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Brand management and role of Trademarks

Why obtain trademarks?

Trademarks and brand names can be an extremely valuable asset for a business – a Forbes article states that the trademark ‘Google’ is valued at USD 44 billion and Microsoft at USD 42 billion (the companies themselves had a market capitalization ranging between USD 150 – 200 billion at the time the article was published).

Obtaining trademarks with respect to the brand names of the various products / services offered enables a business to legally protect its brand value more easily.

What can qualify for trademark protection?

Names, logos, images, shapes, taglines, slogans (e.g. ‘Yeh Dil Maange More’), mascots and anything that can be written or graphically (or pictorially) represented are eligible for trademark protection. In some countries even colour and smell have been successfully registered as trademarks. In India, Yahoo and Allianz AG (a German company) have successfully registered sound marks. However, sound, colour and smell are known as non-conventional trademarks and it is relatively more difficult to obtain registration for them.

Is it essential to register a trademark?

It is always prudent to register a trademark. Enforcing intellectual property rights with respect to a brand which is not registered as a trademark is very difficult and inconvenient – the owner has to file a legal claim for ‘passing-off’ in a court, which requires him to factually establish the following:
  1. his brand already enjoyed some kind of goodwill in the market,
  2. the infringer misrepresented his products as those of the brand owner and that
  3. this misrepresentation caused damage to the actual owner’s business.
Having a registered trademark on the other hand simplifies the enforcement process. If another entity (e.g. a competitor) uses a name that is similar to a trademark, the business is only required to prove that it already owns the registered trademark, and that a similar mark was used by the infringer for marketing his products. The trademark owner is not required to prove that his brand is distinctive and has a reputation in the market, and he is not required to establish that he has been harmed by such usage by an infringer – the court will typically direct the infringer to stop using the mark in relation to his products immediately. The quantum of harm suffered, however, is relevant in determining the amount of damages that should be awarded to the trademark owner.

Further, registration allows a business to use the ® symbol after the mark (the ® symbol can only be used in connection with registered trademarks). The ® symbol provides a formal notice to the general population that the business your business has exclusive rights to use that name. This can reduce the chances of others selling products under the same brand name.

If another entity intends to use an identical or a similar brand name, the registered trademark will appear in the trade mark search reports (a trade mark search is the first step for registering a trademark) conducted by the entity. The Registry will reject any applications if they are identical or similar to an existing trademark.

Registration can increase the valuation of the business, which is useful while raising a financial investment, for a merger or acquisition with a strategic investor, or if the brand name is sold off or licensed by a business to raise funds.

A trademark can be registered for brand names, logos, symbols, signature, numerals, a website, shapes, images, trade dress, 3D designs, packaging, colour, letters and numerals (in combination or independently), combination of colours with a word or device, and anything else that you can graphically represent. In fact, Yahoo has successfully registered a trademark for its yodel (a special way in which its name is pronounced), which is a sound trademark. In some countries, scents associated with a particular product have been registered as trademark, by providing a chemical formula of the compound and a sample of the product. However, the difficulty in presenting sounds or smells graphically is the reason that such trademarks have not yet gained popularity.

Before proceeding further, it is essential for a business to understand what kinds of names are eligible for registration as trademarks, and the legal provisions governing such names.
Which names are eligible for registration as trademarks? What kind of names cannot registered under trademark law?
Choosing an appropriate trademark may be governed by business considerations. Most businesses attempt at creating unique, catchy and short brand names. Choice of brand names also depends on the sector in which the business is operating. For example, pharmaceutical companies give medicines names which will be easier for doctors to remember when they prescribe medicines. 
For a name to be eligible for registration as a trademark, it must meet certain requirements under the Trademarks Act – we are classifying them into two categories below – absolute grounds and relative grounds
  1. Absolute grounds
The proposed name should have a ‘distinctive’ character, that is, it should be capable of distinguishing the goods and services of one seller from another. Therefore, in a market where there are many tablet PC manufacturers, a new company which intends to trademark the word ‘Tablet’ may be refused registration for its trademark because the word ‘Tablet’ will not distinguish its products. 
  • It should not be a functional trademark, i.e. it should not exclusively designate the kind, quality, quantity or intended purpose of the goods/ services. Similarly, a trademark for shape of specific goods cannot be registered if the shape arises out of the nature of the goods or is necessary to achieve a technical result.
For example, the expression ‘Food-Grade’ for a manufacturer of food-grade plastic bottles cannot be trademarked because it is designating a quality of the plastic bottles. Similarly, the word “chocolate” for a chocolate bar cannot be trademarked. ‘Spherical’ shape for a ball manufacturer, or the cylindrical shape of an external antenna of an electronic device cannot be registered, because the shape is integral to the function that the product serves.
  • The mark should not consist exclusively of marks which have become customary in the jargon of the trade in whose context it is used. Such trademarks are called generic trademarks.
 For example, escalator (formerly owned by Otis Elevator Company), aspirin (owned by Bayer AG) and zipper (owned by B.F. Goodrich) have lost trademark protection because their names became used customarily as a noun. The company Xerox has carried out campaigns educating users to use the word ‘Xerox’ not as a synonym for the word photocopy, but as an ‘adjective’ for photocopy machines made by the company.
  • A domain name can be protected as a trademark only in association with a product or service, not in isolation with it. For example, if a company manufacturing speakers under the brand-name Arctisound purchased a domain name called ‘tigerspeakers.com’, the brand name Arctisound can be eligible for trademark registration, but not the domain name tigerspeakers.com. If however, the word ‘tigerspeakers’ was also used in relation with the sound systems, then the domain name would be registrable.
  • Names of places or geographical locations, if they are used in a fanciful context, can be accepted. For example, ‘Silicon Valley Cupboards’ may be a registrable trademark, as the name Silicon Valley has nothing to do with the product, but ‘Silicon Valley Softwares’ or ‘Wall Street Brokers’ cannot be registered because in each case the name of the place is directly associated with the industry, i.e. Silicon Valley is houses numerous technology companies (both hardware and software) and Wall Street is famous as the prime location for a financial services business in the US.
  • When a registered trade mark has multiple aspects to it, the protection conferred is to the trademark taken as a whole, and not to its individual parts. For example, if Café Coffee Day is a registered trademark, its owners cannot challenge the use of the word ‘Café’ or ‘Coffee’ by a competitor, such as Café Mocha or Costa Coffee.
  • A trademark cannot be registered if it can deceive the public or cause confusion, if it is likely to hurt the religious sentiments of any class, if contains scandalous or obscene matter, or if its use is prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950 (Emblems Act). No person can use any name or emblem specified in the schedule to the Emblems Act for commercial purposes without the previous permission of the Central Government. The schedule to the Emblems Act lists out twenty one names and emblems of national and international relevance, such as the Indian Flag, the United Nations Organization, Ashok Chakra, etc. (the full list of items listed under the act is provided in Annexure I).
The grounds mentioned above are called Absolute Grounds under trademark law. In addition to absolute grounds, the requirements mentioned below (called Relative Grounds under trademark law) must also be kept in mind. However, these grounds are usually invoked by the Registrar in the event of an objection raised by another entity during the opposition process.
Therefore, for businesses who seek to protect their existing brand names (even if they are unregistered) and trademarks, periodically browsing through the Trademarks Journal is important, so that they may be able to file in opposition in case an entity seeks registration of similar marks.
  1. Relative grounds
  •  Similarly, a trademark which is identical or similar to an earlier trademark in respect of the same goods may be refused registration if there is a likelihood of confusion on part of the public. The decision on likelihood of confusion is taken by the Registrar.
  • A trademark which is similar to an existing trademark (owned by a different proprietor), but is proposed to be used with respect to a different set of goods or services can be registered, unless it confers an undue advantage on the new applicant, or if it is beneficial or detrimental to the earlier trademark.
  • If an application is made for the registration of a trade mark which suggests a connection with any living person, or a person whose death took place within 20 years before the date of application, the Registrar may require the applicant to furnish written consent of the living person (or the legal representative of the deceased person) as to the connection appearing on the trade mark before proceeding further with the application. For example, a trademark application for a ‘Steve Jobs Camera’ or a ‘Reliance Shoes’ mark may attract the requirement of furnishing consent of the legal representative.
  • If a trademark is a well-known mark – for example, if, for example, Samsung has a registered a trademark for “Samsung” and “Galaxy” under Class 38 (Telecommunications), an application by an unrelated entity to register the word “Samsung” in relation to shoes may not be allowed, because Samsung is a well-known mark. In such cases, it does not matter whether the applicant is looking to register the Samsung mark under a different class.
(See Sections 9 to 17, Trademarks Act, 1999)
A reading of the requirements above will indicate that there are various issues on which the Trademarks Registrar has to take a subjective opinion. For example, deciding whether a proposed name may cause a ‘likelihood of confusion’, or is ‘distinctive’, or confers ‘undue advantage’ is not easy in every situation. The Trademarks Act lays down the principles which the Registrar must observe while exercising his discretion. He is also empowered to conduct independent searches and take evidence (by affidavits expert evidence, evidence of turnover and surveys are some of the types of evidence that can be accepted).
Importance of creating a trademark strategy for an early stage startup

It can be very beneficial for a startup to conceptualize a trademark strategy during its early stages of operation. The strategy can improve and adapt with time as the business of the startup evolves further. However, the strategy also provides additional direction to the branding process of the business. The strategy should address how the business can create maximum brand value through registration of trademarks, and lay down practices on how it can protect existing trademarks from dilution/ infringement. The strategy serves as guidelines for managers and senior employees of the company.
While the law provides remedies to a trademark owner (or an authorized user) for infringement or dilution of his trademark, an effective trademark strategy should lay emphasis on timely identification of possible instances of infringement, in order to minimise any losses. If infringement is discovered too late, the infringer has an opportunity to argue that his mark has already acquired an identity with respect to the products/ services associated with it in the market that is served by the infringer. This is known as ‘honest concurrent use’, and if a court accepts this argument, the trademark owner will not be able to invoke legal remedies against such infringement.
Pointers for a trademark strategy

Based on the observation of trademark strategies of various successful companies, we have mentioned certain pointers below: 
  1. The name of the business entity and its products can be different. For example, the brand Café Coffee Day is held by a company named Amalgamated Bean Coffee Trading Company Ltd. Note that the name of the entity can be independently trademarked, if it is used in connection with products. For example, the names Lux and Pears used for bathing soaps (manufactured by the company Hindustan Unilever Limited) can be trademarked. At the same time, it is possible to have a trademark over the name (or a portion of the name) of the manufacturer as well – for example, ‘Microsoft’ and ‘Windows’ are both independent trademarks, which are owned by Microsoft Corporation in US.
  2. From a valuation perspective, it may be helpful to separate the products or services into distinct brand names or independent categories (so as to maximise the value of each product or service, and as a consequence, the total valuation of the intellectual property). For example, products under a premium range could be classified into a unique category (say, for example, a ‘Rainbow-Stretch’ series for a range of LCD displays). Or, business whose products have many variants should consider giving different names to each variant. For example, Vista and Azure are two different kinds of products, which are eligible for independent trademarks. This has various advantages:
  1. It enables the business to sell or license a specific product / category independently to an acquirer to monetize the intellectual property for the business, while the business continues to utilize the other categories by itself. For example, Microsoft could license Windows 7 to IBM for installation in personal desktop computers, but retain all rights on Windows NT (as a separate trademark) for installation on server machines.
  1. It reduces risk - Not all products may perform equally well. Some product or service lines may be more successful in their market segment than others. Having the same brand name for all products can adversely affect the value of the successful products. For example, Volkswagen owns about 9 other car brands (apart from the name Volkswagen), such as Skoda, Audi, Bentley and Lambhorgini. These have all been given different brand names depending on the market segment.
  1. You may consider registering trademarks for any unique taglines associated with your business – e.g. ‘Impossible is nothing’ by Adidas or ‘Yeh Dil Maange More’ from Pepsi. A series mark can also be a useful tool in certain circumstances (see discussion under Part II – Procedure for Trademark Registration to know more about series marks).
  1. If a third party is engaged, e.g. a PR agency or advertising agency for devising your marketing and advertising strategy, the contract between the business and the service provider must specify that all rights in any of the taglines shall vest in the business, and the business will be free at any point in time to apply for trademarks in respect of any names or taglines prepared by the agency.
The contract may also specify (although this may be difficult to negotiate) that the agency cannot use similar campaigns for competitors.
  1. The trademark strategy should be made with reference to the target market, because trademark protection is granted by an individual country. Registration of trademark in India will not grant trademark protection in the US or UK. Therefore, if a business primarily exports goods or services then it is very important to apply for and obtain trademark registrations in the countries where the target market is situated. For this, doing some preliminary online searches and engaging foreign lawyers may be helpful.
  1. It is important to prevent others from registering trademarks in respect of brand names used by your business. The simplest way to do this is by checking the Trade Marks Journal (a fortnightly publication which is accessible for free on the government website at http://ipindia.nic.in) periodically for public notices of proposed trademarks – if a mark similar to the brand name is published, you will have an opportunity to file an opposition with the Registrar of Trademarks within 4 months from the publication in the journal.
Once a trademark is registered, it cannot be cancelled on the ground that it is similar to an existing trademark. Opposition can be filed even if your trademark is not registered – but a much higher level of evidence is required to make a successful opposition before the Registrar.
Businesses with a large trademark portfolio can consider having dedicated officers for this purpose.
  1. In order to create goodwill and notify the public that a particular mark has been created and is being used by a particular business (but which has not been registered), it must use the ™ symbol.

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