How Apple could fight Cisco

That analogy isn't likely to appear on the SATs next year. But that's precisely the question at the heart of the legal dispute over whether Apple will be allowed to use the iPhone name--currently trademarked by Cisco--for the new device unveiled at Macworld. Cisco sued Apple on Wednesday, claiming the iPhone violates a trademark Cisco acquired in 2000 and uses for a line of Internet phones.

There are a few avenues that Apple can pursue in defending itself against Cisco's lawsuit. However, no matter what the company does, it is treading uphill because Cisco has a registered trademark with the U.S. Patent and Trademark Office, according to lawyers interviewed Thursday. "As a federal trademark holder, there are certain presumptions," said Grace Han Stanton, a trademark lawyer with Perkins Coie in Seattle.

Apple also apparently recognized the value of Cisco's trademark, as it started negotiating with Cisco for the rights to use the iPhone brand as early as 2001 and was involved in negotiations as late as Monday night, according to Cisco. Apple has declined to comment on its negotiations with Cisco.

One tack that Apple can take is proving that its iPhone is as different from Cisco's iPhone as Delta Air Lines is different from Delta Faucet, said David Radack, chair of the intellectual property department at the Pittsburgh law firm Eckert Seamans Cherin & Mellott. No one is going to call Delta Faucet looking for a round-trip ticket from San Francisco to New York, so two companies can use the same trademark if they don't confuse the other's customers, he said.

Preventing consumer confusion is one of the primary reasons for trademark law, Radack said. Courts must consider whether the average consumer would be flummoxed by the fact that a faucet company and an airline share the same name. "Since the mark is the same, are the goods substantially different?" he asked.

This appears to be one facet of Apple's legal strategy, as one part of its statement Thursday in response to the lawsuit read, "We're the first company ever to use iPhone for a cell phone." Any court taking up the Cisco versus Apple case would have to decide if voice over Internet Protocol (VoIP) phones are substantially different from cell phones, and while some might consider a phone a phone, it's not clear cut, Radack said.

McDefense strategy
Apple can also argue that it owns a "family" of trademarks related to the iPhone, said Craig Mende, a lawyer with trademark and copyright firm Fross Zelnick Lehrman & Zissu in New York. For example, the iPod, iTunes, iMac, iWork and iLife products all bear a strong association with Apple, so the company could argue that consumers would naturally associate the iPhone with Apple.

The most famous example of this strategy is used by McDonalds, which has successfully argued that any other company that attached "Mc" to their product, like a McPhone, is creating consumer confusion that the McPhone is a McDonald's product. Even though you really shouldn't eat a phone, consumers would automatically associate McDonald's with anything using the "Mc" prefix, Mende said.

The problem with this argument is that the letter "i" is not a strong letter for trademark purposes, said Grace Han Stanton, a trademark attorney with Perkins Coie in Seattle. "There are a number of parties that use 'i' for Internet services," she said.

For example, Sony uses a technology it calls iLink to describe its implementation of the FireWire, or IEEE1394, connection. And there's also a company that operates the iBoat Store, selling boats and boating supplies over the Internet. And several iPod accessory makers use lower-case "i"s in their product names, such as the Soundcast iCast or the Klipsch iGroove, Mende said.

And Apple has established an association between itself and the specific iPhone term because it went ahead and launched a product with a name that it didn't have clear rights to use. This is called "reverse confusion," when one company starts using a trademark used by another company, and the later entrant into the market creates a significant buzz around its products. Given the sheer volume of iPhone coverage and that Apple is better known among average consumers than Cisco, people might assume that Cisco is ripping off Apple's iPhone with its family of VoIP phones, Radack said.

If either of those tactics fails to impress a judge or jury, Apple could also claim that Cisco has failed to defend its iPhone trademark, Stanton said. Cisco acquired the iPhone trademark when it bought Infogear in 2000. Since then, other companies, such as Teledex and Orate Telecommunications Services, have shipped products--products that directly compete with the Cisco/Infogear line of phones--bearing the iPhone moniker.

Even Cisco doesn't appear to have actively used the iPhone name until weeks before Apple's announcement. Cisco says that it sold products under the iPhone trademark after it acquired Infogear in 2000--until it started selling Linksys VoIP phones using the iPhone name starting in early 2006. But references to either a Cisco or Linksys iPhone were not readily available on the Web sites of either division until December 2006, when Linksys launched the iPhone family of VoIP phones.

If Apple can argue that Cisco failed to defend the trademark until it launched the new iPhones in 2006, it could possibly convince a judge that Cisco abandoned the trademark, Stanton said. Cisco has said that it used the iPhone trademark on VoIP phones sold in early 2006, and maintains that is has actively defended its trademark. "We have taken all actions necessary to satisfy all elements to prove the validity of our trademark under trademark law," a Cisco spokesman said.

However, settlement is the most likely outcome of this dispute, given the burden of proof on Apple needed to overcome Cisco's trademark registration, the lawyers said. "Even big companies get legal fatigue," Radack said.

But Cisco has said that negotiations broke down over Cisco's desire for interoperability between its iPhone and Apple's. Apple is not known for its desire to make its products interoperable with anyone else's, so if there's no amount of money that could make Cisco happy, we could be in for a battle.

CNET News.com's Marguerite Reardon contributed to this report.