Stopping Trademark Squatters

Here’s a scary situation: let’s say you manufacture or sell your product outside the United States, or you plan to in the future. Things are going well. Orders are steady, interest is widespread, and you see demand in other markets. When you’re ready to expand into one of those markets, you discover someone else has already registered your trademark there. Not only can you not register your own brand, but the current owner may now actually control your ability to manufacture and sell your product in that country.

Unfortunately, many U.S. companies have confronted situations like this over the years. It’s a practice known as “bad-faith trademark filing”-sometimes referred to as “trademark squatting.”

Most U.S. companies understand that trademarks are important to their business. Trademarks can include the product name, a graphic logo, a catchy slogan, or perhaps even the distinct shape of a product. Businesses rely on these marks to identify their products and distinguish them from those of their competitors. The public relies on them to distinguish among competing producers and to determine authenticity.

What many U.S. businesses do not realize is that trademarks, like patents, are territorial. Protection derived from trademarks exist only within the country whose laws granted the rights. Research conducted several years ago by the United States Patent and Trademark Office (USPTO) revealed that only 15 percent of small businesses doing business overseas know that a U.S. trademark provides protection only in the United States. This lack of knowledge about territoriality can create significant problems for U.S. companies, especially in today’s global economy.

Trademark squatting is when one party intentionally files a trademark application for a second party’s registered trademark in a country where the second party does not currently hold a trademark registration. They take advantage of the “first-to-file” trademark system (not to be confused with first-to-file patent systems) in that country. While the United States has a “use-based” trademark system where trademark rights are acquired by “priority of use,” most other countries around the world have a first-to-file system, awarding trademark rights to the first applicant. When bad-faith filers obtain registrations in a particular country, they are treated as legal trademark owners in that country. A bad-faith filer’s intent is usually to get the true trademark owner to purchase the trademark registration.

It can be difficult, costly, and time-consuming to have a bad-faith registration canceled. Moreover, as the owner of the mark, the bad-faith filer can even enforce his or her rights against the true owner for trademark infringement. The bad-faith filer could also ask foreign customs officials to detain products of the true owner that were manufactured in that country for export.

Any company, large or small, is a potential target for bad-faith filers. In some cases, your own manufacturer, distributor, or retailer in another country might decide to file for your trademark. In other cases, it could be a person who approaches you at a trade show, asks about your plans for expansion to another country, and then registers your mark first. These are just a couple of the many ways trademark squatters can find out about your mark and register it.

With 95 percent of the world’s consumers living outside our borders, it is critical for all U.S. businesses to consider exporting their products and services, but it is equally important to prepare accordingly. The USPTO provides training for small and medium entities on protecting and enforcing intellectual property (IP) rights within the United States and abroad. Last year, the USPTO conducted 40 such training programs, reaching an audience of more than 4,200 people.

The USPTO and other U.S. government agencies have also created a number of excellent IP tools and programs specifically developed for businesses on the website. The Business Tools section of this site is designed to help protect innovation, spur creativity, and market products safely at home and abroad. Offerings include “Country IPR toolkits” that contain information on protecting and enforcing IP in 19 specific markets, a webinar series on IP protection in China, and an international advisory program that lets you request a free one-hour consultation with a volunteer attorney knowledgeable in international IP issues.

Because it is costly and difficult to cancel bad-faith trademarks, prevention is the best strategy for dealing with them. It’s not always realistic for U.S. companies to register their marks in every country around the world; however, U.S. businesses should take proactive steps to discourage bad-faith trademark filers and make informed decisions on where to file for trademark registrations.

Companies should consider registering their mark in countries in which:

  • Your goods or services are sold.
  • Products or parts for your products are manufactured.
  • Research and development facilities are located.
  • Your products pass through during shipping.
  • You might expand your business in the future.
  • Counterfeiting is likely to be a problem.
  • Once you have decided to pursue trademark protection abroad, there are several ways to file an application, including:

    • Filing directly with the foreign national (or regional) trademark office.
    • Using a trademark application or registration issued by the USPTO as a basis for file through the Madrid Protocol, which provides a cost-effective and efficient way for trademark holders (individuals and businesses) to protect their marks in multiple countries by filing one application through the USPTO, in one language, with one set of fees in one currency.
    • In many cases, it is possible to register your trademark before you have even started to do business in another country. Consult your attorney or use the STOPFakes International IP Advisory Program to find out which is best for you.

    Penned by Scott Baldwin of the Office of Policy and External Affairs for the USPTO newsletter.