Bad faith trade mark registrations are a persistent problem encountered by foreign companies in China. It is reported that large-scale bad faith trade mark registrations have created an industry for numerous Chinese individuals and companies. By deliberately filing hundreds or even thousands of trade mark applications for a wide variety of brand names, those individuals and companies hold and sell those brand names for making money without intending to use the marks in commerce. Typically, they either approach the foreign trade mark owner to sell it back to the owner at an inflated price, or they sell the trade mark to another third party.
To address this trade mark hijacking problem, China revised its trade mark law in May 2014 and incorporated a general principle of good faith. Under the revised law, a trade mark application should be refused when an applicant is fully aware of the existence of a prior unregistered trade mark. The revised law further provides that when a trade mark applicant has a contractual or business relationship or “any other relationship” with the prior user of an unregistered trade mark, and that applicant files a trade mark that is the same or similar to that third party’s prior unregistered trade mark for the same or similar goods, then an opposition against such an application should be supported by the China Trademark Office CTMO.
On January 10 2017, the China Supreme Court issued the Provisions on Several Issues Concerning the Hearing of Administrative Cases Involving the Granting and Affirmation of Trademark Rights, which became effective on March 1 2017. The Provisions interpreted the term “any other relationship” specified in the revised Trademark Law broadly. Furthermore, Article 23 of the Provisions stipulates that a pre-emptive registration by improper means will be presumed if the prior user’s use has resulted in a definite degree of influence and the applicant is fully aware of or should have known of the trade mark.
It appeared that China’s solutions to tackling this problem were limited to the application of trade mark law and its judicial interpretation. An innovative approach did not emerge until a court judgment released on March 8 2018 applied Chinese Anti-unfair Competition Law to deal with the problem. In order to really understand the significance of this judgment, it is important to know the background of a long-standing battle.
Coppertone, a famous sunscreen brand in iconic Bayer’s broad product portfolio, has been widely recognised and has gained popularity in China. The bottle of Coppertone sunscreen products was specially designed with a device mark of the sun and a surfing boy. These images were originally created by Bayer between 2010 and 2011. The pattern and design have become the most distinctive parts of Coppertone sunscreen products.
In 2016, a Chinese individual successfully registered two device marks that are very similar to the images on Bayer’s Coppertone sunscreen bottle, and such trade marks were approved for use on sunscreen and cosmetics products under class 3.
However, instead of using the trade marks in any business activities, the Chinese individual filed large-scale and long-standing complaints against Bayer’s Coppertone sold on Taobao, a Chinese e-commerce platform on the ground that Bayer’s use of similar device marks on the Coppertone sunscreen product had infringed his trade mark rights. His complaints resulted in the removal of Bayer’s Coppertone products from the marketplace during the season of sales, which seriously disrupted the normal operation of Bayer and its distributors. Meanwhile, the Chinese individual repeatedly communicated with Bayer with the intention of selling the trade mark back to Bayer at an inflated price. However, Bayer responded with letters claiming that Bayer enjoyed the prior intellectual property rights and was entitled to use the trade mark. Ignoring the letters issued by Bayer, the Chinese individual continued to make complaints to relevant Chinese authorities and e-commerce platforms.
On October 30 2017, Bayer initiated a lawsuit against the Chinese Individual before the Hangzhou Yuhang District Court claiming damages of RMB 2.5 million ($363,338) on the ground that the defendant’s registration of the trademarks and malicious complaints had violated the principle of good faith and the Chinese Anti-unfair Competition Law.
On March 8 2018, the Hangzhou Yuhang District Court rendered judgment in favour of Bayer by broadly interpreting unfair competition acts. The court found that:
Accordingly, the court held that the defendant‘s act constituted bad faith trade mark registrations and prejudiced Bayer’s competitive strength and goodwill. By citing Article 2 of the Anti-unfair Competition Law, the court further held that having violated the principle of good faith and generally recognised business ethics, the defendant’s acts amounted to unfair competition, and ordered the defendant to pay damages of RMB 700,000.
The judgment is of great significance. Firstly, it affirmed that Article 2 of the Unfair Competition Law can be used to deal with trade mark hijacking. Secondly, the damages ordered by the judgment may deter a person from filing malicious trade mark registrations in the future. The judgment also demonstrates that China is strengthening its efforts to fight against trade mark hijacking.