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Trademarks - The Importance of Registering and Policing Your Brand

09/09/2012 | Fall 2012 Newsletter
A recent federal court case, Sunearth, Inc. v. Sun Earth Solar Power Co., illustrates the importance of registering your trademark and taking prompt action to prevent others from using it.

In the Sunearth case, a U.S.-based company started using the name Sun Earth in connection with solar collectors in 1978. Even though it had achieved recognition and success as one of the largest solar collector producers in the country, it never registered its trademark with the U.S. Patent and Trademark Office.

In 2004, a Chinese company entered the U.S. solar energy market by establishing a U.S. subsidiary to sell solar collectors using the name Sun Earth. A few years later, in 2010, the Chinese subsidiary filed for and obtained a trademark registration for the Sun-Earth mark. The Chinese subsidiary also registered the domain name sun-earth.com.

Subsequently, the U.S. company finally filed a trademark application, but the application was rejected because the Chinese subsidiary had already filed an application.

Soon, customers started confusing the companies at tradeshows. After waiting more than two years, the U.S. company finally filed suit against the Chinese subsidiary. As one of its defenses, the Chinese subsidiary argued that the U.S. company had lost or abandoned its rights by waiting too long to take action.

Fortunately for the U.S. company, the federal court ruled in its favor, and entered an injunction against the Chinese company, based on the fact that the U.S. company had been first to use the name in the United States.

The court’s decision confirmed the principle that, generally speaking, under U.S. trademark law, if a company can show that it started using a name first, and that a second company’s use of the name is likely to cause customer confusion, then the first company can get a court order to stop the second company from using the name, even if the second company was the first to register.

But, the U.S. company’s job in enforcing its rights would have been much easier if: i) the U.S. company had simply registered its name when it first started using the name, and ii) the U.S. company had taken earlier action to stop the Chinese subsidiary from using the name.

As the case demonstrates, registering a trademark serves at least two important purposes.

First, registration may make it more likely that you can obtain additional penalties if you sue and win. If the U.S. company had registered the name, then, in addition to obtaining an order stopping the Chinese subsidiary from continuing to use the name, the U.S. company could have more likely also obtained an award for treble damages and attorney’s fees.

Second, registration puts the world on notice that you claim rights to the name. If the U.S. company had simply registered the name back in 1978, the registration itself might have deterred the Chinese subsidiary from ever starting to use the name.

Finally, as the case teaches, it is important to aggressively police your brand. If the U.S. company had taken prompt legal action against the Chinese subsidiary, the U.S. company could have avoided the argument that it lost its rights because it waited too long.