Legal Briefing

A taste of home: the issue of imitative businesses in the United Arab Emirates

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UAE | 01 September 2012

The Gulf region still represents a growing, often untapped, market for international consumer-facing brands. This is particularly true of the most open and accessible of all Gulf markets – the United Arab Emirates (UAE). The UAE occupies a unique position halfway between Asia and the markets of Africa and Europe. In a very short period of time, it has established itself as a major trade, business and financial hub, as well as a major tourism destination. It is the home of two of the world’s fastest growing and most profitable airlines, bringing people into the region from every corner of the world. Estimates put the Emirati population at 10-15% – the remainder being made up of expatriates, both short and long-term residents, from over 190 countries. When tourists/visitors are added to the mix, a unique market demographic is created, in which the awareness of foreign and international brands is particularly high and many consumers are hungry for something familiar from home.

Not surprisingly, there has been a significant surge in the establishment of imitation or lookalike businesses in the UAE in recent years.Most often these ape well-known foreign businesses, but regional and local businesses are not immune. These imitative businesses, while almost always involving consumer-facing brands, are of all types: from clothing and fashion retailers, rental car companies, and supermarkets/hypermarkets to telecommunications/social media companies, jewellers and coffee houses.

The issues raised by an imitative business often explode without warning – the first the true brand owner may hear of it is when consumers start complaining to head office about poor service or quality of goods; when the blogs/social media of the expatriate community start buzzing about the latest opening; or, as has happened in a number of high-profile cases recently, the press picks it up. At this stage, in-house counsel is likely to be under extreme pressure from the business to ‘get it sorted’.

You are about to enter a world in which preliminary injunctions are not available, the grounds for action may be murky and the successful management of expectations as to how fast the situation can be resolved, and at what cost (both to reputation and in terms of lawyers’ fees), will warrant a gold medal for diplomatic skills. Get a coffee and settle in, this is going to take some time.

STEP 1: DO YOUR RESEARCH

The first step is to fully understand who and what you are dealing with and what cards you have to play.

Brand-owner rights

Check what trade mark rights you have registered in the UAE – you will need to consider the scope of any registrations, ie the goods and services in relation to which the marks have been registered, and whether any of the registrations may be vulnerable, either in whole or in part, to attack for non-use. If you do not have registered trade marks in the UAE, are you confident you could prove that your brand is well-known?

You will also need to fully understand the nature and extent of your company’s business, if any, in the UAE, eg does it trade directly; does it have licensees or franchisees; and what is the scale and geographical spread of the business? If the company does not operate in the UAE, dealing with the imitative business becomes more complex.

Who is the infringer?

You will also need to understand who the infringer is. The first step will be to undertake a company search in the public records. It is important to understand in what Emirate the infringer is registered, as this may determine the jurisdiction in which action can be taken.

What rights does the infringer have?

The company search will already have told you if the infringer is incorporating your brand into its registered trade name.

You will also need to conduct searches of the UAE Trade Mark Register to determine whether or not it has secured any registered trade mark rights (or has applications pending). As trade mark rights are seen as positive rights under UAE Law – that is, the absolute right to use – if a registration has been secured, you will need to attack this first before action can be taken in relation to use of the mark.

Finally, it is also worth checking whether the infringer has registered a domain name and is operating a website. Increasingly, these types of infringement are using the .ae country code top-level domain (ccTLD) for their web presence.

STEP 2: IDENTIFY YOUR CAUSE OF ACTION

Once you have gathered together the information above, the next step will be to identify your cause of action.

Trade mark infringement action

In the most straightforward of situations, the brand owner will have a valid trade mark registration in relation to the relevant services (eg retail services) and will itself have used the mark in the UAE marketplace. The infringer will have no blocking trade mark registration (or trade name rights).

In such a case, the infringement provisions of the Trade Mark Law, providing for criminal, administrative or civil action, can be a basis of proceedings. A precautionary measures order (a type of interim order to secure evidence for trial) may also be available.

In the case of an unregistered, well-known trade mark, civil action would need to be commenced to establish that the mark in question is entitled to protection as a well-known mark. Precautionary measures orders are available to owners of unregistered well-known marks, but it would be advisable to file an application for trade mark registration in the UAE at the time such an order is sought.

If the infringer holds a trade mark registration, it will be necessary to bring cancellation proceedings before the federal courts before an action can be taken in relation to the allegedly infringing use.Finalising cancellation proceedings may take several years.

Action in relation to trade names

The economic departments of each Emirate are responsible for the licensing of businesses. Therefore, in the case of a trade name issue, the first step is to discuss the matter with the appropriate licensing authority.

If assistance is not forthcoming, a civil case would need to be filed with the courts.

Where an infringing business is registered in a free zone, the free zone authority has licensing authority. Free zone authorities tend to be less willing to assist in this type of case, which means that the case is likely to have to go to court unless a negotiated settlement can be achieved.

Domain name dispute resolution

The .ae registry operates a modified Uniform Domain Name Dispute Resolution Policy (UDRP) procedure. Cases are filed with the World Intellectual Property Organization (WIPO) and proceed in accordance with the usual WIPO Mediation and Arbitration Centre procedures.

Unfair competition action

The basis of an action for unfair competition is confusion between the applicant, or its goods or services, and a ‘competitor trader’ or its goods or services. This is generally considered to mean that a brand owner not operating in the UAE will be unable to meet the threshold: it will not be a ‘competitor’ of the allegedly infringing trader.

Jurisdiction and other issues

The UAE is a federation of seven Emirates. Three of these Emirates (Abu Dhabi, Dubai and Ras Al Khaimah) have their own court systems. The other Emirates use the federal courts. Trade name issues are generally Emirate-level issues, as the licensing of businesses is conducted by Emirate-level authorities. Trade mark infringement issues are also generally considered to be Emirate-level issues (the Emirate in which the infringement occurs having jurisdiction). However, because trade mark registration issues are federal-level issues, with trade mark rights being federally granted, jurisdictional issues can arise, eg it is not possible to include a cancellation action in infringement proceedings in a Dubai court, as cancellation of a registered trade mark falls within the jurisdiction of the federal courts.

Evidential requirements are also onerous. Evidence must be translated into Arabic and notarised and legalised. Original documentary evidence is the strongest. In the case of needing to establish unregistered, well-known trade mark rights, significant budget should be reserved for dealing with evidential costs.

Costs are generally not recoverable from an infringer in the UAE and damages awards tend to be very low. In the event of administrative action, any fines levied by the administrative authority are payable to that authority and not recoverable by the brand owner as a form of damages.

It should be remembered that, because interim injunctions of the type available in many western jurisdictions are not available in the UAE, the infringer can often continue to trade until the case is resolved. This means that, as well as an appropriate legal strategy, the legitimate brand owner should be putting in place an appropriate PR strategy to minimise reputation damage. When developing and implementing any PR campaign, it will, however, be necessary to keep in mind the UAE’s strict defamation laws.

STEP 3: COMMIT TO YOUR STRATEGY AND SEE IT THROUGH

Once you have determined your cause of action and committed to a strategy, you will need to be prepared to see it through. Depending on what actions are available, bringing the matter to a successful conclusion may take a matter of months or several years. The comparative table on p32 gives some indication of the range. Persistence will be key to ensuring initial momentum and early investment in addressing the issue is not lost due to delays. Set a course and stick to it.