Establishing and Protecting IP Rights Globally: A Case Study

Building upon our recent note concerning general international intellectual property protection considerations, this article describes how foreign IP expansion efforts might play out in a case study format. The company, a hair restoration lotion manufacturer named WonderFlo Tonight, is fictional, but the fact pattern is derived from real world situations encountered by businesses as they seek to establish and protect their intellectual property in foreign markets.

WonderFlo Tonight was started by two prematurely balding college students in their dorm room. The duo was inspired to address hair loss issues in part by their admiration of the flowing locks (and music) of German composer and conductor Richard Wagner. WonderFlo Tonight conducted reasonably thorough searches of the U.S. Patent and Trademark Office (USPTO) trademark registry records, the results of which seemed encouraging, and filed trademark applications for both WONDERFLO TONIGHT and its hair restoration lotion product name SCALP SALSA. It also filed a provisional patent with the USPTO describing its product composition in general terms, followed by a utility patent a year later that fleshed out its specific patent claims as required. WonderFlo Tonight entered into a series of agreements, including non-disclosure agreements and license agreements, to enable the manufacture of the initial iterations of its product. 

Instead of paying local lawyers to prepare and file trademark applications in foreign countries, WonderFlo Tonight used its U.S. trademark applications for WONDERFLO TONIGHT and SCALP SALSA as bases for applying for International Registrations via the USPTO’s website. They then filed requests that the rights under the International Registrations be extended to participating foreign countries. This approach avoided local counsel filing fees in the short term and will make renewal of the resulting registration rights easier and more cost-efficient in the long term. One of the downsides for this approach became apparent, however, when WonderFlo Tonight discovered months later that “salsa” in its SCALP SALSA mark sounds just like “seolsa”, the Korean word for diarrhea. This left the boys deliberating about whether a separate, Korean market-specific branding approach was in order, and whether they would have been better off with a direct application filing utilizing a local attorney who might have provided pre-filing advice that would have flagged this issue.

Domain Names
WonderFlo Tonight encountered a challenge of a different sort when they were alerted to websites at the URLs and that prominently displayed the WONDERFLO TONIGHT and SCALP SALSA brands along with Chinese characters unintelligible to them. After investigation, they determined that it was their Chinese distributor who registered the domain names and posted this content without their knowledge. The distribution agreement they had negotiated included painstaking detail about royalties incentivizing sales in that important market, but lacked trademark and domain name registration prohibitions that might have averted this unwelcome development. Only very rarely is it a good idea to let a local distributor register your trademarks or domain names. WonderFlo Tonight eventually wrested control of the domain names and secured written assurances about controls around brand and domain name use and registration going forward, but only after spending a lot of time browbeating the distributor and asserting business leverage in view of the lack legal leverage.

Fire drills are almost daily occurrences at growing businesses, but the WonderFlo Tonight business partners experienced a particularly traumatic 48 hours when their misunderstanding about the deadline for the priority filing of foreign patents was corrected with little time to spare. They had been under the mistaken impression that the one-year foreign priority filing deadline (by which an applicant can cause a foreign patent application to enjoy the same priority date as the U.S. application) would begin to run upon the filing of the follow-on non-provisional patent application. In fact, the clock begins ticking for the year-long grace period upon the filing of the provisional patent application. WonderFlo Tonight managed to coordinate timely foreign patent applications after some quick decisions and a flurry of emails to various foreign counsel. The filings were more costly than they would have been otherwise for reasons including the need for rush translations of the U.S. patent documents as is required for filing in many countries.

The drama did not end there. While WonderFlo Tonight’s business expansion into Europe proceeded reasonably smoothly, there was one unsettling episode. Namely, the WonderFlo Tonight boys were surprised to receive a demand letter alleging copyright infringement from legal representatives from, of all places, the Reiss Engelhorn Museum in Mannheim, Germany. The WonderFlo Tonight website included an image of a portrait painting of Richard Wagner, with his inspirational flowing hair. The portrait was painted in the 1860s. Certainly such an old painting is in the public domain? Well, yes, but the photograph of the portrait at the WonderFlo Tonight site was taken by the museum in 1992, and German courts have ruled that even seemingly plain photographs of works in the public domain themselves are entitled to copyright protection. Confused but not discouraged, the WonderFlo Tonight boys settled the matter by removing the photograph and then engaged a graphic design artist to create an image of Wagner that suited their website perfectly. They were careful to make sure that the independent contractor assigned the copyrights in the Wagner image to WonderFlo Tonight in writing. They also made note of the need for legal review of all aspects of their websites and brochures going forward.    

License Recordation
WonderFlo Tonight licensed the use of both its WONDERFLO TONIGHT and SCALP SALSA marks for use by distributors in Mexico and Russia for purposes of preparing localized packaging for its head lotion. WonderFlo Tonight was surprised to learn that these countries, and many others, require the recordation of trademark licenses with the national trademark registry. Failure to publicly record a license in certain countries can cause the license grants to be deemed valid, can jeopardize the validity of the corresponding national trademark registration, or can prevent an exclusive licensee form enforcing the licensed rights against third parties in that country.

Our fictional company WonderFlo Tonight experienced some anxious moments and learned lessons about pitfalls and local law peculiarities during its international expansion of its intellectual property rights. The experiences described are not so unusual. Involving legal counsel that is experienced in assisting growing companies with protecting their intellectual property abroad, and that is connected to a robust network of foreign counsel ready to flag and iron out local law wrinkles, can minimize unpleasant surprises.

Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.

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