Introduction:

It has been misunderstood for years that trademark law was intended to protect the interests of consumers and improve the quality of information available at the marketplace. However, since the time of its inception, trademarks served the only purpose of indicating the commercial origin of services or goods at any given place (McKenna 2007). Public interest always played only a secondary role, even in traditional trademark law as can be seen from the numerous judgments where the courts denied relief though there was clear evidence that consumers were not likely to be deceived (McKenna 2007). Today, with the expansion and developments in trademark law, it has been further established that the central rationale for trademark protection is and ought to be the need of business organizations inherent interest in protecting their brand value instead of catering to public interests. Essentially, trademarks have the functionality of guaranteeing the identity of the origin of the trade-marked product so that it does not lead to confusion between products of similar origin (Fhima 2005). Thus, trademark protection offers enterprises an opportunity to safeguard their business products or services by creating a brand value that distinguishes it from others with a distinctive sign. The core functionality of trademarks is to protect producers from illegitimate diversion of their trade by competitors who might lower the brand value. According to Landes & Posner (1987) trademark law has the singular functionality of promoting economic efficiency. Traditionally, courts have always tried to view trademarks as signs that help consumers to match products with producers and to find the products in the market without getting confused (McKenna 2007). Protection of public interests has always played a secondary role because primarily trademark protection is related to the interests of the trademark owner who is at the center of every related right arising from the trademark. Most businesses are trying to enter the market and compete with well established companies that have already created a brand name for themselves. New businesses who want to register trademarks do not always think about the public interests but rather concentrate on establishing their own brand so as to achieve business success. This is the core principle that drives every business organization and this is what underlines the objective behind registering trademarks. New trademarks are a signal of innovative activity (Mendonca et. al. 2004) and business interests which has been established and accepted by several US judicial decisions (Dinwoodie & Janis 2010). With the functionality of innovation comes the reason to safeguard such innovation and this is the objective that drives business organizations to register their trademarks. In the following sections the importance of brand merchandise and the various reasons that drive businesses to protect their trademark is established and reviewed in detail. It is also established that businesses through centuries have always wanted to protect their brand image and with advancement in technology there has been no subversion of public interests, which always played a secondary role. This paper looks into the various aspects of trademark law that have been established over the years and asserts the importance of brand value protection that has turned into the core functionality of trademark law. Finally this paper concludes by establishing the various economic implications of trademark protection and how the current law is shaping through legislations and judgments around the world.

 

The Importance of Brand and Its Protection

Brand has been defined as a name, design, symbol or term that distinguishes the seller’s services or goods from other’s good and services and which is legally termed as trademark (American Marketing Association, 2006). A brand has also been defined as a combination of trademarks (Blakett 1998). However, trademark and brands are two different concepts though they have often been confused to be the same thing. A trademark is essentially a legal concept whereas a brand is a marketing concept that helps any business to gain broader consumer base.  Trademarks are tangible items such as logo, image or design but brands are incorporate intangibles that encompasses personality, identity or association of any company. Trademarks and trade names have always assisted in commercial exploitation of products, services, distribution channels or customer lists that ultimately leads to safeguarding the brand image of the company (Florek & Insch 2008). Business organizations are constantly seeking to protect their brand image by registering trademarks because they understand that once registered their trademarks would last as long as it is periodically renewed. However, brand value may alter with change in position or profile which the business organizations vehemently oppose with the help of trademark protection. According to Florek & Insch (2008), brand is a mixture of attributes that is reflected in a trademark, so the importance of managing trademarks for any organization is perennial as it tries to create value and influence.

It has been suggested by Landes & Posner (1987) that consumers generally do not investigate the attributes of any brand when they observe a particular trademark affixed to it because they trust the brand image. Businesses in turn aim for trademark protection because it reduces consumer search costs and signals the source of origin of the product, thus helping the business to achieve a broader consumer base (Newman 2008). Brand merchandise is achieved by companies when they register their trademarks. It has also been held by the Supreme Court of America in Mary Kay, Inc. v Weber, No. 3:08-CV-0776-G, 2009 WL 3147888 that most companies follow the brand image and get their trademarks registered so that may reap the benefits of goodwill of his business (Gerhardt 2010). Trademark protection is practiced by companies so that they may shut down pirates and unfair competition that threaten to lower the goodwill of the company (Gerhardt 2010). Today, trademark law recognizes and protects merchandising rights which prevents rival companies from producing similar products and passing them off as the original product by using the logo or brand image of the original company. This shows that the public interest is only secondary to protection of brand image because people who buy fake products do know that such products are not licensed and people are not confused regarding the source or origin of the counterfeit products. However, trademark protection do not consider whether the consumer would get confused regarding the origin of the mark and the sole purpose of registering is to prevent unlicensed manufacturers from producing similar goods as was seen in the case of Bos. Prof’l Hockey Ass’n v. Dall. Cap & Emblem Mfg. 510 F.2d 1004, 1008 (5th Cir. 1975) (Desai & Waller 2010). As stated by Dogan & Lemley (2005), marks today do not serve the purpose of indicating the source to the consumers but it has actually turned into the product. Today, trademark law around the world recognizes the importance of brand merchandising and brand image. The brand perspective makes sense in protecting trademarks as the initial interest of any company is to prevent confusion so that they may reach directly to the consumers, while post-sale, companies try to prevent confusion so that the company may build or manipulate its image according to its needs (Desai & Waller 2010). Further, for a company which is yet to register their trademark or which has no brand value yet, the sole purpose of registering their trademark acquires a business perspective only with no consideration for public interest. The company wants to register their trademark so that they may create a brand image that is easily recognizable. The public interest hardly plays any role for a company which has not yet registered a trademark. Brand value is at the core of success for any company and it is the company or producers who have the right to sue when a mark confuses or harms consumers. The consumer interest hardly plays any role because it is the company which can pursue protection of trademarks and not the consumer (Desai & Waller 2010). Although trademark law ostensibly protects the consumers but inherently it is the protection of company brand value that drives registering of trademarks. From these various perspectives it can be seen that companies and their brand protection is at the core of trademark laws and public interest only plays a secondary consideration.

 

Traditional and Modern Functionality of Trademarks

It has been argued by several scholars that trademark law has digressed from its original purpose of protecting the consumers and focuses more on the rights of the company (Desai & Waller 2010). However, it is not true that traditional law paid special emphasis on the rights of the public and modern trademark law has totally denied the consumer interests. Public interests always played a secondary consideration in trademark protection and still continue to play that same role because trademarks are inherently related to the brand value of a business organization. Several scholars, mostly from the Chicago School of law have argued that traditional trademark law was designed to protect consumers (McKenna 2007). However, trademark law right from its inception has always capitalized on protecting the rights of the producer so that he can in turn protect his business goodwill or brand value, though the brand concept was not prevalent before the twentieth century. Trademark law prevented confusion amongst consumers not because of any public interest but because confusion and deception was harmful for businesses as it stole the competitor’s trade (McKenna 2007). Inherently, traditional trademark law always tried to regulate the relationship between competitors and help companies to build goodwill (brand image) so that their business may benefit. Benefits to consumers always played a secondary consideration and continue to do so in the present generation (McKenna 2007).

Traditionally, American courts protected producers and trademark owners against competitors who passed off their products by recognizing trademarks as property rights. In Canal Co. v. Clark 80 U.S. 311 (1871), 322-23, it was held that relief could only be granted when goods of one manufacturer was falsely represented causing losses to the trademark owner. Traditional American trademark law sought to protect trademark owners from illegitimate trade diversion so that they may protect their goodwill (brand name) (McKenna 2007). However, around late nineteenth century there was shift in focus of trademark law which also included unfair competition as an element of trademark law. However, whatever may be the causes; trademark law still remained primarily concerned with prevention of trade diversion to protect the interests of the business organization (McKenna 2007).

In medieval England too, trademarks were recognized for operation of the guild system and their reputation. In guilds system, the primary objective of trademarks was to maintain the goodwill and punish those who produced defective products (McKenna 2007). A number of common law cases in England, such as Edelsten v. Edelsten, (1863) 1 De. G.J. & S. 185, 199, 46 Eng. Rep. 72, 78 (Ch.), showcases how the courts have regularly emphasized that trademark protection is only available when producers try to pass off goods of others as their own by using their registered trademarks. The secondary role played by public interest in trademark law regime can be best understood by cases – Millington v. Fox, 3 Myl. & Cr. at 352, 40 Eng. Rep. at 961; and Hall v. Barrows, (1863) 4 De G.J. & S. 150, 46 Eng. Rep. 873 (Ch.), wherein the court held that fraud in Defendant is unnecessary as the primary concern of trademark protection has been upon property only (McKenna 2007). This emphasized that public interest was not the core principle that drove trademark protection. It was also held in Levy v. Walker (1878) 10 Ch.D. 448, that courts would only interfere when there is violation of business interests and not for public interests. Thus it is apparent that traditionally too, trademark protection considered business interests to be of primary importance and public interests only served a secondary consideration.

The basis for the importance given to protection of a company’s brand value by registering trademarks can be attributed to the natural rights property theory which was commonly followed by the courts in the nineteenth century. According to this theory, business entities were allowed to maintain a zone of free action and they were also given the right to enjoy the benefits arising out of their own labour (McKenna 2007). Thus, producers were allowed to protect their brand value so that others might not interfere with his business. As stated by Upton (1860), protection of public interests always played a secondary role. Trademarks always had a two-fold purpose of protecting the superiority of the article or service presented by the trademark owner and secondly to guarantee the veracity of products purchased by consumers so that there is no deception. Brand value and brand protection was thus at the core of trademark protection right from the time of its origin and it has remained so till date.

Modern trademark law has not digressed from its original purpose though scholars have often reported that it is more about the brand today than about consumer interests (Desai & Waller 2010). Since early twentieth century, the courts started viewing brand value as goodwill embodied in a trademark (McKenna 2007). The importance given to consumer interests in the twentieth century was possibly because courts viewed traditional trademark law without looking into the normative content and broadened the scope of trademark law. However, the courts in America and the Congress ought to have read the nineteenth century judgments carefully before concluding that protecting consumer interests is the sole purpose of trademark laws (McKenna 2007). As can be seen from the entire discussion in this section, traditional trademark law was not about public interests but it was only about protecting the rights of the producers. Modern trademark law too sought to protect the brand image which came to the fore in the twentieth century. Today, mark owners are protected even if there is any speculative harm to their brand image. The expansion of trademark law has helped producers to not just protect its existing business, as was ingrained in traditional trademark law, but also protects the hypothetical future business and potential markets where the mark owner might establish his brand value (McKenna 2007). The modern functionality of trademarks do have a secondary consideration to prevent confusion amongst consumers but the core functionality of trademark law remains protection of the brand value of any business organization. Today, trademark concepts, such as initial user confusion and post-sale confusion might have consideration for public interests but the business interest still remains the driving force behind trademark registration. In one such case, Mastercrafters Clock & Radio Co. v. Vacheron & Constantin-Le Coultre Watches, Inc., 221 F.2d 464 (2d Cir. 1955), the court held liability of confusion amongst casual observers of the Defendant’s clock would amount to confusion, emphasizing the importance of the doctrine of protection of business interests.

One of the most important concepts that have dawned with the expansion of trademark law is the era of licensing. Today, mark owners are allowed to license their products via sponsorship or affiliation as long as a minimum standard of quality in the products are maintained. This clearly establishes the importance given to goodwill and brand value in current trademark laws and showcases how businesses ought to protect their brand image which when attached to a mark might travel from one market to another (McKenna 2007). Merchandising of goods has also established the importance of brand protection. Further, arrival of the trademark dilution concept has significantly expanded the reach of trademark protection. Today, trademark owners can prevent others from using that same mark even if there is no confusion. Thus, if a brand name “BUICK” is in the business of manufacturing cars and this trademark is used by a shoemaker then the court can interfere and prevent the shoemaker from using that same brand name. However, the potential risk of people confusing between “BUICK” the automakers and “BUICK” the shoemaker is minimum. Thus, it is again evident that public interest is only a secondary concern and brand image is the primary reason behind trademark protection (McKenna 2007).

 

The Economics of Trademarks

According to the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights) – Article 15, trademark has been defined as a sign that ‘marks’ a certain product or service distinctly against related products and services. This in turn creates a commercial interest that prevails over any public interest (Kell 2003).            The TRIPS Agreement is based on the WIPO (World Intellectual Property Organisation) Paris Convention which also guarantees authorisation right to the trademark owner, which means that the owner of the mark can authorise a third party to use the trademark in return for an agreed amount of money (Ghafele & Vanderslott 2011). These features highlight the economic rationale behind trademarks and signify why businesses try to exploit their registered signs for profit. For any business organisation seeking profit, the main functionality ought to be protection of brand value so that they maintain customer loyalty. This can only be achieved by registering trademarks as it enables customers to distinguish between products or services offered by different companies (Ramello 2006). Further, as discussed by Hart (1995), trademarks lower the transaction costs and create vertical restraints which are economically viable for any organisation. Any company that has its trademark registered owns the exclusive right to such mark and it can also sell or grant nominal rights of usage of such marks to other companies. By using trademarks, franchisors often restrict franchisees from production of the goods or services generated by the parent company while it allows the franchisees to specialise in distribution of the products or services. This cuts down competition in the market and helps the owner of the trademark to maintain its reputation without any concern about the public interest (Ramello 2006). It has been asserted by economists that by reducing consumer costs in searching for the origin of any product, trademarks work as information capital (Gerhardt 2010). Today, people around the world are willing to pay more for brand merchandise because they know that such goods have a particular quality that cannot be matched by other products (Newman 2008). Business organizations understand the importance of public’s investiture of a social meaning to their trademark name, symbol, logo or image and it is for this reason they want to get their trademark registered. There is a definite social value added to the trademark by quantifying the perception that buyers would have of that brand image. This is very important for a business organization because they want to appeal to the general public and it has been observed that people in general want to get associated with brands that have a famous logo (Newman 2008). Modern trademark law allows an exclusive merchandising right to the owner of the mark. This is economically and legally viable because inadvertently consumers would want to get associated with a brand name that own exclusive merchandising rights. Thus, even though the law protects the business organizations right to own, create or licence the mark to others, there is an underlying concept of public interest which plays a secondary consideration. Business organizations profit immensely from registering their trademarks because they understand that the brand value created would draw a lot of consumers who would start relying on the brand image. Once the brand image is established, the trademark owner can grant the right to manufacture similar products or to sell such products to different outlets and draw profits without actually investing anything. The goodwill or the brand value created by a company generates an economic interest for the business organization and it is for this reason that the company wants to get its brand value protected (Newman 2008). Once the public imbues a particular value to the trademark it becomes an immense source of revenue for the mark owner (Coombe 1991).  Business owners use the potential harm and business loss theory to bring about trademark infringement suits which the courts most often grant in their favour. Today, the Lanham Act enables the trademark owner to win in courts by pointing out the investment made in the brand to showcase the potential loss that might result from trademark infringement, although there may not be any loss in reality (Desai & Rierson 2007). There have been several American cases where the courts have held that trademarks always grant product monopolies to the mark owner (Newman 2008). Mark owners can decide whom to grant manufacturing rights bearing the mark owned by them and this is the most important consideration of trademark laws. In Boston Athletic Ass’n, 867 F.2d at 22, the court held that unauthorized usage of the brand name “Boston Marathon” or similar goods amounted to trademark infringement as the mark owner is the only person who may decide whom to grant authorization (Newman 2008). Under such circumstances one can verily justify that public interest is only of secondary consideration as the primary concern of trademark law is to protect the interests of the mark owner. Brand image and brand value protection is the most important concern and courts have regularly granted relief to trademark owners whenever confusion has been caused in the mind of the consumer regarding the ownership of the products. Courts have tried to protect the pre-sale investments that a trademark owner puts in to create the brand merchandise and brand value. Any violator who tries to divert the profits to alternative producers by using the mark of the original owner has been called an infringer and courts have regularly punished them (Newman 2008). Public interest though driving the cause behind trademark infringement has always played only a secondary consideration behind trademark registration by business organizations.

Trademark laws around the world have always acknowledged that businesses primarily deal in making profits. Registering trademarks is also driven by such motives so that business organizations may protect their brand value. European Union courts have also opined regularly that public interests only play a secondary role as compared to the interest of a business brand-value protection. In a decision by the European Court of Justice (ECJ) in Adidas AG v. Marca Mode (adidas v Marca II, Case C-102/07), the ECJ held that public interests hardly play any role in granting trademark protection and the most important role of trademarks is to prevent confusion or dilution. The court observed that under Article 3(1) b and 3(1) c of the First Trademarks Directive (89/104/EEC), trademark protection may be denied when the mark is devoid of distinctiveness. However, under Article 3(3) if a trademark registrant can show the distinctiveness of a mark and its importance then the courts have to allow for its registration (Fowler & Winckworth 2008). The court held that adidas’ three striped mark had acquired distinctiveness by usage and companies who were selling similar products with the two-striped marks were infringing their trademark rights. Thus, the court’s decision asserted that famous marks do have a brand value that the company ought to protect by trademark registration. There is a great danger to well-known marks from use of a sign that is similar to the original mark because it links the products to the prior rights holder (Fowler & Winckworth 2008). Thus, the ECJ in Adidas AG v. Marca Mode (adidas v Marca II, Case C-102/07) denied the existence of any relation to public interest to trademark protection and allowed marks to enjoy rights even if they had acquired distinctiveness instead of inherent distinctiveness. The public interest is limited to assess the harm caused to the trademark owner and does not really play any central role in trademark laws.

 

Conclusion:

In conclusion, it can be stated that the central rationale behind trademark protection is and ought to be protection of brand value because mark owners should have the right to exploit their mark in any possible way they want. The public interest only plays a secondary role because companies cannot be forced to regulate their products according to the requirements of the public. Businesses ought to make money out of their investment and they ought to exploit their resources in every possible way. Brand value and business protection is the primary objective of trademark law because often when a business entity registers a trademark that is not yet famous, there is no underlying public interest in registering that trademark. However, the trademark law still allows for such protection because business protection is the primary object of trademark law and public interest is the beneficial result of that protection but not a primary aim. Again, even for famous and well known trademarks that have lots of consumers, one cannot say that public interest is the primary object because any trade mark can be infringed by the mark owner’s own consent. A company like Nike that has been protected by trademark law for many years has created a brand value that helps people easily recognize the authenticity of their products. This does create a public interest but this is not the main objective of trademark protection because Nike can assign the right of selling and manufacturing products with their trademark or sign to any other company by using their license granting rights. Further, as can be seen from the above discussion, traditional as well as modern trademark law is primarily based on business objectives. The natural rights to property theory guided traditional courts of the nineteenth century to observe that owners of marks are the exclusive persons who should be given relief if infringers violate their exclusive rights to enjoy the fruits of their labour. Traditional as well as modern trademark law does take consumer interests into concern but it is only a secondary consideration to evaluate whether business interests are actually getting violated. Every significant doctrinal development in trademark law has primarily focused on giving greater control to the mark owner. Initial interest confusion is based on well-known marks that are easily recognizable which asserts the importance of brand value protection. Again, post-sale confusion also relies on marks that are easily recognizable thus asserting the fact that trademark protection is primarily dependant on brand value created by any mark owner (McKenna 2007). Dilution theory is also based on the value of famous brands and modern trademark law legislations as well as court decision showcase that trademark law is industrial policy aimed at protecting the brand value of any organization. Trademark law now acknowledges the importance of branding and protects not just the company but also its brand image (McKenna 2007). Today, producers can attach any argument in the name of protection of larger consumer interests and claim relief for violation of their trademarks as can be seen from the judgment of the ECJ in Adidas AG v. Marca Mode (adidas v Marca II, Case C-102/07). The core functionality for any business organisation remains profit making and it is the main rationale that ought to drive mark owners to get trademark protection. Enabling customers or public to distinguish between different products or services can only be achieved by generating a brand value that is easily recognizable and reliable. Thus, the public interest is a secondary consideration which drives the primary concern of business organization to seek trademark protection by registering their marks, image, logo, sign or name. Reaping the benefits arising out of the goodwill of a company cannot be denied to the company in the name of public interest and this ought to be the most important characteristic of trademark law. Public interest should not be an end in itself though it must play a crucial role in preventing infringement of trademarks. Modern trademark law should develop on these basic principles and continue to provide protection to trademark owners who are seeking brand value protection.

 

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