Protection of Trademarks Within International Contracts

One of the most important matters with regards to international contracts signed by companies such as distribution, dealership, corner, etc., is the protection provisions concerning the products and trademarks. As within these contracts the companies usually are required to provide rights partially or fully to the persons or companies authorised by them with regards to use of the trademark due to commercial reasons such as granting distributorship, product supply, opening a store, product marketing, etc. The matters that should be taken into consideration within this scope are set out below.

The rights regarding the use of the trademark should be defined in a limited and explicit way.

The companies should especially ensure that this matter is set out within the contract and the scope of the granted authority is defined explicitly in order to protect their trademark which is brought into use by third parties for commercial reasons. For example it will be beneficial for the companies owning the trademark to limit the use of the trademark as “only for sale or in-store marketing for sale” within the corner contracts. It is also advised to limit in-store marketing with showcase applications, in-store booths, visuals, etc., and not to allow the use of the trademark at store signboards, outside of the store and within mediums such as tv, website, etc, as a marketing tool in order to ensure the protection of the trademark.

The trademark which is the subject of the right to use should be set out explicitly and a copy of the trademark registration certificate should be attached to the contract.

It is important to have a copy of the certificate of the trademark owning company within the attachment of the contract in terms of setting forth the ownership of this trademark. In addition to this, it is definitely recommended if possible to provide the registration documents from the country where the trademark where the trademark will be used, if not to have contractual provisions such as an undertaking by the other party to not to claim any rights on the trademark within this country and to compensate any damages that may occur due to the use of the trademark which may arise from the laws of that country.

“The registration of the trademark or the likes of it on behalf of themselves” or “providing licenses for the use of the trademark” to other companies shall not be granted to third parties which are authorised in terms of the right to use the trademark under any circumstance. In fact there should be strict provisions prohibiting these within the contract.

Finally, the usage of the trademark will also be defined by attaching the trademark registration certificate. A universal principle that is applied within many jurisdictions and set out within the Article 14 of the Decree Law No.556[1] is the obligation to “use of the registered trademark in a form differing in elements that do not alter the distinctive character thereof”. Therefore a provision in this regard for the use of the trademark as defined within the registration certificate by the third party should also be set forth within the contract. It is also advisable to have an undertaking that any damages occurring due to altering shall be compensated by the authorised third parties.

It should be set forth that the trademark owning company is not liable for the commercial activities and use by the authorised third party.

The companies have difficulties in terms of controlling the use of the trademark especially within international contracts. Therefore it is advisable to add provisions to the contract on the company not being liable to the third party under any circumstance for the damages due to exceeding its contractual authority or due to the unlawful use by the third party in case of not exceeding together with the company’s right to recourse in case of a liability.

Damage to the trademark reputation should be defined as a ground for rightful termination and a penal clause should be imposed.

The trademark owning company should be able to request ceasing the using of the trademark and even the termination of the contract in case of an abuse  of the rights granted by the contract or there is a possibility of abuse. A penal clause may also be set forth within the contract if it is determined that termination will not be enough to cover the damages.

A right to file a lawsuit shall not be granted to third parties with the right to use the trademark under any circumstances.

The right to file a lawsuit with respect to trademarks shall only belong to the trademark owning company. Accordingly, the right to file a lawsuit or bring forward a claim or notification against other persons or companies shall not be granted to the third parties by using your company’s rights in any country. With regards to this matter, it is advisable to add a liability for notification to your company as third party’s notification is necessary in order to be informed about infringements in the countries where the trademark is used.

Confidentiality should aim to protect the trademark owner.

It is a commercial necessity to share commercial information about the company to the other side of the contract. However the confidentiality provision should ensure that the obligation of confidentiality will survive the termination or expiration of the contract in order to protect these information.

The provisions which should be set out within international contracts for the protection of the trademark are essential for the future of the trademark, product and even the company although they are not limited with the above and depend on the type of the each contract. Bağ&Günen Law Firm provides services with regards to drafting, amending, revising the international contracts together with their legislative compliance in light of their sectoral expertise.

[1] Decree-Law No. 556 on the Protection of Trademarks