — but potentially protectable — “descriptive” mark. “Generic” marks, such as “soda” for carbonated beverages,identify an entire category of products or services. As Chief Judge Coughenourwrote, “a generic term is one that refers to the genus of which theparticular product is a species.” Generic marks are not entitled to trademark protection because the owner of sucha mark would have a monopoly over the use of the term, and the trademark owner’scompetitors would be unable to accurately identify their goods for what theyare. Descriptive marks describe some characteristic or attribute of the good orservice, such as Computerland for a retail computer store. Descriptive marks maybe entitled to trademark protection, but only upon a showing that the mark hasacquired “secondary meaning,” i.e., that the relevant class ofconsumers recognizes the mark as denoting a single source of products. COMMON NAME Lindows argued in response to Microsoft’s motion for a preliminary injunctionthat consumers understood the term Windows to be the common name for theoverlapping visual displays associated with a certain kind of computer operatingsystem. Lindows presented evidence suggesting that the media, dictionaries,computer industry experts, Microsoft’s competitors and even Microsoft itselfused Windows in this generic manner, both prior to and after Microsoft’sadoption of Windows as a brand name. Microsoft responded that Windows describes its computer operating system’s”windowing” feature that allows the user to display and interact withmultiple on-screen images. To support its claim that Windows had obtainedsecondary meaning among consumers, Microsoft introduced evidence that 93percent of personal computer users regarded Windows as its proprietarytrademark. In denying Microsoft’s request for injunctive relief, Chief Judge Coughenourfound Lindows’ evidence sufficient to rebut the statutory presumption ofvalidity afforded Windows as a registered trademark. He noted thatdistinguishing between generic and descriptive marks is extremely difficultbecause “the difference … may be almost imperceptible,” and thatMicrosoft and Lindows had presented “roughly equal” evidence as to theprotectability of the Windows mark. Although similarities exist between Lindows and Windows, Coughenourobserved that “one could just as easily conclude that in 1983 Microsoftmade an equally risky decision to name its product after a term commonly used inthe trade to indicate the [operating system's] windowing capability.” Because any further analysis of Microsoft’s claims against Lindows depended onthe validity of the Windows mark, Lindows subsequently moved for summaryjudgment based on the alleged genericness of Windows. The judge denied themotion in January 2003, reasoning that the factual issues raised by the parties’competing evidence would be more appropriately considered by a jury. Before the anticipated trial, Microsoft argued that the jury should consider thecurrent significance of Windows to the consuming public. Even if the term wasonce generic, Microsoft asserted that it reclaimed Windows from the publicdomain through its exclusive use of the mark in connection with Microsoftproducts. RULING AGAINST MICROSOFT Chief Judge Coughenour ruled against Microsoft in February 2004, holding theappropriate inquiry to be whether Windows was generic at the time Microsoftadopted it as a trademark. Accordingly, the court would instruct the jury toconsider whether Windows was generic during the period prior to Microsoft’sintroduction of its Windows 1.0 software product in November 1985. The order also indicated that the court would not instruct the jury thatMicrosoft could reclaim Windows as a valid mark if it was once generic, citing9th U.S. Circuit Court of Appeals precedent for the proposition that ageneric term can never become a protectable mark “under anycircumstances.” Coughenour certified these issues for immediate interlocutory appealto the 9th Circuit, but the appeals court declined to consider the matter inMay 2004. SETTLEMENT TERMS Under the terms of the settlement, detailed in Lindows’ recent Securities andExchange Commission filing made in connection with its planned initial publicoffering, Microsoft was to have paid Lindows $15 million by Aug. 15 and another$5 million by February. In exchange, Lindows will change its corporate name (andhas already changed its products’ brand name) to “Linspire” and assigncertain Lindows Internet domain names to Microsoft. The resolution allows Lindows to end a costly legal battle — similar caseswith Microsoft were pending in France, Spain and Canada — and gives thecompany a significant financial boost (the settlement amount is nearly 10 timesLindows’ 2003 revenue). The ramifications for Microsoft are unclear. The resolution of the litigationallows Microsoft to avoid for now questions regarding the validity of itsWindows mark, but leaves intact a framework for challenging Microsoft’sexclusive rights to Windows. Windows certainly would not be the first well-known mark to be found generic. Atrademark cannot be protected if allowed to become the commonly used word forthe trademarked product. Many trademark owners have lost their exclusive rights in marks that have become”too” successful. For example, “aspirin” was once aregistered trademark that, over time, became the unprotectable generic word foracetylsalicylic acid. To avoid a similar fate, the owners of popular trademarkssuch as Jeep and Xerox heavily promote the fact that these terms are uniquebrand names; not every sport-utility vehicle is a Jeep, and not every photocopya Xerox. The Windows case is unusual in that it presented the opposite question, i.e.,whether a generic term can become a protectable trademark through exclusive useand extensive advertising. At least in the Western District of Washington, therule appears to be once generic, always generic. However, even if Windows was generic before Microsoft began using it as atrademark, potential users of the term may be deterred by the prospect oflitigating against Microsoft. A Microsoft spokeswoman recently reiterated thecompany’s position that “[Windows is] one of the world’s most famous andvaluable brands, and we feel that it’s important to protect it and preventconfusion with it.” [FOOTNOTE 2] It remains to be seen whether Microsoft’s competitors will be emboldened to jointhat battle, given the potentially significant benefits associated with usingWindows in the marketplace. David M. Klein is a partner in the intellectual property group atShearman & Sterling. Daniel C. Glazer is an associate at thefirm. ::::FOOTNOTES:::: FN1 Microsoft Corp. v. Lindows.com, Inc., No. C01-2115C, Order at 7 (W.D. Wash.March 15, 2002) (citing U.S. Patent and Trademark Office Action of Feb. 17,1993). FN2Todd Bishop, “What’s in a Name? $20 Million,” SeattlePost-Intelligencer, July 20, 2004.

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