Trademarks are valuable commercial assets. They signify the good will and brand recognition of a business. Typically businesses will seek protection in the United States prior to using their trademarks in commerce in order to establish its priority rights. If a mark has not been put into use, an "intent to use" trademark application may nevertheless be filed with the United States Patent and Trademark Office (USPTO). An applicant filing such an application in advance of actually using a trademark in commerce gains a significant right - when the registration issues, priority relates back to the filing date of the application, even though the mark might not have been put into use in commerce until several months, or even a couple of years, after the application was filed.
Frequently businesses have a plan to expand internationally, but for budgetary or other reasons they put those plans on hold until a later date. This wait and see approach carries a significant risk, however. A sometimes overlooked, yet critical, point is that trademark rights end at a country's border. Accordingly, there is nothing to prevent a foreign (or even a U.S.) company from filing a trademark application to register an identical mark for the same goods or services in a foreign country. Compounding the matter is that trademark rights in many, if not most, foreign countries are based upon who filed its application first (in contrast to the United States, where rights are normally based on first use in commerce). Additionally, in many, if not most, foreign countries, a trademark applicant does not have to put the mark into use for significant periods of time and can still protect its trademark rights. For example, a holder of a Community Trademark (CTM) registration that covers all EU member countries does not have to file any affirmative proof that it has put the mark into use in order to obtain or maintain its trademark registration. If, however, the holder of the registration does not put its mark into actual use within five years after registration, then it is subject to losing its registration if challenged by a third party for non-use. Of course, the foreign registrant can maintain its trademarks rights by simply making genuine use of the mark.
The foreign registration rules present third parties with the opportunity to keep an eye on what marks are filed in the United States and then to file registrations for those marks abroad that will tie up the rights in those marks for years (and potentially indefinitely). When the U.S. owner of the mark tries to apply for registration of the mark abroad, it is then met with objection, and even possibly third party opposition. Occasionally the U.S. owner might be able to demonstrate bad faith on the part of the third party under limited circumstances, and move forward to protect its rights. However, the more likely scenario is that the U.S. owner will be forced to negotiate with the third party and either buy or license rights from that party, or forego its opportunity to use its mark in the country or countries in question.
The obvious answer to the problem is this: don't wait to file abroad in those countries where you know you will want to protect and use your mark. The cost of a trademark application now can avoid potentially substantial costs down the road. Furthermore, certain international laws afford a way to buy some additional time before having to file abroad. For example, the Paris Convention permits member countries to invoke the date of the home country filing as long as the foreign filing is made within six months of the original filing date. That extra six months might be just what you need to see if the brand is viable and to obtain enough working capital to proceed with the foreign branding.
Remember - don't wait, it could be too late.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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