I recently had an enquiry from a client who'd been contacted by a trademark holder as their business name and recently registered domain name infringed on their trademark. The client wanted to know what their rights and responsibilities were in this scenario. They had been trading locally under the name for some time, and were unaware of the registered trademark. The problem came to light when the TM holder tried to register the domain name themselves and found that it was already registered.
The registered business name was (let's say) ABC Foods (it wasn't, but I'll use this for the example), which meant the client passed auDA's eligibility requirements for registering the domain name abcfoods.com.au. However, the trademark 'ABC' was registered in a food-related category before the business, so the TM holder has a legitimate right to use that name (and to stop the client from using it in any associated business). The use of the domain name (and business name) by my client would clearly constitute an infringement on the trademark.
The client had spent a lot of money on marketing materials and building a business around the name, so wondered if they should ask for money for the domain name? In this scenario, there are three options:
The client had already told the TM holder that they wouldn't use the domain name, and the TM holder was now insisiting that the client transfer the domain name to them. From the perspective of the TM holder, they'll be thinking that they have legal rights to the name, so why pay anything for it. From the client's perspective, they already hold the domain name (very important!), and are entitled to hold that name so long as the TM holder doesn't resort to the [potentially very expensive] legal path. If they did that, they may be able to sue the client for costs as well (I'm not a lawyer, so I'm not sure), on the basis that the client should have checked for trademarks before they registered the business name (that's their responsibility).
So...what would you advise?