In today’s interconnected global economy, securing protection over Intellectual Property assets has become an indispensable requirement for businesses at various levels. Trademarks being one of the most important instrument of IP and valuable intangible asset to business in today’s era, functions as a source identifier for distinguishing the goods and services of one entity from those of others.
With increasing modern communication technologies, trademarks now play a pivotal role in worldwide branding and marketing strategies, as companies seek to provide their goods and services to a public that is less restricted by international borders. However, this has also led to a rise in the vexatious practice of “Trademark trolling”.
Trademark trolling occurs when an individual or entity registers a trademark in bad faith with no lawful intention of using the said mark. The trolls purposely try to register such marks which have garnered immense reputation and goodwill, in other jurisdictions or classes, which the owner of the mark would have likely want to register in future. Once these marks are registered, they are used as a means for extorting monetary benefits from real mark owners by ways of demanding licensing fees or initiating frivolous infringement suits. In some instances, the real mark owners have to buy their own brand rights from a troll in another country at an exorbitant fee because the troll had first registered the mark in his country.
A classic example of trademark trolling is the well-publicized case dating from 2012 when US tech giant Apple Inc. had paid $60 million to Chinese firm Proview to settle a dispute involving rights to the "iPad" name. In 2009, Apple had paid a Proview Technology affiliate in Taiwan for its iPad trademarks in various countries for £35,000, assuming it covered China. However, when the iPad was introduced, Proview’s Shenzhen operation said that the rights were never transferred in China and proceeded to file a trademark infringement case against Apple and prompting authorities to start seizing iPads in February 20121.
In another instance of trademark trolling, Tesla Motors Inc., the US electric car maker was forced to settle with Chinese businessman Zhan Baosheng, who had registered the “Tesla” trademark in 2006 much ahead of the automaker’s entry into the Chinese market2.
The above instances demonstrate how even large multinational companies have fallen prey to the trademark trolls. These companies had no option but to pay up, as they could not afford to lose access to China’s massive market, which would have severely interrupted their operations and resulted in huge losses. Even celebrities are not immune from the perils of trademark trolling. After almost a decade, U.S. basketball legend Michael Jordan finally secured a major victory in his protracted legal battle against a Chinese sportswear company over the use of his name . Jordan had filed a lawsuit against a sportswear company called Qiaodan Sports (a transliteration of Jordan’s name). The said company had even registered trademarks for the names of his two sons, Jeffrey and Markus (Jiefuli Qiaodan and Makusi Qiaodan).
Despite rise in trademark trolling cases, what is alarming is the fact that the practise of trademark trolling is per se not illegal. The trolls take advantage of the loopholes present in the trademark system, as discussed below.
First to Use v. First to File – Implications of Trademark Trolling
The first-to-use and the first-to-file are the basic systems for obtaining trademark rights in different jurisdictions, which determine whether trademark rights will accrue on account of first commercial use, or on account of getting registration first.
The first-to-use principle is followed in common law jurisdictions such as USA, Australia and India, which establishes that exclusive right to the trademark is granted to those parties which start using the trademark first in commerce. In contrast, the first-to-file principle is followed mainly in civil law countries such as China, Russia, Japan, wherein an exclusive right is created by applying trademark registrations and the parties are not required to prove use of their mark as a precursor to a valid application. This means that a mere trademark registration can also provide legal certainty on exclusive rights to the use of the trademark.
The menace of trademark trolling is, more prevalent in first-to-file countries, as the trolls do not have to invest or bring a trademark into “use.” However, even in first to use countries, the issue of trademark trolling is not uncommon.
For instance, in USA which is a first to use country, to obtain federal registration with the USPTO, a trademark must actually be used in U.S. commerce via the sale of goods or services. To fulfil the use requirement, applicants often submit photos of their products bearing the trademark in question, or submit screenshots that show their trademarked products are available for purchase online. Unfortunately, in the digital age, trolls can easily put a newfound trademark to supposed “use” by creating a website, equipping the site with a secure payment method, and “using” the trademark there. Others simply submit “dummy” specimens—digitally altered photos of goods supposedly bearing the mark sought to be registered4.
India which follows ‘first to use’ principle is also not averse to trademark trolling. Instances of trademark trolling include the case of Sony’S PS-55, wherein, an Indian individual registered the mark ‘PS-5’ in class 28 within a few months of the launch announcement by Sony and even countered Sony’s opposition. The case of H&M; Hennes & Mauritz Ab & Anr v. HM Megabrands Pvt. Ltd. & Ors was one of the first instances of trademark trolling in India, wherein the Delhi High court issued an injunction against the use of ‘HM Megabrands’ and condemned the defendants for indulging in a clear case of trademark trolling. Also, statutory provision recognizing prior use of trademark is provided under Section 34 of Trademarks Act, 1999. This section provides for protecting the vested rights, so that the proprietor of registered trademark or registered user cannot interfere with the use of any identical or similar mark if the person has been using the mark from an earlier date.
Although, trademark trolling has been somewhat curtailed in common law jurisdictions by recognizing the rights of a prior user, implementation of stronger laws in first-to-file countries for protection of the trademark owners is the need of the hour. Irrespective, the brand owners should implement effective strategies at their end to avoid the predicament of trademark trolling.
Brand owners should proactively file trademark applications as early as possible in countries where they plan to do business and by claiming priority wherever possible, especially in first-to-file jurisdictions. These also include filing transliterations trademarks in local language of the country. The brand owners should also keep abreast of the changes made in the local laws of the country. For example, in June, 2019, Canada changed its trademark laws from first-to-use to first-to-file. Also, conducting periodic knock-out global trademark search to identify potential trademark troll is essential for the brand owners. By implementing such strategies, the risk of trademark trolling can be reduced.
About the Author
Managing Associate – Trademarks Prosecution, at Rahul Chaudhry & Partners
Shireen Sidhu is a Managing Associate at Rahul Chaudhry & Partners. She is a 2012 law graduate from The Rajiv Gandhi National University of Law, Punjab. With an experience of over 10 years, Shireen is actively involved in handling all trademark prosecution matters of the firm.