Bad Faith in Trade Mark Application - Research Paper Example

BAD FAITH IN TRADE MARK APPLICATION Insert Name Insert Course Title Insert Date Introduction With the ever expanding economy in Australia and the world at large, manufacturers, service providers, researchers would like to have a unique referencing point or branding that identifies their product or organisation. IP Australia defines a trade mark as a right that is granted for a letter, number, word, phrase, sound, smell, shape, logo, picture and/or aspect of packaging.1 Moreover, they note that a registered trademark is legally enforceable and gives one exclusive rights to commercially use, licence or sell it for the goods and services that it is registered under.2 The essence of all this is to distinguish the goods and services of one trader from those of another.3Apart from mere protection of intellectual property, trade mark has an important connection with marketing. One of the aims of marketing is to create a close bond between customer and the producer or the product/ services. One way of ensuring this is by having unique labels that allow the client to know that the product is from a preferred producer. Thus, with the ever increasing competitive business environment, businesses are obliged to protect their trade marks so as to increase their competitive advantage over their competitors.4 This paper examines the concept of bad faith in trade mark application and under what circumstances this concept can be used to oppose a trade mark application. In order to attain the above vision, most of the argument will be tied to section 62A of the Trade Marks Act of 1995 (Cth) in Australia. This section provides that a trade mark application can be opposed on the ground that the application was made in bad faith. To build the author’s argument, the paper will explore how the concept is likely to be applied in Australia by examining reported cases in Australia and other countries. In order to build on this, the paper will first look at the legal framework governing trade mark issues in the country, the institutional framework, the essence of trade mark and its connection with marketing as justification for registering and protecting trade marks, legal and academic definition and conceptualization of the term bad faith, and lastly, examination of some case examples in Australia, commonwealth countries and other nations so as to show its applicability in Australia. Legal and Institutional Framework Governing Trade Mark Issues in Australia The overall legal framework that governs issues relating to trade marks is the Trade Marks Act of 1995. This Act repealed the Trade Mark Act 1955. The main body discharged with the legal administration of this act is the IP Australia. The Act is divided into 22 parts and approximately 261 sections with each covering different aspects of trade mark regulation.5 The Trade Mark Act 1995 comprises of Act No. 119 that was assented to on 17 October, 1995 and commenced on January 1. 1996. Moreover, the Trade Marks Act 1995 was modified by the Trade Marks Regulations of 1995 No. 341 as amended.6 However, for the current situation, most of the discussions will revolve around section 62 A of the act. This part of the act precisely deals with issues relating to registration in bad faith.7 Apart from section 62A, there are other relevant sections that touch on registration and can be used to support denial of registration based on bad faith. The principal body mandated with managing and regulating issues pertaining trade mark rights is the IP Australia.8 The Essence of Trade Mark There are around four occurrences that have elevated the importance of trade marks. The first is the economic expansion since industrial revolution, the second is product differentiation. The third is the emergence of psychological advertising in 20th century and lastly is the opening of international market or globalization. Over the years since industrial revolution in 1850s human beings have continued to churn out different types of firms, products and services. For a firms, product or service to be identifiable out of these multitudes there is need to find a symbol or label that can act as a land mark that allows consumer to create connection or recall the product. The issue of trade mark is further complicated by emergence of highly differentiated products. These products at a time compete for the same market segment and thus, others might be lured to copy others so as to be able to sell by creating confusion. The emergence of psychological advertising meant that firms had to develop emotive and captivating phrases that would make the consumers identify with their product.9 The emerging force is the need to be identified globally due to globalization process. Most of the multi international companies are known word wide due to their trade mark symbols, phrases or slogans. Firms develop products/services in order to meet customer needs while at the same time ensuring maximum returns for the company. The development of products/services is a sure way of offering clients variety and a bid to capture different market segment. Any individual product or service must be developed in line with the firms overall mission and objectives. Marketing plays a chief role of connecting the firm and the product/service to customer. It is the proper marketing that allows any firm to gain market leadership through higher sales return and customer satisfaction.10Trade mark plays an important role of differentiating another firm’s product from the other. In essence, it has a marketing connotation by allowing customers to easily identify their preferred brand amongst other competitors. This kind of identification allows for intimate relationship between the product and the consumer thereby allowing the producer to lock in the customer. Locking in customers is a sure way of ensuring market dominance by wading off competitors.11 In a nutshell, trade mark is like a commercial magnet or a land mark that one can use to find his way out. The Concept of Bad Faith In academics, the concept of bad faith can be traced from the philosophical works of Jean-Paul Sartre who did a lot of analysis in relation to double speak12. In philosophical view, double mindedness can be through intentional deceit of other or through self deception. This kind of work views the concept as one who is having two semi- independent acting minds within one mind. Moreover, this concept can be seen as a situation whereby one acts as if he or she is influenced with certain ideologies yet in the back of his or her mind she or he has a different thought or belief13. Connected to this line of thought is the Kantian philosophy. This kind of approach encourages one to do what is ought to be done. This is a normative kind of thinking that is abstract and oriented towards ethics.14 Thus, the two theories connect by embracing ethics and honesty rather than deceit, ill will, fraud or misleading information. On the other hand, those who tend to favour the concept of ill motive are normally leaning towards Utilitarian philosophy. Utilitarian philosophy is a positive theory that looks into issues as they come and not how they ought to be.15 Apart from the above, academically especially in line with the philosophy of existentialism, bad faith is seen by Santre as the imperfection of belief. He notes that the fact that no belief ever succeeds in being what it needs to be therefore it turn to be a bad faith. More over he notes that both bad and good faith wants to flee the imperfection of belief. However the difference is that good faith wants to flee the not believing what one believes into being and bad faith flees being into the not believing what one believes. In a nutshell, bad faith is seen as believing something that at the same time it quite consciously disbelieves, insofar as its belief fails to integrate certain elements of its world, leaving them outside its belief and clashing with it.16 In legal context, it is observed that the term bad faith is subjective. However, the positive aspect is that the conceptual framework is built on ill will or deceit in order to gain unfair advantage.17 These unfair advantages can also be seen in terms of sinister motives and withholding of information so that one could inflict revenge or subvert the course of justice. From the above observation, it seems that the concept of bad faith is adopted in most judicial systems so as to guarantee morals. This kind of this kind deviates away from basing most cases and judgments of technicalities and implied terms to a moral point of view. It is indeed true that if judicial is to achieve its purpose of transmitting justice to both parties, then the intention of both the plaintiff and the defendant should be taken into consideration18. Concept of Bad Faith in Trade Marks One source of bad faith in the field of trade marks is the intentional or unintentional bid to create confusion to the consumers by having similar labels. It is noted that confusion in relation to brand names or trade marks can be analysed in different paradigms. The first source of confusion is when a consumer is duped or made to believe that the appellant is actually selling the defendant’s product. This is termed as source confusion. The next is when the consumer is meant to think that the plaintiff has authorised, endorsed or has sponsored the defendant’s product. This is known as sponsorship confusion. The third source of confusion relates to the time of purchase. In this case the consumer is not sure which product is from which company. This is referred to as point-of-purchase confusion. The other is the confusions before purchase or what is termed as initial interest confusion. The last one is the post sale confusion or what is commonly referred as after purchase confusion.19 All these kind of engagement can be termed as bad faith or ill motive because essentially there are numerous colours or combination to be used instead of settling on identical symbols. Moreover, there are numerous words, figures, sound and slogans that it is not prudent for another company to adopt its competitor’s concept. The principal aim of any trade mark law is govern the formulation and use of various trademarks in relation to confusion. In a nutshell, trade mark law should be directed against confusing uses of a mark.20 As noted earlier, bad faith is definable as ill will or deception. One way of creating deception is through what is known as dilution. Dilution is the blurring of the quality of information transmitted to consumers. 21The development of the concept of bad faith in academic thinking is accredited to the works of Frank Schester in 1927. In his works, he believed that trade marks should be protected from dilution. The justification for his argument was that protection of marks from dilution was the true rationale for trade mark protection because it best fit the way marks actually functioned in the market place.22 Dilution is different from confusion since it imposes liability without any requirement of confusion. Dilution can be understood in two perspectives. The first perspective is the tarnishment and the second is the dilution by blurring. Under the concept of tarnishment, the general rule is that the defendant uses a similar mark in a way that deeply clashes with the meanings that consumers associate with the plaintiff’s mark. For instance, if in Australia there is luxury hotel using the name small world, then some one come up and open another new business line dealing with restaurant and names it small world, definitely there is going to be confusion. One source of confusion would be that most consumers would think that these two different entities are related. Secondly, since they are all engaged in service industry of catering and accommodation, the former which specialises in luxury is likely to loose since the luxury is associated with is derailed by the later.23 The other perspective of dilution is referred to as dilution by blurring. This kind of approach is anchored on different approach. Perhaps it borrows from the economic concept of scarcity whereby a scarce product has got a high value. The premise on which this line of dilution is built on is that multiple uses of the same mark on different products will dilute the distinctive quality of the mark. Consequently, this will make it hard for consumers to recall the original product quickly. For instance, if there is a transport company operating regional trains called Smart Commuter and another transport company dealing with public transport though with buses also name their company Smart Commuter. This is likely to create clutter in the minds of the consumer as they will not be able to judge which one is which.24 Circumstances under which Bad Faith Can Be Used to Oppose Trade Mark Application In accepting or rejecting application for trade marks under the Trade Marks Act and regulations in Australia, absolute and relative grounds are utilized. Most of the oppositions based on substantive matters are normally handled by the Federal Court of Australia who can revoke or uphold the previous situation. For the opposition to be successful there are roughly 12 grounds that one can use to object an accepted registration.25 Moreover, it is the onus of the plaintiff to prove on the grounds stipulated in the Act and Regulations, and on no other grounds. Failure to do the above, the opposition to registration will fail.26 However, at the moment the paper will focus on the bad faith grounds. The important factor to note is that objection based on bad faith concept are only admissible to applications that were made after October 23, 2006.27 This is because initially the concept of bad faith was not admissible in the Federal law courts in relation to Trade Marks Act 1995. The need to accommodate this concept in Australia was as a result of the registrar’s experience where some firms or people knowingly register trade marks in bad faith. The examples that she notes included malpractices noted below. The first bad faith malpractice is when a person monitors new property developments, register the names of new developments as trade marks for a number of services and then threaten the property developers with trade make infringement proceedings unless the developer licence or buy the trade marks.28 This is like owning a briefcase trade mark licence for extortion rather than for commercial purposes. This kind of approach instead of encouraging commercial growth, it hinders commercial growth. The third under bad intent is the use of trade mark registration as a speculation procedure. In this situation, the speculator makes random applications especially in relation to well known personalities or events so that in later stages they can block their usage. The last bit relates to filling of a trade mark application for a multitude of entirely different goods and services at the same time. This kind of bad intent is especially justifiable for doing the above in relation to product or service development.29 The second ground reason that an application can be rejected on the grounds of bad faith is when a known person with history of applying for trade marks that are deliberately misspelt so as to imitate already existing registered trade marks.30 The last scenario of bad faith is when a person identifies trade marks used overseas but, with no Australian use registers it with the sole purpose of selling them to the overseas owners.31 It clearly looks that the amendment to insert section 62A is an attempt to scuttle speculation use of trade marks. This helps in entrenching honest and fair commercial behaviour. The only challenge of this new legislation is its application and the ability of courts to determine what is bad faith. This is because some bad faith intentions are well argued out through reflective thinking.32 While it is the onus of the plaintiff to show the court that the defendant hag engaged in bad faith malpractices, there are certain parameters that can be used to guide the whole legal process or the registrar in declining or revoking an application. Moreover, these parameters for proving that one has or had a bad faith is an important of reducing trade mark squatting by allowing legitimate users to exploit this noble phenomena. One of the parameters is the lack of use. It is within common sense that one should register a trade mark with the anticipation of immediate use so that he or she can exploit the economic potential of that trademark. However, it beats logics when one takes longer before using the registered trademark. The main intent of this can be seen as stockpiling of the marks with anticipation of extracting money.33 The second parameter is the intent. It is observed that bad faith constitutes violation of basic civil law principles, according to which rights can be obtained. This is like behavioural practices in contrast with normal expectations such as dishonesty. The concept of bad intent can be seen in terms of unfair completion or even there is no competitive relation between defendant and the appellant. The reality of bad intent is observable when one wants to prevent others from accessing a new market for product and services of the legitimate owner’s trade mark protected in another country. The second is when one wants to unfairly exploit the reputation of the legitimate owner’s trade mark to stockpile trade marks in view of money claims.34 The last relates to knowledge or being aware. In this situation, when the applicant new that there was an existing trade mark that is the same with his in another country then he or she has engaged in bad faith malpractice.35 Example of Cases under which Bad Faith has been Used to Oppose Trade Mark Application One of the applications for trade mark that has been rejected in Australia based on the bad faith concept is the Marvel Characters, Inc v Gary Charles (Unreported); 14 September, 2011. The bone of contention here was the mark of Ghost Rider. In a chronological manner, Gary Charles applied for trade mark licence for Ghost Rider under class 25. His application went up to the stage of acceptance only for Marvel character, Inc, the owner of the famous Ghost rider comic book character opposed the application. Before the application, the comic book character had featured in a recent movie starring Nicolas Cage which was filmed in Melbourne.36 In order to build their argument, the plaintiff which in this case was Marvel levelled the following evidence. The first evidence was based on trade mark search and private investigator work. During the search it was revealed that the applicant had previously made numerous applications for well known and famous marks owned by third parties such as red bull, army of one and beat down. Moreover, the private investigator showed that the applicant was offering for sale several counterfeit garments from shop premises in Queensland such as spider-man and marvel superheroes branded garments. The more tying evidence in this was the ability of the investigator to do trap purchase of men’s and women’s denim shorts featuring the ghost rider mark.37 Apart from just using the ghost rider mark, it was observed that the mark was depicted on swing tags and sews in labels in unusual flaming type script which was identical to that used by marvel in its comic books and other promotional materials. Further, the applicant’s mark was depicted together with the image of a motorcycle ridden by a rider with a flaming skull. This imagery clearly depicted marvel’s ghost rider comic book character. This line of development was used to counteract the defendant’s argument that he had not copied marvel’s ghost rider brand but had adopted it merely because he liked the name.38 In making the judgement in favour of the plaintiff, the presiding officer noted the following observations. The first is that the evidence which the opponent had provided in respect of the applicant’s other trade mark applications and registration, in conjunction with the evidence of the clothing brands available for sale in the applicant shop, is sufficient for him to be satisfied that the contention was an example of the applicant’s standard pattern of behaviour, a pattern which leaves much to be desired as far as commercial fair dealing is concerned and thus the submission by the plaintiff on the grounds of bad faith was accepted.39 Outside Australia, one of the cases that have been handled in U.S. in relation to bad faith based on circumstantial evidence sufficient was the Telefonos de Mexico, S. A. B. De C. V. v. Andres Gutierrez Estrada, Opposition No. 91183487 (June 30, 2010). In this case (TELMEX case) the applicant (Andres Gutierrez Estrada) had applied for the mark AUDITORIO TELMEX for arena services and entertainment services. The plaintiff (Telefonos de Mexico) challenged the application based on the likelihood of confusion with common law TELMEX mark for telecommunication services. The evidence that the defendant tabled include lack of prior reputation or fame in the US in relation the mark in contention. In this situation the defendant argued that the plaintiff had no significant market share. Moreover the defendant said that he made the mark. On the other hand, the plaintiff managed to prove to the court that they had used TELMEX mark for over 60 years in Mexico for telecommunication services. Moreover, they said that the applicant for the mark had lived in Mexico for nearly 30 years, and lived within 10 miles of the AUDITORIO TELMEX arena sponsored by the plaintiff. In their final judgement, the judges found out that the application was done in bad faith.40 Conclusion From the overall discussion bad faith is based on one exploiting the good will that has been created by another person or company. Since proving ill motive is difficult, most of the decisions relating to bad faith are made in reference to circumstantial evidence. This means that the court can only infer bad intent from the facts and circumstances in evidence. An example of this is the Jellibeans, Inc. v. Skating Clubs of Georgia, Inc., 212 USPQ 170 (N. D. Ga. 1981 aff’d 716 F. 2d 833, 222 U. S. P. Q. 10 (11th Cir. 1983).41 However, in a nutshell, the recognition and acceptance of bad faith in Australia by amending Trade Marks Act 1995 in 2006 will help in reducing cases of malpractices such as trade mark squatting and registration of briefcase trade marks for money extortion. References list Bone, Robert G. ‘Schecter’s ideas in historical context and dilution’s rocky road.’ Santa Clara Computer & High Tech. L.J. 24 (2008) 469-506. Brittain, Fiona. Trade mark application for ‘Ghost Rider’ made in bad faith. Davies Collison Cave. 12. Oct. 201. 21. Mar. 2012 < http://www.davies.com.au/pub/detail/522/trade- mark-application-for-ghost-rider-made-in-bad-faith>. Carsley, Fredrick L. and Mendelsohn R Shacter, ‘Good faith and fair dealing in the commercial context’ in Campbell, Denis and Susan Cotter, Comparative law yearbook of international business. London: Kluwer Law International, 1997. Graham, Gordon. Theories of ethics: an introduction to moral philosophy with a selection of classic readings. New York: Taylor and Francis, 2011. International Trademark Association, Board resolutions: bad faith as a ground for opposition proceedings. 2012. Mar. 21. 2012. < http://www.inta.org/Advocacy/Pages/BadFaith asaGroundforOppositionProceedings.aspx >. IP Australia, Trade Mark. 4 Oct. 2011. 21. Mar 21. 2012. Keim, Willard D. Ethics, morality and international affairs. Lanham, Maryland: University Press of America, 2000. Kotler Peter & K L Keller, Marketing management. 13th ed. New Jersey: prentice hall, 2009. Nancy Omelko, Protecting well known marks against bad faith trade mark fillings: national solutions to a global problem. n.d. 21. Mar. 2012. < http://www.cipr.org/activities/roundtable_7_12_11/files/Well- Known_Marks_and_Bad_Faith.pdf>. Office for Harmonization in the Internal Market, Bad faith case study. 2003. Mar. 21. 2012. < http://oami.europa.eu/en/enlargement/pdf/badfaithCS3101.pdf >. Onkvisit, Sak and John J Shaw, International marketing: strategy and theory. 5th ed. Oxon: Routledge, 2009. Solomon, Robert C. From rationalism to existentialism: the existentialists and their nineteenth- century backgrounds. New York: Rowman & Little field, 1972. Thomas, Flynn. Existentialism. New York: Sterling Publishing Company, 2009. Trade Marks Act 1995. WIPO Magazine, ‘The Role of Trade Marks in Marketing.’ IP and Business 10 (2002). WIPO, Trade mark opposition-Australia. n.d. Mar. 21. 2012. . Wood, Allen W. ‘Self deception and bad faith’ in McLaughlin, Brian P. and Amelie Oksenberg Rorty (eds), Perspectives on self-deception. California: University of California Press, 1988. Read More