Q: Jane got exclusive distribution rights in Japan for ABC Bagels, one of the best-selling bagels in the United States. The contract requires Jane to regis-ter the trademark "ABC Bagels" in Japan. What is the purpose of trademark registration?

A: Suppose you were the owner of ABC Inc., manufacturer of ABC Bagels. ABC Inc. expended a huge amount of money for the research and development to make tasty and healthy bagels and used a popular basketball player to advertise the bagels.
DEF Corp. which became aware of ABC Inc.'s success, starts to sell bagels under the same name, ABC Bagels. The customers would not be able to distinguish between the products of ABC Inc. and those of DEF Corp., and as a consequences, ABC Inc. is deprived of a substantial portion of its sales.

Furthermore, if the quality of DEF Corp.'s products was inferior, the reputation of ABC Inc. would be damaged. on the other hand, DEE Corp. obtains unjust profit by getting a free ride on ABC Inc.'s money and efforts. Before such things happen, you would want to monopolize the mark "ABC Bagels". The trademark registration system was invented to gratify such a desire. Once you register your trademark, you can exclude others from using the same (or similar) mark. This is the rule, however, there are exceptions as described below.

Q: Jane asked a patent attorney to register "ABC Bagels," but was later told by the attorney, who made a trademark search, that "ABC Bagels" was already registered by a company in Japan. What happens?

A: In Japan, any person may register a trademark without having used such a mark. Under this system, it is possible for a dishonest person to register a mark used by another person and intimidate such a person into purchasing the registered trademark at an unreasonable price. This happens not only with respect to trademarks used in Japan but also to famous trademarks owned by a foreign company that has not started business in Japan.

Q: The Japanese system you mentioned sounds defective. Why don't you protect the real user of the mark?

A: There are countries that give a trademark right to a person who first used a mark. The problem with this system is the difficulty in determining who used the mark first. Today, most countries in the world employ a trademark registration system, although same countries still require proof of use of the trademark before granting registration.

Q: Should Jane purchase the trademark from the holder of the registration?
A: No, there are other methods to cope with the problem. If ABC Bagels were sold in Japan and its name was well-known in Japan (or a part of Japan) as the mark of ABC Inc. at the time of application for registration of the mark, ABC Inc. may demand a trial for invalidation of the registration.
Q: What happens if ABC Inc. has not sold bagels in Japan and the mark "ABC Bagels" was well-known only in the United States?.

A: ABC Inc. may still demand invalidation of the registration if it could prove that the trademark was registered for unfair purposes, e.g. to obtain unjust profit or to injure other person.

Q: If the above methods were not available to Jane, what can she do?

A: If the trademark "ABC Bagels" was not used for a period of three years by the registrant or its licensee, any person may demand a trial for cancellation of the registration. Although a person may obtain a trademark registration without using the mark, if such person fails to use the mark for an extended period of time, the law deems it inappropriate to give a monopoly to such person. After all, the trademark registration system is designed to protect a person who has a need to use the mark.

In this connection, if you wish to negotiate with the registrant before actually demanding the trial, it is necessary to send a notice in the form of a "contents certified mail" (by which you can establish the contents of the mail and the date when it was posted). The notice should state that if a reasonable settlement should not be reached within a period of three months, you will make a demand for cancellation trial.

The author, Jun Norisugi, is a practicing lawyer at Norisugi & Associates and specializes in international business affairs.