Spotify Smokes Potify

15 Jan Spotify Smokes Potify

Spotify AB (“Spotify”) has prevailed in two opposition proceedings it brought against the registrations of two POTIFY marks, which were applied for by U.S. Software Inc. (“U.S. Software”), in connection to its Potify platform. According to U.S. Software, Potify is “a backend software platform designed for legal marijuana dispensaries to market and sell their products.”

In support of its oppositions, Spotify made three claims against that the POTIFY marks, namely, likelihood of confusion with the SPOTIFY mark, dilution by blurring of the SPOTIFY mark, and dilution by tarnishment of the SPOTIFY mark. The Trademark Trial and Appeal Board (TTAB) ruled in Spotify’s favor only looking at the dilution by blurring ground.

Dilution by blurring

According to Section 43(c) of the Trademark Act:

“the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring … of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.” 15 U.S.C. § 1125(c)

The TTAB has established four requirements for a trademark owner to demonstrate likelihood of dilution by blurring. In the context of the oppositions at hand, Spotify had to show that (1) it owns a famous mark that is distinctive, (2) U.S. Software is using a mark in commerce that allegedly dilutes Spotify’s famous mark; (3) U.S. Software’s use of its mark began after Spotify’s became famous; and (4) U.S. Software’s use of its mark is likely to cause dilution by blurring.”

SPOTIFY’s distinctiveness and fame

The TTAB had no problem finding that the SPOTIFY mark is distinctive, “both inherently, and by acquisition as a result of widespread use and consumer recognition.” It further noted that “it is a coined, fanciful term.”

On the issue of whether Spotify’s mark is famous, the TTAB looked at the statutory factors outlined in 15 U.S.C. § 1125(c)(2)(A), namely, Spotify’s advertising and sales, the extent of actual recognition of the mark, and the SPOTIFY mark’s USPTO registration. Again, the TTAB has no problem finding that, “by any and all measures, SPOTIFY is exceedingly famous.”

U.S. Software claimed that the SPOTIFY mark has not become famous by the time it first used the POTIFY mark, that is, January 1, 2017. The TTAB dismissed this claim, nothing that “the large number of pre-2017 Spotify [monthly active users] alone” justified such a finding.

Likelihood of causing SPOTIFY’s dilution by blurring

Spotify’s allegation of dilution was in itself sufficient to satisfy the second requirement. Finding that the use of POTIFY was likely to cause dilution by blurring, the TTAB again looked at statutory factors, this time laid out in 15 U.S.C. § 1125(c)(2)(B)(i-vi).

First, it noted that the POTIFY marks “are highly similar in their entireties.” Second, with regard to SPOTIFY’s distinctiveness, the TTAB indicated that U.S. Software “does not dispute that SPOTIFY is highly distinctive,” while clarifying that it nonetheless “is among the most highly recognized marks in the United States.”

While U.S. Software did not address Spotify’s exclusive use of SPOTIFY, the TTAB highlighted that the company “enforces its rights in the SPOTIFY mark vigorously, including through demand letters, and domain name and [TTAB] proceedings.” Addressing the issue of recognition, the TTAB opined that “few marks are as widely recognized in the United States as SPOTIFY.”

The TTAB then turned to the issue of whether U.S. Software intended to create an association between POTIFY and SPOTIFY. Considering U.S. Software’s claim that “its decision to adopt the POTIFY mark had nothing to do with [Spotify],” the TTAB said this was “hard to believe,” noting among other factors the fact that U.S. Software’s principals were Spotify users.

Lessons learned

This case offers a few lessons for businesses, and not just cannabis ones. First, it underscores the importance of registering trademarks. While Spotify has common law rights to SPOTIFY (and in fact alleged them in the proceedings), the registration strengthened its claims, at times being determinative in the TTAB’s considerations of statutory factors.

Second, the TTAB explicitly highlighted the fanciful nature of the SPOTIFY mark. Trademark distinctiveness is a spectrum, with generic and descriptive marks at one end, and fanciful marks at the other. Fanciful marks have the best chance of being registerable and enforceable. Be creative and don’t forget trademarking basics.

Meanwhile, Potify’s fate shows there is a limit to how much traction businesses can get from gag names. These might be a hit for T-shirt designers, but is not the bedrock on which to build a brand. In fact, as these proceedings show, such names can prove counterproductive, especially when the intended butt of the joke is a no-nonsense company like Spotify.