Legal notes on the first to file principle

The First to File principle was used to address restricted issues. The First to File principle can be understood as filing the first valid trademark applications before its competitors to be protected. Protection certificates will only be granted to applications having a priority date or the earliest filing date of all qualified applications.

Even if there are several legal trademark applications with the same priority date and filing date, the protection certificate is only issued for one of them, and the certificate is only valid for that one application. If the applicants are unable to come to a mutually acceptable arrangement, all of their petitions will be refused protection altogether.

Regardless of whether the trademark is created or used by another company, the first person to apply for a valid trademark will receive all rights associated with it. In most countries that use this system, however, the first applicant does not always become the undisputed owner of the trademark by default.

Limitations of the First to file Principle

Although the use of the First to File system has made it easier for many businesses and agencies to conduct checks, it has also revealed a number of flaws and inadequacies that allow individuals and organizations to profit from speculation and ‘extortion’ by large international corporations.

A good example is if some individuals observe the efforts of an existing brand in a particular country to reach the worldwide market, they may decide to register the trademark for that brand in their own country. It is possible that the owner of this trademark will be required to pay a substantial amount of money in order for the other person’s trademark that has been “registered” to be reclaimed by the owner of this trademark when it wishes to expand into another nation.

There are many examples of how registering support for well-known trademark languages may result in revenues being multiplied. The most well-known example is the trademark dispute between Starbucks and lawyer Zuykov, which arose at a time when Starbucks was considering expanding its operations into Russia.

The trademark dispute between Starbucks and lawyer Zuykov

Sergei A. Zuykov served as legal counsel for a Starbucks entity operating in Russia, distinct from the globally recognized coffee chain. This particular entity lacked coffee brewing facilities and physical stores; its primary activity involved attempting to sell its brand name back to the original Starbucks corporation based in Seattle, USA.

Mr. Zuykov, a 39-year-old (at the moment of the dispute) with a background in car alarm sales, had effectively delayed Starbucks’ expansion into one of Europe’s rapidly growing retail markets. While numerous competitors, both domestic and international, had emerged, Starbucks had faced hurdles due to trademark issues orchestrated by Mr. Zuykov.

Regarding his control over the Starbucks trademark in Russia, Mr. Zuykov acknowledged the legality of his actions despite their perceived unfairness. He maintained that his application for the trademark predates Starbucks’ interest in the Russian market.

Although Starbucks initially won a legal battle in a Moscow court, Mr. Zuykov secured a temporary injunction, setting the stage for further legal proceedings. This case was considered a pivotal test of intellectual property rights in the region, with an appellate hearing scheduled for October 17.

Mr. Zuykov was among several individuals and entities engaged in trademark squatting and brand name hoarding in Russia, a practice that has flourished despite crackdowns on other forms of intellectual property infringement.

From domain name speculation to trademark speculation

Around half a century ago, with the emergence and growth of the Internet, a phenomenon known as “domain name speculation” garnered significant attention. Domain name registration, which only required a modest investment, could yield substantial returns through resale.

Numerous articles dating from 2005, 2006, and onwards discuss this phenomenon, with a simple search on Google using terms like “domain name speculation” or “sale and purchase of domain names” revealing a wealth of information.

To this date, in 2024, the action of domain name speculation persists, however, as most ‘good’ domain name should have already been registered, the speculation activities have a downward tendency in many countries. From a legal standpoint, most countries have failed to react to this loophole, causing huge problems for enterprises as well as individuals wanting to build their unique personal brand.

From an economic and legal perspective, domain name speculation falls under the purview of intellectual property and unfair competition laws. In many countries, registering and using a “.vn”, “.ch” or “.us” domain name constitutes infringement if it duplicates or resembles protected intellectual property rights (such as trademarks, trade names, or geographical indications), and the content hosted on the associated website also violates intellectual property laws.

Domain names are allocated based on two principles: the first applicant to submit registration documents is granted ownership, and each domain name is allocated to a single entity. However, a registrant may still be compelled to surrender or relinquish a domain name if it is found to be identical or confusingly similar to a protected trademark in some countries.

Nonetheless, most countries don’t have this type of regulation and won’t give the trademark owner any rights if the identical domain name has already been registered by other parties.

Hence, certain individuals intentionally exploit others’ trademarks for domain name speculation and subsequent resale at inflated prices. For instance, if someone registers the domain name applesiphone.cn with the intention to resell it to Apple, it constitutes a violation of the law since Apple holds exclusive trademark rights for the “Apple” and “iphone” in the telecommunications industry in most countries. In such cases, the domain name would be revoked and awarded to Apple.

However, given the inherent flexibility of the legal system, there are loopholes that some individuals exploit to advance their agendas. Rather than engaging in straightforward domain name speculation, some individuals have elevated their strategies to what can be termed as “trademark speculation” in the new era.

In the past 20 years, there has been many cases of individuals apply for trademark protection of foreign brands expected to enter the market, as well as brands already present but not yet registered, or well-known brands lacking formal registration.

Subsequently, they capitalize on these trademarks by selling them at a premium to the original brand owners, thereby pressuring them to either purchase at inflated prices or abstain from conducting business in the market. This practice is known as “trademark speculation,” which has emerged as domain speculation diminishes because the latter has simple run out of good domain name, or has already been negotiated and dealt with.

It’s worth noting that trademark speculation has become a global phenomenon, occurs in all jurisdictions operating under the “First to File” principle.

Countries that follow the principle of first to file have issued regulations requiring the use of a mark for a specific period in order to address the issue of individuals and organizations profiting from others’ registrations while also restricting the growth of businesses and the economy in general.

Another organization can request that a trademark’s protection certificate be invalidated if it has not been used for a specified period (for example, 6 months). This makes it easier for the trademark’s owner to reclaim the trademark and, at the same time, fully exploit the trademark’s commercial potential.

To curb trademark speculation activities, the most straightforward and cost-effective approach for enterprises is to promptly register trademarks intended for manufacturing and market launch. Alongside the “First to File” principle, it’s crucial to consider the territorial principle, which dictates that trademark registration in a specific country or territory grants protection within that jurisdiction.

Therefore, if products are intended for the China or America market, it’s advisable to initiate trademark registration in that market before circulating goods. Another method is to establish or use the service of an IP agent with the main purpose of detecting and conducting legal actions against the use of the company’s trademark illegally, or to find trademark applications with similar or misleading trademark and file oppositions against their registrations.

Different with the first to use principle

In fact, currently no country applies the First to use and First to file principles separately anymore. Instead, each country’s intellectual property offices will combine both First to use and First to file principles in evaluating trademark registration declarations. A typical example of successful application of this form is the United States.

Nonetheless, in the matter of preventing trademark speculation, the first to use countries will have greater advantages as the officers will have to examine the actual commercial present of the trademark to grant or refuse trademark registration.

This will help to prevent trademark speculation. However, in implementation, in addition to the positive aspects, this system has also shown many limitations in law enforcement, especially with an economy that is constantly developing and innovating every second.

Applying the First to Use principle in society is extremely difficult because registration agencies face many difficult problems when trying to determine who is the first user and when the label was applied. When did the trademark start to be used? Is there any individual/organization using the same or similar trademark? Is that use a commercial use of the trademark or just an individual use with no commercial present or the commercial present is not in a large scale to be granted trademark registration certificate?

AAA IPRIGHT – Global IP – Global Trademark Registration

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