The United States District Court for the District of Arizona recently denied a motion for a preliminary injunction seeking to avoid compliance with an Arizona law requiring software providers to implement an application programming interface.  The Court found the law was not preempted by the Copyright Act and did not violate neither the Contracts nor Takings clauses of the Constitution.

Plaintiffs develop, own, and operate proprietary computer systems known as dealer management systems (“DMSs”).  DMSs are licensed to automotive dealerships to help manage their operations, including handling confidential consumer and proprietary data, processing transactions, and managing communications.  Dealers were traditionally allowed to share their DMS login credentials with their chosen third-party integration providers—an integration is necessary to ensure that the DMS operates seamlessly with the dealerships’ other software, such as an accounting system.  In or around 2015, however, Plaintiffs began contractually prohibiting dealers from granting third parties DMS access without Plaintiffs’ permission.

In March 2019, the Arizona Legislature passed the Dealer Data Security Law (“the Dealer Law”), A.R.S. §§ 28-4651–28-4655.  The Dealer Law precluded DMS providers from (1) prohibiting third parties that had met certain security standards from integrating into a dealer’s data system or (2) placing unreasonable restrictions on integration.  The Dealer Law also requires that DMS providers “[a]dopt and make available a standardized framework for the exchange, integration and sharing of data from [a DMS]” and that they “[p]rovide access to open application programming interfaces to authorized integrators.”  An application programming interface, or “API,” is an abstraction that facilitates communication between multiple pieces of software.  In other words, an API might tell users what the DMS can do and how to do it (e.g., how to write and read data), which could make integration easier.

In seeking to enjoin compliance with the Dealer Law, Plaintiffs challenged the Dealer Law as preempted by the Copyright Act and as unconstitutional in violation of both the Contracts and Takings clauses.  Regarding the Copyright preemption argument, Plaintiffs argued copyright protection was afforded to “source and object code; distinctive screen layouts; graphical content; text; arrangement, organization, and display of information; and the dynamic user experience” found in the DMS software, API, and data.  Plaintiffs reasoned that compliance with the Dealer Law would result in unauthorized copying and access of Plaintiffs’ copyrighted works.  The Court rejected these arguments, finding that it was possible to construe the Dealer Law in a way that does not conflict with Plaintiffs’ rights under the Copyright Act.  Specifically, the Court relied on the testimony of Defendants’ expert that the API could be implemented in a way that does not result in reproduction, access, or divulgence of any proprietary, copyrighted material.  The Court similarly rejected the constitutional challenges, finding that the possibility of implementing the API in such a way, which would not require significant expense, meant it was possible for Plaintiffs to comply with the Dealer Law without interfering with their existing contractual obligations or being deprived of the economic benefit of their proprietary software system.

This case highlights the delicate balance between intellectual property and antitrust.  The DMS providers’ decision to limit who could perform integrations had a significant enough impact to warrant state-wide legislation.  In that way, the Dealer Law can be analogized to prohibitions on tying arrangements and rules regarding standard-essential patents, both of which seek to prevent anticompetitive effects that often accompany ubiquitous technology.  On the other hand, forcing a company to implement an API may result in a less than optimal implementation.  Given the integral nature of software to our lives, this is likely not the last time we will see regulation efforts like these.

Last week, the Supreme Court held that the combination of a generic word and “.com” is not necessarily generic and may be eligible for federal trademark registration.  A trademark allows consumers to distinguish the goods or services of one manufacturer from another’s and permits a trademark owner to protect its good will.  Generic names are ineligible for federal trademark registration, as they are the names or classes of services or products.

After its application for BOOKING.COM was refused by the USPTO, Booking.com sought judicial review in the Eastern District of Virginia, which ultimately found the term descriptive, the term had acquired secondary meaning and, thus, the term met the distinctiveness requirement for registration.  The decision was affirmed by the Fourth Circuit and now the Supreme Court.  The lower courts determined that consumers do not perceive BOOKING.COM as a class of online hotel-reservation services and the USPTO did not dispute that finding on appeal.

The Court rejected the USPTO’s proposed adoption of a bright-line rule—the combination of a generic word and “.com” is necessarily generic and, therefore, “ineligible for registration regardless of specific evidence of consumer perception.”[1]  The Court relied on consumer perception and held that “[w]hether any given ‘generic.com’ term is generic … depends on whether consumers in fact perceive that term as a name of a class or, instead, as a term capable of distinguishing among members of the class.”[2]  Consumers understand that BOOKING.COM does not refer to a class but is descriptive of booking services available at that specific website.  BOOKING.COM, therefore, is not generic, as it is not a general name to consumers.

In distinguishing this matter from Court precedent,[3] the Court reasoned that domain names (which are unique) may also convey to consumers the source of a good or service by an association with a particular website.  The Court pointed out that refusing registration flies in the face of the USPTO’s own practice (which previously registered ART.COM on the principal register and DATING.COM on the supplemental register).  Rejecting the USPTO’s argument that registration would prevent competitors from using “booking” or a similar domain name, such as ebooking.com, the Court reasoned that when marks include highly descriptive or generic components, “consumers are less likely to think that other uses of the common element emanate from the mark’s owner.”[4]  Additionally, even if some confusion exists, competitors are permitted to use descriptive terms fairly and in good faith.

The Court further refused the USPTO’s argument that a trademark is not needed because other competitive advantages (e.g., search engine results) are available.  It reasoned that all descriptive marks would have the same competitive advantages and are also provided protection from passing off and false advertising by unfair competition law but are still eligible for registration.

Nonetheless, after this long-fought win, BOOKING.COM is still a weak mark.  Booking.com admitted as much in oral argument, and further conceded that close variations are unlikely to infringe.  Interestingly, presumably to ward off such variants, websites booking.net, booking.org, and booking.biz all redirect users to the booking.com website.


[1] U.S.P.T.O. v. Booking.com, B.V., 591 U.S., ____, at *7 (2020).

[2] Id. at *11.  The Court also notes that beyond consumer-survey evidence to support consumer perception, “dictionaries, usage by consumers and competitors, and other sources of evidence bearing on how consumers perceive a term’s meaning” are also useful to determine whether a mark is generic or descriptive.  Id. at 11, n. 6.

[3] In Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., the Court held that adding a corporate designation to a generic term (e.g., Wine Company) does not bestow trademark eligibility.  128 U.S. 598, 602–603 (1888).

[4] Booking.com., at *12.