Editors Note: Caroline Horton Rockafellow is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A.

RESEARCH TRIANGLE PARK, N.C. – How important is a name? Just ask Apple Computers and Cisco Systems.

Those parties are now embroiled in what could turn out to be a tenacious fight over the name “iPhone.” For users familiar with the iMac and iPod, it would seem natural that a phone launched by Apple would be called the iPhone. The problem is that Cisco Systems already holds a registered trademark for the mark iPhone for use with computer hardware and software for providing integrated telephone communications with computerized global information networks. Given these facts, it is not surprising that one day after the Apple’s introduction of its iPhone, Cisco Systems filed a trademark infringement lawsuit.

So, how could this possibly happen? Every trademark attorney and marketing executive knows that the first thing you do when considering product names is to run a trademark clearance search. Sometimes it is difficult to ferret out all rights in common law marks, and it is possible to miss rights in marks that are not registered.

The Cisco mark, however, was properly filed with the U.S. Patent and Trademark Office and a registered mark was issued for iPhone. This was a fact that was well known to Apple. In fact, statements released by Cisco make it clear that Apple had repeatedly sought permission to use the iPhone mark. Although the parties were involved in extensive negotiations over the use of this mark, those negotiations appear to have stalled once Apple moved ahead with the use of the mark in its product announcement.

Why would Apple launch a product when it was clear there was problem with the product name? The answer is likely to be found in one of four possible scenarios: (i) Apple is confident it will win any trademark infringement lawsuit; (ii) Apple believes the Cisco mark will not withstand the close scrutiny of the legal system; (iii) Apple is willing to take the risk the parties will eventually reach an agreement that would permit Apple to move forward with the mark; or (iv) the publicity generated by the infringement case more than justifies any expense incurred in legal action and the cost of replacing the name.

Could Apple Prevail in the Trademark Infringement Lawsuit?

The standard for trademark infringement is “likelihood of confusion.” In other words, to prevail in its action against Apple, Cisco must be able to show that consumers are likely to be confused between the Cisco iPhone and the Apple iPhone. There are many marks that are used by multiple companies for different purposes without infringing the rights of the other. For example, a consumer is not likely to call the Delta Faucet Company looking for an airline reservation on Delta Airlines. Same mark, but for different uses.

In fact, when looking at the Apple family of “i” marks (iPod, iMac), you may be surprised to learn that IMAC is a registered mark for footwear, shoes and boots as well as security guard services. Neither of these registrations is owned by Apple, and both appear to be used without creating any confusion between those goods and the Apple computer product. Likewise, IPOD is a registered mark for interactive computer software for use by the financial services industry to understand equity-indexed annuity products. It is also a registered trademark for a pulse oximeter.

Again, these identical marks are all able to exist without creating any likelihood of confusion. Accordingly, it is clear that there can be other permitted uses for the “i” trademarks, even marks that are identical to the marks registered by Apple. So then the question is: Can the two iPhones exist contemporaneously without any likelihood of confusion? While it is true that both the Cisco iPhone and the Apple iPhone are phones, the functionality of the two devices is different. The Apple iPhone is a combination cell phone, iPod and an internet communications device.
The Cisco iPhone is a cordless handset that connects to a home network and a telephone landline, but does have the capability of accessing the internet. It is possible that Apple may be able to argue that because one is a cell phone and the other is a landline phone, these two devices are distinct enough that there is no likelihood of confusion between the two devices. However, given the fact that both devices are phones, this would seem to be a difficult argument.

Could Cisco Lose its Rights in the iPhone Mark?

Rights in registered marks can be lost if that mark has been abandoned, if the mark has become generic or if there has been an improper license or assignment of the mark. Cisco acquired the iPhone mark as a part of its acquisition of Infogear in 2000. Although the iPhone mark appeared on the Cisco website in 2006, there is some question as to whether Cisco continued to use the mark for the intervening six year period beginning with the acquisition of Infogear. If Apple is able to demonstrate that Cisco abandoned the mark, Apple could win in its argument that the registration is no longer effective.

If the Cisco registration is found to be invalid, then it might give Apple the ability to move forward with its own mark without fear of a successful infringement claim from Cisco. Of course, even if the registration is invalidated, Cisco may still have common law rights in the mark that would restrict Apple’s legitimate use of the mark. In other words, even if the mark is invalid, that does not necessarily provide Apple with a clear path forward.

So If Apple Doesn’t Need the Cicso Mark, Where is Apple’s Trademark Application?

If Apple’s intent is to pursue either of the above two defenses and argue that it does not infringe the Cisco mark or that the Cisco mark is not good, one must then ask why has Apple not submitted an application to register its own mark? Interestingly enough, there is a trademark application pending in the U.S. Patent and Trademark Office for a handheld and mobile electronic device that sounds very much like the Apple iPhone. This application, however, was submitted by Ocean Telecom Services LLC, and is based on an earlier foreign filing in Trinidad. Apparently a mark with the same description of services has been filed by Apple outside of the U.S., and has even registered in some territories. It is widely speculated that Ocean Telecom Services LLC filed the mark for the benefit of Apple—but this raises some serious questions.

The mark was filed in the U.S. as an “intent-to-use” mark, which means the applicant must file a sworn statement that it has a bona fide intent to use the mark in commerce. It is also a requirement that a trademark application must be filed in the name of the owner of the mark, or in the case of an intent-to-use mark, the party entitled to use the mark in commerce. If Ocean Telecom Services LLC is really a stand-in for Apple and has no intention of ever using the mark in commerce, then it does raise an issue regarding the legitimacy of the application. In particular, if Ocean Telecom Services LLC is not the entity with a bona fide intention to use the mark in commerce at the time the application was filed, the application would be void. Obviously, there may be aspects of the corporate organization that would make this application legitimate, but on its face, it is troubling.

The Parties Could Settle

As with any dispute, there is always the potential that the parties will settle it prior to going to litigation. While there would appear to be good reasons for both sides to settle this dispute quickly, it would also seem that if the intent of Apple were to reach an amicable agreement with Cisco it would have done so prior to the product announcement. By moving forward with the product announcement, Apple only serves to further agitate Cisco. Worse yet, Apple runs the risk that Cisco will seek and win an injunction preventing Apple from using the trademark.

The fact that Apple is aware of Cisco’s rights in the iPhone mark may also provide Cisco with a case for seeking treble damages, damages that are available when there is willful infringement. Either way, Apple’s actions make it more likely that Cisco will move forward and assert its rights under this mark. If Cisco fails to try and enforce its rights, it runs the risk of the mark becoming a generic term for any internet phone, and as a result it could lose it rights in the mark. Regardless of whether this case is settled or litigated, Apple has put Cisco in a position where it must take some action to enforce and preserve its rights.

One Big Marketing Ploy?

As interesting as the trademark issues are in this case, what is more remarkable is the attention this dispute has created for both products. The Cisco product has been around for some time, yet this current media focus has certainly raised the level of awareness regarding its product. In the case of Apple, the trademark publicity has garnered even more attention than it would have with just the product release alone. Even if Apple does elect to change the name of the product, the trademark dispute has created enough of an additional product buzz, that the legal and marketing costs associated with the name change, the legal dispute and any resulting damage claims may be well worth the cost. While it is unlikely that either party moved into this dispute with an eye on marketing, the end result could be heightened product interest for both parties.

This will be an interesting case study to watch from both the legal and marketing perspective.

Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. Caroline Horton Rockafellow concentrates her practice in the representation of entrepreneurial and technology-based business, focusing on corporate, technology and licensing matters. Questions or Comments can be sent to crockafellow@d2vlaw.com