Developing a cost effective trade mark registration strategy

By Derick Swart on 10 September 2013

Trade marks are capital assets of a business that serve the purpose of securing the goodwill between a customer and the proprietor of a product or service. Failure to properly secure exclusivity of a trade mark can have costly consequences, including having to change your trading style and ending up in litigation. Through the trade mark registration process, the protection afforded by trade mark legislation can be used to secure the goodwill that resides in that connection to the exclusion of others. In this post we discuss one approach to a cost effective trade mark strategy. There are many nuances to the topic which fall outside the scope of this post and each particular therefore needs to be assessed on its own merit.

Some practical dilemmas

The trade mark registration process takes time.  In South Africa, although the registry has come a long way, the process still takes substantially more than a year and if there are even slight complications, much longer.  No entrepreneur has the luxury of sitting on the side line waiting for a trade mark to register.  They need to start using the mark, even while unregistered. 
Trade marks are territorial in nature, bar only a few exceptions, meaning that if exclusivity is required for another territory, additional work is required.  Each trade mark registry has its own unique procedure, requirements and costs associated with it that needs to be navigated. 

Some pitfalls

It happens from time to time that we are approached by clients at the end of the creative process to advise on the availability of a mark for use or registration.  It can be quite traumatic at that stage to learn that the mark is not available.  Some clients proceed at great risk to continue with their use of the mark, simply because they have become wed to the mark, or are simply out of time.
If a mark has been established with a view to export, it can be equally traumatic to learn that the mark is not available for use in the country of export.  This can either be due to coincidence, or an opportunistic person in the foreign market.
Managing the cost of trade mark registration can be difficult, especially since the process consists of different steps and cost estimates are often provided “in the normal course”.  That means in the event of any complications, additional charges will become payable, failing which the application will not be taken forward.

A strategy

The disappointment, wasted costs and legal risks set out above can be managed with the following approach.

1. Search for prior use in the market 

Before deciding on trade marks to shortlist for possible use and registration, conduct a thorough search on the Internet, using results from the territories of interest.  Investigate possible uses of your mark or a similar mark relevant to the goods or services of interest.  Include any industry specific databases or publications you may have access to.
Prior conflicting rights through use alone may make your trade mark vulnerable or expose you to claims for the infringement.  If a third party is using nearly the same mark in respect of very similar goods or service, the mark may not be available for your use and registration.
Bear in mind that trade marks are territorial for the largest part, so remember to do localised searching.  Unless a mark is internationally well known, each registry should generally be considered on its own merit.

2.  Select your trade mark attorneys

Ask a number of trade mark firms to provide you with their fee sheets and cost estimates for the work you have in mind.  Fees and expenses will differ substantially and you need to strike a balance between engaging a professional team on the one hand, without paying exorbitant fees on the other.

Some firms are locked into foreign partnerships where they send all their work to certain firms abroad in return for those firms doing the same.  Other firms are independently positioned.   It is important not only to consider your trade mark attorney's fees, but also the costs of their foreign correspondents when it comes to foreign work.

Trade mark attorneys will often quote for the costs at filing only.  You need to make sure that you understand what the remainder of the costs up to registration in the normal course will be.  

3. Basic searches

Pass the initial list of filtered options to your trade mark attorneys to confirm which marks meet the inherent requirements for registration and to conduct precise and near precise match searches in the territories of interest.  Databases of trade marks exist for most territories and therefore this should be a quick and low cost process.

Ask them to undertake these searches on a "knock out" basis, which in trade mark parlance means to stop the search if an insurmountable obstacle is found and to move on to the next mark.  This saves money, since these services are often time based.

Adopting marks with low distinctive ability means the likelihood of prior conflicting rights is high.  Moreover, the likelihood of later conflicting uses of the mark by innocent third parties is likewise high.  This has distinct cost implications – especially in foreign territories.  Therefore, ask your trade mark attorneys to express a view on the distinctiveness of your proposed marks.

The aforementioned advice should feed back into the creative process so that after some iterations, a short list is arrived at for the next phase.

4. Full clearance search 

Once you have identified the mark, a more thorough level of search is required, since conflicting rights can arise due to similarities in respect of appearance, sound and meaning.

Since you have already conducted a search of the Internet to reveal possible uses of the mark, you can consider limiting the trade mark search to a registrability search (in other words, your trade mark attorney will not search for common law rights through use again, but limit the search to the trade mark register).   Reducing the scope of the search reduces the cost.

Again instruct your trade mark attorneys to conduct the search on a “knock out” basis.  You can always go back and ask them to do further work on a seach report if you need sight of other potential conflicting rights.

It is important that you obtain their advice in writing, so that there is a record of the risks that were pointed out to you.  If the mark is later sold, the purchase may call for copies of the search reports, so keep them at hand.

5. Decide on the mark to be filed and make application

Once you are comfortable with the search reports and any risks they may have pointed out, instruct your trade mark attorneys to make application in one territory and make sure you are provided with filing particulars as soon as possible thereafter.  In the absence of prior rights established through use, trade marks are registered in favour of the person first to make application.

Generally speaking trade marks can be filed as word marks (i.e. plain text), composite marks (e.g. stylised text) or devices (images).  It is important that you understand the implications of the choice of filing, since some types of marks have limitations.  For instance, if you file a composite mark and your branding changes, you have to reapply for your trade mark.
You may be tempted to do the trade mark filing yourself.  Resist it.  While most procedure errors can be fixed, some cannot, resulting in vulnerability.  As trade mark attorneys, we regularly draw files from the registrar to see whether an application has become vulnerable to attack.  The time spent studying the legislation can be spent more productively building your business.

6. Track the priority date

In respect of the first application for the registration of a mark anywhere in the world, it is possible to claim that date for later applications in other countries of the same mark (even though they have been filed some months later).  You can use the priority right to delay the cost of foreign filings, unless there is a reason to get a registration sooner.  This might be useful, for instance, to first establish if there is an export market for a product.

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Please note that our blog posts are informal commentaries on developments in the law as at the time of publication and not legal advice. You should place no reliance on our blog posts; we look forward to discussing your particular matter with you.