Preventable TM Problems

Preventable Trademark Problems - Trademarks to Protect your Business -

Sometimes a business does not register a necessary trademark or is late in filing an application. This can result in problems such as being sued for trademark infringement or becoming unable to use the trademark shown on a business's own products.

Even small and mid-sized venture companies and individual businesses can become involved in trademark troubles. The following shows examples of actual cases.

Case 1: A company cannot sell its new T-shirts
Case 2: A competitor sells low-quality imitations, forcing a company to change its name
Case 3: A popular spa is sued
Case 4: A company obtains a trademark right. However...

Case 1: A company cannot sell its new T-shirts

Company A designed new T-shirts. The new design of these T-shirts attracted a lot of attention, and was covered by the media before the T-shirts were available for purchase.
After sale of the T-shirts began, however, Company A received a warning from Company B that it was infringing on Company B's trademark right. Company B claimed that the trademark displayed on the tags of the T-shirts was similar to a trademark registered to Company B.
Company A unknowingly used a trademark similar to the trademark of Company B. Even though this was unintentional, Company A was criticized by the media.
Company A not only had to stop selling the T-shirts, but also had their public image damaged.

Points of note in Case 1

Trademark infringement occurred even though the trademark of Company A was only "similar" to, and not "identical" to, the trademark of Company B.
Trademark infringement occurred even though Company A was unaware of the existence of Company B's trademark. "We didn't know" is not an excuse.

How it could have been prevented

Trademark Search

Company A should have performed a "trademark search" when deciding what trademark to use on the tag.
A "trademark search" is used to check if the trademark you intend to use is "identical" or "similar" to a trademark held by someone else.
If company A had performed a suitable "trademark search," they would not have infringed on the trademark right of Company B.

Case 2: A competitor sells low-quality imitations, forcing a company to change its name

Company A manufactured and sold high-quality women's handbags, which bore a trademark that was the same as Company A's trade name (the name of the company itself).
After 5 years of hard work, Company A received a review in a small local magazine saying that Company A's bags were of high quality. This review helped increase their fan-base.
As a result, Company A began to manufacture and sell designer clothing as well. This clothing bore the same trademark as the handbags.
At this point, Company B noticed the popularity of Company A, and began selling a large amount of handbags bearing a trademark that was similar to the trademark of Company A. Company B's products were cheaper, and many people mistakenly purchased Company B's handbags thinking they were from Company A.
However, the handbags of Company B were defective and quickly fell apart. After a month of Company B's handbags being sold, a slew of complaints were sent to Company A.
Despite explaining that the handbags were not made by them, customers did not believe Company A. Company A lost their fans, and their handbags lost their value.
Company A contacted Company B to complain, but was completely ignored.
While Company A sought ways to deal with the situation, the value of their clothing also plummeted since their trademark had become associated with low-quality goods.
In the end, Company A changed its name and began rebuilding their reputation from scratch.

Points of note in Case 2

Registering a trade name does not enable a company to stop another company from producing or selling goods bearing the trade name. A "trade name" is not the same as a "trademark."
In the end, Company A's reputation was severely damaged. This means that even their clothing, which was not imitated by Company B, lost its value.
Changing a company's name involves updating the homepage, business cards, envelopes, and anything else bearing the old name, and is therefore a significant financial burden. In addition, establishing a reputation with a new name can take a long time.

How it could have been prevented

Trademark Registration

Company A should have obtained a "trademark registration" in addition to registering their trade name.
If the trademark were registered, Company A could have forced Company B to stop sales by using their "trademark right." If Company B had been quickly forced to stop sales, Company A's reputation would not have been significantly damaged.

Case 3: A popular spa is sued

Mr. A opened a spa named "XX" in a small town in Prefecture 1. Within 5 years this spa became popular and was known by almost everyone in the town.
Mr. A was proud of his popularity, and decided to expand the spa to Prefectures 2 and 3.
Mr. A secured a large branch store near a major train station in both Prefecture 1 and Prefecture 2, hired 30 new staff members, and established a company. The startup required a substantial loan, but both branches became popular.
However, 1 year after expanding to Prefectures 2 and 3, Mr. A received a warning that he was infringing on a trademark right. The sender was Mr. B, who opened a spa by himself.
After investigating, Mr. A found that Mr. B did indeed hold the trademark right to "XX". However, Mr. B had filed the application for this trademark only 1 year ago, and Mr. A had been using "XX" for over 5 years. Mr. A ignored the warning, thinking Mr. B was simply jealous of Mr. A's success.
In response to being ignored, Mr. B sued Mr. A. During the trial, Mr. A argued that he was the first to use the name "XX", and that his spa was larger and more famous than Mr. B's. However, this argument was rejected.
Mr. A lost the trial, and could no longer use "XX"
In addition, rumor of Mr. A being sued spread in the small town in Prefecture 1, eventually leading to the closing of the original spa. The closing of the original spa also caused much of his staff in Prefectures 2 and 3 to quit their jobs.
Mr. A was left with large debt and little way to pay it back.

Points of note in Case 3

Just because Mr. A was using "XX" before Mr. B does not absolve him from trademark infringement.
When Mr. B filed the application, Mr. A only had one little-known spa in a small town in Prefecture 1, and so Mr. A's argument could not be accepted.
If Mr. A's "XX" had been famous over a wide region, his use of "XX" would not have infringed on Mr. B's trademark right. However, it is quite difficult to prove in a trial that a trademark is "famous over a wide region," and so there is no guarantee that Mr. A could have convinced the court he was not infringing.
It does not matter whether Mr. B's trademark is actually famous. Furthermore, the size of the business is irrelevant.
Mr. B holds the trademark right, and therefore has the right to stop Mr. A from using the trademark.

How it could have been prevented

Trademark Registration Application

Mr. A should have applied for the trademark "XX" when he started using the trademark "XX".
Had he done so, Mr. B's application would have been rejected, since Trademark Law gives priority to whoever files first. Therefore, Mr. B would not have held the trademark right and would not have been able to sue Mr. A.
It is important to file trademark registration applications to keep a business operating smoothly and safely.

Case 4: A company obtains a trademark right. However...

Company A used the trademark "XX" whenever providing services.
In order to utilize "XX" and promote it as a brand, Company A applied for the trademark "XX" and succeeded in obtaining the trademark right.
6 months later, Company A attempted to use "XX" when providing a new service. However, it was discovered that there was one area lacking in the obtained trademark right.
Company A hurriedly filed a new application to cover this oversight, but the application was rejected. The rejection was issued because Company B had already obtained the trademark right to this overlooked portion one month earlier.
In the end, Company A could not use "XX" for its new service. Company A's plan to promote "XX" as a brand used for all of their services ended in failure.

Points of note in Case 4

Trademark Law gives priority to whoever files an application first. If Company A had obtained the complete trademark rights including the overlooked portion first, then Company B would not have been able to obtain the right to this overlooked portion.

How it could have been prevented

Consultation with an Attorney

Company A should have consulted or hired a professional attorney.
An oversight in the scope of a right can result in a loss of expected future profits or in being sued for trademark infringement.
An up-to-date and deep knowledge of the system is necessary to obtain the most complete trademark rights. We recommend consulting an attorney when filing applications for trademarks that will be used for products important to your company's profits.

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