Japan: The Draft Trademark Bill about letters of consent

1. Summary of the draft amendment bills

The draft amendment bill covers, among other items, an amendment to the trademark law, which introduces a procedure for letters of consent.

Letters of consent will allow a latter-filed trademark to co-exist with an earlier trademark if the applicant of the latter filed trademark obtains an agreement indicating the consent of the earlier filed mark for the two marks to co-exist. Under the current trademark law, letters of consent are not acceptable, therefore a procedure called “assign-back” has often been used to obtain a trademark registration when the registration of a latter-filed trademark is blocked by an earlier-filed trademark. The draft amendment bill allows for the adoption of letters of consent under the following circumstances: (i) the earlier trademark owner issues a letter of consent, and (ii) there is no likelihood of confusion between the earlier trademark and the latter trademark.

2. The current trademark law and practice about letters of consent

Under the current trademark law, a latter-filed trademark cannot be registered (i) if the latter mark is identical to/confusingly similar to a prior-filed trademark and (ii) if the designated goods/services covered by the latter trademark are similar to those covered by the prior trademark application/registration regardless of whether there is actual confusion between the latter trademark and the earlier trademark.

In practice, there are many cases where prior trademark owners are of the view that there is no likelihood of confusion even if the latter trademark which is being used/registered is identical/similar as the practical risks are lower (i.e., different field of business). However, letters of consent are not acceptable under the current trademark law even if the prior trademark owner believes that the latter filed trademark would not lead to a likelihood of confusion in the market. One of the reasons why the current trademark law does not accept letters of consent is because the co-existence of identical/similar trademarks may be harmful to public consumers even if the prior mark owner and the applicant of a latter mark agree to the co-existence of their trademarks.

Under the current practice, instead of obtaining a letter of consent, a procedure called “assign-back” is often used by owners of the latter filed mark to obtain registration in Japan. This procedure involves the owner of the latter filed trademark assigning their mark to the owner of the earlier filed trademark. Once the latter filed mark proceeds to registration, the owner of the earlier filed mark will re-assign the latter filed mark to the owner of the latter filed mark.

Although the “assign-back” procedure does provide an alternative route to letter of consent for applicants to obtain registration, there are some disadvantages to “assign-backs”. One of the disadvantages is the extra costs involved in completing the assign-back. The assign-back procedure usually involves substantial costs for negotiations with the earlier trademark owner, monetary compensation to be paid to the earlier trademark owner, and costs in relation to recording the assignment of the latter trademark. Therefore, many companies and IP professionals have called for amendments to the trademark law to introduce a system which will allow for the submission of letters of consent.

3. The amendment bill letters of consent

The Draft Amended Trademark Law indicates that a latter-filed trademark, which is confusingly similar to a prior trademark, can be registered (i) if the applicant of a latter filed trademark obtains a letter of consent from the prior trademark owner, and (ii) if there is no likelihood of confusion between the prior trademark and the latter-filed trademark.

This means that the owner of a latter filed trademark will now have the option to obtain a letter of consent from the owner of the prior trademark in order to obtain registration for their mark. However, examiners still have the discretion to reject the application of the latter filed trademark even if a letter of consent is obtained if the examiner believes that there is a likelihood of confusion.

To prevent any potential confusion which may arise from the co-existence of two marks due to a letter of consent, the prior trademark owner may request that the owner of the latter filed trademark attach a “confusion prevention display”. In addition, a new form of cancellation actions will be introduced for cancelling a latter-filed trademark registration if the latter filed mark causes confusion with a prior trademark for unfair competition purposes.

4. Future steps

These Amendment Bills have been considered/discussed at the Diet. After the Diet passes the Amendment Bills, the amended law will be enacted, and will come into effect. After that, the new amended law will be enforced.