Trademark Squatting: A Threat To MNCs

With the evolution of Globalization and the increasing presence of multi-national corporations like Amazon and Apple Inc. amongst others, enforcing Global Intellectual Property (“IP”) Rights becomes indispensable. As a result of this, business owners need to be conscious of ways to ensure that their IP, especially trademarks is protected globally. 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. A possible dispute of the same nature could arise in India with respect to Amazon. Amazon[1] has introduced Prime, Echo and Prime Music in India is not able to proceed further with the registration at the Indian trademark office. It has applied for these trademarks under class 9, which is primarily related to computers, software and electronics.

To provide a better understanding of the menace that Trademark Squatting is, The World Intellectual Property Organisation (“WIPO”) defines Trademark Piracy (Squatting) as “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.[2]. It occurs when a person in a foreign country registers a trademark that has already been registered by its true owner in its original country. There have been various instances of the same due to which the original companies are not able to register their trademarks and have to pay a very heavy price to such companies to stop the use of the trademarks.

Interestingly, trademark squatting is a niche area in trademark disputes. It has been seen that generally registration is a major roadblock for foreign companies as once they gain worldwide goodwill, a number of local infringers try to register their trademarks in order to sell their products and make huge profits. With respect to the general rule, the exclusive rights of a trademark owner is territorial in nature and therefore laws relating Trademark varies from one territory to another. Trademark squatters take advantage of such different law enforcement, which becomes a hurdle when companies become multi-nationals.

Trademark Squatting is largely seen in China.[3] It follows a ‘first to file’ system as opposed to the ‘first to use’ system. In a ‘first to use’ system the first user of the Trademark obtains the exclusive right, whereas, in a ‘first to file’ system, the first person registering it gets the right to the Trademark. Thus, the country doesn’t require any proof of actual use or intent to use the trademark in any application. Hence, firms anticipating expansion into other countries, particularly China, should apply for registration at the earliest. In addition to this, brands should register their trademarks in the respective transliterations as well.

In 2016, Michael Jordan, the basket ball star, received a favorable verdict from the Supreme Court of China, that arose out of the legal battle against Qiaodan Sports, a Chinese sportswear company using the Chinese transliteration of Jordan’s name as its trademark. A similar case occurred with Viagra, wherein the transliteration of Viagra in China was “Weige” and was registered in China. Thus, despite several lawsuits, Pfizer has failed to gain ownership of the Chinese trademark, Weige, and has been unable to force Vietnam and others to stop using the trademark.

In spite of the existence of various Conventions aiming towards the protection of trademarks that are “well-known” such as the Paris Convention[4], The TRIPS Agreement[5], The Madrid Protocol as well as the WIPO Joint Recommendation Concerning Well Known Marks[6], these are not enough to counter this problem. India, in its Trademarks Act has provided for protection of foreign trademarks with respect to the “Trans-border Reputation” principle.

It was a principle followed in India that the reputation of a good should benefit its owner even in a foreign land where the goods are not being sold.[7] However, the landmark judgment of Toyota case[8] modified this principle and held that trans-border reputation can only be considered if there are customers of the claimant’s product in the claimed jurisdiction and that such customers exists before the infringer’s activity was established.

The problem of squatting needs to be tackled at an institutional level, both domestically as well as Internationally. Further, with regard to dispute resolution[9], although WIPO has a mechanism but it rests on consent from both parties that is more than often not accepted by the squatters as they prefer their home countries. Another problem which may arise is when firms register their trademarks in China but face problem while expanding their services due registering in only particular classes of trademarks.

Business leaders need to identify the right strategies to protect their Trademark before entering the markets internationally. International registration of Trademarks is still not a prevalent practice. Further, China should introduce multiple class registrations and to first to use policies. These policies are also practiced in the United States as well as in India. The best way to challenge trademark squatting is to assert the filing that is done with bad-faith. Bad faith filing generally refers to “an intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfil it, or violating basic standards of honesty in dealing with others.”[10] However, this can be costly to prove due to the extensive procedure and expansive needs of evidence to support claims. Bilateral and multilateral treaties between states may also help to ensure that Trademarks registered in one jurisdiction are protected in others. Undoubtedly, it is a multifaceted issue that must be solved at every level.

Author: Ruchika Srivastava, Intern at  Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at swapnils@khuranaandkhurana.com.

References:

[1]https://timesofindia.indiatimes.com/companies/amazons-prime-echo-hit-trademark-hurdles/articleshow/63650805.cms

[2]  World Intellectual Property Organization, WIPO Intellectual Property Handbook, 90 (2008).

[3] http://articles.latimes.com/2012/mar/28/business/la-fi-china-trademark-squatting-20120328

[4]The Paris Convention for the Protection of Industrial Property, 1883.

[5] Agreement on Trade Related Aspects of Intellectual Property Rights, 1995.

[6] World Intellectual. Property. Organisation, Joint Recommendation Concerning Provisions On the Protection of Well-Known Marks, Sept. 20-29, 1999

[7]MilmetOftho Industries &Ors. v. Allergen Inc. (2004) 12 SCC 624

[8] Toyota Jidosha Kabushiki Kaisha v. M/S Prius Auto Industries Ltd. & Ors,  AIR 2018  SC 167

[9]World Intellectual Property Organisation, Alternate Dispute Resolution

[10]  http://dictionary.law.com/Default.aspx?selected=21

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