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This article has been written by Praveer Shukla pursuing the Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. This article has been edited by Ruchika Mohapatra (Associate, Lawsikho). 

Introduction

A Trademark is a symbol, word, phrase, logo, or another mark that identifies the source of a good or a service which distinguishes it from competitors. It is a phrase, symbol, or word which is easily recognizable and also denotes a specific product. A trademark legally differentiates any goods or services and also recognizes the source company’s ownership of the brand. The trademark is denoted by the symbol “TM”. Once a trademark gets registered, it needs to be renewed at a time period of every 10 years. Among all the other Intellectual Properties’ (IP’s), i.e. designs, trademarks, patents, etc; only trademark can be applied for even by an unregistered firm. In India, once a trademark gets registered, and if it is not used for a continuous period of five (5) years and three (3) months, it will be liable to cancellation. However, in the United States (U.S.), when there is non-use of a trademark for a continuous period of three (3) years, it is liable for cancellation.

Why does a trademark need protection?

Protection of trademarks is important. It is necessary to get a trademark registered so that a registered trademark can stand out separately from all other non-registered trademarks. When a trademark is not registered, it is known as an unregistered trademark.

An unregistered trademark does not possess any legal benefits; except some common law benefits. There is no action for infringement of an unregistered trademark, but it can be protected by the common law of tort of passing off. The most common difference between infringement of a registered trademark and an unregistered trademark is that the former is a statutory remedy while the latter is a common law remedy. Unregistered trademarks get protection when it is proved that the goods and services of the unregistered trademark have a significant position in the market and are well known to the public. A trademark is an essential component of a brand that encompasses brand identity, reputation, and uniqueness. Getting a trademark registered provides for a clear path for the expansion of business in other markets, both domestic and international. A trademark is registered to protect it from any kind of infringement and counterfeiting.

The Lanham Act

The Lanham Act (also known as the Trademark Act) of 1946 is a federal statute governing service mark, trademarks, and unfair competition. This Act was passed by the Congress and signed by President Harry Truman on July 5, 1946, while the act took effect from July 2, 1947.

Since its enactment, the Lanham Act has been amended several times. However, the impact of the Act was significantly enhanced by the Trademark Counterfeiting Act of 1984. The Trademark Counterfeiting Act of 1984 made the international use of counterfeit trademark an offense under Title 18 of the United States Code. It also enhanced enforcement remedies through the use of ex parte seizures. The Lanham Act not only provides for the registration of a trademark but also provides a way for the companies to watch for any modifications which can be made to their trademarks. The name “Lanham” came from a Texas Congress Representative, Fritz G. Lanham who focused much of his time and energy in securing federal laws that recognized trademarks.

Importance of Lanham Act

There was no formal system in the United States to protect the trademarks of the business or individuals, before the Lanham Act. Companies were easily able to copy their competitor’s trademarks, which was becoming confusing on the part of the consumers. This was the main reason for creating the Lanham Act. There are several legal resources in case of violation of the Act.

While taking legal action against a violator in this Act, few important points have to be proved by the trademark holder:-

  • That the other person or the company’s use of the mark will likely cause confusion among the consumers; and
  • That the holder of the mark holds ownership in the mark;
  • That trademark owner has suffered from commercial loss due to infringement.

While considering if a case violates the Lanham Act, few factors are to be kept in mind. Some of the factors are:-

  • How well the holder of the mark uses the mark publically;
  • Whether the mark is deceptively/ phonetically similar;
  • How much of the business activity is conducted using the mark;
  • How much the marketing of products or services is done using the mark;
  • How likely is it to create any confusion among the consumers due to the non-distinctiveness of the marks.

False advertising under Lanham Act

The Lanham Act protects the companies from misleading claims and false advertising. One such Supreme Court case of false advertising is that of POM Wonderful LLC v. Coca-Cola. In this case, a suit was filed against the soft drink giant Coca-Cola by POM Wonderful LLC (a company that grows and distributes pomegranates and juices). POM Wonderful LLC alleged that Coca-Cola was marketing a pomegranate-blueberry juice drink that actually contained apple and grape juice. This resulted in the loss of sales of Coca-Cola’s juice drinks due to false advertising. However, the Supreme Court reversed the original decision given in the State Court. This case helped to reaffirm the need to improve the clarity in food labels. The case took almost 8 years which caused loss of money and time to both the companies.

Extraterritorial protection

The jurisdiction of the United States Federal Courts is limited. But still, the Federal Courts allow jurisdiction of extraterritorial disputes when a United States trademark or copyright is exploited outside the U.S.

In 1952, the United States Supreme Court applied the Lanham Act extraterritorially. As per the Supreme Court, the Lanham Act confers jurisdiction over extraterritorial disputes which involves trademark infringement and unfair competition in following circumstances:-

  1. The Defendant is a corporation of the United States.
  2. The foreign activity has a substantial effect in the United States.
  3. The exercising of jurisdiction would not interfere with the sovereignty of another nation.

The Lanham Act violation can be established for either a registered trademark or an unregistered trademark. In order to do so, the Plaintiff must prove that:-

  1. It has a valid and a legally protectable mark;
  2. It has the ownership of the mark;
  3. The Defendant’s use of the mark would likely cause confusion.

Foreign defendant

When the Defendant Company is not an American company and has registered the mark in foreign country, the analysis is different. The Lanham Act applies to a foreign company even though the manufacturing, advertising and selling of the trademarked product occurs outside the United States.

The United States Court of Appeals for the Eleventh Circuit (or simply, the Eleventh Circuit) has found that the Lanham Act extraterritorially applies where few components of the alleged infringement take place within the United States. The Lanham Act also allows a court to exercise jurisdiction over a foreign company in case a foreign company uses an agent within the United States to conduct business with consumers within United States.

Recent example

Recently, the Lanham Act was used by the Federal Courts in resolving a dispute between Trader Joe’s, a United States grocer, and Pirate Joe’s, a Canadian Company. [Trader Joe’s Co. v. Hallat, 835 F.3d 960 (9th Cir. 2016)].

In the above-mentioned case, a Canadian citizen who owned a business in Canada as Pirate Joe’s, travelled to Trade Joe’s in Washington State and bought large quantities of Trader Joe’s products and sold them at inflated prices in the Pirate Joe’s in Canada.

In the Trade Joe’s case a test was applied by the Federal Courts. The test minimized the substantial effect requirement and put emphasis on the potential harm to the American company. The test that was applied was as follows:-

  1. The alleged violation has created some effect on American foreign commerce.
  2. The effect is substantially great to present a cognizable injury to Plaintiffs under the Lanham Act.
  3. The interests and links to American foreign commerce are sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.

In Trader Joe’s case, there was hardly any damage alleged by Trader Joe’s, but the Court was influenced that United States commerce was exposed. Trader Joe’s case is a good example of how the United States Courts are more likely to apply the Lanham Act to any extraterritorial act that has even a slightest of effect on United States Commerce.

Comparative analysis of the Indian and US Trademark

In India the trademarks are governed under the Trademarks Act, 1999 while the Lanham Act, 1946 governs the trademarks in the United States. Both these legislations have the same goal (to protect the trademarks), yet there are certain conceptual and procedural differences in the legislations of both the countries. These differences are as follows:-

  • First to use basis

Trademarks in India are based on the “first to use” system. In this system, the trademarks which are used first in the business are assigned the trademark rights and are given priority in their territory of use.

In the United States, the “first to use system” is existent, but still priority is given to the Applicants for being first to file for registration of their marks with the U.S. Patent and Trademark Office (USPTO).

  • Registration

In India, trademark rights can be acquired through registration. Trademark registration can be obtained for marks which are not in use on a “proposed to be used” basis.

The same does not go for the United States. In the U.S., registration can be obtained for the marks only which are used for interstate commerce or in trade between a foreign country and the United States.

  • Use

Indian courts have given a broader meaning to the term ‘use’. The ‘use’ of a trademark may be “non-physical”, but it must be “material”, i.e. meaningful.

In the United States, the ‘use’ of trademarks must be “genuine” and not a mere token use.

  • Opposition

In India, opposition against a trademark can be filed within four (4) months from the date on which the mark is advertised in the Trademark Journal.

In the United States, the time limit for opposition is 30 days from the date on which the mark is published in the Gazette. This time limit can be increased to a maximum limit of 180 days.

  • Remedies for Infringement

Under the Lanham Act, the remedies available for trademark infringement constitute monetary relief only. There is no provision for criminal remedies in case of trademark infringement.

In India, unlike the U.S., criminal remedies for trademark infringement are also available. The trademark infringer can be punishable with imprisonment or with a fine or with both. The imprisonment is for a term which shall not be less than 6 months but which may extend to a maximum of three (3) years. The fine shall not be less than 50,000 and may extend to maximum of 2 lakhs.

Conclusion

The Lanham Act is extremely useful for the companies which are trying to protect their trademark from infringement occurring outside of the United States. For the application of Lanham Act to extraterritorial disputes, there needs to be some effect on American commerce and a sufficient chance that the infringement will result in a cognizable injury to the owner of the mark. There is a high likelihood that the Lanham Act will be implicated, if there is some kind of United States involvement. The implication of the Lanham Act could result from something as simple as shipping of products through the United States, or exporting of products from the United States, or from having a United States company selling infringing products overseas.


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