Infringement claims from bad-faith trademark registrant

In our column in September 2017, the author discussed how a foreign rights holder should respond to the pirate registration of its trademark in China. That article focused more on looking at the strategy for responding to the pirate registration of foreign brands in China as a whole, and on the ways to use the most economical and effective means while taking into account registration of trademarks by class, negotiations with pirates, commercial strategies, etc., to take action and achieve better results.

With the exception of actions to invalidate or cancel a trademark registered in bad faith, not much was said on how to respond to a claim of trademark infringement made by a pirate. Once a bad-faith registrant succeeds in the pirate registration of a trademark, if it actively takes action against the client on the basis of its pirated trademark, e.g., by carrying out customs recordal or going as far as instituting an infringement suit, the same will have a relatively major effect on the client. Accordingly, it is also necessary to duly prepare against a claim of infringement of a trademark registered in bad faith.

Until the implementation of the amended Trademark Law on 1 May 2014, in practice, regardless of whether an application for trademark registration was clearly made in bad faith, as long as there was no prior registration of, or application for, an identical/similar trademark for identical/similar goods or services, it would usually pass preliminary examination; and if no opposition was filed by the end of the gazette period, its registration would be approved. Furthermore, as long as it was a valid trademark, the judicial authority would generally uphold a claim of trademark infringement.

Given the increasing scale and professionalization of pirated bad-faith registration of trademarks manifested in practice, mere mechanical examination of prior identical/similar trademarks for identical/similar goods could result in numerous instances where pirate registrants abuse their trademark rights to strike at the real holders of the right of priority. Accordingly, the amended Trademark Law implemented on 1 May 2014 added the “good faith” provision and related provisions on bad faith. Of course, comprehensive change in judicial practice will still require a certain process after the amendment of the Trademark Law. Accordingly, it is worth paying attention to the safeguarding of the principle of “good faith” and the application in judicial practice of the stance of “bad faith” trademark registration.

In guiding No. 82 precedent of the guiding precedents, issued by the Supreme People’s Court (SPC) specifically to guide lower level courts in trying cases, the SPC specified that where a party breaches the principle of good faith, harms the lawful rights and interests of another and disturbs the normal competition order in the market by securing and exercising trademark rights in bad faith and claiming that another has committed infringement, the People’s Court should render a judgment rejecting its claim on the grounds that an abuse of rights was constituted.

Furthermore, in the trademark infringement dispute between Ningbo SKS Hydraulic Technology (the retrial applicant) and Shao Wenjun (the respondent), the SPC also specified that where exclusive rights to use a registered trademark maliciously secured in breach of the principle of “good faith” are used to institute a trademark infringement action in respect of the legitimate use thereof by another, the same should be denied the support and protection of the law.

For the holder of the right of priority, if the bad-faith registrant institutes a trademark infringement action, the opinions of the SPC in the above-mentioned precedents on rejecting the abuse of rights by a bad-faith trademark registrant based on the principle of “good faith” can serve as a defence opinion. Of course, there are relatively steep requirements in respect of the relevant evidence and circumstances of application to mount a defence on the basis of the opinions in those guiding precedents. The holder of the right of priority must thoroughly prepare for this if it hopes to mount a successful defence.

Furthermore, it is worth noting that, with respect to the ever increasing scale and professionalization of bad-faith registration of trademarks, in addition to judicial authorities applying the principle of “good faith” and the provisions relating to bad faith of the Trademark Law at the hearing stage of civil trademark infringement cases, the Trademark Office, as the competent trademark administrative authority, has also begun to more stringently examine trademark applications that show clear subjective bad faith (e.g., pirate registration of trademarks with a relatively high degree of notoriety, mass pirate registration of generic names or industry terms, applications to register the names of well-known persons as trademarks and other such prior rights of others, repeated bad-faith pirate registrations or successive pirate registrations by the same enterprise, etc.) at the trademark application stage, and actively rejecting the same.

Compared to the past, the proactive rejection of clear bad-faith applications by merely considering prior trademarks at the preliminary examination stage can effectively put a stop to such applications from the outset, avoiding the waste of administrative and judicial resources arising from subsequent abuses of rights, and saving trademark-related administrative and judicial resources. Once the trend in the trial of the above-mentioned cases is understood, even if the Trademark Office fails to proactively reject such a bad-faith application at the application stage, the holder of the right of priority can still secure a better result at the subsequent review of rejection and administrative action stages.

In short, in addition to responding to the bad-faith registration of a trademark in the most economical and effective manner with a tailored overall strategy, it is additionally necessary to prepare an effective and direct response plan against a potential action actively instituted by a bad-faith registrant. The holder of the right of priority needs to have a good understanding of the direction in which the competent administrative and judicial authorities are moving in the hearing of cases so as to duly exploit the legislative and judicial trends and protect its lawful right of priority to the greatest extent possible.

Frank Liu is a partner at Jincheng Tongda & Neal