What to do when your brand gets taken for a ride

Free riders try to take advantage of the reputation attaching to a trade mark. This can be a tough problem to tackle because a likelihood of confusion is traditionally required to succeed in an action against a free rider.

But trade mark and unfair competition laws have evolved in a number of jurisdictions to provide broader protection against free riding. This includes recent decisions not requiring a likelihood of confusion where the public has made a connection between the sign used by the free rider and the trade mark. This has been taken as proof that the free rider has taken unfair advantage of the reputation of the trade mark.

Today’s working question will examine the exact status of any available protection against free riding. It is not always clear whether the protection can be evoked at all, and, even if it can, the requirements for protection and the scope of protection can be unclear. The working question will explore whether changes to the status quo are desirable.

Graciela Pérez de Inzaurraga of Argentinian law firm Hausheer Belgrano & Fernández is the chair of the Q245 working committee. She says free riding is a common problem. “But when this situation arises some trade mark laws – not in all jurisdictions, but in some jurisdictions – are not yet equipped to deal with this issue because there is not confusion,” she says.

Free riding is seen as a problem because they are taking advantage of something the trade mark owner has invested time and money in building a reputation around. De Inzaurraga notes some situations where the use may be legitimate, however, for example in comparative advertising or if there has been prior use in good faith.

Finding some consensus

The Reporter General received 47 reports for this working question. The reports reveal broad consensus on the issue.

“There was consensus, apart from some jurisdictions, that there should be legislation to prevent this use and there was also consensus on what could be called enhanced protection,” de Inzaurraga says. “Let’s say it is outside the boundaries of confusion to have this enhanced protection, the mark that’s being enforced should be well known or at least known in the relevant segment of the public or should have a unique distinct character.”

Most groups responded that their jurisdictions provide for protection against the taking of unfair advantage of trade marks. However, exceptions to this were Australia, Brazil, Canada, Egypt, Russia, the United States and Venezuela. The US is strongly against a statutory provision on free riding because it would create conflicts with existing statutes, precedents and policies, lead to litigation and possibly be unconstitutionally vague and indefinite.

A majority of the groups also agreed that there should be protection against similar use. But the summary report notes that a significant minority disagrees, meaning there is probably not sufficient basis for a resolution on this aspect.

The reports reveal most countries have multiple causes of action available that can be invoked cumulatively, in many cases at least under trade mark law and unfair competition law.

The plaintiff generally bears the burden of proof but the defendant bears the burden of proving any defences it invokes. However, in Brazil this burden can be shifted if the consumer is deemed by the court to be in a less favourable position to produce evidence. In Uruguay, the burden of proof can be shifted if it is clear that one party has evidence in its possession that it does not reveal.

Forty-one of the groups submitting reports believe there should be protection against the taking of unfair advantage of trade marks as defined in the working guidelines. Only Australia, the Republic of Korea, the US and Venezuela did not agree. Australia said that it has enough checks and balances in place, making further cause of action unnecessary.

A large number of groups deem harmonisation in the area of free riding desirable, although disagreeing with this notion were the Czech Republic, Egypt, Hungary, New Zealand, the Republic of Korea, the US and Venezuela.

No consensus

No clear consensus for protection emerged from the reports. Some suggestions for the requirements for protection included a certain level of reputation, a connection between the invoked trade mark and the sign used by the third party, some kind of unfair advantage, and with the trade mark owner generally bearing the burden of proof.

Some suggestions against and/or limitations to the protection included parody, freedom of expression, comparative ­advertising, prior use in good faith, “due cause” and “fair use”.

The groups generally agree that it should at least be possible to invoke the protection in civil proceedings. Many also find that it should be an option in criminal and administrative proceedings.

De Inzaurraga notes, however: “There was no consensus in achieving a definition for what is taking unfair advantage of another party’s trade mark. Consensus with regard to definitions is difficult to arrive at.”

She concludes the preliminary draft resolution that the working committee has been working on looks good. “It is meaningful and makes a stand in connection with the topic,” she says. “Based on the reaction of delegates to the preliminary draft I think the debate will be centred on what requirements need to be met to trigger this special protection. That will be one of the key topics to be debated. A second topic will be concerning defences to be [raised in enforcement actions].”

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