FORUM: Protecting and enforcing trademarks
January 2016 | SPECIAL REPORT: INTELLECTUAL PROPERTY
Financier Worldwide Magazine
FW moderates a discussion on protecting and enforcing trademarks between David Wilkinson at Clyde & Co, Mark Sommers at Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Cornelia Schmitt at Grünecker, and Myrtha Hurtado Rivas at Novartis Pharma AG.
FW: In your opinion, do companies fully appreciate the value of their trademarks? Are they devoting enough time and resources to protecting and enforcing them?
Wilkinson: Companies in some sectors, such as FMCG, tend to have a sophisticated understanding of the value of their trademarks. In our experience, companies in other sectors often do not focus on protecting their brands until a serious threat arises, or when their business is offered for sale. By that time, opportunities may have been missed to maximise the value and legal strength of their trademark portfolio. Prudent investment of resources in trademark protection at an early stage may be returned many times over, either by avoiding expensive litigation or by increasing the price achieved on the sale of individual brands or a company as a whole.
Hurtado Rivas: While the intrinsic value of trademarks is acknowledged internally, it is often not apparent to associates who are not directly involved in issues surrounding trademarks. As such, the value of trademarks is mostly recognised on a broader scale during litigation or when people are effectively employed to defend products and services on the market. Nonetheless, we certainly allocate sufficient resources to the trademarks team, which has continuously expanded over the last decade and thus adequately acknowledges the value of trademarks to our organisation.
Schmitt: We have seen a change over the past years. Many companies have understood that it is not only important to protect patents and other technical rights, but that names or logos are likewise important. These companies have started investing into their brand protection more. Of course, this cannot be said for all companies and there are still many to which brand protection is not equally important. However, the trend seems to be to devote more time and resources into trademark protection and enforcement measures.
Sommers: Savvy companies understand the value of a strong brand and devote significant resources to protecting and enforcing their marks. Branding promotes customer recognition, distinguishes a company from its competition, and, perhaps most importantly, helps a company connect with its customers in terms of both associated product quality and brand image. As a result, companies that invest in brand development and protection nicely position themselves to leverage such enhanced consumer goodwill over those companies that trend towards brand-investment neutrality or deficiency. Even working with ever shrinking corporate budgets, companies continue to prudently devote the time and resources to protect their brands through filing programmes and enforcement strategies that meet both immediate and long-term branding needs and objectives.
FW: What are some of the main risks for companies that fail to adequately protect and enforce their trademarks?
Schmitt: In a first to file country like Germany, not protecting a trademark can turn out to be a significant mistake. Here, rights through use are only created under very limited prerequisites. Companies that only use a particular name or logo as a trademark but do not obtain protection for this brand through the register may face the problem that a third party registers the same or a similar mark and may then prohibit the first company from continuing to use this mark. Companies that do not adequately enforce their marks face dilution and significant loss of value of a particular brand.
Sommers: Given limited financial resources, some companies have chosen in the short-term to allow their trademarks to languish, steering such resources away from promotion, protection and enforcement toward more immediate needs. This is, of course, a gamble. From a marketing perspective, once a brand loses its visibility, position and goodwill, the ultimate result is lost market share. From a legal perspective, the failure to protect trademarks and police them against clear infringement diminishes or weakens such rights and assets. When identical or similar marks are introduced for the same or similar goods, the zone of exclusivity and associated goodwill of a given brand shrinks, diminishing both the legal and marketplace strength of the brand. Systematic failure to enforce essentially gifts competitors the ability to misappropriate the selling power and consumer reach previously enjoyed by the brand exclusively.
Hurtado Rivas: Failure to adequately protect trademarks can have numerous consequences for pharmaceutical companies. The immediate effects of such failure are harms to the business due to brand equity loss and delays in product launches. At the same time, long-term consequences will emerge, mostly relating to lack of adequate brand and company reputation protection. Furthermore, consumers can be harmed by exposing pharmaceutical products to an increased level of danger resulting from counterfeits or by the confusion created by similar brands. As such, failure to sufficiently protect and enforce trademarks can have serious financial consequences for the business and, more importantly, for the health of patients.
Wilkinson: Failure to take prompt action can seriously undermine the value of a trademark. Aside from cases of actual confusion, where your customers mistakenly buy the products of your competitors, use by a competitor of a similar trademark or branding will often ‘dilute’ the distinctiveness of your trademark. This will have a commercial impact, since the brand will have diminished attractive power, and it may also narrow the scope of your legal protection. In the worst case scenario, your trademark may become generic, where consumers use your trademark as a purely descriptive term for the goods or services in question. Additionally, the English courts have found that past failure to take action against one infringer can prejudice later cases against entirely separate infringers. Trademark owners must therefore be proactive in safeguarding their marks.
FW: How should an organisation go about the process of protecting and, if necessary, enforcing a trademark? What steps should they take to monitor potential infringements across the globe?
Hurtado Rivas: Internally, continuously educating the business on trademarks, designs and copyrights is crucial. Improving knowledge about the content, value and importance of these rights enhances effective collaboration on relevant issues within all levels of the organisation. As a consequence, identifying infringements locally and subsequently resolving them can be streamlined efficiently to the benefit of all stakeholders. Externally, this is supported by establishing an appropriate network of legal counsel and by working with authorities, such as health authorities issuing marketing authorisations and customs that inspect imported and exported goods. By additionally observing the internet, competitors and other stakeholders, operational excellence regarding the handling of trademarks issues can be ensured.
Wilkinson: Organisations can outsource the monitoring of infringements, often using online resources, or they can do it themselves. Budget permitting, it is best practice to appoint an in-house IP officer with responsibility to decide on the action to be taken against infringers. Staff training regarding IP infringement, and an easy-to-use system to allow staff to report infringements to the IP officer, will greatly assist monitoring. If the IP officer is suitably qualified, they may be best placed to send ‘cease and desist’ letters to infringers. However, care needs to be taken regarding ‘groundless threats’ laws and the risk of pre-emptive cancellation proceedings.
Sommers: When considering potential new names, a company should work with trademark counsel to search and clear marks, as well as file applications for any marks selected. As for decisions on protecting and enforcing company trademarks, these should be largely driven by the legal and commercial strength and character of the mark at issue, as well as an assessment of the potential marketplace impact of the third-party trademark or infringement in question. Companies should monitor both the registers of the appropriate trademark offices, as well as their own marketplace. Specifically, companies should subscribe to a ‘watch’ service that monitors the appropriate trademark office registers for potentially conflicting third-party trademark filings.
Schmitt: The first step is always proper clearance. Then, a filing strategy tailored to the specific needs of the company needs to be developed and implemented. This often involves word mark filings but should also include protection for distinctive logos. Once registered, in parallel to suitable marketing efforts for the purpose of making the brand a business success, it is important to build a fence around the brand and its value by installing a collision watch system that will help to detect and fight infringements before they can harm the brand.
FW: To what extent has there been a rise in trademark disputes in recent years? What are some of the common causes?
Sommers: Opposition and cancellation proceedings before the PTO have steadily increased in recent years, reflecting that, in the right circumstances, these proceedings can be a cost-effective alternative to district court litigation. Further, many companies have taken a more reflective approach toward trademark infringement in recent years. This has led to a more sharpened focus on trademark disputes involving third-party marks or infringements that pose significant legal or commercial harm to the strength and market share of core brands, such as house marks and primary product brands, but also key source-identifying product configuration trademark rights. Conversely, legal actions and policing over secondary or tertiary marks are, not surprisingly, on the decline.
Schmitt: Having understood the importance of creating and maintaining the distinctiveness of a brand, parties have become far more sensitive to defending their trademarks not only against confusingly similar third party applications on the register but also and in particular against corresponding use which may harm the brand in real life. Also, the sheer number of filings in recent years has certainly increased the potential for conflict.
Wilkinson: E-commerce has driven an increase in trademark disputes. Longstanding companies focused on national markets often find themselves in conflict with foreign companies using the same or similar trade names. In the past, both companies may have coexisted without any trouble, but the international nature of online trading increases the scope for confusion and trademark blurring. In Europe, the sheer volume of case law – from national courts, the EU trademark office and the EU General Court and Court of Justice – and the uncertainty resulting from many of the judgments, motivates many companies to take their disputes to court rather than settle, as the outcome of individual cases is often difficult to predict.
Hurtado Rivas: Over the last decade, one key development in healthcare systems worldwide has been an increase in efforts to reduce costs. This has affected pharmaceutical companies, which have increased consolidation and experienced cost pressure. Paired with a better understanding of brand value this has led to an increase in the defence of trademark rights. Furthermore, the internet has also led to an increase in disputes due to the high number of counterfeit products available online and to the infringing use of brands online, which pose a risk for both the business and consumers of pharmaceutical products.
FW: In your opinion, how important is it for companies launching a new service or product to select a mark with the strongest possible legal status? Are ‘suggestive’ rather than ‘generic’ names the best approach?
Schmitt: Choosing a generic name may seem to make marketing efforts easy at the outset, as consumers will understand immediately what the product or service is about. However, once the product has been successfully introduced into the market and third parties are tempted to take a free ride on the coattails of the successful launch, a generic mark provides for zero protection and can therefore prove to be a strategic mistake. Suggestive marks are a very good compromise between explaining the nature of the goods and creating brand value and are therefore ideal in finding a proper balance between marketing needs and brand protection. However, there is a loophole for infringers: if they choose a descriptive or generic term instead of a similar suggestive term that enjoys protection, they will frequently be able to avoid infringing the suggestive mark. Therefore, at the end of the day, choosing a fanciful term and putting sufficient marketing investment into making the brand a success will be the best strategy in the long run.
Hurtado Rivas: Generic names, for instance non-distinctive ones, should stay in the public domain in order to secure a system in which pharmaceutical substances can easily be identified and to avoid confusion which jeopardises patient safety. As a strong legal status is most beneficial in the long run, trademarks that are suggestive and distinctive work best. This also applies to many other industries. Furthermore, distinctive trade dresses can simultaneously decrease the danger of medication errors and be beneficial for the differentiation of products and services.
Wilkinson: There is often a tension between the desires of marketers, who tend to prefer descriptive marks, and the requirements of trademark law, which affords limited protection to descriptive names. Abstract graphical logos or made-up words often provide the strongest legal protection, but they require greater investment in advertising and marketing before customers recognise the brand in connection with specific goods or services. The best compromise is often to choose a mark that makes a clever allusion to the trademark owner’s products without being overly descriptive.
Sommers: Understandably, marketing teams routinely seek new product names that immediately convey information about the nature of the product or service. This approach must, however, be balanced with the goal of creating legally protectable trademarks. To be legally protectable in the United States, a trademark must be inherently distinctive – meaning the mark has little or no meaning as applied to the products or services, except as a source-identifier – or have acquired distinctiveness, known as ‘secondary meaning’ – meaning consumers have come to associate a particular descriptive term for a product or service exclusively with a single owner. ‘Fanciful’ marks, for example, Exxon for gasoline, ‘arbitrary’ marks, such as Apple for computers, and ‘suggestive’ marks, for example, Coppertone for suntan lotion, are all inherently distinctive and immediately registrable, while ‘descriptive’ marks, such as Best Buy for an electronics store, are registrable only after obtaining secondary meaning. ‘Generic’ terms, such as aspirin, cellophane and escalator, describe products themselves and, obviously, should never be selected as trademarks as they are incapable of serving as source identifiers.
FW: What advice would you give to parties involved in trademark disputes? What general options and strategies should they consider?
Wilkinson: Trademark law is complicated. The EU legislation appears simple at face value, but in many respects it has been changed beyond recognition by case law, which introduces traps for the unwary. US and EU trademark laws are similar enough to give practitioners a false sense of security when advising on foreign laws, but strategies and advice should always be jurisdiction-specific. Additionally, the parallel national and EU systems introduce strategic considerations that do not arise in other types of IP litigation. If you are a trademark owner, the best starting point is to review your portfolio to select the strongest national and EU rights and assess the risk of invalidity before asserting any marks. As a potential defendant, as soon as any proceedings are threatened, you may wish to consider cancellation proceedings before any court infringement proceedings are commenced. Companies may have several options for where to commence their claim, and factors such as court costs, and the importance and size of the marketplace, will influence that decision. For example, the English Intellectual Property Enterprise Court provides a low-cost, specialist venue for trademark disputes, which has the potential to issue judgments affecting the entire EU market.
Sommers: Litigation in the United States is, unquestionably, very time consuming and expensive. Before choosing to litigate a case, the parties should explore whether commercial solutions can be found that might allow the parties’ marks or names to peacefully coexist in the marketplace. In negotiating ‘peaceful’ marketplace solutions, too much time is often spent on the ‘theoretical’ and not enough on the ‘practical’ realities of the marketplace. Parties must assess marketplace realities of any coexistence – for example, the marketplace strength of the plaintiff’s mark – whether consumers of the parties’ respective goods or services are likely to overlap. If the parties are unable to negotiate a resolution among themselves, alternative dispute resolution or mediation should be considered. As for the timing of settlement discussions and mediation, the parties should not be afraid to engage in discussions at the very outset of cases. Having said that, sometimes productive settlement discussions do not become ripe until the parties have completed fact discovery in the lawsuit, as the strengths and weaknesses of each party’s case will have been exposed and ‘compromises’ are more easily reached at such time, especially when facilitated by a skilled neutral, unbiased mediator.
Hurtado Rivas: All options should be considered at any point – from litigation to negotiation and amicable settlement. Moreover, the increasing intertwining of business and legal functions must be considered. As such, the bigger picture concerning the organisation, its objectives and its values is relevant and should affect strategy and internal and external communication of any legal efforts. At the same time, risks can be contained by defining different strategies pre-emptively, including for worst case scenarios, and the currently applied strategy should be subject to regular review and discussion.
Schmitt: The best strategy is to treat each dispute individually and to take numerous factors into account when deciding how to deal with the conflict. The first question that should be asked is whether this is really a business conflict. Are the respective parties active in different fields and can the respective rights be limited in order to avoid the likelihood of confusion on the register? Assuming the matter turns out to be an actual business conflict, the nature of the infringement needs to be evaluated. Is it a deliberate counterfeit matter? If so, a powerful enforcement will be the right and only response. Many other cases, however, allow for a fair and reasonable business solution that will permit the parties to coexist, delineating markets and products from each other or by way of visual or other minor changes to the potential infringer’s mark. Very often costly litigation can be avoided with common sense.
FW: Going forward, do you believe companies will continue to improve their trademark protection and enforcement strategies? What key trends and developments do you expect to see in this area?
Hurtado Rivas: Companies will definitely seek to improve their trademark protection and enforcement strategies in order to maximise return on investment. In the pharmaceutical industry, this supports the ultimate objective to deliver safe medicines and supporting services to patients. In this context, learning from other industries is emerging as a key trend, leading to various new strategies being employed. At the same time, global strategies may be losing relevance in favour of focusing on local or regional peculiarities, as we see IP systems develop and become more mature in numerous countries around the world.
Schmitt: Trademark protection is a valuable asset for companies, and they will continue to protect and defend their brands. While there will be an increase in trademark disputes, trademark owners have started to take a more sophisticated approach. With more competition on the market, there will have to be ways to coexist if business interests will allow this. Companies are concerned about how they are being perceived in public and try to avoid appearing as ‘trademark bullies’. Thus, where settlement of a dispute seems feasible and creative solutions can be found for coexistence, companies will much rather settle than invest significant amounts of money in infringement proceedings.
Sommers: There were those trademark-savvy companies that bucked the trend during the recession and pushed the bounds of branding and protection of their trademark rights. More than ever before, brands like Apple and Under Armour have transcended a purely source-identifying function for a given good or service to basically a brand of lifestyle that people want to embrace. For those companies that took a more conservative approach, as the strength of the economy improves, so too will such companies’ branding strategies and trademark protections. We are seeing that now, as companies are protecting and leveraging rights in colours, sounds, product configurations, product packaging, store design, and myriad other unique source identifiers that differentiate their products from those of their competitors. Exploiting new marketing opportunities and effectively competing in an increasingly cutthroat marketplace commands such concentration and actions going forward.
Wilkinson: In general, companies are becoming increasingly aware of the value of IP. The importance of online trading should motivate companies to focus on their trademark portfolios, as registered rights are typically easier to enforce internationally than unregistered rights, even where those unregistered rights are acquired through long-term use. Cases involving Google AdWords have reached the highest courts in the EU, but confusion remains about the limits of using a rival’s trademark in keyword advertising. There is also inconsistency between countries about liability for online infringement. In some jurisdictions, ‘targeting’ of customers in a given country is necessary for infringement, while in others the mere fact of accessibility, possibly from anywhere in the world, is sufficient. More disputes in this field, and a greater awareness of technical measures to avoid liability for infringement of foreign trademarks, are expected.
David Wilkinson heads Clyde & Co’s UK IP team. He has over 20 years’ experience of handling contentious and transactional IP matters, having been a partner at one of London’s pre-eminent IP firms and Head of IP at a leading national firm. Mr Wilkinson is listed as a leading practitioner in several directories, is Co-Chair of The Intellectual Property Lawyers’ Organisation (TIPLO), and a tutor on Oxford University’s Diploma in IP Law and Practice. He can be contacted on +44 (0)20 7876 4674 or by email: firstname.lastname@example.org.
Mark Sommers is a partner in Finnegan’s Washington, DC office. His practice concentrates on trademarks and unfair competition. Mr Sommers has litigated a broad range of trademark, trade dress, product configuration, unfair competition, domain name, diversion, design and false advertising cases before the federal district courts, federal appellate courts and TTAB. He has also very successfully created and implemented high-value return strategies targeted at acquiring and protecting core branding rights. He can be contacted on +1 (202) 408 4064 or by email: email@example.com.
Cornelia Schmitt is an attorney-at-law at Grünecker. Admitted to the Bar in 2002, she is a certified IP lawyer. Ms Schmitt’s practice areas include all trademark related fields such as trademark prosecution, litigation, general advice, domains and unfair competition. She was educated at the University in Trier, University in Cologne and the University in Thessaloniki in Greece, and is proficient in German, English and French. She can be contacted on +49 (0)89 21 23 50 or by email: firstname.lastname@example.org.
Myrtha Hurtado Rivas joined Novartis Pharma AG in 2011 to lead the trademarks, domain names and copyright department globally. Ms Hurtado Rivas’s breadth of experience in intellectual property comes from an extensive and diverse education, time spent at the Swiss Federal Institute of Intellectual Property in Bern and five years at Sandoz. She has particular expertise in trademark, design, copyright and domain name law, international business law and the pharmaceutical industry. She can be contacted on +41 61 324 1111 or by email: email@example.com.
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