Current IP legislation and judicial practice are exerting ever greater stress on regulating trademark rights abuse.
The China National Intellectual Property Administration last year added a provision prohibiting rights abuse in draft amendments to the Trademark Law (Draft for Comment), in the article on “good faith”.
The Supreme People’s Court earlier stated, in 2021, that in IP infringement litigation, if the complaint by the plaintiff constitutes rights abuse, the defendant may directly make a countersuit or file a separate lawsuit requesting compensation for its reasonable expenditures (in the Official Reply on Issues concerning the Claim of the Defendant for Compensation for Reasonable Expenses on the Ground that the Plaintiff Abuses Rights in the Action of Infringement on Intellectual Property Rights).
This article lists common manifestations and specific countermeasures that can be used on the abuse of trademark rights.
Typical abuses
Associate
Wan Rui Law Firm
A typical abuse of trademark rights takes the form of a malicious rights defence after the preemptive registration of a trademark.
The pirate may engage in malicious activities such as lodging complaints on e-commerce platforms, filing an Administration for Industry and Commerce (AIC) complaint, sending a warning letter, or even maliciously initiating an infringement lawsuit against the rights holder or its distributors.
Typical trademark abuse cases include the “Coppertone” case and the “Beijing Wtown” case, where pirates secured and exercised rights for improper purposes.
Another relatively common circumstance is the abuse of administrative procedures to apply for trademarks in bad faith, or raise an objection to invalidate the trademark of the rights holder, typically in the “BRITA” case.
Some countermeasures
Sue to confirm non-infringement. The party receiving the infringement warning can institute a legal action requesting the court to confirm that its acts do not constitute trademark infringement.
For example, in Paula’s Choice v Kai Men Hong Commercial (2021), the rights holder on one hand filed an objection against the preemptively registered trademark “PAULA’S CHOICE (宝拉之选)”, seeking its invalidation. On the other hand, in respect of a complaint with the platform lodged by the pirate, which caused the rights holder’s distributor to take down the products, it filed a lawsuit to confirm that no infringement had taken place and claim damages.
The court supported the plaintiff’s claims, confirmed that its use of trademarks including “PAULA’S CHOICE” did not constitute trademark infringement, and upheld its claim for damages.
Claims for unfair competition. The trademark rights holder can institute an unfair competition action against malicious rights defence by the pirate. Typically, in respect of malicious complaints to the platform by the pirate, the plaintiff, in Bayer v Li Qing and Zhejiang Taobao Network (2017), instituted an action to confirm non-infringement, and also claimed damages for unfair competition, which the court upheld.
File countersuit or claim against the malicious action. In response to a malicious action based on the abuse of trademark rights, the defendant may directly file a countersuit or claim damages against the malicious action.
In Yanzhi Holdings v Nanfang Black Sesame Group et al (2018), the defendant, Nanfang Black Sesame, argued that trademark infringement was not constituted and filed a countersuit by the deadline for adducing evidence.
Following the trial, the court held that Nanfang Black Sesame’s use of the term registered by Yanzhi Holdings did not constitute the use of a trademark, and the goods were not similar, so it did not constitute trademark infringement. It also held that Yanzhi Holdings’ action constituted abuse of rights, rendering a judgment ordering Yanzhi Holdings to bear reasonable expenditures of Nanfang Black Sesame.
Typical cases claiming damages for malicious litigation also include the “TELEMATRIX” case.
File unfair competition action against malicious registration and abuse of administrative procedures. In general, merely filing a trademark application with malicious intent or raising objections and invalidations does not constitute infringement or unfair competition.
However, in some cases, courts have deemed such actions to constitute unfair competition.
In the above-mentioned case of Brita v Kangdian (2017), the court held that the defendant’s acts of malicious registration and abuse of objection procedures were part of its large-scale and wide-ranging infringement, and constituted unfair competition.
In Emerson v Xiamen Anjier et al (2021), the court held that the malicious trademark registration by the defendant was against the principle of good faith, harmed the plaintiff’s lawful rights and interests, and constituted unfair competition. It rendered a judgment ordering the defendant to cease the application of trademarks identical or similar to those of the plaintiff and assume damages.
There are also cases where the defendant directly argued that the institution of legal action by the plaintiff constituted an abuse of rights, and the court – considering the improper purpose that the plaintiff secured the rights – upheld the defendant’s non-infringement defence.
A typical example of this is the “ELLASSAY” case. Specific elements and evidence requirements for different countermeasures vary among cases.
Generally speaking, when dealing with rights abuses, an enterprise needs to integrate an administrative confirmation of rights with a civil infringement procedure to claim damages, and safeguard its lawful rights and interests – filing for invalidation of the preemptively registered trademark while instituting a countersuit against the malicious defence, or filing a separate action to confirm non-infringement, an unfair competition action or an intellectual property action instituted in bad faith.
Advice to enterprises
From the perspective of prevention, given that confirmation of rights and subsequent administrative and civil proceedings involved in abuses of trademark rights are time-consuming, enterprises are advised to file their trademark applications – especially core trademarks – as early as possible based on their business plans, with subsequent monitoring and inspection to promptly raise objections to invalidate preemptively registered trademarks, preventing adverse impact on normal business operations due to malicious registrations.
If an enterprise has encountered preemptive registration of its trademark, or even malicious litigation, it should collect and prepare ample evidence, and actively respond to the action, combining both administrative and civil procedures to effectively combat the preemptive registration and rights abuse, to ensure protection of the business’s legitimate interests.
Hu Miao is an associate at Wan Rui Law Firm. Wan Rui Law Firm is a member of Sanyou IP Group
Sanyou IP Group – Wan Rui Law Firm
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