Malicious applications to register trademarks have long been an issue for trademark right holders in China. Unlike in some countries where trademark rights are based on use, in China, these rights are primarily derived from registration. This makes the problem of malicious applications for trademark registration more serious. This article explores three strategies to address malicious trademark applications in China, covering the conventional practice, a less commonly used approach and an emerging judicial method, that have proven effective for right holders.
Opposition and invalidation
To combat trademark squatting, the conventional practice is for the prior right holder to initiate opposition or invalidation proceedings to prevent the squatted trademark from being registered or to declare the registration invalid. Given that China's trademark rights are primarily acquired through registration, the prior right holder has to bear a heavier burden of proof in the opposition or invalidation proceedings, which incurs significant time and financial costs. Moreover, the infringer can repeatedly apply for the same or similar trademark as the right holder's trademark with minimal economic investment, necessitating the prior right holder to initiate new opposition or invalidation proceedings. This trend of trademark squatting has not only caused heavier burdens on the prior right holder but has led to a substantial depletion of trademark examination and judicial resources.
Administrative penalties
According to Chinese laws and regulations, in the event of a malicious trademark registration application, the Market Supervision Administration at or above the county level where the applicant is located or where the offence occurs may impose administrative penalties, such as a warning and a fine of up to RMB 30,000 yuan (around US $4,000). In practice, administrative penalties on malicious trademark applications are relatively rare, typically seen in cases where such registrations significantly harm public interest.
Civil litigation
Our firm achieved success in a civil litigation case against malicious trademark applications before Tianjin High Court by utilising anti-unfair competition laws. This case was recognised by the Supreme Court in China on April 22, 2024 as one of China's 50 typical IP cases in 2023. In this case, the defendant and its affiliates had applied for the registration of 32 trademarks identical or similar to the plaintiff's trademark, which enjoys a high reputation and strong distinctiveness, in multiple classes since 2018. This excessive registration exceeded normal production and business needs. Additionally, the defendant imitated the plaintiff's business name and domain name, engaged in misleading advertising, and imitated the plaintiff's operations.
The Court of Second Instance held that the defendant's malicious trademark applications, as part of a comprehensive infringement, violated principles of honesty and credit, disrupted normal trademark registration processes, disturbed fair market competition, and harmed the lawful rights and interests of the plaintiff, constituting unfair competition as per Article 2 of the Anti-Unfair Competition Law in China. Considering relevant factors including the plaintiff's costs of defending its rights over the years in order to stop the defendant's malicious trademark applications, the Court awarded the plaintiff a full compensation of RMB 500,000 yuan.
On a related note, another case selected as one of China's top 10 IP cases in 2023 by the Supreme Court on April 22, 2024 also pertains to regulating malicious trademark applications through anti-unfair competition law. This case was adjudicated by the Wenzhou Intermediate Court in Zhejiang province. In this case, evidence demonstrated that ‘Little Love Classmate', after widespread publicity and usage, had gained significant influence as the name of wake-up words, the name of an AI voice interaction engine, and a product name for a smart speaker equipped with the AI voice interaction engine. The defendant applied for the registration of 66 trademarks across 21 classes that were identical or similar to the plaintiff's reputed wake-up words ‘Little Love Classmate' and even sent a cease-and-desist letter to the plaintiff's affiliated company, which violated the principle of honesty and good faith, disturbed the order of fair competition in the market, and harmed the legitimate rights and interests of the right holder, and constituted an act of unfair competition.
The Supreme People's Court in China has recognised cases of regulating malicious trademark applications through the anti unfair competition law in China's 50 typical IP cases and top 10 IP cases for 2024 IP Awareness Week. This acknowledgment not only validates the lower courts' approach to addressing malicious trademark applications through anti-unfair competition law but underscores Chinese courts' dedication to enhancing IP protection and fostering a conducive business environment.
In conclusion, when confronted with instances of bulk or continuous malicious trademark applications, right holders may opt to pursue civil litigation under anti-unfair competition law to secure an injunction from Chinese courts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.