Being McNaughty: McDonalds v. McFest

Lauren McClusky, 19, raised more than $30,000 for the Chicago chapter of the Special Olympics by hosting a series of McFest concerts in 2007 and 2008. In 2009, she had to use those funds for attorney fees after McDonald's Corp. laid claim to all things "Mc."

It doesn't matter that McClusky's mark, which was filed in June 2008, and published for opposition in February 2009, bears no resemblance to the golden arches. McDonald's has taken the position that "McFest" is similar enough to the brand name McDonald's and its family of 'Mc' trademarks that it is likely to cause confusion under trademark standards and/or dilute its valuable trademark rights.

Based on the illustrations above, it seems to be a slow day for McDonald's attorneys. Primarily in the last ten years, McDonald's has indeed filed dozens of trademark applications for "Mc" names and various combinations with the letter "M." Many of those names (such as McPick, McMax, MCDTV, McMiracle Field) are all dead; cancelled or abandoned. So what makes this one different?

"We have made several attempts to resolve this matter amicably, because we recognize this event is for charity fund-raising," said Ashlee Yingling, spokesperson for McDonalds, in a statement to NBC Chicago. "We have offered to help the event organizers cover costs in selecting a new name for their event; we have suggested other variations of this word that they could use."

Unrelated names don't dilute brands, but poorly thought out legal action might.

The majority of stories and posts centered on this trademark scuffle are largely negative, especially in Chicago. The Consumerist asks Are all things "Mc," automatically McDonald's? The Chicago Sun-Times points out that McDonald's has deep pockets for a legal fight. And Market Watch might have investors wondering why MCD would waste potential McDividends.

That is not to say all the stories are negative. The Legal Satyricion sides with the corporate claim, arguing that McDonald's has not filed to prevent the name from being used. It merely filed an opposition to McClusky’s attempt to secure a trademark registration for “McFest.” Boo hoo McClusky, they said.

While it is a good point (and I'm not an attorney), the opposition could become boo hoo for McDonald's. A ruling against the opposition, which could happen given McClusky's name also has an "Mc" and she is not entering a competing service (like a restaurant chain), potentially opens the doors for more "Mc" usage, not less.

At minimum, there is that public relations cost to consider. While companies have every right to protect their brands, it seems to me that the only one making the connection that McFest would have anything to do with McDonald's is McDonald's. And now, because of the publicity around the opposition, the company has created the implication that the two are somehow connected. They weren't.

So, legal questions aside, one has to wonder whether McDonald's is diluting its own brand at a time when it is much more prudent to keep focusing on those fourth quarter profits (up 23 percent). It could have been just as easy to allow "MC FEST," which was limited to a company organizing, arranging, conducting, and producing concerts and live events, to peacefully coexist. And, given the charity, McDonald's may have elevated the brand by eventually supporting the teen.

Ratcheting Up The Language: iPhone

If you think corporate image and brand positioning should be consistent, then no one can accuse Cisco and Apple of not knowing who they are in their public battle over the "iPhone" trademark. The language their executives use in discussing the iPhone trademark dispute tells a story behind the story.

"We've been following our iPhone trademark issue in the blogosphere closely and it's been interesting to see the commentary from some posters suggesting that somehow Cisco either in the US or Europe didn't meet the requirements to maintain the iPhone trademark. Our response is pretty simple: We have met all elements required by all authorities to maintain our mark. We've been pretty direct about the fact that we've been shipping the iPhone since last spring." — John Earnhardt, Cisco, on their blog.

"It's silly." — Tim Cook, Apple, about Cisco's lawsuit during a conference call with analysts today. He also noted how several companies use the same iPhone name for their Internet-based phones.

Courting Brand Value: iPhone

Some writers shy away from attorneys, but I never have. They almost always lend an interesting perspective on communication. Sure, there are a few who get carried away with calling themselves “wordsmiths,” but the one who left a comment on my last Apple vs. Cisco post is not one of them.

If you missed it, Rick suggested the real question will be whether the term iPhone will be considered a trademark or generic term for a type of telephone.

“This question ultimately turns on the understandings of the relevant consumer market,” he wrote, “So I expect Apple and Cisco to introduce consumer surveys in addition to evidence from dictionary and media sources and references to the status of other ‘i-noun’ terms.”

If that is the case, it seems to me that Apple’s apparent dominance over “i” anything may carry the day, because the public seems to want the Apple phone to be an iPhone. Likewise, there seems to be public resistance to the Cisco iPhone, even after it was explained that it owned the trademark. Of course, that is a communication observation; a judge could just as easily rule against Apple and that would be that, er, until the appeal.

On the communication front, we ask, to what end? Sometimes you can win a lawsuit but lose consumer appeal.

In attempting to address “what is,” it seems to me that Cisco has two battles on its hands. It wants to win the lawsuit because it acquired the iPhone trademark in 2000 after completing the acquisition of Infogear, which previously owned the mark since 1996. But, I suspect, it also wants to win over public perception that this is the right thing to do.

"Cisco entered into negotiations with Apple in good faith after Apple repeatedly asked permission to use Cisco's iPhone name," said Mark Chandler, senior vice president and general counsel, Cisco. "There is no doubt that Apple's new phone is very exciting, but they should not be using our trademark without our permission.”

Outside the courtroom, it becomes tricky. First, Ed Bernette at ZD Net wrote an interesting article on the case, noting that Cisco may not own the mark as claimed. Second, in order to sway public opinion on this issue, someone is going to ask under what terms was Cisco willing to grant Apple permission to use the name iPhone. And third, if it was in negotiations over the name, why did Cisco suddenly make a push on a complete line of iPhone products?

According to the aforementioned article, it had to push iPhone products: “If Cisco didn't launch a product using the iPhone name, their trademark registration would be canceled and they would have no bargaining chips with Apple. So in order to keep the trademark active, they had to file the Declaration of Use, and start selling a product under that trademark.”

Add to all this a recent blog post from Chandler: “Was it money? No. Was it a royalty on every Apple phone? No. Was it an exchange for Cisco products or services? No.”

While the post shows how seriously Cisco takes public perception, it also focuses more attention on that other unanswered question: what were the terms that prompted Apple to abandon negotiations and launch an “iPhone” without an agreement? Or was it something else, an eureka moment from Apple’s legal team perhaps, that killed the deal?

At the moment, only a few know. What the public knows is that several people have laid claim to iPhone over the years, including a Toronto-based company that has been marketing voice-over-Internet services under the registered trademark iPhone since 2004 and even has a wireless device called iPhone Mobile.

How a 2004 claim could potentially supersede Cisco’s claim, I am not sure (unless the ZD Net article is right). However, based upon the comment contribution referenced earlier, it could potentially assist Apple if Apple is looking to turn the trademark iPhone into a generic term, which it may or may not do.

What we also know is that Apple and Cisco have appealed their cases to the public; Apple by releasing its product as an iPhone and Cisco by publicly stating it expected Apple was onboard with those mysterious terms. How good a case both sides can make to the public will be decided by the public or perhaps by investors, who never like to hear the term lawsuit associated with their investments, especially when risks seem to outweigh the advantages.

Sure, Cisco is right to challenge Apple over a trademark it considers an asset. Apple is also well within its rights to look for some wiggle room on a name that has been associated with its product concept before it even landed on the drawing board. But given that the courtroom is not the only place both companies have made a case, public perception may weigh in more heavily than the letter of the law. That’s not good, bad, or indifferent — that is "what is."

All the while, both companies have to be careful not to damage their respective brands that have far and away more value than the potential brand value of an “iPhone.”

Branding Term Primer: iPhone

According to BusinessWeek, Cisco Systems Inc.'s global brand value tops $17,532 million whereas Apple Inc.'s global brand value is $9,130 million. Both have seen gains in the last year, with Apple moving up almost 14 percent.

With Cisco now suing Apple over use of the name "iPhone," something I intend to dig deeper into on Tuesday, the terminology might get a little muddled, given that people in the communication and advertising industry often use pertinent terms interchangeably without meaning to (myself included). Here's a quick term primer that might help keep it straight:

1. A brand refers to the general impression of a person, place, or company (total global awareness of the brand, along with the net sum of positive and negative impressions).

2. A logo is the design and/or name that represents the brand.

3. A trademark is a logo and/or name that has been registered with the United States Patent and Trademark Office or other government trademark offices.

4. A mark is the design element of the logo, apart from the name (eg. the Nike swoosh).

5. An identity is the presentation of company's communication material, which usually includes the logo (eg. an identity package).

This may be helpful in the months ahead as Cisco and Apple spend millions of dollars in a high-stakes legal battle over the "iPhone" trademark. However, if it gets equally ugly outside of the courtroom, the trademark may cause both companies "brand" damage.

Branding Agreement Soon: iPhone

On December 19, I posted about a potential brand war over the trademark "iPhone" shortly after Linksys (a division of Cisco Systems, Inc.) launched an "iPhone" family of products.

Reuters reported that Cisco Systems Inc. expects to reach an agreement with Apple Computer Inc. later today on its "iPhone" trademark. They said it shortly after Apple unveiled a phone with the same name.

So why would Cisco reach an agreement with Apple after fending off so many foes from grabbing up the "iPhone" brand? In the December post, I said that Apple would be wise to sit this one out (they did for awhile without comment), letting others fight it out for the right to use a trademark that Apple might not own, but clearly dominates. Today, Steve Jobs showed the world how much it dominates "i" anything by releasing the product before any agreement was signed.

While Apple could have easily called it something else, I am not surprised. Apple is no stranger to the value of a brand nor litigation over brands. In fact, Apple's earliest court action dates to 1978 when Apple Records, The Beatles-founded record label, filed suit against Apple Computer for trademark infringement, a case that has resurfaced several times over the last few decades. You can read more about it at Wikipedia.

It just goes to show you that — right, wrong, or indifferent — owning a trademark and owning a brand are two different things. And today, it's very obvious that Apple knows it too. Clearly, Cisco does too.

Branding Wars Ahead

What's in a name?

Last July, BusinessWeek reported that Apple's global brand value was up almost 14 percent over 2005, placing it 39th among all globally recognized brands. The publication also estimated Apple's total brand value at almost $9,130 million, fueled largely by stylized iPod, iTunes, and iMac product lines. With that in mind, it was no surprise that Apple was rumored to be releasing an "iPhone" sometime in 2007.

What is a surprise: Linksys (a division of Cisco Systems, Inc.) launched an "iPhone" family of products for the holidays. But, despite boasting Internet services that use Skype and Yahoo! Messenger, most reviews have been less than stellar and include the added pressure of Cisco being accused of "stealing" an Apple brand identifier.

Russell Shaw over at ZDNet has a comprehensive overview of the proceedings (which does not include Apple) along with various filing reports. What he did not note, however, was that Cisco filed its "iPhone" trademark 10 years ago, with the mark published for opposition as early as Dec. 1998. That seems to predate most Apple "i" products, with exception to the iMac.

Still, it's a safe bet that Apple is hoping the Linksys phone might eventually get an unfriendly call from the U.S. Patent and Trademark Office, which is currently sorting through four "live" trademark assignments that include "iPhone" or derivative terms. It seems to me that Apple's wish would have less to do with the name of its future phone and more to do with any brand damage caused by a Linksys "i" product that is less phone (as the original application suggested) and more VoIP.

Simply put, Apple might not want to be associated with it. Even more ironic, Cisco's decision to rightfully use a trademark it has owned for 10 years might backfire anyway, forcing the company to spend millions in repackaging. You see, while the "iPhone" might be their trademark, Apple's brand mastery over "i" products has grown exponentially in 10 years.

In the end, Cisco, right or wrong, knowingly or unknowingly, has started a brand war. And, like all wars, there is hardly ever a clear winner when the smoke settles and investors wonder what they got for it. It seems to me that Apple would be wise to sit this one out, letting the others fight it out for the right to use a trademark that Apple might not own, but clearly dominates. Besides, Apple may have never intended to call its product an "iPhone" anyway.

Protecting Intellectual Property

With the recent spike in Website and blog visitors looking for information on 'copyrights' and other intellectual property rights such as patents and trademarks, I thought I would take a moment to point out one of several resources: Patents, Copyrights & Trademarks

Patents, Copyrights & Trademarks For Dummies explains, in layman’s terms, the basic nature, function, and application of intellectual property (IP) rights, including how you can acquire those rights, wield them effectively, or exploit them through licensing agreements and other rewarding adventures. This book covers all of these critical concepts, including working with IP professionals, presenting a patent explanation, determining what is copyrighted and what isn’t, protecting your commercial identity, and where to go for the appropriate government forms.

To clarify, our company is sometimes misidentified when people misspell 'copyright,' as in to obtain a copyright, as opposed to copywriting, which is trade term for writing commercial 'copy' or words for advertising, marketing, and communication. We've also included a link to this informative book on a variety of intellectual property issues (under the Biz Book Shelf).