Your brand is a major defining part of your business and legal rights arise in respect of it.
You should understand the legal rights arising from your brand and why you should not only register appropriate trademarks but also consider key strategies involving them we detail here.
If you do this you will not only establish strong protection from your competitors, and a platform for business growth but also create value in your business for any eventual sale.
- Trademarks, Passing Off and Trademark Registration
You have common law rights arising just out of the use of your brand name or mark as soon as your brand name or mark is put into use.
This common law right is sometimes signified by the owner placing a small TM that appears after the brand when it is advertised or in other correspondence, but this is not necessarily so and a common law trademark in respect of the name or mark will exist regardless of this. This right is protected by the legal redress of passing off which refers to someone attempting to pass themselves off as your business in the market place and causing enough confusion so as to damage your profits.
Legal actions requiring the offender to stop using the name and/or to pay damages, including an account for profits made for the period of the passing off usage can be taken.The common law rights arising out of the common law trade marks use can be restricted in respect of the area the business is conducted, often to a small area or a State where trading of the product has actually occurred.
For example a small Tasmanian store which had conducted a general merchandise business in Tasmania for many years under the name Target, was able to confirm its rights to the name and restrict the rights of Target, now owned by Wesfarmers , in those areas in Tasmania where that store conducted and conducts business.
There may be a dispute in respect of the trademarks existence by others who claim you have not established your business in their area of trade or that they have prior usage and therefore ownership in the areas where they are trading. The starting point for good brand protection is trademark registration and the good news is that it is not expensive generally to do this, even when it is done by an expert which is highly recommended.If it is put in the hands of someone not fully familiar with the law then the registration can be a slow tortuous failure. Many inexpert applications do not consider the correct form of the application, which leads:
– to many queries from Intellectual Property Australia
– unknown conflicts that need to be resolved,
– do not claim the correct classes for the business should claim and therefore do not get the required protection,
– end up with a frustrating failure to register.
Registering a trademark gives additional strong legal statutory rights to the common law passing off right, that prohibits others from using a sign or mark that is the same or deceptively similar to the mark you use on goods that fall within the category that your trademark is registered, and there are 36 categories of registration, that are common amongst all countries.
The trademark is in respect of the territory of the registration. In Australia the territory is the whole of Australia. You may wish to also register in other territories in which you trade or realistically intend to trade such as New Zealand. You may also use The Madrid Protocol (an international treaty), which allows you to register international trademarks from Australia in countries that you trade in or intend to trade in , that can give your brand protection in more than the 90 signatory jurisdictions.
The scope of this article does not fully explore issues involving what can or cannot be registered or the process of registration.
The good news is that where you have registered your trademark, the facts of the trademarks existence and extent of use are clearly on the public record which reduces any problems establishing the facts and in addition you have those additional statutory rights. This leads to you being able to send a clear and importantly, effective legal letter, claiming your legal rights and demanding a party to cease using the name. No messy litigation is normally required as the case is clear to all that you will win. If it is not resolved easily, your rights are very strong and the other party will generally be ordered to pay your legal costs as well as damages claimed.
Note also that if your trademark is not registered in a particular jurisdiction or within a class of goods you use your trademark, then you are leaving yourself open to others applying for a mark similar to yours and this can cause significant legal problems involving you having to prove your usage, if they make claim to their rights.
You should also for asset protection purposes, very seriously consider the owner of the trademark and whether it is owned by your trading entity or alternatively it is owned by another related party to you and correctly licenced to the trading entity. The licence needs to be both registered with both Intellectual Property Australia and also under the new Personal Properties Security Register legislation.
In addition to your trademark registrations:
– You should consider and implement domain name registrations of your names and its variations.
– Constant monitoring of your trademark for breach should be undertaken
– Conduct a regular scheduled internet search of your trademark
– Word of mouth confusing from any customer or supplier should be carefully followed up.
– Ensure that each registration is monitored in respect of its duration. An expert should offer a service of monitoring for you in this regard and you should also know this yourself.
– Send appropriate cease and desist letters from your lawyers as soon as any breach is brought to your attention
- Licensing and Distributorships
If you are thinking of expanding into interstate markets or international markets, or if you have already done so, then you need to ensure that your licensing and distribution arrangements do not leave you exposed to the unintended application of your trademark or unwanted parallel importation.
Carefully draft licensing and distribution agreements
When appointing a licensee or distributor it is important that you:
– Clearly define the goods that the licensee can apply the goods to
– Clearly define the territories that the licensee or distributor is able to sell into.
– Place an obligation on a distributor or licensee not to sell to a person in the permitted territory if the distributor or licensee reasonably believes that the person may resell the goods in an unpermitted territory unless you intend that they should.
– Ensure that any advertised sale on the internet or elsewhere by the licencee must point out the above restrictions clearly.
Note that there are many examples of licensees in established markets selling to customers in their allowed territories and those customers resupplying those goods into territories that the licencee has no jurisdiction.
The effect is often that the trademark owner or its other legitimate licenced distributors is undercut causing distress or the trademark owner has a potential action against them from their legitimately appointed licensees.
This is known as parallel importation
Where your trademark is applied to goods with your consent (for example under a licensing arrangement), then a person doesn’t infringe your trademark simply by importing the goods into a jurisdiction where your trademark is registered.
Expanding on the above example, if:
– you permit a licensee to apply your trademark to goods manufactured in China
– the licensee sells those goods to a person in the permitted territory (Reseller)
– the Reseller then resells them into the United Kingdom, where you have appointed an exclusive distributor
– and you have registered your trademark in the United Kingdom
then your UK trademark has not been infringed because you consented to the application of the mark on the goods in China and to the sale of the goods to the Reseller.
How do you mitigate the incidence of parallel importation?
The most practical way to mitigate the incidence of parallel importation by the above contractual restrictions set out above. Note is would normally be obvious that a customer is buying for the purpose of reselling due to quantity and there would also be a large incentive on the seller to make that sale. This gives the trademark owner contractual rights against the breaching licencee, but not against the on seller (although the licence may give the licensor the right to prosecute on behalf of the breaching licencee), and also rights to the licencee to prosecute the breaching customer under contract, but not under trademark law. The contractual restrictions must be very carefully drafted as you are restricting the rights of a purchaser from on selling and there are some key legal problems to be addressed in respect of this.
Oddly under trademark law, the trademark owner could not prosecute the end purchaser as he has purchased from a legitimate licensee of the trademark and also the licensee could not prosecute the on seller as he is not the owner of the trademark.
You could also mitigate the incidence of parallel importation by conditionally assigning registration of your trademarks to your exclusive distributors.
For example, you could assign your UK trademarks to your exclusive UK distributor.
To protect your interests, your distribution agreement would unconditionally transfer the trademark back to you on termination of the agreement. This process does work in Australia and other jurisdictions, however it needs to be carefully considered.
The effect of this arrangement is that if the Reseller imported the goods into the UK, then it would infringe the trademark of your exclusive distributor in the UK (who registered the trademark in the UK) as your UK distributor did not consent to the application of the trademark to the goods in China.
You consented to the application, but your UK distributor did not.
Value of the Correct Strategy
This article should help you understand the key legal right rights arising from your brand and if you choose to implement the above strategies you will have established strong protection from your competitors passing off on your goodwill, have given your business a platform for growth and also created value in your business for any subsequent sale. We recommend you should seek advice from your advisors to help you implement these strategies and to discuss any other issues arsing from them that are relevant to you.