OpenAI may have won the latest round of a trademark case against the similarly-named but unaffiliated OpenAI, Inc., but at least one of the judges on a panel for the U.S. Court of Appeals for the Ninth Circuit was not convinced. The federal appeals court affirmed a preliminary injunction that bars Open Artificial Intelligence, Inc., and its founder, Guy Ravine, from using the “OpenAI” trademark on the basis that OpenAI maintains rights in the trademark, as it had likely acquired secondary meaning in the arguably descriptive mark. However, Judge Daniel Collins questioned this determination in a dissenting opinion last week that sheds light on whether companies can amass rights based purely on a stand-out product.
The Background: In August 2023, OpenAI, Inc. filed suit against Open Artificial Intelligence, Inc., alleging that it “unlawfully adopted” the “Open Artificial Intelligence” name after the AI titan had already begun operating in the AI space. As a result, Open Artificial Intelligence and Ravine (the “defendants”) stand to confuse “millions of users of OpenAI’s products into mistakenly believing that [they] have any connection to, association with, or sponsorship by OpenAI when, in fact, there is none.”
The defendants have argued that “OpenAI” is a descriptive term referring broadly to open-source AI systems and thus, OpenAI’s name does not function as an indicator of source, especially in a field where “open” and “AI” are commonly used terms. OpenAI countered, claiming that due to its consistent use of the OpenAI name since 2016, its brand has acquired “secondary meaning” among the consuming public. (Descriptive marks are protectable if they have acquired distinctiveness by establishing secondary meaning in the market.)
The Ninth Circuit affirmed the district court’s decision to grant a preliminary injunction in OpenAI’s favor, stating that the district court conclusion that OpenAI likely acquired secondary meaning in the OpenAI mark “is not clearly erroneous.” The court noted that “in July 2022, over one million users had registered for early access to [OpenAI’s text-to-image generator] DALL-E 2, and, as of September 2022, more than 1.5 million users were creating over 2 million images per day with DALL-E.”
Against this background, the appeals court signed off on the U.S. District Court for the Northern District of California determination that OpenAI’s mark likely acquired distinctiveness by September 2022, which predates the first allegedly infringing use of the mark by the defendants, thereby satisfying the secondary meaning requirement.
Popular Products & Secondary Meaning
Not all of the Ninth Circuit judges were convinced, though. Judge Collins asserted in a dissent that “the district court’s orders supporting its grant of a preliminary injunction failed to identify and apply the correct legal standards and made confusing and insufficiently explained findings.” Part of the issue, according to Collins, centers on secondary meaning, and in particular, the connection between a popular product (DALL-E in this case) and the creation of secondary meaning.
Specifically, Judge Collins states that “the majority notes that there is evidence in the record that it concludes would support a finding that the release of DALL-E 2 in September 2022 was sufficient to establish secondary meaning in [OpenAI’s] mark.” Part of the problem, he asserts, is that the district court’s original order “never explicitly stated that the release of DALL-E 2 alone established secondary meaning in Plaintiff’s mark; instead, it recited only a combined finding that the release of ‘ChatGPT and DALL E 2’ had made that mark ‘a household name.’”
At the same time, Judge Collins argues – citing McCarthy on Trademarks – that the district court’s orders “appear to have overlooked that the ‘[p]opularity of a product is not synonymous with secondary meaning.” He also points to Second Circuit precedent in PaperCutter, Inc. v. Fay’s Drug Co., stating that “it is only in atypical cases that a product’s introduction results in a very rapid acquisition of secondary meaning.” (Note: Five years of use is generally considered to be prima-facie evidence that a mark has acquired distinctiveness is through substantially exclusive and continuous use. However, depending on the mark, the U.S. Patent and Trademark Office could find that it has acquired distinctiveness in less time or that more time is needed.)
Is OpenAI one of those exceptional (or “atypical”) cases in which secondary meaning is amassed more quickly? It might be. According to Judge Collins, “ChatGPT may indeed be that sort of unusual product, and it (combined with the earlier release of DALL-E 2) may have rapidly made ‘OpenAI; a ‘household name.’” He noted, however, that the district court “did not specifically find that DALL-E 2 alone sufficed to make [OpenAI’s] mark a household name before November 16, 2022.”
As for what that means for other companies that may be looking to fast-track a finding of acquired distinctiveness, it means that the bar is high. ChatGPT, after all, nabbed records early last year when it amassed an estimated 100 million monthly active users in January 2023, just two months after launch. According to a UBS study, the 100 million figure situated ChatGPT as the fastest-growing consumer application in history. (For some perspective, UBS stated that it took TikTok about nine months from the date of its global launch to reach 100 million users and Instagram 2.5 years.)
More recently, 9-year-old OpenAI – which was valued at $157 billion in October – revealed in August 2024 that ChatGPT had more than 200 million weekly active users, twice as many as it had in November 2023.
The case is OPENAI, INC. v. Open Artificial Intelligence, Inc. et al., 3:23-cv-03918 (N.D. Cal.)
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