Features

Mitigating the Risk of Trademark Trolls in India

Published: June 9, 2021

Ashwin Julka

Ashwin Julka Remfry & Sagar Gurgaon, India INTA Bulletins—Asia-Pacific Subcommittee

Bisman Kaur

Bisman Kaur Remfry & Sagar Gurgaon, India Brands and Innovation Committee

A trademark “troll” is generally understood to be one who seeks to register or use a mark with the mala fide intent of extorting monetary benefits from the unsuspecting rightful owners of the same or similar marks. In the field of domain names, such trolls are called cybersquatters. How serious an issue is this in India, a first-to-use jurisdiction? And how can trademark owners mitigate the possibility of being trolled? This article analyzes these issues in the context of recent case law developments and India’s status as a first-to-use jurisdiction.

Sony’s PS5 Launch in India

Gaming enthusiasts in India waited with bated breath as Sony Interactive Entertainment (Sony) announced that it would launch its famous game console PlayStation 5, commonly known as PS5, in the country in November 2020. Little did they anticipate that an existing trademark application filed by a trademark troll would delay the PS5 release in India until February 2021, after compelling Sony to get involved in a trademark opposition dispute.

An individual named Hitesh Aswani filed trademark application No. 4332863 for the mark PS5 on October 29, 2019, for goods in Class 28 (covering video games consoles and related goods). Sony filed an opposition against this mark, relying on the well-known status of its video game consoles sold worldwide under the PLAYSTATION and other “PS formative” marks—including in India—as well as its extensive and prior statutory rights in the marks in India.

Mr. Aswani initially opposed Sony’s Indian applications related to PS5 but subsequently withdrew his application (No. 4332863), lending credence to the assumption that he had no intention of using the PS5 mark in India.

This was a prime example of filing by a troll: a preemptive, mala fide trademark filing with no intention to use the mark but rather with the intent to impede bona fide use and registration by the rightful owner.

Types of Trolls

Trolls are most common in first-to-file jurisdictions, and they can be “opportunistic registrants.” This category of troll attempts to register well-known or recently introduced trademarks used (or registered) in other jurisdictions by third parties. In first-to-file jurisdictions, such entities can also become lawful owners of marks that are, in fact, already in prior use by a bona fide third party. A troll acquires such spurious registrations in anticipation of the rightful trademark owner eventually wanting to file or use the mark in the troll’s jurisdiction, thereby affording the former an opportunity to make an easy profit by forcing a license negotiation or buyout.

 

A troll acquires such spurious registrations in anticipation of the rightful trademark owner eventually wanting to file or use the mark in the troll’s jurisdiction.

China, for example, is a first-to-file jurisdiction and, in 2009, it was reported that a Chinese businessman, Zhan Baosheng, had registered the TESLA trademark in China across a range of classes, including cars. Upon learning of these registrations, Tesla Motors made a multitude of offers to purchase the marks. Mr. Zhan reportedly demanded a price of US $32 million, which Tesla rejected. Both parties instituted several suits against each other. Ultimately, they entered into a settlement in August 2014, whereby Mr. Zhan would give up his registered rights while Tesla would drop its compensation demands in return. Tesla also agreed to buy the domain names including tesla.cn and teslamotors.cn from Mr. Zhan for an undisclosed purchase price.

“Suspect trademark users” is another category of trolls and is typical in first-to-use jurisdictions, such as those under common law. This malpractice includes entities that adopt a trademark (which can include filing trademark applications) without bona fide reasons and claim to use the mark. Their objective is to impede bona fide proprietors from using the mark later by threatening or bringing infringement or opposition actions against the latter. This malpractice is typical in first-to-use jurisdictions, such as those under common law.

A good case in point in India is H&M Hennes & Mauritz AB and Ors. v. HM Megabrands Pvt. Ltd and Ors., (CS (COMM) No.707/2016), filed before the High Court of Delhi. In September 2014, Swedish fashion retailer H&M came across products—clothing, footwear, accessories, etc.—bearing an HM mark being sold by an Indian entity, HM Megabrands Pvt. Ltd. (HMMPL). The Indian entity was selling the products through a retail store, the www.hmmegabrands.com website, and popular online shopping portals. Further, a search through the records of the Trade Marks Registry revealed that HMMPL had filed several applications for registration of the marks HM MEGA BRANDS and an HM label mark. The letters HM were the most prominent feature of the marks and were depicted in a red/white combination akin to the combination used in H&M’s proprietary logo.

H&M sent a cease and desist notice to HMMPL, which replied with a refusal to comply with H&M’s demands. Subsequently, HMMPL instituted a suit for groundless threats against H&M before the High Court of Bombay. It also filed a rectification action at the Trade Marks Registry against H&M’s registered trademark “H&M in stylized text” (Registration No. 1393619). This led to H&M filing a suit against HMMPL in June 2016 before the High Court of Delhi. In the suit, H&M alleged trademark and copyright infringement as well as passing off.

The crux of HMMPL’s defense lay in the adoption and use of its marks in India since 2011 when H&M did not have a brand presence in India. However, the court on May 31, 2018 strongly condemned HMMPL’s arguments, noting that H&M had entered the world market at least two decades prior to HMMPL’s venture in India. It also found that H&M was already a well-known global brand when HMMPL commenced its business. The court recognized the cross-border reputation enjoyed by the H&M trademark in India and issued an injunction restraining HMMPL from using the disputed marks.

Intent-to-Use Applications

Trolls can take advantage of provisions that allow filing of intent-to-use applications and though such applications can be cancelled on the basis of non-use, the process of cancelling bad faith registrations can be a long one for rightful trademark owners. While India is a common law first-to-use jurisdiction, it is also possible to file a trademark on an “intent to use” basis under India’s Trade Marks Act. This was the case in Mr. Aswani’s application in the Sony PS5 dispute. Official filing fees for a single class is approximately US $60—not a large sum—so it is easy for trolls to pursue the filing route to operate as “legitimate” trademark holders in the market for a certain period.

Under the Trade Marks Act, a registered mark does become vulnerable to a cancellation action on the ground of non-use if it is not used in India for a continuous period of five years from the date it is entered on the register, or any continuous period of five years thereafter. Apart from this procedural safeguard, the courts also strongly favor legitimate rights holders (as the H&M case above bears out).

 

A cancellation proceeding or opposition/infringement action vis-à-vis a trademark troll can take time.

However, a cancellation proceeding or opposition/infringement action vis-à-vis a trademark troll can take time. For instance, H&M’s injunction came nearly two years after it filed a suit against HMMPL. For trolls, such time windows provide an opportunity to unfairly restrain and exploit bona fide proprietors wishing to use and register their trademarks in India.

Avoiding Trolls

Given the commercial importance of brands and the need to protect their assets, it is advisable for trademark owners in India and elsewhere to take measures to mitigate the risk of being trolled. These may include the following:

1. Early filing: Companies looking to bring their brands to India should seek trademark registration as early as possible to secure registered proprietary rights. Sony’s numerous PlayStation trademark filings (and registrations) in India are a good example of how such prior rights can put legitimate brand owners in a strong position to combat trolls.

For some rights holders, particularly those whose products target the mass market, such as fast-moving consumer goods companies, it may also be helpful to file marks with transliterations/translations in certain local languages—for example, in Hindi.

2. Being vigilant: Employing watch services to proactively identify trolls and fight them at the initial stages can also be helpful.

3. Cataloguing trademark use: Use of a mark in India can prove critical to determining priority of rights, particularly in the absence of trademark registrations. Note that in some recent cases, including Roland Corporation v. Sandeep Jain & Ors., (Delhi High Court – CS (COMM) 565/2018)), courts have upheld the territoriality doctrine in the context of marks with a reputation. They have stated inter alia that prior use of a trademark in one jurisdiction would not ipso facto entitle its owner or user to claim exclusive rights to the mark in another dominion. In addition, the decisions said, it would be necessary to establish that reputation had spilled over to the Indian market prior to commencement of the defendant’s use of the disputed mark in India. In this context, keeping a record of documents such as invoices, commercial papers, advertisements, etc., can prove vital in establishing legitimate and prior use of a mark in India to block infringing use by a troll.

At the moment, trademark trolls are not so common in India, a scenario aided no doubt by the fact that Indian courts come down heavily on fraudulent marks. However, brand owners intending to enter the Indian market should take this issue into consideration and secure their rights through early registration, especially for those who intend to launch their products and services in India in the near future, and quick intervention once they spot misuse.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest.

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