The Legal 500

Brands have become key components of corporate value. Protecting them is a sophisticated business, particularly across the US and Europe, which are key markets for their exploitation. Brands are unique in their ability to distinguish one company from the next, even in the most competitive of markets. A successful brand will invariably end up becoming the single most important asset on a company's balance sheet because it encourages repeat sales.

For example, the cumulative value of the top ten brands (released by Interbrand in July 2005) is more than £20.5bn, which works out on average as 34.8% of the market capitalisation of those companies. It is therefore not surprising that we are seeing increasing board-level and shareholder attention being paid to all forms of brand protection. The result is that in-house lawyers need to have a sound grasp of all forms of registration and dispute resolution techniques and principles, as well as an intricate understanding of the brand, to be effective and also to save money.

Over the past ten years we have seen major changes to the way in which brands are managed. Technology has made access to information, including company trade mark records, quick and simple. A single registration covers the entire European Community, and with the US and all EU member states now part of the Madrid Protocol, it is possible (though seldom advisable) to cover both the EU and US in a single registration.

However, the paradox is that this apparent simplicity masks the undeniable difficulties of harmonising vastly different trade mark regimes across Europe and using the US's unique use-based system. Brands may have the ability to communicate a single message across different countries, yet the law, by nature, does not. This is partly why at least once every six weeks the European Court of Justice (ECJ) is asked to adjudicate on the meaning of the Trade Mark Harmonisation Directive. The good thing about the constant flux is that a company can derive great benefit, competitive advantages and savings by using its trade marks correctly and employing the proper skills.

Considered registration is the key

The average cost of litigating a trade mark lawsuit in the US from start to finish through trial is between $400,000 and $750,000. Sometimes the cost is more, but it is seldom less. In the UK the cost is similar. Although in other parts of Europe it can cost less, the fact is that it is expensive - often prohibitively so - for most businesses. As a result, companies are looking at ways to avoid court action and there are numerous ways to do this. One of these is to invest in proper use of the registration system, preferably before litigation, but also during it.

The benefit of a considered approach to trade mark registrations is that companies can:

• Take advantage of the often underestimated deterrent value of a trade mark filing, which works as an active deterrent (such as in letter before action) as well as a passive deterrent (such as through the examination procedure or in pre-clearance searches).
• Ring-fence opponents and increase negotiating leverage and chances of favourable settlement.
• Create opportunities for moving the dispute to a more cost-effective forum, such as the opposition or cancellation forums, or to a forum where the language favours you.
• Take advantage of the wide goods specifications and ambit of protection which prevail in the EU and in certain circumstances, in the US.
• Create opportunities for EU-wide relief which may be possible using a Community trade mark (CTM) right in certain circumstances. This may have the effect of creating doubt in the mind of your adversary as to where you may take action, and has obvious cost savings.
• Create wider scope for forum shopping when choosing if or where to litigate.
• Manage the complexity and speed at which the matter progresses, such as by using opposition proceedings (often in several countries) to delay or speed up court action.
• Avoid the higher cost and risks of relying on reputation and use to protect the brand, which in some countries, such as France, can be significant.
• Take advantage of the first-to-file principle, which underpins the EU trade mark system.
• Take advantage of the different speeds at which one can obtain a registration between member states in the EU to outsmart opponents. In Benelux it may be possible to obtain a registration in as little as one day.

The costs involved in registering a trade mark are, in context of the cost of litigating, very small. For example, the average cost of a CTM, which provides protection in 25 countries, is in the region of £2,800 (from start to finish, provided all goes relatively smoothly). A typical registration in the US normally attracts a similar fee. Rights in EU member states tend to cost less, but obviously the protection is limited geographically.

Companies make clever use of sounds, colours and shapes to communicate brand messages about the experience consumers will enjoy when interacting with them. The communication tools of the brand can be protected as trade marks and also as designs and copyright. Once registered, a trade mark right is indefinite, provided it is renewed every ten years and, in the US, is also put to use.

Considered methods and strategies from the outset mean that all of the elements of a brand can be protected, that litigation is less likely and that competitors are kept at bay by a legal net of protection that provides for, in most circumstances, injunctive relief, damages and delivery up of infringing products. More often that not, the threat of the remedies available to the trade mark owner is sufficient to deter would-be infringers. Trade mark infringement relief has become a primary tool in preventing new and non-traditional forms of unlawful activity, such as phishing, which is more akin to fraud (see for example Nasscom v Ajay Sood).

The trade mark filings figures released by the United States Patent and Trademark Office (USPTO) and the European Community Trade Mark Office (OHIM) in 2005 show that the protection of brands is now more than ever acknowledged by companies as a vital part of any management strategy. If trade mark filings provide a rough guide to investment in brands, then it is fair to say that we are at new levels. This is evident in China, the EU and the US, whose respective trade mark registries recorded record filings. A total of 588,000 filings were made in China; OHIM recorded its highest number of filings since its inception in 1994; and the USPTO recorded its highest number of filings since the dot-com crash in 2000-2001.

Bearing in mind the downward trend of the dollar against the euro that is fuelling demand for US exports to the EU, the cheap flights that now make weekend shopping between US and Europe a reality and the ease of buying on the internet, the market for a company's brands between the EU and US is increasing. But then so is the competition. Trade marks will be infringed, copying will prevail and the importance of brand vigilance will be key, not only in a company's home market but also in export markets.

As brand image needs to be consistent, the danger is that a failure to police the brand properly across territories (even in those in which you do not trade) can harm your brand in a home market. We have seen this in particular where a mark starts to fall into the public domain or where there is a risk of it becoming generic in an overseas market.

For a number of years now the courts have grappled with new forms of infringement related to the internet. Is metatag use an infringement? Is domain name hijacking trade mark infringement? When is use on the internet justifiable use in defence of revocation proceedings, and when does such use amount to infringement? This has led to a raft of litigation across the EU and in the US, the most recent being pop-up advertising and the use of keywords (Government Employees Insurance Co v Google, Inc). Litigation of this sort is pioneering in the sense that the forms of use of the registered trade mark and the business methods are new. To some extent, companies caught up in this litigation have little choice but to foot the bill and the risk for the industry, to determine the new law. However, in almost all cases involving internet use of a trade mark, the litigant with the trade mark right is in the stronger position.

More security with national rights

The choice for most companies operating in Europe is whether or not to file for a number of national rights or to protect the mark via a CTM. While the CTM system has proved, over the past ten years, to be a valuable and cost-effective way of protecting one's brand over 25 countries, there are still very good reasons to register national rights, no more so than when it comes to litigating their use. In France, for example, there are only two CTM courts, the Tribunal de Grande Instance de Paris and the Cour d'Appel de Paris. This means that if you litigate using a CTM in France you can only do so in those courts.

We were recently involved in a case where we chose to litigate on a French national right principally because we could use the Court of Nanterre, which has a history of decisions favouring rights owners. Although the CTM has existed for some time, courts, and even some practitioners, are still more comfortable with national rights when it comes to enforcing them.

Problem with the CTM route

The benefit of using a CTM is that it is possible to obtain an EU-wide order out of one set of proceedings. By virtue of the CTM Regulation, a CTM court will have jurisdiction for infringements committed anywhere in the EU, provided the CTM court has been chosen following the order of priority set out in the Regulation.

Although the circumstances in which an EU-wide order is given are limited, an adviser who is asked to assess the possibility of court action by a CTM rights owner will have a difficult task ahead, as, in theory, the rights owner may chose to sue in any one of the 25 member states if the priority system allows.

Although substantive trade mark law in the EU is harmonised, there are still major differences in litigation between member states, which will continue to exist for a long time, notwithstanding the EU Directive on the enforcement of IP rights.

Ring-fencing

Ring-fencing is also a major tool to a would-be litigant or defendant in a trade mark case.

Consider a US plaintiff with strong rights in the US who takes action against an infringer in the US, both of whom have the US as their home market. The defendant then embarks on an extensive registration programme outside the US in places such as the EU, Mexico, the Caribbean and Canada, and the plaintiff suddenly finds itself ring-fenced by prior rights. In today's trade environment, this creates an awkward state of affairs and may mean changing company websites and not taking orders from outside of the US. This registration tactic can help create leverage for a favourable settlement.

Staying on top of competitors

Litigation is big business. The stakes are often high, particularly in the area of brands, which can be the single most important communication tool for a business. The loss of one's brand to a competitor or to the public domain can be catastrophic. On the other hand, having the best advice at your fingertips can set you apart from competitors.

For most companies in the US and EU, it is of paramount importance to choose the right adviser to help you plan strategically, litigate and defend your position. The adviser needs to have a sound grasp of all forms of registration and dispute resolution techniques and principles across both territories, as well as an intricate understanding of the brand to be effective and also to save money. More often than not, considered trade mark application(s), combined with an awareness of how to manage and control major litigation, can make the difference between winning and losing this all-important game.

Nasscom v Ajay Sood (unrep, 2005, Delhi High Court)

Government Employees Insurance Co v Google, Inc (Case 1: 04-CV-507, US District Court, ED Va, 25 Aug 2004)

John Olsen is a partner and head of the Trade Marks and Brand Protection Group, and Darren Olivier is a partner at Field Fisher Waterhouse LLP.