Business identity theft: avoid becoming a victim of trademark squatting

Business identity theft is on the rise, according to The ​​National Cybersecurity Society (NCSS). In 2019, Dun & Bradstreet’s High Risk and Fraud Insight (HRFI) team saw a 100% increase in business identity theft and estimated there would be a 258% increase in the upcoming year. Small businesses are the ones most affected by this issue, as they don’t always have the required security controls in place to detect and deter fraudulent activity, which can make them easier targets. Whether a business’s identity is being fabricated, manipulated or outright stolen, the effects can be devastating for shareholders, employees and customers.

Business identity theft, also known as corporate or commercial identity theft, involves the illegal impersonation of a business in order to take advantage of its brand's reputation for financial gain. This fraudulent activity can take many forms, such as fake invoices, phishing Emails, and fake websites and/or social media accounts.

One of the most common types of business identity theft involves trademark ransom: imitating an existing business by using its name or logo and registering it as an official trademark. In the aftermath, perpetrators can claim a ransom for releasing the trademarked business identity. This practice is also known as trademark squatting. Becoming a victim of business identity theft can lead to multiple setbacks for the original brand and lengthy and costly legal proceedings.

Over time, people develop a sense of loyalty to some brands. A complex combination of trust and other emotional aspects tied to the brand is what converts people into loyal customers. Customers believe that the brand offers the preferable features, images, or standards of quality at the right price. This consumer loyalty and trust can be easily broken or misused by third parties that pose themselves as the original brand, leading to consumer confusion and tarnished reputation.

Trademark squatting is one of the biggest issues business owners face when expanding their business internationally. If somebody else registers a brand owner’s trademark first in another country, they hold full rights to the trademark and can later sell it for profit or leverage the brand’s success. In order to prevent this from happening, it is best not to delay filing trademark registrations abroad, particularly in countries where you intend to launch a product or service in the near future.

In case a competitor business acquires the rights to the usage of the company’s name/logo, the original brand may receive a “cease and desist” letter or face infringement lawsuits, despite being the first one to use the name in commerce. If that happens, the only viable option may be to rebrand your business, forcing you to start virtually from scratch once again. In addition to the loss of positive recognition of the brand, rebranding also incurs costly changes to all promotional materials.

A trademark is defined as a sign capable of distinguishing the goods or services of one enterprise from those of other businesses. The main purpose of trademark registration is to protect distinctive brands from infringement attempts, ensuring that their image and reputation gained from the customers remain associated solely with the original brand. As a result, trademarks are well suited for brands, product names, product logos, slogans, or any other brand assets, providing that these elements are used to distinguish a company’s offering from that of the competitors. 

You can register a name or a logo separately, but the highest level of protection is achieved by making two trademark applications, for all essential creative assets of your brand. This approach provides explicit protection for key branding elements, covering edge cases and ensuring that the uniqueness of the brand is strongly protected. Learn more about the trademark registration process with Trama, explore our transparent price list, and whenever you are ready to proceed, you can start with our free lawyer’s check - the result of which, alongside thorough recommendations, you can expect to receive within 24 hours.