The Goodwill and Malicious Squatting of Trademarks in Taiwan

[ March 2024 ] >Back
The Goodwill and Malicious Squatting of Trademarks in Taiwan
We all know that a trademark is a word, phrase, picture or symbol which indicates the provider of a product or service, and distinguishes it from others. Trademarks are widely recognized as intangible property, i.e., intellectual property. But what makes a mere word or symbol valuable? What’s the main idea of a trademark? 

Humans have used symbols to demonstrate certain ideas before letters and complicated writing systems were developed. Symbols are efficient tools to deliver images and concepts, e.g., the cross for Christians, the rod of Asclepius for medical associations, and family crests for nobles. People understand the message behind such symbols even though they can't write or read.

Trademarks play the same trick. They embed certain images of a product in consumers’ minds in an intuitive way. Such images are usually positive, like “elegancy,” “simple and fashionable,” “cheap but amazingly reliable,” or “always on the top tier of the field.” Consumers need not stand before a product and analyze it with rationales, they just feel it. The process to create such feelings is usually costly, which requires superior quality of goods, excellent marketing strategies, a lot of advertisements, or all of them. The stronger and more distinctive image a trademark carries, the better sales power it has. We use “goodwill” to conclude the image and reputation that a trademark bears. A trademark is just an instrumentality, a carrier, of goodwill. It is the trade reputation that flows in the symbol, not the symbol itself, which grants sales power and makes it valuable. If the owner does not use the trademark for 3 years, the registration of the trademark might be revoked since there is no goodwill flow in it. It loses its proprietary value and should not be protected as properties anymore. 

Before the first trademark law was enacted, the court used the notion of unfair competition in common law to try trademark infringement cases. That is to say, a person is not allowed to sell his own product under the cover of the goodwill of another person’s product. It is unfair to “borrow” a trademark’s established trade reputation by using its name, symbol, or other indicia by which consumers might wrongly believe that the product is made by another person. In fact, the trademark law is but a branch of the unfair competition law. However, under some circumstances, goodwill might be legally “borrowed” without violating the trademark law or the unfair competition rule.

Under the principle of territoriality, the rights bestowed upon the owners for their trademarks do not go beyond the territory of the sovereign entity by which the right is granted. Therefore, a trademark’s goodwill can be legally “borrowed” if another person registers the same mark first in another country. 

Registration is a necessary way to protect the goodwill of, and all efforts the owner had put in, a trademark, especially in countries adopting the “first to register” system. Under the “first to register” system, whoever registers a trademark first owns the trademark rights, subject to limited exceptions.

Taiwan adopts the “first to register” system. There are some grounds for refusal of malicious trademark squatting in Taiwan Trademark Act, which require a showing that the mark is well-known in Taiwan before the application of the registration, or that the applicant is aware of the trademark due to some business or contractual connections with the true owner, and the applicant has the intent to imitate the earlier used trademark. However, it is usually hard to establish such claims. Mostly, the true owner does not register first because he has no intent to penetrate the market in that country. It is hard to imagine that a trademark can become well-known in a country where the owner has no intent to market it. Also, it is usually hard to prove that the applicant has some connection with the true owner and the applicant has the intent to imitate. If a trademark is squatted, the squatter usually takes the high ground. In comparison with the registration fee, the price to revoke a squatted trademark is much higher, with little chance to win. In fact, a trademark with noticeable sales power will be registered sooner or later, by the true owner or by a malicious squatter. The solution to prevent your goodwill from squatting is quite simple. Just register it first.


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