This article was first published in the May 26, 2009 edition of The Legal Intelligencer.
Stretching to get the most trademark protection for the dollars available starts with an understanding of trademark laws around the world, the value of each brand in your business, and the markets you serve or plan to serve. Once you understand each of these components, you can balance the needs of your business against the costs of various options, and choose the option that best protects the business within reasonable costs. This may require making some difficult value judgments, but a few basic guidelines can help.
Use A Tiered System of Protection
First, with input from the appropriate business leaders, categorize each mark in a portfolio into one of several tiers of importance. Thus, for example, you might include your house mark in a first tier, the mark for a product line in a second tier, and individual product brand names in a third tier.
Second, categorize the core goods/services associated with each mark to determine which classes are relevant to the business. If your core goods are consumer electronics (class 9), but you also provide repair and maintenance services (class 37) and distribute promotional items such as toys (class 28) and t-shirts (class 25), assign toys and t-shirts to the lowest tier, repair and maintenance in a middle tier, and consumer electronics in the top tier.
Third, categorize the markets. If 90% of your business is in NAFTA countries, but you are building a market in Europe and have longer range goals in Asia, the first tier may include only the U.S., Mexico and Canada, whereas the second tier may comprise the European Community, and the third tier may be for key Asian countries.
Top tier marks may warrant registration in all three tiers of goods/services/countries, whereas second and third tier marks typically justify protection in fewer tiers of goods/services/countries. Applying a tiered approach to enforcement may prompt policing top tier marks more aggressively and in more jurisdictions than lower-tier marks. For maximum savings, apply the tiered approach not only to new filings, but also to an existing portfolio. A trademark audit can reveal numerous opportunities to trim renewal and maintenance costs through adoption of the tiered approach.
Because the goods/services/country tiers may be different for each mark, however, it is best to pay individual and careful consideration to the business needs for each mark, and take a flexible approach.
Take Advantage of Savings in the U.S.
Developments in U.S. caselaw forced many brand owners to re-think using multi-class trademark applications because of numerous decisions invalidating trademark registrations for fraud. Brand owners feared that one errant listing in a multi-class registration of goods/services on which the mark was not actually used might invalidate the entire registration. This fear is subsiding thanks to a recent Trademark Trial and Appeals Board (TTAB) decision, holding that fraud committed in fewer than all classes requires cancellation of only those classes. Thus, multi-class applications remain a viable cost-saving tool without undue risks, because despite a multi-class application incurring the same amount of government fees as the equivalent number of single-class applications, it avoids attorneys fees for preparation and filing of separate applications and may also consolidate prosecution issues downstream for greater efficiency.
Front-loading the trademark application process can also lead to considerable savings. Taking the time to carefully craft the identification of goods/services prior to filing a new application should avoid some of the costs and delays of receiving a later office action. Particularly for firms who file applications for a standard charge rather than based upon an hourly billing rate, the cost of conforming the goods/services to the U.S. Acceptable Identification of Goods and Services Manual at the time of filing can be absorbed as part of the flat fee, rather than billed at an hourly rate in responding to a later office action. Plus, an application listing only goods/services straight out of the Manual can take advantage of a streamlined application system to enjoy a $50-per-class reduction in government fees.
Save Using the Madrid Protocol
Since 2003, the United States has been a member of the Madrid Protocol — a treaty that allows an applicant to secure a single International Registration designating numerous foreign countries (including the European Community as a whole, nearly all Western and Eastern European countries individually, many key countries in the Asia-Pacific, most Soviet bloc countries and many African countries). Filing through the Madrid Protocol avoids foreign associate fees for preparing and filing applications. While you may eventually need counsel in any country where the registration is refused during examination, a well-designed application may mature to registration in many countries without incurring any foreign associate fees. A Madrid Protocol filing designating multiple member countries in multiple classes of goods/services can provide savings on the order of tens of thousands of dollars. In general, a filing designating just two or more member countries in even a single class can justify the cost of applying through the Madrid Protocol.
Many U.S. practitioners initially adopted a cautious approach to the Madrid Protocol out of a concern that foreign registrations filed under that system would necessarily have a narrower scope of protection available than those filed directly. This is because the International Application must be identical to a base registration, which for U.S. applicants typically means a U.S. registration limited to goods/services in connection with which the mark is actually used, whereas direct registrations in many foreign countries can include an entire class of goods/services without a use requirement. Consider, however, whether the coverage is really worth the extra cost for goods/services on which a mark is not used now and is not likely to be used 3-5 years from now when the foreign registration will be vulnerable to cancellation for non-use, particularly where that extra cost may include the cost of potential oppositions or cancellations arising from an overbroad description. Upon such consideration, many brand owners are content to register only for goods/services on which their marks are actually used.
Another oft-cited concern with the Madrid Protocol is that for the first five years after registration, the International Registration is dependent upon the base registration, subjecting the protection in all designated countries to a “central attack” on that base registration. Reported statistics show that less than 1% of all International Registrations worldwide are fully cancelled as a result of a central attack, and only another 2% subject to some limitation of goods/services. In a worst case scenario, even if the base registration is centrally attacked, the designations in the various countries can be “transformed” to national registrations.
Save Using the Community Trade Mark
European Community Trade Mark (CTM) applications and registrations permit the owner to file a “seniority claim” to European national registrations for the identical mark. A CTM registration with accepted seniority claims has the same legal standing as the original national registration for all goods/services identical to those in the national registration. Thus, you may be able to consolidate many European national registrations into a single new CTM with seniority claims, allow the national registrations to lapse, and save significantly on future renewal costs. While it may seem counterintuitive to spend money now to save money later, the return on investment of such a filing is usually quite favorable. Furthermore, because a CTM covers the entire EU, a CTM is likely to cover at least a few additional countries not covered by earlier national registrations and can also include new goods/services (not based upon seniority claims) to reflect an updated product offering. Once issued, a CTM is valid across the entire EU and not vulnerable to cancellation so long as the mark is used in connection with the listed goods/services in any one country of the EU.
Search for Savings
Consistent with the well-known saying that an ounce of prevention is worth a pound of cure, conducting a comprehensive search before adopting a new mark is another way to “save by spending.” While the cost of obtaining a comprehensive search and clearance may tempt an inexperienced brand owner to forego this step, it is far better to understand potential obstacles before launching a new brand, rather than facing a costly infringement lawsuit later. The costs of having to re-brand a product or to fight over trademark rights with a third party for even one mark out of a fifty could easily dwarf the cost of adopting a conservative practice prior to adoption of a new mark.
Tailor Enforcement Strategy to Maximize Results and Minimize Costs
Although policing and watching may be among the services for which a tiered approach can offer savings, consider the advantages of identifying an infringer sooner rather than later. Using a watch service to catch infringers early may actually save money compared to discovering an infringer after he has become emotionally or financially invested in his mark. Caught early, an infringer may cut his losses and move on (especially in this economic climate), whereas an infringer who has already started to build some goodwill in his own mark may be more inclined to litigate when challenged. Thus, in some cases, particularly when the accused infringer truly creates a commercial concern and is identified before commencing substantial use, an aggressive posture at the outset may be more productive than an overly conciliatory one. While it may initially cost more to file a lawsuit or a TTAB action first and send letters later, an aggressive approach may force an earlier settlement or complete capitulation.
When the dispute is less about genuine likelihood of confusion and more about trying to preserve the maximum possible scope of protection for an existing mark, however, an approach that seeks a reasonable business solution at the outset may promote a faster resolution with minimal costs. In short, for each policing decision, give close consideration to the commercial situation, desired goals, and expected costs before deciding upon an enforcement strategy.
Continuously Look for Business Solutions
Both offensively and defensively, dispute resolution costs may hold the key to the biggest potential trademark cost savings. Continuously review business goals in trademark disputes to identify opportunities for solutions that can achieve acceptable business results without incurring the full cost and uncertainty of litigation. Consider using the TTAB Accelerated Case Resolution procedures where applicable, or alternative dispute resolution, and even in traditional litigation, look for ways to work with opposing counsel to limit the issues in dispute.
Adopt Policies That Work in All Economies
The foregoing strategies are not just temporary tactics for surviving in the current business cycle, they are prudent measures for getting the most “bang for the buck” in any economic climate and are practices that we routinely counsel our clients to consider. Good policies adopted now will not only make the most of lean budgets, but will pay ongoing dividends in the future without a material sacrifice in commercial protection.