TRADEMARK SQUATTING: BANE OF A LEGITIMATE TRADEMARK OWNER
As brands build their brand image and reputation through their trademark, the value of trademark is increased with increase in the value of that brand. Well known brands thus have high valued trademarks, whose protection is very necessary. Trademark squatting is a tactic where the trademark of a well known brand is copied or a similar mark is applied for registration intentionally and knowingly of the goodwill and reputation of that mark generally to sell the mark at a higher price to original owner. This article provides detail on issues of trademark squatting, laws hindered, forms of squatting and some suggestions on how to be protective from such tactic.
INTRODUCTION
A new business has to work hard for gaining recognition and earning goodwill. It takes long time for a business to have an established and reputable brand identity in market. This identity is by the face of trademark.
Trademark is a sign or logo which represents a brand or a product and which distinguishes the identity of one brand or product from another. Trademark in India is regulated by Trademark Act, 1999. According to section 2[1][zb], “Trademark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours;”
Trademark Squatting is a relatively new term referring to unethical practice of applying for registration of trademark by an entity knowing it to be identical or similar to the trademark of a well recognized brand with intention to selling their trademark to the original owner at much higher price. In this way it is a great threat to overall integrity of Trademark Law. The squatter, i.e. the entity which applies for new trademark is aware of the reputation of the well known brand and takes advantage of it.
In wider scope, it is defined 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’ by World Intellectual Property Organisation [WIPO].
Many companies face difficulties in protecting their trademark in foreign jurisdictions due to non registration or non use of that mark in that country. This allows small business entities in that country to use similar or identical trademark, without facing any legal issue.
In the recent judgement of Volance Uptown LLC vs Mahendra Jayeshbhai Bhambhania [CS(COMM) 257/2023] Delhi HC discussed the issue of Trademark Squatting in detail and how it affects the authenticity of legitimate trademark owner.
Key Issues with Trademark Squatting:
1. Diminishing Reputation of well known brand:
By squatting trademarks, the reputation of big brands hurt due to the confusion among the customers. It also affects when similar goods are sold by the squatter at way lower prices.
2. Legal Enforcement of Protection
For restraining the squatter to use the similar trademark, the original owner has to fight a legal battle against the squatter which will require them to incur costs and other expenses and will consume time. These can be better utilized in business.
3. Barrier for entering different country
It is not essential that registration in India will grant a company the right to exclusive use of that mark in other jurisdictions. Every country has different laws and regulations regarding trademark registration and its squatting. Some countries are favorable for squatting, so if a company registers a trademark similar to a well known brand in another country but is not registered or in use in their country, and law is protective of their mark against the already registered of well known brand then the entry of well known brand in that country will be difficult and the squatter will keep on operating with the identical mark.
4. Financial Loss
When the squatter is operating in the region where registration of original trademark is valid, the original owner loses potential customer to squatter. When in situations the owner cannot legally protect its trademark from infringement by squatter, it has to buy their trademark at higher cost.
These are the key issues prevalent today which tells us why this problem should be fixed.
Forms of trademark Squatting
1. Pre-emptive Registration
As the name suggests, this form involves registration of similar or identical trademark of a well known brand before the original brand applies for registration. Foreign entities interested in entering Indian market find this strategy relatively hard for various reasons.
In the landmark case of Toyota Jidosha Kabushiki Kaisha v. M/S Prius Auto Industries Ltd, Toyota was required by Supreme Court to prove trans-border reputation in order to protect their renowned trademark “Prious” from being registered by an Indian entity. It failed to prove the same.
2. File to File system:
In this system, the entity which applies earlier gets preference for registration. This system ignores rule of prior use and reputation of brand.
How to prevent Trademark Squatting?
1. Prior Registration: It is advisable that every business entity must register their trademark as early as possible to avoid any chance of squatting. Also international trademark registration system such as Madrid Protocol should be considered for seamless protection of trademark from infringement in foreign countries.
2. Legal Consultation: In dispute of trademark squatting involving entity from foreign country, lawyer`s help is must. The trademark attorney can also help in making strategies to prevent infringement of trademark in global market.
3. Monitoring and investigation: Continuous monitoring must be done, a system must be developed to check any infringement or squatting.
4. Legal Audits: Timely auditing by professionals can help businesses identify any threat to their mark, so that action can be taken as quicky as possible.
In India, judicial remedy is being given through section 57[2] of Trademark Act which allows any person aggrieved to file for rectification of entry registered in the registrar of trademark.
CASE STUDY
Volance LLC vs Mahendra Jayeshbhai Bhambhania, CS(COMM) 257/2023
In this case, the plaintiff Volans Uptown LLC is a company of USA exclusively using trademark “BOTANIC HEARTH” and registered the same in USA in 2017 and started selling its products in India in 2020 September. The defendant, an Indian entity, filed for identical trademark “BOTANICAL HEARTH” in September 2022 which plaintiff opposed. Then defendant asked for 18,00,000 for giving up the right of using trademark. The defendant was received several notices and he did not respond. It was found by the court that the defendant was a habitual infringer of trademark. The court held that this is trademark squatting. Such a tactic is unhealthy for the integrity of trademark law. Court passed permanent injunction order against the defendant restraining him to further use the impugned mark.
CONCLUSION
Trademark squatting is an evil practice which is done with mala fide intention to cause loss to original owner and gain unfair advantage of the well-known mark. Squatters are smart and take advantage of non-registration of a mark which is although popular enough in that area. There must be strict laws made to deal with trademark squatting.
