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What Is Trademark Squatting?

What Is Trademark Squatting?

Understanding what trademark squatting is and how it affects you is important for anyone running an established or expanding business. Find out more here.

16th April 2021
Reading Time: 3 minutes

Introduction

Understanding what trademark squatting is and how it might affect you is important for any established and/or expanding business. We’re going to break it all down for you in this guide. First, we’ll briefly explain some trademark basics. Then we’ll explain the requirements for owning and using a trademark. Following that, we’ll explain how trademark squatting fits into that framework. Finally, we’ll sum it all up for you at the end.

What is a trademark?

A trademark is basically a mark used to distinguish your goods and services as unique. It separates it from the goods and services of your competitors. The mark can be things like numbers, words, phrases, logos, or even a combination of these. You can register a trademark under the Trademarks Act 1995 (Cth) (‘Trademarks Act’). If it is unregistered, you can still enforce it under the common law. Nevertheless, trademarking is an important way of protecting your brand. As such, registered trademarks can provide a bit more certainty in doing so.

Owning a trademark

Now we know what a trademark is, it should be clear that registration of a trademark is not all there is to ownership. So, let’s be clear. Registering a trademark gives you the exclusive right to use it in relation to the goods and services it is registered for. However, you can only register a trademark if you are the owner of it. The Trademarks Examiner’s Manual indicates that ownership is based on a ‘first to use’ basis. Basically, this means that if someone has sufficiently used the trademark before you, then they may be the true owner. As such, they could oppose your registration on the basis that you’re not entitled to register it.

Using a trademark

Now, in order to register a trademark, you must also intend to continue to use it. This is really important because it means that you can’t just register trademarks for safekeeping (see ‘Trademark squatting in Australia‘ below). In fact, someone may oppose your registration application on the grounds that you do not intend to use it. If it is already registered, someone may apply to remove your trademark from the register on the grounds of non-use. Arguing non-use basically means you didn’t intend to use it when you registered it and you haven’t used it since. Alternatively, non-use can mean you haven’t used your trademark for three years.

Trademark squatting in Australia

Now we know that in Australia, using a trademark is important to both establish and maintain your ownership of it. So where does trademark squatting fit in all of this? Well, trademark squatting is basically when you register a trademark merely to sell it for a profit later to someone who actually wants to use it. We’re going to consider how trademark squatting works in the context of ‘first to file’ and ‘first to use’ jurisdictions.

‘First to use’

Australia adopts a ‘first to use’ approach to trademarks. This means that if squatters aren’t the first to use a trademark, it’s fairly easy to undermine their ownership of it. If a ‘squatter’ wants to use a trademark registration to make a profit, they have to be the first to use it in Australia. Even if a ‘squatter’ is the first user, you can oppose their trademark registration. Grounds for opposition include no intention to use it (see ‘Using a trademark‘ above) and bad faith applications. The Patent Examiner’s Manual provides useful examples of what a bad faith application looks like. These examples capture trademark squatting. One example involves a person who identifies overseas trademarks which haven’t been used in Australia yet. If they register it ‘for the express purpose’ of selling it to the overseas owners when they enter the Australian market, this would be in bad faith.

‘First to file’

On the other hand, a ‘first to file’ approach identifies ownership based on who filed the trademark application first. China uses this approach and is pretty well-known for being a hotspot for trademark squatting. This is because it’s harder to undermine ownership. It’s not enough to use the trademark first. This can be problematic for businesses who expand into the Chinese market before registering a trademark there. Recent Chinese laws have sought to combat this. They expand the scope for making an opposition application on the grounds of ‘bad faith’. If you are considering expanding your business overseas, get in touch with an IP lawyer to understand how trademark squatting might affect you.

Conclusion

In conclusion, a trademark is a mark used to distinguish your brand from those of your competitors. In Australia, you own a trademark if you were the first person to use it. As the owner, you can register your trademark. However, your registration can be undermined if you don’t intend to continue to use it in good faith. Trademark squatting is where you register a trademark just to sell it for a profit. In Australia, it can be undermined by showing an earlier use, showing the registration was made in bad faith, or showing that the squatter doesn’t use it.

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Author
Beulah Pene

Beulah is a Legal Tech Intern at Lawpath. He is in his final year at the University of Technology Sydney (UTS). He is interested in disruptive technologies in the legal industry and intellectual property law.