On Your Marks
When considering an investment, a crucial factor to any Angel Investor is the ‘unique selling point’ (USP) of the company’s products.
If that ‘uniqueness’ can be replicated legally, the marketing advantage is gone. Global markets are crowded and businesses need a competitive edge to succeed. If there is an opportunity to reproduce a successful product and capture part of its market, there are many businesses happy to take up that challenge. Most would prefer to exploit the opportunity within legal boundaries; but there are less scrupulous traders happy to circumvent the law. In fact, lots of them: it has been estimated that IP crime costs the UK economy around GBP £9 billion each year and that it is on the increase.
The type of IP protection you will need depends on what is being protected and how it will be used. Intellectual property can be protected in various ways: by a patent, a registered design, copyright, design right or a trade mark. In a previous article, we looked at patents and their importance to an Angel Investor. In this article we consider trade marks: the signs that can distinguish the goods and services of one trader from those of another, and facilitate the establishment of a worldwide brand. Trademarks can wield power: consumers choose LEGO® over similar products because their trade marks are synonymous with a quality durable brand, with trusted inter-product compatibility.
Similar trade marks may not in themselves be a problem. There are many similar, even identical, trade marks, and this does not result in any detriment to either party where the goods and service differ: for example consumers know that the Volkswagen Polo is not made by a mint manufacturer. In fact, it is not unusual for companies with similar trade marks to come to a coexistence agreement. The Apple Corps record label and Apple Computer (both with apple logos) coexisted quite happily through a contract that stipulated that Apple Computer would stay out of the music industry. The problem occurs when similar trade marks are used within related market sectors. When Apple Computer used the apple logo on its iTunes Music Store, Apple Corps tried unsuccessfully to sue for breach of contract: the courts decided that Apple Computer used the apple logo in association with the online store and not the music it sold. A more common conflict caused by new technologies is the right to a website domain name. Pitman Publishing and Pitman Training both believed they were entitled to the “pitman.co.uk” domain name; litigation found in favour of the publisher. However it does make sense to limit the conflicts. Before applying for a trade mark, get a trade mark attorney to carry out a search of the Trade Mark Register to establish that no-one has earlier and better rights to your trade mark or a similar trade mark for your goods and services of interest. The search should encompass both registered trade marks and unregistered trade marks where possible: a used but unregistered trade mark may prevent you from using and registering your own trade mark.
A trade mark does not have to be registered to be afforded some protection. Although the symbol ‘TM’ has no legal significance in the UK you can display it next to your trade mark to indicate that the sign is being used as a trade mark. If someone then uses your mark on their products without your permission, you can then take action against them using the common law of ‘passing off ’.
So why bother to register a trade mark? Well passing off actions can be difficult to prove and costly to bring. In such an action you will have to prove that you have ownership of the mark, a trading reputation for using the mark and that the actions of the off ender have been to your detriment, typically because the other person’s goods or services are being bought by consumers who believe them to be your own. Registration will better safeguard an Angel Investor’s investment. It protects the trade mark prior to establishing a reputation in the mark and its national effectiveness will support future plans for expanding markets or franchising. Registering your trade mark through the UK Intellectual Property Office (IPO) gives you the exclusive right to use your mark for the goods and/or services that it covers in the UK.
A registered trade mark:
- Provides a public record of the exclusive right to use the trade mark;
- Is more likely to discourage people from using your trade mark without your permission;
- Provides UK wide protection even where you have no trading presence;
- Allows you to take legal action against anyone who infringes your trade mark;
- Empowers Trading Standards Officers or Police to bring criminal charges against counterfeiters if they infringe your trade mark;
- Is your property, which means you can sell it, or sell a licence to use it;
- Distinguishes your products from competitors;
- Protects future national marketing strategies; and
- Can help to establish a brand synonymous with quality products.
In addition, if you do not register your trade mark it may be more difficult to fight a passing off or infringement action that is brought against you.
To be considered suitable for registration by the IPO, a trade mark must be:
A sign or ‘badge of origin’ which can distinguish the goods and services of one trader from those of another. The sign can include words, logos, pictures, slogans, domain names, sounds, smells, colours, shapes or any combination of these. Be able to be seen, or understood.
It must not be: Deceptive, against the law, or against accepted morality.
Similar to, or identical with, any earlier marks for the same or similar goods or services.
An internationally protected symbol or name.
Already registered. Note that a company name or a word may not be suitable for registration as a trade mark.
There are three types of mark accepted for registration by the IPO.
- ‘Regular’ trade marks: these are the most common marks and indicate the trade origin by linking the owner of the mark to the goods or services, e.g. the World Wildlife Fund Panda.
- Certification marks: these provide a guarantee that the goods or services bearing the mark meet a certain defined standard or possess a particular characteristic for example marks registered in the name of trade associations, government departments, technical institutes or similar bodies e.g. the ‘Champagne’ certification mark which is used to indicate goods whose origin is the Champagne region in France.
- Collective marks: these indicate that the goods or services bearing the mark originate from members of a trade association, rather than just one trader e.g. the ‘CA’ device used by the Institute of Chartered Accountants. A trade mark registration application should be registered in the UK with the Trade Mark Registry through the IPO at www.ipo.gov.uk. It must be graphically represented on the application form TM3. The standard fees to process a UK trade mark registration are:
- £200 for the application for the first class of goods or services
- £50 for every other class you apply for. A trade mark attorney’s fees are in addition to the IPO levied fees listed above.
A straightforward trade mark application is processed in approximately 3 months although it can take longer if the mark is not initially accepted. Once the trade mark is accepted it is published in the Trade Marks journal, and there is then an additional 3 month period during which oppositions or observations may be filed before the trade mark is registered. Trade mark registration rights last indefinitely and must be renewed on the 10th anniversary of the filing date and every 10 years subsequently to remain in force. If a trade mark is not renewed the IPO will allow the owner to restore the trade mark under certain circumstances within 6 months of the renewal expiry date.
To track the progress of your application, you can file an electronic caveat with the IPO. You will then be informed by email when the application is advertised in the Trade Marks Journal, or if it is opposed before this stage. A caveat can also be used to monitor the status of competitor’s trade marks throughout their registration thereby receiving early warning of an objection, surrender or expiry. Once the trade mark registration has been granted you should use the ® symbol or the abbreviation “RTM” (for Registered Trade Mark) to show that your trade mark is registered and to warn others against using it. As intellectual capital, a registered trade mark can be used to providing leverage in crosslicensing arrangements, attract additional investors or act as security for a loan. If you do not want to use the IP yourself, you can sell (‘assign’) it to another party. Once you have sold the IP you cannot use it unless you are granted a licence by the new owner. If you want to let other parties use the IP, but you want to keep control of it, you can licence it to the said parties for a financial consideration. All licensing arrangements and assignments (including those associated with company mergers) should be registered with the IPO.
Remember that you are responsible for enforcing your trade mark rights.
Counterfeiting is the most common trade mark abuse: for example fake replica football strips or other ‘signed’ clothing.
If you suspect that someone is using your trade mark without permission you should contact your local Trading Standards Office. You may be able to seek an injunction, claim damages, and negotiate a solution or taking other appropriate action. If there is sufficient evidence, the Police or Trading Standards Officers can take criminal proceedings under Trade Marks law. In all cases you should consult a Trade Marks attorney before taking legal action. It is also worth considering intellectual property insurance in case of such an infringement to help cover your legal costs should you need to take enforcement action. Trade Mark attorneys can offer advice and information and deal with all Trade Mark matters on your behalf, not just infringement. You can find a locally registered attorney through the Institute of Trade Mark Attorneys at www.itma.org.uk.
Be aware that trade mark rights are territorial; if you wish to protect your trade mark overseas you will need to register your trade mark separately outside the UK. If you just want to register your trade mark in a few countries, you can apply for trade mark rights in the individual countries through each country’s national Trade Mark Office. However it is generally cheaper and easier to consider a collective trade mark. Regardless of the application method employed, multiple country trade mark registration does not come cheap and the full cost of both registration and ongoing renewal fees should be weighed up against the realistic market consequences of foregoing international protection. If you want trade mark rights across all countries in the European Union (EU) you can apply for a Community Trade mark.
This is processed as a single application, but once granted it becomes separate trade mark registrations in the designated countries. The application can be filed through the IPO or direct with the Office for Harmonization in the Internal Market (Trade Marks and Designs) (OHIM) at http://oami.europa.eu/en. The IPO will charge a nominal handling fee of £15 but in return you will receive an earlier filing date and a filing receipt, worth £15 of most company’s money. The OHIM fee for a CTM application is currently €900 for up to three classes of goods and services and the fee for a CTM registration is €850 for up to three classes of goods and services. If you want the protection to include non-EU countries you can apply to register an International Trade Mark in countries which are party to the Madrid Protocol.
Some of the countries party to the Madrid Protocol are also members of the EU: a full list of member countries can be found at the World Intellectual Property Organisation’s (WIPO) website www.wipo.org. Again you make a single application that is then processed separately in each country. The application can be filed through the IPO or through the WIPO. An International application made through the IPO must be based on a UK trade mark application or registration and can be made simultaneous with or subsequent to a UK application. Note that the international system does not cater for series marks which must be applied for separately. WIPO provide a fee calculator on their website to allow you to accurately determine the fees levied for a selection of countries and classes prior to application.
Even if you decide not to register your mark outside the UK you still need to be aware of the eff ects of the international trade mark systems. Since October, the IPO will no longer refuse registration of a new trade mark application because of an earlier conflicting trade mark, unless the owner of the earlier mark successfully opposes the new application. Owners of earlier UK marks will automatically be notified of the clashing trade mark applications but EU mark owners will not. Holders of Community Trade Marks (and International Trade Marks designating the EU) will therefore have to be particularly vigilant about monitoring trade mark applications in the UK. To assist them the IPO is launching a new ‘opt-in’ fee-paying notification service.
There are many ways to fall foul of the trade mark legislation. If your trade mark is unregistered or not registered in all markets in which you operate you run a greater risk that your products will be copied and passed off as your own. If you don’t register your trade mark it will be more difficult to successfully challenge such an action. Worse still, without the benefit of publicly recorded ownership of the trade mark you could be prosecuted for passing off or infringing someone else‘s trade mark. Not only may you have to pay court costs, but if found guilty may have to pay compensation, cease trading and either redesign and relaunch your goods and services or buy a licence from the existing owners. For an Angel Investor, it is all about risk and reward. The cost of registration may prove to be a small extra price to pay to protect the risk to your much larger investment.
Intellectual Property Office (IPO)
World Intellectual Property Organization
Chartered Institute of Patent Attorneys
European Patent Office (EPO)