Trade mark squatting

What is trade mark squatting?

Trade mark squatting or bad faith trade mark filing occurs when a party files and registers an original applicant’s trade mark in a country where the trade mark is not yet registered in bad faith.

The original applicant then potentially faces challenges in registering in the other country since the squatting party controls the rights to the trade mark. Squatting parties normally commit bad faith trade mark filing to gain control of the trade mark in a country with the aim of forcing the original applicant to purchase the trade mark back when the original applicant expands their business into that country.

Trade mark squatting is a significant issue in countries like China as a result of the differences in trade mark laws in different countries. Unlike Australia, China has a first-to-file trade mark system, which means that the party who applies for a trade mark first, obtains the rights to the mark. The filer can enforce their rights to the trade mark and potentially sue the original owner in the foreign jurisdiction for infringement. Rights to the trade mark also means that the filer can request for customs officials to seize products manufactured for export by the original applicant that use the trade mark.

How to prevent trade mark squatting

Given the difficulty and costs involved in canceling an application after trade mark squatting has occurred, the best way to avoid any issues is to file in all relevant jurisdictions as soon as possible, particularly in first-to-file jurisdictions. Ideally, companies should not only file their trade mark registrations in their home country but also apply for trade mark registration in key countries in which the trade mark will be used, as well as prospective jurisdictions under consideration for future business expansion.

An example of trade mark squatting: Qiaodan Sports & Michael Jordan

Up until 2016, Qiaodan Sports was using a Chinese transliteration of Michael Jordan’s name and a logo similar to that of Nike’s well-known Air Jordan symbol as registered trade marks. They sold jerseys and footwear with the number 23, Jordan’s famous basketball number, and the name “chee-ow dahn,” Jordan’s name in Chinese. Jordan emphasised that the products were intentionally tricking customers into believing the former basketball player was associated with the company. It was ruled that the rights to these trade marks be revoked from Qiaodan Sports to protect Jordan’s name and legacy.

Use of a trade mark within a corporate group

One Federal Court decision clarifies what is considered as “authorised use” of a trade mark wherein the trade mark user is not the trade mark owner but a subsidiary of the owner’s company.