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Seller of Travel Laws

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Welcome to California                                      Photo credit:Frank Kovalchek 

Nevada Governor Brian Sandoval signed a bill on June 10, 2015 repealing a law, that for decades, required all travel agencies doing business with Nevada consumers to register, maintain trust accounts and support a consumer recovery fund. Prior to the repeal, the Nevada legislature instituted three suspensions of the seller-of-travel law (NRS 598.305 - 598.395) for two-year periods beginning in 2009.

The law was initially enacted to protect consumers from being victimized by scams in which unscrupulous travel agents and tour operators would pocket client payments and deposits without booking travel reservations and without the ability to obtain a refund. But the seller-of-travel program has not been a cost-effective measure for the state, a factor which likely influenced lawmakers under pressure to balance budgets in a tight economy, to first suspend and then eliminate the program completely. The repeal bill passed with nearly unanimous support in both of Nevada's legislative chambers.

Provisions requiring registered sellers of travel to display a written statement both online and at their business premises informing consumers of their rights to recover from the fund have been permanently erased from Nevada's collection of statutes regulating deceptive trade practices. Travel agencies that have previously registered in Nevada no longer need to prominently display their registration numbers on advertisements and websites.

Since the current suspension was due to expire on July 1, travel agencies can now operate in Nevada with the certainty that their activities will not be subject to additional scrutiny by state officials.

Nevada was one of six states that maintained seller-of-travel laws requiring registration. California, Florida, Hawaii, Iowa, and Washington are the only remaining states that require such registration. The repeal in Nevada follows a growing trend of states that have abandoned seller-of-travel legislation during the past 12 years, including Ohio, Oregon and Rhode Island.

Posted June 12, 2015
Welcome to California                                      Photo credit: Ken Lund

The California Seller of Travel Program which is administered by the state's Office of the Attorney General has introduced a procedure earlier this year which effectively exempts hundreds of travel agencies from the requirement of having to maintain client trust accounts or surety bonds.  Financial security is not necessary if the travel business never deposits or retains funds from California clients and client payments are made by credit card as a pass-through transaction with the supplier listed as the merchant of record. 

In offering this procedural exemption, the Attorney General's Office has adopted a more expansive interpretation of the financial security provisions of the Seller of Travel Law. The relevant section of the law that addresses pass-through credit card payments to suppliers states as follows:

The seller of travel is not required to comply with the direct deposit requirement [for trust accounts] set forth in subdivision (b) if all of the following apply:

(1) The payment is made by credit card.

(2) The seller of travel does not deposit, negotiate, or factor the credit card charge or otherwise seek or obtain payment of the credit card charge or the crediting of the amount of the credit card charge to any account over which the seller of travel has any control.

(3)(A) If the charge includes transportation, the carrier that is to provide the transportation processes the credit card charge.

(B) If the charge is only for services, the provider of services processes the credit card charge.

See California Business and Professions Code § 17550.15(j).

The Attorney General's Office previously applied the pass-through credit card payment exemption on a per transaction basis. But now sellers of travel can become categorically exempt from the trust and surety bond requirements if they attest in an affidavit that they do not collect customer deposits. The Seller of Travel Program has made a standard affidavit available on its website under Form 750. The Attorney General's Office first circulated the form on January 20, 2014 without publicly announcing its adoption of the new procedure.

Compliance with the voluminous, 17,000-word Seller of Travel Law can often seem like a daunting process for lawyers and clients alike. However, by introducing Form 750, the Attorney General's Office has lifted a significant burden on hundreds of travel businesses that are now eligible for this financial security exemption. Travel firms that are looking into registering in California for the first time should determine if they are eligible for the financial security exemption. Travel businesses that are already registered as sellers of travel in California may want to consult legal counsel to determine whether they, too, qualify for the Form 750 exemption which would permit them to close trust accounts or redeem surety bonds.

Posted December 2, 2014
Corporations continuously invest tremendous amounts of capital in intellectual creativity and marketing. As brand names become widely recognized, owners of famous trademarks aggressively take legal action to protect their rights. In recent years, small travel agencies have found themselves pitted in trademark battles brought by powerful corporations which offer no competing or related goods and services. Several such cases, discussed in greater detail below, illustrate the need for small businesses to exercise caution and due diligence before branding themselves with a trade name.

The Saul Zaentz Company D/B/A/ Tolkien Enterprises v. Wozniak Travel, Inc.
In 2006, Tolkien Enterprises sued Hobbit Travel in the U.S. District Court for the Northern District of California, accusing the company of wrongfully appropriating the word “hobbit,” the name coined by J.R.R.Tolkien and featured in his books “The Hobbit” and “The Lord of the Rings” to describe dwarf-like creatures who inhabit the mythical world of Middle Earth. The suit claimed that the travel agency, which has operated under that name since 1976, was confusing the public about its association with Tolkien and capitalizing on Tolkien's good will. On July 29, 2008, the Northern District of California granted summary judgment in favor of Hobbit Travel. The court dismissed the suit because Tolkien Enterprises waited an unreasonably long time to file suit, 18 years after the company became aware of Hobbit Travel's existence.

Intel Corp. v. Intellife Travel, Inc.
Few people would cognitively associate  a semi-conductor maker and a business that sells airline tickets but these distinct differences did not deter Intel Corp. from asserting a suit for trademark dilution and infringement against Intellife Travel Inc., a two-person travel agency based in Santa Clara, California. The 2008 suit claimed that the agency's name, which stands for "Intelligent International Lifestyle," causes "confusion that Intel is the source or sponsor of Intellife's services" and is a "dilution of the Intel trademark." The companies later resolved the dispute in an undisclosed settlement.

Trans-High Corp. v. High Times Travel, LLC
In the most recent case, a Seattle-based seller of vacation packages found itself in a similar predicament after it started a travel business that caters to cannabis enthusiasts, called High Times Travel, LLC.

In a sign that the marijuana industry has become mainstream, it took just nine days from the date the High Times Travel publicly launched on June 24, 2013 for Trans-High Corp., the parent company of High Times Magazine, to file a lawsuit against the "budding" travel agency. Although the magazine is not a seller of travel and has no travel related registrations in its trademark portfolio, it sponsors several cannabis-themed events and competitions which have been previously held in marijuana-friendly locations like San Francisco, Colorado, Amsterdam and Jamaica. To promote these events, the magazine signs contracts with a number of travel agencies and tour operators that help event-goers find transportation and lodging at various High Times gatherings.

In its complaint, Trans-High claimed that the travel agency's use of its marks is "likely to cause confusion and mistake in the minds" of consumers creating a false impression that the agency and its owner are "approved or sponsored by, or are in some way associated or connected with Plaintiff's products and services when, in fact, they are not." The travel agency never responded to the lawsuit. But the agency's quiet disappearance from the worldwide web likely influenced the magazine to drop the suit. 

Trademark Dilution
One lesson derived from these cases is that trademark protection can expansively extend beyond companies directly competing against each other. Direct competition is just one of several determining factors as to whether infringement has occurred but the existence of competition is not a necessary element to sustain a separate claim of trademark dilution.

The Federal Trademark Dilution Act (FTDA) provides that the owner of a famous mark is entitled to protection against a junior user's commercial use of a mark if the use begins after the mark has become famous and causes dilution of the distinctive quality of the mark. The Act defines dilution as "the lessening of capacity of a famous mark to identify and distinguish goods or services" regardless of whether the dual use would likely confuse consumers or involve competing goods and services.

So, even though there is very little likelihood of confusion created by a travel agency's use of the name "Intellife," Intel sued for dilution on the premise that the name "Intel" is a famous mark which was in danger of becoming less distinctive due to the junior user's incorporation of the term "Intel" in its name. Tolkien Enterprises employed a similar argument when it sued Hobbit Travel for dilution.

[Just to clarify - Trans-High Corp. did not accuse High Times Travel of dilution. Rather, it sued for trademark infringement based on the premise that its name causes confusion within the minds of the public since both firms are cannabis-themed businesses marketing products to the same customer base.]

While business owners should remain vigilant about lateral suits for infringement brought by competitors, such as the 2010 suit brought by Travel Dynamics International against the Travel Dynamics Group (now known as Cadence Travel Management), they should also avoid selecting a name that resembles a famous brand operating in an entirely different industry. Trademark dilution suits (even obscure ones) threaten the survival of small businesses. Owners of famous marks usually have plenty of money and resources to troll the internet for copycats and threaten them with litigation.  Therefore, when selecting a trade name you should carefully evaluate the risks of both infringement and dilution.

Duty to police trademarks
Trademark dilution remains an area of great controversy. And Intel found itself at the epicenter of controversy when it sued a tiny travel agency for dilution and infringement, claims which many analysts criticized for their questionable merits. But in many instances large corporations have few alternatives when it comes to defending the integrity of their marks.

Trademark holders are under an affirmative duty to actively police their trademarks. If they fail to do so they may suffer the consequence of a court subsequently finding that the trademark holder acquiesced to infringing uses or that the mark now lacks distinctiveness.   When truly infringing  or dilutive  conduct is discovered, the trademark holder must take aggressive action to assert its rights.

Therefore, the stakes for trademark holders have never been higher. The number of trademark suits filed each year continues to increase and unsuspecting entrepreneurs who name their businesses arbitrarily without first determining whether the mark is already in use could be at risk for trademark violations.

In the next blog article Daniel Zim will offer tips on avoiding trademark infringement and dilution.

Second article in a two-part series on trademarks
Posted on November 20, 2013

Trademark litigation can take a financial and emotional toll which may even force a small business to close. But following the simple steps outlined below can help protect your business and your brand from wasteful and unproductive litigation.

Risk avoidance for trademark liability begins at the time you select your business name. To ensure that your trade name does not infringe or dilute another trademark, you or your attorney should perform a thorough search of existing trademarks to verify that no one has claimed your name or a similar sounding name that might cause confusion.  Generally, you should conduct name searches of  the three following sources:

1.       the U.S. Patent and Trademark Office's database of registered trademarks using its  search tool;

2.       popular search engines like Yahoo, Bing or Google; and

3.       a domain registry for trade name candidates in combination with popular used domains such as .com, .net and .travel. This type of search is also useful in determining whether the domain you want is available.

When you conduct your searches don't limit your results to the exact name. Expand the search by creatively brainstorming and looking up similar sounding names, misspelled versions of your name and synonyms. Keep documented records of your search results capturing screen shots of web searches to show that you made a good faith effort to avoid infringing another's mark in case a problem arises. If a conflict arises during your search or you think there is a possibility consumers will confuse your business with another travel agency, tour operator, supplier or  a nationally-known brand you should probably avoid selecting that name.  If uncertainty persists or if you are already using a mark that possibly infringes another, you may want to consider retaining a trademark attorney for professional advice.
The internet has improved quality of life for most people in the United States but for a segment of the population with disabilities it remains a significant barrier to accessing information and services. Websites are often not configured with features that are accessible to disabled individuals. People with manual dexterity disabilities, for example, cannot easily use drop down menus which are commonly installed on travel website booking engines. The visually impaired face their own set of web navigation challenges. Screen readers used by the blind as assistive technology cannot transcribe non-textual visual imagery such as photographs and other types of graphics which, unbeknownst to a blind web user, may house a link to another web page.

These accessibility barriers have prompted government action to ensure equal access to products and services offered on the internet. To that end, on June 10, 2014, a new Department of Transportation (DOT) regulation went into effect requiring some "ticket agents" (the term includes travel agencies and tour operators) to offer additional assistance to disabled air travelers. Pursuant to the amended DOT rule on unfair and deceptive practices (reference 14 CFR § 399.80), ticket agents that are not exempt from compliance will have to disclose and offer internet-based discounted air fares to “prospective passengers who contact the agent through other channels (e.g., by telephone or in the agent’s place of business) and indicate they are unable to use the agent’s website due to a disability.”

Scope of DOT rule
Not all ticket agents must comply with the DOT's new requirement. The rule applies only to firms that fit within the Small Business Administration's definition of a large business which, in this case, are ones that earn annual receipts exceeding $19 million.

For these non-exempt large businesses, a limited circumstance triggers the need for compliance. The caller or walk-in client first must affirmatively self-identify himself as being unable to use an inaccessible website due to his disability. Once the client has done so, the ticket agent must offer a fare that is no higher than the one that is offered on the ticket agent's website.

It is also significant that the regulation is limited to the "fare" and not a fee charged for making a reservation with a live representative. DOT has said in the Federal Register that it decided not to include an additional requirement in the rule to prohibit a ticket agent from charging a fee for reservations made over the phone or at the agent’s place of business to individuals who cannot use the agent’s website due to a disability because it believes that practice is already prohibited under Title III of the Americans with Disabilities Act (ADA).

If DOT is correct that an agency's refusal to waive the fee under this circumstance violates the ADA, then ticket agents of all sizes are prohibited from engaging in this practice because there is no small business exemption under Title III of the ADA. However, the issue of whether Title III applies to operators of commercial websites remains in murky legal territory since Congress has never passed legislation amending the ADA to extend coverage to operators of commercial websites and, for that reason, courts have been largely reluctant to take an expansive view of ADA coverage. Yet, adding further legal uncertainty, the Department of Justice (DOJ) has promised to issue a rule confirming its longstanding opinion that Title III of the ADA applies directly to commercial websites.

Best Practices
As a growing number of companies, including Orbitz and American Express, are charging fees for taking air reservations over the phone, such companies should evaluate with their legal counsel whether a waiver to the phone fee policy should be provided to website challenged individuals and whether notice of a policy waiver should be posted on the section of their respective websites where the fees are disclosed.

Ticket agents that are not exempt under the DOT rule due to their large size should not offer internet-only fare discounts without making an accommodation for website-challenged individuals. If such deals are offered these companies should disclose in promotional advertising that special exceptions apply to those whose physical or intellectual limitations impede them from accessing the web.

Non-exempt travel agencies and tour operators should train their employees to affirmatively respond to a disabled person's need for special booking alternatives. When quoting airfares over the phone or in-person to those individuals, staff members should do a website check to verify that the verbally communicated fares are no higher in price than the fares posted online.

Although not specifically required under the DOT rule, it is probably a good idea to conspicuously display a customer support telephone number on the home page. A lot of online travel agencies don't do this, often displaying the phone number as many as three or four click-views away. One must assume that it takes a disabled person a longer amount of time than usual to navigate the web due to their impairment and since airfares rarely ever remain stagnant it may make it more difficult to comply with the DOT rule if fares increase during the time that a customer searches for the support line. Furthermore, placing callers on hold for lengthy periods can also contribute to this problem.

Through the disability rule and DOT's latest consumer rule proposal, the Department has made it part of its mission to raise customer service standards for ticket agents. Therefore, we should expect to see efforts to penalize ticket agents that fail to provide the required assistance to disabled individuals.

Posted June 16, 2014