Trademark disputes

To sue or not to sue, that is the question. As recent law cases have shown, it's sometimes better to take a balanced view over trademark infringements. Emma Allen reports

It's every small business owner's nightmare. A letter from a top City law firm telling you you're being sued for trademark infringement by a large multinational company, with limitless legal funds and an efficient PR machine in place. Earlier this year, this is what happened to Tracy Daly, a Yorkshire pub landlady, when fast-food giant KFC threatened to take her to court for using the words "Family Feast" to advertise the pub's Christmas menu.

Arguing it was an infringement of its own Family Feast trademark, the chicken chain issued a lawsuit to persuade the pub to change the wording, but the David and Goliath image of corporate heavyweight versus small country pub caught the media's attention and KFC faced mounting public criticism. Eventually, faced with a potential PR disaster, it backed down and dropped the case, with a spokesman saying at the time that "things had been blown out of all proportion".

While KFC might have attracted considerable negative publicity for being so heavy-handed, companies nevertheless have to make sure that other businesses are not infringing their trademark rights, according to Peter Jennings, partner in intellectual property at law firm Cripps Harries Hall. Some companies will also deliberately adopt a policy of pursuing every infringement, no matter how small or harmless it may seem. "Then they become known as ‘don't mess with us'. It's a way of warning off potential misusers of that brand," he says.

Research

So how can businesses avoid a costly lawsuit for using what appears to be innocent generic language? The answer, Jennings says, is to do as much research as possible. "If you're starting up and want to use a logo or brand, do a Google search and consult directories in your industry sector to see if they're already in use," he suggests.

He also recommends doing a trademark search by visiting the Intellectual Property Office website, where you can search online for free. Once you've found your logo or desired company name, you should apply for a trademark registration, which is valid for 10 years and costs £200.

For Andrew Radford, owner of Edinburgh's Blue Bar Café, who found himself embroiled in a three-year legal wrangle with drinks firm Allied Domecq over the use of the name Blue, it was the fact that he'd applied to register the trademark first that ultimately won him the case. "Our application date was crucial in proving that the name was ours, which also meant that other bars and restaurants couldn't use Blue in a similar way after we'd applied for the trademark," he explains.

He points out that nowadays, with the internet making it possible to search on any number of keywords, if a business has, even unwittingly, copied something, the chances are that the brand owner will be able to pick up any misuse fairly easily. Equally, it's much easier than it used to be to avoid a potentially litigious - and costly - error by checking what has been already trademarked and what hasn't.

Passing-off rights

But it's still possible to fall foul of the law. "You can get into trouble for using a name that isn't technically trademarked but is just in general use," says Jennings. "The first user has what's called passing-off rights, by being first to use that particular name. If they can prove their business reputation relies on using that name, show there has been confusion or that the business has been harmed, they are likely to win the case."

Unsurprisingly, it's wise to steer well clear of using any known trademark, or even just a similar-sounding name, particularly if you are likely to benefit from doing so. Jennings points to the case a couple of years ago, again involving KFC, and a restaurant calling itself Kennedy Fried Chicken. The Kennedy restaurant lost the right to use the name, largely as it was deemed a deliberate attempt to gain directly from the established brand's reputation. Another case involved Wagamama, which successfully sued an Indian restaurant called Rajamama citing passing-off rights and the fact that consumers could confuse the two similar-sounding names.

So what if you discover another company is using your brand name? The key is to work out whether it's a breach or not and, if so, how serious that breach is. "Even if there is an infringement, you need to ask the question ‘Is it going to do the company or brand any harm?' before you launch in with a stroppy letter or, more seriously, legal proceedings," says Jennings.

Furthermore, small clients up against bigger players will usually find it extremely difficult to fight a legal battle. "I'd usually advise the smaller client to get out as soon as possible, simply because most big brand owners know they won't have the financial clout to fight the case," says Jennings.

"If a big firm uses a City law firm, for example, you could be looking at hundreds of thousands of pounds in legal costs. Even in a couple of weeks, fees could rise to about £10,000 quite easily. That's potentially crippling for a small business, and big firms are aware of that."

For Radford, an independent restaurateur, being up against a big operator was particularly nerve-racking. "Especially as we weren't 100% sure we'd win. But the alternative we were faced with was to lose our name and write a big cheque in costs, so we were determined to stick to our guns," he says. He stresses that getting good legal advice is essential.

Stick it out

"We were told we had a good case and that we should stick it out. That gave us belief in what we were doing. But, equally, if the advice is to pull out, do it."

With legal fees rarely coming cheap, smaller businesses are often put off pursuing legal claims due to costs. However, the explosion in "no win, no fee" legal firms in the past decade or so means that some lawyers might well be willing to take on a case on that basis if they think there are sound grounds for proceeding.

An alternative to slugging things out in a courtroom is to appoint a mediator, who will help both parties reach an agreement. The decision can be legally binding, and reaching a resolution via mediation can be quicker - and often significantly cheaper - than going to court.

Steve Richards, an accredited mediator who specialises in hospitality cases as well as general disputes, says that mediation can be a useful tool for smaller businesses looking for a cost-effective legal solution.

He says: "It can work in all kinds of situations, from professional negligence and boundary disputes to intellectual property, and it's more user-friendly than going to court. Unlike in court, the results can be kept confidential, too.

"Either party can suggest mediation as a route, and fees are usually organised on a sliding scale, split between the two parties." Or, he adds, "If it' s a dispute worth millions, the costs might be worked out on a percentage basis, but it will still be much less expensive than going to court."

"If a big firm uses a City law firm, for example, you could be looking at hundreds of thousands of pounds in legal costs. Even in a couple of weeks, fees could rise to about £10,000 quite easily. That's potentially crippling for a small business, and big firms are aware of that"

Avoiding a trademark wrangle

• If you're starting a new business, do a trademark search at www.ipo.gov.uk to check your chosen brand name isn't already registered.
• Don't go for names that sound similar to famous brands. You could be accused of trying to trade off the established brand's reputation.
• Names, slogans, domains, shapes and colours can all be registered as trademarks. Applications cost £200 and registrations last for 10 years.

For more information visit the Intellectual Property Office website, www.ipo.gov.uk, or call 0845 950 0505