Trademark Law: Consequences Of Ignorance And Intentional Infringement

Trademark law protects a business's identity, helping consumers find their favourite brands when shopping. Violating a trademark, or infringing, can cause consumer confusion, and there are legal penalties for doing so. The consequences of trademark infringement can be severe and can alter your financial situation. A trademark owner can force a violator to stop using their mark by obtaining a court order, or injunction, prohibiting the infringer from continuing to use the infringing mark. If the infringer disobeys, they can be held in civil contempt of court and fined. The owner of a trademark can also sue a violator for cash damages, which can be based on the profit made from the infringing products or the profit lost by the trademark owner. The violator may also be required to pay the owner's attorney fees and court costs.

Criminal penalties

Trademark infringement is defined by the Lanham Act as the unauthorised use of a trademark that is likely to cause confusion among consumers as to the origin of the goods or services being offered. This occurs when the infringing use of the trademark is similar enough to the original trademark that consumers are likely to believe that the goods or services are produced, authorised, or sponsored by the owner of the original trademark.

Criminal trademark infringement is identified by the Lanham Act (15 U.S.C. §§ 1051 et seq.), primarily when intentional counterfeiting or piracy occurs. According to the law, it is a criminal offence to intentionally use a counterfeit trademark in connection with the sale, offering for sale, or distribution of goods or services. This act becomes a federal crime when it is capable of deceiving or causing confusion.

If charged and convicted with criminal infringement of someone else's intellectual property through trademark infringement, one could face as much as ten years in prison, depending on the circumstances and the specific violation, and fines of up to $2 million. The severity of the crime is generally measured by the profit obtained through the IP infringement.

In addition to imprisonment and fines, other criminal penalties for trademark infringement can include:

• Forfeiture and destruction of counterfeit goods and any equipment used to produce them.
• Restitution: Courts may order defendants to pay restitution to the trademark owner, compensating them for the financial losses caused by the infringement. The owner may also file for civil damages separately from the criminal charges.

Cease-and-desist letters

The purpose of a cease-and-desist letter is twofold: firstly, to notify the alleged infringer that the trademark holder believes that infringement is taking place; and secondly, to instruct the alleged infringer of the demands of the trademark holder, which may include injunctions of use and monetary compensation.

The letters are usually structured in a predictable way, beginning by outlining the owner's trademark rights, including a description of the trademark, the associated goods and services used, the strength of the trademark, and the date of its first use. The letter will then describe the alleged infringer's trademark and goods and services, and argue why this new trademark infringes on the owner's. Finally, the letter will issue a series of demands, which may include the immediate cessation of use of the trademark, removing the trademark from existing products and service advertisements, and paying profits.

It's important to note that receiving a cease-and-desist letter does not mean that legal action has been taken, or will be taken. If a lawsuit has been filed, the recipient will be served with a complaint and a summons.

There are several ways to respond to a cease-and-desist letter, and it is recommended that the recipient consults an attorney experienced in trademark disputes. Options include:

• Denying infringement, if there is a basis for doing so
• Requesting more specific evidence as to why the trademark owner believes there is an infringement
• Electing not to respond—however, this decision should not be taken lightly, as doing nothing carries some risk
• Negotiating with the trademark owner for a license to use the mark on mutually agreeable terms
• Filing your own lawsuit for a "declaratory judgment" stating that your mark does not infringe the trademark

Payment of damages

There are five types of monetary damages that may be awarded in a trademark infringement case, and the decision to pursue these damages depends on the facts and circumstances of the case. These five types include:

• Disgorgement of the defendant's profits
• Actual damages
• Reasonable royalties
• Attorneys' fees in exceptional cases
• Costs

Actual damages can be measured in several ways, including:

• Lost profits that the plaintiff would have realized if not for the infringement
• Loss of goodwill acquired through the association of consumers with the plaintiff's mark and the quality of goods and services sold under that mark
• Corrective advertising required by the plaintiff to alleviate the impact of the defendant's infringing activities on the consumer public
• Reasonable royalty, or the amount of money the defendant should have paid the plaintiff if they had licensed the trademark in an appropriate and agreed-upon manner

It's important to note that a judgment in favor of the plaintiff does not guarantee an award of monetary damages. The plaintiff generally has to prove unfair enrichment or confusion to receive such an award. Additionally, the Lanham Act does not provide clear guidance on when and to what extent monetary damages should be awarded, leaving this decision mostly up to judges. As a result, monetary relief is less common and more challenging to obtain than injunctive relief, which forces the defendant to cease the actual trademark infringement.

Injunction

There are two primary types of injunctions: preliminary and permanent. Preliminary injunctions serve as immediate relief, aimed at halting infringing activities before a full trial occurs. They are granted based on the plaintiff demonstrating a likelihood of success on the merits, potential irreparable harm, and a balance of equities favoring the injunction. Conversely, permanent injunctions are issued after the resolution of the case, establishing a long-term prohibition against further infringement. These injunctions are predicated on a finding that the plaintiff has successfully established a trademark violation and that ongoing infringement would cause irreparable harm.

Courts assess several factors when determining whether to issue an injunction, including:

• Likelihood of success on the merits: Evaluating the strength of the trademark rights involved in the case.
• Potential irreparable harm: Assessing the risk of trademark dilution and loss of brand distinctiveness.
• Balance of hardships: Weighing the harm to the trademark owner against the potential harm to the infringer if an injunction is granted.
• Public interest: Focusing on protecting consumers and ensuring fair competition in the marketplace.
• Intent of the alleged infringer: Malicious intent strengthens the case for an injunction.

The consequences of failing to obtain an injunction in trademark cases can be significant. Without an injunction, the infringing party may continue the unauthorized use of the trademark, leading to substantial financial repercussions and reputational damage for the plaintiff.

Civil penalty

Civil penalties for trademark infringement can vary depending on the specific circumstances of the case and the laws of the jurisdiction in which the case is being heard. However, here is some general information about civil penalties for trademark infringement:

Civil penalties for trademark infringement can be severe and include a range of consequences. One common civil penalty is a cease-and-desist letter, which informs the infringing party that their actions are violating the trademark owner's rights. If the infringing party does not comply with the cease-and-desist letter, they may face further financial and legal consequences.

Another possible civil penalty is the payment of damages to compensate the trademark owner for any harm caused by the infringement. This can include monetary damages for lost profits, as well as damages for any dilution or tarnishing of the trademark, including damage to the trademark owner's reputation. In some cases, the court may award damages that exceed the actual amount of profits lost, especially if the infringement was found to be intentional.

The infringing party may also be subject to a civil penalty in the form of a monetary fine imposed by the court. The court will determine the amount of the fine, which is typically based on the severity of the infringement and the financial loss suffered by the trademark owner.

Additionally, the infringing party may be required to pay the trademark owner's attorney's fees and court costs associated with bringing the lawsuit. This is often done to avoid the high costs of litigation and can be negotiated as part of a settlement agreement.

It is important to note that trademark infringement can also result in criminal penalties, particularly in cases of intentional counterfeiting or piracy. These criminal penalties can include imprisonment and significant fines.

Frequently asked questions