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International trademark protection: A brand new way in the U.S.A.

By Pradip Sahu

On November 2, 2002, President Bush signed into law the legislation that will make the United States a member of the Madrid Protocol for the International Registration of Marks (The Madrid Protocol). This international treaty enables owners of trademark applications and registrations in member states to register their marks in any number of the other 57 member states by filing a single application (the "basic" application) in their home countries. Trademark owners in the United States may be able to file such applications under the Madrid Protocol as early as November 2, 2003. This system, administered by the World Intellectual Property Organization (WIPO), will have many benefits and a few drawbacks compared to filing individual applications in each country.

Benefits

Filing. The owner of a United States trademark application or registration can file a single application for an "International Registration" with the United States Patent and Trademark Office (USPTO) in the English language, designate the countries in which trademark protection is desired, and pay the associated fees in a single currency. A translated application is then forwarded to the national trademark office of each designated country where it will undergo the traditional registration process. This is simpler and less expensive than the current system in which an application is filed in each individual country using the official language and paying the fees in the official currency of each country.

Further, under the Madrid Protocol, in most cases the national trademark office of each member country has 12 months to either allow the application to mature to registration or issue the first office action. If no action issues within the prescribed time limit, a registration will be granted for that individual country. This gives the applicant a better understanding of the worldwide protection available much sooner than if applications were filed individually in each country.

Foreign associates. Because the international application is filed in the USPTO and forwarded to the national trademark office of each designated country, there is no need for foreign associates in the early stages of the application process. This eliminates some of the delays and costs associated with retaining local counsel.

Portfolio management. Once the application matures into an "International Registration," maintenance is greatly simplified. The registration is valid for 10 years from the filing date and renewable for periods of 10 years. Again, all fees can be paid in a single currency to WIPO. Moreover, administrative matters such as name changes and assignments can be filed directly with WIPO instead of with each individual country. This is simpler and much less expensive than the current system.

Expenses. Normally, the fees associated with designating each country under the Madrid Protocol are, at most, equal to those of filing applications in each country individually. Further, many costs are eliminated because there is no need for foreign translations, currency conversions or the retention of foreign associates for the initial filing.

Drawbacks

Scope of protection. Under the Madrid Protocol, the International Registration cannot have a broader scope of protection than that of the basic application. Trademark applications filed in the United States must specify the goods and services with which a mark is associated in greater detail than in most countries. As a result, the scope of protection in each designated country may not be as broad if it is based on the U.S. filing.

Preliminary searches. Although it is not necessary, it is advisable to perform a trademark clearance search in each individual country before designating the country in the application for International Registration. A search of the international register using the search engine located on WIPO's Web site can be done as a preliminary screening to find similar International Registrations and Applications. However, local counsel should be retained to help identify any potential conflicts that may arise from unregistered marks as well as marks that are only registered in the individual country. This is initially more expensive than simply filing an application and waiting to see in which countries trademark protection will be available. However, trademark owners interested in a worldwide product launch can use the information obtained from preliminary searches to assist in their marketing strategy as well as to estimate trademark prosecution costs if an initial refusal is made by an individual country's national trademark office.

Foreign associates. Most countries, including the United States, require prosecution of trademark applications to be done by attorneys licensed to practice in that country. Therefore, if an initial refusal is made by a country's national trademark office, local counsel must be retained to assist with prosecution or the application must be abandoned in that country. Although this may seem like a disadvantage, it is no worse and no more expensive than if the application were filed in the country individually.

Choosing a base country. One pitfall that must be avoided is the effect of abandonment of the basic application or cancellation of the basic registration within five years of filing. Under the Protocol, these may result in the cancellation of the International Registration in whole or in part for all of the designated countries. To avoid the effects of this "central attack," the International Registration can be transformed into a series of national applications or registrations in the designated countries, each retaining the original filing date. Prosecution would otherwise continue as if each application were filed in the corresponding country individually, incurring associated costs. Therefore, it may be beneficial for multinational organizations to choose a base country in which there is less likelihood of abandonment or cancellation for filing purposes.

Also under the Madrid Protocol, assignments of International Registrations in part or in whole can be made only to entities that are domiciled or otherwise located in countries that are also members of the Protocol. This is an added dimension that comes into play for trademark owners that would like to maintain portability of their trademark portfolios.

Conclusion

The United States' accession to the Madrid Protocol will be a great benefit for organizations with global operations. If handled properly, it will result in simpler procedures, lower costs and more efficient management of international trademark portfolios. For attorneys in the United States practicing International Law, this is a wonderful opportunity to expand their practices by providing international trademark services to their clients. This is also a marvelous time to market their practices to foreign attorneys and organizations that cannot prosecute applications before the USPTO but still desire trademark protection in the United States.

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Pradip Sahu is an LL.M. Candidate (Intellectual Property Law) at The John Marshall Law School.

Cost of doing business: Air freight carriers pay
prejudgment interest too

By Michael Schimmel and Matthew J. Kissling

While the Warsaw Convention appears on its face outdated and the Hague Protocol inapplicable, these two doctrines are still well alive and are often applied in modern day situations. In the recent decision of Motorola, Inc. v. Federal Express Corp., these two doctrines converged and the very essence of their existence was questioned. The ruling of this case hinges upon the interpretation of the Warsaw Convention, specifically Article 22, which encompasses the method for calculating an amount recoverable, when goods shipped internationally are damaged.

The present casenote is broken down into three sections: the first deals directly with the case as decided by the 9th Circuit, the second section discusses its application, and the final section includes the authors' assessment.

There were two issues dealt with by the Court of Appeals in this decision. First, whether the Trial Court erred in awarding damages based on the entire weight of the shipment rather than the weight of the damaged portion under the Warsaw Convention. Second, whether prejudgment interest can be awarded under Article 22 of the Warsaw Convention, which otherwise limits the liability of air freight shippers.

One point that should be noted at the onset is that Kuehne & Nagel, Inc. (K&N) settled with FedEx and dismissed its cross complaint prior to trial. Also, a pretrial agreement between K&N and Motorola stipulated that the manner for calculating liability should be based upon the entire shipment. However, this was conditioned on Motorola providing sufficient evidence that the damaged portion affects the value of the entire shipment. Therefore, since a joint pretrial order was entered, the court did not have to address the issue of calculating damages.

To understand the holding and law of this case, a brief overview of the background facts is provided. Motorola hired K&N, an indirect carrier and freight forwarder, to transport a cellular telephone base station system (system) from the United States to Japan. Subsequently, K&N hired FedEx, a third party, to transport this system. In addition to FedEx, another third party, not involved in the present suit, prepared the system for shipment by packaging it in 22 separate crates. Following the packaging of the system, K&N issued a single airway bill covering the entire shipment. This statement articulated that there was no apparent damage to the cargo prior to shipment. Thereafter, FedEx transported the cargo in six flights. Upon arrival in Japan, K&N noted that a portion of the cargo was damaged. When Motorola received the shipment, it discovered that the damaged portion contained the system's common control frame (control). The resulting cost to Motorola was $459,330.70 to replace the control, plus a delay of six weeks to receive the replacement. The total weight of the entire shipment was 12,204 kilograms, while the damaged crate only weighed 680 kilograms.

Motorola filed suit to recover maximum damages under the Warsaw Convention ($20/Kg). After a two-day bench-trial, where only the plaintiffs presented evidence, a judgment was issued awarding full damages of $244,080 to Motorola. ($20 U.S. ­ 12,204 kg x $20) In addition, the plaintiffs were awarded prejudgment interest. Shortly after this judgment, K&N appealed, challenging both the damages and the award of prejudgment interest.

In addressing the first issue, the court articulated that under the Warsaw Convention, a court can only award damages based upon the weight of the damaged portion of the shipment unless the plaintiff proves that the damaged portion so affects the value of the entire shipment that the entire shipment is without value because of the damage to the specific portion of the shipment.

In the present instance, the 9th Circuit concluded the proper measure of damages should be calculated by the weight of the entire shipment. In making this determination, the court considered several factors. Although, the Warsaw Convention is silent on the matter, the appellate court looked at other evidence such as the Hague Protocol, and caselaw dealing with similar issues and facts. Specifically, the court determined that the affected weight standard in the Hague Protocol is a clarification of the Warsaw Convention. It found support for this position in several cases dealing with similar facts.

As a practical matter, the court looked at the testimony of Gary Koepke, a Motorola project manager and engineer. Mr. Koepke testified that the system could not be assembled and would not function without the control. Since K&N did not offer any evidence to refute this testimony or other evidence presented by Motorola, the court decided that the Warsaw Convention, explained further by the Hague Protocol and interpreted by the caselaw, was uncontroverted. Therefore, the proper measure for calculating damages is by the weight of the entire shipment.

As alluded to earlier, K&N maintained that the damages should have been calculated against the weight of the damaged crate alone. This argument carried little merit considering K&N's failure to present any concrete arguments to support their position.

When addressing the second issue, the court of appeals held that in appropriate cases prejudgment interest is provided for under Article 22 of the Warsaw Convention to ensure that the plaintiff receives the full value of his limited damages. Such a determination is discretionary, but should be well-reasoned and rational.

As the 9th Circuit noted, both according to the history of Article 22 of the Warsaw Convention and its fundamental purpose, as well as the reasoning of the trial judges' application of the facts, prejudgment interest was an available measure of damages. In addition, this court adopted the view expressed by the 5th Circuit, which applied prejudgment interest to an award for damaged cargo. Boehringer-Manheim Diagnostics, Inc. v. Pan American World Airways, Inc., 737 F.2d 456 (5th Cir. 1984).

By accepting prejudgment interest as an available remedy, this court rejected the interpretations of the 2nd and 7th Circuit Courts of Appeals, which do not allow liability to exceed the limitation of the Warsaw Convention. Specifically, the 9th Circuit stated that the 2d and 7th Circuits' decisions were based on the faulty premise that the signatories to the Warsaw Convention envisioned the liability caps as absolute ceilings.

Therefore, because the 9th Circuit found that the purpose of Article 22 of the Warsaw Convention was to balance the interests of the shippers with the interests of the air carriers, and because an award of prejudgment interest simply encouraged prompt resolution of a successful claim, the court of appeals held that in appropriate cases prejudgment interest is allowable under Article 22 of the Warsaw Convention to ensure that the plaintiff receives the full value of his limited damages.

This case demonstrates the complexity in litigation arising from shipping goods through air carriers internationally. Clearly, Article 22 of the Warsaw Convention, as modified by the Hague Protocol, still has teeth. The major concerns for future litigants under Article 22 are the limitations covering liability. Given that two Circuits hold that no prejudgment interest can be awarded and two Circuits conduct a case-by-case analysis, both of which allowed prejudgment interest, the next logical step is the Supreme Court of the United States.

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