September 16, 1996

Intellectual Property Pitfalls and Opportunities in Banking on the "Web"

Banking Policy Report, Vol. 15, No. 18
Every major technological advance brings with it both opportunities for visionaries and traps for the unwary. So too with the Internet and banks. Widespread use of the Internet may revolutionize the way a bank communicates with its existing and potential customers. But along with the possibilities come new issues of intellectual property law that require banks to be vigilant in unaccustomed ways. Indeed, there are some significant trademark and copyright issues that a ban should consider as it establishes its presence on the Internet. 1
The Internet is a computer network developed by the Department of Defense in the 1960s as a means to communicate with contractors and university researchers. It has since been made accessible to the public, and within the last few years, development of the World Wide Web has made it much easier to use. The number of Internet users has mushroomed, with estimates of as many as 128 million users by 1997.
The Web, as it is frequently known, is a method of communicating and obtaining information over the Internet using "graphical interfaces" that facilitate access to the desired information. The Web has rapidly become a common way of publishing enriched text and all kinds of non-text formats, including audio, video and interactive applications.
No single organization owns or operates the Internet, although a professional organization known as the Internet Society promotes cooperation among the interconnected subsidiary networks that comprise the Internet and provides a forum for development of technical standards for the Internet.
Web Banking Services
Hundreds of financial institutions already have a Web site and additional banks establish a presence on the Web every day. 2 In addition, there are estimated to be approximately 3,000 mortgage-related sites on the Web.
Banks are using the Web for a wide variety of purposes including publicizing new products, posting annual reports and company information, disseminating press releases, making databases available to the public, and allowing users to send electronic mail to the host bank. The most basic bank Web sites generally offer the kind of information that banks traditionally print in brochures. Some bank Web sites offer on- line banking services such as bill payment and transfers between accounts. Security First Network Bank (actually a thrift) transacts business primarily over the Internet. 3
Most of the mortgage-related Web sites, some of which are operated by financial institutions, primarily offer information such as rates on loans. However, a few lenders are offering on-line loan origination, and that practice is likely to become increasingly common.
To attract visitors, some bank Web sites also offer games and other content intended to be entertaining. For example, some banks use their Web sites to display items from their art collections. As banks become producers and publishers of multimedia content and operators of on-line transmission services, they are likely to face new issues of intellectual property law, some of which we address below. 4
Trademark Issues
The expanded use of the Internet has brought with it a new genus of potential trademark disputes, stemming mostly from the manner in which domain names are allocated. Product advertising on the Internet may also raise trademark infringement issues. For example, third parties may be using a mark owned by a bank in a manner that falsely suggests that they are somehow sponsored by, endorsed by, or affiliated with that bank.
Yet the Internet can provide opportunities, as well as problems, for a creative trademark owner. A trademark owner may strengthen its rights through widespread advertising and use of appropriate proprietary legends on the Internet, and by policing its marks through use of the Internet.
Domain Names
The Registration Process
A bank may make information available using the Web through a Web site, which has a unique address known as a domain name that is adopted and registered by the bank. Because a domain name identifies the bank, it functions in a manner similar to a trademark and can be a valuable asset.
A domain name includes at least two components: (1) a top level domain name, which is a generic abbreviation describing the nature of the user (e.g., .com for a commercial entity or .gov for a civilian federal agency) preceded by (2) a second level domain name, which is a unique designation that the Web site operator selects. A possible domain name for a bank might be, with com being the top level domain name and nationalbank being the second level domain name. 5
A bank obtains a domain name by registering it with a central authority designated by the Internet Society's Internet Network Information Center or InterNIC. In the U.S., that authority is Network Solutions, Inc. (NSI) of Herndon, Virginia. The process requires completion of a simple form and payment of a modest fee. Over [315,000] domain names are now registered, and NSI is receiving about [30,000] applications monthly.
Domain Name Disputes
Disputes have arisen because of NSI's practices for domain name registration. Unlike the U.S. Patent and Trademark Office (PTO) and many other trademark registries worldwide, NSI does not conduct a search to determine whether an applicant has the right to use its proposed name in commerce. Instead, NSI allocates domain names on a first-come, first-served basis. NSI will generally register a domain name that is not identical in all respects to a previously-registered name -- even if the proposed name differs from a preexisting name only slightly in spelling, or in the generic abbreviation used. As a result, NSI might register, despite a prior registration of nat' or a PTO registration for NATIONALBANK.
Domain name disputes may take several forms:
Trademark Piracy. The most widely-publicized domain name disputes have involved trademark pirates. Individuals and companies have registered domain names that are similar or identical to famous names and trademarks that do not belong to them, often in the hope that the true trademark owners will pay to recover use of their marks on the Internet. 6 For example, and were registered as domain names by other than the trademark owners. In many instances, the true trademark owner is forced to take legal action against the trademark pirate or to buy the pirated domain name from him.
Identical Names for Different Goods . Trademark problems also arise because NSI only allows one registration for a specific domain name on a first-come, first-served basis. The person that secures that name first may thus effectively preclude others from using it, even if their use would not create confusion. Suppose, for instance, that a bank and a manufacturer of consumer goods used the same coined name, but no one would confuse them as the source of two very different types of products. Under the trademark laws, both companies would be allowed to provide their products under the same name. Yet only one of them could use and register their common name as a second level domain name.
Domestic versus Foreign Names . The situation is further complicated by the fact that foreign countries also issue domain name registrations with a country-specific code that may be otherwise identical to registrations issued by NSI. Each country code is a two-letter top level domain name. These domain names are allocated by registrars for each individual country under the general auspices of InterNIC registries in Europe and the Asia-Pacific region known as RipeNCC and APNIC, respectively. Thus, the U.K. registrar might allow the name, despite a preexisting registration for
Resolution of Domain Name Disputes
The courts have not yet definitively determined whether use and registration of a domain name may constitute trademark infringement, unfair competition or dilution. However, a trademark owner could make solid arguments to support such claims, and at least one federal court has preliminarily agreed. Hasbro, owner of the CANDY LAND mark for a children's board game, recently sued a couple who used and the mark CANDYLAND for a Web site featuring sexually explicit materials. The court granted a preliminary injunction against the defendants' use of their name and mark, finding that the defendants had diluted Hasbro's well-known mark under both federal and state law. 7 The Board of Directors of the International Trademark Association has issued a resolution stating that domain names can function as trademarks and that use of a domain name can result in infringement of trademark rights. 8
Meanwhile, NSI has made some effort to address domain name disputes through a Domain Name Dispute Policy (the Dispute Policy), to which each applicant for a domain name must agree. The latest version of the Dispute Policy took effect on September 9, 1996, and by the terms of prior versions applies to persons already possessing domain names. 9 A domain name applicant now must represent that its use of the domain name, to the best of the applicant's knowledge, does not infringe upon the rights of any third party. The applicant must also have name service from at least two operational Internet servers for each domain name that it requests.
Under the Dispute Policy, NSI will not revoke a domain name registration unless the party challenging that registration presents an order from a U.S. court directing such action. Absent such an order, NSI will put a domain name on hold in certain limited circumstances when a challenger presents a trademark registration prior in time to the domain name registration. When NSI places a domain name on hold, it remains on hold, and thus unavailable for use by either party, until a court orders appropriate action or the parties arrive at a settlement.
In an apparent attempt to minimize its increasing involvement in domain name disputes, the revised Dispute Policy implements a new interpleader-like procedure. If either the registrant or a challenger provides to NSI a copy of a complaint filed in a U.S. court and the domain name is not already on hold on account of the dispute. NSI will not place the domain name on hold. Rather, it will deposit control of the domain name into the registry of the court and will carry out all court orders without being named a party. It remains to be seen what effect this new Provision will have on domain name disputes, but in practice it may remove NSI from disputes entirely.
Despite these new rules, NST's procedures for registering domain names and resolving disputes are still problematic in several respects. As noted above, in registering domain names, NSI does not conduct a trademark search. NSI does not recognize that trademarks that are similar but not identical can create a likelihood of consumer confusion when used as domain names -- or that identical trademarks used in very different fields may not cause a likelihood of confusion. Moreover, NSI's procedures do not recognize rights that a person may develop in a trademark through common law use (as opposed to registration). And it is only under very limited circumstances that NSI will either revoke a registration or suspend a registrant's ability to use a domain name. NSI generally assumes that the parties will resolve disputes themselves, either in litigation or through settlement.
NSI's monopoly on the registration of domain names may be in jeopardy. The Internet Assigned-Numbers Authority, which coordinates technical parameters for the Internet, has recently announced plans to organize a competition for the right to establish additional top-level domains. If that comes to pass, identical second-level domain names could exist simultaneously with different top-level domain names. For example, both "" and "" could be valid domains. Such an arrangement might solve some trademark problems under the current system related to the unavailability of similar domain names for multiple users of identical trademarks, but would likely create a host of additional problems for trademark owners trying to protect their marks from piracy.
Strengthening Trademark Rights
The Internet is not only a source of potential trademark infringement. It may also provide a very useful avenue for banks to make widespread, global use of their marks and thereby strengthen their trademark rights. This has become increasingly beneficial with the advent of the federal dilution statute. Federal law now protects the owners of famous marks against use of the same or similar marks, even in the absence of any likelihood of confusion. 10 This law sets out several criteria for determining whether a mark is famous, which include the scope and extent of advertising using the mark. 11 A bank could point to Internet advertising, which reaches users worldwide, to demonstrate the fame of its mark. The bank may also illustrate the extent to which the public has been exposed to its mark by monitoring Internet users' visits to its Web page. 12
A bank should protect its trademark rights in cyberspace just as it does outside cyberspace. Among other things, banks should consider registering with the PTO any mark that it uses on the Internet to identify its goods or services, including its domain names, and should consider registering its trademarks as domain names.
A bank should also use its Web site to advise people of the bank's trademark rights. For example, the bank might use a legend like FinancialService is a registered trademark of National Bank. Any unauthorized use of this mark is prohibited. The owner of a trademark that is registered with the PTO should use the registration symbol ® in conjunction with any use of its mark on the Internet. In so doing, the owner provides actual notice to others that its mark is registered with the PTO.
In addition, under section 29 of the Trademark Act, failure to use the symbol may limit the owner's ability to obtain certain remedies in a trademark infringement action. An owner of an unregistered mark should use an appropriate symbol (TM for a trademark, SM for a service mark) to indicate its claimed trademark rights.
A bank should also police the Web for domain names in conflict with one of its marks or names and for infringing use of marks and names in advertising on Web pages. Like many aspects of rapidly changing Internet technology, the tools for policing these types of potential infringements are still being developed. Some tools allow users to search for conflicting domain names, while others enable users to search the content of home pages for references to their names and marks.
Copyright Issues
Two broad sets of copyright issues are likely to be important to a bank contemplating the use of the Internet in its business: how to avoid infringing the copyright rights of others and how to protect its own rights in content made available over the Internet. Unfortunately, applying traditional principles of copyright law to the Internet raises many difficult questions that are likely to remain unsettled for a long time to come.
Avoiding Infringement
Banks long have created and distributed various kinds of advertising and printed publications. However, particularly through sites on the Web, banks are now distributing to a worldwide audience a wide variety of content that they have not previously distributed. Increasingly, they are trying to attract attention to their Web sites through the use of flashy interactive features, audio, video and the like. As banks design and implement Web sites and make other uses of the Intel-net, they should give the same careful attention to avoiding infringement that would be advisable in the dissemination of similar content through more traditional media.
Most Internet uses of copyrighted works will at least implicate, if not necessarily infringe, the exclusive rights of the copyright owners of the works. For example, a copyright owner has the exclusive right to reproduce a copyrighted work and to authorize its reproduction, and the Internet operates by making copies. Further, the copyright owner has the exclusive right to prepare derivative works based upon a copyrighted work and to authorize others to do the same. This right could be implicated if, for example, text is edited before being made available over the Internet or if music is arranged and then made available over the Internet. Also, the copyright owner has the exclusive right to distribute copies of a copyrighted work to the public and to authorize the work's public distribution. While the traditional view has been that the distribution right applies only to the distribution of physical copies, some recent authority supports the view that a distribution is made when a work is transmitted electronically and a reproduction is made by or for the transmission recipient.
Internet uses are subject to all of the limitations on the exclusive rights of a copyright owner that apply in other media. Of these, the most important limitation is probably the fair use doctrine. Under that doctrine, certain fair uses of copyrighted works are not considered infringing, even though they otherwise would be if one solely considered the exclusive rights of the copyright owner. Fair use is a flexible doctrine. In time, courts probably will develop a body of case law applying the fair use doctrine to various kinds of Internet uses. In the meantime, it is difficult to give abstract guidance about particular uses that might be deemed fair. However, as an extreme example, a bank would seem to have a very weak argument that it is fair to use an entire work of the visual arts or a significant part of a song to attract visitors to a Web site operated primarily to promote the bank. On the other hand, when copyrighted content is lawfully made available to be viewed through a Web site without payment of a fee to the Web site operator, a user would seem to have a reasonably good argument that retaining a copy of that content for personal use to avoid paying connect time charges to an Internet access provider is a fair use because doing so has little or no impact on the market for the work.
A bank should exercise the same degree of care in avoiding infringement in the operation of its Web site that it would if it were printing a brochure or producing a television commercial. To the extent that content is not created exclusively by bank employees, it generally will be advisable to obtain a license from the copyright owner. Even where a bank has previously obtained a license for use of a work in another medium, care should be taken to ensure that the scope of the license permits the on- line uses of the work being contemplated.
Particularly troublesome issues are raised when a bank permits users to place content on its Web site, such as through a discussion group. For example, one bank hosts an electronic forum for treasury management professionals to share ideas. There is a trend toward making Web sites more interactive, which may lead to more opportunities for users to add content to the Web sites of others. A bank operating a Web site should consider its potential liability if a user provides content that is infringing (or otherwise objectionable).
Because there generally is strict liability for copyright infringement, commercial on- line service providers have been very concerned that they could be found liable for infringement due to their further dissemination of infringing content provided by a subscriber.
The law in this area is not well settled. For this reason, on-line service providers have made their liability a key issue before Congress in connection with pending copyright legislation to address Internet-related issues. It is unlikely that this Congress will act on that legislation, and it is not clear whether or how this issue might eventually be resolved by Congress. However, until it is, a bank probably should have some concern about operating a Web site that permits users to add to the content that the bank makes available to others.
Protecting a Bank's Copyright Rights
A principal purpose for operating a Web site is to make content available to the public, generally for promotion. Most operators of commercial Web sites probably would be pleased if their advertising materials were copied and redistributed widely. However, there may be instances in which the operator of a Web site wishes to restrict the further dissemination of its content. This is likely to become increasingly true as the Internet becomes a viable means of distributing copyrighted content for profit.
It is not necessary to use a copyright notice on copyrighted works made available over the Internet or in traditional media. However, use of a copyright notice makes it clear to users that copyright rights are claimed and may deter some infringement. The statutory form of copyright notice consists of the (a) symbol ©, the word Copyright or the abbreviation Copr. followed by (b) the year of first publication of the work and (c) the name of the owner of the copyright. For example: © 1996 National Bank.
Because Internet transmission inherently involves the making of copies, and it usually is easy for a user to make further copies still, a copyright owner that makes its content available over the Internet probably takes a higher risk that its content will be redisseminated than a copyright owner that makes its content available only in other media.
One easy way to discourage (although certainly not to prevent) further dissemination of content is through a restrictive legend such as: This material is licensed for your on- line viewing only. No further reproduction or distribution of this material is permitted. Use of such a legend would tend to weaken a user's argument that the Web site operator impliedly licensed the user's subsequent dissemination of the content. Conversely, if a copyright owner wanted to encourage dissemination of copies of a work, the copyright owner could do so by including an appropriate legend granting users a license to disseminate the works.
There are various technologies for encrypting content made available over the Internet and for marking content with copyright management information. These technologies are likely to continue to evolve and to become increasingly important. In appropriate circumstances, a bank might consider technological means to restrict further distribution of its copyrighted works.
1 . As banks increasingly offer advanced financial services over the Internet, they are increasingly likely to be users or developers of proprietary software and of new technologies that may be patented. These activities involve important intellectual property protection and licensing issues that are beyond the scope of this article.
2 . Lists of banks with Web sites may be found on the Web at and .
3 . Security First Network Bank promotes itself as the "World's First Internet Bank" and can be found at .
4 . As Banks assume new roles to establish a presence in cyberspace, they also may encounter new issues of privacy, defamation and export control law, which we do not address in this article.
5 . Illustrating the ambiguity of some domain names, as this article is being written "" is an active domain name, but not for a financial institution.
6 . In other situations, a user may innocently adopt a domain name that may conflict with someone else's not-so- famous trademark.
7 . Hasbro, Inc. v. Internet Entertainment Group Ltd., No. C96-13OWD, 1996 WL 84853, (W.D. Wash. Feb. 9, 1996).
8 . International Trademark Ass'n, Assignment of Domain Names on The Internet (Sep. 19, 1995).
9 . This article went to press prior to the effective date of the new Dispute Policy. The discussion herein assumes that the new policy is in effect.
10 . See 15 U.S.C. § 43(c), as amended by Pub. L. No. 104-98, 109 Stat. 985 (1996).
11 . See 15 U.S.C. § 43(c)(1)(A)-(H).
12 . Use of one's marks on the Web page may also enhance a trademark owner's ability to invoke international treaties (such as the Paris Convention and GATT) that extend special protection to well-known marks in member countries. Generally, to invoke these treaties, a trademark owner must have some form of trademark use in the country where it seeks protection. Use on a Web page arguably may constitute trademark use for this purpose.
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