In recent trends, the term Trademark Squatting has become a quite popular activity that continues to haunt every brand’s reputation and hard work. Wondering what it is and how to deal with it?
Read here…
Understanding Trade Mark Squatting: What You Need To Know
As per World Intellectual Property Organization (WIPO), Trademark squatting is “the registration or use of a generally well-known foreign trademark that is not registered in the country or is invalid as a result of non-use”.
Frequently, trademark squatters adopt, submit applications for, and use someone else’s trademarks with the sole intent of later selling them for a profit. The usual situation is for a squatter to file a trademark registration for a well-known company and then wait until the brand owner makes an appearance on the local market.
A court may force the squatter to hand over the registration or application to the actual proprietor if it is shown to the court through documents and evidence that the aggrieved is the actual user and adopter of the mark. Additionally, the court may award financial compensation to the owner of the mark. However, it will be challenging for a proprietor to preserve rights in the trademark if the aforementioned trademark does not have a widespread reputation. As a result, the owner may need to engage in protracted legal actions before the tribunal and/or the Court or negotiate a price with the squatter for the trademark’s purchase.
Knowing the Reasons for Trademark Squatting
The goal of a trademark squatter is typically to persuade the legitimate trademark owner to buy the Trademark Registration from them. The profit made from this sum is significantly greater than what they spent on a false trademark application. A bad faith registration can be challenging, expensive, and time-consuming to cancel.
A trademark squatter may even use legal action against the legitimate owner of the mark if the country where the trademark was first filed allows it. Additionally, he or she has the option of asking the customs officers to hold for export goods that belong to the legitimate owner. Any company, regardless of how big or little, can become the target of trademark squatting.
Some trademark squatters concentrate on trademarks in a particular industry or class. Based on their thorough research in this field, they plan the squatting, even keep track of how far along the legitimate owner is with their trademark application, and then promptly file new applications to obstruct further progress. Rarely will trademark squatters use the registered trademarks of other owners to uncover gaps in their registration, seek out similar trademarks in bad faith, and lay a trap for the target company’s commercial progress. After receiving the necessary rights, the trademark squatters manage and preserve their trademark registrations in order to achieve their ultimate goal of trademark squatting. They even consciously create and hold the evidence of trademark “use” in order to defend against the cancellation action.
The Dangers of Trade Mark Squatting: Protecting Your Brand
It has been observed that trademark registration presents a significant barrier for overseas businesses because many domestic trademark infringements attempt to register their marks in order to market their goods and generate large profits once they have established a reputation and goodwill on a global scale. For legitimate trademark owners, trademark squatting poses the following risks:
1. The introduction of brands into overseas nations is delayed. Time management is crucial, especially in sectors like gaming and electronics.
2. The legal process can be expensive and drawn out, often taking months to get an order.
3. In the event that the trademark squatter uses the mark or sells it to a third party for use, there is a risk of trademark dilution, which might seriously damage the goodwill and reputation of the legitimate owner.
4. Since prior usage is irrelevant in countries with superior rights to first-to-file, it may even happen that a brand never manages to register its mark if there is already a bad faith registration in existence.
How to Detect and Prevent Trademarks from Squatters
Despite the existence of various international conventions targeting the protection of trademarks that are ‘well-known’ such as the Paris Convention, the TRIPS Agreement, the Madrid Protocol as well as the WIPO Joint Recommendation Concerning Well Known Marks, these are not enough to put an end to this problem. In India, the Trade Marks Act, 1999, has provided for the protection of foreign trademarks following the ‘Trans-border Reputation’ principle.
This principle allows the unregistered trademarks in India to maintain an action for passing off without the requirement of having commercial use in India.
Even though trademark squatters use complex and innumerable methods for trademark squatting, bona fide prior owners are not completely deficient in retaliatory strategies. It is critical to outline a complete strategy with precise actions. Since it is expensive and tough to cancel bad-faith trademarks, prevention is the best strategy for countering them.
It is not always realistic for businesses to register their trademarks in every nation around the world; however, companies should take active steps to discourage bad-faith trademark squatters and make informed decisions on where to file for trademark registrations.
Businesses should consider registering their mark in countries where:
- The goods or services they provide are sold;
- Manufacturing of products or parts for their products takes place;
- Their research and development facilities are located;
- During shipping their products pass through;
- Expansion of business is possible in the near future; and
- Problems like Counterfeiting are quite likely.
Proactive Strategies to Combat Trademark Squatting
Trademark squatting is becoming a menace to society. It leaves the brand aggrieved in a vulnerable position, with tireless litigation, and a damaged reputation. Here are a few practice strategies that can be equipped to combat trademark squatting:
1. Get your Mark registered: To prevent any trademark squatters from making benefit on your brand’s reputation, it is suggested that you get your Trademark duly registered within time. Nip the problem right from the bud!
2. Look out for possible trademark squatters: Staying vigilant and keeping updates on the market you wish to enter can help prevent a trademark squatter from going through with its malicious plans. It’s also crucial to be aware of any additional internet resources, like social media accounts, that are connected to your brand name.
3. Registering your trademarked name as a domain name and keeping a close eye out for any attempts to register similar names are the best ways to defend your company from trademark squatting.
4. Hire a Trademark Firm to offer their expertise for a bulletproof plan: While a proactive approach is quite the need of the hour to prevent future damage, the truth is that this process of prevention can be quite time-consuming and energy-taking. Therefore, taking the aid of a trademark firm can come to your rescue.
Domain Name v. Trademark: the difference between the two and their Squatting
A universal resource locator (URL), which is used to access online sites, is a series of letters, numbers, and dashes that is referred to as a domain name. Every website has a different domain name that is used to access it. They start with “www.,” are then followed by a distinctive name, such as “XYZ,” and end with domain name extensions, such as “.com,” “.org,” “.edu,” “.net,” “.ac.in,” etc. The domain name appears as “www.xyz.com” as a result. Over time, the purpose of domain names has changed from just serving as a communication and internet address to a platform for performing commercial operations.
A trademark is the exclusive means through which the goods or services of its owner may be identified. According to the definition of a trademark, it is “a mark that can be graphically represented and that can distinguish the goods or services of one person from those of others and may include the shape of goods, their packaging, and combination of colors.” By granting the owner the exclusive right to use the mark for just his goods and services, a registered trademark sets its owner’s products and services apart from those of competitors in the marketplace.
As a result, a trademark is always used in relation to the goods and services that its owner offers. This is how domain names and trademarks are connected. Regarding the goods and services they offer, each is distinctive. Therefore, it is accurate to say that both domain names and trademarks are “identifiers”.
The methods used to register a domain name and a trademark is different. A domain name can be registered for a few Rupees in under an hour, as opposed to a trademark, which requires a lengthy and complicated process to register. The process of registering a domain name is what causes the problem of cybersquatting.
Case Studies: Famous Brands Battling Trademark Squatters
- Yahoo!, Inc. vs Akash Arora [(1999) IIAD Delhi 229]: This was the first time the Indian Courts were presented with an opportunity to deal with a cybersquatting case. In this case, the defendant was utilizing a domain name for online services that are confusingly similar to the trademark “Yahoo.com” owned by the plaintiff. In this case, the court noted that there is every chance and potential of creating confusion and deception, making the degree of likeness of the marks extremely crucial and substantial to bring an action of passing off. Looking at both domain names, it is obvious that they are identical or similar in nature, and there is a good chance that an Internet user will be misled into thinking that both of the domain names are owned by the same person when in fact they are owned by two distinct people. A temporary injunction prohibiting the defendant from using “Yahooindia.com” or any other trademark or domain name that is confusingly similar to the plaintiff’s trademark was successfully obtained by the plaintiff.
2. N.R. Dongre and Ors. v. Whirlpool Corporation and Ors. [(1996) PTC (16)]: In this judgment, while upholding the decision of the single bench and division bench of the High Court of Delhi, the Supreme Court of India in this judgment, recognized the principle of trans-border reputation in India.
In this case, Whirlpool Corporation applied for registration of the Whirlpool mark in 1956 for use on laundry equipment such as washers, dishwashers, and clothes dryers. However, the registration of said trademark expired in 1977 as a result of non-renewal. Mr. N.R. Dongre submitted a registration application for the Whirlpool mark in 1986, which was later opposed by the Whirlpool Corporation on January 16, 1989, after being published in the Trade Marks Journal on October 16, 1988. The Registrar of Trade Marks rejected the opposition on the grounds that Whirlpool was not used and had no reputation in India. This led to the appeal being heard by the High Court of Delhi’s Single Bench. A single bench of the High Court of Delhi concluded that Whirlpool Corporation was the trademark’s original user and had a trans-border reputation in India based on the documents Whirlpool Corporation submitted before the court demonstrating these facts.
3. Hengst SE & Anr. v. Tejmeet Singh Sethi & Anr. [CS(COMM) 600/2021]: The Court noted that a total of 378 well-known marks belonging to various companies were squatted by the Defendants. According to the court’s instructions, the defendants accepted the plaintiffs’ rights in their written undertaking and agreed to withdraw all other applications that would have violated well-known marks in addition to the one that would have violated the plaintiffs’ rights.
The Plaintiffs were also given permission to request the revival of the current lawsuit and to pursue their claim for damages of INR 2 crore in addition to the additional costs if the Defendants failed to pay the cost of INR 10 lakh to the Plaintiffs’ counsel in the specified amount of time.
Other Examples:-
1. Due to trademark squatting, Apple had a problem with its trademark registrations in 2012 and was forced to pay a significant sum of $60 million to the owner of the “iPad” brand in China.
2. When Tesla Motors sought to expand its business into China, it learned that a man by the name of Mr. Zhan had already filed for registration of the trademark “TESLA” in class 12, which was reserved for motors and other comparable goods. In order to revoke the trademark, Tesla Motors submitted both a non-use and an invalidation application. In reaction, Mr. Zhan sued Tesla Co. for trademark infringement. He demanded that Tesla Co. cease selling infringing items and engaging in associated promotional activities and pay damages of 23.94 million RMB. After five years, the parties finally reached a settlement. Tesla Co. eliminated all claims for damages against Mr. Zhan at the same time as Mr. Zhan renounced all use of the TESLA marks.
3. When Sony PlayStation most recently sought to introduce the PS5 game console in India, it was discovered that Delhi resident Hitesh Aswani had previously registered the PS5 brand as a trademark in India back in October 2019. Hitesh Aswani was forced to withdraw the trademark application but this act substantially delayed the timeline in which Sony wanted to launch its product.
FAQs
- How does Trademark squatting affect businesses?
Squatting on trademarks can harm businesses in a number of ways. Trademark squatters can confuse consumers, lower the value of the original trademark, and harm a company’s reputation by registering a mark that is confusingly similar to one used by an already established business. Losses in sales, a decline in brand recognition, and legal fees incurred in contesting the trademark squatter’s registration can follow from this.
2. How can I identify if my Trademark has been squatted upon?
You can run a trademark search on the Indian Trademark Registry website to find out if your trademark has been illegally used in India. This will enable you to see if other people have registered any trademarks that are identical or similar to yours. To make sure that no one is violating your rights or trying to register a trademark that is identical to yours, you can also periodically monitor your trademark. Additionally, you can look for assistance from a trademark lawyer or agent, who can help you do a comprehensive search and take the necessary legal action if your trademark has been infringed upon.
3. Can Trade Mark squatting occur in different countries?
Yes, trademark squatting can occur in different countries. In fact, it is a common issue in the global marketplace, where businesses may operate in multiple countries and have trademarks registered in different jurisdictions.
4. How long does it typically take to resolve a Trademark squatting dispute?
In India, the time it takes to settle a trademark squatting lawsuit can vary based on several variables, including the case’s complexity, the strength of the evidence, and the backlog of cases at the court or registry. A trademark squatting case in India can often be resolved in a few months to a few years. The establishment of specialized intellectual property courts and tribunals by the Indian government, which can serve to streamline the legal process and decrease the time and expenses associated with resolving disputes, has been made in an effort to hasten the resolution of such issues. Additionally, alternative dispute resolution methods are also used actively to speed up the process.
5. Can Trademark monitoring services help in preventing squatting?
Yes, trademark monitoring services can help in preventing squatting by regularly monitoring the trademark databases and alerting businesses to any potentially infringing trademarks.
Apoorva Sharma
Apoorva Sharma is an Advocate enrolled with Bar Council of Delhi.
