Trademark Protection: Preventing the Risk of Trademark Squatting

Corporate Secretary Service Indonesia – Trademark squatting presents a formidable challenge to businesses seeking to protect their marks, particularly in countries that operate under a “first-to-file” trademark registration system, such as Indonesia, China, and Singapore.

In Indonesia, the trademark registration system as stipulated in Law Number 20 Year 2016 on Trademarks and Geographical Indications follows the principle of granting property rights to the first person or entity to apply for trademark registration. Unfortunately, this system can be exploited by individuals who utilize the law in bad faith.

Exploitative Practices

Domestically, unethical elements keep a close eye on promising foreign businesses and proactively file trademark registration applications before legitimate users can do so in the region-a practice called trademark squatting. Their primary intention is to obtain substantial financial compensation from legitimate trademark owners in exchange for relinquishing control over the trademark in the region. Due to their exploitative practices, trademark squatting is also referred to as the “trademark mafia”.

Trademark squatting places a significant financial burden on legitimate trademark owners, forcing them to engage in negotiations and make large payments to reclaim their own trademarks within the jurisdiction. A case in point is a well-known foreign business that discovered the potential of the Indonesian market for its products and sought to register its trademark in the region. Unfortunately, they discovered that someone had already registered the same trademark.

As a result, the business began negotiating with the trademark squatter in an attempt to reach a settlement and regain control of their intellectual property. Unfortunately, the trademark squatter takes the opportunity to exploit the situation and demands a very high amount of money as compensation.

With the compensation, there is an agreement to revoke or delete the trademark application/registration from the Directorate of Trademarks, or transfer the trademark in question to the rightful trademark owner.

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Efforts to Prevent Trademark Squatting

Proactive registration of trademarks, even in countries where expansion is not currently planned, is an effective strategy. This can be achieved by utilizing the MadridProtocol. With a membership of over 103 countries, the protocol aims to integrate the registration of marks from and across different member countries. This integration function aims to accommodate the differences in legislation, language, and procedures for trademark registration among member countries. 

One of the requirements of this protocol is that marks to be registered in member countries must have been registered in the country of origin. This can certainly inhibit the practice of trademark squatting because not every party can easily register and claim a mark.

Further, it is imperative for trademark owners to conduct regular monitoring of their marks both offline and online. This diligent vigilance ensures that their trademarks are not being used without authorization.

When it comes to monitoring, involving the public in this endeavor can prove to be invaluable by creating 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 for brand protection.

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