What Constitutes Trademark Infringement?
For brand-centric enterprises (franchise systems included), trademark protection is of utmost importance. If a competitor – knowingly or otherwise – starts using a trademark that interferes with your exclusive trademark rights, this can have significant negative effects for your business. Even if you ultimately prevail in a trademark infringement lawsuit, you likely will have spent substantial sums of money to do so, and potentially lost business and even lifetime customers along the way.
Sure, you might be awarded damages (even triple damages if the trademark infringement is wilful), but (i) you actually have to collect those damages from the infringer, and (ii) it’s difficult to predict with any degree of certainty the true scope of your losses in terms of non-repeat customers and potential customers.
With these concerns in mind, it should be clear that the best way to combat infringement and mitigate its costs is to spot the issues early. So what exactly do you need to look for?
What is Trademark Infringement?
The basic test for trademark infringement is whether someone else is using a trademark that creates a “likelihood of confusion” amongst consumers in the relevant marketplace. At the outset, this means a few critically important things:
- A trademark does not have to be an exact copy of another in order to be infringing. In terms of protecting yourself, you need to be looking broader than just exact replicas;
- There is potential for confusion any time two similar trademarks are presented to consumers at the same time – so infringement may occur with respect to products or services that are related to yours, even if they aren’t the exact same, and using even an identical trademark in a completely unrelated area (candy bars vs. architecture services, for example) likely won’t be considered trademark infringement; and,
- Intent is irrelevant (well, almost): someone can infringe on your trademark rights even if they don’t know that you exist, but wilful infringement might cost the infringer extra.
Of course, someone who uses your trademark won’t be infringing if they have your permission to do so. This permission can come in the form of a license or franchise, and may even be implied where, for example with media buys, someone else needs to use your trademark in order to do what you’ve asked them to. However, subject to the terms of any agreement that is in place, this permission can be revoked, and then if the former licensee continues to use your trademarks they are setting themselves up for trademark infringement liability.
How Do You Spot Trademark Infringement?
The best way to protect your company’s trademarks is institute a comprehensive trademark monitoring program. Sure, sometimes infringement will be obvious, but other times it may be harder to find. In all cases, it is important to respond quickly:
- The more infringers that are out there, the less likely other potential infringers will take your trademark claim seriously;
- The more infringers that are out there, the less control you have over your brand image;
- You can actually lose trademark rights if you don’t police and enforce them adequately;
- The longer someone goes on using an infringing trademark (especially in close cases and in cases where they don’t know you exist) and establishing themselves, the less cooperative they tend to be when you try to get them to change their name.
A comprehensive trademark monitoring program will scour numerous resources for references to trademarks that are confusingly similar to your own. As noted above, a comprehensive strategy will focus not only on your exact trademark, but on other related terms that may also cause confusion in the minds of consumers.
By taking a proactive approach to combating trademark infringement, brand owners can put themselves in the best position possible to maintain their image, exclusivity, and financial resources.
Jeff Fabian assists business owners in protecting their brands so that they can stay focused on running their businesses. Visit www.fabianip.com for more information, and follow Jeff on Twitter @FabianOnIP.
A Checklist for Franchising your Business
We thought it might be useful to break the process down into a to-do list for the prospective franchisor. This isn't meant to be an all-inclusive guide by any means, but the list below should give you a solid idea of what lies ahead.
Best Practices in Protecting and Enforcing Trademarks, Copyrights and other IP
Trademarks, copyrighted works, trade secrets and proprietary business information form the core of any franchise system, and are frequently a company’s most valuable assets. Trademarks, including service marks, logos, slogans and trade dress, define the brand identity as presented to the public. The “behind the scenes” business know-how on which the system is built and implemented by franchisees is embodied in a variety of copyrighted and proprietary works – operations manuals, proprietary processes, recipes and formulas, custom software, advertising copy to name a few.
Negotiating the Franchise Agreement
Now that we’ve discussed the franchisor’s point of view and arguments towards negotiating the franchise agreement, here are a couple of tips for not wasting time on trying to negotiate items which franchisors do not alter and concentrating on the change-able clauses in the Franchise Agreement.