Brand owners in China are increasingly concerned about the issue of trademark squatting, as they often find themselves caught in protracted opposition and invalidation proceedings. Even when they successfully navigate these administrative challenges, they are unable to recover any costs from the squatters, making trademark squatting a low-risk endeavor with minimal financial repercussions.
However, there is a positive shift occurring within the Chinese judicial system, as courts are beginning to recognize the abuse of trademark proceedings as actionable under the Anti-Unfair Competition Law. This development allows brand owners to pursue legal action against squatters for losses and damages resulting from trademark squatting, even in the absence of actual infringement.
The SANTAK Case
(2023) Sichuan Zhimin No. 416
Case Background
SANTAK the plaintiff and trademark owner is an international manufacturer specialized in uninterruptable power supply (UPS) technology. The defendant, Zhou, engaged in trademark squatting by applying for several trademarks, including SKSATAK, EDUNSTK, and VSASVNTEK, which were similar to the trademark held by Sante, known as SANTAK. Although Sante successfully opposed and invalidated Zhou’s trademarks, this process required significant time and resources. Consequently, Sante decided to take legal action against Zhou for both trademark infringement and unfair competition.
Court Judgement
Whether Zhou’s alleged behavior constitutes unfair competition.
Shante claimed that Zhou had repeatedly applied for registration of logos similar to Shante’s registered trademarks as trademarks, violating the principle of good faith and constituting unfair competition. Zhou contends that Shante’s claims extend beyond the original scope presented in the first instance. However, it was confirmed that Shante raised this issue before the conclusion of the first-instance court debate, and Zhou’s argument was not supported by the court.
According to the facts ascertained in this case, Zhou successively applied for registration of trademarks No. 8059880 “SKSATAK”, No. 8510206 “EDUNSTK”, No. 8059881 “VSASVNTEK”, No. 22508373 “VSASVNTEK”, etc. The aforementioned trademarks were all deemed invalid following Shante’s objections. Regarding whether Zhou’s repeated application for trademark registration constitutes unfair competition, this court comments as follows:
First, the Supreme People’s Court’s interpretation of the Anti-Unfair Competition Law emphasizes that operators must adhere to principles of voluntariness, equality, fairness, and good faith in their business activities. The court will evaluate Zhou’s behavior according to the recognized business ethics within the industry, considering factors such as industry norms, the operator’s intent, and the impact on consumer rights and market competition.
The evidence shows that Zhou has applied for multiple trademarks that are similar to Shante’s registered trademarks, particularly the “VSASVNTEK” trademark, which was invalidated after Shante’s challenge. Despite this, Zhou continued to seek registration for similar marks, which raises concerns about his intent behind these applications. The trademark registration system in China requires adherence to good faith principles, and Zhou’s actions appear to be conflicted with this requirement.
Furthermore, Zhou’s repeated trademark applications have been characterized by trademark authorities as attempts to take a free ride on Shante’s existing trademarks, indicating a clear intent to mislead consumers and undermine the market order of fair competition. Given Shante’s established reputation and the high recognition of its trademarks, Zhou should have reasonably avoided actions that could lead to confusion in the marketplace.
In conclusion, Zhou’s actions not only violate the principle of good faith but also disrupt the trademark registration process and harm Shante’s legitimate business interests. As a result, Zhou’s behavior constitutes unfair competition, and Shante has indeed suffered actual damages due to these actions.
