“To use or not to use”: A discussion on the ‘use’ of a trademark In Sri Lanka

By Ms. Anomi I Wanigasekera & Ms. Sandamali Kottachchi

Posted: 26th June 2018 11:32

A trademark is a sign used to identify and distinguish the goods of one enterprise from those of another. The Intellectual Property regime of each country provides for the registration of trademarks under their respective laws subject to various conditions.
 
Whilst certain countries like China grant rights to those who are ‘first to file’ for registration[1], some others like the USA recognise ‘first to use or adopt’[2]. There are also countries that have adopted a hybrid system. Most countries determine priority of trademark rights on a first-to-file basis rather than on a first-to-adopt-and-use basis. In first-to-file countries, prior use is not a pre-requisite to registering a trademark. Also, in first-to-file countries, use of the mark without a registration will not provide priority trademark rights unless the mark is a famous mark.
 
It is therefore interesting to examine the Intellectual Property Act of Sri Lanka No. 36 of 2003 (hereinafter referred to as ‘the Act’) on the importance given to ‘use’ of a trademark. The Act appears to recognise both use of a mark applied for registration and third party marks. Whilst registration is not mandatory for use of a trademark in Sri Lanka, neither is use mandatory for registration. However, a mark may acquire goodwill by use only, which may sometimes supersede a registered owner’s rights. Thus, although registration is absolutely beneficial and ownership rights flow from such registration, ‘use’ appears to play a vital role in the Act as well.
 
Prior use of a third party mark as grounds for refusal and/or oppositions and/or nullity
 
Section 104 (1) (b) of the Act provides that a mark shall not be registered if it resembles in a misleading manner, an unregistered mark used earlier in Sri Lanka by a third party in relation to identical goods, that the applicant is aware or could not have been unaware.
 
Similarly, Section 104 (1) (c) prevents the registration of a mark which resembles in a misleading manner, a tradename already used in Sri Lanka by a third party that the applicant is aware or could not have been unaware.
 
Section 104 (1) (d) of the Act also provides that a mark shall not be registered if it is identical with, or misleadingly similar to, or constitutes a translation or transliteration or transcription of a mark or trade name which is well known in Sri Lanka for identical or similar goods or services of a third party.
Similarly, Section 104 (1) (e) prevents the registration of a mark which infringes other third party rights or is contrary to unfair competition.
 
All of the above sections provide grounds for refusing a mark by the Director General of the National Intellectual Property Office[3] based on third party marks used in Sri Lanka. The same grounds may be used by any third party to oppose a published mark even if it is accepted by the National Intellectual Property Office. Accordingly, where any person considers that a mark is inadmissible on one or more of the grounds specified in section 103 or 104 he may, within a period of three months from the date of publication of the application, give the Director-General notice of opposition to such registration.[4] Further, according to the Act, an interested party may within five years from the date of issue of the Certificate of Registration of a mark, apply to Court for nullity of the said registered mark if its registration is precluded under the provisions of sections 103 and 104, which include the provisions discussed above[5].
 
Unfair Competition
 
Section 160 of the Act provides protection against unfair competition, as a fallback provision for bona-fide users of intellectual property. The Section provides that any act or practice carried out or engaged in, in the course of industrial or commercial activities, that is contrary to honest practices, that causes, or is likely to cause, confusion with respect to a mark, whether registered or not[6] or a trade name[7], or a practice that damages, or is likely to damage, the goodwill or reputation of another’s enterprise with respect to a mark, whether registered or not[8] or a trade name[9] is actionable in Court. Thus it thereby recognises the rights of a ‘user’ of an unregistered mark or a trade name against any third party whether a registered owner of a mark or otherwise.
 
Non-Use Cancellation of a Registered Mark
 
It is a common misconception that a mark may be cancelled for non-use if the mark is not used for a specified time period after its registration in Sri Lanka. A close examination of the section reveals that the time period is calculated from the date of application to Court.
 
Therefore, if a registered mark is not used for five years immediately preceding an application to Court by an interested party, the mark may be cancelled. Thus the moment a mark is registered the mark becomes vulnerable for cancellation if not used, as any third party may institute action in court against a registered mark.
 
If such action is instituted, the court examines whether the mark has been used within the five consecutive years immediately preceding the date of said Court Action. Therefore, the period of non-use of a mark in Sri Lanka is NOT calculated from the date of registration or application.
 
The Section in question reads as follows:
 
“Section 136 (1) The Court may on the application of any person showing a legitimate interest, or of any Competent Authority including the Director-General, to which the registered owner of the mark and every assignee, licensee or sub-licencee on record shall be made party, remove any registered mark from the register—
(a) if the registered owner has, without valid grounds, failed to use the mark within Sri Lanka or cause it to be used within Sri Lanka by virtue of a licence, during five consecutive years immediately preceding the date of the application to Court;
 
However, in this regards, the Court will take into account if the non-use was due to circumstances beyond the control of the registered owner[10]. The Court will also accept the use of the mark in a form differing in elements which do not alter the distinctive character of the registered mark[11]; and use in connection with one or more of the goods or services in respect of which the mark is registered would also be sufficient use[12]. The Court shall however not take into account the lack of funds of the registered owner as a ground for non-use of the mark[13].
 
Issues
 
As with any law, the above provisions are not without its critiques. For instance, the nature, extent and form of ‘use’ considered in the above sections have not been stated clearly and neither has the judiciary been able to shed any light in this direction to date. Whilst some academics have argued that it should be ‘reasonable use’ it would be interesting to see what constitutes such reasonable use in the eyes of the judiciary. In the rapidly developing communication technology and advertising culture, use of a trademark may well be superficial in the form of a mere internet advertisement without actual sale of goods or provision of services, and could thus block a bona fide actual user or potential/ intended user of the mark.
 
Another specific issue associated with non-use cancellation is the calculation of the period of five years preceding the date of instituting action in Court. As per the section, the moment the mark is registered it becomes vulnerable for cancellation. Thus a question arises as to the exact point of time a mark may be considered ‘registered’, i.e. whether it is when the Certificate of Registration is issued or when the three-months opposition period lapses without any oppositions being raised providing the assurance that the mark is clear for registration. In any case, the section indirectly indicates that an applicant should not wait for the mark to be registered for it to be used. However, in practice, an applicant would run a risk if they invest in a mark / use a mark without the assurance that it is clear for use and registration.
 
Hence the dilemma faced by an applicant of a trademark is whether or not to use a mark before such clearance is received. If it is used and the mark does not proceed to registration due to a refusal or opposition based on a third party mark, the applicant will be compelled to abandon the mark and all costs incurred and use until such point would become sunk cost[14]; and if the mark is not used till it is registered, for abundance of caution, the applicant runs the risk of finding himself in Court defending a Non-use Cancellation Action. The challenge is therefore achieving a careful balance of these conflicting rights and interests.
 
Ms. Anomi I Wanigasekera
 
Mrs. Anomi Wanigasekera, LLM (Wales), Attorney-at-Law is the Partner in charge of the Intellectual Property Group and holds Diplomas in Intellectual Property Law, International Trade Law , Banking and Insurance Law of Institute of Advanced Legal Studies of the Incorporated Council of Legal Education. She has extensive and wide experience in contentious and non-contentious Intellectual Property Law matters. She has participated in several International Seminars both inland and abroad. She has been involved in several complex Trademarks, Designs and Infringement cases for over two decades.

Mrs. Anomi Wanigasekera can be contacted on +9411 2422601-5, Ext. 330 or by email at anomi@juliusandcreasy.com
 
Ms. Sandamali Kottachchi
 
Ms. Sandamali Kottachchi, LL.B (Colombo), Attorney-at-Law is an Associate of the Intellectual Property Division of the firm and holds Master of Arts in International Relations from the University of Colombo and awaits results of her Degree in Master of Laws from the University of Colombo. She has experience in Intellectual Property, Commercial Law, Arbitration and Litigation matters.

Ms. Sandamali Kottachchi can be contacted on +9411 2422601-5 Ext 318 or by email at sandamali@juliusandcreasy.com


[1]Some of the other countries that have a first-to-file trademark system are France, Germany, Japan, and Spain.
[2]Some of the other countries that have a first to use or adopt trademark system are Canada and those using British law-based systems.
[3]Section 111 (2) of the Act
[4]Section 111(9) of the Act
[5]Section 134 of the Act
[6]Sec. 160 (2) (b) (i) of the Act
[7]Sec. 160 (2) (b) (ii) of the Act
[8]Sec. 160 (3) (b) (i) of the Act
[9]Sec. 160 (3) (b) (ii) of the Act
[10]Section 136 (2) of the Act
[11]Section 136 (3) (a) of the Act
[12]Section 136 (3) (b) of the Act
[13]Section 136 (2) of the Act
[14]‘Sunk cost’ in economics and finance is a cost that has already been incurred and that cannot be recovered. See https://www.britannica.com/topic/sunk-costaccessed on 12-01-2018.

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