Trademarks are not only a "shield" to protect a company's brand value, but also a "weapon" for building a competitive advantage in the market. However, even if we understand its importance, there are many cases where we fall into unexpected pitfalls in actual operation. This article introduces typical failure patterns related to trademarks in the form of case studies and explores lessons to avoid repeating the same mistakes.

Case 1: “I used it first…” Wall of first-to-file principle

What happened

The privately run cafe ``Morning Bell'' is a long-established cafe that has been loved by locals for over 10 years. The owner, Mr. A, had never thought about registering a trademark and continued to operate the business with the simple belief that ``our store's name is ours.''

One day, however, I received a certified mail from Company B, a major cafe chain. Company B has registered the trademark "ABCD XYZ" and has asked Mr. A's cafe to stop using the store's name. Mr. A claimed that ``this company used it first,'' but Company B refused to budge, saying ``We were the first to obtain the trademark registration.''

What went wrong

Japanese trademark law adopts the "first-to-file" principle. This is the principle that if multiple applications are filed for the same or similar trademark, the person who filed first will be granted registration. In other words, no matter how long you have used your trademark, if someone else registers it first, you will generally not be able to claim your rights.

Mr. A had the defense of "prior user rights." This is a right that can be continued if the trademark has been used for the purpose of unfair competition even before another person applied for trademark registration, and as a result, it is widely recognized among demanders. However, proving this "well-known knowledge" is not easy. Even if Company B is famous locally, if it cannot be proven that it is well known in the area where Company B operates, prior user rights may not be granted.

Lessons learned

The idea that ``I have a right because I use it'' is dangerous. Once you start using your brand name, store name, or service name, you should file a trademark application as soon as possible. Trademark registration is essential, especially when your business is starting to get off the ground or when you are considering opening stores or franchising. If you skimp on registration costs and then end up paying huge rebranding costs and licensing fees, you're putting the cart before the horse.

Case 2: Hole in rights due to oversight in category selection

What happened

Apparel brand Company C had registered the trademark of its own brand "NEXTERA" under Class 25 (Clothing). The brand grew steadily and eventually expanded into leather products such as bags and wallets.

A few years later, when Company C tried to make a full-scale entry into the leather goods market, it was discovered that another company, Company D, had already registered "EFGOP" as a trademark in Class 18 (bags, bags, leather goods). Company D knew of the existence of Company C and intentionally filed an application under this category. Company C was unable to sell leather products under its own brand name and was forced to negotiate with Company D.

What went wrong

Trademark registration is effective for each specified category of goods and services. Company C had protection for clothing, but not for leather products (Class 18), creating a rights vacuum. This gap was exploited.

There are 45 trademark classifications in Japan, and it is necessary to select a classification based not only on your company's current business scope, but also on the possibility of future business development.

Lessons learned

When applying for a trademark, you should consider designated goods and services based not only on the current business content but also on medium- and long-term business plans. Particularly if the brand is expected to diversify, knowing a wide range of related classifications will help prevent future problems. Although there is a trade-off with cost, it is worth considering registering major brands in multiple categories as a "defensive investment." It is also important to periodically review your company's trademark portfolio and file additional applications as your business changes.

Case 3: “Trademark squatting” damage overseas

What happened

Company E, a cosmetics manufacturer, was developing a skin care brand that was popular in Japan. Through word of mouth on SNS, awareness of the product increased in Asian countries, and cross-border e-commerce sales were also increasing. When we finally established a local subsidiary and tried to enter the Chinese market in earnest, a problem was discovered.

A trademark identical to Company E's brand name had already been registered in China by a third party. This third party (a so-called "trademark broker") knew that Company E's brand was popular in China and proactively seized the trademark. In order to conduct business in China using its own brand name, Company E was forced to negotiate an expensive purchase.

What went wrong

This is a problem called "trademark squatting". China and other countries have adopted the first-to-file system, and even if the brand is famous in Japan, it will be difficult to obtain rights if the patent is filed locally first.

China has a system to invalidate "bad faith applications," but the hurdles to proof are high and litigation takes time and costs. In the end, Company E had no choice but to proceed with negotiations to purchase the trademark at the same time as requesting an invalidation trial.

Lessons learned

For brands that have even the slightest idea of expanding overseas, they should complete their local trademark application ``before'' rather than ``after''. Trademark squatting is especially rampant in China, Southeast Asia, the Middle East, and other countries, and brands that have become a hot topic in Japan tend to be targeted. When you start cross-border e-commerce or when you start to receive more reactions from overseas on SNS, you should consider securing trademarks in major markets. By utilizing the Madrid Protocol (international trademark registration system), you can efficiently seek protection in multiple countries with a single application.

Example 4: Brand value dissolved due to “common name”

What happened

Company F, a manufacturer of daily necessities, developed a cleaning tool with groundbreaking functionality, and it became a huge hit under the product name "Clean Magic." The company had also obtained trademark registration and was thought to be in good hands.

However, the product became so popular that consumers and retailers began to refer to similar cleaning products collectively as "Clean Magic." Competitors also began to use terms such as ``Our Clean Magic'' and ``Clean Magic Type,'' and even when Company F protested, they were retorted by saying, ``We are just using this as a generic name.''

What went wrong

When a trademark loses its function as an identifying mark indicating a specific source and becomes recognized as a general name for goods or services, it is called "common nameization" or "genericide." There are many examples of things that were once trademarks of specific companies becoming common names (or about to become common names), such as escalators, sellotape, and washlets.

As the name becomes common, even the trademark owner may not be able to stop others from using it. In the worst case, the trademark registration itself may be cancelled.

Lessons learned

Trademarks require efforts not only to "nurture" but also to "protect" them. Specifically, effective measures include adding the "®" mark when using a trademark, clearly stating that "○○ is a registered trademark of △△ company," and writing the trademark and general name together (e.g., "Clean Magic Cleaning Tools"). Additionally, if the media or retail store uses a trademark as a generic name, it is important to continue to carry out steady awareness-raising activities, such as sending letters politely requesting corrections. The value of a trademark will be diluted unless the rights holder continues to demonstrate that ``this is a unique brand name.''

Case 5: Being caught off guard by a non-use revocation hearing

What happened

Food manufacturer Company G had registered the trademark "Fresh Garden" under Class 29 (processed foods) and Class 30 (seasonings and confectionery) in preparation for future new products. However, due to a change in management policy, the launch of the new product was postponed, and the trademark remained unused for over five years.

After that, when Company G tried to sell a product under the "Fresh Garden" brand, it discovered that a competitor, Company H, was already selling a product with the same name. When Company G claimed trademark infringement, Company H requested a "trial for non-use cancellation." Company G was unable to prove its use over the past three years, and its trademark registration was cancelled.

What went wrong

Under Japanese Trademark Law, anyone who has not used a registered trademark without justifiable reason in Japan for three years or more can file a request for a trial for cancellation of non-use. This system is designed to prevent unused trademarks from unduly restricting the freedom of others to choose trademarks.

Company G claimed that they "intended to use it in the future," but "planning to use it" and "actually using it" are two different issues. Without proof of use (product packaging, advertisements, catalogs, transaction documents, etc.), you will not be able to win in court.

Lessons learned

Trademarks are not "once you get them". Continued use is required to maintain registration. There is nothing wrong with securing a trademark for future business, but even in that case, it is important to keep a track record of its use, such as by actually selling the product, distributing sample products, or introducing the product on a website, even if it is only in small quantities. Also, get into the habit of regularly taking stock of your company's trademark portfolio and checking its alignment with your business plan. If there is no prospect of using a trademark, it is also an option to consider abandoning it, taking into consideration the cost of maintaining it.

Case 6: Confusion caused by defective license agreement

What happened

Company I, an outdoor goods brand, entrusted domestic sales to company J, a distributor, and granted company J a trademark license. Although the contract included licensing clauses, the regulations regarding quality control and usage were simple.

At first, Company J followed the brand guidelines faithfully, but due to pressure to increase sales, it gradually started selling lower-quality products with the Company I brand. Complaints from consumers increased, and word spread on social media that the quality of Company I's products had deteriorated. Even when Company I asked Company J to make corrections, Company J countered by saying, ``The contract does not contain any specific quality standards,'' and the response was slow.

What went wrong

In a trademark license agreement, it is essential for the licensor (right holder) to manage the quality of the licensee's (licensed person) products and services in order to maintain the "quality assurance function," which is the essential function of a trademark. If this quality control is insufficient, it may result in a so-called "naked license," which can damage consumer trust and, in the worst case scenario, lead to dilution of trademark rights.

In Company I's case, the contract did not clearly stipulate quality standards, inspection rights, corrective measures in the event of violations, contract termination clauses, etc., making it difficult to deal with problems once they occurred.

Lessons learned

When concluding a trademark license agreement, it is important to define not only the scope of the license but also the quality control provisions in detail. Specifically, it should include clearly stating product quality standards and specifications, securing inspection and auditing rights for the licensor, obligation to comply with brand guidelines, corrective procedures and contract termination clauses in the event of violation, reporting obligations, etc. Additionally, it is essential to regularly monitor the licensee's activities even after signing the contract and address any problems as early as possible to protect brand value.

Case 7: Rights extinguished due to forgetting renewal procedures

What happened

Company K, a long-established Japanese confectionery store that has been in business for 50 years, registered its trade name and trademarks for its main products several decades ago. For Company K, which had been using the same trademark for many years, it was so commonplace that they were hardly aware of it in their daily work.

One day, Company K, which was planning to open a new store, was shocked when they tried to check the validity of the trademark. The trademark registration expired several years ago due to its expiration date. I forgot about the update procedure. To make matters worse, it was discovered that a third party had applied for and registered the same trademark during the blank period after the trademark ceased to exist.

What went wrong

The term of trademark right is 10 years from the date of registration, and renewal procedures are required every 10 years. Renewals must be made between six months prior to the expiration date and the expiration date. You can renew your license at a premium price within 6 months after expiration, but once that period has passed, your rights will expire.

Company K was a small family business, and there was no person in charge of intellectual property management or an advisory contract with an expert. After the person in charge at the time of registration retired, no one knew about the renewal deadline, and the deadline passed.

Lessons learned

In the management of trademark rights, managing renewal deadlines is the most basic and important task. In order to manage deadlines, we recommend keeping a copy of the trademark registration register and creating a list of renewal deadlines. It is also important to have a system in place to share information among multiple people in charge, and to ensure that information is handed over when a person in charge transfers or retires. Another effective option is to enter into a consulting agreement with a patent firm or patent attorney and outsource deadline management. In recent years, there has been an increase in the number of offices and online services that provide renewal deadline notification services, so please consider a management method that suits your company's size and resources.

Summary: Tips for successful trademark strategy

Summing up the lessons learned from these cases, we can see that trademark management requires both "offensive" and "defensive" aspects.

From an "offensive" perspective, it is important to file a trademark application before starting a business, or at least at an early stage, to select categories with an eye on future business development, and to formulate an early international application strategy with an eye to overseas expansion. The idea that a trademark can be obtained later is dangerous, and under the first-to-file system, it is of utmost importance to take the first step.

From a "protective" perspective, continued use after registration and preservation of evidence of use, brand management to prevent common names, reliable management of renewal deadlines, and quality control for licensees are required. A trademark does not have value just by acquiring it; it can only serve as a shield to protect your business if it is properly managed and utilized.

What all of these have in common is the importance of "cooperation with experts." Trademark law has many technical aspects, and the system differs from country to country. It is difficult to perform perfect management on your own, and many problems can be prevented by receiving support from a patent attorney or intellectual property expert.

Brand is one of the most valuable intangible assets of a company. In order to protect and nurture that value, I would like to see trademark strategy become an important part of business strategy.

If you have any questions or would like to know more about a particular issue, please feel free to let us know. It is also possible to consider scenarios similar to actual cases and provide specific advice on preventive measures.

AUTHOR

Takefumi SUGIURA （杉浦 健文）

EVORIX Intellectual Property Law Firm　Managing Patent Attorney

Supports clients across IT, manufacturing, startups, fashion, and medical industries, covering patent, trademark, design, and copyright filings through trials and infringement litigation. Specialized in IP strategy for AI, IoT, Web3, and FinTech. Member of the Japan Patent Attorneys Association (JPAA), Asian Patent Attorneys Association (APAA), and Japan Trademark Association (JTA).

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