Trademark Squatting In India And China

By Saloni Jain and Khushboo Sukhwani
Additional Contributions by Pooja Dutta

Trademark squatting is not new to the corporate world. Virtually every industry has been affected by trademark squatting and trademark cyber-squatting. Trademark squatting refers to register-ing names similar or identical to popular trade-marks, with the intent to extort the trademark holder.

Like the People’s Republic of China, India has a “first to file”—as opposed to “first to use”—registration system. Under China’s Trademark Law of 1983 and India’s Trade Marks Act of 1999, “first to file” rule, where two or more applicants apply to register identical or similar trademarks for use on the same or similar goods or services, the first application for registration will be awarded the trademark.

The failure of owners of well-known global trade-marks to file them promptly in China and India when trade relations thawed in the early 1990s opened the floodgates to trademark squatting in both countries. Global trademark owners are be-ginning to pay for their failure to file promptly and are now have to deal with squatters if they want to exploit opportunities from growing consumption demand in both countries. In addition to exploiting the “first to file” law, trademark squatters in India take advantage of the carelessness of trademark owners in failing to register their trademarks, their unwillingness to enforce their rights, and the country’s poor enforcement mechanism.
An exception in China to the “first to file” rule is if the mark, whether registered or not, is a “well-known” mark. Proving notoriety, however, can be an uphill task. A “well-known” mark in China is one that is widely recognized in China and enjoys a positive business reputation with the Chinese public. Prior to 2002 only trademarks registered in China could qualify for “well-known” status but in 2002 an interpretation of the Supreme People’s Court extended “well-known” mark protection to marks that were not registered in China. In general, Chinese courts have broad discretion over interpreting the meaning of “well-known” and tend to favor Chinese businesses over foreign companies whose products may be widely recognized and enjoy a positive business reputation in China.

While Article 14 of China’s Trademark Law defines a “well-known” mark, the law is enforced under the Anti-Unfair Competition Law (UCL). The UCL prohibits the unauthorized use of a name that is identical or substantially similar to a well-known brand name, especially when that use causes consumer confusion. There are, however, cases where “well-known” global brands have lost out to Chinese entities who have registered their trademarks first in China. For instance, a Shanghai snack maker successfully took the name and logo of the popular computer game “Angry Birds”.

In order to satisfy China’s “well-known” standard, the trademark owner must demonstrate public recognition of its trademark in trading areas, the duration for which the trademark has been in use, the duration and extent of its advertising and the geographical areas the advertising has covered, the records of protection it has gained as a well-known trademark; and any other factors establishing that the trademark is well-known.
India, too, has the “well-known” standard. How-ever, this requires lengthy and expensive litigation which can be avoided by the simple expedient of registering the trademark in India. Registration is prima facie evidence of ownership.

Furthermore, unregistered “well-known” trade-marks in India, or internationally, are also pro-tected against misuse in India under common law, but, again, the burden of proving that a brand is “well-known” lies with the owner. Registration, of course, is the best proof. Relying on India’s backlogged judicial system to protect and enforce non-registered trademarks is inadvisable simply because the owner might have to wait for over a decade for its day in court, let alone a judgment in its favor.

India also has a “transborder reputation” rule. For example, Walmart challenged a Delhi-based Indian firm which infringed its trademark by using the name Wal-Mark. Wal-Mart was successful in obtaining an injunction because it had a preexisting transborder reputation. The Wal Mart decision followed the finding in the case of NR Dongre and Ors v Whirlpool Corp. (1996 VIAD SC 710), where Whirlpool successfully argued that its lapsed trademark registration should be over-looked given the transborder reputation of the Whirlpool name. Transborder reputation, however, is a difficult standard to satisfy, and it can be costly, and time-consuming to have a squatter’s registration canceled based on this ground.

In part to counter squatting, India also introduced the “propose to use” standard, which, ironically, has had the opposite effect. The “propose to use” provision is similar to the U.S.’s “intent to use” rule. India’s “propose to use” provision provides that no prior use of that mark is required for its registration. The provision allows a brand owner to get its mark protected by registering it in India even though the owner is not using it and merely intends to do so in the future. Again, however, a continued lackadaisical attitude in registering has opened the door to trademark squatters who register under the “propose to use” provision first.

Immediate trademark registration should be a critical priority for any brand wanting to enter the Indian market. Registration is a relatively inexpensive alternative to litigation.
India does have an alternative to taking the squat-ter to court. The Ministry of Commerce has a trademark dispute resolution mechanism for registered trademarks. In what could be worrying news for businesses, however, the Commerce Ministry disclosed in 2011 that it had over 126,000 trademark dispute cases pending and lacked the manpower to examine them.

DOMAIN NAME SQUATTING IN CYBER SPACE

Trademark owners also face cyber squatting or domain name squatting—a problem not limited to China or India. Cyber-squatting involves simply registering a domain name similar or identical to a well-known and/or registered trademark with the intent to take advantage of the goodwill in that trademark.
India has witnessed many instances where the do-main of well-known trademarks are registered by squatters in the hope of selling them to the owners of those marks (or rival owners) or simply to take advantage of the reputation attached to those marks. Domain names are valuable intellectual property for every company in every industry. With the advancement of internet communication the domain name may be as important as a trademark.
In a case that was arbitrated by the World Intellectual Property Organization’s Arbitration and Mediation Center, Armani claimed that an artist who registered the domain name armani.com was a trademark squatter. In his defense, the artist argued that his name was Mani, and his first two initials were A.R., which entitled him to register his domain named as ARMani.com. The arbitrators ruled in A.R. Mani’s favor as he had registered the trademark before Armani. The arbitrators also found that Mr. Mani had made reasonable counteroffer to Armani’s original offer to buy the domain name from him. G. A. Modefine S.A. v. A.R. Mani, Admin. Panel Decision, Case No. D2001-0537 (2001).

In 2005 the .IN Registry was created in India by the National Internet Exchange of India to protect domain names with an “.in” extension. But it remains the duty of the trademark owner to protect its trademark from any kind of infringement. For instance, http://www.walmart.in, http://www.cnn.in and http://www.rediff.in are not owned by the respective companies. Several companies have had to face lengthy disputes before obtaining injunctive relief against squatters. E.g., Yahoo! Inc. v. Akash Arora, 1999 PTC (19) 201 (Delhi).

In conclusion, companies entering or planning to enter the Indian market must take the following precautionary measures:

  • File early, File often. India’s “propose to use” system for trademark registration, combined with the trademark office’s backlog, makes it essential for brand owners to file a trademark well in advance.
  • The cost for the registration of a trademark in India is comparatively low and minuscule com-pared to the cost of litigation.
  • Register not just the English-language brand name but also Indian versions of the brand name (which may be more popular in the local market than the English equivalent).
  • Due to India’s class filing system, companies need to protect their brands across all sectors, not just those in which they are active. The World Intellectual Property Organization website shows that there are 34 classes of goods and 11 classes of trademark registration in India. This limits the potential for a trademark squatter to register trademarks associated with non-traditional products.
  • Subscribe to a trademark watching service that will monitor trademark applications in India. Various firms provide this service for the Indian market.
  • Last but not the least, register the domain name with all the major gTLDs (generic Top Level Domains).

Saloni Jain and Khushboo Sukhwani are second year students at National Law University, Delhi. They can be reached at
khushboo.sukhwani11@nludelhi.ac.in and
salonijain195@gmail.com.

Pooja Dutta is a partner in LawQuest, Mumbai, specializing in intellectual property, bankruptcy and immigration law. She can be reached at pooja@lawquestinternational.com.

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