For a long time, there have been numerous acts of bad-faith trademark squatting in China. These acts are not for the purpose of use but involve registering trademarks that market entities actually engaged in production and operation have not registered in a timely manner. Subsequently, the squatters harass the actual rights holders through threats, complaints, and lawsuits, coercing them into purchasing the squatted trademarks at high prices to obtain illicit profits. This type of trademark right abuse based on bad-faith squatting severely disrupts the fair competition order of the market and also wastes significant judicial and administrative resources.
This article, drawing on cases adjudicated in China's judicial practice in recent years concerning bad-faith trademark squatting, summarizes the situation of judicial regulation of such acts by China's judicial authorities, aiming to provide a certain degree of reference for relevant operators in safeguarding their legitimate rights and interests.
I. Relevant Cases
In past judicial practice, the outcomes of trials conducted by Chinese courts for abuse of trademark exclusive rights based on bad-faith squatting have not been entirely consistent. This is certainly due to differences in individual case circumstances, but more importantly, it reflects a trend of gradually increasing determination and intensity by China's judicial authorities to regulate bad-faith squatting. The author categorizes notable recent relevant cases into the following three types based on their differing judgments.
1. Seven Color Flower Case & Uniqlo Case
In these two cases, the courts supported the claim that the defendants, as prior rights holders, infringed upon the plaintiff's trademark exclusive rights, which were of a bad-faith squatting nature, and ordered the defendants to cease using the disputed signs immediately. On the other hand, regarding the plaintiffs' claims for damages, the courts adopted a dismissive attitude: either not supporting their claims for compensation or only partially supporting them, with the awarded compensation amounts being vastly different from what the plaintiffs requested.
Seven Color Flower Case (2012-2015)
Case Background: Defendant Seven Color Flower Co., Ltd., originally named Guangzhou Aiyaya Shanghan Investment Consulting Co., Ltd., was established in 1999. It registered the trademark "7magic" and also used the sign "七色花" (Seven Color Flower) on its products. In December 2010, it changed its name to Seven Color Flower Co., Ltd., primarily engaged in women's accessories. By the start of the lawsuit in 2012, it had over a thousand chain franchise stores nationwide. Plaintiff Guangzhou Aiyaya Company obtained a three-year exclusive license for the registered trademark "七色花及图" (Seven Color Flower and Design) from a third party, Huamao Company, in 2010 (registered in 1996 and 1997, but neither Huamao Company nor Aiyaya Company had used the trademark in the relevant classes by the time of the lawsuit). In 2012, Aiyaya sued Seven Color Flower Co., Ltd., claiming that the latter's use of the "七色花" sign on its products constituted trademark infringement and that using "七色花" in its trade name constituted unfair competition. The case went through first instance at the Fujian High People's Court and was ultimately subject to second instance and final judgment by the Supreme People's Court.
Adjudication Results: ① The plaintiff had no intention of commercial use of the trademark, and its lawsuit constituted an abuse of trademark rights, violating the principle of good faith and the principle that rights must not be abused. The plaintiff's claim for 100 million RMB in damages was not supported. ② The defendant's use of "七色花" as its trade name did not involve an intent to free-ride and did not constitute unfair competition. ③ Some of the defendant's acts of using the "七色花" sign constituted infringement of the plaintiff's registered trademark exclusive rights. The defendant was ordered to compensate the plaintiff for losses and reasonable expenses totaling 1.2 million RMB.
Uniqlo Case (2014-2015)
Case Background: Plaintiffs Guangzhou Compass Company and Zhongwei Company specialized in trademark registration and transfer, having registered over 2,600 trademarks. Starting in 2014, they filed a total of 42 lawsuits nationwide against Uniqlo Co., Ltd. and its affiliates, alleging infringement of their registered "UL" trademark.
Adjudication Results: The 42 lawsuits yielded varied judgments. The most representative judgment from the Shanghai High People's Court is as follows: ① The defendant's use of the disputed trademark constituted infringement and should cease. ② Since the plaintiff had not actually used the disputed trademark, the infringement did not cause actual losses; therefore, the claim for damages was not supported. ③ The plaintiff's initiation of the lawsuit lacked legitimacy, and the costs of the batch lawsuits were not reasonable expenses, so the litigation costs were to be borne by the plaintiff.
2. Saikesi Case & Ellassay Case
In these two cases, the courts directly ruled from the perspectives of violating the principle of good faith and abuse of rights that the defendants, as prior rights holders, did not constitute infringement, fundamentally rejecting the damage claims of the bad-faith squatters.
Saikesi Case (2011-2015)
Case Background: Saikesi Company was established in 1997, primarily engaged in hydraulic equipment. It registered the domain name "saikesi.com" in 2000 and obtained the exclusive right to the registered trademark "sks" in 2007. Its affiliated company, the defendant Guangtian Saikesi Company, registered the domain name "赛克思.cn" in 2007 and acquired the exclusive right to the "sks" trademark from Saikesi Company in 2009. Plaintiff Shao Wenjun obtained the exclusive right to the registered trademark "赛克思saikesi" in 2009. In 2011, he sued Guangtian Saikesi Company, alleging that the latter's use of identical text as its trade name and its prominent use on goods identical to those covered by the registered trademark constituted trademark infringement.
Adjudication Results: ① For signs identical to the disputed trademark, Saikesi Company possessed legitimate prior rights in its trade name and domain name. Its use of these signs did not involve malicious intent to free-ride on the disputed trademark and would not cause confusion or misidentification among the relevant public; thus, it was justified. ② The plaintiff, taking advantage of his position or business advantages, maliciously registered the trademark, infringing upon the prior rights of others for his own unjust gain, constituting an act violating the principle of good faith and not deserving legal protection. ③ The plaintiff acquired the trademark exclusive right in bad faith and used it to file an infringement lawsuit against Guangtian Saikesi Company's legitimate use, constituting an abuse of registered trademark exclusive rights. His claims should not be supported, and litigation costs were to be borne by the plaintiff.
Ellassay Case (2012-2014)
Case Background: Defendant Ellassay Company is engaged in clothing production and sales, owning the "歌力思" (Ellassay) trademark (Class 25: clothing, etc., registered in 1999). Plaintiff Wang Suiyong obtained registration for the "歌力思" trademark in Class 18 (wallets, handbags, etc.) in 2011. In 2012, he sued Ellassay Company, alleging that its use of the "歌力思" sign on women's handbags infringed his trademark rights. The case went through first and second instance, was retried by the Supreme People's Court, and a final judgment was issued.
Adjudication Results: 1. The defendant, based on its trade name and Class 25 registered trademark, had a prior rights foundation for the commercial sign "歌力思". Its manner and acts of use were legitimate and would not cause consumer confusion about the source of the goods, thus not constituting infringement of the exclusive right to the disputed trademark. 2. The plaintiff acquired the trademark exclusive right in bad faith, constituting an abuse of rights. His related claims could not be supported by law.
3. Coppertone Case (2017-2018)
In this case, the bad-faith squatter, after obtaining registration, did not file a lawsuit but instead used administrative complaints and other means to harass the prior rights holder and related merchants. Consequently, in subsequent litigation, the squatter was found as the defendant to have engaged in unfair competition and was ordered to compensate the plaintiff for economic losses.
Case Background: Defendant Li registered the graphic from the packaging of Bayer Group's "Coppertone" sunscreen products as a trademark in 2016. Subsequently, he used his trademark exclusive right to launch large-scale, persistent complaints against "Coppertone" products sold on the Taobao platform and offered paid withdrawal of complaints services to the complained "Coppertone" product distributors, causing significant losses to relevant merchants. In response, plaintiff Bayer Group filed an unfair competition lawsuit and a declaratory judgment action of non-infringement, requesting the defendant to cease the infringing acts and compensate for losses and reasonable expenses totaling 2.5 million RMB. In March 2018, the Yuhang Court issued a first-instance judgment.
Adjudication Results: ① The defendant had the possibility of access to the plaintiff's product and constituted copyright infringement of the plaintiff's work. ② The defendant's acts of bad-faith squatting, malicious complaints, malicious sales, and paid withdrawal of complaints violated the principle of good faith and constituted unfair competition acts under Article 2 of the Anti-Unfair Competition Law. ③ The defendant was ordered to cease the unfair competition acts and compensate the plaintiff for economic losses of 700,000 RMB.
II. Judgment Analysis
From the judgments in the above cases, it can be seen that in such cases, the damage claims of malicious litigants are mostly not supported. However, the differing attitudes of judicial authorities towards malicious enforcers can be observed from the perspective of determining whether the actual rights holders constitute infringement. In the Seven Color Flower and Uniqlo cases concluded in 2015, the courts found the defendants, as prior users, constituted infringement and ordered them to cease using the disputed signs. Moreover, in the Seven Color Flower case, the plaintiff's compensation claim was partially supported. This indicates the judicial authorities' intent to find a result in line with legal justice without undermining the stability of the registered trademark exclusive rights system—a relatively moderate middle path.
In contrast, the Saikesi case concluded later in 2015 and the Ellassay case, listed as a guiding trademark case by the Supreme People's Court in 2017, adopted a firmer stance against malicious enforcers. They ruled that the prior users possessed legitimate prior rights to the disputed signs and their use was legitimate, thus not constituting infringement. The infringement lawsuits filed by the squatting plaintiffs, based on trademark rights acquired in bad faith against the legitimate use by actual rights holders, violated the principle of good faith and constituted abuse of rights. Related claims should not be supported by law.
Going a step further, in hearing the Coppertone case, the Yuhang Court held that trademark squatters exhibiting elements such as "bad-faith registration," "malicious complaints," "malicious sales," and "trademark hoarding" could be brought within the scope of the Anti-Unfair Competition Law. In the absence of other specific applicable provisions, the court applied Article 2, the general provision on the principle of good faith, to regulate such acts. This case broadened the approach to handling such cases in practice, providing more possibilities for judicial relief for actual rights holders.
III. Conclusion
From the above cases, it is evident that China's judicial authorities are increasingly determined in regulating acts of bad-faith trademark registration and the resulting abuse of trademark exclusive rights. The Ellassay case creatively applied the principle of good faith to the trademark field, playing a very important guiding role for future judicial authorities in adjudicating similar cases. The Coppertone case is the first successful instance where a rights holder used the Anti-Unfair Competition Law to combat professional trademark squatters and obtained compensation. It provides a breakthrough solution for other enterprises in similar situations to protect their legitimate rights and interests and combat bad-faith squatting and malicious complaints.