Monday, February 18, 2013

Japanese Venture Company Defeated by Trademark Law

When a start-up launches a new business, it is usual in the United States to consult a lawyer. However, in Japan, this may not be true. A Japanese venture company affiliated with Tsukuba University called BearTail announced its new service called "Amazon Gacha" (or Blind Purchase at Amazon).

The original business model might be good. Japanese people love the "heartbeat" of a blind purchase. One of the best examples is "lucky bag" which is very popular among Japanese in the new year sales. Virtually every shop offers a lucky bag where customers do not know what they are purchasing. One of the most notable example is the lucky bag of Apple Store where one man waited for eight days (from Christmas!) to purchase the bag.

The business model of BearTail's new business is that they offer a similar experience every month from Amazon. They offer the users who pay 5000 yen (around $50) a month, the chance to receive a "secret" Amazon box, where popular items equivalent to 4500 yen (around $45) are contained. BearTail gains the margin of 500 yen (around $5) per month for its system to randomly choose popular items which may make the users become jubilant. This is a kind of  "value adding intermediary" model in online shopping.

However, it looks like that they did not ask for a legal advice in deciding the name of its service. In Japan, like in many countries, the third party's usage of a trademark "similar" to the registered trademark is prohibited. Although Amazon (Japan/US) did not register the "Amazon Gacha" trademark, the trademark BearTail is apparently similar to Amazon's famous trademarks such as "AMAZON" or "" [Note that Gacha is a "standard" word for a blind purchase originally from a vending machine, usually for toys, but now is widely used to represent a blind purchase of any sort.] Also, there would be an additional problem of unfair competition.

Because many have criticized BearTail for using a confusingly similar trademark to Amazon without a license, BearTail wrapped up its business of Amazon Gacha within four days after the press release. If a "qualified" Japanese lawyer or a qualified patent lawyer was asked for advice, she would definitely have advised against the service. Of course, this does not mean that a lawyer would hinder BearTail's business. There are many techniques to realizing the business model with much lower legal risks such as changing the name to "Online Gacha" or "Gacha Delivery." It is best for a Japanese venture to consult with a qualified lawyer on many issues including the trademark before launching a new business. It is regretful that this kind of interesting new business failed because of a lack of legal advice. This case reminds everybody in the field of Japanese venture business of the significance of obtaining prior legal advice.

Finally, some people pointed out that a law firm group which boasts to have supported 74 companies for IPO is named as BearTail's "legal advisor" and state that the company must have asked for legal advice. I definitely do not think so. If there is a qualified lawyer in Japan who gave the go ahead for this apparent infringement, it means that the Japanese qualification system for lawyers is malfunctioning. I believe that the business was launched without obtaining any legal advice and after the criticism, BearTail consulted with the legal advisor who strongly urged them to finish the business because of the high possibility of a trademark infringement. However, I am not perfectly sure because the law firm who was named as their legal advisor has so far not explained anything publicly on this issue.

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

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