Fashion retailers today face multiple challenges arising from global trade, the explosion of e-commerce and the imperative to operate sustainably while meeting ever higher client expectations. In this climate, a brand’s image and reputation have become key factors of business success. Trademarks, in this shifting climate, provide a highly valuable competitive advantage, making the need to protect them even more important. The prudent business thus is proactive in its trademark protection and enforcement strategy.
One significant threat to trademarks arises from so-called trademark troll practices. These practices, although less known than patent troll practices, occur when a person or a company pre-emptively applies to register a mark used by a brand owner without the intention of using it for trade or production of goods or services, but as a means of pressure against the legitimate brand owner.
Trademark troll practices encompass two main behaviors:
- Opportunistic trademark registrant: the applicant does not actually use or intend to use the trademark, but opportunistically files for a trademark (well-known or not) that has been registered by another company in other countries or in other classes. Subsequently, the troll holds the trademark for ransom, demanding a license or purchase fee when the legitimate owner decides to extend its trademark protection.
- Trademark bullies: a company with a well-established reputation in one or more countries engages in aggressive enforcement of its brands beyond its actual territorial borders and/or business scope, bringing actions against other companies that use the same or similar marks in other countries or in unrelated areas. A trademark bully uses threats of litigation against another company that is clearly and beyond any reasonable doubt operating within the bounds of trademark law. Trademark bullies use trademark law as camouflage; their goal is to drive competitors, or those they construe as competitors, out of business. They typically accomplish this by threatening to sue, being well aware of the fact that many small competitors cannot afford the costs associated with lengthy litigation.
The behavior of the trademark bully is not illegal per se; trademark claims are part of any trademark enforcement strategy and are necessary for an entity of any size to preserve its trademark rights. However, if the abuse is blatant, such behavior could be condemned by the courts through the relevant abuse of rights provisions.
The behavior of the opportunistic registrant could be addressed through actions based on fraud or absence of bona fide intention to use. A recent decision held by the first instance court of Nanterre on December 20, 2018 admits an ownership claim based on fraud in an interesting dispute involving a well-known US brand, Supreme, owned by the company Chapter 4, which sells street and urban wear clothing and accessories. Chapter 4 owned several trademark registrations in the US and in France in class 25 on the Supreme trademark, which it intensively used in both countries in this form:
As the stylized form was not protected in France, and the French trademark registration Chapter 4 owned was limited to clothing in class 25, the US company decided to file two French trademark applications, one for the word mark Supreme and the other one for the above logo. Both applications were opposed by a French entrepreneur, who - only 13 days earlier - had filed the French trademark application for the following mark in classes 16, 25 and 32:
Chapter 4 filed an opposition against the French entrepreneur’s trademark based on its prior trademark rights in class 25. The trademark application was partially rejected, but registered in class 16. A year after, the French entrepreneur filed a new French trademark application for the same stylized trademark in classes 2, 14 and 33 and a French trademark application for the word mark Supreme in classes 18, 25 and 35. All were registered.
Because the French entrepreneur - despite a new cease-and-desist letter from CHAPTER 4 - maintained his trademark registrations, the US company filed a lawsuit on fraud grounds, claiming ownership of those trademarks and, alternatively, their nullity.
Unsurprisingly, considering the clear fraudulent element of the case, the court held that the defendant's trademark registrations had been fraudulently filed and ordered the total transfer of the rights in the disputed trademarks to the benefit of their legitimate owner, on the basis that (i) the Supreme trademark had a well-established reputation in France, especially since the opening of its popular Parisian boutique; (ii) there was a likelihood of confusion regardless of the absence of similarity between the products covered; and (iii) there was no bona fide justification for using the disputed sign in relation to the French entrepreneur's business activity.
The importance of facts when ascertaining and analyzing potential fraud
As a brand owner, when you are considering the possibility that a trademark troll is attacking your brand, you first need to be able to respond to the following questions:
- Does the adoption of an identical trademark by a third party prevent you, as the legitimate owner of a trademark, from using your own trademark, which you have been using for several years, in the given country?
- Is the trademark filed by the third party necessary for its current or future activities?
- Is it linked to a legitimate business?
- Is there any element that shows that the third party may not have a bona fide intention to use the trademark ?
The burden of proof, which lies on the plaintiff/victim, is quite high; it is always difficult to provide clear and non-ambiguous evidence of malevolent intent. Fortunately, fraudulent intent is usually determined by French courts based on the body of evidence (faisceau d’indice), arising from such factors as reputation of the earlier mark abroad and in France; a similarity between the marks and goods and services; absence of use; the applicant attending the same exhibitions or events as the legitimate brand owner; the applicant being a former employee, distributor or contractor; and proofs of regular travel in the country of the legitimate owner.
Strategic considerations to limit situation of fraud
Fraud is multiform and unfortunately there is no absolute defense against fraudulent behavior, which may be seen as an unavoidable price of success. Nevertheless, the first recommendation is to be diligent in the follows ways:
- Protect your trademark for the goods and/or services of direct interest to your business, but also with a defensive consideration against fraud in covering goods and services, which may not be of immediate interest to your business but are similar or somewhat complementary or are commonly associated on the market with the goods and services you are selling;
- Protect your trademark in the countries where you are doing business or plan on doing so in the future, but also where infringement and fraudulent applications are common behavior.
- Take advantage of the Paris convention priority whenever you extend your trademark protection abroad in order to benefit from the first filing date.
- File translations and/or transliterations of your trademark.
- Monitor the market and any third party's trademark applications worldwide in order to identify as early as possible fraudulent or infringing trademark applications as early as possible.
While there is no perfect guarantee, these steps will help you build an efficient trademark enforcement strategy.