Tuesday, 9 February 2010

Brand Bullies: IP and the SMEs

Afro Leo has recently come across several articles (see here and here) appealing about the difficulties faced by small companies in defending trade mark infringement claims. Soulsa failed to take an iffy decision on appeal because of cost and suffered a name change, Orange Ink used the press and found themselves agreeing to a restrictive use agreement (a positive outcome from their point of view) and the other, Bodtrade 54, were so elated in defending an opposition in the UK by Virgin Enterprises that they have claimed it as a "David and Goliath" type victory. Does this make a case for the introduction of legislation against unlawful trade mark infringement threats (as in the UK) or is it really a case that South African companies, especially SMEs, are either naive about brand protection or are simply chancers prepared to take the risk?

Trade mark litigation in RSA is often about aggressive letters of demand with so many "thereofs", "wherefores", "mutatis mutandi", "inter alias" and broad claims of "unfair advantage", "detriment", "undesirables" and "infringement" that companies capitulate in the dense wordage without properly defending the case. In reality they should consult a lawyer but often do not. Some realise that these letters, if ill-conceived, are excellent material for the likes of Noseweek (who get copies quite frequently) and others enter their own defence. Costs, without a doubt, are a factor - few income statements of SMEs even have a provision for this type of expense even though, on a worldwide level, the relative cost of trade mark litigation in RSA is surprisingly cheap. The result is that lawyers will continue to send aggressive letters with broad claims and why should they not do so? They are effective. It is also very unlikely that "unlawful threats" provisions will be introduced and the disapproving words of the SCA in recent decisions are unlikely to change the way in which trade mark litigation is conducted.

The SMEs, of course, are also brand owners with the advantages of local legislation available to them. Few though invest in filings and even fewer in cheap pre-clearance searches before choosing trade marks. Not all SMEs are chancers; many are looking to create their business as cost effectively as possible and most are ignorant of the importance of brand protection which is actually an opportunity for lawyers seeking new clients, for CIPRO seeking higher filings and for the SAIIPL - one acronym that sadly, very few SMEs even know about.

Thanks to Mary-Ellen Field for the Forbes article.

4 comments:

Barry Eagar said...

I think legislation against unlawful trade mark infringement threats has merit. In Australia, such legislation helps to prevent those with financial muscle from too much flexing. A threat of legal proceedings can be extremely distracting particularly for small business. Then there's the cost of legal counsel to add to that distraction.

Paul Asiimwe said...

Darren,



In my experience, small firms have failed to appreciate the long term cost of not filing for protection. This in many cases is because their plans are short term and so if trademark protection cannot be justified in terms of short term returns, it becomes a problem for them.



One way of dealing with this problem is through industry associations looking out for SME interests. They have the resources and channels of discussing the long term benefits of brand protection in a manner that lawyers cannot.

Sipi Law Associates
Advocates, Patent & Trademark Agents
Investment & Corporate Legal Advisors
Teachers House, Suite 204, Bombo Rd,
#4180, Kampala, Uganda
Tel: +256.312.272921/ +256-414-235391
Fax:+256.414.235391/ Mobile: 256.712.403763
Blog: http://www.afro-ip.blogspot.com/
Web: http://www.sipilawuganda.com (Member INTA)

Darren Olivier said...

Thanks - Barry, you posted about Commercialisation Australia funding on Bazpat (http://bazpat.blogspot.com/2010/02/commercialisation-australia-to-cover-ip.html) which may be an idea (if adopted in RSA)to assist SMEs even in non techno environs. I guess it meets with Paul's suggestion of similar type industry associations. Unlawful/groundless threats provs can be a powerful deterrent, I agree though also, controversial.

Adam said...

Interesting to see that RSA has a problem with this. Is it a sign of a mature trademark system? Also interesting to hear that Australia has legislation against bully behaviour.

WTR just published an article on this topic in the US. A senator is recommending a study into the problem.

"Trademark monsters: tackling Lanham Act bullies" here -
http://www.worldtrademarkreview.com/daily/Detail.aspx?g=076a4a6d-c684-4155-9175-ea6833614b9f

Adam Smith
World Trademark Review
www.worldtrademarkreview.com