Attorney-at-Law   Min YAO

For trademarks filed in bad faith, usually the true right holders will, in accordance with the relevant provisions of the Trademark Law, request the China National Intellectual Property Administration not to approve or invalidate the bad faith trademark by filing an opposition, invalidation or taking other administrative means. When the Trademark Law was amended for the third time, the fourth paragraph of Article 68 was newly added to clearly stipulate the administrative liability for bad faith trademark applications, as well as the abuse of the right of action after obtaining registration in bad faith, and the court may impose penalties to the exercise of trademark right in bad faith according to law. However, the existing Trademark Law does not expressly stipulate that a bad faith applicant shall bear civil liability for its application of the bad faith trademark. In practice, there is no shortage of situations where a large number of bad faith trademark applications continue to be filed, and in order to deal with bad faith applications, the true right holders need to continuously file opposition, invalidation, cancellation, etc., spending a lot of time and money. Is it possible to file a civil lawsuit against the bad faith applicant to claim compensation for its bad faith applications, and more effectively crack down on bad faith applicants? This article will explore the possibility of filing a civil lawsuit against bad faith applications, the basic conditions that need to be met, etc., and hope that it will be useful to readers.
 
I. Under the current legal framework, the act of filing bad faith trademark may be regulated by the Anti-Unfair Competition Law
 
China's existing legal framework clearly regulates the act of exercising trademark rights in bad faith. The 2011 Provisions on the Causes of Civil Cases separately listed "disputes over liability for damages arising from filing of intellectual property lawsuits in bad faith" under "intellectual property ownership and infringement disputes". Article 68 of the existing Trademark Law also provides penalties for filing trademark lawsuits in bad faith.
 
In judicial practice, there are many precedents in which the right holder filed a civil lawsuit to claim compensation after the bad faith registrant has enforced its trademark right against the true right holder based on its bad faith registration, such as initiating a complaint, issuing a cease and desist letter, filing a trademark infringement lawsuit, etc. In such cases, the right holders generally claim that the enforcement of rights by the bad faith registrants based on the trademark rights improperly obtained constitutes abuse of rights, which violates the principle of good faith, and constitutes unfair competition.
 
In some cases, the right holder filed a lawsuit against a series of improper acts of the bad faith registrant, including trademark squatting, filing complaints in bad faith, issuing a cease and desist letter, filing a lawsuit in bad faith, abuse of opposition and other procedural rights, and claimed compensation. In such cases, courts usually make judgment on each of the multiple acts being sued. At present, there have been a number of cases in which the courts, when judging a series of misconduct of the defendants, held that the act of filing trademarks in bad faith was unfair and violated Article 2 of the Anti-Unfair Competition Law. 
 
For example, in the case of BRITA GMBH, BRITA China Co., Ltd. v. Shanghai Kangdian Industrial Co., Ltd., the plaintiff enjoyed the exclusive right to use the registered trademarks "BRITA", "ALUNA", "Maxtra", "Elemaris", "Marella" and "碧然德", etc. in China on household and commercial water filters and their accessories, water treatment facilities and equipment in Class 11. Between 2012 and 2016, the defendant imitated the plaintiff's trademarks and applied for the registration of a total of 21 trademarks in various classes, including “碧然德”, “德碧然德”, “BRITA”, “DEBRITA”, “MAXTRA”, “Elemaris”,“Aluna”, etc., all of which were declared invalid or not approved for registration. However, the defendant used trademarks such as "碧然德" in its business activities, and at the same time used false promotional terms such as "imported from Germany". The defendant even filed oppositions and invalidations against the plaintiff's six trademarks based on its bad faith registrations being cited marks. For the multiple acts committed by the defendant, Shanghai Minhang Primary Court found separately that the defendant's use of the trademark constituted trademark infringement and the false publicity constituted unfair competition, and at the same time found that the defendant's trademark squatting and abuse of trademark opposition and invalidation procedures were part of the defendant's large-scale and comprehensive infringement acts, serving the overall purpose of infringement, and its purpose was to take free ride on the goodwill of the competitor that is the plaintiff and its brand, set up obstacles and cooperate with other infringing acts to interfere with the plaintiff's normal business activities. It is intended to undermine the plaintiff's competitive advantage and establish its own competitive advantage, which has obvious subjective malice, violates Article 2 of China's Anti-Unfair Competition Law, and constitutes unfair competition. The judgment has entered into force.
 
In the above-mentioned case, although the court found that the act of trademark squatting in bad faith constituted unfair competition, from the perspective of the reasons for the determination, the act of trademark squatting in bad faith was part of the comprehensive infringement and was an important factor considered by the court. Then, if there is only bad faith application and no other infringement or bad faith enforcement of trademark rights, is it possible to file a civil lawsuit and claim compensation? The Court's view on this point is not unanimous.
 
In the case of Afton Chemical Corporation, Afton Additives (Beijing) Co., Ltd. v. Beijing Weixin Technology Co., Ltd., Tianjin Positive Energy Intellectual Property Agency Co., Ltd., Zhang Jingdong [First instance case number: (2020) Jing 73 Civil First No. 1283, second instance case number: (2021) Jing Civil Final No. 497], Beijing Intellectual Property Court and Beijing High Court both held that the defendant's trademark application for registration was not an infringement of trademark rights under the Trademark Law, and the plaintiff could seek relief through the procedures for trademark right granting and affirmation and the following trademark administrative litigation procedures prescribed by law. Therefore, in this case, the lawsuit filed by Afton Chemical Corporation and Afton Additives (Beijing) Co., Ltd against the trademark registration application is not within the scope of civil litigation.
 
However, in the case of Emerson Electric Co. v. Xiamen Hemeiquan Drinking Water Equipment Co., Ltd., Xiamen Haina Baichuan Network Technology Co., Ltd., Wang Qianping, and Xiamen Xingjun Intellectual Property Co., Ltd. [First Instance Case No.: (2020) Min 02 Civil First No. 149, Second Instance Case No.: (2021) Min Civil Final No. 1129], the defendant only had act of continuous bad faith filing of trademarks which are imitations of the plaintiff's trademarks. There is no actual use of the trademark or the enforcement of trademark rights based on the trademark registered in bad faith. The plaintiff claimed that the defendant had committed trademark squatting, violated the principle of good faith, infringed its civil rights and interests, caused economic losses, and constituted unfair competition, and requested a judgment to stop the accused infringement, eliminate the impact, and compensate for its economic losses and reasonable expenses. The court held that the legal relationship in dispute is a lawsuit between equal subjects arising from the property relationship due to the act of registration of the trademarks being sued, and in which the plaintiff requested the defendant bear civil liability, which complies with the relevant provisions of the Civil Procedure Law and falls within the scope of civil litigation of the people's court. In the end, the court found that the defendant's act of trademark squatting in bad faith violated the principle of good faith, undermined the market order of fair competition, harmed the legitimate rights and interests of the plaintiff, and violated Article 2 of the Anti-Unfair Competition Law.
 
In summary, although there are no explicit provisions in the existing law, based on the legislative intent to safeguard the order of competition in good faith, there are examples in judicial practice where the act of applying for trademarks in bad faith is regulated by Article 2 of the Anti-Unfair Competition Law.
 
II. Basic conditions for a bad faith application to be found to constitute unfair competition in a civil lawsuit 
 
1. The plaintiff's prior right is of relatively high popularity, and the defendant’s trademark application is obviously in bad faith.
 
In the cases found so far in which civil lawsuits were filed against bad faith applications, the prior rights such as trademarks or copyrights of the plaintiff were well known, and the defendant should have known of the prior rights of the plaintiff, and the defendant's trademark registration was obviously out of bad faith.
 
2. The squatters had other acts of infringement or unfair competition, or there were continuous and large amounts of trademark squatting, causing actual damages to the true right holders.
 
In the vast majority of cases where bad faith trademark applications were identified as unfair competition, the defendants also had actual use of trademarks, malicious complaints, malicious warnings and other acts of bad enforcing trademark rights, and bad faith applications served the overall infringement, disrupted the plaintiff's normal business activities, and undermined the plaintiff's competitive advantage.
 
If the defendant does not actually use the trademark or enforce trademark rights in bad faith enforcement, but continues to apply for trademarks in bad faith, the plaintiff has to continue to file a large number of opposition, invalidation and subsequent administrative litigation to protect its legitimate rights and interests, and pay a large amount of rights protection fees for this, which is also considered causing actual damage to the plaintiff.
 
3. The right holder has initiated a separate procedure for trademark right granting and affirmation against the bad faith trademark application.
 
In the cases mentioned above, the right holders have already filed opposition or invalidation against the trademarks applied for in bad faith before initiating a civil lawsuit, and the relevant administrative procedures for trademark right granting and affirmation have been completed, and the China National Intellectual Property Administration and the administrative litigation trial court have determined that the trademark is filed in bad faith in the relevant cases.
 
The author believes that although it cannot be assumed that civil litigation cases against bad faith trademark applications must be premised on the conclusion of the relevant administrative procedures for trademark right granting and affirmation related to bad faith trademark applications, it is certain that a trademark application is found filed in bad faith will be helpful in the civil lawsuits.
 
In particular, when there is only bad faith application without actual use or bad faith enforcement of trademark rights, the author believes that the administrative procedures for trademark right granting and affirmation should be carried out before civil lawsuit, and the right holder cracks down on bad faith trademark application through the trademark granting and affirmation procedures, and actually pays the rights protection fee, which is the premise for the right holder to claim civil compensation through civil lawsuit later.
 
III. Prospect of civil liability for bad faith trademark applications
 
At the beginning of this year, the China National Intellectual Property Administration issued the Draft Revision of the Trademark Law (Draft for Comments), initiating a new round of revision of the Trademark Law. The Draft adds a compulsory transfer system for preemptively registered trademarks, and stipulates in the first paragraph of Article 83 that "if a person violates the provisions of Item 4 of Article 22 of this Law by applying for trademark registration in bad faith and causing losses to another person, the other party may file a lawsuit in the people's court to claim damages. The amount of compensation shall at least include the reasonable expenses paid by the other party to stop the bad faith application for trademark registration." The civil liability of compensation for bad faith trademark applications was written into the draft for comments for the first time, which has received widespread attention from all walks of life. If the relevant provisions of the above-mentioned Draft for Comments are finally implemented, it will form effective pressure on trademark squatters and will serve a powerful weapon to solve the problem of bad faith trademark applications.