Is the Internet Putting Your Corporate Identity at Risk?

With the Internet opening so many doors to the expanding global economy, your corporate identity may be more vulnerable than ever before. But with a proactive strategic trademark and domain name plan in place, you can remain one step ahead of would-be infringers both in and out of the US. Every country has different laws, and to the extent that the theories behind the laws overlap, they are applied differently. Whether you are trying to obtain a trademark registration in Japan or fighting for common law rights in the US, there are several basic strategies that should be undertaken to keep your portfolio or trademarks, including domain names, strong.

With economic changes forcing companies to reconsider how aggressively to build and maintain the portfolio, global pirates have and will become bolder in pursuit of the trademark rights of others. You and your firm would thus do well to consider the following:

1. Start off strong

Most countries subscribe to the theory that unusual or strong marks are afforded more protection than "weak" marks, which include highly suggestive marks or marks with features common to other marks in the same or related industries. The problem lies in the fact that the determination of whether a mark is strong or weak will vary greatly. For example, in China the definition of "weak" is very broadly interpreted with only a slight overlap or small element of suggestiveness enough to preclude registration. On the other hand, the same mark in Canada may be afforded relatively broad protection. If you start with a mark that is clearly unusual, this country-by-country variation in interpretation subsides.

What if you already have a mark that has become recognized internationally and you do not want to change? Besides obtaining registrations, you should also consider the cost of buying the registrations of others in the industry - registrations that may make your trademark weak in certain countries.

Local culture dictates the costs and results, and working closely with a counsel in that country becomes quite important. Depending on the jurisdiction, responses can range from friendly to traditional demands for enormous fees, or even cease-and-desist letters to stop your use of the mark. Setting up a straw man to determine the level of interest in transferring a mark can help avoid such a negative response.

Many countries view trademarks and domain names as related property rights. Therefore a strong trademark - which usually forms the basis for domain name selection - should help with enforcing your rights in the URL against cyber-pirates. That's because adoption by others of domain names similar to your strong trademark can be convincing evidence of bad faith.

2. Register, register, register

Registering your trademark at the local trademark office or obtaining the relevant domain name should always be budget-driven since no registration program can include every potential application. However, the importance of obtaining key registrations cannot be understated. Many countries grant substantial and sometimes exclusive rights to the registrant of a trademark over prior users of even the same trademark in that country. Only through a showing of world fame by the rightful owner or bad faith by the registrant of the mark or domain does the prior user have a chance to recapture lost rights. It's critical to create a strategy of when and what to register.

Creating a hierarchical grid of countries crossed with the use of the mark can be a valuable tool in planning and budgeting a trademark and domain name registration program. For example, a decision about where to register your trademarks and domain names should consider why registration may be important:

  1. Sales (subdivided by amount)
  2. Manufacturing (subdivide further if products are manufactured in multiple locations)
  3. Competitive sales
  4. Competitive manufacturing
  5. Future sales
  6. Future manufacturing

The primary criterion should have to do with likelihood of actual infringement in a country. For example, a company considering expanding its manufacturing operations into another country might not need to register its marks there (or all of its marks) because the likelihood of an infringer in that particular country is nil. On the other hand, countries targeted for actually selling the manufactured merchandise might be more worthy of trademark protection.

Factoring in future manufacturing

If future sales or manufacturing are projected in one or more countries, are the plans far along or are they still on the drawing board? Rushing out to register all possible marks and domain names the instant one imagines a new operation or market is not usually the best approach. Figuring in the probability of piracy and/or the value of specific business activities will yield more practical decisions.

Keeping registration costs in mind, the decision whether to register a particular mark in a particular country likely falls into one of four categories: 1. Must register. 2. Probably should register depending on budget. 3. Not of interest now. 4. Will never be of interest.

Throughout this whole process, there are various rules that must be kept in mind based on the countries of interest. For example, the cost varies substantially from country to country and between various registration strategies. A group European Community Trademark (CTM) registration is often more cost-effective than pursuing registration separately in more than three European countries. However, the scope of protection may not be what you need if sales or commerce occurs in possessions or territories of European Community countries. If you need protection in the Caribbean, the British or French territories may not recognize a CTM registration, but would provide full recognition for individual United Kingdom or French country registrations.

Similarly, on the domain name side, while world-wide registration is generally less expensive, the number of top-level and second-level domain names has expanded so greatly over the last few years that trying to capture everything has become all but impossible. In addition, some countries or territories require that the company have a physical presence there to obtain a domain name registration.

Stick to critical

This all adds up to the currently growing realization that you cannot and should not go after all domain names potentially of interest, but rather go after only the first-tier, critical domain names and sometimes the typographical or otherwise related domain names in jurisdictions of interest.

The common strategy today is to write to registrants of encroaching domain names and warn them that the domain name will be monitored and that anything posted at the URL will be met with appropriate action.

3. I spy

Monitoring the Web, registration databases, and various directories can be the most efficient and cost-effective way to protect your portfolio. Contacting a potential infringer before any serious amount of money has been spent building a product, service, or brand makes dropping a mark from them much easier. Very simply, a company that has adopted a mark which you believe is potentially infringing is more likely to terminate or not use the mark if they receive your communication before they have spent thousands of dollars on designers, printed materials, and promotional efforts. Contacting that party early on demonstrates your strong interest in the mark and makes a favorable settlement more likely.

Various commercial organizations provide monitoring of these databases and directories, but your company can do much of it internally. These vendors provide the most value with regard to trademark and domain name applications that have been filed. The largest cost incurred by using these vendors is generally monitoring "common law" or non-application uses of marks. You can reduce this cost by creating an in-house program that continually monitors the Internet for use of your important marks and by working with trademark counsel to learn what types of uses should be pursued.

4. Keep your friends close and your enemies closer

Unfortunately, your local representative -- including distributors -- can be the primary source of problems in international business on the trademark and domain name front. In Japan, China, and many Central and South American countries (Brazil in particular), the practice can be quite popular. "Experienced" distributors often check local trademark office and domain name registration information to see what a company has applied for. If there is any hole in the company's portfolio in that country, a local entity will often register a trademark or domain name "on behalf of" the client. While at first glance intentions may seem noble, the practice is instead intended to force the client to keep the distributor relationship intact. If it does not stay so, the distributor may use the property later for competitive products.

The end result is often an expenditure of money -- through threatening litigation, undertaking actual litigation, or buying the property right. One way to avoid such a problem is to register the properties before you enter the country or before you even select the local representative or distributor. Another option is adding to the distributor agreement a requirement that the distributor not register any trademark or domain name related to or confusingly similar to the property rights of the client.

The contract should also provide for an automatic assignment of such rights if that part of the agreement is breached. You should also consider adding a requirement that the local entity inform you of any marks adopted by third parties that may cause confusion. While you may not find complete compliance with these terms, having a written obligation may provide the otherwise missing psychological advantage.

5. To sue or not to sue?

On the bright side, litigation outside the US is substantially less expensive by at least an order of magnitude than it is in the US. Even if the cost is only a few thousand dollars, however, you should avoid litigation since no result can be guaranteed and securing what you need -- even if it includes paying the other side for something that you believe is legitimately yours -- often makes sense. All such settlements, however, should be done by agreement and include at least promises not to register any confusingly similar marks or domain name of the company in the future, even if those marks or domain names are different from the one in dispute.

Sometimes litigation cannot be avoided. In those circumstances, select your counsel carefully. Be sure to confirm that you have secured all ancillary rights in a country, since some unsavory companies, from competitors to your own distributors, will spitefully register close marks to force you into litigation again if they are looking for a payoff later.

One technique you should always consider is leveraging your domestic attorney against an opposing counsel in a dispute in a foreign country. Rivalry between attorneys abroad often causes difficulties in settling cases. Your domestic counsel, however, often has relationships with several law firms in the subject country on matters for other clients. As such, your domestic counsel's involvement in the dispute can be enough to convince the opposing foreign counsel to behave differently, leading to a more responsive and reasonable result. The underlying reason is that a large percentage of the work for some foreign law firms comes from US attorneys.

With a proactive trademark/domain-name registration plan, you can remain a step ahead of those in both your home country and abroad who would love to steal your hard-earned good name. Heeding these five strategies can go a long way toward protecting your company's identity, image, domain and trademarks, including prevention of unexpected piracy (cyber or otherwise) as well as a multitude of other unsavory turns of events.

Pullout quotes:

  • Consider the cost of buying the registrations of others in the industry - registrations that may make your trademark weak in certain countries.
  • Many countries grant substantial and sometimes exclusive rights to the registrant of a trademark over prior users of even the same trademark in that country.
  • Very simply, a company that has adopted a mark which you believe is potentially infringing is more likely to terminate or not use the mark if they receive your communication before they have spent thousands of dollars on designers, printed materials, and promotional efforts.

 

Courtesy of Douglas R. Wolf of Wolf, Greenfield & Sacks, P.C.