Trade mark clearance searching is essential for any business looking to launch a new brand.
Failure to conduct a proper clearance search can lead to adoption of a brand that infringes pre-existing rights of another trader in an identical or very similar trade mark. The potential costs of defending legal action, in addition to costs of rebranding and the associated loss of market recognition, can cripple a business or at the very least put a significant break on its growth.
Unfortunately, trade mark clearance searching has become increasingly complicated. This means that any professional providing trade mark clearance advice needs to be able to balance commercial and legal factors in order to provide commercially practical and pragmatic advice.
Why is clearance searching getting more complicated?
Highly subjective tests – the tests for determining whether two trade marks are likely to be confused are open to significant interpretation, and reasonable opinions can differ.
Increasing number of trade mark filings – The Australian Trade Marks Office currently administers over 800,000 pending and registered trade marks. The number of new applications filed each day is approximately 200. The greater the number of trade marks filed, the more potential for conflict.
Broad specifications of goods and services—The Australian system permits very broad claims for goods and services not limited to specific functions or types, e.g. ‘computer software’, ‘pharmaceuticals’, ‘vehicles’, ‘entertainment’, ‘printed matter’, etc. Such broad claims increase the frequency of conflicts between trade marks, even in situations where businesses operate in completely different fields.
Long pendency periods for pending applications – many trade mark applications filed in Australia eventually lapse and do not proceed to registration. Unfortunately, the current lengthy wait for examination (around 7-8 months), and the long period given to applicants to respond to examination reports (15 months), mean that applications can sit on the register for at least 2 years before they die.
No maintenance requirements – trade marks in Australia can be renewed in perpetuity without filing a declaration of use. These trade marks are effectively dead wood, but can only be eliminated if a person applies for their removal from the register.
Unpredictability of the Federal Court – predicting whether the Federal Court will consider two trade marks to be deceptively similar is impossible. There have been numerous instances where the court has reached somewhat surprising conclusions, including the following examples:
|Marks considered not deceptively similar||Marks considered deceptively similar|
Convention priority and increased use of Madrid Protocol – trade mark applications claiming convention priority and filed under the Madrid Protocol may not be immediately visible due to processing delays. These issues can take several months to resolve. The result is that an application may not appear on the Australian register until 6-12 months after its priority date.
Balancing and quantifying risk
The sheer number of applications and registrations in Australia means that most searches will reveal potential obstacles to use or registration of a new trade mark.
It is often not practical to simply tell a business to select another trade mark. A business will often invest significant time and money into brand development, and abandoning the new brand may not be an option. The business may already have packaging under production, or suitable domain names secured. A business requires a practical assessment of the commercial risk to determine whether to proceed.
The legal tests for determining trade mark infringement are only one factor to be considered. In many cases, the issue of deceptive similarity is arguable. Trade marks are enforced through civil actions brought by trade mark owners. Infringement cannot occur if the trade mark owner is not sufficiently motivated to bring infringement proceedings. Further, even in cases where infringement is alleged, the matter may not progress beyond some initial exchanges of correspondence between the parties.
As such, in many cases what is most important to the business is the commercial risk, i.e. determining how likely it is a dispute will arise and particularly the likelihood of it being escalated to litigation:
Some factors that will influence quantification of commercial risk include:
- Are the parties direct competitors? If the parties sell to the same customers, trade mark disputes are more likely to arise and to escalate.
- Is the earlier mark used as a primary brand or a secondary brand? Trade mark owners tend to be much more protective of their primary brands, and less protective of secondary brands.
- What is the size of the respective parties and do they have a history of litigation over trade mark matters.
- Location of the parties – Australian companies are more likely to litigate in Australia than overseas companies. US companies are also more likely to litigate than other overseas companies.
- Is the earlier mark potentially vulnerable to cancellation or removal from the register? If so, how strong are the grounds for cancellation?
- Is the business adopting the later mark potentially liable for additional damages if sued for infringement (e.g. is the infringement flagrant)? Does the prospect of additional damages constitute a financial incentive to the other party commencing litigation?
- Could a director of a company be held personally liable as a joint tortfeasor for infringement? This is particularly relevant for small companies where directors are also the major shareholders.
An earlier registered mark may cover “software”. Another business is also interested in using a mark that is arguably deceptively similar for software, but for a specific purpose (navigation guidance software for drones).
A brief investigation indicates the owner of the earlier mark produces inventory management software targeted at fresh food wholesalers.
While application of the standard legal tests could lead to a finding of infringement, the chances of infringement proceedings being commenced are low. Even if a dispute arose, the costs of litigation would also motivate the parties to reach a commercial resolution.
Further, the earlier registration appears to be vulnerable for an action to partially remove the trade mark for non-use. This vulnerability could be used as leverage to negotiate a co-existence agreement or letter of consent from the owner of the earlier mark.
In this case, the quantification of commercial risk is likely to be low. Even in the unlikely event a dispute arises, the most likely outcome is a negotiated resolution rather than commencement of proceedings.
However, the business adopting the later mark should also take steps to obtain their own registered trade mark, which will further strengthen their position.
Trade marks clearance searching relies on educated guesswork.
It is important to understand that there are no absolutes, and that if there is a risk (even if quantified as a low commercial risk), the business adopting the mark must be willing to assume that risk.
A practitioner must also be able to give advice on risk minimisation strategies, to reduce the exposure of a business to potential litigation.
Finally, where a business adopts a more risky trade mark, the business should have an exit strategy that is commercially practical and likely to be palatable to the other side.
While trade mark clearance searching can lead to difficult decisions when launching a new brand, it can also allow a business to detect and avoid significant problems before they arise.
An experienced trade mark professional can assist a business to navigate the challenges posed by an overcrowded and complex trade mark system by giving advice that is commercially practical and takes into account all relevant considerations.