In today’s world of fax machines, e-mail and teleconferencing, even small, local business have the opportunity to market and sell their products in foreign countries. Although U.S. business owners generally understand the importance of registering their trademarks on their own turf, even the most savvy business owners frequently overlook the importance of obtaining trademark protection in the foreign countries where they do business. This seemingly innocent oversight can be detrimental to a business’ ability to conduct business abroad.
Trademark laws outside the United States differ greatly. In the United States, trademark rights are based on use of a trademark in connection with the sale of goods or services. The first to use a trademark generally has superior rights and can stop the use of the same or similar mark by another. This is true even if the trademark owner did not register its mark with the United States Patent and Trademark Office. However, in most foreign countries the “first to file” for trademark registration rather than the “first to use” will own the trademark.
Furthermore, trademarks outside the United States need not be in use in order to obtain a registration. In fact, in most countries there need be no actual use of a mark for three (3) or more years after the issuance of registration. Because use is not required to obtain a registration a business can perfect its right to use a mark in a country before the business actually enters that market.
The ability to file for trademark registration outside the U.S. prior to use is a double edge sword as it also permits third parties to register a business’ important trademarks without ever using or intending to use such marks. It is not uncommon for a U.S. trademark owner who sells its products in another country but fails to register its mark in that country to find out that its mark has been registered in that country by a third party. In many instances, that third party turns out to be the trademark owner’s own foreign distributor or, even worse, its competitor. If another company registers a business’ mark, it can block that business’ ability to register and thereby block its ability to both import goods or enforce its rights.
Without a trademark registration, a trademark owner faced with a third party foreign registration for its mark has little recourse other than choosing a new mark and starting over, or buying the mark back from the registrant, usually at a steep price. This situation can be easily avoided however, if the business owner has the foresight to register its mark prior to conducting business abroad.
Foreign trademark registrations can be viewed both as a means to prevent competitors from using the same or a similar mark to ride the coattails of a product success and as “insurance” that a company can expand into and use its trademarks in foreign countries where it does or contemplates doing business. If the business owner decides not to seek protection of its marks in foreign markets, the business owner risks possible exposure for liability for infringement — including fines, seizure of goods, business interruption and costs for indemnifying distributors for any breach of warranty or for any other basis pursuant to which the distributor can withhold payment to the trademark owner. This is probably the single most important reason to seek trademark protection abroad.
With few exceptions trademarks are registered on a country by country basis. In general, a business owner must register its trademark with the national trademark office of each country in which it is or contemplating doing business.
There are, however, two filing systems which permit trademark owners to seek protection in multiple countries by filing one application. On November 2, 2002, President Bush signed a long awaited bill ratifying the United States’ adherence to the Madrid Protocol. In a nutshell, the Protocol permits a United States business or citizen to file an application for trademark protection in any number of the 60 member countries by filing one trademark application, with one trademark office, in one language and by paying one fee.
The Community Trademark Application is another type of foreign trademark application commonly used to cover multiple countries. A single Community Trademark (“CTM”) Application covers all member countries in the European Union. The European Union includes twenty-seven countries, namely, Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
Both the Madrid and CTM systems leave the national trademark filing systems of the individual countries intact. A trademark owner can file a Madrid application, a CTM application, a national application or any combination of the three. As with any trademark registration system there are many pros and cons to utilizing the Madrid, CTM and national filing systems. Choosing the appropriate filing system depends on a specific business’ needs, future plans and financial situation. Regardless of which system is right for your particular business, one thing is clear — if you are doing or contemplating doing business abroad, you must register your trademarks!