Trademark protection: Impeding the risks of trademark squatting

Trademark squatting presents a formidable challenge for businesses looking to safeguard their trademarks, particularly in countries like Indonesia, China, and Singapore, that operate under a “first-to-file” trademark registration system.

In Indonesia, the trademark registration system, as stipulated in Law No. 20 of 2016 concerning Trademarks and Geographical Indications, follows the principle of granting ownership to the first individual or entity who files a trademark registration application. Unfortunately, this system can be exploited by unscrupulous individuals who take advantage of the law in bad faith.

Exploitative practices

In these countries, including Indonesia, unscrupulous individuals closely watch promising foreign businesses and proactively file trademark registration applications before the legitimate owners can do so in the region.

Their primary intention is to extract substantial financial compensation from the rightful trademark owners in exchange for relinquishing control over the trademark. Due to their exploitative practices, the trademark squatters are also referred to as the “trademark mafia”. 

Trademark squatters impose a significant financial burden on rightful trademark owners, compelling them to engage in negotiations and make hefty payments in order to reclaim their own trademarks within the jurisdiction. 

A notable instance exemplifying this challenge involves a renowned foreign business that discovered the potential of the Indonesian market for its products and sought to register its trademark in the region. To their dismay, they discovered that someone had already registered the same trademark. 

Consequently, the business initiated discussions with the squatter in an attempt to reach a settlement and regain control over their intellectual property. Unfortunately, the squatter seized the opportunity to exploit the situation, demanding an exorbitant sum of money as compensation.

With this compensation, an agreement was reached to either revoke or delete the trademark application/registration from the Directorate General of Intellectual Property, or to transfer the relevant mark to the rightful owner.

Preventing trademark squatting

Proactive trademark registration, even in countries where extension is not currently planned, is an effective strategy brands can take against this phenomenon. This can be achieved by utilizing the Madrid Protocol.

With members from more than 103 countries, this protocol aims to integrate mark registration from and in various member countries. This integration function aims to accommodate differences in legislation, language, and procedures for registering marks among member countries.

One of the requirements of this protocol is that for a mark to be registered in member countries, it must already be registered in the country of origin. This of course can hinder the practice of trademark squatting because not every party can easily register and claim a trademark.

Furthermore, it is very important for trademark owners to carry out regular monitoring of their brands both offline and online. This diligent vigilance ensures that their trademark is not used without permission.When it comes to monitoring, involving the community in this effort can prove invaluable by setting up a dedicated hotline or platform for them to report suspected unauthorized use. For more comprehensive monitoring, brand owners can work with third parties who have competence in market surveys and brand investigations in the context of brand protection.

Putri
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