What is perhaps one of the most useful and innovative creations ever developed is also a great source of mystery as to the way it will be dealt with in the future.  This useful yet mysterious creation is the Internet.  It has provided a way for the United States military to communicate with other departments regarding matters of national security to allowing the everyday user to read a review of the newest movie.  It has also become prevalent in the area of commerce, typically referred to as e-commerce.

 A main issue that has not been considered in any great detail is exactly what body of law will regulate the Internet.  While it is possible to apply various fields of law to the Internet, the area of Internet law is ever increasing to meet the need that has been created.

 One area of law that has been greatly affected by the advent of the Internet is trademarks.  A trademark is “a word logo or package design, or a combination of them, used by a manufacturer or merchant to identify its goods and distinguish them from others.”   As with most laws, trademarks are designed to protect the public.  In this situation, trademarks are designed to protect the public from confusion regarding the source of a product as well as to protect the good will of a company that has established a reputation with the public through the use of its mark.

 As with all other types of law, trademark law has its own unique doctrines and rules that are used when deciding cases that deal with a certain issue.  One such rule that is greatly affected by the Internet is the Dawn Donut Rule.  The Dawn Donut Rule will be discussed in greater detail, but for the moment, it is important to note that it deals with concurrent trademark holders conducting business in two geographically different regions.

 The following example will better explain the basic principle of the rule.   A trademark holder in New York could have a trademark that he uses for his business on the East coast, while another trademark holder in Iowa owns the same trademark, but only does business in the state of Iowa.  The aforementioned rule outlines why it is possible for two people to own the same mark simultaneously, what restrictions are applied and when the junior mark has to be canceled due to encroachment into the area of one holder by another.

 Due to the ever-changing nature of the Internet and the impact it has on everyday life, there will most certainly be legislation that arises to regulate the Internet as well as to simplify any legal issues by indicating what forum the trial will take place in.

 One such issue is that of sales tax.  Currently, if a consumer purchases an item on the Internet and the business is not located in the purchaser’s home state, there is no sales tax.  As a result, many consumers are able to avoid paying tax by purchasing items on the Internet.  This most certainly will change, for it could be argued that by looking at a business’ merchandise on the Internet, the business is therefore located in your state as well as every other state for that matter.  It is this concept that has the greatest impact on the trademark doctrines.

 There has been some legislation pertaining to the Internet.  One example is the Internet Tax Freedom Act, which creates a moratorium on sales tax for Internet transactions that is to last for three years while time is provided for the expansion of the Internet since it is in a fledgling state.

 But before an in depth examination into those doctrines is begun, it is important to get an understanding of the origins of the Internet and where it is heading.

 As with most technological advancements, the Internet has its origins with the military.  The history of the Internet has its roots in the 1960s when the Department of Defense started to explore the idea of having a computer network that could be used for secure communications.   It is interesting to note that the creation was an international project at first.  But it is made clear that the military took over in the book Inventing the Internet by Janet Abbate.  The book states, “Although the design of the Internet came from the international computer research community, the actual implementation was done under the auspices of the U.S. Military.”

 The Advanced Research Projects Agency (ARPA) was created to conduct research on ways to create a computer network.   One of the precursors to the Internet was the ARPANET that arose out of the efforts of the ARPA agency.  The ARPANET involved a series of computer networks.  The problem though, as stated in the Internet Book by Douglas Comer was that, “In essence, each network formed an isolated island that connected a set of computers, with no path between the islands.”   While there was a system of networks, they were not part of one large network, so the ultimate goal had not yet been realized.  As a result, “ARPA funded research to investigate ways to solve the problem of incompatible networks.  Both the project and the prototype system that researchers built became known by the name Internet.”

 There are two programs that the Internet uses that are of significant importance.  The following quote explains this best.  “Two pieces of the Internet software stand out as particularly important and innovative.  The Internet Protocol (IP) software provides basic communication.  The Transmission Control Protocol (TCP) software provides additional facilities that applications need.”

 After a prototype Internet was tested in 1982, it was not until the following year that the Internet was put into wide use.  “In the beginning of 1983, ARPA expanded the Internet to include all the military sites that connected to the ARPANET.  The date marked a transition for the Internet as it began to change from an experiment to a useful network.”

 As previously stated, before the Internet became so widely used as it is today, its original use was for military use as well as to facilitate academic research.  But as progress continued, the Internet was taken over for the most part by the military.  All that was to change in 1982 when the Internet was split into two networks.  “The new arrangement meant that the ARPANET was once again a research oriented network dominated by universities.  This would make it much easier to imagine transferring the network to civilian control.”   This goal was further facilitated by the commercialization of the Internet technology.

 It is interesting to note that it has been predicted that the Internet will at some point collapse due to certain technologies reaching their limit.

 However, some of these predictions have come and gone, much like the concern over the Y2K bug.  It has also been stated that the Internet is a finite entity in that it has a limit, but the limit will be reached when approximately twenty times the amount of computers currently in existence are connected simultaneously.   Certainly with improvements in technology, this will not be a problem, even if that many computers were to be connected, but the likelihood of that number ever being reached is improbable.

 It is also important to note that the above look into the origins of the Internet is a very cursory one at best.  It would require much more space and technological jargon to fully appreciate the intricacies that are involved.

 The first rule that is to be examined is the Dawn Donut Rule.  This rule was created in the Dawn Donut Company v. Hart’s Food Stores, Inc.   In order to fully appreciate the rule that arose from this case, it is necessary to understand the facts that lie therein.

 The issue at hand involved the Plaintiff, Dawn Donut Company (Dawn), who furnished certain buyers with mixes, advertising and packaging material bearing the trademark “Dawn.”   These items were shipped to customers in New York from the company’s base of operations which were located in Michigan .

 The mark in contention is “Dawn,” which Hart adopted without any knowledge of Dawn’s prior trademark registration.   However, they did have constructive notice under the Lanham Act which pertains to trademarks.  Constructive notice refers to the idea that even though Hart unintentionally adopted the same mark as Dawn, they should have checked the trademark registry to verify whether or not that mark was currently in use.

 During 1926-1927, Dawn entered into the region of New York and its business was confined to areas not less than 60 miles from the defendant’s trading area.   However, after this time, they did not use their trademark.  The court stated,

 The primary difficulty arises from the fact  that although plaintiff licenses purchasers of its mixes to use its trademarks in connection with the retail sales of food products made from the mixes, it has not licensed or otherwise  exploited the mark at the retail level in  defendant’s mark area for some thirty years.

 In order to keep a trademark, it is required to maintain its use.  If it lies dormant, the trademark expires.  Therefore as pertains to this region, the mark was essentially expired, even though it was in use in other regions.

 The Defendant, Hart Food Stores, Inc. (Hart), owned and operated a grocery store chain located in the New York counties of Monroe, Wayne, Livingston, Genesee, Ontario and Wyoming.  Hart’s products were confined to an area within a 45 mile radius of Rochester.

 Dawn brought this action to enjoin Hart’s use of the same mark on the basis that Dawn was the senior user, meaning that it was the first to register the mark.  As a result, Hart is considered the junior user.

 At one point in the case, there was a mention of the fact that Dawn did in fact conduct business in the Rochester area which was in the trading region of Hart.  However, it was proven, to the detriment of Dawn, that none of the transactions involved the use of the trademark.   This was harmful to Dawn’s case for the reason that there was no likelihood of confusion, for there was no use of a mark with which to be confused.

 The court held,

that because no likelihood of public confusion arises from the concurrent use of the mark in  connection with retail sales of doughnuts and other baked goods in separate trading areas, and because there is no present likelihood that  plaintiff will expand its retail use of the mark into defendant’s market area, plaintiff is not now entitled to any relief under the Lanham  Act.

This is not to say that the defendant has acquired any permanent right to use the mark in its trading area.  On the contrary, we hold that  because of the effect of the constructive notice  provision of the Lanham Act, should the plaintiff  expand its retail activities into the six county area, upon a proper application and showing to the district court, it may enjoin defendant’s use of the mark.

 The reasoning for this is that as long as the two users are in different regions, there can be no likelihood of confusion as to which company the mark is identifying.  But when the senior user moves into the area occupied by the junior user, a likelihood of confusion is created and in order to protect the consumer, the junior user is prevented from the continued use of said mark.  This may appear unfair on the face, but it is important to remember that at all times the junior user could have checked the registry to determine if their intended mark was already taken or not.

 The implication the Internet has on this rule is severe.  As discussed, the senior and junior user can have concurrent trademarks as long as they conduct business in different locations.  However, the problem arises when these companies conduct business on the Internet.  To use the hypothetical from the beginning of the paper, there is one trademark holder in New York and one in Iowa who both have the same trademark.  Normally, there would be no chance of a likelihood of confusion due to the vast expanse of miles between the two states.  However, now change the hypothetical with both companies having a web site through which they both offer their wares.  Now both companies, with the exact same trademark are in a position that will certainly cause confusion to the consumer.

 Confusion would arise when a consumer uses a search engine to find the supplier of a particular product.  It is important to understand how a search engine works in order to understand the implications of this problem.

 When a company sets up their web site, several keywords are used to describe the site.  These words are not visible to the casual Internet user as they are in the underlying codes.  The search engines operate off of these codes when people are trying to find a site.  For example, the company that sells Ajax dish cleaning products might use the keywords; Ajax, dishes, cleaning, household, etc.

 The problem of confusion arises when two companies using the mark Ajax set up a web site and a consumer types in “Ajax” into a search engine.  The engine then brings up all the sites that has the word Ajax in the list of keywords.  The consumer will then see a list of web sites that relate to Ajax.  It is quite possible that the company who is the junior user will be first on the list, while the senior user is second.  The consumer will be confused as to which is the exact one they are looking for, but if the products are similar, it will not matter to the consumer which site they go to first.  However, this violates the rights of the senior trademark holder who originally created the trademark and has established good will with the consumers.

 A recent case involves an issue similar to the aforementioned hypothetical.  The case is Interstellar Starship Services, Limited v. Epix Incorporated.   Epix is a manufacturer and seller of video imaging hardware and software and also provides a consulting service to their customers regarding their products.   Epix registered the mark “EPIX” with the United States Patent and Trademark Office (PTO) in 1990.

 Six years later, Interstellar Starship Services (ISS) applied for registration of the mark “EPIX” as a trade and service mark for use on computer graphics design services and computer graphics.  The application was denied by the PTO, as it was currently in use.

 It came to Epix’s attention that ISS had Epix.com registered as a domain name.  As they felt this was a violation of their mark, they requested that Network Services, Inc. (NSI) cancel the registration.   NSI is the registrar of domain names and is therefore the one that has the ability to grant and cancel domain names.

 The court record mentions the policy of NSI which states, “Under NSI’s domain-name dispute policy, when Epix supplied NSI with a certified copy of its registration of the ‘EPIX’ trademark, NSI informed ISS that it would lose its right to use ‘epix.com’ unless it could present NSI with a declaratory judgment of non-infringement of Epix’s trademark.”   The trial court found for ISS.  However, for reasons to be examined, the United States Court of Appeals for the 9th Circuit reversed the decision.

 In the trial court, summary judgment was granted for ISS, but the 9th Circuit stated,

Under federal trademark infringement law, 15 U.S.C. S 1114 (1994), federal unfair competition law, 15 U.S.C. s 1125(a) (1994), and Oregon common law of trademark infringement, Epix can defeat summary judgment by placing evidence on
 the record tending to ‘establish that ISS is using a mark confusingly similar to a valid,  protectable trademark of Epix’s.

 Further expanding upon this idea the court stated, “Testimony and ISS server logs indicate that numerous Epix customers reached the ‘epix.com’ web site when searching for Epix on the internet.  At the very least, as the district court acknowledged, this is substantial circumstantial evidence of initial customer confusion.”

 This evidence indicates that customers were misled by ISS’s use of the domain name of epix.com for they thought by typing in epix.com they would naturally go to the web site of Epix.

 In addition to determining there was an issue of confusion, the court employed the Sleekcraft factors from AMF, Inc. v. Sleekcraft Boats.   The Sleekcraft factors are used to determine whether or not a likelihood of confusion exists.  Only two of the factors need be examined.  The rest of the factors will be explored in greater detail later.

 The first factor that played an important part in the courts decision was factor number one which is the “similarity of the conflicting designations.”   The court concluded that ISS’s mark was “for all intents and purposes, identical in terms of sight, sound, and meaning to Epix.”   This was clearly the right choice for one mark was EPIX and the other was epix.com, clearly blurring the distinction between the two companies.

 The second factor that was employed was factor number four which is “marketing channels used.”   The court stated that “because both ISS and Epix market on the internet, the marketing channels are identical.”   Since both companies used the same “channels” of business, there was certainly a likelihood that confusion would arise due to the proximity of the two companies marks.

 As stated, the court found for Epix by reversing the trial courts decision of granting summary judgment for ISS.

 The aforementioned case illustrates the idea that even though these were two different companies, located in two geographically different regions, it was not possible for there to be a concurrent holding of trademarks due to the companies’ use of the Internet.

 Because these companies were both on the Internet, everyone in every region had access to them, which was a source of confusion to consumers as discussed in the case.

 One of the impending issues that will need to be decided is whether or not by conducting a business on the Internet you are actually operating within each state, or if it will be treated as a separate entity.  One drawback of treating e-commerce business as operating in each state sets up the companies to greater liability, for consumers will be more likely to bring a suit when they have jurisdiction in their home state.

 It seems certain that this will be the outcome, for a magazine publisher is subject to liability in all of the states in which its magazine is sold due to the minimum contacts that it has with each state.  The same principle should apply to e-commerce for they are setting themselves forth to conduct business in each state and therefore should be subject to jurisdiction in all of the states.

 This is perhaps not desirable for it may discourage people from conducting business on the Internet if they will have to waste resources to defend themselves from frivolous cases that could be filed in every state.

 In light of the prior issues discussed, it would seem certain that the Dawn Donut Rule has no place in a world where the Internet exists.  At one time, when the Internet did not exist, it was possible for concurrent trademark holders to co-exist due to the fact that if they were geographically removed from each other, then there was virtually no possibility that the customers in either region would be confused with which goods were produced by which company.  However, now that the Internet exists and geographical boundaries cease to exist, the likelihood of confusion is ever prevalent if two companies share the same, or even a similar mark.

 The problem is exacerbated by the use of the search engine which can easily cause people to be misled depending on what keywords are incorporated into the underlying codes of the web site in question.

 In order to deal with the ever increasing problem of concurrent trade marks between senior and junior users and to protect consumers from confusion, there are certain steps that need to be taken.

 First, it is important to abolish the notion of the Dawn Donut Rule, with limited exceptions.  If two companies both use the Internet to conduct business, then the Dawn Donut Rule should not apply, for they are for all intents and purposes, everywhere at once.  However, if neither of the companies are on the Internet, which the likelihood of this occurring is dwindling each day, then the Dawn Donut Rule should still apply, for the Internet would have no bearing on them and they would still be limited to their regions.

 Also, it would seem reasonable that if an issue arose between a senior user who was not on the Internet and a junior user who conducted business on the Internet, the rule should apply in order to enjoin the junior user.  The reasoning behind this is that by using the Internet, the junior user would be intruding upon the region of the senior user, for any customer in that region might try to find them on the web and by only finding the one site, would be misled into thinking it was the one they were looking for.  This also would siphon business off of the senior mark holder.

 Secondly, it would be advisable to treat a business that operates on the Internet as if it had a base of operations in each state, thereby subjecting it to liability in each state.  This would further support the idea of the almost complete abolishment of the Dawn Donut Rule for business’ on the Internet would truly be operating in every geographical region of the United States and therefore, there could be no concurrent trademark holders for there would most certainly be a likelihood of confusion.

 It is desirable to treat these business’ in this way for it provides an incentive to act in a way that best serves the consumer.  If companies were allowed to run rampant on the Internet, they could defraud consumers without having to worry about a consumer going through the trouble of filing a claim in the state of the business.

 The third step would be to incorporate the Sleekcraft Factors.  These factors would be used to determine what the likelihood of confusion would be and whether or not to enjoin the junior user from using the trademark.  again, the factors are found in  AMF, Inc. v. Sleekcraft Boats.   They are:  [1] Similarity of the conflicting designations; [2] relatedness or proximity of the two companies’ products or services; [3] strength of companies’ mark; [4] marketing channels used; [5] degree of care likely to be exercised by purchasers in selecting goods; [6] companies’ intent in selecting its mark; [7] evidence of actual confusion; and [8] likelihood of expansion in product lines.

 In implementing these factors, it is important to note that some of these factors will be weighted more heavily than others and that there are modifications that need to be made.

 Factor [1] states, “Similarity of the conflicting designations.”   This factor is important in determining how similar the web sites names are and to what degree that would cause confusion amongst consumers.  If two companies have the same mark and therefore have web sites with slight variations on the mark, it is quite likely that the consumer would be confused as to which company was which.

 Factor [2] pertains to the relatedness or proximity of the two companies’ products or services.   This is one of the weaker factors, in that if two concurrent trademark holders are on the Internet, consumers will be subjected to the possibility of going to the wrong web site due to the fact that the marks are the same.  Therefore, it is not entirely relevant as to the relatedness of the products between the two holders.

 The question of the proximity of the products, as interpreted in this situation, relates to the geographical location of the two holders. This is irrelevant, for as discussed previously, if the two holders are on the Internet, it does not matter whether or not they operate in the same region or not.

 The third factor deals with the strength of the companies mark.   This is useful for standard issues of trademark law, but is not entirely relevant to the effect the Internet has on the issues of concurrent trademark holders and the confusing effect that this has on consumers.

 Factor [4] incorporates the idea of the marketing channels that are used by the companies.   This is an important factor, for by conducting business on the Internet, the marketing channels being used by each company is identical.   Therefore, there is a great likelihood that consumers will be directed to the wrong web site in their searches.

 The fifth factor states, “degree of care likely to be exercised by purchasers in selecting goods.”   This factor was downplayed in Interstellar Starship Services, Limited v. EPIX Incorporated  for the reason that an educated customer who is in the market to purchase high priced items will eventually get to the right web site.  That is not the issue in the current scenario, as the point of these steps is to set a guideline for determining whether or not the concurrent marks pose a problem by co-existing on the Internet.  This is another factor that is useful for standard trademark law, but really has no application in these proposed steps.

 The sixth factor examines the companies intent in selecting its mark.   There are two ways that this factor can be interpreted.  The first is that it has no bearing on whether or not a senior mark holder can enjoin a junior user for the reason that the two companies may not have even heard of each other in their decision to adopt a particular mark, which leads to the inevitable conclusion that intent is irrelevant in this regard.

 However, if it can be proven that a company used bad faith in their adopting the same mark as another to confuse the public, a provision for the appropriate damages should be created to prevent usurpers from confusing the public as well as siphoning off the goodwill of another mark holder.

 Factor [7] pertains to evidence of actual confusion.   This is the last factor that mainly has its roots in trademark law.  While the issue of confusion is important, as that is what is trying to be prevented, the fact remains that as discussed in relation to search engines, if two concurrent mark holders are on the web, confusion will arise.  Therefore, a junior user would have to be enjoined regardless of whether the amount of confusion was minor or of immense proportions.

 The eighth and final factor explores the issue of the likelihood of the expansion in the product lines of the companies.   The analysis of this factor is similar to that of factor [7] in that the fact of the matter is that there cannot be two holders of the same mark on a channel of advertising that has no borders.

 The aforementioned steps would provide a valuable framework in helping to determine what must be done in regards to concurrent trademark holders in the age of the Internet.  The proposed steps also reveal that the Dawn Donut Rule has become stale and no longer applicable in a world where concurrent users are not separated by geographical boundaries as the Internet has none.

 As discussed, the Internet is still a mysterious entity that currently really has no concrete body of law to help govern it.  What is used to sort out the Internet is basically a conglomeration of existing forms of law.  However, the Internet and its users would be best served by a new area of law.

 In addition, new legislation needs to be created to help lay the groundwork for this new area of law that needs to be created.

 There need not be any concern that the Internet is going to unfairly cause junior users of marks to be enjoined from using the mark. The fact that technology has brought the Internet into existence which has rendered doctrines such as the Dawn Donut Rule and in most circumstances the notion of concurrent trademark holders null and void is unavoidable.  One key step that all junior users should follow is to check with the PTO registry to determine whether or not a mark has been taken.  With the advent of the Internet and the impending obsolescence of concurrent mark holders, there should be no defense against not verifying with the registry whether a desired mark is in use or not.

[NOTE: The word processor version of this paper numbers the endnote calls in the text and the endnotes. Although the endnotes are here, the numbering of endnote calls, and endnotes, was lost in the transposition to HTML.]

Jane Ginsburg et al, Trademark and Unfair Competition Law (Virginia:  Michie Law Publishers, 1996) pg 44.
Internet Tax Freedom Act of 1998 (Public Law 105-227)
Douglas E. Comer, The Internet Book (New Jersey:  Prentice Hall, 1995) pg 54.
Janet Abbate, Inventing the Internet (Massachusetts:  The Mit Press, 1999) pg 113.
Comer, pg 54.
Comer, pg 54.
Comer, pg 55.
Comer, pg 55.
Comer, pg 55.
Abbate, pg 143.
Abbate, pg 143.
Comer, pg 71.
Comer, pg 71.
Dawn Donut Company v. Hart’s Food Stores, 267 F.2d 358 (N.Y. 1959)
Id. at 362
Id. at 362
Id. at 362
Id. at 362
Dawn Donut Company v. Hart’s Food Stores, 267 F.2d 358, 361 (N.Y. 1959)
Id. at 362
Id. at 362
Id. at 361
Id. at 361
Interstellar Starship Services, Limited v. EPIX Incorporated, 184 F.3d 1107 (Or. 1999)
Id. at 1109
Id. at 1109
Id. at 1110
Id. at 1110
Interstellar Starship Services, Limited v. EPIX Incorporated, 184 F.3d 1107, 1110 (Or. 1999)
Id. at 1110-1111
Id. at 1111
Id. at 1112
AMF, Inc. v. Sleekcraft Boats 599 F.2d 341 (Ca. 1979)
Id. at 348
Interstellar Starship Services, Limited v. EPIX Incorporated, 184 F.3d 1107, 1111 (Or. 1999)

AMF, Inc. v. Sleekcraft Boats 599 F.2d 341, 348 (Ca. 1979)
Interstellar Starship Services, Limited v. EPIX Incorporated, 184 F.3d 1107, 1111 (Or. 1999)

AMF, Inc. v. Sleekcraft Boats 599 F.2d 341 (Ca. 1979)

AMF, Inc. v. Sleekcraft Boats 599 F.2d 341, 348-349 (Ca. 1979)
Id. at 348
Id. at 348
Id. at 348
Id. at 348
AMF, Inc. v. Sleekcraft Boats 599 F.2d 341, 348-349 (Ca. 1979)
Id. at 349
Interstellar Starship Services, Limited v. EPIX Incorporated, 184 F.3d 1107 (Or. 1999)
AMF, Inc. v. Sleekcraft Boats 599 F.2d 341, 349 (Ca. 1979)
Id. at 349
Id. at 349