The Journal of The DuPage County Bar Association

Back Issues > Vol. 24 (2011-12)

Fighting Foreign Trademark Piracy
by Jefferson Perkins

Almost every business uses at least one trademark or service mark. If the business renders services to the public, the service mark that it is using may be the same as or related to its corporate name. If the business manufactures or distributes goods, it is very likely using a trademark to indicate the source or sponsorship of those goods.

In a typical scenario, the business adopts a mark to use in connection with a new product or service (with or without the advice of trademark counsel) and then launches the product or service. The business will then decide whether the mark is important enough to merit federal protection. Sometimes the business defers the decision of whether the mark should be registered to a later time.

This gradual approach has certain validity in the United States, because in this country, trademark rights are largely predicated on use rather than registration.[1] As a business uses a mark in connection with a product or a service within the business’s trade area, it begins to acquire a right to exclude others from later adopting and using that or a confusingly similar mark within that trade area. Those rights exist independent of whether the mark is registered and will persist, even against a competitor who at a later time, and elsewhere, adopts and uses the mark and then obtains a federal registration.[2]

Another legitimate reason not to immediately apply for federal registration is that such is not even available for a mark that is used in connection with goods or services which move only inside of one state. In demonstrating use which will support a federal registration, one has to demonstrate use “in commerce”, defined by the Lanham Act as “all commerce which may lawfully be regulated by Congress”[3] and which has been interpreted by the United States Patent and Trademark Office (“USPTO”) to mean commerce occurring in a U.S. territory, between states or between the United States and a foreign country.[4] Many restaurants, doctor’s offices and the like local businesses have trouble demonstrating such use.

Geographically and economically, the United States is a big place. Apart from the European Union, the US remains the single largest economy for which a trademark registration can be obtained. This has several effects. An American businessperson inside the country may be less focused on international protection than he otherwise would be if his business were headquartered in, say, the Netherlands. And his market may not include any foreign territory for a long time, if ever. It is only when a business seriously considers offering its goods or services in other countries that it typically contemplates protection of its mark in those countries. It is only at this point that the differences between US trademark law and most foreign trademark laws start making themselves felt.

The theory that trademark rights are based on use rather than registration is grounded in English common law and prevails only in certain countries having an English “common law” tradition. The United States, Canada and Australia are among these. Most of the rest of the world follows a “civil law” tradition. Those countries base trademark rights on registration and give few if any rights to a prior unregistered trademark user. In these countries, the first applicant to file an application for registration becomes the registrant. The prior user but second applicant usually has no defense against the first applicant’s assertion of trademark infringement.

If the American business’s mark becomes known outside of the country prior to the business’s acquisition of foreign trademark rights, there is a chance that the rights to the mark in one or more countries will be seized by a trademark pirate. A typical foreign civil trademark registration law does not require the applicant to demonstrate use prior to the application filing date or even prior to registration. In one scenario, the pirate will crawl through the USPTO database for newly filed trademark applications, or newly published ones, or ones newly registered. The trademark database of the USPTO is completely open to the public. The pirate weighs the likelihood that the legitimate owner will expand into the pirate’s country. If in the pirate’s view there is a good chance that the legitimate owner will eventually seek a registration in that country, the pirate spends a modest fee to apply for and receive a registration of the mark in that country, and then awaits developments. If the US business subsequently applies for registration of the mark in that country for use in connection with goods or services in the same class as those for which the pirate has obtained registration, the foreign Examiner will reject the owner’s application and cite the pirate’s prior registration.

The US business is then forced to deal with the pirate to obtain trademark rights in the country in question. The pirate may demand substantial compensation for assigning the business’s own mark to the business. Sometimes the pirate just happens to be the foreign distributor of the US company, and has done the US business the “favor” of registering the mark -- in the distributor’s own name. This is sometimes done to increase the expense and trouble of firing the distributor. While there is no silver bullet, there are several things which an American trademark owner can do to mitigate foreign trademark piracy.

Foreign Searching. Prior to applying for registration, the business owner can search the trademark register of the country, region or international organization with which registration is sought. If the business owner can confidently predict that the mark will be used in a foreign country (or several of them) simultaneously or soon after its introduction in the US, then searching both US and appropriate foreign databases at the same time makes sense. If a conflicting mark is found, another one may be adopted. The United States became a member of the Madrid Protocol in 2003, and from that time onward it has become possible for an international registration to designate the United States as a covered country. The International Trademark Registry,[5] kept by the World Intellectual Property Organization (WIPO), therefore should be searched even prior to applying for registration of the mark at the USPTO. But the number of registrations in the International Trademark Registry is still pretty small, and a search there is no substitute for doing searches in the foreign countries or regions of interest.

The Paris Convention Six-Month Priority Period. Most of the countries of the world, and all economically important jurisdictions, are members of the Paris Convention. One article of this Convention [6] accords a USPTO trademark applicant a six-month grace period for putting an application for registration on file in another country. If this deadline and certain formalities are met, the US applicant obtains the benefit of the US filing date. Unless the mark has attained international recognition prior to the applicant filing for registration at the USPTO, this effectively precludes a trademark pirate from filing a trademark application in a foreign country which will have an effective filing date that is senior to that of the business owner. But it requires the business owner to quickly file an application for registration with the USPTO, confidently predict that the product or service will do well in the foreign country in question, and file an application in that country within the six-month period.

The Madrid Protocol. If the business has as much as a pending US trademark application, it’s possible for it to file an application for international registration through the Madrid Protocol.[7] This is an international agreement now having 84 nations as members, including China, Japan, Korea and the European Community, where this last is considered as a single territory. Unfortunately certain other countries which may be important to a US business are not members of the Madrid Protocol (or the Madrid Agreement which preceded it): Canada, Mexico, Brazil and India. The US applicant will have to make a separate application in those countries if it wants protection there. The cost of a single-class application for international registration under the Madrid Protocol, exclusive of attorneys’ fees, as of the time of writing, and covering China, Japan, Korea and the EU, is about USD 4000. This cost varies with currency fluctuations and with both the number and identity of the states designated by the application. Follow-on costs can be substantial, as the trademark office of each designated state (and the Office of Harmonization of the Internal Market (“OHIM”) of the European Community, its trademark office) can and often does raise objections. But the international application can be done quickly and its overall cost becomes attractive if protection in more than one or two foreign countries is contemplated. A quick Madrid filing limits the window of opportunity that a foreign pirate has to file an intervening national application. If the Madrid application is placed on file within six months of the US application, it will obtain the benefit of the US filing date.[8] In this scenario, a foreign trademark pirate operating in a Madrid country would have to file its application prior to the business owner’s US filing date.

Cancellation for Non-use. All foreign, economically important jurisdictions permit the applicant to file without demonstrating any use of the mark -- but all of them have procedures for canceling the registration after a number of years if the owner doesn’t use the mark. Typically, an interested party can petition to cancel a registration if the registrant hasn’t used the mark for a statutorily defined period of time, which is three years in the case of Canada, China, Korea, Mexico and Japan, and five years for a European Community registration.[9] One characteristic of a typical trademark pirate is that it isn’t really using the mark. Lodging such a cancellation (otherwise variously known as a revocation or invalidation proceeding) can make the resolution of the dispute in that country much more reasonable in cost. But this tactic won’t work where the trademark pirate is also a copyist of the competitor’s product, as has often occurred in China.

Invalidation because of “bad faith.” At least Korea and the European Community,[10] and (theoretically) China,[11] have an additional ground for invalidation: the applicant did not apply for registration in good faith in the first place. Where the business can show that the prior applicant’s purpose was simply to extort money from the legitimate trademark owner, or position itself as a potential distributor for the territory in question, the business may succeed in removing the prior registration as a bar to its own. Making this showing will likely be more expensive than simply pointing out that the prior registrant hasn’t used the mark. Recent experience in China shows that the invalidation on this ground is virtually impossible to prove.[12]

 Well-known marks. Article 6bis of the Paris Convention [13] requires the signatory nations to protect “well-known marks,” independent of whether these marks have been registered in the country. But the mark has to be “well-known” in that country as opposed to more generally, and it can be difficult to prove that the business’s mark has attained this status. For example, the State Administration for Industry and Commerce of the People’s Republic of China considers the following kinds of evidence in determining whether a mark is “well known” under their Trademark Law:[14] (1) documents concerning the degree of knowledge or recognition of the mark in the relevant sector of the public; (2) documents concerning the duration of the use of the mark, including those related to the history and scope of the use and the registration of the mark; (3) documents concerning the duration, extent and geographical area of any promotion of the mark, including the approach to, geographic area of , the type of media for and the amount of advertisements for the promotion of the mark; (4) documents concerning the record of successful enforcement of rights in the mark, including the relevant documents certifying the mark in question was once protected as a well-known mark in China or any other country/region; and (5) other evidence certifying that the mark is well-known, including, in the past 3 years, the outputs, sales volumes, sales incomes, profits and taxes and sales regions etc. of the principal goods to which the mark applies.

In recent cases, Ferrari was unable to obtain this status for its prancing horse,[15] while Starbuck’s was able to prove that the Chinese phonetic characters equivalent to Starbuck’s, XINGBAKE, had become “well-known” and as such was able to shut down a local copyist.[16] In general, only truly famous and internationally recognized marks will be able to take advantage of this Article of the Paris Convention, and even then enforcement will prove chancy and expensive.

Conclusion. Obtaining and maintaining a foreign trademark portfolio comes at a not insignificant cost and obviously this cost has to be justified by a significant actual or prospective foreign business activity before a business launches a foreign trademark protection program. But because most economically important foreign jurisdictions are based on first-to-file rather than first-to-use, opportunities exist for unscrupulous foreign entities to obtain registrations of a business’s mark and then hold up the business for ransom. To minimize opportunities for this piracy, businesses should consider applying for foreign registration of their marks sooner rather than later. And because the Paris Convention accords the US applicant a six-month grace period from the date of filing an application for registration at the USPTO, even filing for US protection earlier rather than later can diminish the opportunities for a foreign trademark pirate to intervene.

[1]MCCARTHY ON TRADEMARKS 2: §16.1 (2007).
 
[2]15 U.S.C. §§ 1065, 1115(b)(5).
 
[3]15 U.S.C. § 1127.
 
[4]Trademark Manual of Examining Procedure (TMEP) 901.03, 7th Ed. (October 2010).
 
[5]  http://www.wipo.int/romarin.
 
[6]Paris Convention for the Protection of Industrial Property (Stockholm Text as amended 1979), Art. 4(C).
 
[7] http://www.wipo.int/madrid/en/legal_texts/trtdocs_wo016.html.
 
[8]Madrid Protocol Art. 4(2) (November 12, 2007); available at http://www.wipo.int/export/sites/www/madrid/en/legal_texts/pdf/madrid_protocol.pdf.
 

[9]  European Community: Council Regulation (EC) No. 207/2009 on the Community trade mark, Art. 51(1)

[10] European Community: Council Regulation (EC) No. 207/2009 on the Community trade mark, Art. 52(1); Korea: Trademark Act (1998) Section 7(1)(xii).     
 
[11]Dan of Harris & Moure, pllc, “Bad Faith Trademark Registration in China. Good Luck With That.”, at http://www.chinalawblog.com/2010/01/bad_faith_trademark_registrati.html.
 
[12]Id.
 
[13]Paris Convention for the Protection of Industrial Property (Stockholm Text as amended 1979), Art. 6bis.
 
[14]http://www.china.gov.cn/lawsarticle/laws/lawsar/trademark/200604/233108_1.html, (P.R.C. State Administration for Industry and Commerce, April 17, 2003).
 
[15]Luo, Jing & Ghosh, Shubha, Protection and Enforcement of Well-Known Mark Rights in China: History, Theory and Future, 7 Northwestern J. of Tech. and Intell. Prop. 141-147 (Spring 2009).  

[16]Id. at 147 – 150.

Jefferson Perkins is a partner of Momkus McCluskey LLC, where he heads the firm’s intellectual property practice. He obtained a BSEE and a BSLAS from the University of Illinois at Urbana-Champaign in 1978, and a JD (distinction) from the John Marshall Law School in 1983. He is currently the Chair of the Intellectual Property Committee of the DuPage County Bar Association.

 
 
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