Bad faith and trademark squatting cases
New SPC response


On 3 June 2021, the Supreme People's Court (SPC) issued its Reply on the Issue of the Defendant's Request for Compensation for Reasonable Expenses on the Grounds of the Plaintiff's Abuse of Rights (the response).

The SPC's response provides that:

In an intellectual property infringement case, if the defendant submits evidence proving that the plaintiff's lawsuit constitutes an abuse of rights and damages its legitimate rights and interests and claims for compensation not just for the court costs, but also the fees of lawyer, accommodations and travelling expenses, etc., the people's court shall support this claim in accordance with the law. The defendant may also sue separately and request the plaintiff to compensate the above-mentioned reasonable expenses.

Bad faith and trademark squatting cases

Bad-faith infringement claims are closely associated with trademark squatting. In recent years, trademark squatters have brought increasing numbers of legal actions to force real trademark owners to either pay damages or purchase back trademarks acquired in bad faith at very high prices.

The Chinese courts have gradually developed a consistent practice of dismissing such cases on the basis of abuse of rights by trademark squatters.

In the Ellassay case (2014), the Supreme Court ascertained that the principle of good faith, which applies to the act of filing and using trademarks, also applies to civil litigation. Therefore, a trademark right acquired in bad faith cannot serve as a legal ground for an infringement claim.

In the Uniqlo case (2018), the Supreme Court dismissed a lawsuit brought by a plaintiff who had registered more than 2,600 trademarks and, after having failed to sell one of the trademarks to the defendant, had started an infringement lawsuit nationwide. The Court reiterated that filing so many trademarks with no intention to use them harmed the public interest. It affirmed that the lawsuit was an abuse of rights.

The rights owners fought back after invalidating the squatter's trademarks and claimed compensation of reasonable costs and even damages.

In the CPU case (2018), the SPC ascertained that Gongli Company had been fully aware that "CPU" is a generic name in the industry but it had still applied for a trademark registration and filed a trademark infringement lawsuit against Keshun Company and malicious complaints with the local Administration for Market Regulation. Gongli Company was ordered to compensate Keshun Company's reasonable expenses of 160,500 yuan (approximately $25,000), including attorney fees and notary fees.

In the Bridgestone case (2018), the Suzhou Intermediate Court ruled that the cost of 291,343 yuan (approximately $45,500) for safeguarding trademark rights, including trademark opposition and subsequent administrative litigation and infringement, should be paid by the losing defendant.

In the Bayer case (2018), the Hangzhou Intermediate Court went further and ordered the bad-faith squatter to pay damages. The Court considered that by knowingly registering the logo for which Bayer enjoyed the copyright as a trademark and then filing a large number of online complaints against Bayer's distributors, the bad-faith squatter had violated the principle of good faith. The Court ordered the defendant to pay Bayer 700,000 yuan (approximately $106,000) in damages.

In the Brita case (2021), Brita, after successfully concluding all of the administrative cases brought by the defendant, sued on the ground of unfair competition. The Minhang District Court held that the defendant's malicious pre-emptive registration of trademarks and abuse of trademark administrative procedures (namely, systematically challenging Brita's registrations or uses) violated the principle of good faith and business ethics and disrupted the order of market competition. The Court affirmed that the defendant's behaviour constituted acts of unfair competition and ordered the payment of 2.8 million yuan (approximately $437,500) as damages.

New SPC response

The new SPC response suggests that when a rights owner faces a bad-faith infringement claim, it is possible, even before the trademark acquired in bad faith is invalidated in the relevant administrative procedure – like in the Ellassay and Uniqlo cases – to argue the existence of an abuse of rights and ask the court to order the plaintiff to compensate for reasonable costs in association with the infringement lawsuit. The SPC response should be sufficient to deter trademark squatters from filing bad-faith infringement claims.

It is hoped that the Supreme Court could go one step further and extend this practice to administrative procedures (namely, oppositions and invalidations), and provide victims of trademark squatting with a means to recover the related costs. This should be possible under article 61 of the Administrative Procedure Law (amended on 11 January 2014), which provides as follows:

In an administrative litigation involving administrative licensing, registration, expropriation, and administrative agency's rulings on civil disputes, where the parties apply to resolve the relevant civil disputes together, the people's court may hear them together.

If the applicant of an opposition or invalidation procedure that is followed by an administrative litigation involving the registration of a trademark requests the recovery of its costs, such civil claim should be treated and answered together with the decision on invalidation or refusal of the trademark. The recovery of costs should be granted whenever the litigious trademark is found to have been filed in bad faith.

For further information on this topic please contact Zhigang Zhu at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email ([email protected]). The Wanhuida Intellectual Property website can be accessed at

An earlier version of this article was first published by MARQUES.