'Does trade mark cluttering exist in Australia?' (IP Australia Economic Research Paper 07)
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When cluttering of the trade mark register becomes significant, it has the potential to undermine competition and stifle innovative entrepreneurship. The Productivity Commission’s 2016 Inquiry Report, Intellectual Property Arrangements (PC 2016), identified trade mark cluttering as a possible problem to be addressed in order to ensure the effectiveness of the trade mark system in Australia. However, the PC report did not provide sufficient evidence in support of this claim. This paper explores more extensively whether there is any evidence indicating trade mark cluttering in Australia and assesses how significantly it has been affecting the register.
We find that overall the extent of trade mark cluttering in Australia is not unduly serious on the evidence of two key indicators: less than 0.1 per cent of registered trade marks have been removed annually by a third party via the non-use removal procedures; while about 0.5 per cent of trade marks in force may be blocking other applications while they are not in use. Relative to the total number of trade marks on the register, these small proportions do not seem to be cause for concern.
Nevertheless, potential sources of trade mark cluttering have been increasing in Australia: the first renewal rate has decreased from about 70 per cent in the 1980s to 50 per cent in the 2000s, and an increasing number of trade marks remain on the register for an average of an extra four to five years after their owners deregister their businesses. A comparison of the average number of classes per trade mark between Australia and some countries and priority pairs between Australia and the United States indicates that the per-class-based fee system and proof-of-use requirement have played a positive role in reducing the extent to which non-use trade marks and overly broad non-use classes remain on a register.
IP Australia states
Trade marks identify a unique product and serve to distinguish a business’s goods and services from those of competitors. The mark can be a symbol, letter, number, word, phrase, sound, smell, shape, logo, picture and/or an aspect of packaging. In the case of word marks, studies have found that the most competitively effective trade marks for businesses are unique and concise, with short common words generally working better than neologisms (Beebe and Fromer, 2018).
Consumers often know little about the characteristics of the goods or services they are considering purchasing and there are numerous unobservable differences in the quality of goods and services. Trade marks therefore play an important role in bridging the information asymmetries between producers and consumers. For consumers, a unique trade mark helps them to identify their desired product by associating it with various attributes that serve to establish its quality and reputation. For producers, a registered trade mark gives the owner the exclusive right to use and authorise other people to use the trade mark.
With clarity in trade marks, producers and sellers can create concise identifiers for specific goods and services, thereby facilitating market transactions. Therefore, clarity in the Trade Marks Register serves to provide transparency to other potential traders and enable them to easily identify where market opportunities do, or do not, exist and enabling them to target gaps
in the market.
Trade marks are by far the most widely used intellectual property (IP) right because they are not specific to an invention, like patents or design rights, but to the broader identity of a business. Trade marks are the legal underpinning of a business’s brand and the two concepts are closely related but often confused. A brand is an intangible asset that makes up a significant share of a company’s value, and branding is a key arm of a company’s business strategy. Branding is also integral to a business’s innovation strategy, as it reflects the business’s attempts to define and position itself in the marketplace. Maintaining a business’s brand reputation is an ongoing work that involves continual refinement of its strategy and investment in response to the dynamics of changing markets and consumer tastes. A strong brand helps a business build customer loyalty and obtain a price premium for its products, increasing its revenues and profits. Trade marks are important for the protection of a business’s brand reputation.
Trade mark cluttering refers to a phenomenon suspected to be a problem for many trade mark registers around the world: it occurs when a large number of unused trade marks or overly broad trade marks (including unused classes) remain on a register that block others’ use of the same or similar marks. This clutter substantially increases the costs to other applicants of creating and registering new trade marks (Graevenitz et al. 2012). These costs are an obvious burden for new entrants to a market, but they can also affect existing businesses trying to create new trade marks. Trade mark cluttering can undermine the effectiveness and the efficiency of the trade mark system by making it more difficult and expensive for new applicants to establish their brands, resulting in unfair advantages for incumbent firms over new entrants (Greenhalgh and Webster 2015). Consequently, it weakens the role of the trade mark system in promoting fair competition (Carter 1990) and increases the cost to consumers of searching and identifying their desired products in the market. Trade mark cluttering also has a negative impact on trade mark offices
in terms of their wasted efforts administering unused trade marks and searching inflated trade mark registers.
Closely related to trade mark cluttering are problems of trade mark depletion and congestion; these have been closely examined in the US by Beebe and Fromer (2018). Trade mark depletion occurs when a decreasing number of available words, signs, or their combinations remain unclaimed by any trade mark owner. Implicitly, depletion assumes the supply of trade marks is finite, contrary to an assumption that has long prevailed in economic thinking about trade marks (c.f. Posner and Landes, 1989) and governed policymaking. By contrast, trade mark congestion happens when, for any given mark that has already been claimed, that mark is claimed by an increasing number of trade mark owners. This can occur when a trade mark is assigned to multiple owners but in different classes of goods and services, as allowed under the Nice classification system administered by the World Intellectual Property Organization (WIPO).
The problems associated with trade mark cluttering may be exacerbated and become systemic if growing numbers of applicants try to register trade marks but with no intention of future use, whether for defensive or other reasons (Graevenitz et al. 2012).
The Productivity Commission’s 2016 Inquiry Report, Intellectual Property Arrangements (PC 2016), identified trade mark cluttering as a potential problem that needs to be addressed in order to ensure the effectiveness of the trade mark system in Australia. The Commission’s assessment was based on two main indicators of trade mark cluttering:
i. Rapid growth in the number of applications and registrations of trade marks in Australia in recent decades.
ii. An increasing success rate of oppositions to trade mark applications on the grounds that the provisions of a mark were too similar to an existing mark (s. 44 of the Trade Marks Act (1995)) or that another similar mark already has achieved a reputation in Australia (s. 60).
The Commission’s report largely attributed the cluttering to the introduction of the presumption of registrability in the Act, and suggested that this has swung the balance too far in favour of trade mark owners. IP Australia observed that the presumption of registrability was introduced in response to concerns that the previous legislation was too strict and prevented registration of marks that should have been registrable. It argued that “the increased likelihood of a trade mark application being registered is not in itself evidence that the register is cluttered” (IP Australia 2016). While the Commission’s report suggested Australia’s trade mark system is “lax” in encouraging businesses to seek rights as broadly as possible, it did not conclusively demonstrate the existence of significant cluttering in Australia as it did not provide evidence on non-use of trade marks on the register.
In its submission to the Commission’s inquiry, IP Australia agreed that the trade mark system should not encourage applicants to seek registration of their trade marks without any intention to use them or for more goods or services than they need. IP Australia also suggested that this is an area in which more work should be done in order to identify the nature and extent of the problem (IP Australia 2016). It is against this policy background that the Office of the Chief Economist at
IP Australia initiated its own investigation into the potential existence of trade mark cluttering in Australia, with the aim of providing an evidence base to support IP policymaking by the
Australian Government.
'Confusing the Similarity of Trademark Law in Domain Name Disputes' by Christine Haight Farley in (2019) 52
Akron Law Review 657
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This article anticipates doctrinal disorder in domain name disputes as a result of the new generic top-level domains (gTLDs). In the course of the intense and prolonged debate over the possibility of new gTLDs, no one seems to have focused on the conspicuous fact that domain name disputes incorporating new gTLDs will be markedly different from the first-generation domain name disputes under previous gTLDs. Now second-generation disputes will have the added feature of the domain name having a suffix that will likely be a generic word, geographic term, or trademark. This addition is significant. Rather than disputes over mcdonalds.com, we will have disputes over mcdonalds.ancestry. Before these new gTLDs, Uniform Dispute Resolution Procedure (UDRP) panels have routinely ignored the gTLD portion of the domain concluding that the suffix is inconsequential to their determinations of confusing similarity. This approach has already changed. While this change may seem trivial especially in a non-precedential system, the consequence of this change may be profound for trademark owners’ rights on the internet and portend a fundamental shift in how trademarks will be called upon to pick winners and losers in this new land grab. Farley,
