Anna Pompe, interviews

Anna Pompe: Polish distributors often unknowingly infringe trademarks

Litigation Portal: May a distributor of goods of a given brand take the same name as the producer, just adding a corporate suffix, like “sp. z o.o.”? This seems like a win/win solution: the distributor is clearly associated with the product, particularly because the name of the producer is often the same as the trademark.

Anna Pompe: It is a common error. Many Polish businesses do not realise that a trade name or trademark is a licensed good, even for distributors. Using a trademark in your business name requires a licence. Distributors often unknowingly encroach on the producer’s rights in this way, and it may be regarded by the producer first and foremost as a display of disloyalty.

A distribution agreement, giving the distributor the right to sell a given product, is different from a licence agreement or clause that allows the distributor to use the trademark in the agreed way.

The general rule is that a trademark may not be used without the consent of the owner of the mark. There is an exception when the mark is used for informational purposes. However, because this is a departure from exclusive rights, like any exception it should be approached cautiously. Informational use clearly cannot involve display of the trademark that creates the impression that the user and the owner of the mark are somehow affiliated.

Does the same apply to exclusive distributors?

The status of being an exclusive distributor does not in and of itself carry any privileges with respect to use of a trademark in one’s business, including as part of the trade name. It does not convey the entitlements that belong to the owner of the trademark simply because the distributor has been given exclusivity, and often builds the market for the product from the ground up.

Meanwhile, there appears to be a strong inclination among Polish businesses to identify themselves closely with the producer. They apparently believe that because they are building or expanding the market for the brand, undertaking marketing activities and incurring related costs, they automatically assume certain rights. They may then begin to assert claims to the trademark or trade name, sometimes even going as far as registering the trademark for themselves.

Do such registrations actually go through?

Yes. Oftentimes a producer does not register its trademarks in Poland because it does not think it will find a market for its goods here. Then when the distributor achieves its first success and the brand begins to gain popularity, the infringement begins. But the producer does not always start proceedings against infringers, particularly when it still does not consider the market to be strategic. Then sometimes the distributor takes it upon itself to protect the market by registering a trademark that actually belongs to the producer. This is impermissible.

Registration of a trademark by a distributor or agent for itself, even with the best intentions, will always be deemed to be in bad faith.

Oftentimes I encounter attempts at trademark registration by former distributors, after termination of the distribution agreement or when a conflict arises between distributor and producer. Then the former distributor’s intention is clearly different.

In every such instance the Polish Patent Office should refuse registration. But the office does not examine the market from this perspective and has no capacity to do so. It requires action on the part of the producer that owns the mark. If the producer does not have its own agent or subsidiary in Poland, but just ships its goods here, typically it does not even know about an attempt to register its trademark and fails to raise an objection at the proper time.

Then the registration is made in bad faith, in violation of the prior rights of the producer arising from its use of the trademark. Oftentimes there is also a violation of the producer’s reputation, if the producer’s trade name is the same as the trademark that it uses.

If a trademark has not been validly registered in Poland and was never used here by the producer, theoretically it is not subject to protection and anyone may seek to register it. But even then, under certain circumstances, the producer may claim that the registration is in bad faith, for example if it can show that the registration was made deliberately to block the producer’s planned entry onto this market.

What if the producer does not learn of the unlawful registration until, say, three years after the fact?

A producer may always seek to invalidate a registration made in bad faith—then there is no time limit. Otherwise, if there is a conflict with a prior registered mark or trade name, it has five years.

Why would the distributor’s use of the trademark be considered detrimental to the producer, since the distributor in a certain sense is acting for the producer’s benefit? The distributor is developing the sales and building the market for the producer’s goods.

Use of the trademark by the distributor may be beneficial to the producer, but only if the producer can control the use. The trademark owner will typically set an overall strategy for building and positioning a brand on the market. The trademark is a fundamental tool for this purpose. Specialists plan when and where the brand will appear, the media to be used, the context in which the brand will be visualised, down to the shade of colour to be used, the size of the font and so on.

It is easy to ruin a trademark. Actions that are not clearly thought-out, contrary to the firm’s policy, may not only result in a change in how the given brand is perceived on the market, but also weaken the distinguishing power of the trademark itself. If a trademark is used without the owner’s control, by definition it is a threat to the owner. The situation is dangerous even when the producer and distributor cooperate smoothly. If a dispute arises, their commercial ties may cease.

What to do then to stay within the law?

First and foremost, agree on the conditions for use of the trademark and trade name. It is in the interest of both parties to clarify these issues. For one thing, obtaining a licence to use the trademark need not require payment of a licence fee, since the distributor incurs certain costs associated with development of sales which may also be taken into account.

The Polish distributor benefits from having a clear situation. It is aware of the scope of the rights it has been given with respect to use of the trademark in advertising and other marketing activity as well as commercial documentation. If the distributor develops its business under a trade name it has been licensed to use, it knows from the start what situations may result in losing the right to the name. This allows the distributor to build its own image on the market more skilfully, minimising the risk of future losses.

Often the Polish distributor has close organisational ties to the producer. For example, the producer may be a shareholder, and in a certain sense may be using the distributor to build a market for its products in Poland. But even then, it is crucial to have clear rules for use of the trademark and trade name. If the producer does not consider in advance how to secure its rights to the trade name, if it ever exits the Polish company it cannot be sure whether it will be able to take the name with it and prohibit the company from continuing to use the name. Then it will depend on the facts of the specific case whether the distributor, for example by operating for 5 years or more, may have established some stronger rights for itself, so that the trade name has also become a personal good of the distributor’s. Therefore it is necessary to have very clear terms in place—whether in a licence agreement or in the distributor’s articles of association—governing the issue of the trade name, from the very start of the cooperation.