Whether it is a company’s name or the name of a specific brand or service, corporate
trademarks and service marks are the way by which most companies establish their
reputation and distinguish themselves from competitors in the marketplace. Intellectual
property, including trademarks, is often the most valuable asset of a business.
Maintaining ownership of corporate trademarks is especially important in the global
marketplace. Registering trademarks in multiple countries, often through the Madrid
Protocol, is one tool that companies use for global trademark protection. However, it is
not the only tool. Even as companies are increasingly using the Internet and social media
to promote and market their goods and services worldwide, they usually must rely upon
local companies and representatives to sell their goods or services in local markets.
Unfortunately, trademark ownership disputes can and do frequently arise between foreign
manufacturers and local distributors. Companies seeking to establish and maintain brand
ownership in foreign countries must thus pay close attention to the specific trademark
and distribution laws of the local jurisdictions in which they do business.
In the United States trademark ownership rights are usually determined by the first to use
the mark, not the first to invent or the first to register the trademark. Registration is not
required to assert trademark ownership rights in the United States, although registration
does confer important legal benefits.
Disputes between a manufacturer and a distributor over which party was the first to use
and thus acquire trademark ownership rights in the United States can often be avoided
if the relationship between the manufacturer and distributor is properly defined. For
example, if the manufacturer clearly licenses the distributor to use a trademark that the
manufacturer has registered, or if the distributor has its own mark that it affixes to the
manufacturer’s goods.
If the relationship between the parties – and ownership of the trademark – is not
clear, in the absence of a written agreement U.S. courts will usually presume that the
manufacturer owns the trademark, regardless of whether the manufacturer is a U.S. or
non-U.S. company. If a written agreement exists, U.S. courts will look at the agreement
to see if it determines trademark ownership rights.
However, the presumption in U.S. law that a manufacturer owns a trademark or that
a written agreement establishes ownership and governs a trademark’s use can be
rebutted. Since the purpose of U.S. trademark law is to assist the public in identifying
the source and quality of a brand, U.S. courts have found that in some circumstances
distributors can acquire superior trademark ownership rights over a manufacturer. A
distributor may be determined to be the actual owner of a trademark and the goodwill
associated with it if a U.S. court finds that the public associates the name of the distributor
with the trademark and identifies the distributor as being the source of the goods and
responsible for maintaining their quality and uniformity.
While trademark registration is an important step to protecting ownership rights in a
mark, even registered trademark rights can be lost through abandonment, improper
licensing, assignment, and other circumstances. It is thus advisable for companies
seeking to do business through distributors or representatives to enter into written
contracts that specify exactly which party owns the trademark; the terms and conditions
that govern the licensing and use of the trademark by the distributor, and the quality
control and supervision that the trademark owner will exercise over both the actual use
of the trademark as well as the products being sold under the mark.
Developing a successful business takes time and money. Losing the intellectual property
associated with a business, especially a trademark, can destroy years of investment.
As a core component of any business plan companies relying on distributors or
representatives to market their goods in the United States or abroad should always
adopt a proactive brand management policy that includes protecting the ownership of
their intellectual property and trademark rights.
Author: Andrew Danas, Partner, Grove, Jaskiewicz & Cobert LLP, Washington, D.C.
Contact: adanas@gjcobert.com
