Ralph Nader and the adult Web site priceless420.com do not seem to have a whole lot in common. One appeals to disaffected Democrats, the other veers more toward those who like to spank disaffected Democrats. Yet both the presidential candidate and the Web site have run afoul of MasterCard International by spoofing the company’s successful “Priceless” advertising campaign. Indeed, the ad’s success–it won the Gold Effie, among other awards of varying prestige–has posed something of a problem for MasterCard. The company’s global reach–it holds 15,000-plus trademarks in 200 countries–and the Priceless ads’ popularity have made policing its brand an ominous task.
“If we went after every infringer, we’d spend every corporate resource,” says Russell Falconer, the Baker Botts partner who has been MasterCard’s main outside trademark counsel for the past quarter-century. “You try to have a practical approach. Go after the important stuff, and make a reasonable effort on everything else.”
Under the MasterCard policing calculus, porn sites get sued; college kids mocking the Priceless ads online don’t. However, students will receive a warning letter, Falconer says, and sometimes MasterCard enlists the school’s help in pulling down an offending Web site. “You have to make a distinction between when it’s entertainment and when it’s a commercial use. You have to protect the brand, but not abuse protections,” says Noah Hanft, MasterCard’s general counsel, who joined the company in 1984 as its IP counsel.
MasterCard went after Nader because his spoof, which appeared during the 2000 presidential election, spurred people to call the company asking if it was backing the candidate. “You don’t want to face that,” says Falconer. Three years after losing the presidency, Nader prevailed over MasterCard. The court found that Nader’s use of MasterCard’s trademarks was political–not commercial–and didn’t infringe.
Going after the risqué Web site’s operator, Kevin Moulton, was an easier call: In its complaint, filed last year in the Southern District of New York, MasterCard alleges that Moulton not only imitated its ads and infringed its trademarks, but used an awful lot of pornography in the process. “There was a strong corporate desire not to be associated with this,” Falconer says. The case is currently in discovery.
Drawing the line between trademark misuses that need a swift, tough response and those that require a softer touch has been a collaborative effort between MasterCard’s in-house and outside trademark lawyers ever since Falconer was retained in the late 1970s.
One of the main reasons Falconer was tapped as outside counsel was the consensus, in-house, that MasterCard’s previous outside lawyers had been a little too aggressive in policing the brand. (MasterCard would not identify its previous firms.) When Falconer interviewed in 1977, MasterCard, which was founded in 1966, was embroiled in some 200 trademark opposition and cancellation proceedings throughout the world. “In trademark enforcement you can be downright silly,” says Hanft. “You don’t want to react to every petty misuse.” Within a year of getting the nod, Falconer, who was practicing at New York IP boutique Brumbaugh, Graves, Donohue & Raymond, drastically pared down the caseload. “We shed 65 percent of the proceedings, and wrapped up another 25 percent, saving them money,” says Falconer.
In the years since, trademark trials have been a relatively rare event for MasterCard. Of the 40-plus trademark cases involving the company–almost overwhelmingly filed by MasterCard–less than a dozen have gone to trial, and of those, Falconer has tried eight (other firms represented MasterCard either because of indemnity agreements or shared counsel arrangements with other defendants). Yet even in a slow year, Falconer says, there are invariably 20Ð30 misuses that warrant a closer look–something more than a boilerplate warning.
This year Falconer even had to go to trial against a MasterCard member bank. Typically, disputes between MasterCard and its members are resolved amicably, according to Falconer. Not this one. When MasterCard began using its OneSmart trademark in conjunction with smart card services, First National Bank of Omaha, Inc., complained that the mark infringed its own SmartOne trademark, which was used for similar services. (Smart cards are like credit cards on steroids, containing a microprocessor allowing for greater security and expanded features.) “We wanted a declaratory judgment that we didn’t infringe,” says Falconer. “They took exception to that and filed a separate complaint”–resulting in a full-blown trademark infringement suit. In May a jury in the Southern District of New York decided in MasterCard’s favor.
Sponsorship agreements are another area where MasterCard can get tough. Seven years ago, both Sprint Corporation and MasterCard signed up as official sponsors of World Cup Soccer; Sprint in the phone category, MasterCard in the payment category. When Sprint introduced a World CupÐlogo prepaid phone card, Falconer and MasterCard pounced, alleging breach of contract and trademark infringement, and winning an injunction in the Southern District that blocked the card.
“Sprint can have phones, but MasterCard gets payment,” Falconer says. “We pay a king’s ransom to get exclusivity–we’re going to enjoy it.” If MasterCard can seem particularly aggressive when it takes action, well, that seems to be standard operating procedure in the payment card business. Indeed, in the 1980s American Express Company was well-known–and feared–for the draconian way it policed its “Gold Card” trademark. The company stopped the Newark Board of Education from giving gold cards, redeemable for local discounts, to high-achieving students. It also put an end to the University of Iowa’s practice of calling season passes to women’s sporting events gold cards. In both cases, American Express cease and desist letters were enough to shut down the programs.
In 1988 American Express came after MasterCard, seeking to enjoin the company from using the term gold card to identify its premium-level credit card. “There was a lot of prediction that we didn’t have a chance,” says Hanft, who worked with Falconer on the case. “In the industry, it was kind of considered that Amex owned the term ‘gold card.’ But Russ managed the case extremely well. He’s unflappable, pragmatic, and able to relate well to people. His cross-examination of the Amex paralegal who sent the cease and desist letters was low-key, yet managed to get across the point that they shut down a well-intentioned program to reward school kids.” In the end, MasterCard prevailed. The Southern District of New York found the term “gold card” generic, opening the flood gates for other companies to use the term.