A trademark is a visual symbol in the form of a word, a device, or a label applied to articles of commerce with a view to indicate to the purchasing public that they are the goods manufactured or dealt in by another person[1]. In other words, a trademark can be nearly anything that distinguishes a product or service from others and indicates its origin. The goal of establishing legal protection for trademarks is to shield the brand identity from fraud. Trademarks are protected by both national and international legislation as intellectual property rights. In the notable case of Cadbury India limited v. Neeraj food products[2], the Delhi high court observed that the spirit intendment and purpose of the trademark legislation is to protect the trader and consumer against dishonest adoption of one’s trademark by another with the intention of capitalizing on the attached reputation and goodwill.
Broadly speaking, the protection of trademark can be divided into three periods, most essential being the first period, also called as the territorial period. This period primarily talks about the absence of international protection to the trademark[3]. The second, the international period, which got a HeadStart in Europe towards the end of the 19th century with some countries agreeing to the formation of the Paris Convention for the Protection of Industrial Property, 1883 (the Paris Convention) and a similar group agreeing to the Berne Convention for the Protection of Literary and Artistic Works, 1886 (the Berne Convention). The third period, the global period, has its origins in the linkage that the United States of America (the U.S.A) made between trade and intellectual property in the 1980s, a linkage which emerged at a multilateral level in the form of the Agreement on Trade-Related Aspects of Intellectual Property Rights, 1994 (the TRIPS Agreement). The dates of the various conventions do not represent a sharp epochal divide[4].
What is trademark squatting?
Trademark squatting, also known as trademark piracy or trademark trolling, refers to the practice of registering, using, or attempting to register a trademark that belongs to someone else, with the intent to profit from the trademark’s goodwill or sell it back to the legitimate trademark owner at an inflated price. Squatters attempt to register such trademarks with the sole purpose of extracting money from the brand owners or other companies that rely on the brand. It may be possible for the brand owner to get the intellectual property office or a civil court to cancel the squatted trademark, but this is costly and may involve considerable delay and legal as well as commercial uncertainty[5].
With reference to international perspective, as a first-to-file jurisdiction, China sees the highest number of trademark squatting cases globally. In 2022, Chinese authorities reported handling over 430,000 cases of bad-faith trademark applications, leading to rejections or cancellations with regards to high-profile disputes including cases involving Apple, Tesla, Nike, and Michael Jordan. The domestic scenario with the growing market in India faces rising instances of trademark squatting, particularly targeting foreign brands looking to enter the market. In 2021, Indian courts saw a notable increase in disputes involving international brands like Ferrero Rocher and Starbucks[6].
Trademark squatting is a pervasive issue, particularly in jurisdictions with a first-to-file system. To illustrate the disruptive impact of this practice on global businesses, consider the case of Tesla in China. In 2006, a Chinese businessman, Zhan Baosheng, registered the trademark ‘Tesla’ in China before Tesla Inc. entered the market. When Tesla attempted to expand into China, Zhan demanded compensation for relinquishing the trademark, causing significant delays for the company.
In 2014, Tesla reportedly paid $9 million to Zhan to acquire the trademark and settle the dispute[7]. This case demonstrates how opportunistic trademark registrations can hinder market entry for global companies, leading to financial losses and strategic setbacks. It underscores the importance of proactive trademark registration strategies.
The ‘Doctrine of Territoriality’ clearly signifies the protection of a trademark within the territory of the state where it has been registered[8]. As per the doctrine, if the trademark enjoys a cross-border reputation, and if any sort of squatting takes place, then The Court may even award monetary damages to the owner of the well-known trademark. However, if the said trademark does not enjoy cross-border reputation, it will be difficult for the owner to protect rights in the trademark.
As a result, the original owner may have to negotiate with the squatter for the purchase of the trademark or involvement in protracted legal actions before the tribunal and/or the Court[9]. This territorial protection frequently results in ‘squatting of trademarks’ in countries where the trademark has little presence or is not widely known to the general public. Many well-known companies have been unable to preserve their rights in countries other than their native territory because a third party has obtained statutory rights in that country. This frequently results in a rethinking of plans and the implementation of new initiatives. The primary purpose wherein the squatting of trademark happens is:
Intent to Profit: The primary motive behind trademark squatting is to gain financial advantage by exploiting the reputation and recognition of a well-established trademark. Squatters hope to profit from selling the trademark rights to the rightful owner or by using the trademark for their own gain.
Prevents Legitimate Use: Trademark squatters often block the rightful trademark owner from using their own mark in the regions or industries where the squatter has registered the trademark. This can cause confusion among consumers and harm the legitimate brand’s reputation.
In the recent Judgement of Delhi High Court in the case of BPI Sports LLC vs Saurabh Gulati & Anr, stated that even though the term “trademark squatting” does not specifically stated in the law, however, it would undoubtedly constitute “bad faith” within the meaning of Section 11(10)(ii) of the Trade Marks Act[10]. The bench observed that Gulati was well aware of the fact that the trademark was registered in the name of BPI Sports in the USA. The court stated that there was a clear purpose (mala-fide) to steal the petitioner-business’s mark in order to prevent the firm from having it registered in its name in India. Gulati, according to BPI Sports, fraudulently secured registration of the mark “BPI SPORTS,” which belongs to it and is registered in its favor in the United States. It claimed that Gulati engaged in trade mark squatting because he had no intention of utilizing the mark and just registered it in its favors to stop it being registered in the petitioner-company’s name. It claimed that Gulati was only importing goods under the impugned mark and had no intention to use the mark in India.
The court concluded that it was the clear intention of Gulati to steal the mark of the petitioner-company. As per Section 11(10)(ii) of the trademark act, it requires the Registrar to take into consideration the bad faith of the applicant of a trade mark. Discussing various definitions of what would constitute ‘bad faith’, the Court held that trade mark squatting would certainly amount to ‘bad faith’ within the meaning of Section 11(10)(ii) of the Act[11].
Notable instances of trademark squatting
- In 2012, Apple faced an issue with its trademark registrations due to trademark squatting and had to pay a hefty amount of $60 million to the owner of the ‘iPad’ trademark in China.
- Michael Jordan, the basketball player, obtained a favourable verdict from the Supreme Court of China that rose from the legal battle against a Chinese sportswear company using the Chinese translation of Jordan’s name as its trademark.
- Sony PlayStation planned to launch the PS5 gaming console in India, it was found to utter surprise that a Delhi resident, Hitesh Aswani, had already filed a trademark for the PS5 name in India back in October 2019.
The madrid protocol and prevention of trademark squatting
The Madrid protocol covers more than 130 nations, it is an efficient way for all the trademark owners worldwide to protect their trademark. Owners of various trademarks across the world can file an application and one time payment as prescribed to register their trademark in all the convention countries in one go[12]. The Madrid Protocol is an international treaty that simplifies the process of trademark registration across multiple jurisdictions. Established in 1989 and administered by the World Intellectual Property Organization (WIPO), the protocol allows trademark owners to file a single application, called an “International Registration,” which can be extended to any of its 130+ member countries. This streamlined approach is particularly effective in combating trademark squatting.
Proactive Registration Across Borders enables businesses to secure trademark rights in multiple countries through a single application, the Madrid Protocol reduces the risk of squatters registering the same or similar trademarks in foreign jurisdictions. Early registration ensures businesses have legal precedence over bad-faith actors[13]. Broadly speaking, without the protocol, companies must file separate trademark applications in each country, often at great expense and administrative burden. The Madrid Protocol makes it more feasible for businesses, including small and medium enterprises, to secure global protection before expanding internationally. Moreover, Trademark owners can manage renewals and updates for all registered jurisdictions through WIPO, reducing the complexity of maintaining international trademarks and helping businesses stay ahead of potential squatters[14].
Methods to protect your mark from trademark squatting
There are various provisions to protect the trademark from getting violated, enshrined under the Paris Convention, the TRIPS Agreement, the Madrid Protocol.Similarly, In India, the Trade Marks Act, 1999, has provided for protection of foreign trademarks following the ‘Trans-border Reputation’ principle. Even though there have been several laws protecting the rights of the trademark holder, rights of the trademark holder have been infringed[15]. So, in order to protect the rights of the consumer, precise actions shall be taken. The businesses and companies shall consider following these steps[16].
- As per the ‘Doctrine of Territoriality’ the trademark is only protected where its business is established, i.e. only within the territory. So, the businesses should consider registering their trademark, where their goods are sold.
- The businesses or the company shall also ensure that, their products is also registered at the places where the parts of the product are manufactured.
- The businesses should consider registering their trademark, where Research and development facilities related the business are located.
- The businesses should consider registering their trademark, when their products pass through during shipping from an area or territory where there is apprehension of infringement[17].
- If they think of expanding their business in the future. They should consider registering their trademark at the places where it is going to be established in the future.
Conclusion
Trademark squatting poses a serious threat to businesses, from start-ups to global giants. By exploiting legal loopholes and jurisdictional gaps, squatters can disrupt market access, tarnish brand reputations, and force businesses into costly legal battles. However, proactive measures such as timely trademark registration, leveraging international frameworks like the Madrid Protocol, and understanding local trademark laws can help mitigate these risks.
In an increasingly globalized economy, protecting your intellectual property is not just a legal necessity but a strategic imperative. By staying vigilant and investing in robust trademark protection strategies, businesses can safeguard their brand identity and ensure long-term success in the face of opportunistic challenges.
[1] P. Narayan, Intellectual Property Law 145 (Eastern Law House, Kolkata New Delhi, 3rd edn., 2001)
[2] 2007 (35) PTC 95 (Del) at p.126
[3] Trademark Squatting and ‘Bad Faith’ under Section 11(10)(ii) of The Trademarks Act, available at: https://markshield.in/bpi-sports-llc-v-saurabh-gulati-anr/ (last visited on September 14, 2023).
[4] VK Ahuja, laws relating to intellectual property law 272 (Lexis Nexis, Haryana, 3rd edn., 2017)
[5] Carsten Fink, Christian Helmers, “Trademark squatters: Theory and evidence from Chile” 59 International Journal of Industrial Organisation 2 (2018)
[6] VK Ahuja, laws relating to intellectual property law 272 (Lexis Nexis, Haryana, 3rd edn., 2017)
[7] Car maker Tesla sued in China for trademark infringement, available at : https://www.reuters.com/article/us-tesla-motors-china/car-maker-tesla-sued-in-china-for-trademark-infringement-idUSKBN0FD0TW20140708/ (Last Visited on November 03, 2024)
[8] ibid
[9] VK Ahuja, laws relating to intellectual property law 272 (Lexis Nexis, Haryana, 3rd edn., 2017)
[10] Trademark Squatting and ‘Bad Faith’ under Section 11(10)(ii) of The Trademarks Act, available at: https://markshield.in/bpi-sports-llc-v-saurabh-gulati-anr/ (last visited on September 14, 2023).
[11] Trade Marks Act, 1999
[12] Madrid Protocol for international trademark registration, Available at: https://www.uspto.gov/ip-policy/international-protection/madrid-protocol (Last Visited: September 21, 2024)
[13] Trademark Squatting: A Foul play, available at: https://sandalawoffices.com/trademark-squatting-a-foul-play/ (Last Visited on November 11, 2024)
[14] Trademark Squatting and ‘Bad Faith’ under Section 11(10)(ii) of The Trademarks Act, available at: https://markshield.in/bpi-sports-llc-v-saurabh-gulati-anr/ (last visited on September 14, 2024).
[15] Trademark Squatting: Jurisdictional Perspective & Madrid Protocol, Available at: https://taxguru.in/corporate-law/trademark-squatting-jurisdictional-perspective-madrid-protocol.html (Last visited: September 21, 2024
[16] Trademark squatting: Keeping early birds at bay, available at: https://www.obhanandassociates.com/blog/trademark-squatting-keeping-early-birds-at-bay/ (Last Visited on November 07, 2024)
[17] ibid
Author: Ajit Ranadive
