Trademark Law: Consequences Of Infringement And Violation

Breaking trademark law can have serious consequences, and even if accidental, you are still liable. Trademark infringement occurs when a trademark is used by a person or business other than the owner, without their permission. This can be in the form of placing it on goods or packaging, importing or exporting under the trademark, offering, marketing or stocking goods or services under the mark, or using the trademark on business papers or advertising material.

If you are found to be infringing on a trademark, the owner may choose to take legal action, and you could face a fine, a sentence and/or be instructed to stop selling a product. In the UK, trademark infringement can carry an indictment of 10 years, a 6-month sentence and/or an unlimited fine.

Before taking legal action, the trademark owner may send a cease-and-desist letter, which will likely insist on various undertakings being agreed upon to cure the infringement and avoid court proceedings.

You are still liable

Breaking a trademark law, even by accident, can have serious consequences. Trademark infringement is the unauthorised use of a trademark or service mark, or a substantially similar mark, on competing or related goods and services. Even if you don't get caught, you are still liable.

One of the first vital steps when registering a trademark is to do a trademark search. This is an important step in the process, so it cannot be missed. Therefore, accidentally infringing on a trademark is not a strong argument for defence. It is your responsibility to ensure that you won't end up with any conflicts.

If you are caught infringing on a trademark, you will likely receive a cease and desist letter. This document is sent to an individual or firm to stop any illegal activity and not to resume the activity again. If the owner finds greater evidence of your violation, they may also demand compensation for damages. Agreeing to the cease and desist order can lessen the burden on your part.

If you receive a cease and desist letter, it is important to check and review the document thoroughly. Are you really using the materials claimed by the owner? Are you using them in the way that's stated in the letter? Have you obtained an assignment from the owner? By answering these questions, you might be able to prove that your violation wasn't extensive and reduce the cost of damages.

Cease and desist letter

A cease and desist letter is a formal notification sent by a trademark owner to an alleged infringer, informing them of the ongoing trademark infringement and stipulating the demands and consequences of non-compliance. The letter outlines the owner's trademark rights, including a description of the trademark, associated goods and services, the strength of the trademark, and the date of its first use. It also provides an analysis of how the alleged infringer's trademark infringes on the owner's.

The letter demands that the recipient ceases using the accused mark and may include additional requests such as removing the trademark from existing products and advertisements, and paying profits or damages. It is important to note that receiving a cease and desist letter does not mean that legal action has been taken or will be taken against the recipient.

Trademark infringement occurs when someone uses a sign that is identical or similar to a registered trademark in the course of trade, creating confusion among the public. Trademark owners are obligated to enforce their trademark rights to maintain their distinctiveness and status as a source identifier. If they fail to do so, widespread unauthorised use may result in a loss of trademark protection.

There are several ways to respond to a cease and desist letter, and it is recommended to consult an attorney experienced in trademark disputes. Possible responses include:

• Denying infringement if there is a valid basis for doing so.
• Requesting more specific evidence and information from the trademark owner regarding the alleged infringement.
• Negotiating with the trademark owner for a licence to use the mark on mutually agreeable terms.
• Ignoring the letter, although this carries some risk as it may indicate recklessness if the recipient is later found liable for infringement.
• Filing a lawsuit against the trademark owner for a "declaratory judgment", stating that the recipient's mark does not infringe the trademark.

Trademark infringement is a criminal offence

Trademark infringement can be enforced by common law, even if the trademark is not registered. This is done through the common law action of passing off, which is based on the principle that "a man is not to sell his goods under the pretence that they are the goods of another man". Passing off occurs when the claimant's goods or services have goodwill attached to them, there has been a misrepresentation to the public that leads or is likely to lead the public to believe that the goods or services offered by the defendant belong to the claimant, and there has been damage caused to the claimant's goodwill or reputation.

Trademark infringement can result in criminal penalties, although this is less common. Judges can order infringers to pay judgments, fines, court costs, and other monetary penalties. In addition, infringers may be issued with injunctions that tell them to stop using trademarks. Prison time is possible for trademark infringement if the infringer continues to use the trademark after a cease-and-desist letter or after an injunction from the court. Ignoring the court's orders is a serious crime and this is often what results in prison time.

If you believe that your trademark is being infringed, you can take steps to stop it with the help of a competent attorney. The first course of action is usually to consult with an attorney experienced in trademark law who can draft a cease-and-desist letter. This document lays out for the violator what they are doing that is illegal, why it is illegal, and what the potential consequences may be if the violations continue. If the violator continues to impede on your trademark, your attorney can file a legal document with a court of appropriate jurisdiction to ask the judge to issue an injunction. An injunction is a court order to the violator to stop using the protected trademark or risk penalties.

The infringer must have used the mark in the course of trade

• Use through an actual dealing in the goods and/or services
• Use through an offering for sale of the goods and/or services
• Use through an intention to offer the goods and/or services which is manifested through preparatory steps showing an objective commitment to using the trade mark

A dealing generally means a sale where the mark is used on, or in physical or other relation to, the goods or services in question. In the case of *Thunderbird Products Corp v Thunderbird Marine Products Pty Ltd*, a sale of a single boat as a prototype from an American company to an Australian importer was sufficient to constitute a dealing in the goods. The trade mark occurred in brochures, invoices and shipping documents relating to the sale.

In the case of *Blackadder v The Good Roads Machinery Co Inc*, an Australian company imported machinery from the United States bearing the American exporter’s trade mark but removed it and affixed its own trade mark on the goods prior to sale. Although purchasers never saw the exporter’s trade mark, the exporter was held to have used it in Australia.

The offering for sale of goods or services, if genuine, will also suffice. It is not necessary for goods or services to have actually been sold. In *Moorgate Tobacco Co. Limited v Philip Morris Limited and Another*, it was found that there was no local use of the trade mark as a trade mark; there were merely preliminary discussions and negotiations about whether the trade mark would be used.

Use of a trade mark in advertising must be concurrent with the placing of the goods or services on the market. Advertisement where the goods/services are not immediately available for sale does not constitute use within the meaning of the Act. However, advertising will be relevant in determining an objective commitment to use.

In *Settef SpA v Riv-Oland Marble Co (Vic) Pty Limited*, it was stated that:

> a mark is used as a trade mark only if it is used with a view to facilitating or promoting the operation of a trading channel which in a business sense had already been opened to Australia. The mark must be used for the purposes of trade: W D & H O Wills (Australia) Ltd v Rothmans Ltd (1956). The forwarding of samples and brochures is not sufficient to indicate that Settef was ready and willing to fulfil such orders as it received from Australia. The purpose of these items may well have been to ascertain whether there was a market in Australia sufficient for it to be worthwhile for Settef to export here.

In *Buying Systems (Aust) Pty Ltd v Studio SrL*, the combination of activities indicated a clear intention, coupled with preparatory steps demonstrating an objective commitment to use, sufficient to ‘constitute a relevant use of the mark’ in respect of the relevant goods. The opponent claimed to be the owner of the trade mark, and in support lodged evidence showing it had obtained business cards and letterheads bearing the mark. Crucially, it had also solicited third parties to advertise in the magazine.

In *Oakley, Inc v Franchise China Pty Ltd*, Drummond J observed that:

> where the owner of a mark is able to show that it is committed to supplying marked goods to persons prepared to purchase them, activities preliminary to the actual commencement of selling the goods, such as the distribution of marked samples and marked brochures to agents, so that they could show them to prospective customers in soliciting business will probably amount to the use of the mark in the course of the trade.

Whether an objective commitment has been demonstrated will depend on all the relevant circumstances. A case for objective commitment to use the mark at a particular date may also be difficult to establish where the person claiming use has not subsequently sold or offered for sale the goods or services in question.

The following activities will not by themselves constitute use ‘in the course of trade’:

• Registration of a business or domain name
• Hiring a graphic designer to design a product label
• Use on business cards or letterheads
• Creation of a price list and order form without evidence pertaining to who has seen these documents and in what circumstances
• Use of the sign on an A-frame board followed by the words ‘Coming Soon’

The owner may demand compensation for damages

If you are found to have infringed on a trademark, the owner may demand compensation for damages. This is one of the remedies available to a claimant if they can successfully prove trademark infringement. The owner may also seek an interim injunction to prevent the defendant from continuing to infringe on the trademark before a full trial, or a final injunction to prevent the defendant from using the trademark without permission in the future. They may also demand the delivery and/or disposal of the infringing goods.

The amount of damages a claimant can claim will depend on the loss of sales or damage to the goodwill of their business, or the profit made by the defendant as a result of the infringement. In the UK, trademark infringement can result in a criminal conviction, with a potential sentence of up to 10 years' imprisonment and/or an unlimited fine.

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