Up and coming small businesses are at risk from people whose job it is to register trade marks so they can cash in when they sue for trademark infringement.
Cathryn Warburton, Principal at Acacia Law, said there is an increase in trolls registering trade marks of small businesses who have not protected themselves and then pursuing them for breach of the trade mark law.
“This really is a money making venture for these trolls,” Cathryn said. “They have no interest in building a business using the name trade marked; all they want is the money that comes from either selling the trade mark back or suing for breach of the trade mark.”
Cathryn said these opportunists have the capacity to ruin a small business overnight. “The worst case scenario of a costly court battle could be avoided if the business registered their trade mark before they started their business,” she said.
“Trolls were those nasty creatures, harking back to fairy tale times, who use to hide under bridges demanding a toll be paid if the person wanted to cross.
“These modern day trolls are just as nasty and greedy. They prey on small businesses who do not understand the importance of protecting their intellectual property. As soon as they see the business’s star rise, they lock that trade mark in and cash in.”
Cathryn said trade mark trolls are similar to the people who used to buy up domain names and sell them for top dollar.
“There are three types of trolls – the innocent one even where there is no troll deliberately trying to monetise the trade mark of a competitor but a small business might still find themselves in trouble if they have not registered their name as a trade mark,” she said.
"For example, one of my clients had been trading under a name for years before she asked me to do a trade mark search. She was shocked when we discovered she had inadvertently been infringing a prior registered trade mark,” she said.
“Or the competitor troll who is deliberately trying to shaft the business. Then there is the troll under the bridge. The person who searches for a business with an elevating profile and registers their name.”
Last year there was a case where a pensioner, wanting to stir up trouble for Clive Palmer, took the name of one of Mr Palmer's companies and registered it. Cathryn said for the sake of a few thousand dollars, Mr Palmer learnt a valuable lesson about protecting his IP from someone who saw an opportunity to profit.
“Another example is a small family owned business that had been trading for 15 years and built a fantastic reputation. Someone in the industry saw how well they were doing, registered the name as trade mark and sued our client for trade mark infringement.
“They were faced with having to pay $60k to buy back the trade mark incorporating their own business name, or go to court which would have cost over $100k or change their name. They could not afford either of these options and so had to change their name losing the profile they had built over 15 years. Registering their business name as a trade mark before they started their business could have inoculated themselves against the trade mark troll."
It is not enough to register a business or company name with ASIC. This does not protect a business owner from trade mark trolls. The court sees the holder of the trade mark as the rightful owner, unless the business owner can prove to the court's satisfaction they have earlier and stronger rights to the name.
Most business owners do not have $100k+ it would take to remove the troll as the owner of the trade mark on the Trade Marks Register. The only way to arm a business against these trolls is to register the trade mark, before the trade mark troll gets their application filed (preferably before the business even starts trading).
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