The Risky Business of Copying Established Traders’ IP

As COVID-19 continues to affect economies around the world, an increasing number of individuals are trying their luck as business owners.

For the new business owner, or one expanding into a previously unknown area, reviewing what works for other traders can be a natural first step. But creating a business that imitates too closely the look, feel and trade marks of an already established trader can lead to problems – even if that other trader is not operating in your market.

Copyright and the 10% Myth

Copyright is an inherent right that covers original artistic works, including but not limited to logos, trade marks, photographs, images and in some cases product design.

The most obvious form of infringement is making a direct copy of someone else’s logo, but you need to be aware that there is still risk associated in copying any part of an original work.

There is no hard-and-fast rule that sets out how much of a copy is too much.  For example, there is no rule that says a 10% difference is enough to escape copyright infringement.  Each potential copyright infringement is assessed by looking at the original work, the extent of copy, and any link between the original and the copy.

Not being in the same country is also not a defence to copyright infringement.

Countries that are members of the Berne Convention[1] recognise copyright across borders.  By virtue of the Berne Convention, if you copy a logo originating from one country and use it in another country, you may still be infringing.

Fair Trading Breaches may arise even when the trader is not physically in your market

The absence of a first trader’s bricks-and-mortar store in your location does not necessarily mean that you are free to use that trader’s look and feel.

Even without sales in your local market, that first trader could establish a reputation with your local consumers through advertising or a reputation overseas.  If those consumers are likely to be confused or deceived by your activities, you could be at risk of breach of fair trading legislation and/or liable under the tort of passing off[2].

Registering Company and Domain Names

Incorporating trade marks which you do not own into your company name or domain name is another risky action.

Company and domain name registrars do not review trade mark rights as part of their compliance work.  Successful registration does not necessarily mean that you are free to use that company name or domain name.

If your company name or domain name incorporates another trader’s trade mark, you could face legal action for trade mark infringement, breaches of fair trading legislation or for passing off.

If your domain name includes another trader’s trade mark, the domain name could be subject to domain name retrieval processes.

Having to resolve an objection to your company name or domain registration can tie up valuable time and resource better spent establishing a business.

Trade Mark Rights and True Ownership

Like many countries around the world, the New Zealand Trade Marks Act provides that the applicant for trade mark registration must be the owner of the trade mark.

If you apply to register in entirety a first trader’s trade mark, or a trade mark which incorporates the first trader’s trade mark, you may face an opposition to registration by that first trader.  If the first trader can show it owns the trade mark, be it through copyright or earlier use overseas, it could prevent your own application progressing.

Even if you successfully register the trade mark, the resulting registration could be immediately vulnerable to attack by the first trader on the grounds that you are not and will never be the proper owner of the trade mark [3].

Trade marks can be an enormously valuable business asset, and an inability to secure valid registered trade marks can greatly affect the worth of your business in the future.

David v Goliath is not about the size of the business, it’s all about the right

Being a small business, or family owned, a young entrepreneur, or starting with a really compelling back-story does not give you an inherent right to copy the look and feel of an overseas business, without permission.  However, a small new business does not need to roll over simply because someone with more money than you objects to what you are doing.

The narrative of David v Goliath is often recalled as shorthand for a small trader winning out over a large trader.  But the story is not one about the differences in size for size’s sake, but about how to level the playing field for the smaller player by ensuring they have right on their side, the correct weapons in hand, and the best focus and aim.

Your business will be in the best position if you are original, have the right intellectual property free from any claim by other traders, registered in the best way, and targeted to maximise business advantage.

Be inspired but be original

The safest way to start a new venture is to make it your own as much as possible.  Taking inspiration is great, but developing original trade marks, look and feel can be the key to long-term success.

It is imperative, therefore, that you get the right advice so that you are aware of the rules, any limitations to what you can do and the best way to make your intellectual property work for your business.

[1] Berne Convention for the Protection of Literary and Artistic Works – 179 signatory country as of March 2021

[2] Muzz Buzz Franchising Pty Limited v JB Holdings (2010) Limited [2013] NZHC 159 at paragraphs 74 – 74 discusses the globalisation of the marketplace and a reputation for an Australian-based business recognised by New Zealand consumers.

[3] The North Face Apparel Corp v Sanyang Industry Co Ltd [2014] NZCA 398 at para 17 “A person cannot claim to be the owner of the mark if another person has previously used that mark  … as a trade mark and the use was public”.