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Trademark trolls are no longer exclusively a big brand problem, but what can small and medium-sized enterprises do to combat the risks? Sharon Daboul, attorney at law firm EIP, has some practical suggestions.
Trademark ‘trolls’ are companies or individuals that register a trademark without any intention of trading under it. The main aim of filing an application is to use the resulting trademark as leverage to gain money from the companies whose marks have been registered.
Trademark trolls entered the news again recently as a US-based company called 47 / 72 Inc filed more than 60 trademark applications that appear to target well-known brands. The earliest application was filed on February 26 and the most recent on May 21. All applications were pending examination at the time of writing.
47 / 72 has been accused of being a trademark troll, the argument being that it cannot possibly intend to use all the marks it has applied for, the majority of which cover online retail store services.
Further, many of the marks covered by these applications evoke well-known brands or artists, for instance, 'Oh Snap! Chat', 'Periscope' and 'Qwikster' will remind readers of mobile apps, and '99 Problems', 'Prince of Darkness', 'Nothing Compares 2 U' and 'Haters Gonna Hate' may remind readers of particular music artists or songs.
Trademark trolls are a problem that all brand owners should be aware of, especially if they have global ambitions. Start-ups and small and medium-sized enterprises are the businesses most targeted by trademark trolls and, with limited funds to spare, they ultimately suffer the most from the activity.
Types of troll
1) Opportunistic applicants
Traditionally, this type of troll has attempted to register well-known marks or similar marks, but it may also target newly introduced brands that have not yet been protected. This is a particular risk to small businesses who have not yet considered trademark protection.
The goal of this activity is to register the mark before the true owner realises it has happened. The opportunistic applicant might also try to register the trademark for goods and services in seemingly-unrelated areas of business that may or may not be related to the brand owner’s product but may become useful in future, such as online services.
The troll will then ask the true owner to pay for a licence to use the mark, or name a price to purchase the mark, the threat being that of an infringement claim against the true owner if they continue to use it. Use of the mark could include use on social media websites and in a domain name, as well as on the products themselves.
2) Trademark squatters
This practice is similar to cybersquatting (or domain squatting) where squatters would register a domain name with the intention of selling it back to the true owner, for a profit.
Trademark squatters include those who pre-emptively apply to register a mark that is owned or used by a brand owner in another country. Trademarks are territorial, so protection exists only within the country whose laws have granted the rights. Rather than proactively getting in touch, as with the first category, the troll might lie in wait until the true owner tries to enter the new market and finds the trademark to be a barrier to entry.
A successful troll could block a brand owner from registering the mark in a particular geographical market and may be able to control the brand owner’s ability to manufacture or sell the product there. This type of trademark troll is a particular problem in the age of the online marketplace, where borders tend to be more fluid. The true owner might be exposed to a trademark infringement claim, if goods or services are widely available online. Further, a troll might be able to pursue the true owner for trademark infringement, or ask foreign customs officials to detain genuine products. Again, the main aim of squatting is to solicit money.
“As well as thinking of where you might expand your business, consider registering the mark in the territories where your goods are sold and manufactured.”
This issue is most relevant in first-to-file countries, where trademark rights are given to the first person to apply to register the mark, and actual use of the mark overseas is given little weight. This means that an applicant could be treated as the true legal owner even if it applied for the mark in bad faith—China is a familiar example of where this occurs.
Smaller businesses are more at risk from this activity because they are less likely to have registered their marks in all the territories of interest.
Are trolls a genuine threat to business?
A troll can hamper a company’s ability to do business. It can present a threat to expansion and sales. Without the exclusive right to use its name, a business will face obstacles to trade.
Further, a business might not be able to stop other parties from infringing its mark, if it cannot prove that it is the true brand owner. Conclusive evidence of brand ownership is generally shown by having registered the trademark.
In some cases, brand owners may be forced to negotiate with trolls in order to purchase back the trademark, or they may feel that they need to pay excessive amounts to make the problem go away. Trolls will try to rely on the ignorance of the business owner when making infringement threats or demands for payment.
Smaller brand owners might find that it is a better use of money to rebrand, although this is still costly and time-consuming. A rebrand would include losing any domain name registrations and social media accounts.
What if my mark has been taken by a troll?
If you have been the victim of a troll, you can fight back.
It is possible to oppose a trademark application or cancel a registration based on earlier rights. Success will depend on the extent of evidence showing that the mark belongs to you as the true owner, and the outcome can be uncertain. Where the marks are not identical and/or the goods and services do not overlap, you may also need to establish that there is a likelihood of consumer confusion.
It is possible to cancel a registration with evidence showing that the application was made in bad faith. Again, this can be difficult to prove, especially where the marks are not identical, or the goods and services are in different sectors. However, if there has been direct correspondence with the troll, this is useful when making a case to demonstrate bad faith.
In the majority of systems, if a trademark registration is not put to use after a certain period, it can be revoked. In the UK and EU, a mark may be revoked for non-use after it has been registered for five years. Some countries, such as the US, require applicants to show an intention to use the mark, before it can even be registered. This will be problematic where the applicant has no real intention of using the mark.
If a troll invites you to buy a trademark, look carefully at what you are purchasing. Trolls are not professionals and may not have prepared the specification in the way you would have done. The trademark you are considering purchasing may not have that much value.
If you receive a threatening letter from a troll, seek advice and do not feel intimidated. It’s possible that any threats may not be justified, and the troll might retreat if you stick to your guns.
Ten ways to beat the trolls
1) File trademark applications where possible. A trademark need not be your name alone. It is any sign that represents your business and could include a logo, an icon, or a phrase;
2) File trademarks early, and preferably prior to launch. Trademark applications cost relatively little to file, so they may be seen as a form of insurance;.
3) Be proactive in registering marks in lucrative markets. In the age of the global marketplace, the net is wider than you might think. As well as thinking of where you might expand your business, consider registering the mark in the territories where your goods are sold and manufactured, where research and development facilities are located, or where counterfeiting is likely to be a problem. If funds allow, registering transliterations in territories such as China and Russia might be useful;
4) Take advantage of the Paris Convention. When a trademark application is filed for the first time, it can be used as a basis for filing further applications in other territories. If those further applications are filed within six months of the original filing date, your trademark rights can effectively be back-dated to the date of the original application. This is very helpful where a troll has filed an application in another territory within six months of your first filing date, as you may be able to pre-date it;
5) Make sure that you have trustworthy trading partners overseas. It is not unusual to find that a manufacturer, distributor or licensee has registered the mark;
6) Remember to record any exclusive licences that you have arranged;
7) It is far easier to rely on registered than unregistered rights, but common law rights remain powerful, so keep records of your trademark use should you need to show how you adopted the mark. This might include the dates that any domain names and social media accounts were registered. Ensure any copyright in logos has been assigned to you, so that your ducks are in order should you need to take action;
8) Review your existing trademark portfolio regularly. A review should include the list of goods and services covered by your trademarks, to check that protection is still sufficient, as well as the territories where the marks are registered. If you have rebranded recently, check that you have sufficient protection in place;
9) Monitor the trademark register to get early warning of conflicting applications. It’s usually easier to oppose a trademark application than apply to cancel an existing registration. Trademark watching services are useful in this regard; and
10) Retain all emails and communications with trolls in case you need to demonstrate that an application has been filed in bad faith.
It will be interesting to see whether all 47 / 72’s applications proceed to registration in the US, and whether the company faces any third party challenges along the way.
If you have been the victim of a trademark troll, the message is that in most cases, the courts will help you, provided you have evidence to prove that your earlier right exists. Threats of infringement and demands for payment should be discussed with a trademark lawyer before action is taken.
There is good value in being proactive and having a trademark strategy in place.
Sharon Daboul is a trademark attorney at EIP. She can be contacted at: firstname.lastname@example.org
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