The Scourge of Trademark Squatting

What happens when a multinational corporation is forced* to delay a product launch because someone else owns the right to use the name?

Well, ask Sony.

The Story

Sony designs and markets one of the most iconic products known to mankind — The PlayStation Console.

Okay, maybe we are going a bit overboard. But if you haven’t heard of the PlayStation line of gaming consoles or more commonly referred to as “PS1, PS2, PS3 and PS4” — Then that’s a bit of a bummer because these gaming consoles are huge. For some context, the company plans to sell 7.6 million units of their latest console PS5 by March 2021. Remember, they only launched the PS5 in November 2020. And since each console retails for about $400-$500, they’re looking at billions in revenues over the span of just four months. However, when Sony began preparation to market the PS5 in India, they noticed something peculiar.

Back in October 2019, a resident from Delhi filed an application to register the trademark “PS5” in the country. And although the trademark wasn’t granted to the individual, Sony realised they could have a problem on their hands since somebody else was staking a claim. In fact, almost everybody was anticipating a long drawn out court battle after the story broke out in The Mako Reactor. But then, the gentleman withdrew his claim all of a sudden and that was that. Sony was in the clear once again.

But this begs the question — Who are these individuals? And why do they resort to such silly antics?

Well… The industry likes to call them Trademark Squatters. They pay a few thousand rupees for trademark registration and then hope to prevent the original owners from using this name by claiming ownership.

Take for instance a popular case from China. As one paper notes —

When Apple tried to introduce its wildly popular iPhone into one of the biggest markets in the world, China, the company was in for an unpleasant surprise. Though Apple had made the first application for the iPhone trademark with the Chinese Trademark Office (CTMO) in 2002, they only filed in a subclass for “computers and computer software.” Soon after, a Chinese company called Hanwang Technology registered the iPhone mark under the proper subclass that included “phones and mobile phones.” Apple fought in vain to reclaim the mark, and it ultimately lost... Eventually they reluctantly paid the $3.65 million to Hanwang Technology for rights to the trademark.

So clearly there’s a lot of money to be made, especially if you are operating in the right establishment. For instance, China usually relies on the first-to-file principle to recognize ownership. Which means that you’ll likely be offered protection if you are the first to register the trademark. But this approach is a bit dubious considering most trademark squatters really have no intention to market a product under the said brand name. Do you honestly believe the Delhi resident had plans to use the trademark? Quite unlikely… And while the registration will lapse eventually in the case the applicant doesn’t use the mark, it still means companies like Sony will have to bide their time.

And that’s not an option when you are planning to launch a product within a very narrow window.

So it becomes incumbent for courts to rely on more than just registration files. And thankfully, Indian courts do just that. They often rely on the first-to-use principle to resolve trademark disputes. Which means if Sony can prove that they have been selling products under the brand name Play Station (PS) in the past to Indian consumers, then they’ll be deemed the true owners even if the trademark is registered with another individual.

But what happens when foreign companies seek protection without actually marketing their products in India?

That's an interesting question.

Consider the popular case of Whirlpool Corporation. In 1956, the company registered the trademark “Whirlpool” to market dryers, washers, and dishwashers in India. And while they maintained the registration for the next 20 years, they failed to renew it in 1977. After all, the company had a negligible presence in the country. They only sold their washing machines to the US Embassy and the US Aid office in India. Instead, they relied on TVS Whirlpool Ltd. (an Indian company) to market their brand. TVS held the exclusive rights to sell products using the phrase ‘in collaboration with Whirlpool’ and things were fine for the most part.

But then unbeknownst to Whirlpool, a different Indian company applied for the registration of the same trademark and started marketing their own products under the brand name “Whirlpool”. The registration became effective in 1992 and by 1994 Whirlpool knew it had a problem on its hands. Whirlpool challenged the claim by taking this company to court. Their contention was simple.

At the time, Whirlpool Corp. had over 2000 trademark registrations in several parts of the world. Their products had often appeared in Indian magazines and commercials. Their reputation was travelling quick and they were beginning to make a mark in certain sections of Indian society. So their whole argument hinged on the fact that their trans-border reputation should afford them protection and prevent the other company from using the name “Whirlpool”, even if they weren’t actually selling a lot of products in India.

And in a landmark judgement, the courts ruled in their favour.

As another article notes —

After the Whirlpool Judgment, the Indian courts have been quite consistent in recognizing the trans-border reputation of a trademark… For seeking relief on the basis of trans-border reputation, it is not necessary for the trademark to have been used in India and the Trademark owner would only need to establish that the reputation, awareness and global admiration of the trademarked goods had crossed over to India before the Defendant started using the infringing mark.

Meaning, even if Sony weren’t selling its consoles in India, its mere reputation would have sufficed for courts to rule in favour of the company.

Anyway, that’s it from us.

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Until then…

Note: The original story on the PS5 trademark issue appeared in the Mako Reactor and we've amended the article to reflect this detail.

*While there were rumours circulating that Sony was forced to delay the launch of their much-anticipated console in India because of the trademark issue, it’s still not quite clear if this was the principal reason for the apparent delay. After all, despite the gentleman withdrawing the application. Sony is yet to announce a launch date for the PS5 in India. So who knows?