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We’re pleased to bring to you a guest post by Manvee Kumar Saidha, analysing the effect of ‘first to use’ and ‘first to file’ regimes on trademark trolling, in light of the attention that the the recent PS5 case has drawn towards the possibility of such trolling becoming a menace in India. Manvee is a 4th year law student at School of Law, Christ University, Bangalore.
Trademark Trolls: Perspectives, Pitfalls and the Way Forward
Manvee Kumar Saidha
Trolls – a term morphed to refer to those who relish and exploit online anonymity, have become a common construct of the present day. The manifest sadism associated with the practice of trolling can be extended to the trademark regime, and a ‘trademark troll’ is defined as an entity who engages in pre-emptive and frivolous trademark registration; and ‘trolling’ refers to the practice of registering trademarks without the intention of using them. Once registered, these are used as means to extract profits by initiating infringement lawsuits or pursuing negotiations for acquisitions and/or licenses. Although the abuse is blatant and may even be construed as morally shallow, the practice is per se not illegal.
First to Use v. First to File: Difference and Implications
For the sake of differentiating, ‘use requirement’ countries are those jurisdictions where trademark registration is provided on the basis of prior commercial usage of the mark. On the contrary, ‘file requirement’ countries refer to jurisdictions where registration is provided upon simply following due procedure i.e. applicants are under no obligation to demonstrate usage of their mark as a precursor to a valid application.
China is a file-requirement jurisdiction, which means that under Chinese trademark law, the first entity to register a trademark becomes its lawful owner, despite current usage by another. Its case record of trademarking trolling, including the (in)famous case that involved the tech giant – Apple Inc., which paid $60m in 2012 to retrieve the right to use their iPad trademark in China, makes it the most poorly placed country. Scholars attribute the problem primarily to the registration process, and recognise that parallel socio-legal factors such as valuing trademark certifications in priority, infringement procedures that are inequitably favourable to trademark holders, quantum of damages (rightly referred to as a ‘glittering award’ of damages), etc, contribute towards incentivising troll activity.
Conversely, in the US, commercial usage is not only a pre-requisite for registration, but it also underscores the application of other trademark related doctrines. To elaborate, in addition to Section 45 of the Lanham Act that provides for ‘use by a person’ as a preliminary requirement, courts reinforce the stipulation via supplementary doctrines. These include abandonment of mark in case of non-usage (interestingly also applicable to foreign mark holders), and prohibition against naked licensing and assignments in gross. Thus, the cumulative judicial approach creates an obligation of quality control and transaction in goodwill.
Additional strengths of the US legal system include credible precedents, availability and widespread use of opposition and cancellation proceedings (at the USPTO). Moreover, private initiatives such as the ‘Trademark Watch Dawgs’ – a group dedicated to challenging trademark bullies and frivolous applications – play an active role in protecting the sanctity of trademark rights.
Despite this, there have been cases of trademark trolling in the US. For instance, in 2016, a US-based company called ‘47 / 72 Inc.’ filed more than 60 trademark applications that targeted well-known brands. More recently, the USPTO, as of 1st November, 2020, has received more than 600 applications to register marks related to Covid-19. In anticipation of to-be-relevant products, trolls have sought to register marks such as ‘COVIDFREE’ for antibacterial goods, among others.
Thus, it is clear that despite strong legal frameworks in place, trademark trolls aren’t altogether avoidable, and can be an expensive menace for businesses.
Bringing the Debate to India
In India, trademark trolls are yet to meme-ic the vigour of their Chinese counterparts. Though the mandate of ‘first-to-use’ rule offers an inherent layer of protection, Indian trademark law does allow proprietors to file for registration on a ‘proposed to be used’ basis. Accordingly, where two or more similar or identical trademarks have been filed for future use, the trademark with an earlier application date is given priority; though neither is required to demonstrate prior usage. Such registration is liable to be cancelled only when it is challenged on ground of non-usage after a 5 year period which is discussed later in the post.
Instances of trolling in India, include the H&M; Hennes & Mauritz Ab & Anr v. HM Megabrands Pvt. Ltd. & Ors. case wherein H&M, a Swedish fashion giant, sued HM Megabrands for trademark infringement. The marks in-dispute were:
In what was identified as a classic case of trademark trolling, the Delhi High Court set the tone by condemning the frivolous arguments of the defendants and issuing an injunction against usage of the mark ‘HM Megabrands’. The judgement was a welcome decision and its equitable nature is bound to have secured international confidence. In a more recent context, the Sony PS-5 case presented a rather amusing example of trademark trolling, where a Delhi-based individual beat Sony to register a mark under the same class (Class 28), and even countered Sony’s opposition. The malice is apparent since the individual filed for registration in October 2019, only a few months after Sony announced the launch of its PS-5. Moreover, based on the recent withdrawal of application, it becomes abundantly clear that there was no intention of securing rights for personal use in the first place. While it is unknown as to whether he made any money off an internal dealing, the fact that he didn’t pursue a legal battle to protect proprietorship says enough.
Pitfalls and the Way Ahead
While the problem in India is far from being termed a ‘menace’, businesses have been trolled. Accordingly, I have attempted to explore three limitations in the existing framework that can be potential exploitation sources for trolls.
First, proceedings to initiate cancellation on the ‘no-use’ ground can be proceeded with only after a 5-year blanket protection period expires. Not only is 5 years half the lifespan of a registered trademark, the litigation that follows the cancellation application is likely to stretch to alarming lengths of time. To illustrate with reference to foreign examples, the USPTO found in 2018, that the average length of time from the commencement of a trademark cancellation to completion was approximately 140 weeks (2.7 years), while the expected period in China is at least 12 months. Notorious respondents are further known to ‘use’ their trademarks during this litigation period, thereby making it impossible to utilise invalidation actions as a remedy. It is accordingly suggested, that in order to accommodate spirited and timely action that can ‘check’ frivolous registrations, the 5-year period be reduced – ideally to 3 years (as is the case under US trademark law), or less.
The second limitation is with regard to the statutory procedure provided for cancellation and rectification. Although the trolled party, usually a large corporation, approaches a court to pursue litigation (for instance, in case of the alleged trolling faced by ASUS ZenFone – the writ petition was filed with the Delhi High Court) another option with the aggrieved party is to file a petition before the Registrar or IPAB (Intellectual Property Appellate Board) – who are empowered to rectify the Register under Section 57 of the Trade Marks Act, 1999. However, this too presents a hiccup since the IPAB has the history of being a rather dysfunctional authority, with over 2626 cases pending pertaining to trademarks alone. In order to combat trolls or at least abate the illegitimate advantages of their trade, it would be desirable if disputes are resolved in a time bound manner. Although the 2017 amendment sought to tighten timelines for proceedings by reducing the number of Forms involved, allowing video conferencing, etc., Rule 95 (which deals with procedure for cancellation) upon further perusal still remains devoid of a structured timeline, and gives the Registrar more-than-recommended discretion. Thus, steps to further the efficiency should include ensuring that a quorum is formed and available, expanding location of sittings, and prescribing a time-limit within which disputes should be disposed – failing which the IPAB must be held accountable, and accordingly be required make written submissions explaining delay(s).
Third, we can draw from China’s shortcomings, where the meagre filing fees of 300 RMB (around Rs. 3300) leads to unfettered registrations (in the Uniqlo case, the Supreme Court identified that the plaintiff (troll) had more than 2600 trademarks to their name!). In India, the filing fees was considerably increased by the 2017 amendment which means that the current fee structure was preceded only by Trademark Rules, 2002. A 15 year gap is categorically undesirable and renders the efforts to curb whimsical registrations unavailing. It is therefore recommended that the fees be strategically determined and regularly updated in accordance with the economy and registration trends of the time. To this effect, a 5 year period can be determined as the benchmark to revisit the fee structure and implement necessary changes.
With India likely to attract greater foreign scrutiny post the pandemic, constructive preparations to enhance business experience is key to both – sustaining domestic endeavours and inviting foreign investment. Intellectual property is one of the largest assets of any business, especially trademarks which represent the identity of a brand. Trolls however stand to threaten this asset, and consequently deter international expansion. India’s position as a commercial hub is only a few legal tweaks away, and a robust IP regime will be a leap in the right direction.