Trademarks are relied upon by businesses to identify their products and distinguish them from those of their competitors. The public also relies on the brand to distinguish among competing manufacturers and to determine authenticity. Trademark rights are territorial, and protection is accorded to the mark only within the country whose laws granted the rights. ‘Trademark squatting’ is when one party intentionally files a Trademark Application for a second party’s registered trademark in a country where the second party does not currently hold a trademark registration. Most often, it occurs in countries that follow the ‘first-to-file’ trademark system. However, it is also seen in ‘first-to-use’ countries since marks can also be registered based on the intention to use.
Understanding the Motive behind Trademark Squatting
A trademark squatter’s intent is usually to get the bona fide trademark owner to purchase the Trademark Registration from him or her. The profit received from this amount is a lot more than the amount they spend on a bad-faith trademark application. It can be difficult, costly, and time-consuming to have a bad-faith registration canceled. In first-to-file countries, a trademark squatter can even enforce his or her rights against the actual owner for trademark infringement. He or she can also ask the customs officials to detain products of the bona fide owner that were manufactured in that country for export. Any business, whether large or small, can be a target of trademark squatting.
Certain trademark squatters focus on trademarks in a specific field or category. Based on their exhaustive study in this domain, they plan the squatting, even monitor the bona fide owner’s actual advancement of the trademark application, and then file timely additional applications to create more hindrances. Few trademark squatters will turn to registered trademarks of other owners to find gaps in their registration, seeking bad-faith filing for related trademarks, and setting a trap for the business expansion of the target company. For attaining the final goal of trademark squatting, the squatters also manage and maintain their trademark registrations after they are granted the corresponding rights, and even consciously produce and hold the evidence of trademark ‘use’ as a defense against the cancellation action.
Some Instances of Trademark Squatting
Risks for Businesses
Trademark squatting is a niche area in trademark disputes. It has been seen that trademark registration is a major obstruction for foreign companies as once they obtain international reputation and goodwill, many domestic infringers try to register their trademarks to sell their products and make enormous profits. The risks of trademark squatting for the bona fide owners of trademarks are:
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 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:
In the administrative and judicial proceedings related to trademarks, the prior and bona fide owners must produce sufficient, objective evidence to convince trademark examiners and juries. The best practice for international brands is to file trademark applications on the ‘intent to use’ basis, specifically in jurisdictions such as India, which allow such applications and protect marks based on the intention to use the mark in the country.