Brands and trade marks are powerful business assets. As consumers, we rely on branding to differentiate the products and services of one trader from another. We familiarise ourselves with the brands we use, and are loyal to brands we enjoy and have grown to trust.
No client wants the exclusivity and reputation of their branding to be undermined by a competitor. Clients should therefore seek timely expert advice in order to protect their trade marks. If a trade mark is protected at the right time and in a correct manner, the playing field can be levelled between individual traders, SMEs and corporations. Competition becomes less about “David v Goliath” and more about even competition among brand identities.
Let’s consider the hypothetical case of a client, Ace Corp Limited, who wants to set up a new venture. This case example is not a substitute for advice, and is instead a brief overview of some of the issues which should be considered by lawyers and their clients.
Ace Corp’s brand is born
When setting up a new venture, Ace Corp will probably have in mind a trade mark or two to be used on its product or to promote its services. Ace Corp’s trade mark might be in the form of a logo, a word, a shape or a colour, or a combination of various features.
In an ideal world, Ace Corp would first consult its intellectual property professional who can search the applicable registers and the online marketplace in Ace Corp’s key markets. The IP professional could then advise on the availability of the proposed trade mark(s) in terms of both:
- whether the trade mark is capable of registration and therefore exclusive ownership; and
- whether there is a risk the trade mark will infringe upon the rights of another trader.
The fact that Ace Corp may own the copyright in its brand does not remove the risk of trade mark infringement proceedings. An original logo which attracts copyright protection may still be attacked on the basis that it is too similar to a competitor’s mark used in respect of similar goods or services.
If Ace Corp does not instruct an IP professional to conduct relevant searches, and is not aware of the risks its choice of trade mark may pose, Ace Corp may find itself in a dispute with another party over the trade mark.
In a worst case scenario, Ace Corp might have to defend legal proceedings for trade mark infringement and potentially be exposed to damages. Even if this can be avoided, Ace Corp may have to re-brand. Re-branding can have significant consequences for a newly established business, adversely affecting growth and brand recognition.
Let’s assume Ace Corp’s IP professionals have analysed the search results and concluded that the trade mark is free to use. Ace Corp can then consult the IP professional to develop a filing strategy so that it can apply to register the trade mark in the countries in which it intends to trade, over a specified period of time.
The nature of the trade mark laws in the countries must be considered too. Certain countries such as China should be considered early on, given that it is difficult to battle trade mark squatters who take advantage of the reputation of overseas businesses. Further, depending on the countries where coverage is sought, Ace Corp may be able to delay filings for up to six months while being able to claim the filing date of the first trade mark application made worldwide.
The search may also have alerted Ace Corp to potential obstacles to the registration of its trade mark. Many applicants give up when a hurdle to registration is raised, but there may be strategies to overcome obstacles. If there is a trade mark which Ace Corp is dead set on using, or in which it has already invested significant resources, as part of the filing strategy Ace Corp’s IP professional can help manage these obstacles in a cost-effective way.
There are many benefits once Ace Corp’s trade mark application matures to registration. The presence of the trade mark on the register will serve as a warning to other traders who may be contemplating whether to adopt an identical or similar trade mark. Further, if a trade mark dispute arises it is usually easier and more cost-effective for Ace Corp to rely on its registered rights than it would be to rely on fair trading provisions and common law rights, including the tort of passing off.
Importantly, clients should note that a trade mark registration owned by a small local player can be used to hold at bay much larger companies who seek to enter the same market.
Ace Corp must carefully consider who should own the trade mark application. As with any asset, the implications of differing ownership structures must be fully thought out. It is common for a director to file a trade mark application in their own name, or for the wrong company to be inserted as owner of the trade mark, which may have adverse consequences down the line.
For example, during a merger or sale of a business, a company’s assets may be liquidated and the company dissolved. If the trade mark registration is not transferred at the right time, the registration will be deemed vested in the Crown, pursuant to the doctrine of bona vacantia, or “ownerless” property. If this is not addressed promptly, it may be a difficult process to claw back the registration.
Alternatively, if a trade mark has been filed in the name of an individual who is now deceased, the vesting of the mark in the individual’s estate may have unexpected consequences for the business, unless this was deliberate.
Importantly, the value of a registered trade mark is easier to conceptualise and quantify than that of an unregistered mark. This means that a registered mark can easily be identified in business agreements, including for the sale and purchase of a business, the assignment of property, distributorship and licensing. A trade mark registration may also need to be valued for taxation purposes, or it could form a registrable security under the Personal Property Securities Act 1999.
Domain name protection
As well as registering Ace Corp’s trade mark, it is wise to secure domain name protection. As the owner of a registered trade mark, Ace Corp has the right to own the corresponding domain name, unless another trader in a different industry who owns an identical trade mark registration has already secured the domain name. Ace Corp may also wish to purchase adult-themed domains, such as .xxx and .adult, or the controversial .sucks domain, in order to prevent others from purchasing these domains and tarnishing the reputation of its brand.
Growth of Ace Corp’s business
Registering a trade mark is not the end. Ace Corp and its lawyers must continue to consider the importance of trade mark registrations as the business enters different phases of development.
As part of this growth, Ace Corp might update its branding. Ace Corp could introduce a new style, colour or other additional features to its core trade mark. At this stage it is important to consult an IP professional to assess whether the trade mark protection already in place is enough, or if additional steps are required to secure protection for the revised branding.
Otherwise, Ace Corp may later find its trade marks are not properly protected, and it may be too late to secure exclusivity in the market if another trader has built up a reputation in similar branding for similar goods or services in the meantime.
How trade mark registration provides protection
For most businesses, branding is a valuable part of commercial practice. The scope of any trade mark registrations Ace Corp owns must therefore provide solid practical protection for its business activities, and should be future-proofed where possible.
When preparing an application for a trade mark registration it is important to consider how the trade mark is to be represented on the register. For instance, Ace Corp’s trade mark could be a word used in conjunction with a label that varies as to the quality of the product, or it could be a logo moulded into a particular point on a beverage bottle. In both cases, care and expertise is required so that the application best represents the trade mark in question.
A trade mark application can cover up to 45 classes of goods and services. Each of these classes are then broken down into further detail; often referred to as the specification. Specification drafting is an art. It is important that the trade mark specification covers Ace Corp’s proposed activities without being so narrow as to allow other traders to use similar branding on similar goods or services. Equally, the specification should not be so broad that Ace Corp’s application is frustrated by unnecessary obstacles, or later becomes vulnerable to removal on the basis of non-use.
It should also be reiterated that a business in an entirely different industry may be able to use the same brand as Ace Corp if there is no cause for confusion. There may, however, be grounds to take action if Ace Corp’s trade mark ultimately becomes a well-known or famous trade mark.
Branding is a very powerful asset and can make or break a business. It is important that a client’s trade marks are sufficiently protected, appropriately valued, and recognised in commercial transactions. Clients must undertake due diligence at the outset and as their business grows, in order to reap the benefits of owning a successful brand.
Emily Ellis is principal of Ellis Terry (www.ellisterry.com), a firm that provides advice and expertise in all aspects of intellectual property. Rachael Koelmeyer is an associate and Hemma Vara is a solicitor with Ellis Terry. The firm offers legal assistance to innovative entrepreneurs and corporations in a range of occupations. Creators of artistic works, inventors and designers from specialist fields as diverse as mechanical, electrical and computer engineering have sought our guidance. The firm’s trade marks team works with clients from a variety of industries, including food and beverage, pharmaceuticals, technology, film and entertainment, insurance, farming and agricultural, building, clothing and textiles, automotive and wine.