Trade Marks 2022

Introduction

Trade mark law around the world continues to evolve, as jurisdictions try to keep pace with both new challenges and perennial issues. Increasing globalisation brought extraterritoriality concerns to the forefront for many jurisdictions, but interesting developments also arose with respect to doctrines such as functionality that have long been a focus for trade mark practitioners. Fraudulent filings were also a recurring area of focus; last year’s passage of new laws to prevent bad faith and fraudulent applications may, however, be starting to bear fruit.

Extraterritoriality

Trade mark infringement in far-flung jurisdictions can have tremendous impact not only in the mark holder’s home jurisdiction but also to their business interests abroad. Globalisation means these challenges are only going to intensify, and courts and legislatures are taking on the task of clarifying the extraterritorial reach of their trade mark laws.

India

In November 2021, the Delhi High Court in India held in Tata Sons Private Limited v Hakuna Matata Tata Founders & Ors that an Indian Court can exercise jurisdiction over a defendant website that is not located in India if the website intentionally targets Indian customers. Tata Sons Private Limited ("Tata Sons"), headquartered in Mumbai, owns the TATA trade mark in connection with providing a platform for cryptocurrency trading. Tata brought suit against Hakuna Matata $Tata Founders ("Hakuna Matata"), which is based in the UK and uses its website (www.hakunamatatafinance.com) for trading a cryptocurrency called TATA COIN or $TATA.

Tata Sons put forth arguments that the website allowed Indian users to purchase the TATA COIN cryptocurrency, the site averaged 50 Indian visitors a day, and Indian users had interacted with the defendant’s social media, saying that these activities amounted to purposeful availment of the forum. The Delhi High Court, however, said this did not establish jurisdiction where Hakuna Matata had not targeted Indian users. The court therefore denied Tata Sons’ request for an injunction against Hakuna Matata, preventing Tata Sons from enforcing its trade mark rights in India through Indian courts.

Indian courts do, however, recognise well-known famous marks and will limit their use by other parties in India without proof of use in the jurisdiction or likelihood of confusion; see Renaissance Hotel Holdings Inc v B Vijaya Sai & Ors and Alfred Dunhill Ltd v Kartar Singh Makkar (India Law & Practice (1.4 Well-Known Foreign Marks). Other jurisdictions have similar policies: Costa Rica Law & Practice (1.4 Well-Known Foreign Marks), Czech Law & Practice (1.4 Well-Known Foreign Marks), and Saint Lucia Law & Practice (1.4 Well-Known Foreign Marks)).

USA

In the USA, the Court of Appeals for the Tenth Circuit found in Hetronic Int'l, Inc v Hetronic Germany GmbH that Hetronic International, Inc (HII), a US company that produces radio remote controls, was able to obtain an extraterritorial injunction against Hetronic Germany Gmbh and other defendants ("Defendants"). Despite Defendants’ arguments that their infringing conduct – foreign sales to foreign customers – was beyond the reach of US trade mark law, the Tenth Circuit affirmed the district court’s finding that it had jurisdiction over Defendants. In reaching this conclusion, however, it acknowledged a circuit split on the issue, causing legal experts to surmise that the US Supreme Court may take up the case, or a similar one, addressing this issue.

The Tenth Circuit also found, however, that the worldwide injunction the district court had issued was too broad because HII had not established trade mark rights in every country; the injunction therefore should have been limited to jurisdictions where HII had marketed its products. Even where a court is happy to find jurisdiction over a defendant, courts should always look to the rights at issue to determine just how far it can legitimately exercise control.

China

In early 2021, China acted to defend its citizens and companies from the potential overreach of other jurisdictions’ laws, including those relating to trade marks. The Ministry of Commerce issued Measures on Obstructing the Unjustified Application of Foreign Laws and Measures, a law that is designed to prevent extraterritorial application of foreign laws to Chinese citizens when that application may be unfair. The State Council of Commerce will examine the law or the legal ruling to determine if it violates international law, if there will be an effect on China’s sovereignty, national security, or development interests, and the impact on the Chinese citizens or companies at issue. The law has the potential to blunt the extraterritorial application of trade mark laws where the State Council of Commerce finds that those laws have an unfair impact on Chinese interests.

Japan

Japan also took steps to prevent the impact of foreign infringing conduct within its jurisdiction. Previously, so-called "private imports", which are imports for non-commerical purposes, were not subject to suspension by customs. The Trade Mark Act was amended in 2021 to allow customs to prevent such imports where a foreign party asks someone else to import their goods under this exception.

Functionality

Companies continue to dispute the boundaries of the trade dress doctrine of functionality. Requiring that trade dress be nonfunctional can help a jurisdiction prevent one entity from monopolising an attribute that provides a commercial advantage under the guise of serving as a source identifier.

The most prominent US functionality cases of 2020, Ezaki Glico Kabushiki Kaisha v Lotte Int'l Am Corp (finding that the plaintiff’s "Pocky" cookie design was functional and therefore unprotectable) and Blumenthal Distributing, Inc. v Herman Miller, Inc (finding that the plaintiff’s chair design was nonfunctional despite some functional elements), were resolved at the circuit level and were denied certiorari.

The US Supreme Court has a new opportunity to take on the issue, however. In Sulzer Mixpac AG v A&N Trading Co, the Second Circuit reversed the district court’s judgment for the plaintiff, finding that Sulzer Mixpac’s trade dress was functional and therefore unprotectable. Sulzer Mixpac manufactures dental products; namely, a system for precisely mixing components for dental procedures. The system uses a set of tips that are colour-coded to indicate size. The "candy-colored" tips were found to be functional because of their role in helping dentists determine the tip’s size on sight. Although Sulzer Mixpac argued that the particular colours are arbitrary in the dentistry context, the court found that the use of the candy colours affected the quality and usefulness of the product line. It applied the Louboutin test, which asks if the feature is "essential to the use or purpose of the product; affects the cost or quality of the product; and has a significant effect on competition". Sulzer Mixpac has petitioned for certiorari, and the International Anticounterfeiting Coalition and the International Trademark Association have both submitted amicus briefs asking the Court to take on the case and standardise the legal test for functionality across the circuits; see United States Trends & Developments (Second Circuit Court of Appeals Addresses Functionality of Trade Dress in Colourful Design Mark Dispute).

Relatedly, the doctrine of aesthetic functionality restrains companies from owning features that make an item visually appealing under trade mark law. The Ninth Circuit found in LTTB LLC v Redbubble, Inc that the plaintiff’s use of the phrase "LETTUCE TURNIP THE BEET" was aesthetically functional. LTTB had registered the phrase for use on apparel, tote bags, and other products, and it brought suit against Redbubble for allowing products on its online marketplace that used the phrase on similar products. The court found that consumers were likely to purchase the products due to the phrase’s amusing nature, rather than because they believed that LTTB was the source of the products. LTTB therefore could not use trade mark law to prevent others from using the phrase to make their products aesthetically appealing. Some courts will likely rely on aesthetic functionality to impose limits on companies that attempt to monopolise phrases or design features that would give them a competitive advantage in the marketplace.

Ukraine recently adopted a law that made functionality an absolute ground for refusal to register. Among other things, the law bars registration of a mark that "consist[s] exclusively of the shape, or another characteristic, which results from the nature of the goods themselves; is necessary to obtain a technical result; or gives substantial value to the goods"; see Ukraine Law & Practice (4.9 Refusal of Registration).

Bad Faith and Fraud

National trade mark offices continue to struggle against a tide of applications filed fraudulently or in bad faith. 2020 saw a number of jurisdictions developing new law to tackle this challenge, such as Mexico’s Federal Law for the Protection of Industrial Property, the United States’ Trademark Modernization Act, and the PACTE Law in France.

USA

In 2021, the United States Patent and Trademark Office (USPTO) had a chance to put the principles behind the new law into practice; it issued an order for sanctions against Shenzhen Huanyee Intellectual Property Co, Ltd, a Chinese company that had improperly filed thousands of documents in trade mark matters. The company had used its executive director’s name in around 1,700 filings, despite not being licensed to practice law in the USA as required by US trade mark regulations. It had also provided false information about applicants and improperly entered applicants’ signatures.

Based on this conduct, the USPTO ordered that all trade mark proceedings involving the company would be terminated and the company is precluded from further filings. The massive scale of the company’s fraud is not representative of most bad faith filings, but the case will hopefully deter smaller users from similar actions.

China and Japan

Similarly, China has a practice where one can submit a letter to the CNIPA to alert it to a party’s practice of filing a high volume of applications and/or copying other parties’ marks, showing bad faith. If the CNIPA agrees, it may reject future applications; see China Law & Practice (4.5 Consideration of Third-Party Rights in Registration).

Japan also monitors the filing of large numbers of applications by a single entity and the frequent filing for marks that are similar to well-known marks owned by others; it even goes so far as to place criminal penalties on fraudulent conduct in trade mark submissions; see Japan Law & Practice (4.9 Refusal of Registration; 6.8 Measures to Address Fraudulent Marks).

UK

In the UK, a recent ruling addressed a case where the facts may not have clearly shown bad faith. The Court of Appeal found that Sky Ltd had not applied for marks in bad faith despite not actively using the marks, because the services were in the company’s zone of expansion. Rather than filing the applications solely to prevent others from using the marks, Sky Ltd established that it was only seeking broad protection in areas where it may want to do business.

Given the five-year grace period to begin use of a mark after registration, Sky Ltd did not need to show use early in the period to prevent a finding that it had no intention to use the marks. This case shows that courts may be reluctant to find bad faith or fraud without strong evidence in support.