The next venue for trademark disputes?

While even the least tech-savvy person knows about the existence of domain names, even the most tech-savvy trademark attorney may not know about the growing use and importance of common short codes on their client’s marketing efforts, or their potential impact on trademark interests. As U.S. companies increasingly embrace text messaging as a marketing approach, their use of common short codes has soared as a brand-awareness tool. Trademark attorneys should be aware of this new technology and the potential trademark issues it may generate.

What is an common short code?

Common short codes (CSCs), or simply “short codes,” are five- or six-digit numbers (as contrasted with traditional ten-digit number strings) that people can use to send and receive plain text messages on their mobile phones using the short message service (SMS) protocol. A short code, analogous to traditional SMS texting, is an “address” to which a text message is sent. Unlike traditional SMS texting, however, consumers use CSCs to send text messages to link to commercial services or applications rather than other individuals. Designed to be easier to remember than normal-length telephone numbers, short codes have been used for charitable solicitations, surveys, participation in sweepstakes, direct marketing, voting and polling efforts, Internet searches, and the receipt of a wide range of information including sports scores, restaurant reviews, and the like. For example, the television show “American Idol” encouraged voter participation by requesting that viewers send text messages to the short code assigned to their favorite contestant.

Billions of messages

Popular in Europe for several years, the use in the United States of text-messaging and, increasingly, the use of short codes, have exploded since their launch in the U.S. in 2003. According to the Common Short Code Administration (CSCA), the agency in the United States charged with managing the CSC process (www.usshortcodes.com), revenue from SMS texting in the United States reached $1.24 billion during the first six months of 2005, a 154% increase from 2004. Mobile phone users sent more than 7.2 billion SMS messages over U.S. carrier networks during June 2005, over a 50% increase from June 2004. By 2008, analysts predict that worldwide SMS messaging could reach 1.5 trillion.

Capitalizing on the increasingly widespread use and recognition of text-messaging and, correspondingly, short codes in the United States, marketers have started incorporating short codes into interactive marketing campaigns for an ever-widening range of products. Because digits 2 through 9 on telephone keypads correspond to letters, short codes may spell easy-to-remember words including a company’s trademark. For example, “GQ” magazine launched a CSC campaign using the number 47624 (GQMAG) which consumers could use for a chance to win a Kid Rock CD.

The registration process

In the United States, registering a short code is similar to registering a domain name: a user submits an online application, waits for approval by e-mail, and pays upon acceptance. CSCA offers registration terms of three months, six months and one year, and a user may renew a CSC at any time during its lease. If the short-code registrant has not renewed the short code before its expiration date, the short code expires and is placed in a 30-day grace period where the registrant may renew the CSC.

Selecting such a vanity short code, the alphanumeric equivalent of a numeric telephone number, is one option for a trademark owner. Alternatively, a registrant may acquire a random short code in which the digit number is arbitrarily assigned. Vanity CSCs may be five- or six-digit numbers and cost $1,000 per month, whereas random CSCs may only be five-digit numbers and cost $500 per month. Registration fees are due upon registration, so a three-month registration of a vanity CSC costs $3,000, and an assigned CSC for three months costs $1,500.

The significant costs associated with the registration and maintenance of short codes are likely to ensure against the type of profiteering and abusive registrations widely associated with domain names. This does not mean, however, that CSCs will necessarily be immune from all the trademark pitfalls experienced in the domain-name context. Perhaps the first and greatest issue confronting trademark owners in the short-code context is their relatively rarity. Unlike in the domain-name context where the overall number of domain names coupled with the frequent addition of top-level domain names offers many opportunities for corresponding domain-name registrations (some estimates suggest that there may be more than 65 million “.com” domain names currently registered around the world), in the United States there are a total of only 79,999 short codes available for registration, many of which are already registered. As more users pursue this new technology and marketing avenue, your client may find it difficult to register the short code of its choice. And because digits 2 through 9 correspond to more than one letter, a numeric short code may correspond to more than one party’s trademark. (For websites that provide number-to-word translation tools, see for example http://www.phonespell.org or http://www.phonespeller.net).

Dispute-resolution procedures

If the short code corresponding to your client’s trademark is registered to another party, what are your options? This is a question that has yet to be answered conclusively in any venue.

The CSCA’s (Common Short Code Administration’s) website currently fails to detail any dispute-resolution procedures for trademark owners seeking relief from third-party registration of a CSC that corresponds to their registered or unregistered trademark. The registrant sublicense agreement (available at http://www.usshortcodes.com/csc_subLeaseAgree.html) merely provides for a registrant to indemnify Neustar, Inc., the CSC registry operator, in the event of any claim or demand made by any third party relating to intellectual property or other proprietary rights. And as an interesting twist, the registrant sublicense agreement also requires short-code registrants to expressly acknowledge that they have “no proprietary interest” in the CSC, and requires that they agree not to take any action that would “cause [them] to acquire any trademark, trade name, or trade dress rights” in the CSC they have registered. (Id. at Paragraph 9)

Nor does there currently exist any comprehensive WHOIS database for U.S. short codes. Thus, Neustar is currently the only repository of conclusive registration information. The indemnity language in its registration agreement clearly contemplates that Neustar may be sued by a third party as a first step to puncture the current anonymity of CSC registration records.

Due to the relative novelty of short-code technology in the United States, it is perhaps not surprising that case law addressing trademark disputes over infringing short codes does not exist as of the writing of this article. Given the similarity of vanity short codes to vanity telephone numbers (e.g., 1-800-HOLIDAY), however, the authors anticipate that the established precedent governing vanity telephone numbers offers insight, not controlling precedent, on the approaches that will be taken in future short-code disputes. As for vanity telephone numbers, some courts have determined that if they correspond to trademarks and indicate source, sponsorship or affiliation, they may be entitled to trademark protection. For example, the court in Dial-a-Mattress Franchise Corp. v. Page, 880 F.2d 675 (2d Cir. 1989), found that a local telephone number spelling “MATTRES” (628-8737) could be protected, and that a competitor’s use of 1-800-MATTRES could be enjoined as both unfair competition and trademark infringement.

Other courts, however, have held that mere use of a telephone number (e.g. , having a telephone number that happens to spell a trademark owner’s mark) does not constitute infringement; infringement exists only where a holder of a vanity telephone number promotes it in a way to cause confusion. For example, in Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619 (6th Cir 1996), the court held that the number 405-4329 was not the legal equivalent of“H0LIDAY” (spelled with a zero) and did not violate the plaintiff’s trademark which was the legal equivalent of “HOLIDAY”(spelled with an “O”).

Accordingly, the fact that a third party’s short code may correspond to your client’s trademark will not necessarily ensure your client an easy avenue for relief. The manner in which the short code is actually being used and promoted as well as the identity and business of the third-party registrant will all be important factors in any realistic evaluation of the availability of relief. If, for example, the desired short code corresponds not only to your client’s trademark but to other unrelated generic or descriptive terms, and is being used to promote unrelated goods and services, your client may well be out of luck. Your client will likely face a similarly uphill battle if the challenged short code was obtained randomly (rather than specifically requested for its alphanumeric meaning) and is being used and promoted exclusively as a number (i.e., call 44624) and not as a mark similar or identical to the client’s mark. And if your client’s trademark is weak or descriptive, the same obstacles to enforcement will apply. As with all trademark disputes, the devil will be in the details.

Despite these obvious enforcement obstacles, CSCs offer a potentially important new platform for your client to promote brand awareness. The increasing popularity in the United States of text-messaging and the impact that CSCs has already had on global marketing suggest this new technology is too important to ignore.