Domain name values affected by hotels.com decision?

Domain name owners will be interested in the ruling of the US Court of Appeals for the Federal Circuit In re Hotels,com, L.P. that the domain name "hotels.com" could not be trademarked. In a decision that will affect any of the hundreds of millions of domain name owners who wish to obtain a US trademark for the domain name under which they conduct business online, the court found that the mark was too generic.

The ruling affirmed the earlier decision of the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office that the addition of ".com" to a generic term did not of itself create a term that could be trademarked. In other words, it did not create a marketing brand that could be protected.

The court's discussion indicates that a generic term is the common name for the type of goods or services being sold. A generic term cannot be registered as a trademark as they are incapable of indicating source. Descriptive terms describe a thing, while generic terms name the thing. A term that is descriptive, but not generic, may acquire distinctiveness and serve as a trademark.  Whether a term is entitled to trademark status turns on how the mark is understood by the purchasing public.

The US Court of Appeals concluded that it agreed with the TTAB that the separate terms “hotel” and “.com” in combination had a meaning identical to the common meaning of the separate components. The Board’s finding that "hotels.com" is generic and, therefore, could not be registered as a US trademark was affirmed by the court.

Future domain name values

The decision may impinge upon the value of similarly generic domain names, some of which have already sold for millions of dollars. Their one word simplicity, coupled to a popular market meant they were perceived as highly valuable.

But in light of this decision would big business really want to spend millions on purchasing and marketing a domain name that it could not legally protect?

The lack of trademark protection means, for example, that they would have difficulty finding a cause for action in a civil case against anyone who used their generic domain name to trigger pay-per-click AdWords ads on Google.

Domainers may have to re-evaluate the worth of their one or two-words domain name investments that were previously seen as valuable if they can be termed as generic.

Similarly, domainers who are investing considerable sums in acquiring domain names in new TLDs such as .me, .tel etc may have to rethink their buying strategy.

Are there any circumstances in which a generic term can be trademarked?

Hotels.com had tried to avoid the accusation of it being a generic term by showing that its website does not provide lodging or meals for its users (i.e. it is not a hotel) and so its services were not synonymous with the terms "hotel" or ".com". By creating a distinction between the name of the website and what the website does it could avoid the charge that the name of the website was a generic term for the goods it provided.

But the TTAB used other domain names that included ‘hotels’ in their domain name including www.all-hotels.com, www.web-hotels.com and www.my-discount-hotels.com, to show that they too provided hotel information and reservation services like hotels.com.

The TTAB said that this use of the word "hotel" in promotional materials by everyone in that info & reservations industry “demonstrates a competitive need for others to use as part of their own domain names and trademarks, the term that applicant is attempting to register.," and included this finding as support for its conclusion that “hotels” indicates the genus of hotel information and reservation services. Thus the purchasing public would understand from the website name "hotels.com" that they would find information and hotel reservations services there, therefore, the term, the domain name, was generic for those services and could not be trademarked.

What this means is that domain name investors may register a generic domain and obtain a US trademark, but just not for the one topic that is the natural subject of that domain name! That part of the decision effectively breaks the link between generic domain names and the one thing that makes them really valuable.

They still have a high value because they are simple to remember and easy to type into the browser's navigation bar but their value has been diminished by this ruling.

Google and PPC search engines should see a rise in business as companies and marketers begin to bid on domain names of competitors unwise enough to trade online under generic domain names.

For those interested, here is a PDF of the full decision of the US Court of Appeals In re Hotels.com,L.P. (2008-1429)