Last May, far-reaching trade mark law changes came into force in China, which were aimed at making it easier to stop trade mark squatters from registering overseas companies' trade marks. 'Bad faith' was added as a ground to successfully oppose a trade mark application, or to invalidate an existing trade mark registration. However, nobody really knew how 'bad faith' would be interpreted, until last week.

In a landmark case brought before the Chinese Trade Mark Review and Adjudication Board (TRAB) in Beijing, American menswear designer, Michael Bastian, successfully won the right to use his name and intellectual property in China based on the Principle of Honest and Good Faith. This case will act as a strong precedent for foreign trade mark applicants who find their trade mark has been registered or applied for by an unauthorised third party in China.

Up until now, little appears to have changed with squatters continuing to register overseas trade marks in China with impunity, and then extracting large amounts of money in order for them to be re-assigned to the rightful owner.

There are a number of trade mark oppositions and invalidation actions currently before the TRAB. It is important to note that trade mark squatting is not illegal in China due to its 'first-to-file' system. Sharp practice yes, but theft, no. It is equally important to understand that every case is determined according to the particular facts surrounding that case, and the facts put forward as evidence in any court proceedings.

But this case involving Michael Bastian may have unlocked the problem for foreign trade mark owners who have had their trade marks 'stolen' in China. The TRAB rejected a trade mark application filed by a Chinese trade mark squatter on the basis that the US trade mark owner had established bad faith on the part of the local entity (squatter). Counsel for Michael Bastian succeeded in preventing the Chinese entity from registering the name Michael Bastian for clothing and fashion accessories.

What was considered relevant in establishing bad faith was that the Chinese entity had registered numerous other trade marks belonging to overseas trade mark owners.

In the past, this conduct had not been considered relevant in being able to successfully oppose a squatter's trade mark application. We have been aware in the past of a Chinese entity owning over 300 overseas trade mark registrations which were clearly not filed in good faith. And yet, this wasn't sufficient to establish 'bad faith'.

Now, however, this decision has made it clear that Chinese courts will find such conduct on the part of a local Chinese company as having been made in bad faith.