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What if you wrongly register trade marks

The case of NOCN (formally National Open College Network) vs Open College Network Credit4Learning (‘OCN’) case emphasises the importance of initiating settlement discussions at an early stage of litigation. It also highlights the need to follow correct due diligence procedures prior to trade mark registration. This would help avoid trade mark invalidation and loss of goodwill.

In Summary

NOCN alleged infringement of its trade-mark. OCN put forward solid arguments behind registering its OCN trade mark. NOCN failed to prove goodwill in its trade mark, but proved a monopoly in its Swoosh logo which was infringed by OCN’s use of its own mark.

The outcome

NOCN was unable to substantiate its claim for breach of the ‘OCN’ abbreviation trade mark used in OCN’s trading name. However, NOCN successfully claimed for trade mark infringement for OCN’s use of NOCN’s Swoosh mark in its logo. It was held that the abbreviation ‘OCN’ was not distinctive and did not have goodwill. However, the court held that the Swoosh mark did carry goodwill and was distinctive.

OCN lost its registered trade mark. Consequently, OCN will lose goodwill generated by 10 years trading and will incur damage to its established customer base. In effect OCN must begin trading afresh with a new mark and brand image, so OCN will incur rebranding costs and may lose business in the competitive education market.

The general rule that the “loser pays” was applied. OCN was ordered to pay NOCN’s costs for this claim. The case was heard in the Intellectual Property Enterprise Court which used its discretion to order the “loser pays” principle.

The facts in outline

NOCN and OCN entered into a membership agreement but following a disagreement both parties ended the relationship.

This case was about passing off and trade mark infringement of NOCN’s registered trade mark and Swoosh logo. OCN defended these claims and counterclaimed for cancellation of NOCN’s trade mark and Swoosh logo on the basis that they had not been validly registered as:

  • NOCN’s trade mark and Swoosh logo conflicted with prior rights;
  • ‘OCN’ is a customary term and an abbreviation of open college network; and
  • NOCN obtained a trade mark registration of OCN in bad faith.

NOCN’s logo

NOCN’s Swoosh logo

OCN’s logo

What did OCN have to do to succeed?

OCN had to prove that goodwill associated in open college networks (OCN) was collectively held by the members of NOCN’s association (rather than NOCN itself), of which OCN was a former member.

The challenge for OCN was to provide documentary evidence of open college networks that existed prior to NOCN without an affiliation or membership from NOCN. The evidence was needed in order to substantiate its claims of established goodwill prior to registration. ‘OCN’ is the common element which is an abbreviation of open college network. OCN had to show that the trade mark of ‘OCN’, as a term, was purely a descriptive term and that NOCN’s trade mark registrations were obtained in bad faith.

Why OCN failed to defend its trademark?

Although OCN was successful in proving that it did not infringe NOCN’s trade mark of ‘OCN’ it still lost because:

  1. OCN failed to demonstrate that NOCN’s Swoosh trade mark lacked goodwill; and
  2. OCN failed to sufficiently distinguish its trade mark from NOCN’s Swoosh logo.

As a result, OCN’s trade mark stands to be revoked which will result in a loss of goodwill acquired by OCN from years of trading.

Why NOCN successfully defended its trademark?

It was found that goodwill in NOCN’s business was associated with the trade mark for the Swoosh logo but not in the term ‘OCN’. Confusion could have arisen only because of OCN’s use of the term ‘OCN’.

NOCN won this case by showing that its Swoosh mark was sufficiently distinctive and held goodwill. NOCN supplied strong evidence to prove:

  1. There is a similarity in the services provided by OCN;
  2. There is visual similarity in both trade marks; and
  3. There is a likelihood of confusion on the part of public, which includes the likelihood of association of OCN with NOCN.

The infringements of NOCN’s registered trade marks were dismissed as the use of the term ‘OCN’, which is the dominant part, was considered descriptive. However, NOCN’s Swoosh mark was found valid and infringed by OCN’s use of its own trade mark.

Consequently, OCN’s mark stood to be revoked and OCN was ordered to pay damages to NOCN. Had OCN prepared legal documentation on dissolving the membership agreement with NOCN, its defence may well have succeeded.

How to protect your business and safeguard your brand

A registered trade mark offers stronger protection. However, you can only rely on this blanket protection if your trade mark is correctly registered. We are one of the very few commercial specialist IP law firms offering a dedicated in-house trade mark filing practice.

Filing a trade mark looks easy enough from the Intellectual Property Office’s website but a failure to appreciate the subtleties can invalidate the registration. Often, you will only know about the problem of invalidation of the trade mark once it has arisen and it is too late to rectify. Best advice will always be to get your trade mark registered correctly from the start following an investigatory procedure for which you keep records.

 

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