Brands that are influential in their home markets need to actively pursue trademark registrations in other regions. Neglecting this can result in trademark squatting, which can hinder the brand's operations in the new market and lead to legal challenges from the squatter. Typically, the registered party may respond by seeking to invalidate the trademark or applying for administrative revocation after three years of non-use. However, these administrative processes can be time-consuming, complicating the immediate response to potential infringement lawsuits. Therefore, while taking administrative actions against trademark squatting, brand owners should also proactively defend their rights and consider civil proceedings based on their prior rights.
Establishing a Strong Non-Infringement Defense
1. The "Prior Use" Defense
According to Article 59 of China Trademark Law, if someone has been using a trademark that is identical or similar to a registered trademark before the registration application, and this use has gained recognition for similar goods, the registered trademark holder cannot stop this individual from continuing to use the trademark within its original scope. However, it may be necessary to add distinguishing features. Thus, if a brand's trademark has been used in China and has gained recognition before a squatter's trademark application, the non-infringement defense can be invoked based on these legal provisions. The key condition for the "prior use" defense is that the registered trademark must have established a significant association with the brand through promotion and use. If the previously used trademark has gained recognition, the brand's continued use within its original scope does not constitute trademark infringement.
2. The "Abuse of Rights" Defense
Article 7 of our Civil Code states that civil subjects must act in good faith, honesty, and integrity. Similarly, Article 7 of the Trademark Law requires trademark registration and use to follow the principle of good faith. Additionally, Article 132 of the Civil Code prohibits civil subjects from abusing their rights to the detriment of the state, public interest, or the legitimate rights of others. Based on these legal principles, a squatter can argue that preemptively registering a trademark violates good faith and constitutes an abuse of rights, which should not be upheld.
Ellassay Case
In the ELLASSAY trademark infringement case, Corus registered the Chinese "Corus" trademark for clothing in 1999 and the English "ELLASSAY" trademark for leather goods in 2008. However, Wang registered the Chinese trademark "Golis" in 2011 and subsequently sued Golith Company for infringement. The court found that "Golis" is a fictitious term with strong inherent significance, and the likelihood of coincidental registration without prior knowledge was low, especially given the close geographical and business proximity. Wang's application for the "Golis" trademark was deemed illegitimate, and the court ruled that his infringement lawsuit against the legitimate use of trademark rights acquired in bad faith constituted an abuse of rights.
王碎永与深圳歌力思服饰股份有限公司侵害商标权纠纷、不正当竞争纠纷二审民事判决书
Guangzhou Compass Case
In another case involving Guangzhou Compass Company and Zhongwei Company against Uniqlo Company, the second-instance court found that Guangzhou Compass and Zhongwei had improperly obtained trademark rights and targeted Uniqlo with the intent to sell the trademark at an inflated price. After unsuccessful attempts to transfer the trademark, they initiated multiple lawsuits claiming infringement based on similar facts. Their actions, which exploited Uniqlo's extensive store network to file a series of lawsuits, demonstrated clear malicious intent and a violation of good faith. The court ruled that their misuse of judicial resources to gain improper benefits from trademark rights would not be legally protected, and Uniqlo's defense against these malicious lawsuits was upheld.
These judicial cases illustrate that malicious trademark registration violates the principle of good faith, rendering such registrations illegal. The malicious acquisition and enforcement of trademark rights, along with claims of infringement to seek improper benefits through legal means, constitute an abuse of rights that should not be supported. Therefore, it is advisable for brands to gather evidence of malicious intent from squatters and mount a non-infringement defense based on the opposing party's abuse of rights.
广州市指南针会展服务有限公司、广州中唯企业管理咨询服务有限公司、优衣库商贸有限公司与优衣库商贸有限公司上海船厂路店侵害商标权纠纷二审民事判决书
Taking Initiative Based on Prior Rights
1. Yinpin Stone Case
In the case of "Yipin Stone" the trademark had been registered for over five years by the time Fuku Company filed for invalidation, meaning it could not be challenged on the grounds of prior copyright protection. Fuku Company, adhering to good faith, sought to address the situation by initiating civil litigation for copyright infringement against those they deemed malicious squatters.
青岛福库电子有限公司与郑俭红、湛江市一品石电器有限公司侵害商标权纠纷再审民事判决书.1748401181.doc
The Supreme People's Court determined that the images and text used by Fuku Company qualify as works protected under copyright law. Furthermore, the "Yipin Stone" trademark logo used by Zheng and his company, which features calligraphic characters, closely resembles Fuku Company's "Yipin Stone" artworks, indicating substantial similarity. Zheng's use of this historically significant font as his trademark logo, despite never visiting South Korea, was deemed an infringement of Fuku Company's copyright, resulting in a ruling that required him to cease the infringement and compensate Fuku Company with 500,000 yuan.
This case highlights the importance of taking proactive measures to protect civil rights based on prior copyright when administrative procedures fail to invalidate a malicious trademark. Ultimately, Fuku Company successfully prohibited the continued use of the trademark and safeguarded their rights.
2. New Balance Case
Given the significant impact of commodity decoration rights, the New Balance sports brand enjoys considerable visibility and market share in China. The distinctive design of New Balance sneakers features capitalized English letters as decorative elements on both sides of the shoe, near the laces.
In 2004, Xin Bailun (China) Co., Ltd. was the first to apply for a trademark closely resembling the logo of New Balance, which was registered in 2012. Although New Balance's own image trademark was registered in 2016, the use of this trademark in the same position on their sneakers, along with the overall similarity in shoe design, led to market confusion and a decline in New Balance's market share. Consequently, New Balance initiated a civil lawsuit against Xin Bailun for unfair competition, alleging infringement on its well-known merchandise.
The court determined that due to extensive promotion and consistent use, the public has come to associate the decorative elements on the sneakers with New Balance. As a result, the decoration is recognized as having significant identifying features. Evidence from publicity reports and judicial decisions indicated that the decoration had made an impact by the time the defendant Xin Bailun trademark application was filed. The court ruled in favor of New Balance, concluding that the company had infringed upon the plaintiff's merchandise decoration and awarded damages of 10.8 million yuan.
This case underscores an important principle: if a later logo closely resembles a well-established commodity decoration and causes confusion, it may still infringe upon the rights of the original brand, even if it is a registered trademark. This holds true regardless of any administrative revocation, as the market interests of influential decorative elements must be protected.
Unfair Competition against Merely Trademark Squatting
A civil lawsuit addressing unfair competition has been initiated in response to malicious trademark squatting. In cases where trademark squatting is driven by malicious intent, brands can pursue civil litigation not only based on their prior rights but also on the grounds that the squatter's actions constitute unfair competition. This allows the brand to seek compensation for losses incurred due to the squatter's actions and to request an injunction to prevent the squatter from continuing their trademark infringement.
In the case involving Emerson and its trademark "InSinkErator," the court recognized that Emerson's ongoing marketing efforts had established a significant presence in the food waste disposal sector, as well as in the instant hot drink system related to water purification. Meiquan Company registered multiple trademarks identical or similar to Emerson's "InSinkErator" series across various goods and services categories, without providing a reasonable explanation for their registration intentions or the origins of the trademarks. Such actions clearly exceeded normal business needs.
Consequently, Emerson took steps to protect its legitimate rights by filing trademark objections, requests for trademark invalidation, administrative lawsuits, and civil lawsuits, which somewhat disrupted its normal operations. The court determined that the trademark registrations by Meiquan Company violated the principle of good faith, disrupted fair market competition, and harmed Emerson's legitimate interests, thus constituting acts of unfair competition as defined by the Anti-Unfair Competition Law of the People's Republic of China. As a result, the court ordered the infringing party to compensate Emerson for economic losses amounting to 1.2 million yuan.
Furthermore, the court acknowledged that trademark squatting undermines fair market order and that the costs of infringement are relatively low. Without a court order to cease such squatting behavior, the rights holder would be compelled to continue incurring costs through trademark opposition, invalidation, and administrative litigation, leading to a significant waste of public resources. Therefore, the judgment mandated the defendant to halt any trademark squatting activities related to the "In-Sink-Erator" trademarks that the plaintiff sought to protect.
Conclusion
In conclusion, when faced with trademark squatting and malicious rights protection, it is advisable to adopt a comprehensive civil rights protection strategy, particularly in administrative procedures aimed at invalidating the squatted trademarks. This approach should include effective defenses against infringement based on "prior use" or "abuse of rights" by the opposing party. Additionally, it is beneficial to proactively initiate civil lawsuits for infringement and unfair competition against malicious squatters to safeguard one's legitimate rights and interests. Ultimately, a civil lawsuit for unfair competition can be pursued against the squatting party, seeking compensation for economic losses incurred due to the brand's rights protection efforts and prohibiting the continuation of malicious trademark squatting.