DigiTimes
April 1. 2009

The United States has been one of Taiwan's most important trading partners for years. When creating and marketing brand names in the U.S., Taiwanese companies should bear in mind the following U.S. legal considerations about trademark rights.

I. Trademark Selection

To be legally protectable in the United States, a trademark must have a certain degree of inherent distinctiveness (i.e., it has little or no meaning as applied to the products or services, except as a source-identifier), or acquired distinctiveness, known as "secondary meaning" (i.e., consumers associate a particular descriptive term for a product or service exclusively with a single owner). "Fanciful" marks (i.e. EXXON for gasoline), "arbitrary" marks (i.e., APPLE for computers), and "suggestive" marks (i.e. COPPERTONE for suntan lotion) are all inherently distinctive and immediately registrable, while "descriptive" marks (i.e. BEST BUY for an electronics store) are registrable only after consumers identify the trademark as a source-indicator. Therefore, when selecting brand names for the U.S. market, Taiwanese companies should strive to adopt inherently distinctive names, because they do not require proof of secondary meaning before becoming protectable.

II. Trademark Searches

Once a trademark is selected, a trademark clearance search should be conducted to ensure that no confusingly similar marks exist in the marketplace. The search will help to determine whether the proposed mark is confusingly similar to any other marks that might give rise to future disputes. In addition, if a proposed trademark is generally similar to a host of other third-party marks—a "crowded field" situation—it will be deemed relatively "weak," suggesting that an alternative trademark should be selected.

The results of the search should be analyzed by a U.S. attorney. A clearance opinion letter provided by U.S. counsel will also help establish good-faith adoption of the trademark if a later dispute develops with a third-party.

III. Trademark Use and Registration

In addition to registration, trademark rights can also be acquired through mere use of a mark in the U.S. However, registering the trademark with the U.S. Patent and Trademark Office ("PTO") provides several advantages, including providing a constructive notice and a legal presumption of the trademark ownership and the ability to prevent importation of infringing goods.

To obtain a registration, an applicant must either be using or have a bona-fide intent to use the mark in the U.S. If the trademark is already in use, a "use-based" application may be filed. If the trademark is still in development, an "intent-to-use" application can be filed. Intent-to-use applications are advantageous because they establish a constructive priority date of use before the trademark has actually been used in the United States.

IV. Licensing

In Taiwan, the lack of quality control over a licensee's use of a mark does not adversely impact the validity of a trademark license. Under U.S. law, however, if a licensor does not exercise adequate quality control, the owner may lose its exclusive rights in the mark.

Thus, a license agreement needs to allow the mark owner to routinely inspect the licensee's goods and manufacturing so as to ensure it is complying with the stated quality standards. It should also provide that any unapproved products be destroyed.

V. Enforcement

In the U.S., failure to enforce trademark rights against third-parties can result in a loss of trademark rights. As such, it is important for trademark owners to monitor and police potentially infringing third-party marks.

A. Opposition and Cancellation Proceedings

A trademark owner should monitor third-party trademark applications filed with the PTO to ensure that no identical or confusingly similar trademark applications are filed. If an application is discovered, the owner can oppose its registration through an opposition proceeding. If the offending mark has already been granted a registration, the mark owner can then seek to cancel the registration.

B. "Laches" and "Acquiescence" Defenses

Laches defense refers to a trademark owner's unreasonable delay in bringing suit, that results in prejudice to the defendant. Acquiescence defense requires some affirmative word or act of the trademark owner that explicitly or implicitly consents the defendant's action. Accordingly, trademark owners should take care to timely and aggressively police their trademark rights.

VI. Conclusion

A successful "Branding Taiwan" strategy requires both a sophisticated business plan and a sound legal strategy. Taiwanese companies that understand the protections and limitations of U.S. trademark law will be in a better position to maximize the value of their brands and leverage the ever-growing consumer recognition of "Made-In-Taiwan" as a reference to high quality.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.