The impact of non registering the trademark User agreement

4th October, 2024 - 11:33 am Categories: Trademark 0 Comments

Introduction

Trademark are critical since they provide the identity of any company. Through trademark registration, customers differentiate various products and services. While trademark registration is one of the means through which legal protection is available, most firms do not recognize the register for user agreements of trademarks. These agreements involve the terms guiding third-party usage of a trademark and, as such, are as important as others in themselves. Non-registration of such agreements deprives the trademark owner not only of legal rights but also poses a huge threat, like forfeiture of a trademark on account of its non-use. In today’s competitive business environment, getting trademarks with the right legal protection through user agreement registration becomes more critical than ever before.

Importance of Registering a Trademark User Agreement

Trademarks have become an essential asset in the fast-paced modern business environment, especially when business houses are looking to go global. Trademarks are measures to differentiate products and services, which instills consumer trust and loyalty. However, if you are registering a trademark, then agreement forms the indispensable yet often overlooked component. It is also very important for any company licensing its trademark to third parties, who lawfully employ the brand while clearly setting terms and conditions with the users.

Now, it holds more importance because business houses worldwide or through the online system where it is very easy to commit intellectual rights violation without proper agreements. Under Trademark Act 1999, the registration of user agreement is a legal documentation which is an explanation of scope of usage of trademarks. And registration of such agreements clarifies the transparency and legal rights and liabilities of the parties.

Advantages of a Registered User Agreement

Legal Surety in Licensing Agreements: Trademark licensing has emerged to be one of the most significant sources of revenue to companies, ranging from apparel, entertainment, and even software. Registration of the agreement with the user can go a long way in preventing later disputes about what exactly constitutes permitted use of the trademark. Intellectual property laws in a foreign jurisdiction posed a problem for licensees of trademarks by various territories, and therefore clarity on this particular aspect is especially helpful.

Right to Sue for Infringement: Section 29 (1) provides great importance to the right of the trademark owner to sue in case his mark is used without an authorization. If such agreement for use is registered, a suit against the infringer becomes easy as such a document becomes sufficient proof before the court. Section 28 (1) further strengthens the position of the trademark proprietor by vesting exclusive rights to use the mark and resulting in legal action in case it is infringed.

Exclusive Use and Brand Control: A registered trademark, and user agreement give the brand owner the exclusive right to determine usage of the trademark, so that messages relating to brands are consistent and there is controlled reputation management across markets. Now with increasing global e-commerce and franchising, exclusive rights to mark use in particular goods or services has never been more important than it is now.

Legal Implications of Non-Registration in the Current Market

A non-registered trademark user agreement leaves a brand extremely vulnerable. In the competitive markets of 2024, the risks are much more prominent. The failure to register trademarks and their agreements has significant implications on businesses operating across borders. Very limited legal recourse is available; Section 27(1) of the Trademark Act makes it abundantly clear that a user would not be able to take legal recourse in case of infringement without having a registered agreement. In this scenario, as cases of counterfeit products are growing at a rapid pace-from luxury goods, pharmaceuticals, and technology-it becomes extremely imperative to have a registered trademark user agreement protecting intellectual property.

In today’s market, the worth of any existing trademark is within its continued usage and exposure. However, if that so happens it falls dormant for more than five years without a registered agreement, then most likely it might be removed from the register.

Increased competition in FMCG and retail industries call for the firms to have functional and registered trademarks, as well as user agreements. This way, they will avoid other competitions that will remove marks for being inapplicable.

The protection is much milder in the new digital age that opens new avenues for trademark infringement. There is that instance of fake products and unauthorized use of trademarks being sold on online marketplaces, social media, and e-commerce websites. Public notice and formal documentation needed in taking swift legal action against the infringers are also deprived of the companies because there is no registered user agreement that exists. Because of these lack of agreements, cross-border enforcement of trademark rights via e-commerce is hindered.

In the case of Zara vs Zara Tapas Bar (2015) An international fashion retailer, Zara, and an Indian restaurant chain, Zara Food Court, have recently been in a very high-profile case that shows just how much importance today’s market landscape should give to the registration of trademarks and user agreements through that way. Unrelated fields of business, the huge fashion giant successfully held that the use of the word “Zara” by the restaurant chain would cause consumer confusion, damaging its brand reputation.These factors strengthen the case since Zara has brought comprehensive trademark registrations as well as use of registered user agreements to brand control across markets. This case presents the emerging relevance of trademark protection and articulation, especially in light of digital platforms and brand recognition.

Current Trends: Trends in Trademark Use under the Global Digital Economy

The emergence of digital businesses places trademarks at the core of brand identities in both the local and international markets. The development of digital economies mounts new challenges to firms seeking to create protection on their marks as easy access to online platforms exposes third parties to misuse or infringement of established brands. For example, online marketplaces commonly use third-party sellers who have not been licensed to use the trademark.

In such a case, it would almost be impossible for businesses to take legal action against their brand without such a registration of user agreement.

Brands are spreading in the metaverse that describes a new fresh digital territory hosting NFTs. This new land will need trademark protection; in emerging markets like this, clear trademark user agreements supplemented by registration will be needed to prevent others from fleecing well-known trademarks in virtual markets. Business, therefore needs to stay ahead of these trends by having them ensure their trademark user agreements are updated and registered as technology changes.

Best Practices in Business for 2024

In Today, businesses need to adopt the following amidst legal and market complexities.

• Registration of trademarks as well as user agreements: This will give a legal basis for the enforcement of rights, particularly while entering new markets and penetrating online platforms. And Monitor trademark use actively according to the usage on all channels- online platforms and third-party sellers. Obtain all proper agreements registered and maintained with the users.
• Trademark portfolios: This must be protected and updated accordingly into emerging technologies ensuring the trademark’s evolving business landscape is integrated into new arenas like metaverse, NFTs, and other digital assets.
• Impose non-use clause: Prevent removal by maintaining trademark use in continuous motion. Trademarks must be in use and active within the marketplace and to continue to monitor third parties that make use.

Conclusion

Companies that do not make Time to file a trademark user agreement might face some of the worst penalties available in business today from very limited legal redress and the very real possibility of removal due to non-use. A company never needs vigilant intellectual property protections as much as it does now in this increasingly digital, expanding worldwide marketplace. Businesses will therefore aid in safeguarding their brand identity and also the legal status to prevent infringement against them, protect market share, and control how their brand is perceived throughout the world by having registered such trademarks, as well as through agreements with users.

Author: Divang Babbar, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

References

• Trademark Act,1999.
• Tomar, Vernika, ‘Trademark Licensing & Franchising: Trends in Transfer of Rights’, Journal of Intellectual Property Rights, vol.14(2009), pp 397-404.
• S. Rana & Co, ‘Registrable and Non-registrable Trade Marks in India’,2018.
• Mohammad A. Al-Faouri, ‘THE EFFECT OF REGISTRATION AND USE ON TRADEMARK OWNERSHIP’,PUBLIC GOODS & GOVERNANCE, vol.7(1), 2022
• World Intellectual Property Organization (WIPO) – Guidelines of Trademark Laws
• Non-Registrable Trademarks in India: Absolute & Relative Grounds(https://www.setindiabiz.com/non-registrable-trademarks-india)