This is why organizations must remain strategic and alert, making full use of all tools and technologies available to increase competitiveness, boost agility and enhance their market position.
In this article, we explore the risks and threats in the use of unregistered marks in Nigeria—whether actual or potential. Highlighting relevant laws in Nigeria concerning the subject, we also examine the legal implications of the use of an unregistered trademark in Nigeria and identify the risks and threats associated with this. The article concludes by advising the need for trademark registration in the best interest of businesses operating in Nigeria.
Brief overview of legal framework for unregistered marks in Nigeria
Unregistered marks are known as marks which are not registered in relation to goods or services, or in relation to a business.
Trademarks in Nigeria are governed by the Trade Marks Act 1965 (the Act), the Trade Marks Regulations 1967, and the Merchandise Mark Act. The Trademarks, Patents and Designs Registry under the Commercial Law Department of the Federal Ministry of Trade and Investment, is responsible for trademark registration in Nigeria.
The Trade Mark Act, the principal legislation, recognizes both registered and unregistered trademarks, but it does not entitle the owner of an unregistered trademark to enforce any rights under the Act. In other words, unlike registered trademarks which enjoy statutory protection in Nigeria, unregistered trademarks do not. According to the Act:
“[n]o person shall be entitled to institute any proceeding to prevent, or to recover damages for, the infringement of an unregistered trade mark; but nothing in this Act shall be taken to affect rights of action against any person for passing off goods as the goods of another person or the remedies in respect thereof.”
Therefore, for the proprietor of an unregistered trademark to enforce any right in the trademark, the proprietor is limited to the common law action of passing off. There are certain risks and threats associated with this.
Highlights on risks and threats associated with the use of unregistered marks in Nigeria
The use of unregistered marks works well in an instance where the use of the unregistered trademark predates the use or registration of the registered trademark (Principle of Prior Use). The principle is hinged on goodwill and reputation. In American Cyanamid Co. v. Vitality Pharmaceuticals Ltd., the Supreme Court of Nigeria, relying on section 7 of the Trade Marks Act, held, per G. Karibi-Whyte, J.S.C. that “the proprietor or registered user of a trademark is not entitled to interfere with an existing trademark, even if, identical with, or nearly resembling its own if it has been in continuous use before the use of or registration of his own trademark.”
While the court in American Cyanamid recognized unregistered trade marks in Nigeria, it is important to note two vital points: (i) Before a court recognizes an unregistered trademark in Nigeria, the court must have determined that the unregistered trademark has become well-known and enjoys goodwill in the relevant market where the trademark is in dispute; and (ii) the burden of proof of the unregistered trademark being well-known and having goodwill in the relevant market falls on the shoulders of the proprietor making such claim. The same principle applies to businesses—putting them in certain risks as owners of the unregistered trademark.
“For marks to work, they have to be unique, rooted in solid legal foundations, and thoroughly protected to reduce risk and maximize commercial value.”
There are a number of risks and threats that businesses are likely to face if they use unregistered marks in Nigeria. Below are six risks and threats businesses must avoid:
Burden of Proof
Actionable in tort, a passing-off action is instituted to protect a brand that enjoys goodwill or brand recognition and reputation. This brand goodwill must be actual, not potential. When a brand enjoys such goodwill but is an unregistered trademark, any unauthorized person or entity as well as opportunist may attempt to pass off such brand as theirs or as being connected with theirs. Should this happen, it becomes a burden on the startup or business that originally owns such a brand to prove that it has indeed acquired such goodwill distinctively for its brand. To establish goodwill is particularly not seamless. Besides, establishing goodwill alone by a claimant does not satisfy the requirements that constitute the tort of passing off. In The Boots Company Limited v. United Niger Imports Limited, three ingredients of a successful passing-off action were listed as follows:
- Proof that the name, mark, sign which the plaintiff claims ownership has become distinctive of his goods and is regarded by a substantial number of the public or persons involved in a trade in the relevant market as coming from a particular source;
- That the defendants who are engaged in a common field have used a name, mark, sign so resembling to the plaintiff’s that it is likely or calculated to deceive or cause confusion in the minds of the common customer; and
- That the use of the name, mark, sign is likely to cause or has caused injury, actual or probable, to the goodwill of the plaintiff’s business.
Note also that in cases where an infringement has been alleged by a party, all the ingredients of passing off identified above must be present and proved. This burden is normally a heavy one.
Limitation in Enforcement
Although Nigeria operates a ‘first-to-file’ system, an unregistered trademark—however well-known—cannot afford grounds for opposition proceedings. In Nabisco Inc. v. Allied Biscuits Company Ltd, it was an appeal against the judgment of the Court of Appeal (Lagos Division) which allowed the appeal of Allied Biscuit Co. Ltd to that court. The proceedings originated from the applications of both parties for registration under the Trade Marks Act, 1965. The opponent (Allied Biscuits Co. Ltd) filed an application to register “RITZ” as a trademark after conducting searches in the Registry of Trademarks. The application was accepted. Thereafter, Nabisco Inc., the appellants made an application for the same “RITZ” to be registered as their own trademark. The application of the appellant was advertised in the Trade Marks Journal at the instance of the appellants (Nabisco Inc.). When the respondents noticed the advertisement they commenced opposition proceedings in the Trade Marks Registry. Afterwards, the court per E. O. Ogwu Egbu, J.S.C. (delivering the lead judgement) held as follows:
“I accordingly accept the opponents evidence that the applicants intended to destabilise the Nigerian market and her economy. Only an unreasonable tribunal would fail to take judicial notice or cognisance of commercial law promulgations of his government.”
As earlier mentioned, because Nigeria has a ‘first-to-file’ IP system, it becomes even more necessary for companies to speed up their decision-making process if they seek to gain significant share in Nigeria’s emerging market or increase its risks of missed opportunities. There is also the associated risk of reputational damage. According to the Trademark Ecosystem Report 2021, 56% of all respondents have changed a brand name because they suffered infringement. Reputational damage and customer confusion also inflict significant trauma on the bottom line of any organization in no small way. Consequently, when a trademark or brand is compromised, rebuilding trust with audiences takes time and makes heavy demands on multiple resources and fields of expertise within an organization, from marketing and PR to legal, sales and service.
An action for passing off seems a good option to take until one is ready to institute an action in court. The claimant is immediately confronted with the issue of the appropriate court to approach—whether the Federal High Court or the State High Court. It is trite that an action for infringement of registered trademarks should ordinarily be heard at the Federal High Court. But before this became trite, there had been conflicting positions even at the Supreme Court over the years on this issue. In 1988, the Supreme Court held in Patkun Industries Ltd. v Niger Shoes Ltd that the Federal High Court has jurisdiction in trademarks infringement and passing off actions flowing from the infringement of trademarks, whether they are registered or unregistered. But in Ayman Enterprises Limited v. Akuma Industries Limited & Ors, the Supreme Court overruled its previous decision in Patkun’s case in holding that passing off action for an unregistered trademark should be instituted in a State High Court since the right of action in a passing off did not arise from the infringement of any federal enactment. In its words, it held that:
“the jurisdiction of the Federal High Court to deal with actions on passing-off depends on the registration of trademarks as provided by Section 3 of the Trademarks Act … where the trademarks unregistered, as in the present case, then the cause of action for passing-off is in common law of tort and can now be brought in a State High Court.”
The issue appears to have been settled recently. In 2007, the Supreme Court of Nigeria in Omnia (Nig.) v Dyktrade Ltd held that the Federal High Court has exclusive jurisdiction to hear and determine a claim for passing off whether the claim arises from the infringement of a registered or unregistered trademark. We strongly agree with the decision of the Supreme Court in Omnia’s case as it squarely aligns with section 251(f) of the Nigerian Constitution on jurisdiction of the Federal High Court to hear and entertain IP matters in Nigeria.
Legal Remedies available differ and may be inadequate
While the legal remedy for a successful passing-off action in the case of an unregistered trademark is limited to general and special damages under tort, the legal remedy in the case of a registered trademark affords the registered trademark owner room for better compensation. For example, in a trademark-infringement action, a successful claimant may request actual damages (e.g., from lost sales), defendant’s profits from sales made from using the infringed trademark, and request special injunctions and orders that may not be (easily) available or grantable in a passing-off action.
Cost of Litigation and Length of Trial
Nigeria’s judicial system especially in the current Covid-19 period continues to witness an increasing delay in litigation. Since Nigeria does not have special courts created to entertain IP matters, this has further increased the burden on judges of the High Court that try IP matters in Nigeria. Such delays typically come with its attendant consequences, including delay in getting justice, avoidable and unforeseen litigation fees.
Limitation in Licensing and other Means of IP Monetization
The owner of an unregistered trademark cannot maximize the benefits of trademark licensing. Besides, assigning a trademark—should this ever be the case in the future—without being a registered owner of the trademark will be problematic. No serious assignee or licensee of a trademark or any IP asset would be in a hurry to get into a licensing or assignment contract without evidence of registration. Licensing or assigning an unregistered trademark—however well-known such trademark is—comes with both business and legal risks that are best avoided.
Nothing beats trademark registration, regardless of how big or small your brand is.
Trademark registration offers exclusive ownership for businesses. The hallmark of registration is the bundle of exclusive rights that is granted under the law. Section 5 of the Act grants exclusive right on a registered user of a mark, including the right to exclusive use of the mark in relation to the products and services. This means that businesses have the right to prevent others from using an identical or confusingly similar trademark for the same goods or services or description of goods or services in respect of which the first trademark was registered. Basically, the business enjoys the monopoly of use that comes with registration if it is registered. This will put the business in a better legal position to prevent or address the unauthorized use of the mark by third parties.
Some big brands tend to ignore other marks of their business because they erroneously believe their established trade names would cover for other unregistered marks. This is wrong, and dangerously so.
Registering other marks of a brand—however well-established—presents a fine and safer opportunity for brands or businesses to own them as house marks. This has become very necessary in an age where brands compete to set their identity apart from the competition. So apart from the legal rights that will be granted to startups or businesses upon registration, knowing the specific registerable identifiers will place it in the public consciousness as an authority in the market.
While big brands or startups may choose to proceed with the use of unregistered marks in Nigeria without registration they cannot absolve themselves of the attendant consequences and liabilities that accrue—ranging from loss of revenue to negative impact on strategic partnerships, licensing roadblocks to lost rights, inability to move into new markets legally to reduced customer loyalty and increased customer confusion. In the event of an infraction by a third party, it is likely that the unregistered trademark might have gained goodwill and reputation in the Nigerian market thereby entitling a proprietor to institute an action in passing off. Notwithstanding, this is not advisable. We consider them serious risks. Making your startup brand a valuable intangible asset starts with having a trademark strategy. This should finely align with your business goals and risks. Early in the game, big brand or small brand, always consult IP experts to help with IP portfolio assessment and IP monetization.
If you’re interested in protecting your intellectual property in Nigeria and want to know more, you can start today by referring our AfricanLaw Guide™. Alternatively, you can click here for a range of Trademark services in Nigeria.
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