Quality function of a trademark

As mentioned in the previous section, trademarks have different functions. One of the most popular and predominant functions of trademarks is indicating the source of goods. However, the functions of trademarks have been modified in the course of economic and social development at the global level. In 1879, the United States Supreme Court acknowledged that a trademark, in addition to source indication, also has a quality assurance function. The quality function of trademarks can be historically traced to the

“Industrial Revolution”. At that time, consumers and producers both depended on the brand name, which was later called “quality assurance mark”. Trademarks in this regard provide people with a guarantee that the product in question originally depends on the specific enterprises that have affixed a

575 - Those common elements are: 1- commonality of product and service quality for the purpose of distinguishing the source by affixing the mark on the specific goods and products. 2- permission for the member of an association to use the mark. 3- Members are connected with the association. 4- Considering the requirement to ensure and control the use of the trademark.

5- Failing to consider the provisions of the regulation will be punished and. 6- a list of the members of the association is available. See Maria Gabriela Contreas Aulilera, How Collective Marks Can Help Protect the Products of Guatemalan Artisans’ Small Business in the Local and International Market. Lund University, Master Thesis (2007), p. 30. [hereinafter Maria Gabriela Contreas Aulilera, How Collective Marks Can Help Protect the Products of Guatemalan]. See also Collective Trademark, Estudio Colmenares & Asociados, Patent and Trademarks of Argentina p 3.

576-Maria Gabriela Contreas Aulilera, How Collective Marks Can Help Protect the Products of Guatemalan, p. 30.

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certain symbol or a mark. However, we have to be aware that the quality function of a trademark does not assure the consumer that the goods and services have always been embodied with the highest standard of quality. Rather, it provides assurance for consumers that the products are in conformity with the previous quality.⁵⁷⁷ Therefore, every single product and service has its own qualities and attributes.

These attributes are apparently hidden to the consumer, before consuming. In such a situation, the only person who understands the degree of quality is the producer of the product.

It is said that, according to this function, the consumer is not concerned about understanding the source of a product or who made it, but rather his concern is with the quality of goods and services.

Therefore, trademarks perform the task of indicating reliable quality.⁵⁷⁸

Recently, trademarks have been associated with a “secondary function” that gives consumers a guarantee of “uniformity and quality” of the product and services on which the trademark is affixed.

However, it is not clear when this function was first recognized or who recognized it for the first time.

Currently, almost all trademark scholars accept the “quality assurance function” of trademarks.⁵⁷⁹ In short, the quality function of trademarks mostly relies on the notion that consumer satisfaction is the first priority for the producers. The reputation of a trademark from a quality perspective is more important for the people. Therefore, trademark embodies a steady degree of quality.⁵⁸⁰

According to Elmer, consumers are not interested in the origin or source of goods, and they are not aware of the source of a product and do not know who produced the products and services.

However, the consumer focus is on the quality of goods rather than source indication. Therefore, at the moment, the main purpose of a trademark is to indicate the quality of goods and services. From this perspective, the aim is to satisfy consumer needs and to keep them happy as permanent/returning consumers of different products that bear the desired trademark.⁵⁸¹ The quality function of a trademark is also important for trademark licensing and franchising.⁵⁸² If the owner of a trademark is not willing to monitor the quality of the product produced by the licensee and franchisee, the owner of a trademark will lose reputation in the marketplace. Accordingly, a trademark owner’s aspiration is to extend different aspects of their enterprises such as “recognition” and “reputation” via licensing and franchising

577 - Patricia Kimball Fletcher, Joint Registration of Trademarks and the Economic Value of a Trademark System, p. 318.

578 - Kalistratova, Zhanna. Modern Concept of Trademark Protection and Their Application to Internet Uses, Central European University Legal Studies International Business Law (2007), p. 2.

579 -Elmer William Hanak, III, The Quality Assurance Function of Trademark, p. 363.

580- Rabeen Obhrai, Traditional and Contemporary Functions of Trademarks, p. 17.

581 - Elmer William Hanak, III, The Quality Assurance Function of Trademark, p. 364.

582 -Franchise: “To grant [to another] the sole right of engaging in a certain business or in a business using a particular trademark in a certain area”. This is mostly conferred by an agreement which is called “franchise agreement” which is “the contract between a franchisor and franchisee establishing the terms and conditions of the franchise relationship”. See Bryan A. Ganer, Black’s Law Dictionary, p. 683.

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activities. In addition to those benefits, the owner of a trademark may look for extra “royalties” without extra effort. Licensing and franchising activities may not work properly under the source indication of trademark. The rationale might be the inability of the licensee and franchisee to produce and offer goods and services of equal quality to those produced and offered by the trademark owner. In other words, the quality and attributes of two products that are respectively offered by the owner of a trademark and the licensee and franchisee may be different. Generally, the trademark owner wishes to retain power over both the quality and the nature of the product and services that are produced or offered by his licensees.

A lack of control over the licensee’s production may damage the higher quality products and services that bear the same trademark. However, some commentators believe that a trademark should serve both the quality function and the source indication function at the same time, and that these functions are interrelated.⁵⁸³

Unlike Elmer, Mohammad Amin Nasser, in his article “Re-Examining the Function of Trademark law”, states that the key function of a trademark is the “source and origin function of trademarks”. According to him, the secondary functions of trademarks are quality indication, advertising and supplying the necessary information about the goods and services. He points out that there are differences between the quality function and the source indication function. The latter is necessary and essential for all trademarks, whereas the quality function is not, since the quality function serves to transfer the information naturally to the consumer that the product has high or low quality.⁵⁸⁴

Afghan trademark law and the practice of the Commercial Court of Afghanistan have not recognized the quality assurance function of trademarks. The ATML has not articulated the issues pertaining to the licensing and franchising of trademarks. The law is silent in this regard and we cannot even find any Articles that touch upon the “licensing and franchising” matters indirectly. Thought should be devoted to reflecting the licensing and franchising issue in the law.

In conclusion, there is no doubt that trademarks not only perform protection and indication functions, such as consumer protection, producer protection and source indication of the product, but also give assurance for the purchaser that the product bears a certain quality.

From a historical perspective, trademarks protect the consumer interests. From this point of view, the legal purpose of trademarks was to indicate the source of products. From an economic point of view, the purpose of a trademark is to reduce consumer search costs and to motivate trademark owners to maintain the quality of their goods and services. The consumer does not need to enquire about the

583 - Patricia Kimball Fletcher, Joint Registration of Trademarks and the Economic Value of a Trademark System, p. 320-21.

See also - Kalistraatova Zhanna, Modern Concept of Trademark Protection and the Application of Internet Uses, p. 18.

584 -Mohammad Amin Naser, Re-examining the Function of Trademark Law. p. 101.

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quality, because he/she has already used the products previously. Moreover, another purpose of trademarks is to protect the producer or owner of a trademark. At the same time, according to some scholars, trademarks serve to distinguish one product from another.⁵⁸⁵

Therefore, at the moment, from a development perspective, the purpose of trademarks is not limited or constrained to their traditional function (consumer protection). There is no doubt that trademarks have a significant impact on the development of an economy. As economic impact increases, the functions and purposes of trademarks also expand. It seems that developments in the world economy and in the volume and number of commercial transactions results in a widening of the functions and purposes of trademarks in every developed economy. Therefore, legal protections have been increasingly provided at both the national and international levels. At the national level, every single country has its own laws and regulations. At the international level, WIPO has made and continuous to make efforts to harmonize and stabilize legal protection for economic development. Trademarks serve as a tool to protect the benefits and interests of the consumer and to communicate to the consumers that the goods and services that they are using are original, trustable and consistent. When consumers see the trademark, they do not need to conduct more research about the quality and originality of the goods.

Finally, the purpose of trademark law is not just to protect producers and the owners of trademark rights, but also to protect everyone who is directly or indirectly involved in trademark usage, such as trademark owners, producers, competitors and consumers or the public.⁵⁸⁶ There are also collective trademarks which belong to associations. Collective marks also have their own attributes. The Afghan legal system has recognized most of those purposes and functions. In the legal system of Afghanistan, the ATML has mainly followed the source indication purpose of trademarks.

585 - Sidney A. Dimond, The Public Interest and the Trademark System, p. 528.

586-Steven Wilf, Who Authors Trademarks, University of Connecticut School of Law, Cardozo Arts &

Entertainment Law Journal, Vol. 17: 1 (1999), p. 15 .Available at:

http://digitalcommons.uconn.edu/cgi/viewcontent.cgi?article=1073&context=law_papers. [hereinafter Steven Wilf, Who Authors Trademarks].

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CHAPTER FOUR

CONSEQUENCES FOR THE FUTURE OF AFGHAN TRADEMARK LAW

4.1. Introduction

In the previous chapter, the purpose and function of trademark law were examined. As was alluded to, one of the core objectives of trademark law is to regulate the right of ownership of a trademark. A trademark right will not be acquired unless the trademark law provides a legal framework for such acquisition. Therefore, a trademark right is composed of three main elements: The first element is to obtain the right of the ownership and acquisition of a trademark. The second is concentrated on the right of usage of a trademark by the proprietor, in some instances by a third party, and preventing others from the illegal use of a mark. The third element is concerned with the termination of legal protection of trademark rights, which may occur by misuse and non-use of a mark and violating the trademark law rules. The underlying question is how and when a firm or trader obtains trademark rights and will be eligible for legal protection. To protect the rights of a trademark’s owner, it is necessary to provide legal instruments to secure the right to use, produce, transfer and acquire the legal possession of that trademark.

This chapter has been allocated to study the current legal status for the acquisition (ownership), usage and termination of a trademark. These issues are first described from a general point of view and, at the same time, the position of the Afghan legal system regarding the acquisition, usage and termination of trademarks is examined.

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Ownership of a trademark can be acquired in three different ways. Trademark ownership is created based on an official registration. In such cases, the granted right is “registration-based”. The second model of acquisition of trademark rights is created based on “actual use”, also referred to as

“use-based”. The third system is affected by both a registration and use-based system, which is called a mixed model. It must be noted that, according to the legal system of Afghanistan, the acquisition of trademark rights is based on both (registration and use-based) systems. The ATML in Article 7 follows the registration model. At the same time, Article 21 also follows the use-based system. Generally, the legal system of Afghanistan for trademark protection tends to be gauged towards the registration-based model. It should be noted that the acquisition of trademark rights in Afghanistan for both national and foreign commercial entities is subject to the same rules and regulations. However, there are some extra procedures and formalities for foreign companies.

Both systems have their own merits and limitations. For instance, in the registration system, an exclusive right is created by applying for trademark registration, and that right is certain and provable.

This means that trademark registration provides “legal certainty” and an exclusive right to the owner of the trademark. Whereas, in the “first-to-use” system, trademark “squatting may not take place”, and the first use of a trademark establishes ownership for the entity that initially owns the trademark right.

After a person has acquired a trademark right or the ownership of a trademark, the next issue that is significant for the owner of a trademark is the usage and the assignment of a trademark. When a company or a person has legally acquired ownership of a trademark, the owner obtains an exclusive right to that trademark. Therefore, the proprietor may use the trademark by himself or may transfer use of it to another person. This transformation takes place through the sale and donation of a trademark or via licensing. Transferring a trademark via licensing is much more common and is widely used in the current market economy. Various types of licensing have been incorporated into national laws to define these kinds of licensing, such as “exclusive”, “non-exclusive”, “sole”, “compulsory” and “sub-licensing.”

It should be noted that the use of a trademark will not be indefinite, but rather will be terminated under certain circumstances. Rights to use a trademark can be terminated under different conditions, such as “opposition”, “cancellation” and “revocation.” Finally, if a trademark is not used for three consecutive years, it will be removed from the CBR office and the trademark will be returned to the public domain.

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The method used in this thesis for assessing the abovementioned issues is based on a descriptive and legal analytical approach. It focuses on the respective provisions of the ATML, and other legal documents.

However, this research provides more arguments in favour of the registration model, which might work more efficiently and be more applicable in the context of Afghanistan. Furthermore, the ATML provides insufficient provisions regarding the ownership, assignment, licensing and termination of trademarks. This chapter reveals those shortcomings and proposes that it would be useful for the Afghanistan legal system to be amended based on these findings.