IP Enforcement

PRC – New Civil Decisions against Bad Faith Filers

SIPSIP Enforcement, Knowledge

Chinese courts have previously issued substantial civil damages against bad faith registry pirates, including compensation of the legal costs of victim brands in pursuing registry actions, subject to a showing that the pirate has used the victim’s mark and/or that the pirate has taken enforcement measures that have interfered with the victims’s legal use of its brand. The leading case in this regard involved a logo used on Coppertone sunscreen from 2018 (see our earlier case note here). More recent cases include those involving the brands Brita (see here), In-Sink-Erator (see here), Pearlosophy, as well as UFC and STAUD (disputes handled by our firm).

In 2023 and 2024, Chinese courts issued four additional decisions involving the marks Santak, Shikang, Super Dry, and ReFa. While the holdings in these cases do not appear to break new ground, the compensation in these cases was significant. Just as importantly, these decisions suggest that future civil case against registry pirates will be handled by Chinese courts in a similarly positive fashion.

These new decisions also provide reason for victims of trademark piracy to consider filing civil actions at an earlier stage of disputes, and with the goals of perhaps achieving quicker settlements.

While encouraging and helpful, it is unlikely that the latest round of civil decisions will have a strong deterrent impact on new bad faith filings. This is mainly because civil liability is now limited to cases where the pirates use the victim’s trademark and/or interfere with sales of genuine products. While the policy makers are considering amending the PRC Trademark Law to eliminate these conditions and thereby allow recovery of legal costs from pirates, the National People’s Congress is not expected to amend the law any time soon. (See for our firm’s White Paper on a draft of a proposed amendment to the Trademark Law circulated in January 2023 by the China National IP Administration here: White Paper on Proposed Trademark Law Revision in China (east-ip.com).

Further Details

Until 2018, Chinese courts were unwilling to acknowledge bad faith trademark filing as a form of unfair competition. Since the Coppertone case noted above, there have been no less than nince decisions where Chinese courts determined that bad faith filers may be held liable under Article 2 of the PRC Anti-Unfair Competition Law.

With one exception – the In-Sink-Erator case – in all of these cases, the defendants had not merely filed applications for trademark registration in bad faith, but had also used the victim’s trademark and/or interfered with sale of genuine products, for example, through the filing of online take-downs against ads by the victim brand’s distributor.

In the In-Sink-Erator case itself, while these conditions did not appear to apply, the pirate had tempted fate by filing bad faith applications for a mark even after a final decision had been issued in an invalidation against an earlier registration.

We offer below case summaries on the four latest decisions of Chinese courts – this time in Chengdu, Suzhou, Quanzhou and Ningbo. These were the first time courts in these cities have dealt with these particular questions, as earlier decisions were mainly issued by courts in more IP-savvy courts in Shanghai, Beijing and Hangzhou.

The decisions below – as well as cases which our firm has dealt with over the last few year – illustrate that Chinese courts are increasingly willing to award much higher damages against bad faith filers. As such, it is increasingly worth considering the filing of civil actions against such pirates at an earlier stage in disputes, including before final decisions are issued in parallel registry proceedings.

Case Notes
1. Santak
Parties Appellant: Santak Electronic (Shenzhen) Co., Ltd. (Santak)

Defendants: Mr. Zhou (the registry pirate), Guangdong (Taiqifeng), Chengdu Aipeisi (Aipeisi), Mr. Zhao (shareholder of Taiqifeng and Aipeisi).

Courts Second instance: Sichuan Higher People’s Court

First instance: Chengdu Intermediate People’s Court

Date of Final Decision January 2024
Compensation RMB8 million (approx. US$1.11 million), including legal expenses
Summary of Facts The defendant, Mr. Zhou, repeatedly filed applications to register trademarks similar to the plaintiff Santak’s famous mark “SANTAK.” Santak succeeded in invalidating these pirate marks.

Zhou licensed the pirate marks to the defendants Taiqifeng and Aipeisi, and these companies produced and sold infringing products through their own websites (vsasvntek.net and techfine.net), WeChat official accounts, a Marco Polo website, and through shops on 1688.com, JD.com, Tmall, and other e-commerce platforms, as well as through offline channels. In addition, Taiqifeng engaged in false advertising by claiming that the infringing products were produced by an entity it described as “American International SUNTEK Power Co., Ltd., established in 1983 in Nevada, USA”.

Santak filed a civil lawsuit against the four defendants before the Chengdu Intermediate People’s Court, claiming that the defendants’ unauthorized use of similar marks had infringed its trademark rights and amounted to unfair competition.

Holding In its decision, the Chengdu court did not support Santak’s claim of unfair competition arising from Zhou’s registration of the mark “VSASVNTEK”.

Both Santak and the defendant’s appealed the Chengdu court’s decision.  But on appeal, the Sichuan Higher People’s Court affirmed that the disputed marks “VSASVNTEK” and “USASUNTEK” are similar to Santak’s prior registration for “SANTAK” and that the defendants’ use of the disputed marks infringed Santak’s registered trademark rights.

The court also determined that Zhou’s repeated applications to register trademarks similar to Santak’s mark violated the principle of good faith, disrupted the normal order of trademark registration management and fair competition in the market, damaged Santak’s legitimate rights and interests, and constituted acts of unfair competition.

The court ordered compensation of RMB5 million for the defendants’ acts of trademark infringement, with Zhou jointly liable for RMB 1 million;

For their acts of unfair competition, the court ordered Aipeisi to pay damages of RMB1.005 million, while Zhou and Taiqifeng were each ordered to pay damages of RMB1 million.

 

2. Shikang
Parties Appellant: Suzhou Shikang Protective Products Co., Ltd. (Shikang)

Defendants: Shanghai Yuanshi Information Technology Co., Ltd. (Yuanshi) (the registry pirate), Xingli Supply Chian Management (Shanghai) Co., Ltd. (Xingli), Mr. Xu (shareholder and legal representative of Yuanshi and actual controller of Xingli)

Courts First instance: Suzhou Intermediate People’s Court

Second instance: Jiangsu Higher People’s Court

Date of Final Decision

 

December 2023
Compensation RMB3 million (approx. US$416,000), plus legal costs of RMB321,000 (approx. US$44,580)
Facts The defendants in this case had pursued numerous aggressive actions against the plaintiff based on their ill-gotten trademark rights and copyright in copies of the plaintiff Shikang’s marks. Recognizing the relative severity of the defendant’s actions, the Jiangsu Higher People’s Court ordered the defendants to pay compensation of RMB3 million (approx. US$415,000).

The defendant Yuanshi was formerly a distributor of Shikang. In 2012, Yuanshi filed an application to register the mark “MASkin” in Class 10 (No. 10519462). Shikang successfully invalidated the registration in 2018. Yuanshi also registered copyright in the “MASkin logo” in China in 2014.

Based on the above trademark registration and copyright registration, Yuanshi took a number of aggressive actions against Shikang, including filing online take-downs, filing complaints with the local Market Supervision Bureau and relevant industry associations, and filing civil litigation for trademark infringement. The defendants also spread malicious rumors about Shikang via WeChat (a Chinese social media platform).

Shikang’s trademark registrations include “MASKIN”, “BENEHAL,” “必利好” (BI LI HAO in Chinese), and “世康” (SHIKANG in Chinese) covering protective masks, and medical masks in Classes 9 and 10.

After its first pirate mark “MASkin” (No. 10519462) in Class 10 was invalidated by Shikang in 2018, Yuanshi and Xingli continued to file trademark applications targeting Shikang’s brand in Classes 9, 10, 21, 25, 35, 45 in 2019 in an attempt to disrupt Shikang’s business operations. They also registered corresponding domain names and Wechat account names.

Holdings The first instance court concluded that the defendants’ activities, including their malicious pirating of Shikang’s trademarks / trade name, and registration of imitation WeChat accounts constituted acts of unfair competition. In addition, the court determined that the defendants’ spreading of malicious rumors about the plaintiff on social media constituted commercial defamation.

In its decision, the Suzhou Intermediate Court also affirmed that Yuanshi’s initiation of a civil suit against Shikang constituted malicious litigation, and that Yuanshi’s malicious pirating of Shikang’s trademarks constituted acts of unfair competition.

The court ordered the defendants to pay damages of RMB3 million (approx. US$416,000), and to compensate the plaintiff for RMB321,000 (approx. US$44,580) in legal costs.

The defendants appealed, and the Jiangsu Higher People’s Court upheld the lower court’s decision in full.

 

3. Super Dry
Parties Plaintiff: Super Dry Desiccant (Shenzhen) Co., Ltd.

Defendants: Fujian Huaying Chemical Co., Ltd. (Huaying)

Fujian Haoyidian Daily Necessities Co., Ltd. (Haoyidian)

Fujian Taiweike Packaging Co., Ltd. (Taiweike)

Xiamen Meibiqing New Material Co., Ltd. (Meibiqing)

Mr. Chen Moufa – Main owner of Huaying and Haoyidian

Ms. Huang Yingying – Main owner of Taiweike and Meibiqing

Court Quanzhou Intermediate People’s Court (Fujian Province)
Date of Decision July 25, 2023
Compensation RMB300,000 (approx. US$42,000)
Facts The defendant Chen Moufa was a former distributor of the plaintiff, Super Dry. Mr. Chen repeatedly applied to register copies and imitations of Super Dry’s trademarks, both in his own name and in the names of his relatives and companies under his control. He also filed numerous oppositions and invalidations against the Super Dry’s trademark applications and registrations.

Super Dry’s marks “SUPERDRY” and “” have been used in the calcium chloride desiccant industry since 2006, and have achieved a high degree of reputation.

Between 2014 and 2021, Mr. Chen and other defendants conspired to engage in malicious actions against Super Dry, including filing oppositions and invalidations against marks owned by Super Dry, repeatedly filing for trademarks that are identical or similar to Super Dry’s marks, registering copyright in the “” logo, then recording the copyright registration with China Customs.

Super Dry incurred significant legal fees and notary expenses through its efforts to protect its rights against the defendants’ onslaught. The defendants’ actions disrupted Super Dry’s business, resulting in tangible economic losses to Super Dry that are attributable to the defendants’ actions.

Holding Mr. Chen Moufa began purchasing desiccant from the plaintiff as early as June 2010. As such, he should have been well aware of the plaintiff’s trademarks when he applied to register the plaintiff’s mark “SUPERDRY” covering the plaintiff’s core goods “desiccants” in Class 1 in August 2010.

Between 2014 and 2021, Mr. Chen, in cooperation with other defendants, filed more than 30 applications for trademarks that were identical or similar to plaintiff’s marks in Classes 1 and 11. Thus, there is clear bad faith on the part of the defendants.

In its decision, the court affirmed that the defendants’ activities, including pirating the plaintiff’s marks (on identical or similar goods), filing copyright applications and recording such fraudulently obtained rights with China Customs, constituted acts of unfair competition.

However, for three marks which did not cover goods deemed similar to those covered by the plaintiff’s prior marks, the court concluded that such filings should not be deemed as malicious registrations.

The court issued a decision ordering the defendants to refrain from filing further trademarks identical or similar to Shenzhen Super Dry’s trade name, SUPERDRY as well as its logo “”, and found the defendants jointly liable for RMB300,000 (US$41,418) in damages.

The damages awarded in this case are low because the defendants had been focused mainly on filing pirate trademark applications, and filing registry disputes against the plaintiff’s marks, and had sold only a relatively small amount of infringing goods.

 

4. ReFa
Parties Plaintiff: MTG Co., Ltd. (MTG)

Defendents:

Zhejiang Pusu Electric Co., Ltd.

Ningbo Zhizhi Electric Co., Ltd.

Ningbo Qicai Holding Co., Ltd.

Ningbo Quandu Network Technology Co., Ltd.

Ningbo Jideng Electronics Technology Co., Ltd.

Court Ningbo Jinzhou District Court (Zhejiang Province)
Date of Decision December, 2023
Compensation RMB650,000 (approx. US$90,000), including legal expenses
Facts The plaintiff, MTG, is a Japanese company that initially registered its “ReFa” mark in 2012. MTG subsequently entered the Chinese market and established subsidiaries in Shanghai and Shenzhen in 2012-2013. MTG obtained four registrations in China for its marksmarks “ReFa” and “黎珐 (ReFa/LI FA in Chinese)” covering its core goods of interest,including hair dryers and facial cleansing devices.

Beginning in 2014, the defendants, which were closely interconnected through shareholdings and personnel, repeatedly applied to register marks that were identical or similar to MTG’s “ReFa” and “黎珐(ReFa/LI FA in Chinese)” marks across umore than a dozen classes.

MTG took administrative actions, including filing oppositions and invalidations against the pirated marks filed by the defendants. The China National Intellectual Property Administration upheld MTG’s claims and recognized the defendants’ trademark filings as bad faith acts.

The defendants not only filed trademark applications targeting MTG’s brands, they also manufactured and sold infringing hair dryers and facial cleansing device s bearing the “ReFa” and “黎珐 (ReFa/LI FA in Chinese)” brands through their own e-commerce shops on platforms such as Tmall, Tiktok and WeChat.

In 2023, MTG filed a civil suit against the defendants for trademark infringement and unfair competition.

Holding The court determined that the defendants’ acts had infringed upon MTG’s trademark rights and ordered the defendants to immediately cease their infringing activities. The court dismissed the defendants’ arguments that they owned the trademarks, as their relevant registrations had already been declared invalid.

The defendants to register a large number of additional trademarks that were identical or highly similar to MTG’s trademarks after MTG’s products entered the Chinese market and gained a degree of reputation. This demonstrated the defendants’ intent to infringe on MTG’s trademarks, in violation of the principle of good faith.

Furthermore, the large number of trademark applications filed by the defendants far exceeded their actual business needs, and reflecteds their intent to hoard trademarks and engage in unfair competition.

Additionally, the pirated trademarks blocked MTG’s trademark filings, MTG was required to expend significant resources and efforts to remove these obstacles. This further disrupted fair market competition and caused substantial harm to MTG’s interests.

Based on foregoing, the court concluded that the defendants’ conduct constitutes unfair competition and ordered the defendants to cease filing marks identical/similar to MTG’s marks, and to voluntary withdraw/deregister all pirated marks that were already registered or awaiting examination.

Considering the fame of MTG’s trademarks, and the defendants’ bad faith and the scope of their infringement, , the court ordered the defendants to pay MTG RMB650,000 (approx. US$90,000) in compensation for damages and the reasonable costs incurred by MTG in defending its rights.

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