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First to file v first to use

First to file v first to use : comprehensive analysis of both systems in the context of trademark registration

July 20, 2022

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This article is written by Mercy Munachimso Nwaogazie of 500 level law student of Nnamdi Azikiwe University, Awka, Nigeria and is enrolled in Diploma in US Intellectual Property Law and Paralegal Studies by Lawsikho. This article has been edited by Ojuswi (Associate, Lawsikho).

This article has been published by Sneha Mahawar.

Introduction

Although Apple, Inc. used the “iPhone” trademark first, it lost its opposition against a third party’s registration of the mark before the Chinese Trademark Review and Adjudication Board. Conversely, a mere prior user won its opposition against another’s application before the Intellectual Property Office of Singapore. Thus, prior applicants and users can have the rights to it under specific conditions in different countries. Situations like these have spurred strategic business owners to make concerted efforts to protect their trademarks according to the laws of the countries they intend to conduct business. Indeed, despite the craze for trademark registration, the advantages available to owners depend on whether a jurisdiction upholds a first-to-file or first-to-use system of priority and the circumstances surrounding the case.

Trademark priority

Trademark priority entails who has the right to a trademark. There are two forms of priority and each determines the level of advantages or restrictions available to trademark owners. They are:

i. First to file

ii. First to use.

The first-to-file system

This system demands that whoever applies for the registration of a trademark first has the exclusive right to it, and it is immaterial that another used it first. The use of the mark in commerce is not necessary, at least at the point of application.

Some first-to-file countries include China, Nigeria, United Arab Emirates (UAE), and Singapore.

Upon any issue affecting the rights to a trademark, the below benefits are enjoyed by the prior applicant.

Right against mere prior users

One’s registration will scale through even if prior use is raised by a third party. Despite Apple’s opposition and appeal to the court, an applicant registered the iPhone mark. Like other countries, in China, for others to be excluded from registering a trademark, it must be registered under the classes the owner wants. Apple’s loss arose from the fact that its registration was under a different class, hence technically unregistered. However, this system allows profiting from the goodwill of a brand. An extreme implication is where original owners pay these registrants to be able to use their trademark. Apple Inc. had to pay the registrant of its iPad mark $60 million to be able to sell its products in China.

Low burden of proof

During a claim for eligibility of a registrant or the validity of a registration, priority is often considered. All a party has to do is show the date of application. Where there are other factors to invalidate priority, the burden remains on the complainant to prove it to the satisfaction of the court/tribunal.

Reduction in enforcement cost

Upon receipt of trademark applications, examiners often check for the likelihood of confusion with other registered marks. So, where another has filed a mark before an applicant, the registry will generally reject the application in favour of the first applicant. Hence, saving the registrant the cost of any proceedings against the applicant.

Limitations of the first to file system

Like China was until 1993, some jurisdictions exceptionally give advantage to prior applicants alone. Nonetheless, limitations abound, thereby the following remedies can be utilised by the parties.

Honest prior user

An honest user can invalidate the application or registration of a party. In Nigeria’s American Cyanamid Co. v. Vitality Pharmaceuticals Ltd, the plaintiff registered the GONOCIN mark in 1973 and subsequently sued the defendant for using the GONORCIN trademark for trademark infringement on the grounds of the likelihood of confusion. The defendant proved that he was continuously using the mark registered by the plaintiff since 1968. Consequently, the court held that the mark should not have been registered in the first place. The registration was then nullified.

Protection of well-known marks

By being well-known, a party’s trademark can be rejected or cancelled. In the Harrods case in UAE, two companies registered the trade name of the respondent. Relying on being well-known, the respondent claimed trademark infringement and the court cancelled the registrations in his favour. However, in Apple’s case, the courts were not satisfied that it was well known in China. Thus, making the standard for determining well-known marks high.

Bad faith

The proof of bad faith by a prior user can lead to the doom of an application or registration. In the Chinese case of Ambitmicro Technology Limited v. Ambiq Micro, Inc., the plaintiff had no business but registered a mark being used by the defendant. Having used the mark for years in different countries, prior rights and bad faith of the plaintiff were proven in favour of the defendant.

Concurrent use

Despite the existence of a prior applicant, where there has been a concurrent and honest use of a trademark by different people without any issues, registration by both entities is possible. In Thailand’s Jaspal Co., Ltd. v The Department of Intellectual Property, the plaintiff sought to register his trademark. The application was refused due to a likelihood of confusion against a third party’s registration by the board. Upon appeal to the Supreme Court, the court held that both marks are similar and could ordinarily cause a likelihood of confusion. Nonetheless, relying on section 27 of the Trademark Act, the Supreme Court held that the plaintiff proved honest concurrent use and declared that the mark was registrable.

Mere time differences

In countries like China, the system is not strict enough to apply to mere time differences. This entails that, where applications for similar marks are filed by more than one party on the same day (say 8th July 2022) but at different times (say 8 am and 3 pm respectively), the party who filed first (by 8 am) does not get priority. In that situation, the first user of the mark among them will gain priority and such party’s application will succeed. Nonetheless, where none of the parties has used it, a settlement will be reached by them to decide who should be the rights holder. Otherwise, registration for either will be based on a lottery.

The first-to-use system

Prior users have trademark rights in first-to-use countries and its continuous use must be shown. Ordinarily, use means employing something to achieve a purpose. Under trademark law, use entails employing a trademark for the sale of goods or services. Similarly, Section 45 of the Trademark Act (US) states it is the bonafide use in the ordinary course of trade. For example, placing a mark on a product or using it for promotional services.

Some first-to-use countries are the USA, India, Zimbabwe, and Kenya.

This system is characterised by the benefits enjoyed by prior users. They are:

Opposition of applicants

A prior application can be opposed by the original user. However, the party must prove that the mark was used in commerce or used in a way similar to it. In a USA opposition proceeding, Blas t Blow Dry Bar LLC v. Blown Away LLC d/b/a Blast Blow Dry Bar, the opposer alleged the likelihood of confusion and prior use. The board averred that mere registration as domain names and LLC (by both parties) did not constitute use, as they were not published. The opponent’s lease agreement was private and the promotional efforts of the parties did not suffice since the numbers of people reached were not discernable. Consequently, the applicant could only rely on the date of filing (i.e., the date of constructive use) and the opposer’s promotional and hairstyling services (both before the application date) to establish actual use. The opposition was upheld.

Cancellation of a trademark

A prior user can cancel a registered mark upon proof of prior rights. In a USA Trademark Trial and Appeal Board (TTAB) proceeding named Boi Na Brasa LLC v Terra Sul Corporation a/k/a Churrascaria Boi Na Brasa, this issue arose. The prior user sought to cancel the registrant’s wordmark due to the likelihood of confusion with the former’s trademark, and the cancellation was successful.

Priority of senior users over junior users

They are the first and second unregistered users, respectively. Upon the senior user’s registration, the junior user’s right to use can be cancelled. However, they can concurrently use the trademark if there is no likelihood of confusion.

Low cost of trademark protection

Considering the costs of trademark registration, a brand may choose to opt for trademark protection based on mere use. This protection is regarded as common law rights in first-to-use jurisdictions. These rights are granted to trademark owners for using their trademarks in commerce. They do not have to register it for this right to accrue. However, this is dicey and almost unrealistic. This is because, in the long run, the brand may be forced to institute proceedings against unauthorised applicants or registrants, thereby incurring expenses. Furthermore, proving common law rights is harder than proving rights in a registered trademark. Consequently, any little technicality could make a party lose priority.

Limitations of the first-to-use system

They have made trademark registration desirable in use-based countries.

Limited protection

A prior applicant can register a trademark, but certain questions, like whether the applicant knew the prior user, or the likelihood of confusion, are considered.

A negative answer to any of these questions can limit the prior user’s protection to that geographic area the mark was used. In Boi Na Brasa LLC v Terra Sul Corporation a/k/a Churrascaria Boi Na Brasa, the prior user, who had a reputation in New Jersey and New York sought to cancel a registration. It was successful only in those states. This can be bad for prior users seeking wider protection.

Examination advantage

Trademark applications are often examined based on the date of receipt. Where a party files before the original user, the latter’s application will be suspended, pending the result of the former’s application. This may take years and can put the prior user in a weaker position.

Cost of proceedings

Although an original user can institute proceedings against unauthorised parties, this takes a lot of finances. Experts have estimated trademark lawsuits to be between $120, 000 and $750, 000 or even more. These expenses can be a problem for brands with limited operating budgets. Hence, crippling their finances, which may take time to recover. Those that do not pursue the matter may end up losing their rights. Either way, there is a sort of loss.

The intent to use basis

During trademark registration, use-based jurisdictions allow for a bona fide intent to use a mark. In this situation, trademark rights and priority will remain in the registrant and the date of application will be seen as the date of constructive use. Consequently, where another, who is technically the prior user, uses the mark, no trademark rights will accrue to such party.

Foreign filed applications

Following the Paris Convention, countries that are signatories to it grant automatic priority to trademarks filed in other member countries. However, the trademark must be filed within some months. Consequently, even if someone first uses that mark in any use-based country, the foreign applicant remains the holder of the prior right within that period.

Conclusion

There are various rights and advantages enjoyed by individuals in specified situations in first-to-use and first-to-file systems. The advantages and limitations of each system also depict their implications regarding trademark registration. Although the importance of trademarks has made individuals take proactive steps to protect and enforce them, they must wholly consider the systems of trademark priority in all the countries they care about.

References

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