Fair and Unfair Competition Under Trademarks

Introduction

Competition in the modern business environment is normal and often considered healthy. According to Nesheiwat, a highly competitive business environment embraces innovation as a way of meeting needs of customers in the best way possible (29). Companies that embrace creativity often emerge successful in such markets. They can understand emerging trends, new tastes and preferences, and what can be done to align products with new demands. It is common to find companies that use unethical practices in such highly competitive business environments. Brown and Nagy emphasize the need for business entities to operate in an environment where there is mutual respect among firms (17). It is unethical for a company to engage in acts that may harm other firms or customers because of the desire to make quick gains.

The need to ensure that business entities and customers are protected from unscrupulous practices led to the enactment of laws and regulations that define how firms should operate. Bouchoux observes that in an environment where companies are keen on making impressive profits at all costs, the temptation to eliminate major market rivals may exist (41). The legal structures ensure that such temptations are subdued to create a healthy competitive environment for all players. Trademark laws are specifically meant to ensure that intellectual rights and trademarks are not infringed upon by their rivals in the market. According to Grigoriadis, the United States has strict trademark laws meant to create a perfect environment for the business community to operate (32). In this paper, the researcher seeks to investigate fair and unfair competition under trademarks.

Trademark and Trademark Laws

The concept of a trademark has gained massive popularity in the modern business environment. Dornis defines trademark as “a word, phrase, or logo that identifies the source of goods or services” (34). As the name suggests, it is a mark that identifies a company and distinguishes it from its rivals in the market. The concept of defining the identity of business emerged because of the existence of companies offering similar products in the same environment. Coca-Cola Company and PepsiCo offer cola products in the global market. The two fierce market rivals are keen on ensuring that they offer the best value to their customers. They constantly add value to their products and try to improve the experience for their customers as a way of gaining a competitive edge over the competitor. However, such efforts would go to waste if customers are not able to distinguish the two companies’ products. Coming up with a unique product name, logo, and colors makes it easy to differentiate products from one company from another. Every time customers realize that there is uniqueness in a given product, they will know the company that is committed to meeting emerging needs. As such, it makes it possible for a firm to develop a pool of loyal customers.

Product and brand promotion has become one of the crucial areas of marketing because of the competitive business environment. Firms are finding it necessary to use mass and social media to popularize their brands and products in the market. Such promotional campaigns would be impossible to conduct without a clear trademark. Sreenivasulu states that a firm needs to inform its customers about the name of the product, its unique characteristics, and how it can be distinguished from other existing products in the market (45). Apple Inc. is one of the most successful companies in the market for electronic products. Its phones, laptops, and other products are considered superior to most of the rival products in the market. When promoting its brand and product both in the local and international market, this company uses its brand name and logo to remind its customers what to look for when they are planning to make a purchase. Its brand logo stands out above the rest as a mark of quality.

The competitive business environment makes it necessary to have a trademark that identifies and distinguishes products of one company from another. When purchasing a mobile phone, a customer may have a preference, such as Samsung, because of a specific characteristic that it has. When a given brand becomes popular in the market, some less popular companies may be tempted to use names and logo of the popular brands. Dornis states that the practice has become common in China (45). Some companies operating with obscure names brand their phones as Samsung or Nokia because they know these brands are popular. Customers end up purchasing these products believing that they have their preferred brand only to realize that they have been duped. Trademark laws are meant to fight such unfair business practices.

As Brown and Nagy explain, trademark theft may have devastating consequences both to customers and the affected companies (19). To customers, this form of theft denies them the experience they expected from products they purchased. A customer often has a specific need to be met, and the choice of a given brand is often made for a specific reason. When they are duped into purchasing a product that is not what they expected, the post-purchase dissonance may not be avoided. It may be worse when the product purchased is significantly inferior to what they expected. Pathak states that such cases are common in counterfeit products (28). These unscrupulous business entities do not care about the issue of quality because they are riding on the wave of a strong brand of their targeted company. They make substandard products, earn quick profits within a fairly short period, and shift their focus to another company. Customers’ interest is often the last of their concern.

The trademark laws are also meant to protect business entity. According to Grigoriadis, it takes years and a significant amount of resources for a company to develop a strong brand that is largely acceptable in the market (41). Top global brands such as Apple Inc., Coca-Cola, and Samsung are worth billions of dollars because of the heavy investment the relevant companies have placed in their promotion. According to Brown and Nagy, one of the biggest problems of counterfeiting that trademark laws seeks to fight is the possible loss of value of a given strong brand (18). Most of the counterfeited products are of poor quality. When a customer chooses to purchase a specific brand over others, one of the defining factors is quality. They feel cheated. The main problem that emerges from such a scenario is that such customers will not only avoid the company’s products but will also influence others against the brand.

It is unfair for a company that has embraced business ethics and has spent millions of dollars to promote its brands and produces quality products to be subjected to such practices. It may take a long time and heavy investment in promotion to win back customer’s trust. The existence of trademark laws ensures that such practices are avoided in the modern business environment. Companies or individuals found to be engaging in such unfair practices are often subjected to stiff penalties to discourage others from the same and to compensate the aggrieved party. Sreenivasulu explains that the ability of the aggrieved company to take the aggressor to court and prove that its trademark name was used in selling substandard products may help restore the faith of customers (11). The company will be able to explain its position, the unfortunate occurrence, and measures put in place to avoid similar situations in the future. It becomes easy to repair the damaged image of the brand in the market.

Unfair Competition

After analyzing the concept of trademark, it is necessary to understand the concept of unfair competition. One must understand what it means to be unfair in the business realm. Dornis defines unfair competition as “any act or practice carried out in the course of industrial or commercial activities contrary to honest practices constitutes an act of unfair competition” (57). It what Pathak defines as professional correctness, there is a standard code of conduct that is expected of business entity (84). A business entity, just like a person, has rights and freedoms that must be respected. As such business entity enjoys its rights and freedom it has a responsibility to ensure that it does not infringe upon the rights and freedoms of other companies. There must be a clear line beyond which companies and businessperson should not cross because of the possibility of harming other firms. It is in the interest of a company to operate without being unfairly disrupted by other entities. The following acts are often classified as unfair competition, as Sreenivasulu observes (32).

Misleading Activities

In a highly competitive business environment, misleading acts are highly undesirable because of their consequences to the affected firms. Companies spend a lot of resources to promote their products and brand. Their primary goal is to have a pool of loyal customers. Such goals are always defeated if a different firm embraces practices that may mislead customers. Dornis notes that when customers are misled, they can make decisions that may harm a given company (57). In an effort to discredit a competitor’s product and to reduce its market share, a firm may be tempted to misrepresent its products to influence decisions of customers. The affected company can seek legal redress against the entity that has provided the misleading information.

Confusing Activities

According to Grigoriadis, any commercial or industrial activity that has a potential of confusing customers may be considered an unfair business practice (59). In a highly competitive business environment, companies struggle to remain unique. They achieve that uniqueness in products that they deliver to their customers. Nesheiwat argues that some of the successful brands in the market invest a lot of time and resources to come up with unique products in the market (76). They benefit from such initiatives by having a pool of loyal customers who trust their products. They use unique trademarks as a constant guide to their customers whenever they want to purchase their product. Any act that causes confusion among customers in a way that makes it difficult to identify their desired product is an unfair business practice. This issue of discussed further in trademark infringement section of the paper.

Activities That Damage Reputation or Goodwill

Sreenivasulu states that an act that reduces the appearance or distinctive character of another company’s brand or products is an unfair business practice (83). In a highly competitive business environment, any news that is harmful to the image and products of a rival company may be beneficial to a given company in the same industry if it will influence customers to avoid the rival’s product. However, if it is established that the attempt to discredit the reputation of a rival firm is planned and executed with malice, the perpetrator may be subjected legal action to compensate the affected company and to act as a warning to others who may be tempted to engage in similar acts. A perfect case is Johnson & Johnson Merck Pharmaceuticals, Co. v. SmithKline Beecham Corp of 1992 (Brown and Nagy 19). Smithkline Beecham Corp ran an advert that discredited the quality of products of Johnson & Johnson. Although Johnson & Johnson lost the case, it was a strong indication that marketing strategies that unfairly focuses on tainting the image of a rival firm may be subject to a legal suit.

How to Gain Rights in a Trademark

It is prudent for a company to register its trademark to avoid cases where its brand image and name is abused by unethical business entities or individuals. Pathak states that each country has its legal system that defines what a company needs to do to have a right to a given trademark (116). Although there may be variations from one country to another, it is a universally accepted practice for one to register a given trademark to have exclusive rights to its use in a given market. The United States has a set of rules and procedures that must be followed before one can claim full ownership and rights to a given trademark. The following are steps that one needs to follow to gain such rights:

Selecting a Mark

When a business entity decides that it is appropriate to have a trademark, Sreenivasulu advises that the first step is to select a mark (90). Based on products that the firm will offer to its customers and the appropriate product proposition, a firm may choose a given pattern of words and images that it considers suitable. It may be necessary to hire a graphics designer to develop an impressive mark that will be presented to the United States Patent and Trademark Office (USPTO) for approval. It means that the company may need to conduct its research about the existing trademark brands to avoid possible cases of rejection once it is presented for approval. In case it is established that the desired mark already exists, then the owner of the new mark will need to make adjustments to the proposed mark. Such personal initiatives of looking for an original and unique mark eliminate time wastage.

The team should be sure that the mark that is developed is not in active use in the local and also preferable international markets. Bouchoux recommends choosing a strong mark that will have the desired impact on customers who hear about it (16). The chosen mark must observe ethical and cultural concerns within a given market. In some societies, specific colors, animals, and images tend to be offensive based on beliefs and practices. For instance, the use of a pig as one of the images of a consumable product may not be appropriate when the firm is operating in a market with a significant population of Muslims (Brown and Nagy 20). They will find such marks offensive and are likely to avoid purchasing the products bearing the image.

Filing an Application

When a firm is convinced that it has a trademark that effectively represents its products and policies under which it operates, it will be appropriate to file an application for its registration. Grigoriadis suggests that at this stage, it may be necessary to hire an attorney who will be responsible for the entire process of getting the trademark approved (72). The government, in its effort to integrate its services, improve customer experience, and reduce the time needed for the application, has made it possible to make the application online. In the application, the identity of the trademark owner (which sometimes may be a business entity) must be defined, including the physical address and relevant contacts. The chosen mark must be depicted in a clear way that can be understood by the authorities responsible for the approval. Pathak argues that it is a legal requirement for the applicant to state the basis for filing the trademark (129). An application will only be considered valid if it states either of the following factors as the reason for its registration.

The first is a use-in-commerce trademark (Calboli and Lee 33). In this case, the applicant contends that the trademark is already being used in operations of a given business entity and it is in the interest of the applicant to register the mark so that it can enjoy its benefits exclusively. The second valid reason is intent-to-use (Fei and Zhou 438). In this case, the applicant explains that the mark is to be used in a soon-to-be-started business entity. The period within which such a business is to be started should be stated. Sreenivasulu states that doing so is important to avoid cases where people register trademarks for speculative purposes (78). Common speculation is that a large company may come to the local market interested in using the trademark. The person who registered the trademark would make quick money by selling the mark. The law forbids such unethical practices when making an application for the registration of the mark. The applicant will also make the necessary application fee which may vary depending on the class of goods and services for which it is registered (Grigoriadis 53).

Approval of the Trademark

It is the responsibility of United States Patent and Trademark Office (USPTO) to inspect and approve (or reject if necessary) an application for the registration of a given trademark. Once a request is received, the authority will evaluate it based on a number of factors. First, it will look at the brand name and images to determine if they are ethically appropriate. For instance, an image that depicts nakedness or practices that the society considers immoral may be rejected without allowing it to advance to the next stage. The interest of members of the public is often given precedence over desires of the applicants at this stage. If it is established that the name, image, and other attributes satisfy the moral standards, the next stage will be to evaluate the purpose for which the application is made.

The authority must be convinced that the mark is to be registered for a primary reason for conducting business within the country. In case the business is yet to start its operations, there must be a clear timeline provided on when it will begin. If these demands are met, the next stage is to establish if the mark or name has a high index of similarity with other existing brands to the extent that it may confuse. In the past, Grigoriadis explains that the comparison would be done manually (119). It was a demanding process. It has been simplified by emerging technologies. It takes a relatively short time to compare the proposed mark with other marks to determine any similarities. In case the authority identifies anomalies at any of the stages of assessment, a preliminary rejection will be issued stating the area of concern that needs to be addressed.

The applicant has two options to respond to such a rejection. First, the entity may consider making appropriate changes in line with the identified issues with the logo. If the applicant feels that the chosen mark is the best and does not infringe upon any other company’s trademark, it may launch an appeal against the decision. The appeal will be evaluated, and if it is established that it lacks merit, the authority will issue a final rejection. When the final rejection is issued, the applicant will need to start the entire process afresh with new marks. Dornis recommends that instead of launching an appeal, it is always prudent to follow suggestions of the authority and make the necessary changes because it saves time and eliminates the need to pay the application fee twice (78). However, the attorney assigned that task is best positioned to offer the most appropriate actions that should be taken based on the unique needs of the firm and realities that it faces in the application process.

International Registration and Maintenance of the Trademark

After the registration, Sreenivasulu notes that it is necessary to keep the registered trademark valid (63). The trademark validity may expire after a specific period. Different countries have varying dates upon which it must be renewed. Otherwise it may no longer be valid. Locally, it is necessary to file a Declaration of Use or a valid reason why it is not in use after every six years otherwise it will be canceled. The owner of the trademark is also required to renew the application after every ten years. The process of renewal is not as challenging as that of an application. The business owner only needs to reaffirm its commitment to continue using the trademark and pay the necessary fees in the process (Balganesh 98). The renewal will be automatically approved after that unless there is a valid reason not to do so.

It may be necessary for a company to register its trademark in the global market. The need may arise if the firm has intentions of going global with its operations. Nesheiwat explains that the Madrid system for international trademark registrations allows business entities of its member states to make a single application that remains effective in all the participating countries (83). It works alongside the World Intellectual Property Organization (WIPO) to ensure that trademarks and other copyrights are protected. Once approved, the owner of such marks will need to renew their applications after every ten years. In case the country of interest is not a member of the Madrid System, the trademark owner may be forced to make direct application with the trademark and copyright authorities of the relevant states. Finding a local attorney who understands the local forces in such countries may be advisable (Calboli and Lee 54). The lawyer may provide relevant advice, especially if it may be necessary to modify the mark in line with the local needs.

What Can Be Protected under Trademark Law

According to Brown and Nagy, it is important to understand what can be protected under the trademark law (19). These are terms meant for general classification of goods that cannot be registered and be protected in the United States trademark laws. For example, soap is a general term that includes all types of detergents sold under different brands. It is not possible for a business entity to claim ownership to such a name that defines a variety of products. It is necessary to develop a unique name to define a company’s image in the market. Dornis clarifies that the law can only protect a trademark that is unique and cannot raise a conflict with the current or possible future companies in the same industry (89). When looking at what can be protected under the trademark laws, it is important to look at the following areas:

Generic Trademarks

Success in branding is the desire of every company in the global business arena. Companies in the United States and all over the world are embracing various strategies to ensure that they make their product as popular in the market as possible. However, it is important to note that sometimes that high level of success can be counterproductive. Bouchoux explains that some brand name may become so common that they are used to describe all products in that category despite their manufacturer (23). Good examples include Aspirin, Cellophane, and Escalator. These were extremely successful trademarks that became generic names. It reached a moment where all products in their categories used the same name. Consequently, Aspirin lost its trademark in 1919, Cellophane in 1912, and Escalator in 1900 (Fei and Zhou 439). The process through which a company loses its trademark is referred to by Brown and Nagy as genericide (21). In such circumstances, it may force the affected company to find an alternative name for its brand and products as the law ceases to protect such a generic trademark. Benefits that were previously associated with such a powerful brand such as a strong customer base, high profitability, and brand value are lost in the process.

It is important for a firm to ensure that its brand does not become generic. Omo, a washing detergent, gained massive global success in Asia and African countries that it almost achieved the generic status. However, the company was able to take appropriate measures to avoid such eventualities. Grigoriadis notes that Coca-Cola brand also achieved such a massive success in the same market and North America that the name almost became the identification of all cola products (23). However, these companies were able to fight off the danger of losing their trademarks. These two companies used the same strategy to protect their brand name. They added a descriptor after the trademark, as Balganesh advises (97). Instead of just using the name Coca-Cola, the company used the Coca-Cola Company as its trademark. This was a reminder of the existence of other cola products. The Coca-Cola Company was just one of the many companies offering cola products. The company was able to maintain a highly popular trademark without letting it become generic. More recently, Google Inc was almost losing its trademark become it was rapidly becoming generic.

People were using the term ‘Google it’ instead of ‘search it in the online platform’. For fear of the name becoming generic, the company made two major moves to protect its trademark. It developed a parent company, Alphabet Inc., under which Google was to operate. The move was meant to ensure that if the company lost its trademark with Google, it would be left with an equality strong brand in the market. Secondly, the company started dissuading its customers from using the term Google it. Instead, its commercials promoted the use of the term ‘search it in the Google’ to distinguish the word search from Google. The popularity of Google is still growing as the most preferred online search engine and only time will tell if it will be able to protect its trademark from becoming generic. In the case August Storck K.G. v. Nabisco, Inc, it was ruled that marks devoid of any distinctive character may not be protected under trademarks laws (Pathak 105).

Descriptive Trademarks

Descriptive trademarks cannot easily be protected under the trademark laws. Dornis defines descriptive trademarks as those using names that describe their products (78). In many cases, they are used as a promotional slogan when advertising a brand or a given product. When promoting its cola drinks, the Coca-Cola Company uses the slogan ‘obey your thirst’ for its Sprite sub-brand. The term has been used so often by the company that its mention evokes the thought of taking one of the company’s products (Fei and Zhou 446). However, one can still use milk or tap water, products which are not offered by the company, to quench thirst. As much as the phrase has become closely associated with the Coca-Cola Company, this firm cannot register it under the trademark laws. It means that rival companies and those that operate in different companies can also use the phrase to promote their products. Brown and Nagy explain that the essence of avoiding the protection of descriptive trademarks is because of their common usage (22).

Sometimes a company may use the word but in a misleading manner. For instance, it is common to find cases that firms describe their products as the best in the market. It is not possible to register a product with the name ‘the best option’. Even if the company offers the best value in the industry at the time, it is not guaranteed that its products will be the best forever. When a new company emerges that offers superior value, the name will lose its validity. The message it passes to customers will, therefore, be misleading. Even when a firm is keen on selecting a name that would give it an edge over its rivals, Bouchoux advises that it is prudent to avoid trademark names which are descriptive (34). This approach of developing a trademark may leave a company name and brand exposed to legal challenge. To have such a name protected by the country’s trademark laws, a firm may need to modify it in a manner that makes it distinctive in the market. Zatarain’s, Inc. v. Oak Grove Smokehouse, Inc. is a case example of how a company can easily lose a descriptive trademark (Pathak 32). Zatarain owned trademarks FISH-FRI and CHICK-FRI. Trademarks were challenged by Oak Grove as being descriptive and limiting other companies from using phrases such as fish fry and chicken fry in their advertisements. It was held that these two brands had no other secondary meanings and as such, could not be protected under the Lanham Trademark Act.

Suggestive Trademarks

The trademark laws may fail to protect a trademark that is established to be suggestive. Sreenivasulu defines suggestive trademark as “a distinctive, but not descriptive, mark which does not describe a product, but suggests or references it, requiring consumers to exercise imagination to connect the mark with the product” (112). The name suggests the quality or characteristics of products offered by the company. A good example of a suggestive trademark is Android, which refers to artificially intelligent user-interactive software (Nesheiwat 16). It is not possible for a company to have such a name protected under the trademark laws, as was established in the case of Abercrombie & Fitch Co. vs. Hunting World, Inc. (Calboli and Lee 117). It was held that Smartphone from numerous companies such as Apple Inc. Samsung, and Nokia may fall into the category, and therefore, it is not prudent to have a single company enjoying such exclusive rights. However, some rare cases exist when a company manages to register a suggestive trademark that becomes fully protected by the country’s trademark laws.

Microsoft is a trademark name that suggests the nature of the product offered, microcomputer software (Balganesh 95). However, the name was registered when the concept was almost non-existence so it was not easy to envision a situation where another entity may challenge the name. However, as market forces continued to change and Apple Inc. developed its microcomputer software, Microsoft realized the vulnerability of its trademark and moved with speed to protect it from being declared a suggestive trademark. It introduced the term ‘corporation’ in the name to have Microsoft Corporation. The name is yet to face any serious legal challenge and is less likely to be subjected to such a problem because of the modification. Sreenivasulu advises that it is necessary to avoid suggestive trademarks because they do not attract strong protection under the United States trademark laws (31). Some few cases of a company that enjoy protection exist, but it is an option that one should avoid if possible.

Arbitrary Trademarks

According to Grigoriadis, some of the brands that enjoy strong protection under Lanham (Trademark) Act are arbitrary trademarks (41). These are names that have nothing to do with the industry or the product that a company offers. They are creatively chosen because of the unique meaning or attachment they have to the owner. Kodak is a name that has little to do with the filming industry. However, it is one of the brands enjoying protection from possible infringement both locally and internationally. Apple Inc’s operations have nothing to do with fruit production. The same approach of branding is embraced by Camel Oil and Shell gas stations (Balganesh 88). It is uncommon to challenge these trademarks.

From a marketing perspective, it may not be the most appropriate strategy for naming a brand because it may take them some time to associate the name with the product offered. However, when it is creatively developed, it can form a strong trademark that enjoys protection from possible infringement. It is important to note that even arbitrary trademarks may be subject to litigation if certain terms are breached. Apple Corps vs. Apple Inc. is a perfect example. Apple Corps, a multimedia corporation, came ahead of Apple Inc., an electronics company. Apple Corps took Apple Inc. to court for using a trademark that was already in active use. Apple Inc. was forced to make a settlement and promise to avoid the music industry. When the temptation to join music industry became too strong, Apple Inc. was forced to purchase Apple Corps trademark to avoid further legal battles (Fei and Zhou 444). Such cases are common not only in the United States but also in other countries around the world.

Abandonment of a Trademark

When an entity has registered a trademark, it is its responsibility to ensure that it is kept in active use and renewed regularly to avoid its loss. A trademark will only remain protected under the Lanham Trademark Act if it is established that the company that registered it is trading as was suggested when making the application. The law requires that the registered owner renews the application every ten years. In case the registration is not done for thirty years, the trademark will be considered abandoned, and it will lose its protection. For a company to continue enjoying the protection under trademarks law, it should remain in active operations and should renew applications as stipulated in the law.

Trademark Infringement

Bouchoux defines trademark infringement as “the unauthorized use of a trademark or service mark on or in connection with goods and services in a manner that is likely to cause confusion, deception, or mistake about the source of products” (86). Infringement may be constituted as a result of a deliberate attempt by an individual or a company to benefit unfairly from the name of a strong brand by assuming a trademark that is similar to that of the competitor. In other cases, it may be a mistake caused by the inferiority and inconspicuous nature of the already existing trademark that leads to the confusion. Whether the action was deliberate or not, the affected party can seek legal redress whenever it feels that its brand name, logo, or other brand attributes have been infringed upon. It is expected of the owner of the trademark affected by the infringement to go to court and report the matter. It means that as long as the case is not presented to the courts for redress, little can be done even if customers are affected by the problem. The only legal option that customers or their legal representatives can take is to complain about the quality or any other issue that can be proven to affect them because of the confusion. When such a case is presented in court, the measurement of the infringement is often conducted using the likelihood of confusion test (Balganesh 87). The following are the critical factors that define trademark infringement.

The Degree of Similarity of Trademarks

According to Brown and Nagy, one of the principal factors that often define the infringement of a trademark is the level of similarity of the marks (20). The Coca-Cola Company has a unique trademark defined by specific colors, images, and letters. In Qualitex Co. v. Jacobson Products Co., Inc., the United States Supreme Court held that color is a legal requirement for trademark registration and deserves protection under the Lehman Act (Calboli and Lee 43). When a company, irrespective of the industry in which it operates, uses the same trademark or that which is almost the same, it would be considered a copyright infringement. Sreenivasulu explains that customers can easily be confused that the Coca-Cola Company has diversified its product portfolio (81). When fighting such a case of infringement, the Coca-Cola Company would argue that the infringing company’s mistakes and scandals may hurt its image (the Coca-Cola Company’s) in the market even if they are not operating in the same company. Customers may want to dissociate from the brand and its products because of such scandals. It will be a sufficient ground for a presiding judge to rule that there was a trademark infringement.

The Plaintiff’s Trademark Strength

According to Nesheiwat, sometimes it may be necessary to determine the plaintiff’s trademark strength before concluding that there was infringement (91). Registration of trademarks is a continuous process. Most of the registered trademarks in the country are not in active use. Some were for companies that started but failed along the way in their initial years of operation. Others were registered by individuals who wanted to start their companies, but circumstances made it impossible to happen. Dornis explains that there is also a category of individuals who intentionally register numerous trademarks with the primary goal of extorting money from companies who may be interested in using the same in future (112). When a case is presented before the court, one of the issues that will be investigated is the usability of the first trademark. As the name suggests, a trademark should be a mark that identifies a given company in the market. Its relevance is lost if the company for which it was registered is no longer operational. The new company will not be infringing on anyone’s right. As stated above, trademark infringement test looks at the possible confusion that is caused by the existence of marks which are similar. In case the original company is no longer in operation, the concept of confusion will no longer hold. The new company that is in active operation in the market may be granted opportunity to continue using the trademark.

The Degree of Products’ Similarity

It is common to find a case where two different companies use a similar image to identify their brands. Apple Inc. is one of the leading electronic companies in the global market. It uses the image of apple fruit to help identify and distinguish its products from that of its market rivals. Stribling Orchard is a firm that specializes in the production and distribution of different kinds of fruits, especially apples. They both use the apple fruit in their trademark to help promote their brand and to distinguish their products in the market. Apple Inc. registered its trademark ahead of Stribling Orchard. It is not possible for Apple Inc. to claim that there is a copyright infringement because this fruits company is using a logo that is almost similar to its own. Industries within which these companies operate are so distinct and can never be confused. Products that companies offer are also different. It is not possible for a customer who intended to purchase an iPhone, iPad, or Macintosh to end up with an apple fruit from Stribling Orchard because he got confused due to the similarity of the logo. There is no legal basis for Apple Inc. to sue this fruits company for trademark infringement. However, the situation may change in case the fruits company decides to diversify its products to include those that are offered by Apple Inc. The infringement will be proven if it is established that customers are likely to end up with a product they never intended to purchase because of the similarity.

Evidence of Confusion in the Market

In some cases, it may be necessary for the plaintiff to provide evidence of confusion in the market. It may be a case where trademarks are not the same, but the plaintiff feels that the use of colors, images, or the naming pattern of the new trademark may be an infringement. It is a common problem if the two companies are operating in the same industry hence is a direct competitor. Bouchoux explains that such issues arise when it is not easy for customers to distinguish products of companies in that industry other than by their brand name, logo, and other brand attributes (46). Bottled water companies may be a perfect example of such a case. The court will need a proof that customers are likely to confuse products in the market if the new trademark is allowed to operate without major changes. The new trademark owner may be directed to make significant changes on the product to ensure that customers do not get confused when planning to purchase products of a given brand.

The Sophistication of Purchasers

The level of sophistication of customers is another factor that may be looked at when investigating a possible trademark infringement. Some products only attract a specific segment of customers. Sreenivasulu states that the court may be convinced that customers are highly sophisticated to the extent that they cannot easily be confused by a possible attempt of a different company to use a name similar to their preferred brand (49). This applies to products that target highly trained professionals such as doctors, engineers, and other scientists. They may have the capacity to test and determine the genuineness of a product before making the purchase. Pathak warns that such extreme requirements are often rare and it must be established that all customers will make the test before purchasing a product (47). For instance, it is easy for a customer to determine whether they are purchasing a genuine iPhone by simply logging into the iTunes and getting the specifications of the phone. However, not all customers have that level of sophistication. Most of them will look at the brand logo and the shape of the phone as the only primary factors before making their purchase. By the time they realize that they have been cheated, it may be too late to take an appropriate corrective measure (Grigoriadis 71).

Determining if Trademark Registration was Bona Fide

The primary assumption that is always made when one registers a trademark is that there is a legitimate business-driven desire to have a mark that will distinguish the owner’s products from that of the market rivals. However, Nesheiwat observes that some individuals have ulterior motives when they register their trademarks (52). Some do it with the intention of making quick money by possibly selling it to a company that may find it relevant. Others do it deliberately to hurt an already existing firm. It is possible that the court may find the level of confusion between the two brands to be reasonably low. One final factor that the court may look at is whether or not the trademark was registered in good faith. Dornis warns that when the focus is on the reason behind the registration, the court’s decision will not give preference to the trademark that was registered ahead of the other (51).

The ruling will be made against a trademark that was registered with ill intentions. For instance, if it is established that the trademark owner has ten or twenty other registered trademarks, none of which is in active use, it may be an indication that the owner is interested in extortion other than engaging in genuine business activities. A perfect case example is Zazu Designs v. L’Oreal, S.A. of 1992 (Fei and Zhou 442). It involved a deliberate move by L’Oreal to distribute its product under a new brand name, Zazu, with a full knowledge that Zazu Designs intended to use the same brand name to sell its products in the market. The court determined that L’Oreal acted in bad faith by using a name that a rival company intended to use. It was denied the ownership of the name because it lacked a valid reason why it was necessary to introduce a new brand name at a time when a rival firm that had been using the same trademark was planning an expansion and a possible registration of the brand.

Dilution

Dilution of a trademark refers to a situation where unauthorized persons use a company’s trademark on its products that do not compete with those of the owner of the mark (Calboli and Lee 72). Such unethical business practices are common among small and medium-sized companies that do not have registered trademarks. They try to ride in the wave of the strong brand of the targeted company. For instance, a coffee shop may use the name Microsoft Inc as its name in the market. Products offered by such a coffee shop may not be related in any way with products offered by Microsoft Corporation. The two companies may not be in any form of competition. However, the act of using a known brand on a product that the owner does not offer may be considered an infringement upon rights of the owner. Customers that hold the company in high regard may be shocked when they see a local shop that offers substandard products using the same name. They may develop a negative impression towards the brand as they associate it with the local coffee shop. Bouchoux observes that sometimes it may not be easy to detect such forms of infringements, especially if it is in a remote location that agents of the trademark owner rarely visit (54). However, once it is detected, an immediate measure should be taken to stop it and relevant damages awarded to the aggrieved party through a legal process. The following are the two main types of dilution:

Blurring Dilution

According to Brown and Nagy, blurring dilution occurs when there is an unauthorized use of a trademark on dissimilar goods and services (18). The trademark’s image in that specific market gets blurred as customers will be confused about the exact products that the brand specializes on within a given market. As explained above, this is a case of a company that is keen on achieving success in the market using a strong brand but without any intention of posing its products as those manufactured by the owner of the brand. The main damage that is caused by this form of dilution is the confusion that customers are subjected to as they wonder about the product portfolio of the originating company. Sreenivasulu explains that it is a silent approach to dilution and sometimes it may go undetected for a long time because it may not raise instant suspicion (97). In the case of Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, and the district court ruled that the products of defendants were parodies of plaintiff’s trademark and as such, diluted it (Fei and Zhou 447).

Tarnishment Dilution

Tarnishment dilution is a more serious form of infringement because it targets the products of the affected company. It happens when one company uses the trademark of a different firm, without authorization, to sell inferior quality products in the market. In this case, the aggressor ends up developing and selling products similar to that of the targeted company and uses the same trademark. Customers will be confused in the market when making purchases. Bouchoux explains that these clients will purchase the counterfeited product thinking that it is from the desired company only to realize that they have been offered substandard products (67). The effect is that both the customer and the affected firm will be hurt. The customer will end up with a poor quality product that fails to meet the need for which it was purchased. On the other hand, the affected company will get its name tarnished. After years of effective marketing and production of high-quality products, actions of an unscrupulous businessperson may cost the firm the benefits that come with a strong brand. It will be viewed as an untrustworthy company that delivers substandard products to its clients. It may take awhile to recover from such an impact.

The trademark laws in the United States seek to protect companies from such malpractices. Moseley v. V Secret Catalogue, Inc., is a case that demonstrates a dilution of the trademark by tarnishment (Fei and Zhou 450). Victoria’s Secret sued Victor’s Secret for using a name that closely resembles its own to sell similar products. Although the Supreme Court rule against Victoria’s Secret based on the Federal Trademark Dilution Act (FTDA), the United States Congress overturned the decision when it enacted Federal Trademark Dilution Revision Act (FTDRA) of 2006 (Nesheiwat 67). It is now impossible for an entity to go unpunished for committing a similar mistake after the new law came to force.

Nominative/Fair Use and Misrepresentation under Unfair use

The normative use, also known as a fair use of a trademark is permissible when one is describing a given product or comparing it with its own without the intent of malice. Under the doctrine of fair use, a person may be allowed to make reference to a company’s logo, image, product, or other brand distributes in public discourses only when it is necessary. The United States Ninth Circuit outlines the normative use test that a person may be allowed to use a company’s trademark. The first condition is when a product cannot be easily identified when the trademark is not used (Balganesh 58). For instance, the name Coca-Cola is more popular than cola. If fact, many people do not even understand the meaning of the word cola. When a teacher is defining the word cola, it may be necessary to use the Coca-Cola Company’s trademark to make the message clear to the audience. However, it should not cause confusion.

In the case Century 21 Real Estate Corp. v. LendingTree, Inc., the majority held that the owner bears the burden of proving that the use of a trademark is likely to cause confusion in the market (Calboli and Lee 75). The second condition is that one should use the mark in cases when it is necessary to make the identification. Finally, the user should not make a suggestion to endorsement without the approval of the company because sometimes such decisions may hurt its image. Misrepresentation under unfair use is strictly prohibited under trademark laws. In the case New Kids on the Block v. News America Publishing, Inc., the court held that the publishing company could use New Kids trademarks as long as it was in a formative way (Fei and Zhou 451). A person cannot use the trademark in ways that may hurt its image, such as making negative references in public discourses in a way that may hurt its image.

Conclusion

Trademarks are crucial for companies operating in a highly competitive business environment. It helps in distinguishing a firm’s products from that of the rival companies. It is clear from the above analysis that it takes time and a lot of resources to popularize a product in the market. It is the reason why the United States, and many other countries around the world, has come up with policies to protect trademarks. Trademark laws helps in ensuring that a company enjoys its benefits based on the value of the brand. The law protects companies from unfair use of its brand by rival companies or possible acts of malice that may have devastating consequences on the value of the brand and its ability to attract customers. The paper outlines the process that one should take to register a brand and steps to be taken to ensure that it remains validly protected.

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