Concept of IP Misuse: Trademarks




How does one know a trademark is being misused?

Trademark misuse is a type of defence which claims that an owner of a particular trademark has misused their trademark registration to strive to create an unfair monopoly of trademark rights. This problem is so widespread that some legal scholars have prescribed revoking trademark registrations of such owners if they use abusive strategies that do not align with the principles of fair competition. Having already been successfully applied in respect of patents and copyrights, the doctrine of trademark misuse has already acquired some precedential merit.


Not merely a legal and marketing nuisance, trademark misuse is also an ethical problem. Importantly, in a world where corporate social responsibility (CSR) has taken precedence, there lies accountability in profit protection, the planet and concerned stakeholder - namely, business communities, employees and the consumer. Having an appropriate response mechanism to trademark misuse may be understood to fall under CSR because a company must not stop at protecting its intellectual property (IP) but ensure that the IP it owns is also used for consumers’ and communities’ interests as responsible corporate citizens.


It is perhaps pertinent to understand the repercussions of trademark misuse through a hypothetical case study:


Anon, a baked goods company, is well-established, well-known and has a good reputation in the market. Another company Anon, dealing in software development, has recently begun operations. Anon, the baked goods company misusing its trademark, issues a letter of cease and desist asking Anon, the software development company, to shut down, alleging trademark infringement. However, it is evident that the latter deals with a different class of services. Here, Anon, the baked goods company, is misusing its trademark to create a monopoly over the rights associated with the trademark it owns (“Anon”). The result of such action by Anon, the baked goods company, can create barriers to new entry merely because new entrants bear a likeness to its trademark, which can be detrimental to the market.


Are there other ways to tackle trademark infringement without misusing the trademarks one owns?

Instead of taking indiscriminate steps that push new entrants away, companies may take other measures to respond to potential trademark infringement by other companies. Instead of bombarding these companies with legal action, they may be approached directly to give them a chance to explain themselves. More often than not, these companies constitute people who did not know what they were doing was wrong, and it sometimes helps to give them a chance to fix their mistakes. It may also be wiser to spend more time focusing on innovation that benefits a company’s target consumers rather than spend exorbitant time and money restraining unauthorised use. When one has limited resources, it is wiser to plan out how to use them rather than unreasonably invest in defending existing assets.


For instance, Minecraft, a gaming application, allows YouTube content creators to do amazing things with their brand and IP, with specified limits. Some gamers even make their whole career out of using the company’s assets. This type of use must be encouraged to foster creativity while boosting the popularity of the brand name and its reputation. While trademark misuse is a powerful defence, infringement is a real threat - it has become one of the leading causes of brand failure. If a company’s target consumer base loses faith in its brand promises, long-term profits will be compromised.


Comparing the EU and India

In the 2021 case of Sky Ltd. (formerly Sky PLC) & Ors v. Skykick UK Ltd. & Anr. (the “Sky” case), the Advocate General (AG) of the European Court of Justice delivered a judgement in which some similarities can be noted with respect to the case of Vishnudas Kishandas v. Vazir Sultan Tobacco Ltd., Hyderabad and Ors. (1996) - also known as the “Charminar” case.


In the Sky case, the plaintiff, who was the owner of “Sky-formative” trademarks with respect to television broadcasting, broadband and telephone services, claimed that the defendant, who was a user of “Sky-Kick” and “Sky-Kick-formative” trademarks with respect to cloud backup services and email migration had infringed the former’s trademark. The defendant prayed for the invalidation of the plaintiff’s EU trademark registrations, arguing that the specifications of goods and services covered by these registrations were ambiguous and obtained without the plaintiff’s bonafide intent.


The AG held that there was no part of the relevant legislation to invalidate a registered trademark based on a lack of clarity regarding the specifications of the concerned goods and services. In dissenting to the judgement of the referring court, the AG affirmed that this lack of clarity could only be cured before or after registration. It was further held that registering a trademark for computer software was contrary to public interest since it bestowed upon the proprietor a massive monopoly which was unjustified by any argument of his or her legitimate interest. A proprietor who aimed to acquire trademark rights without any intent to use it but merely to restrain third parties from using the said mark to sell those goods and services could not be with bonafide intention. Such a trademark whose application was made without bonafide intention can be declared partly invalid.


In 1996 the “Charminar” case, the Indian Supreme Court held that a manufacturer who only deals with one or more goods that constitute a broad classification of goods and services, without a bonafide intention to utilise her trademark with regard to these goods, may have her trademark registration partially cancelled since such an insincere effort is not backed by the proprietor’s legitimate interest.


As discussed above, similarities between the two cases’ judgements can be observed with relevant legislations - just like in the EU’s case, the Indian Trademarks Act of 1999 fails to establish the grounds to cancel a trademark registration where the deciding factor is the lack of clarity of the goods’ and services’ specification. The “Charminar” case’s judgement has been cited in several Indian trademark misuse cases, most notably in the case of Nandhini Deluxe v. Karnataka Co-operative Milk Producers Federation Ltd. In this case, the Indian Supreme Court reaffirmed that the proprietor of the already-registered mark “Nandhini” could not be permitted to monopolise an entire class of goods since the business mainly dealt with milk and milk products and did not have any plans to expand its operations to other goods of the same class.


In the United States Supreme Court

In the case of Eastman Kodak Co. v. Image Technical Servs., the U. S. Supreme Court authorised the operation of certain “single-brand” markets and came about with the “lock-in” theory of market power. It was alleged that Kodak tied service to specialised components only available with Kodak by restraining the sale of these components by third parties. Kodak had edited its policy to “lock-in” purchasers who had invested in machines to render them solely dependent on Kodak for components and services such that they would not have been able to anticipate this at the time of purchase of the machine. In light of these facts, the Court held that Kodak’s claim that it did not have any market power was invalid. In the cases of Phi Delta Theta and Carl Zeiss, the U. S. Supreme Court noted that some lower courts addressed misuse allegations grounded by claims of an antitrust violation. In contrast, the U. S. Supreme Court, in the case of Clinton E. Worden & Co., applied the misuse defence without having to prove an antitrust violation.


Deriving from the U. S. Supreme Court’s analysis of the history of the trademark misuse doctrine through the cases mentioned earlier - as well as ones that have not been included in the scope of this article, it is observed that a litigant may establish the misuse defence only in the event of the proprietor’s violation of the relevant trademark rights policy - misrepresentation of the product under the trademark by its proprietor, for instance.


Sources:

  1. https://www.forbes.com/sites/work-in-progress/2014/03/28/how-brands-protect-their-reputations-by-combatting-trademark-misuse/?sh=6ffb156a5f63

  2. https://blog.ipleaders.in/defences-available-infringement-trademark/#Invalidity_of_Registered_Mark

  3. https://marklaw.com/index.php/trademark-terms-t/321-trademark-misuse

  4. Intellectual Property Misuse : Licensing and Litigation. ABA Section of Antitrust Law 2000.

  5. https://sc-ip.in/2019/12/31/invalidity-of-a-registered-trademark-uniformity-in-indian-and-european-perspectives/

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