We have patent trolls and copyright trolls (especially in jurisdictions that provide for statutory damages). Now it is the turn of the trademark troll.
Consider the following situation. You file a trademark application on behalf of a client (when you filed, you remember well the client's instructions--"no need to do a clearance search prior to filing"). The jurisdiction in which the appliction has been filed only examines the mark on absolute grounds, i.e. whether or not the mark is too descriptive to be registrable. The mark sails through examination and it is published for opposition.
Days before the end of the opposition period, you receive a Notice of Opposition. You examine the grounds for the opposition and you conclude that the Opponent has a strong, indeed a very strong, case. One year has passed since the application was filed. During that time, your client has been using the mark on the branded product bearing the mark, supported by substantial marketing and advertising. The client is pleased with the commercial results of the product and believes that the mark has acquired brand equity. The opponent is not in the business of using the mark, but rather warehouses registrations and applications and then waits for an opposition opportunity -- such as yours.
The question is how to advise my client. Having particular regard to the inevitable "compare and contrast" with the patent troll situation, here are my first thoughts:
1. The operative assumption is that the opponent's basic goal is to extract payment in exchange for agreement to withdraw the opposition and to agree to allow the applicant to use the mark in an unimpeded fashion.
2. That said, the circumstances described above only involve the right of registration. Even if the applicant fails to register the mark, any challenge by the opponent to use of the mark must be separately brought in a civil action. In most jurisdictions, it is relatively inexpensive to maintain an opposition proceeding. To the contrary, an infringement action will likely be substantially more costly (for both parties). Unless the jurisdiction allows an award of costs, each party will have to bear its own costs with no likelihood of recovery.
3. The threat of an injunction, if an infringment action should ultimately be filed, may well less potent than in the patent troll situation (even after the "eBay" case in the U.S.). In principle, there are an infinite number of words and signs that one can choose as a mark for a given product. Unlike a patent suit, where there may not be any viable alternative if the defendant is enjoined from using the invention, an injunction regarding trademark use merely requires the defendant to choose another mark. In most situations, this will not mean that end of the product.
All of this brings me back to situation described above. I assume that neither my client nor the opponent wishes to reach the litigation stage. My client wants to continue to use the mark while the opponent seeks payment of a sum of money. However, the opponent also knows that if my client chooses to withdraw the application, the value of the mark for my client (and hence any payment to the opponent) will become zero. The challenge, therefore, is for the parties to find a way of reaching an agreement, especially where the threat of a zero payment hangs credibly over the head of the opponent.In particular, the sum cannot exceed the amount that the applicant will reasonably be required to expend, should it choose to withdraw the application and to adopt a new mark. This is the rub -- how can we come up with a rough metric to quantify this amount? The following comes to mind:
(i) The easier part is to calculate how much has been directly spent on creating, protecting and promoting the mark. (ii) But what about indirect costs and the amount of the brand equity, if any, that might be lost if the marked is discontinued? (iii) And what about the time value of money, as the negotiations trundle forward against the backdrop of continuing costs, both direct and indirect, in connection with the use of the mark?
At least with respect to the applicant, the information that might enable it to come up with an amount that is presumably within its knowledge and control. What about the troll? True, the troll should be able to quantify its expected costs, both for the opposition and any infringement action. But unlike its patent cousin, this troll must always be fearful of the "nuclear option" of withdrawal and presumably ascribe a discounted value to reflect this risk. All of this would seem to make the trademark troll situation more uncertain than its patent counterpart.
