Going Global: How to Protect Your Brand Overseas

Trademarks are among the most valuable assets of a business. All too often, developing a trademark portfolio strategy is the last thing on a growing company’s mind when viewing the tremendous opportunities international expansion presents to a brand owner. Unfortunately, failing to have a brand strategy in place well before product ever ships can be an open invitation for opportunists or unprincipled competitors to begin registering trademarks, cybersquatting or selling counterfeit or gray market goods. But there are ways to make sure you and your brands are protected; knowing the basics will help you make more informed decisions.

A trademark portfolio may include registered trademarks and service marks, trademarks that are in use but not necessarily registered, trade dress (i.e., the packaging or design of a product) and domain names, which are usually trade names or word marks combined with a top level domain (TLD) or a country-code-top-level domain (ccTLD).

The first step in building a global brand strategy to protect your trademark portfolio is to determine which marks and regions and/or countries are important from a business and marketing perspective. Early assessment of any barriers to entry or brand protection is key to setting a strategy. Once countries and brands are selected, trademark searches and clearance reviews should be conducted in each target country to determine where the mark is protectable and where third party use may pose a barrier to entry or require additional negotiations to secure your right to introduce your products into the marketplace. 

Once a mark is cleared, a timetable for registering available marks should be established. Because trademarks get their protection from the national laws of individual countries, the manner in which trademarks are protected vary greatly by country. Generally, it is best to apply to register a trademark sooner rather than later—preferably before its use or adoption is announced in a particular country. However, there are some countries where market entry should be achieved by an immediate physical presence. Thus, it is important to be aware of the trademark system in your target countries.

Getting There First
In general, all countries that recognize trademark protection use one of two systems: “first to file” or “first to use.” In the “first to use” system, trademark rights belong to the first to use the mark in commerce, regardless of whether the mark is registered. Rights in unregistered marks are known as “common law” rights. While registration is not necessary, it generally provides some important benefits regarding ownership, validity, scope of use, remedies and ease of enforcement.

By contrast, “first to file” countries vest superior rights in the first party to file an application to register a mark (regardless of whether they are the first to actually use the mark). While some countries recognize limited exceptions for “well-known” unregistered marks, in most cases, the first party to file an application has superior rights, even if you have been using the mark in that country for years.

The “first to file” system allows unscrupulous parties to take control of your trademark. They can use it as a bargaining chip in negotiations, try to sell it back to you or even use it against you by having genuine products seized at the border as “counterfeits.” Regardless of what they do with it, once they have your mark, your options are limited and generally expensive.

In “first to file” countries, it’s critical to file national trademark application(s) very early in the process. In many cases, applications should be filed even before conducting meetings or negotiating with third parties (like distributors or manufacturers) in those countries. Getting your application filed will go a long way toward avoiding the preceding scenarios.

Once a filing and/or use strategy has been established, the next step is to consider how and when your product introduction will occur. When entering into negotiations with potential distributors it is very important to state upfront in writing who has control of your trademarks, trade dress, domain names and copyrighted materials. An all-too-common scenario involves a potential distributor that files a trademark application for a brand owner’s mark without permission and then attempts to force an exclusive contract, thereby limiting access to a particular market.

It is vital to review any licensing and distributor agreements and create language to address how, when and where your marks are to be used and ensure that you retain the rights to register your trademarks and any domain names containing your trademarks. Such agreements should include language that stipulates how products should be marked and the proper use of trademark ownership symbols (i.e., use of the TM, SM and ® symbols) in advertising materials and publications.

Protection Plans
Once trademark rights have been secured, establish a plan for the ongoing protection of your brand in each region. The nature of any brand enforcement plan will vary depending upon budget, product type, importance of the mark and local laws and regulations. The best protection plan will include both offensive and defensive elements.

Offensive brand protection tools include appealing or opposing the registration of identical or confusingly similar marks, issuing cease-and-desist letters to potential infringers, publishing warning letters and identifying distributors, manufacturers and financial sources of potential counterfeiting.

Defensive brand protection tools include watch services that monitor trademark filings and registrations around the world; on the ground investigations by outside counsel; distributors and/or vendors to identify potential infringers; Internet policing to look for online infringement in the form of domain names, keywords that divert traffic and counterfeit sales on discount or auction websites; and working with customs and local agencies to identify counterfeit goods and minimize the flow of imitation products between markets.

A brand protection plan will also take into consideration steps for monitoring the flow of parallel imports or gray market goods. Billions of dollars in revenue per year are lost to gray market diversion in the U.S. and worldwide, along with other possible damage, such as negative consumer experiences that damage the goodwill and reputation of a brand and issues surrounding consumer protection, product integrity, service and warranties and recall notifications, according to a report by the International Trademark Association. 

Gray Market Goods
Unlike counterfeit goods, gray market goods are genuine branded products sold without a trademark owner’s consent. The extent to which a trademark owner can control the distribution of its branded goods is limited by the concept of exhaustion. According to this concept, once a trademark owner sells its branded goods within a particular country it must allow the resale of that product within that country because its rights have been “exhausted” by the first sale. There are two types of exhaustion regimes: national, which allows trademark goods that have been exhausted in that country or region to be resold but prohibits resale outside of that area; and international, which allows trademark goods that have been exhausted to be resold in countries or regions other than the country or region of origin.

Because remedies for parallel imports are country specific, it is important to consult local counsel to determine what remedies may be available under trademark law. In some countries, sale of gray market goods is allowed under trademark law but protection under copyright laws may be available, while in other countries both criminal and civil protections are available for the trademark owner to prevent third parties from importing parallel goods.

Companies can take steps to mitigate the impact of gray market goods by drafting supply, distribution and licensing agreements that include language that addresses the gray market goods and the parties’ responsibility for monitoring and reporting of such imports. These agreements should further include language outlining a manufacturer’s warranties to limit the ability of purchasers of gray market goods to rely on those warranties unless they return the goods to the place of original purchase. That way information on the source of gray market activity can be collected through both internal and external sources, and consumers can be educated about known parallel imports and any different packaging or lack of the manufacturer’s warranty that may be used to identify such gray market goods.

The final step in the process is to establish a program to ensure the maintenance and renewal of any registered trademarks. Most trademark registrations are valid for a period of 10-15 years depending on the country of registration. However, marks may become vulnerable to cancellation due to periods of non-use in many countries. Accordingly, it is important to audit your trademark portfolio periodically to ensure proper use and timely renewal of your marks and to document any reasons for non-use within each country.

While this may seem like a lot to go through to protect your brand, at the end of the day, the process and investment will yield a stronger brand—free of third-party challenges and ready to connect in the minds of consumers.