Research Trends and Conclusions: Trademarks 2010
Emma Notfors -
Recent high-profile cases such as L’Oréal v Bellure and Daimler v Sany and the litigation over the right of Google’s Adwords to use trademarks as keywords in searches prove that trademark holders are still willing to protect marks and bring infringement cases despite the current economic climate.
Arguably the importance of aggressive trademark protection has increased during the recession. Third parties hoping to ride on the coat-tails of a more established brand or to gain some of their competitors’ market share tend to use more aggressive tactics in straitened times, including the use of advertising to attempt to damage the positive image of a brand.
That said, the need to protect brands from infringement is tempered by the necessity to choose battles wisely. This is not only to satisfy the budgetary restrictions of clients – it represents a move to a more sophisticated approach to brand protection. Trademark lawyers are refining their practices to adjust to an ever-growing plethora of threats to brands, complicated IP strategies and budgetary constraints.
Brand Protection Strategies
What remains clear is that trademark infringements continue regardless of the state of the economy or the business environment.
Certain countries are hotspots for trademark work. One jurisdiction that was pointed out several times during our research as a source of new challenges and opportunities for the trademark bar was China. More and more counterfeit goods are being produced in China and this is predicted to continue. On the other side of the coin, foreign companies coming into China are often faced with the situation where domestic companies have pre-existing intellectual property rights that conflict with their own. Furthermore, foreign trademark holders must deal with a different business culture and although they may have some experience of the Chinese market, dealings with local officials continue to present many obstacles. Clearly, securing trademarks, ensuring that manufacturing agreements are carefully worded and choosing the correct forum for disputes can make all the difference in jurisdictions like China and it is in these situations when efficient and knowledgeable local counsel who are familiar with and can negotiate with local authorities are most useful to their clients.
Along with the challenges that specific countries produce for trademark lawyers there is a notable international source of trademark disputes and infringements – the internet. Because of the development of new online technologies, advertising methods and commercial venues, the law can find it difficult to keep up. This lag creates a space that allows parties to operate in areas where there is often no legal precedent. The case of third parties bidding on the phrase ‘Louis Vuitton’ as an adword earlier this year is an apt example of the problems faced by mark holders online. These call for a more sophisticated response from trademark lawyers – it is important to understand what the client wants to achieve and how damaging a particular instance of infringement is to these aims. It is perhaps not worth lodging a complaint for every infringement if the infringer can simply change their domain name or link to a different one – the level of brand protection must justify its cost.
Nonetheless, brand protection has increased in importance during the economic downturn – in a global marketplace where many businesses offer similar products and services to well-informed, cost-conscious consumers, products rely on their brand to distinguish themselves. Products marketed as luxury goods or as budget options will always appeal to their target consumers, but it is their branding that differentiates them from competitors. Trademarks can encapsulate a product’s reputation, its consumers and even its history and these are worth protecting from competitors who would seek to assimilate or tarnish a product’s reputation. This is particularly true during a recession, when competitors have shown themselves eager to tread on the toes of more established brands in an attempt to get ahead. As a result clients are reportedly becoming more willing to litigate in crucial cases in order to protect their assets and reputation, even despite the unwelcome expense.
These nuanced factors can be compounded when the distribution network or advertising reach of a product is multi-national. Clearly, there are varying degrees of intellectual property enforcement in different jurisdictions. The expansion of markets makes it more likely that there will be disputes when a newcomer to a market files for a trademark that another company with an established local presence considers to clash with their own IP rights. Knowledge of regulation and variations in their enforcement can become another arrow in the quiver of the resourceful intellectual property lawyer. During our research, many interviewees with international experience or from firms with international IP networks claimed that awareness of these variations and the knowledge of how to use them could be an advantage.
Fees & Logistics
No matter what trademark protection strategies a legal team advises or what variations they are able to use to their advantage, the one factor informing the work of all trademark lawyers comes in the form of the financial pressures their clients face. The billable hour is increasingly threatened and some of our sources see this as a positive development. As a billing method, it can create a tension between the interests of the client and the law firm in that it can be perceived as rewarding inefficiency, while on the other hand seeming to be the most convenient method of determining the value of the legal service provided. Clients are now demanding lower legal costs and are finding ways of making sure that they are getting the best deal. One lawyer interviewed during our research claimed to have been hired by three separate high-profile clients to shadow the work done for them by other law firms in an attempt to make sure that they were providing maximum efficiency; which resulted, in one case, in a change of representation. Of course, not all companies resort to these methods.
Increased financial pressure has had inevitable consequences on the work of private practice lawyers, both in terms of how they work and the sort of work they undertake. Firstly, companies are increasingly choosing to keep routine work (such as filing and the administrative side of trademark work) in-house or outsourcing it to legal services providers. While the quantity of work available to commercial trademark lawyers may have reduced, the complexity has increased. This has been seen in particular for clients with reduced resources, who are often giving complicated work to their external counsel, slimming down their in-house legal team and outsourcing filing work. In the UK, Magic Circle firms stopped their filing practices several years ago and many full-service firms are downsizing their intellectual property practices overall. This has benefited boutique IP firms and those smaller full-service firms who have not yet developed core IP practices. Overall, this has resulted in a drop in the amount of administrative work and also means that at law firms, individuals working in trademarks are more likely to be ‘pure lawyers’ than trademark agents.
A development that we have witnessed in other practice areas and which seems to hold sway for trademark lawyers as well is that clients are awarding a larger proportion of their external legal work to a law firm in return for a reduction of fees. Lawyers are increasingly handling brand management projects that often involve a portfolio of intellectual property assets. When a portfolio belongs to a multi-national company, this can add the increased difficulty of management of intellectual property rights across numerous acquisitions, which may not necessarily be subject to scrutiny by central management. The logistical issues of co-ordinating brand protection internationally mean clients can award work to full-service firms with an international network or to a series of boutique firms. Often, law firms must come to an arrangement that incorporates elements of both, as it is essential to ensure a high quality of legal protection throughout a client’s international network. Having an international network of offices or contacts with other firms means that lawyers can be aware of – and take advantage of – variations between jurisdictions and make sure that they are providing a consistent level of service.
The past three years have served to underline the importance of brand integrity to the business strategies of successful multi-national companies in all industries. Lawyers and their firms must prove that they possess the qualities that will allow their clients to be confident in the services they are paying for. Understanding clients’ needs, knowing what challenges they face, sophisticated legal responses to these challenges and sensitivity to relationships and business cultures remain the most important characteristics of excellent trademark protection. The legal industry must now provide this level of service while competing for a reduced level of work, so it is more important than ever that these qualities be in evidence.