PATENT INFORMATION AND DOCUMENTATION
CllAPTER 6 TRADE1\1ARKS
6.3 Policy Considerations in Trademark Law
6.12.3 Protected acts (a) Use of the mark
The exclusive right acquired by registration or use of a trademark in general can be defined as the right to exclude others from using the tradcmark for commercial purposes. The various national laws sometimes contain only such a general defini
tion (or, where the right is acquired by use, no definition at ail since the matter is left to the courts) or they contain a more specific definition. But there are practi
cally no differences between the countries in respect of that definition.
What does "use for commercial purposes" mean? Jlcre several cases have to be distinguished.
The simplest case of infringement is the case where the protected tradcmark is used by another enterprise for the same products or services as those for which the trademark is used by its owner. This is a clear case of tradcmark infringement and it is not even necessary to examine whether in that case a risk of confusion exists in the minds of the consumers.
It is generally accepted that "use" means the reproduction of the trademark on products or in connection with services, or in advertising, the sale and offering for sale and importation of products bearing the infringing tradcmark and the offering and rendering of services in connection with the infringing trademark. In some laws, even preparatory acts, such as the stocking of products for sale, are expressly mentioned.
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(b) Use of the mark on similar products or services
While no doubt exists that the unauthorized use of the trademark for products or services which are the same kind as those offered by the trademark owner con
stitutes an infringement, the question arises whether, and, if so, un der what condi•
tions, the use of the trademark for similar products or services may also constitute an infringement.
lt is has been recognized in practically ail countries that there is infringement if the use of the trademark for similar products causes confusion in the mind of the consumer. In other words. if the average consumer believes that the products or services for which the tradcmark is used by the defendant originate from the enterprise of the trademark owner, confusion exists, and therefore, the tradcmark owner has a right to prevent such use.
Thus, it is recognized in many countries that the scope of protection covers prod
ucts or services which are not listed in the registration, provided that they are so closely related to the listed products or services that confusion may arise. In the application of this rule, many countries take into account the extent of the use of the protected trademark and the size of the enterprise of the trademark owner: the bigger the enterprise and the more extensive the use of the trademark, the larger is the scope of protection as regards the products.
(c) Restraining the use of similar marks
A further very important aspect of the scope of protection of a trademark concerns the question of whether the use of similar signs may constitute an infringement.
1 lere again, it is generally recognized that such use is an infringement if it creates a risk of confusion.
ln many countries, this question bas given rise to a huge number of court decisions from which certain rules can be deduced. For example, it has been frequently stated that it is not the differences between two tradcmarks but the similarities of those two trademarks which have to be ta ken into account. Moreover, it is gener
J1.lly recognized that the similarity may be on three levels. There may be a visible similarity or an audible similarity or a pronunciation in the language of the country where the tradcmark is to be protected. As regards similarity in respect of the meaning, it has bcen recognized, for example, that confusion may exist between an emblem (for example, a Jaguar) and the name of the item which appears in the emblem, for example, the name "Jaguar."
( d) Other cases
Many national laws also recognize two further cases of tradcmark infringement, either in an express provision of the statute or on the basis of court decisions.
The first case concerns the use of the protected trademark in connection with entirely different products or services.
For example, if the trademark "Coca-Cola" is used by a manufacturer of bluejeans and if such use gives the impression that the product made by that manufacturer
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draws on the reputation of "Coca-Cola" as a drink for dynamic young people, the interests of the "Coca-Cola" company are at stake. However, it can hardly be maintained that there is a risk of confusion with respect to the origin of the blue jeans since the manufacturer of the bluejeans made it clear that they did not corne from the "Coca-Cola" company. He only profits from the reputation of the trademark "Coca-Cola., without crcating confusion.
In such a case, one speaks of "a dilution" of a trademark. lt has bcen recognized in several countries that the trademark owner may prohibit acts which amount to such dilution. The condition for such protection, however, is that the tradcmark bas gained a certain reputation or that it is a particularly well-known or "famous"
trademark.
The second case concerns the use of the protcctcd tradcmark in a dictionary or encyclopedia or similar work. }fore again, we have the situation that there exists a well-known trademark which is used by a numbcr of people as the dcsignation of the product. It may happen that editors of a dictionary inadvertently use the trademark as the name of a product. Obviously, this is not a use for commercial purposes so that the normal infringement action does not apply. However, since such a use does damage to the trademark owner because it supports the dangerous degeneration of a well-known tradernark to a generic dcsignation, it is recognized in several countries that the trademark owner may prohibit such a use.
6.12.4 Exceptions to the scope of trademark protection
Having defined the exclusive right and the scope of protection, we have now to examine whether there exist any exceptions to the scope of protection. In this connec
tion, two completely different cases have to be distinguished.
(a) Use of own name and other necessary indications
The first case concerns the use by a person or entity of his or its name and the use of other necessary indications such as geographical indications, etc.
For example, the "Ford" Corporation could not prohibit somebody whose name is
"Ford" from using his name in connection with his business even if that business is the manufacture of automobiles. The exclusive right conferred with respect to the tradernark here suffers an exception. A pcrson or entity rnay use his or its name provided such use is not use as a trademark. In other words, the name may be used as a trade name but not as a trademark, and the use of the trade name must be in a way that confusion between the enterprise and the tradernark owner is avoided.
Similar exceptions exist in respect of the use of geographical indications or indica
tions concerning the kind, quality, quantity, destination, etc., of a product. In the BIRPI Model Law for Developing Countries (Section 19), this rule has been defined as follows� .. Registration of the mark shall not confer on its registered ., owner the right to preclude third parties from using bona /ide their narncs, addreses, pseudonyms, a geographical name, or exact indications conccrning the
TRADEMARKS 175 kind, quality, suppl y, of their products and services, insofar as such use is confined to the purposes of mere identification or information and cannot mislead the public as to the source of the products or services".
(b) Exhaustion of trademark rights
Many of the restrictions placed upon the assignment and licensing of trademarks stem from the desire to shield the public from possible confusion or deception;
their object is to preserve the function of a tradcmark as an indication of trade origin. In addition, it has often been found necessary, or desirable, to impose conditions that prevent trademarks from being used to divide up markets or to create artificial barricrs to free tradc. The most important of this latter group have given rise to what has corne to be known as "the doctrine of exhaustion of tradcmark rights", or " the exhaustion principle".
Reflecting this principle, s.20 of the said Madel law provides:
"Registration of the mark shall not confer upon the registered owner the right to preclude third parties from using the mark in relation to the goods lawfully sold in the country under that mark, provided that these goods have not undergone any change."
This limitation cornes into play once goods bearing the trademark have been law
fully sold in the country concerned. The commentary on the Model law explains that the expression ''lawfully sold'' in this context, means sold either by the regis
tered owner of the mark (whether before or after registration), or by his licensee.
(In the case of a collective mark, sale by an authorized user would be lawful). Once goods have been placed on the relevant market by the trademark owner or under bis aegis, the owner•s rights are exhausted. That is to say, he cannot prevent use of the trademark by third parties in relation to those goods. Third parties may, for example, re-sell the marked goods and may use the mark in promoting such sales, without interference from the owner of the mark. This is subject to the important qualification that the goods must not have undergone any change, such as, for cxample, would result from the goods being diluted, being mixed with other goods, or even from being repackaged:
(D. Myall, Trademarks, WIPO/IP/CM/86/1, pp.3-7]
6.13 Parallel Importation
The requirement in Section 20 of the said Model Law that the lawful sale must have taken place in the country of registration, leaves open the question of what action should be taken over the contentious matter of parallcl imports. The question that arises most often in these cases is whether the owner of the tradcmark registration can prevent third parties from importing goods which bear the mark and which have been lawfully sold (in the sense given to this phrase above) in another country. A trader may, qui te legiti
mately, wish to make slight changes to his product to meet the needs, tastes and pre
ferences of different markets, yet apply the same mark to them ail. If he cannot prevent
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parallel imports, he will find this marketing objective frustrated, and his goodwill may be damaged by the sale of an unsuitable product (from the point of view of his customers) under his mark. Moreover, this would not be in the interests of the public. However, a blanket power to prevent parallel imports in ail cases would enable the owner of an international trademark to abuse bis exclusive right, for example, by dividing up markets so as to maintain a dominant position, or by maintaining high prices. lt may be that this is not a serious problem for developing countries, at any rate in the early stages of their development, and the commentary on the said Madel Law states that it will be for the courts to determine whether the exclusive right can be enforced in the particu]ar circum
stances.
[Ibid., pp.3-7J
6.14 Product Piracy and Counterfeiting
6.14.1 Introduction
The pirating of trademarked products through commercial counterfciting has reached epidemic proportions in recent years. The practice occurs where an unau
thorized representation of a lcgally registered trademark is carricd on goods which are similar to the product for which the trademark is registered. The objcct of the counterfei
ter is to deceive the purchaser into believing that he or she is buying a legitimately branded product. Commercial counterfeiting may thus invo]ve patent and copyright infringements and passing off, as well as infringements of registered tradcmarks.
Commercial counterfeiting is a superficially attractive proposition; it providcs a source of foreign revenue and a means of penetrating western tradc barricrs. Passing themselves off as the producers whose trademarks they are pirating, the counterfeiters do not have to incur either the research or development costs of the legitimate producers and, of course, the pirates can have a free ride on the promotional efforts of those producers.
The deception involved in commercial counterfeiting has an obvious adverse effect on consumers and trademark owners. However, notwithstanding the short-term com
mercial attractiveness of counterfeiting certain long--run adverse effccts on the country of origin of counterfeit products have been idcntified as fo1lows:
First, foreign firms are seriously dcterred from placing valuable foreign invest•
ments in countries which do not have and enforce stringent intcllectual propcrty laws.
Additionally t once a country becomes known as a significant source of counterfeit products, the reputation of ail products emanating from that country becomcs tainted. A consumer may shy away from products which indicate they were made in a country which also makes a substantial quantity of counterfeit goodst for fear that his purchased product will also turn out to be a counterfeit.
The counterfeiting of trademarked products stifles the creation and development of original trademarks and original products. To the extent that a country's manufactur
ers are merely imitating the marks and products of othcrs, and doing so lucrative1y, there
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is little incentive for them to invest in research, development and marketing of new products and marks. As a result, the development process of a country can be hampered.
Finally, as is true of ail illicit activities, the counterfeiting "industry" is very successful in avoiding the payment of taxes. Operating on a cash basis, the counterfeit business is not likely to pay income or employment taxes. Similarly, sales taxes often are avoided.
(J. Rimelspach, Trademarks and Counrerfeit Goods, BrTM/84/12, pp. 9-11]
6.14.2 Remedies and enforcement
A range of remedies are available under most trademark statutcs to deal with the various aspects of commercial counterfeiting. Obviously, ail the remedies associated with tradcmark infringement provide a primary sanction. Additionally, some statu tes provide criminal sanctions upon those who import or traffic in counterfeit goods.
The Paris Convention contains three specific articles to deal with commercial coun
terfeiting: Article 6 prohibits the use and registration of confusing trademarks; Article 9 prohibits the importation of goods bcaring unlawful trademarks and authorises their seizure; and Article 10 provides protection against unfair competition.
6.15 Transfer of Trademarks
An invariable incident of trademark rights is the right of a trademark owner to transfer a tradcmark.
The transfer may be effectcd by operation of law where the owner of a trademark dies and is succeeded by his heirs. Transfer may also be effected by contract. Two separate instances of contractual transfer have to be identified:
ln the first case, the trademark is transferred with the enterprise for which it is used. This case happens where an enterprise is sold or where there is a merger between two enterprises. lt is generally recognized that the transfer of the trademark with the enterprise does not cause any problem.
The second case concerns the transfer of the tradcmark without the enterprise.
This happens if one enterprise sells its trademark or trademarks to another enterprise. In this connection, there may exist a danger of misleading the public because the trademark is undcrstood by the public as a reference to a particular enterprise from which products or services originate. Therefore, some laws do not permit the transfer of a trademark without the enterprise or at least without that part of the enterprise to which the trademark relates. Other laws permit such a transfer but only on the condition that there is no danger of misleading the public.
Where trademark rights are acquired by registration there will invariably be an obligation for the transfer transaction to be recordcd.
6.16 Licensing
A very significant incident of trademark ownership in some countries is the right to licence other enterprises as registered users. This permits the exploitation of the
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trademark outside the owner's own country. Trademark licensing is of great practical importance in developing countries in facilitating the transfer of technology and commer
cial know-how.
The use of a trademark by anyone other than its proprictor is, prima facie, a use which ought not to be allowed in the public interest. Indeed, the right to restrain such use is the basic right given by ail trademark laws. The indiscriminate granting to others of a license to use a registered trademark would strike at the foundation of a tradcmark's function, namely, to indicate a single trade origin of the goods bearing the tradcmark. If unregulated, it could amount to use of a trademark as an article of commerce itself.
Accordingly, most trademark systems that permit the licensing of tradcmarks, impose conditions which are designed to preserve thcir origin and guarantee functions and to prevent deception of the public.
The conncction betwccn the goods and the owncr of any tradcmark attachcd to them can only be maintained if the owncr continues to excrcise control over the use of the trademark, particularly concerning the quality of the goo<ls and the conditions undcr which they are marketcd. If this control is effective, it is not neccssary that the owner use the trademark himself; use by the licensee can be dcemed to be use by the licensor (See Section 22(1) of the said Modcl Law). This secures the registration from attack on the grounds of non-use. It also prevents the licensee from claiming rights in the trademark by virtue of his use of it.
lt is necessary to stress that the control over the use of a tradcmark must be effecti�e. It is suggested that it would not suffice for the owner to take power to control quality, but never to exercise it. Arrangements that are mcrely a sham dcsigned to placate official requirements, not only fail to maintain the function of a tradcmark, they destroy it. Accordingly, such cases are likely to render the license con tract as à whole (not just its trademark provisions) null and void (see, for example, Section 23 of the said Model Law).
The said Mode] Law also contains provisions aimed at certain types of restrictive clauses that are considered to be inimical to the interests of the Iicensee, in particular, or the public, in general. These are usually attempts by the licensor to obtain widcr exclu
sive rights than are obtainable from registration, or rights which might opcrate as a restraint on trade. For example, a clause which prevented the liccnsce from using other trademarks would probably be invalid under Section 24 of the said Model Law (in this case only the clause and not the whole con tract would be invalid.)
Not ail restrictions in a Iicense contract are objectionable. lt is generally thought that limitations concerning the duration of the license, the terri tory it covers, and the list of goods or services affected, are acceptable. Clauses obliging the licensee to do nothing that might invalidate the registration are wholly beneficial. In fact, the licensee has a positive interest in maintaining the registration. He will usually be entitled to objcct to its abandonment by the registered owner, to prosecute an infringement, and to renew a régistration.