[author: Hong CHANG]
The trademark system in China follows the first-to-file rule. As long as the application meets the statutory application requirements, trademark registration can be obtained, resulting in a large number of bad faith preemptive registrations, hoarding of trademarks and trademark right enforcement in bad faith for profit. Although the accused infringer can deprive the foundation of its trademark rights through administrative procedures such as invalidation actions and non-use cancellations, thereby fundamentally eliminating the abuse of trademark rights, the period required for the procedures is too long. In civil trademark infringement cases, courts usually do not support the defendant’s claim to suspend the trial because it has initiated proceedings such as invalidation actions, etc. This also objectively encourages the trend of bad faith trademark right enforcement, and in a different way condones such acts to seek improper interests through bad faith right enforcement.
In view of the above problems, this article will summarize the adjudication rules against the abuse of trademark rights in judicial practice, and sort out the strategies for directly countering the abuse of trademark rights in judicial proceedings without filing invalidation actions, or the filed actions are not yet over.
- The Main Means of Bad Faith Trademark Right Enforcement
After a trademark owner obtains a trademark right through preemptive registration in bad faith, it does not use it for the purpose of use, but obtains unfair benefits by means including requiring the actual right holder to repurchase at a high price, or indiscriminately issuing infringement warning letters, filing complaints with administrative authorities, or even filing trademark infringement lawsuits in bad faith.
- Strategies to Deal with Trademark Right Abuse
As mentioned above, in addition to filing administrative procedures such as invalidation actions against the registered trademark, the alleged infringer can also directly deny the trademark owner’s claim of bad faith right enforcement through judicial procedures and protect its legitimate rights.
- Against a Bad Faith Complaint from the Trademark Right Holder
In response to malicious threats from others, indiscriminate issuance of lawyers’ statements or administrative complaints, relevant business operators may file a non-infringement action to protect the stability of their lawful interests. In an intellectual property dispute case, the following three conditions should be met to file a lawsuit confirming non-infringement: (1) The right holder has issued an infringement warning letter; (2) The warned party sends a written reminder to request the right holder to enforce the right to sue; (3) The right holder has not withdrawn the warning or filed a lawsuit within a reasonable period of time.
- Against a Lawsuit Filed in Bad Faith by the Trademark Right Holder
(1) Defense of No Compensation for the Trademark is not in Actual Use
If the trademark for which the right holder sues for protection is not put into actual commercial use, the right holder has no right to claim compensation. Therefore, if the trademark holder enforces its rights by using a trademark that is preemptively registered in bad faith and has not actually been used, the defendant may defense that it is not liable for compensation due to the reason that the trademark is not actually used.
(2) Defense of Non-infringement Based on Prior Use
Trademarks registered in bad faith are often based on prior rights or interests of others. If the defendant is the prior rights holder, the defense of non-infringement can be carried out, that is, to defend that the alleged infringement is only a fair use of its prior rights or interests, and does not cause confusion amongst the public.
For example, in the case Shenzhen Ellassay Clothing and Accessories Co., Ltd. (“Ellassay”) v. WANG Suiyong over a trademark infringement dispute, the Supreme People’s Court pointed out that the defendant Ellassay had a legal basis of prior rights. “歌力思 (Ge Li Si – “Ellassay” in Chinese)” as its trade name and registered trademark had already enjoyed a high reputation in market, so Ellassay’s use of the same mark in this case was based on the legal rights, and the use and behavior were legitimate. It was not inappropriate to use the text “歌力思 (Ge Li Si – “Ellassay” in Chinese)” to refer to the manufacturer of the goods on the allegedly infringing goods. Ordinary consumers will not be misled and thus the court decided that their actions do not constitute trademark infringement.
(3) Defense of Non-infringement Based on Fair Use
It is also common for malicious registrants to preemptively register a generic name in the industry or the geographical name of an origin of the products to enforce rights in bulk. In such circumstance, the alleged infringer may claim that its use is a descriptive use with respect to the goods, and does not play the role of identifying source as a trademark, and thus it is a fair use so as to make a defense of non-infringement.
For example, in the case Wenjiang Auntie Wu Green Peppercorn Fish Hotpot Restaurant (“Auntie Wu”) v. Shanghai Wan Cui Tang Catering Management Co., Ltd. over a trademark infringement dispute, Sichuan High Court held in the second instance that due to the natural connection between restaurant services and food seasonings, the boundaries between the service trademark and the special dishes with the words “青花椒 (“green peppercorn” in Chinese)” are subtle and may be mixed with each other, which has significantly reduced the distinctiveness of its registered trademark. As such, the scope of protection should not be too broad, otherwise it will hinder the legitimate use of other entities in the market and affect the market order of fair competition. Therefore, Auntie Wu’s use of the words “青花椒(“green peppercorn” in Chinese)” is an objective description of the seasoning contained in the special fish hotpot dish provided by Auntie Wu. Such use is not use as a trademark, and thus does not constitute infringement.
(4) Defense of Non-infringement Based on Trademark Right Abuse
If the right holder’s abuse of the trademark right is subjectively in obvious bad faith, and objectively does not actually use the registered trademark right, the relevant business operator may defend itself in accordance with the principle of good faith stipulated in Article 7.1 of the Trademark Law, and request the court to reject the plaintiff’s claim for trademark right protection.
For example, in the case Uniqlo Trading Co., Ltd. (“Uniqlo”) v. Guangzhou Compass Exhibition Service Co., Ltd. (“Guangzhou Compass”) over a trademark infringement dispute, after Guangzhou Compass and Zhong Wei Company obtained trademark rights in an improper means, they started nationwide litigation in bulk and demanded compensation. The subjective bad faith was obvious. The Supreme People’s Court ruled that their behavior clearly violated the principle of good faith, and their use of judicial resources to seek improper interests with trademark rights constituted malicious litigation and such trademark enforcement shall not be supported according to law.
- Directly Filing a Lawsuit against the Trademark Right Abuse
If the trademark holder’s malicious complaints or malicious lawsuits disrupt the normal business activities of the business operator and causes actual losses to it, the relevant business operator may also directly file a lawsuit or counterclaim against the malicious right enforcement to make up for the losses and better protect its own interests.
For example, in the case Bayer Consumer Care Holdings LLC and Bayer Consumer Care AG v. LI Qing over an unfair competition dispute, the court found that the defendant had preemptively registered the trademark in dispute which the plaintiff enjoys legal prior rights for, has continuously used and has certain influence. Then the defendant launched a large-scale and sustained complaints based on the trademark in dispute, which inevitably undermined the plaintiff’s competitive advantage and benefited its personal interests. The defendant’s registration and complaint acts were in obvious bad faith. Therefore, the defendant’s conduct was a typical act of obtaining interests for nothing, violated the principle of good faith, disrupted the order of fair competition in the market, and fell under the act of unfair competition stipulated in Article 2 of the Anti-Unfair Competition Law.
In addition, for losses caused by an intellectual property lawsuit filed against others for malicious right enforcement, the person who is defending its rights against such act in bad faith can also file a lawsuit based on the claim of compensation for infringement damages.
- Conclusion
Facing bad faith trademark right enforcement, relevant business operators should make good use of the existing judicial system and adopt different strategies according to their own needs and specific facts, so as to efficiently safeguarding their legitimate interests and in the meanwhile effectively combat trademark right abuse.
