Laying in to ‘Layout’: the dangers of unregistered and non-distinctive branding
Article written by: Joseph Bracewell, Saturday 18th April 2015
On 23 March 2015, the social-media savvy were shouting for joy at the release of Layout for Instagram, a new standalone app created by the Facebook-owned photo-sharing service. This new app, quickly shortened and referred to by media and users as “Layout”, primarily allows users to form collages from their existing photos and share them on services including Instagram and Facebook.
One independent software developer was shouting too, but for very different reasons. In 2012, Juicy Bits, owned by former Microsoft employee Mike Swanson, released an app to great acclaim, including being named one of 2012’s Best Apps in the iOS app store. That app primarily allowed users to form collages from their existing photos, and share them on services including Instagram and Facebook – and it was called Layout. Feeling a bit of deja vu?
Unsurprisingly, a new app released by one of the world’s largest social media companies gains a bit of attention. At the time of writing (a week out from launch), Instagram’s app has collected a four-star rating, with 150 reviews, while Juicy Bits doesn’t have enough reviews for its current version, released 10 October 2014, to receive a star rating. When you search for the term “Layout” in the NZ app store, one of them shows up at the top of the results page – and it’s not the one that’s been around for a few years.
There are clear differences between the two apps – Instagram’s is free and has relatively limited functionality, while Juicy Bits’ costs NZ$2.59 and includes a wider range of features. At base, though, these apps are in direct competition and provide services that could be described in identical terms.
A clear cut case of trade mark infringement then, right? Unfortunately for Juicy Bits, it’s far from it. As Swanson explains in a blog post on the subject, he never sought registration for the name of the app – the expense “didn’t seem worth it at the time”. Instead he relied on “common app naming courtesy and the desire to avoid obvious confusion”, which didn’t quite work out the way he’d hoped. It also hasn’t prevented other developers from releasing other apps with names like “Next Layout” and “Layout Lite for Instagram and More”.
That leaves us with a few questions to answer. Could a name like “Layout” even be registered as a trade mark for apps like this? And what is Juicy Bits’ legal position without registration? For the purposes of this article, we’ll discuss the situation under New Zealand law – the US Lanham Act applies principles that are much the same in practice.
The Trade Marks Act 2002 sets out a number of absolute and relative grounds which prevent registration of a trade mark. The relevant provision here is Section 18, dealing with the grounds generally referred to as “distinctiveness”. The various sub-sections of s18 prevent registration of:
- a sign that is not a trade mark;
- a trade mark with no distinctive character;
- a trade mark that consists only of signs or indications as to the characteristics of the goods or services; and
- a trade mark consisting only of signs or indications that have become generic, either generally or in the practices of trade.
Here, the use of the word Layout might be objected to on the basis that it designates the purpose of the app – namely, to aid in laying out photographs in particular ways, or that Layout is a generic term of trade with regard to the collaging together of photographs. That is not to say that such objections could not be overcome – the most common tactic is to provide evidence of use, showing that while the mark itself is not distinctive, it has acquired distinctiveness through use.
The factors to be considered on this point include:
- the market share held by the mark;
- the intensity, geographic spread and time period of use;
- the amount invested in promotion;
- the proportion of customers who would identify the mark with the producer; and
- statements from relevant industry associations.
Juicy Bits’ market share is hard to judge, as it is in many cases, without significant research – but the speed with which Instagram rocketed to the top of the app store charts over Juicy Bits’ app, now languishing far down the list below even other apps with ‘Layout’ in their names is indicative. Using this relative view as a metric is a bit unfair, given that the Juicy Bits app requires payment, while these others are free (and, frankly, because Instagram is Instagram) but it does illustrate the point. Against that we can weigh Swanson’s words that “Layout did end up doing much better than [he] expected.”
As for intensity, this goes hand in hand with market share - which brings us to the 2012 recognition of Layout as an Editor’s Choice and one of the year’s Best Apps from the App Store itself. Clearly this is a factor in Layout’s relative success at the time.
One of the benefits of the internet and app stores like the one built into iOS, is the geographic reach available to even the tiniest company, spanning the majority of the (at least) English-speaking world. Unfortunately it’s a bit less convincing to claim a worldwide reach if only a few hundred or thousand sales are ever made. As for time period, Juicy Bits’ app has only been around since 2012 – but then the entire market for mobile phone software hasn’t been around for that much longer.
The amount invested in promotion is as hard to ascertain as market share, but given the size of Juicy Bits it’s unlikely to be much, if anything – it’s hardly uncommon for independent apps to rely almost entirely on word of mouth.
In the end, Juicy Bits might well be able to make a case based on acquired distinctiveness. It would be a hard sell, though, to convince an examiner that three years of use of a common term of trade, already in use by competitors, is distinctive enough for registration.
As Juicy Bits never did seek registration for the word Layout, any rights they have in the name Layout exist solely under the common law. Juicy Bits will have developed some reputation and goodwill in the name of their app in its three years on the iOS App Store and some rights do attach because of this. The potential recourses available to holders of unregistered trade marks are found under the Fair Trading Act and the common law tort of passing off.
Section 9 of the Fair Trading Act prevents “conduct that is misleading or deceptive, or is likely to mislead or deceive”. Passing off is an action taken where one trader is attempting to “pass off” their goods as those of another trader. Essentially, both of these causes of action exist to prevent consumers being confused or actively duped into buying one product when they sought out another.
In this case, both potential causes of action for Juicy Bits have the same problem – Instagram’s popularity is so huge that any confusion on the part of the consumer is very likely to run the other way. Swanson noted the same in his blog post, stating that he’d already received emails from consumers who’d bought his app thinking it was Instagram’s. Fortunately for those confused app-seekers, Swanson says he doesn’t want sales he hasn’t earned and expects to spend some time providing refunds. While it would be very interesting to see such a case argued under either of these causes of action, we can’t imagine Juicy Bits would be successful.
The Truth, Laid Out
The lesson to be drawn from this situation is that the best ammunition for David to sling at Goliath in a situation like this is a trade mark registration – and that if you want to protect your mark, you’d better pick something distinctive.
As a side note, Swanson suggests in his blog post that he release an app called “Instagram by Juicy Bits” in reply. Rest assured that Instagram is in no danger of a role reversal here. INSTAGRAM is a textbook example of a trade mark that manages to evoke the product it applies to while retaining its distinctiveness – and no doubt their lawyers would be very quick to remind everyone that that mark is indeed registered and very well defended.
 In more than one way – a very similar dispute arose in 2014 between independent developer Fiftythree and Facebook over their respective Paper apps.
This article is intended to summarise potentially complicated legal issues, and is not intended to be a substitute for individual legal advice. If you would like further information, please contact a Baldwins representative.