How to Succeed in IP Litigation in China – Lessons from the Supreme Court’s Case Files

China IP litigation presents significant challenges for foreign companies, from navigating complex trademark registration processes to defending against or pursuing patent infringement claims in an unfamiliar legal system. This article draws on recent Supreme People’s Court typical cases to clarify how key provisions of China’s Trademark Law, Patent Law, and Anti-Unfair Competition Law are interpreted and applied in practice, providing foreign companies with actionable insights for protecting their IP rights in China.

Protection of intellectual property (IP) and patents in China can be challenging for foreign companies navigating a complex network of laws, regulations, and judicial interpretations. Local companies are often better-versed in domestic laws and regulations and have access to skilled legal counsel that can provide effective legal advice, giving them an upper hand in civil lawsuits.

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A new set of typical cases of trademark and patent infringements released by the Supreme People’s Court (SPC) sheds valuable insight into how cases of trademark and patent infringements are handled by the lower and upper courts, and crucially, how key parts of the legislation are interpreted. 

With litigation forming an integral part of the IP and patent protection process, the SPC cases provide a better understanding of what types of claims are successful and on what grounds, and illustrate which laws and provisions can be successfully applied in civil suits. 

The cases presented below cover typical trademark registration and infringement matters, including rejections for a “lack of distinctiveness” and malicious trademark registration. 

In some cases, decisions against plaintiffs in lower courts were overturned by the SPC, emphasizing that repeated appeals can be effective in these types of cases. Two of the cases represented here also intersect with both civil and criminal law and outline how these branches of the judiciary system can work in tandem and even assist in plaintiffs’ cases. 

The final case also illustrates how cases of trademark infringement can intersect with laws on anti-unfair competition, providing additional legal tools and grounds for mounting a successful civil suit where applicable.

Case 1: Trademark distinctiveness 

What happened? 

On June 24, 2021, Company A applied to the China National Intellectual Property Association (CNIPA) for registration of the trademark “The Tragedy of Lord George”, designated for use for Nice Class 3 products, including eau de toilette, cologne, and perfume. 

Company A has been selling perfumes under this trademark since 2020 in China, and numerous consumers and media outlets have used the name “The Tragedy of Lord George” to refer to specific perfumes launched by Company A. However, after reviewing the trademark registration application, CNIPA determined that the trademark “Lord George’s Tragedy” consists of a phrase, designated for use on goods such as perfumes, and is unlikely to be easily recognized as a trademark by the relevant public. The trademark was therefore deemed insufficient to distinguish the source of goods and was determined to “lack distinctiveness”, a disqualifying trait under Article 11.1.3 of the Trademark Law. The trademark application was therefore rejected.  

Dissatisfied with this decision, Company A filed an administrative lawsuit, which was dismissed, a decision that was upheld by the court upon Company A’s appeal. Company A then applied to the Supreme People’s Court for retrial. 

What was the outcome? 

In its retrial, regarding the name “The Tragedy of Lord George”, the SPC held that: 

• The phrase itself is not a fixed collocation or vocabulary with common usage;
• Its composition, meaning, and pronunciation have a certain degree of uniqueness;
• Its constituent elements are not common or customary symbols in the perfume industry;
• The overall phrase possesses distinctive features; and
• Its use as a trademark on perfumes and other goods is neither a promotional phrase nor a descriptive term related to the goods, nor is it associated with the function, use, or other characteristics of the perfumes and other goods.  

Further, many trademarks with similar styles have already been approved for registration in related industries, such as “Madame Pompadour’s Teacup”, “The Secret of the Flower Princess”, “Miss Sophie’s Diary”, and “Madame Audley’s Secret”. Based on the evidence on file, the public had already used “Lord George’s Tragedy” to refer to a specific perfume, easily regarding it as a mark indicating the source of the goods.  

Therefore, the “Tragedy of Lord George” trademark, when used on perfumes and other goods, can effectively identify the source of the goods and possesses inherent distinctiveness.  

The first and second instance judgments and the appealed decision were revoked, and the CNIPA was ordered to make a new decision. 

Why was the trademark registration first rejected and then permitted? 

Under China’s Trademark Law, registration authorities will reject a trademark application if the trademark lacks distinctiveness. However, the law also stipulates that a trademark can achieve distinctiveness through usage and thereby be granted.  

The initial trademark application and subsequent appeals were dismissed because the name was deemed to lack distinctiveness. 

However, the Trademark Law also stipulates that a trademark that “has acquired distinctiveness through use and is easily identifiable” can be registered. As Company A’s trademark had already been used by the public to refer to its products, proving it had achieved distinctiveness through usage. 

Key takeaways 

The final SPC ruling clarifies the criteria for judging the distinctiveness of phrasal trademarks and how the law should be applied in these instances. For foreign companies, it also shows that CNIPA decisions can be successfully appealed, and that industry precedence and existing brand exposure can be effective and legitimate arguments in litigation.  

Further, the case shows that more unconventional brand names can be permitted in China, and underscores that early market research is important to successful trademark registration, both for building up consumer recognition and for assessing whether the proposed trademark aligns with existing industry conventions. 

Case 2: Concurrent criminal and civil liability for trademark infringement 

What happened? 

Company A, a technology company, is the owner of a trademark series approved for use on goods such as program-controlled telephone exchange equipment and computer network switches under Nice Class 9. The three defendants, including a person identified as Zhou (“Zhou et al.”), purchased second-hand switch equipment and components at low prices, and arranged for multiple people to carry out refurbishments on the products, including disassembly, cleaning, replacement of parts, alteration of serial numbers, and painting and packaging. They then affixed the registered trademarks involved in the case.

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The defendants, Company B, established by Zhou et al., along with its affiliated companies, sold these counterfeit products as new equipment. For these acts, the Beijing Haidian District People’s Procuratorate filed a public prosecution, and the Beijing Haidian District People’s Court rendered a criminal judgment, finding Company B and Zhou et al. guilty of counterfeiting registered trademarks. Corresponding fines were imposed.  

Company A argued that, in addition to the four main defendants (Company B and Zhou et al.), two other individuals also participated in the sale and distribution of the infringing products and provided banking support for the transfer of funds. All six defendants infringed the IP for profit and should therefore bear civil liability and be held liable for punitive damages. Company A, therefore, sued for trademark infringement. 

What was the outcome? 

The Haidian District People’s Court, in the first instance, did not support the defendants’ claim for reduction or exemption of punitive damages in the civil case where the same infringing act had already been subject to administrative or criminal fines and the fines had been fully meted out.

However, the court did consider this when determining the multiple of punitive damages. In this case, without Company A’s permission, the six defendants cooperated in a division of labor to carry out extensive refurbishments of second-hand switches and components purchased online and through other channels, and affixed commercial marks that were substantially identical or similar to Company A’s trademark series, and sold them as new equipment for profit. They thereby jointly infringed on the company’s trademark rights.

The court found that the conduct of the defendants constituted wilful infringement of a serious nature and that punitive damages should be applied based on the following considerations:  

• Company A’s trademark series had previously been recognized as well-known trademarks in respect of programmable telephone switching equipment and enjoyed considerable public recognition;
• The defendants had engaged in a planned and organised division of labour and cooperation, forming a complete chain of infringement, with concealed and egregious means of infringement; and
• As established by the findings of the prior criminal judgment and the parties’ own admissions, the defendants had sold several thousand infringing products at significant profit and on a substantial scale, with seized but unsold infringing stock valued at over RMB 5.4 million (US$789,768).

Taking into account that some defendants had already paid fines imposed in the criminal judgment, the court applied a treble damage multiplier to each defendant, ultimately fully supporting Company A’s claims and ordering the six defendants to jointly compensate for economic losses of RMB 20 million (US$2.9 million) and pay reasonable expenses of RMB 100,000 (US$14,625). Some of the defendants appealed but later withdrew their appeals, and the first-instance judgment took legal effect. 

Why were the defendants given further penalties in the civil case? 

Under the Trademark Law, acts that are considered to be trademark infringements include using a trademark that is identical to a registered trademark on the same type of goods without the owner’s permission, selling goods that infringe upon the owner’s exclusive rights to the registered trademark, and counterfeiting or unauthorized manufacturing of another person’s trademark, among others. 

The Law also outlines provisions allowing authorities to impose a penalty of between one and five times the amount of losses suffered by the trademark holder for serious cases in which infringement was malicious. 

In this case, the egregiousness of the activities carried out – that were in direct violation of the Trademark Law – meant that the court could impose higher penalties on the defendants. 

Key takeaways 

This case is an example of a civil and criminal case running concurrently, and the penalties resulting from one case do not preclude a defendant from being liable for additional penalties from another. At the same time, it illustrates how Chinese courts are making an effort to crack down more severely on cases of serious tort.

Due to the egregious nature of the violations, the civil lawsuit helped Company A to expand the scope of the initial criminal case to more defendants and ultimately recover more damages, helping to both repair damages and deter other possible infringers.

This can be empowering for companies embroiled in serious cases of trademark infringement, as it provides grounds for launching civil cases even where criminal activity has already been litigated by the State. 

Case 3: Unfair competition in trademark registration

Company A, a beer company, was granted the trademark series “Lan Mei” and “Lan Mei Jin Zhuang”, starting in 2001, approved for use on beer and other goods. The “Lan Mei” trademark series had gained a certain degree of popularity through continuous promotion. Company B, a competitor in the beer industry, repeatedly entrusted Company C, an IP agency, to apply for registration of more than ten trademarks, including “Lan Wei Beer”, “Lan Mei Beer”, “Zheng Han Lan Mei”, and “Lan Wei Jin Guan”, between 2017 and 2022, and licensed two of these trademarks to others.

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The CNIPA and the People’s Court both ruled that the aforementioned trademark series applied for registration by Company B are similar to Company A’s “Lan Mei” trademark series used on the same or similar goods. Furthermore, the People’s Court ruled that Company B’s applications to register trademarks such as “Yiqi Haipi”, “Lan Mei Beer”, “Lan Wei Beer”, “Bai Ying”, and “Ha Bing” demonstrate a clear intent to copy or plagiarize well-known trademarks, violating the principle of good faith and significantly disrupting the normal processes of trademark registration, use, and management.   

For this reason, all of Company B’s applications to register the aforementioned trademark series were rejected, denied registration, or declared invalid. However, Company A believed that Company B’s applications to register trademarks identical or similar to its trademarks, and that Company C’s provision of agency services to Company B, constituted unfair competition. Company A therefore filed a lawsuit, requesting that Company B and Company C immediately cease their activities constituting unfair competition, that Company B compensate Company A for economic losses and reasonable expenses totaling RMB 1 million (US$146,253), and that Company C bear joint and several liability for RMB 250,000 (US$36,563) of that amount.

The first-instance judgment held that Company B’s trademark application and licensing to others constituted unfair competition, and Company C’s involvement constituted contributory infringement, and should therefore bear joint liability with Company B. The judgment ordered Company B to compensate Company A RMB 500,000 (US$73,126), and Company C to bear joint liability for up to RMB 100,000 (US$14,625). Company C appealed. 

Outcome 

The Yuexiu District People’s Court in Guangzhou held in the first instance that Company A’s “Lan Mei” trademark series, through continuous use and promotion, had already gained a certain level of influence at the time of the trademark registration. Company A legally enjoyed prior rights to the “Lan Mei” trademark series.

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Multiple prior court judgments and rulings from the CNIPA had determined that Company B’s application for registration of the trademark series constituted large-scale trademark hoarding, lacked legitimacy, and damaged fair competition. As a competitor in the same industry, Company B, knowing that Company A’s “Lan Mei” trademark series was legitimate, continued to repeatedly apply for registration of trademarks similar to Company A’s registered trademarks. This clearly exceeded the requirements of normal production and operation, indicating an intent to exploit Company A’s goodwill and seek illegitimate profits. This, therefore, constituted malicious trademark registrations.

Furthermore, licensing two of these trademarks to others amounted to trademark hoarding for profit. Company B violated the principle of good faith, disrupted fair competition, and harmed Company A’s legitimate rights and interests, thus constituting unfair competition. Company C, as a professional trademark agency located in the same region as Company A, should have been aware of the reputation of the “Lan Mei” trademark series. After its “Lan Mei Beer” trademark application was rejected, especially after the court’s negative evaluation of Company B’s registration, Company C, knowing that Company B was maliciously registering trademarks, still accepted Company B’s commission to provide trademark agency services, constituting contributory infringement. Company C, therefore, had to bear joint liability with Company B.   

The Guangzhou Intellectual Property Court therefore dismissed Company C’s appeal and upheld the first-instance judgment. 

Why was the appeal dismissed? 

This case falls under the category of “obtaining registration by other improper means” as stipulated in Trademark Law. Under this provision, the Trademark Office can declare a registered trademark invalid if it was obtained through deception or other improper means, while other entities or individuals can also request the Trademark Review and Adjudication Board to declare the registered trademark invalid. 

The Trademark Law also explicitly stipulates that malicious applications for trademark registration will be subject to warnings and fines. 

The case also violated China’s Anti-Unfair Competition Law (AUCL), which obliges companies to adhere to the principles of equality, fairness, and good faith, to abide by laws and business ethics, and participate fairly in market competition. The case details explain that Company B’s repeated attempts to register infringing trademarks, as well as licensing the infringing trademarks, “damaged the fair competitive market order”, “violated the principle of good faith”, and “disrupted fair competition”.

Additionally, while the SPC’s case details don’t explicitly state this, the case could also have violated the AUCL’s provisions on “acts of confusion”. This prohibits companies from engaging in behavior that could mislead consumers into believing a company’s goods are those of another party, or that they have a specific connection with another party, including through the misuse of trademarks.

Key takeaways

This case illustrates how the AUCL can be applied in cases of trademark infringement, specifically for repeated malicious attempts to register a trademark. For foreign companies, this offers additional legal provisions upon which to base trademark litigation where applicable.  

It also highlights the types of behavior that can constitute aggravating factors in a case, such as, in this instance, repeated attempts to register the trademarks even after prior judgments had found the defendants’ activities to be illegitimate, and the licensing of two of the trademarks. This underscores the importance of maintaining careful records of prior infringements, as they can substantially strengthen a civil case.

Intellectual property is a valuable asset for companies and IP protection is of paramount importance. However, navigating intellectual property laws across different jurisdictions can be complex. Our intellectual property advisory services in China and broader Asia help companies secure, manage, and enforce their IP rights- ensuring compliance with regional regulations.

Allan Xu 

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