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Articles

First-Class Protection for Second-Tier Trademarks

August 19, 2014

Articles

First-Class Protection for Second-Tier Trademarks

August 19, 2014

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Reprinted with permission from the Association of Corporate Counsel, © 2014. All Rights Reserved. www.acc.com

Imagine this scenario: You have just received a cease-and-desist letter charging that one of your company’s product names infringes someone’s prior trademark. The letter demands not only that you cease using the mark, but that you also submit an accounting of your sales and prepare to disgorge your “wrongful” profits. It threatens litigation where multiple damages and attorneys’ fees may come into play. You talk to the operational and marketing staff, and learn from them that the product at issue is not a big seller — definitely a second-tier offering — and they never intended to seek registration of the mark. For that reason, they did not think trademark pre-clearance was necessary. They tell you that they still have a lot of inventory of this product to be sold, and now, it is up to you to negotiate some sort of resolution with the trademark owner. Worse, the letter might state that your company has already been sued, and the plaintiff is seeking preliminary injunctive relief. You are looking at six-figure legal bills, the prospect of having key personnel tied up with depositions and hearings, and the possibility of having to shut down or withdraw a product line (at enormous cost in dollars, opportunity and good will) if the injunction is granted. How could this have been prevented?

In-house counsel at brand-owning companies are already well aware of the importance and value of the due diligence that should go into the introduction of any major company trademark (e.g., the company name or logo, tagline or flagship product name). Due diligence involves a comprehensive clearance search followed by registration in those jurisdictions in which the mark is used or expected to be used. What many companies lack, however, is a consistent policy for handling less critical marks, such as second-tier product names, taglines or other promotional marks that may only be used for a limited time, or marks that may only be used in a limited area. Use of such marks can expose a company to liability just as easily as a flagship mark if it turns out the mark infringes upon the rights of another. And third-party infringement or misuse of even a lesser mark can still cause significant headaches and disruptions to both the operational and legal functions of a company, not to mention exposing the company to legal proceedings and significant commercial embarrassment.

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