Trade-marks on the internet: Selling goods or services into other countries can land a website in hot water
Published on September 16, 2013
Posted in: Blog
The internet is a great tool for businesses to expand into new markets, including foreign countries, with relatively little effort. After all, a Canadian website can be accessed from almost anywhere in the world. Businesses can establish a presence in a foreign country through the internet without actually having any feet on the ground, and send goods through the mail or electronically in some cases. What businesses often overlook, however, is that selling goods or advertising services into other countries can infringe foreign trade-mark registrations. This can leave businesses exposed to serious trade-mark infringement lawsuits in those foreign jurisdictions.
Registering a trade-mark in Canada does not provide any rights in other countries. Your trade-mark may well have already been registered by someone else in another country; you simply don’t know without performing a search there. Whether you are infringing on an existing foreign trade-mark registration depends on that country’s laws, not Canada’s, and a foreign business will sue you in its own country if it thinks that you are violating its trade-mark rights. Foreign court orders, meanwhile, can potentially be enforced against you in Canada due to reciprocal international agreements.
Trade-mark laws vary from country to country, so it is difficult to state any hard-and-fast rules about what practices will attract liability. There are certain activities, however, which are more likely to lead to trouble than others. Consider the following to be “rules of thumb” to guide you in your online ventures.
The Zippo principle
The American case of Zippo Mfr. Co. v. Zippo Dot Com, Inc. illustrates the general principle that most courts follow for assuming jurisdiction in online trademark infringement cases. The court held that in order for a website owner to attract liability in a foreign country, there has to be some type of connection between the website and the country, beyond the website merely being accessible from that country. If there is no connection, a court is said to not have “personal jurisdiction” over the website.
A passive website that does little more than make information available to those who are interested in it is not sufficient to attract liability. At the opposite end of the spectrum are situations where the defendant clearly does business over the internet and enters into repeated contracts with residents of a foreign country. Many websites fall into a sort of middle ground in that they are not pure e-commerce sites but they do have a commercial purpose. Such websites typically generate revenue through advertising or the collection and sale of personal data.
Selling or shipping goods to other countries
It can be tempting for e-commerce websites to sell their goods to paying customers wherever they may be located. This temptation should be avoided. Selling goods and/or shipping goods directly from Canada to a foreign country without first establishing trade-mark rights in that country is almost always a bad idea. This is true whether the goods are being sold over the internet or by traditional distribution channels. It is also true for goods that are transferred electronically, such as software, apps, or music.
As soon as goods are sold in a country it will constitute “use” of the associated trade-mark in that country. If there is someone in that country with superior trade-mark rights to the seller, the seller may be opening themselves up to an infringement lawsuit. They may also be violating various packaging, language, health, or other regulations in that country that they are unaware of.
Consider the U.S. case of Euromarket Designs, Inc. v. Crate & Barrel Ltd. In that case, a company in Ireland operated a retail furniture store called “Crate & Barrel.” The Irish company had an online store and sold products to customers in Illinois. The Irish company was subsequently successfully sued for trade-mark infringement by the American owner of the more famous Crate & Barrel chain, who owned the relevant trade-mark in the United States. The court found that selling products to Illinois residents through a website was sufficient to constitute “use” of the trade-mark in Illinois. Accordingly, the court held that it had jurisdiction over the Irish company and its website.
Advertising services online
In many countries, including Canada and the United States, the standard for when a person is “using” a trade-mark is lower for services than it is for goods. Merely advertising services to people in a foreign country through a website can be enough to attract trade-mark liability. The services do not actually need to be performed at all—the act of advertising them alone can constitute “use.”
Suppose you operated a graphic design business in Canada under the business name ABC DESIGN. Now suppose that you had a website advertising ABC DESIGN’s services to the world and were prepared to take orders from anywhere. Arguably, the mere act of advertising your services online would be sufficient for a trademark owner in another country to sue you for trade-mark infringement. If you were to actually provide your services to people in that foreign country then you would almost definitely be liable, even if you did not have a bricks-and-mortar operation in that country. The key issue is whether the services could be performed without the customer leaving his or her home country.
For certain service industries such as hotels or car rentals, the services will be performed in Canada but reservations may be taken in advance from abroad. In the recent Canadian Trade-marks Opposition Board decision Mirage Resorts, Inc. (Re), the Board held that accepting reservations from foreign countries does not constitute “use” in that country. Unlike online shopping or graphic design services, hotel services cannot be enjoyed remotely. The location where the reservations were made from was held to be irrelevant; the deciding factor was where a prospective customer had to be to enjoy the services.
Advertising-based websites and social media
Many websites do not generate revenue from direct sales transactions with visitors. Rather, these websites typically make money through advertising or the sale of user data. The content of the website is offered for free (or very cheaply) in an effort to build up a user base. That user base can then be leveraged by selling advertising space or data mining the users’ personal information. Advertising-based websites should consider both (a) where their advertisers are located, and (b) where their users are located. Having either advertisers or users in a country where they do not have trade-mark rights could be problematic. Such businesses risk a competitor in that country having or obtaining superior trade-mark rights and suing them for infringement.
Consider the U.S. case of Playboy Enterprises Inc. v. Chuckleberry Publishing Inc. The defendant in that case was an Italian publisher who ran a website out of Italy called PLAYMEN. Although the Italian company had the right to use the PLAYMEN name in Italy, the court held that they were infringing Playboy Enterprises Inc.’s trade-mark for PLAYBOY in the U.S. The plaintiff obtained a court order that forced the defendant to block the infringing website to all U.S. visitors. While the defendant’s website in that case was actually selling something to its visitors (magazine subscriptions), the outcome would have likely been the same if it had been purely an online magazine.
The proper approach for selling goods or services abroad over the internet is to select the markets you want to enter carefully and expand deliberately. Restrict access to your website, or at least restrict the orders you will accept, to only those countries where you have secured trade-mark rights. Once you have decided what markets to move into next and have secured the relevant trade-mark and other rights, you can update your website to be accessible to those users.
In the case of the sale of goods, if you are manufacturing the goods yourself, one approach is to locate a distributor in that country to import the goods and help you navigate that country’s regulatory hurdles. If you are an e-commerce website, you or your Canadian counsel should enlist the help of local lawyers to secure the necessary rights. If your e-commerce website sells a variety of different products each with their own trademarks, there may be a plethora of barriers for entering into a new market, none of which can safely be disregarded.
For digital goods and services that can be provided remotely, be aware that foreign trade-mark laws will apply to you if you sell to customers in other countries, even if you do not have a physical presence there. Ignore those laws only at your peril.
Registering foreign trade-marks is not necessarily as complex or expensive as it sounds. Unlike Canada, the rest of the developed world has made great strides in standardizing trade-mark applications across different countries. Applicants can often file a single Community trade-mark application in the European Union to obtain protection in all 27 member states. Similarly, applicants may be able to file a single International Application in up to 85 countries worldwide if they have a subsidiary or division operating in another country. Trade-mark counsel, such as our firm, can advise you on your options for registering trade-marks abroad.