3 Ways Foreign Companies Can Avoid Trademark Problems in the U.S.

Given the nature of today’s global and online marketplace existence, international trademark protection is increasingly critical. Trademarks, including your company name, the name of your product or service offerings, logo, tagline, or even your product and package design, can be among your company’s most valuable assets. A strong and well-protected trademark embodies the public goodwill, brand reputation, and consumer recognition that you’ve worked hard to build and now will want to continue in the U.S.

Trademark rights are territorial, meaning that they are only granted on a county-by-country basis, so having trademark protection in your home country does not automatically confer rights to the brand name in other key markets, such as the United States. A careful international trademark strategy helps companies expand and leverage their brand and business in other locations. Failing to protect trademarks in the U.S. can damage and dilute valuable assets and competitiveness and could potentially cause problems resulting in having to change a company’s entire brand.

Entering a new market, such as the U.S., presents challenges for any company looking to expand its business abroad. There are many matters to consider, such as entity formation, taxes, employment and immigration issues, finding the right distributors and business partners, and establishing a base of operations in the right place. However, protecting your intellectual property is another equally important step to take and is often overlooked. Essential questions to ask and consider include: Should the company’s trademarks be protected in the U.S.? Will the company’s use of its trademarks in the U.S. infringe the rights of others? How does the company manage the use of the trademarks by distributors or other parties?

If you are a foreign company wishing to expand into the U.S. or even just hoping to sell products via ecommerce to U.S. clients or customers, you should absolutely consider protecting your intellectual property as soon as possible. The following steps can help you avoid major trademark problems in the U.S.

1. Have a Trademark Attorney Conduct a Trademark Search to Clear Your Mark

Prior to commencing operations or selling in the U.S., you should pinpoint all trademarks your company intends to use in the U.S. This could be just one main identifier, or it could be several distinguishing unique words, designs, or tag lines you plan to use on your branded product or services.

Once you’ve identified the company’s top priority trademarks to use in the U.S., you should have a preliminary Trademark search conducted to make sure your Trademarks are not already being used in the U.S. for similar goods or services that could cause potential conflicts. These trademark searches should not only cover federal trademarks registered with the United States Patent and Trademark Office (USPTO), but also trademarks registered at the state level and common law rights via a Google Search. In the U.S. a party can acquire limited trademarks rights in the party’s geographic area of operation without taking any steps to register those rights at the federal or state level which could cause significant problems if that party is in the area you wish to sell as well.

The best and most efficient way to screen for potential trademark conflicts is to retain U.S. trademark counsel. Your U.S. trademark counsel will help analyze the marks and uses identified in the trademark search report and advise you of any potential risks associated with moving forward with a particular trademark.

• File a Trademark Application

Once you are confident that your trademarks are safe to use in the U.S., you should then absolutely consider taking proactive steps to protect them, such as filing a trademark application with the USPTO.

A federal trademark registration provides the maximum level of protection available to a trademark owner. Once the trademark is registered, the owner of the registration is presumed to have the exclusive right to use the mark in all areas of the U.S., even in areas where the owner does not operate. Additional benefits that a federal trademark registration provides:

• A federal registration provides constructive notice that its owner has the exclusive right to use the mark in commerce, subject to the rights of prior users.
• After five years of continuous use in commerce, the mark becomes incontestable, which means that the registration of the mark cannot be attacked on the basis of prior use or descriptiveness.
• The registrant of the mark may sue for trademark infringement in federal court when diversity does not exist.
• In a trademark infringement action, the registrant may be entitled to increased statutory damages.
• The registrant may use U.S. Customs & Border Protection to prevent the importation of counterfeited goods.
• A federal registration generally makes it easier to obtain trademark registrations in foreign countries.

Another critical aspect with the federal trademark system is that it permits the filing of trademark applications on an “intent to use” basis. This means that an applicant can essentially reserve the rights to a trademark that it is not presently using but has a bona fide intention to use in the future.

So, if you are planning to expand in the U.S., you should not wait until you are actually operating in the U.S. to file trademark applications. Rather, you should file intent to use applications as soon as you decide that a move to the U.S. will happen in the near future, even if that is several years away.

• Execute Written Licenses with Quality Control Provisions

Oftentimes, a foreign company enters the U.S. market by partnering with a distributor or reseller. It is critical that you document all rights granted to that third-party that relate to the company’s intellectual property, specifically trademarks.

A proper license agreement is imperative to have that specifies the trademarks that the third-party will be entitled to use, the applicable time period, the type of license (e.g., exclusive or non-exclusive), the territory, and other terms. These basic terms will vary depending on the nature of the relationship and the role the company expects the third-party to play and the agreement can either be stand-alone or can be a part of a broader agreement.

In all cases, the agreement must contain quality control provisions. At a minimum, these provisions should require the third-party licensee to maintain the quality of the licensed goods and services. They also should give the company the right to monitor quality and cancel the license if the quality standards are not maintained. The failure to include quality control provisions in a trademark license can result in the loss of the company’s trademark rights. And, if the company does lose its rights, it’s often the licensee that is in the best position to step-in and claim those rights for itself. The license agreement is an important aspect if you plan to distribute or sell with a third party in the U.S.

Overall, securing trademarks is important because it protects your company’s name from being used for similar purposes by another company. In the age of e-commerce and online business, it is more likely than ever that an American customer could find and want your product and it is easier than ever for you to be able to provide it to them. With that said, it is also easier than ever for people to sell “knock offs” and fake branded products. To ensure your goodwill is not taken advantage of it is imperative you take the appropriate steps to protect your goods or services reputation.

Securing and protecting your trademark in the U.S. from the outset can save you a lot of time, money and heartburn later, so we highly suggest you carefully consider registering your trademark in the U.S. Please reach out if you are interested in protecting your trademarks and let the McHattie Law Firm help you avoid major trademark problems in the U.S.