China adopts the “first-to-file”principle in regard of trademark registration application, which means the applicants who first file a registration application of a trademark will be granted the right of the trademark and shall have priority over the subsequent applicants as well as any prior users of such trademark.

For a long time, the application for trademark registration shall not be deemed as illegal per se. Only when a trademark that has been registered maliciously is actually put into use, the original owner of such trademark may bring up lawsuit and hold the Actor liable for trademark infringement or unfair competition.

At the end of 2021, the Fujian High People’s Court issued judgementon the case of Emerson Electric Co. v. Xiamen Hemeiquan Drinking Water Equipment Co. and others (case number: (2021)闽民终1129号) that the defendants’ behavior of maliciously registering the plaintiff’s trademarks in bulk constitute unfair competition and shall compensate for the losses of the plaintiff, the original trademark owner, inthe amount of RMB 1.6 million even if the defendant has not put the maliciously-registered trademark into use. The summary of this case is as follows:

•  Since 1994, Emerson Electric Co. (“Emerson”) applied and successfully registered the trademarks “In-Sink-Erator”, “爱适易”, “” and “” (collectively referred to as “Disputed Trademarks”) in Class 1, 7, 9 and 11 in China.

  
  

• From the evidences provided by Emerson, it can be seenthat the Disputed Trademarks were used by Emerson on food waste processors and other goods since 2004 in China.

  
  

• From 2010 to 2019, Xiamen Hemeiquan Drinking Water Equipment Co. , Ltd. (“Hemeiquan”)filed applications of 27 trademarks which are the same or similar to the Disputed Trademarks in 15 Classes.

  
  

• Emerson has filed opposition and invalidation applications againstthe trademarks which are applied or registered by Hemeiquan. After the procedure of review, litigation (the first instance and the second instance)and other proceedings, all of the trademarks held by Hemeiquan were rejected ordeclared invalid at last.

  
  

• From 2017 to 2019,Xiamen Haina Baichuan Network Technology Co., Ltd. (“HainaBaichuan”) , another company invested by Mr. Wang who is also the investor and executive director of Hemeiquan, filed registration applications of 21 trademarks which are either the same or similar to the Disputed Trademarksin 13 Classes.
  

  
  

• Emerson filed opposition and invalidation applications against the trademarks which are applied or registered by Haina Baichuanagain. After the procedure of review, litigation (the first and the second instance) and other proceedings, all trademarks heldby Haina Baichuan were rejected or declared invalid at last.

  
  

• Except for the Disputed Trademarks, Hemeiquan, Haina Baichuan and Mr. Wang, as applicants, also filed a large number of registration applications for trademarks which are the same or similar to the trademarks of other existing famous brands.

  
  

• In response to the numerous trademark applications filed by Hemeiquan and Haina Baichuan , Emerson has spent more than RMB one million in attorney fees forthe legal actions of opposition, invalidation, review, litigation and other proceedings.

  
  

• An IP agency named Xiamen Xingjun Intellectual Property Affairs Co., Ltd. (“Xingjun”) filed all but one of the trademark applications on behalf of Hemeiquan and Haina Baichuan.

  
  

• Emerson filed lawsuit against Hemeiquan, Haina Baichuan, Mr. Wang and Xingjun(collectively referred to as the “Defendants”), arguing that the Defendants violated the Anti-unfair Competition Law of China, and claiming that the Defendants should stop applying for registration of trademarks which are the same or similar to the Disputed Trademarks, compensate the plaintiff for its losses and publish a statement and apologize in the media.

  
  

• The courts of the first and the second instance both held the opinion that, Hemeiquan and Haina Baichuan are competitors of Emerson, the trademarks of Emerson are already famous in the market at the time when Hemeiquan and Haina Baichuan filed the trademark registration applications and its applications for registration of trademarks are obviously beyond its normal production and business needs. Their behaviors have disturbed the business operation of Emerson, which shall constitute the acts of unfair competition as stipulated in the Anti-unfair Competition Law of China.

  
  

• The courts also held the opinion that Mr. Wang, as the investor and legal representative of Hemeiquan and Haina Baichuan who was subjectively aware of the actions of the two companies, shall be deemed as joint tortfeasors with these two companies. In addition, Xingjun’s acceptance of the entrustment shall be deemed as an assistance of infringement since it was aware of the fact that its clients had violated the provisions of the Trademark Law of China and thatthe registered trademarks was not intended to be used.

  
  

• Based on above, the Fujian High People’s Court made the judgment that the claims of Emerson should be supported.

It is the first time that Actors are held liable merely for its malicious trademark registrations. We agree that the act of trademark registration application may constitute the act of unfair competition. Trademark is an important carrier of an enterprise’s commodity reputation and trademark applications are the preparation for the production and sale of goods. Therefore, trademark application should be regarded as a part of business operation and governed by the Anti-unfair Competition Law of China accordingly. The liabilities of the infringers could not be pursued until the trademarks have been actually put into use according to the previous judicial practice, which goes against the protection of the interests of the original owner of the trademarks.

Although precedent verdicts are not binding on subsequent cases in China, it still provides an important reference for other judges and courts in future cases. Besides, it is also a good sign for foreign investors as such legal practice will significantly enhance the protection of trademarks if it can be recognized widely.