Authored By: Chaitrali Sawant
University of Mumbai Law Academy
⮚ Introduction
Trademark Squatting is a fraudulent process in which any unscrupulous person or entityapply in a bad faith for the trademark identical, when there is existing trademark of awell-known and renowned brands. This Article discusses the primary intention of unscrupulousentity to try to use the trademark not with the intention of using for any commercial businessbut to gain or obtain money from the original brand owners by selling or leveraging thelegal ownership of the trademark. This article will also discuss challenges faced by the original brand owners pertaining trademark squatting and the provisional legal remedies providedbythe law.
The legal framework in India practices the First-to-file rule, due to which whoever files thetrademark first will gain the legitimate ownership for that trademark regardless of whoprimarily originated the brand. This develops a threat for owner and wrongful opportunityforthe squatters to take over the trademark belonging to the original business who have not yet filed in India. This creates a serious concern among the international businesses whooperatemultiple brand franchises across the world, but if they have not registered first in Indiaandthe squatter did it will get treated as a valid registration according to the law.
⮚ Understanding Trademark Squatting
It is important to differentiate trademark squatters from a regular trademark dispute. Wherethe marks include common words and/or the businesses are in different industries, twodistinct businesses can use the same mark without any attempt to deceive. Trademarksquatting, however, usually is run with a opportunistic behaviour whereby an individual orentity tries to achieve a commercial benefit from a trademark that has alreadybeenestablished by another party’s reputation or goodwill. This can often occur whenaninternational brand has a high level of recognition in its home territory and becomessuccessful there, but does not rush to register a trademark in other countries this specificallyhappen to foreign brands.
The opportunity may be spotted by a third party and registered in India for the sameor asimilar trademark. The true owner may then find that a trademark previously registeredbyanother company is the one that they had chosen. While this type of registration does not automatically prevent any of the rights that the true proprietor has, it can make a big hurdleinthe legal and commercial world. Some other examples of trademark squattingincluderegistering trademarks in other classes, registering similar trademarks on the internet andsocial media, and intentionally misspelling existing trademarks.
The problem is more acute in the digital environment as an online identity can be quicklycreated and promoted and can engage consumers almost instantly across geographical boundaries. In these cases, the problem is that the value of the mark to the commercial userdoes not stem wholly from the squatter’s own actions. Rather, the squatter is lookingtogainadvantages from the recognition of another business that has grown with investment, advertising, product quality and consumer relations.
⮚ Why trademark squatting is a concern to brand owners
Perhaps the most important effect of trademark squatting is that it can hinder the legitimateproprietor from entering a market. A company planning to extend its brand to India mayfindthat another company has already registered a similar or identical brand name. Wheretheoriginal proprietor has a legal claim, they might still need to file for opposition, rectificationand/or civil proceedings before truly being able to use the mark. This can impact commercial growth and cause uncertainty about the name under which the business will operate, andresult in a delay and expense.
Another potential issue of trademark squatting is the use of good will. A registered trademarkis a body of commercial goodwill and background and consumers may have come to expect acertain quality or source from that trademark. Adoption by an unrelated party couldleadtothe consumer’s perception that the goods or services are from, or connected to, thetrueproprietor. The damage is, therefore, not only to the trademark owner but alsototheconsumers, the issues become even more pronounced when the trademark that is squattedislinked to a digital identity. A domain name that matches an established trademarkcanmislead consumers and creat confusion from the actual business, and can give the impressionthat the site is run or authorized by the trademark owner. This means that trademark squattingcan impact on not only a brand’s market entry, but also their digital footprint.
⮚ Trademark squatting under the Indian Legal Framework
The different legal provisions of the Trade Marks Act, 1999 1, may arise when a trademark has been adopted or registered in a situation where there is a suggestion of squatting. Section11 is significant because it provides relative grounds of refusal of registration. Section11(1)will not be registered under the following conditions: where an earlier trademark is identical or similar and there is a likelihood of confusion or association amongst the public. Additional protection is provided under section 11(2) which covers certain cases of dissimilargoods/services where the earlier mark is a well-known trademark in India. Bad faithisaprimary requirement under section 11(10) where it comes to trademark rights.
Bad faith is important because in most cases, trademark squatting is distinguishedfrominnocent adoption by the circumstances of the trademark’s adoption. Familiarity withanexisting brand or the unique character of the mark, false claims of prior use or actions that would give the impression that the brand was being used with the intention of blockingtheoriginal owner from entering the market may be relevant when determining if an adoptionisdishonest.
The applications for registration by a person claiming to be proprietor of a trademarkaredealt with under Section 18(1). Proprietorship becomes pertinent when a squatter triestosecure a registration of a trademark that is already linked to other enterprise. In accordancewith this, Section 34 of the Act has been included to safeguard the rights of qualifyingpriorusers. This is important in squatters’ rights cases because it is not enough to be registeredtobeat an existing prior user. Adoption, continued use, advertising, sales and consumerrecognition, therefore, may become more important in the making of competing claims. Thisis then reflected in the statutory landscape which offers various possibilities to a genuinebrand owner to oppose a potentially squatted mark. But these provisions are not alwayseffective if there is no evidence of the use of the competing mark or if it was adoptedinanunusual situation.
⮚ Trademark squatting and Cross-country reputation of Brand.
When the trademark squatting includes international brands, it becomes essential tounderstand the question of transborder reputation. While trademark rights are primarilyterritorial, commercial reputation can be built internationally via advertising, media promotions, tourism, crossing borders and the internet, through communications. One of themost important cases in this regard in India is the case of N.R. Dongre v. Whirlpool Corporation, 1996, 5 SCC 714.2 The Court held that the Whirlpool mark had a special relevance in the present context and that the reputation of the mark was transborder. Thedecision showed that a foreign business owner can develop goodwill and reputationinIndiawithout having wide-spread physical business activities.
International fame does not equal protection in India. This limitation can be seen inToyotaJidosha Kabushiki Kaisha v. Prius Auto Industries Ltd., (2018) 2 SCC3553. TheSupreme Court considered whether there was “enough reputation and good-will” built upbyToyota amongst the relevant Indian public at the relevant time. The judgement highlightedthe territoriality of trademark rights, and also the requirement of evidence of the reputationinIndia.
These two decisions are important balances to consider when examining trademark squatting. While on the other hand, if a genuine brand registers a trademark to its name, it shouldnot beallowed to be violated because the shrewd party got there first. A foreign proprietor, however, cannot rely upon the world’s fame alone and needs to build the goodwill and reputationinIndia. Thus, proof regarding advertising and publicity, consumer awareness, website visitsand other modes of exposure may come into play when trying to attack a potentially squattedmark.
⮚ Trademark Squatting in the Digital Age
Trademark squatting has changed across the adoption of the digital commerce. Domainnames and other online identities are now ways to be appropriated as a trademark. Oneissueof special concern is domain-name squatting, which is a problem because domain names canserve as trademarks. It is possible to register a domain name similar to someone else’strademark and use it to divert customers, create fake websites, sell competing productsoreven steal money from the owner in return for surrendering the domain name.
The most relevant Indian precedent case for this aspect of the article is SatyamInfowayLtd. v. Siffynet Solutions Pvt. Ltd., (2004) 6 SCC 145.4 The Court did note that elements of passing off may be applicable if there is a likelihood of confusion because the domainnameis similar to the trademark; and that domain names may have a trademark-like character. It’sasignificant ruling for the decision is a reflection of the fact that trademark protectionshouldno longer be limited to the traditional physical marketplace, as commercial identityis nowmore likely to be found online.
The international location can be illustrated by the following example: PanavisionInternational, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998) 5. If so, Dennis Toeppen registered domain names using Panavision’s trademarks and then demanded cash, for theright to give up its domain names. The Ninth Circuit affirmed the determinationthat it constituted commercial use and dilution. The case is an example of cybersquatting sincethedomain name was registered to take advantage of the value attached to another party’strademark.
⮚ The legal actions against the Squatters.
The best thing for a brand owner to do is to take action when they discover a trademarkthat may be a squatter. An opposition to a trademark application is laid out in Section 21of theTrade Marks Act. Early opposition can help prevent squatters from getting registeredandcanhelp spare the more expensive and complicated process of challenging a registered mark. Inappropriate situations, rectification or cancellation of a registered trademark where thereisaconflict could be sought under Section 57. The provision provides means of challengingentries on the Register which are subject to cancellation or variation. But that doesn’t meanthat the registered trademark is automatically non-attackable because of its registration.
Where the rightful owner of the product has a registered trademark, and the statutoryrequirements are fulfilled, then Section 29 might be a remedy for infringement. Passingoffalso is significant in the case of reliance on goodwill and prior use by the proprietor. Theremedy of passing off is expressly saved by Section 27(2). The principle of passingoff isdefinitely available in such a scenario where the actual proprietor had established goodwill without registering a mark in India. In relation to domain-name squatting, the brandownercan also seek judicial relief as well as use available domain-name dispute-resolutionprocedures. Today’s trademark fights showed that there are three facets to a trademarkfight: Registration, commercial use, and digital identity.
⮚ Enforcement issues in India for brand owners.
Although there is a legal framework in place, there are a number of practical challenges forbrand owners. The first is trademark protection being territorial. A company may have agoodinternational brand image and be in a poor position at the time of the study, to maketheirimage as strong with consumers in India. A company can have a good brandimageinternationally and be in a bad brand image with the Indian consumers at the time of study.
The second is enforcement is essentially reactive. The trademark owner can only findout about this issue once a competing application has been submitted, a trademark registrationisgranted or a false online identity has been created. This is where trademark watching&digital monitoring can be of significant importance. An extra challenge is providedbythespeed at which it happens online. It can only take a few minutes to establish a fake websiteoreven a fake identity and get a website established and lots of consumers may have alreadybeen targeted before you can formally claim to the court. In addition, online actors might usemultiple names, websites, and/or user names, making a name or website alone insufficient toidentify and enforce.
Enforcement costs are still high. Opposition, rectification proceedings, civil litigationordomain name disputes can take a long time and a significant amount of money. Thesecostsmay be too great to enforce the rights of smaller companies in a timely fashion or to allowaninfringing/squatted trade mark to be used for a significant period.
⮚ A critical analysis of the existing legal framework
The Indian trademark regime offers ample protection against trademark misuses in theformof remedies. Section 11 deals with conflicting marks, and bad faith is a factor in section21’sopposition. Qualifying prior users are protected under Section 34 and Section 57 allowsamethod of challenging registrations. Infringement and passing off (sections 29 and 27(2)) arealso available remedies.
However, the idea of trademark squatting remains divided, in that the definition does not appear to be clear and unambiguous in the Trade Marks Act. The nature of the legal responsewill greatly be shaped by the specific nature and stage of the conduct. An applicationforregistration may be opposed, a registered trademark may require rectification, the trademarkmay have been used by the third party in an infringing or passing off way and there maybeadifferent dispute-resolution process for the appropriation of the domain name.
Indian law does not necessarily have a lack of remedies. Instead, there are greater challengesin making sure that current mechanisms are working properly in a dynamic commercial anddigital landscape. There is a potential opportunity for better coordination betweensomeonline marketplaces and social media platforms and trademark monitoring and domainnameprotection, which would enhance the ability of brand owners to be able to spot and respondtoinstances of domain name squatting early on. A blanket protection without supportingevidence of Indian reputation could have a negative impact on all the domestic businessesaswell as legitimately owned brands, and on the other hand, a weak protection could result inthe misuse of the internationally-recognized brands. This implies a balance betweenterritoriality and anti-immoral appropriation in the law.
⮚ Conclusion
In today’s global and technological environment trademark squatting has become an issueforbrand owners. Squatters may be able to make it difficult for other businesses to enter themarket and use the trademark, may be able to benefit from a business’s goodwill to squat onit and mislead consumers that they are the same business. While various remedies includingopposition, rectification, infringement and passing off are provided under Indian law, thereisa dearth of specific laws to deal with trademark squatting that can make enforcement challenging and time consuming.
It takes a combination of both legal and brand management to be an effective measure. EarlyTrademark Registration, Regular surveillance of Trademark applications and Digital platforms, defence of domain names and timely action against suspicious use or registrationof trademarks are key areas of focus for businesses. At the same time, greater collaborationbetween the trademark office and the digital platforms can be useful to make it more efficient to manage such activities. Brands are increasingly visible, in both the physical anddigital marketplace, and it is more important than ever to strengthen preventive and responsiveactions to protect the rights of the real brands, consumer confidence and fair competition.
Reference(S):
Table of Cases
N R Dongre v Whirlpool Corporation (1996) 5 SCC 714 Panavision International LP v Toeppen 141 F 3d 1316 (9th Cir 1998) Satyam Infoway Ltd v Sifynet Solutions (P) Ltd (2004) 6 SCC 145 Toyota Jidosha Kabushiki Kaisha v Prius Auto Industries Ltd (2018) 2 SCC 355
Table of Legislation
Trade Marks Act 1999
Bibliography
World Intellectual Property Organization, ‘Making a Mark: An Introduction to Trademarksfor Small and Medium-sized Enterprises’ (WIPO 2017)
1 Trademark Act, 1999
2 N.R. Dongre v. Whirlpool Corporation, 1996, 5 SCC 714
3 Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd., (2018) 2 SCC 355
4 Satyam Infoway Ltd. v. Sif ynet Solutions Pvt. Ltd., (2004) 6 SCC 145
5 L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998)
