Introduction
Trademark agencies wield considerable expertise in identifying prior registered trademarks and navigating the registration process. Unfortunately, this expertise can sometimes be misused, leading these agencies to play central roles in bad-faith trademark registrations. Some agencies knowingly assist infringers in registering or purchasing trademarks that infringe on others' rights. They may plan and guide infringers to register similar trademarks, aid infringers evade responsibility by designing trademarks and selecting related goods/services, fabricate evidence specifically to counter non-use cancellation applications, and set up shell companies for trademark registration or licensing. At times, agencies even register trademarks under their own or their shell companies' names for profit. Such malicious trademark agencies have become a significant source of widespread trademark infringement, complicating efforts by rights holders to safeguard their intellectual property.
Legal Framework and Judicial Practice
Chinese trademark law mandates that trademark agencies adhere to principles of honesty and credibility. Agencies engaging in malicious practices may face administrative penalties and, if their actions constitute a crime, criminal liabilities. However, the law is less explicit about whether these agencies should bear civil liabilities towards the infringed party and how such liabilities should be determined.
In recent years, Chinese courts have increasingly confirmed that trademark agencies should bear civil liability for their roles in trademark infringements or unfair competition activities.
For instance, in Emerson Electric Co. v. Xiamen Hemei Quan Drinking Water Equipment Co., Ltd. (Case No.: (2021) Min Min Zhong 1129), the Fujian Higher People's Court held that the defendant's trademark agent was liable for 40% of the joint compensation for aiding and abetting in malicious trademark registration.
Landmark case holding full liability of bad faith trademark agency
In a landmark judgment in 2024 (Case No. (2024) Zhe Min Zhong No. 234), a Chinese court imposed stringent penalties on malicious trademark agencies. The court ruled that a trademark agent, which was the original registrant of an infringing trademark and authorized dealers to sell infringing goods, was directly involved in the infringement and thus liable for 80% of the damages. Another agent that planned and organized the entire infringement process and directly participated in buying and transferring the infringing trademarks was held liable for the full damages.
Liability of Agency Registering Infringing Trademarks in Its Own Name
The trademark agent Wealth Connection applied for the registration of the disputed trademark "Da Luwang" in bad faith and later assigned it to a Hong Kong company. Before the assignment became effective, Wealth Connection issued authorization letters to dealers, permitting them to use the disputed trademark.
Zhejiang Higher People’s Court found that the agent had registered at least 215 trademarks for class 25 goods, including multiple trademarks containing the word "Luwang" This clearly indicated a lack of intent to use them in good faith. The agent's actions showed malice, as it should have been aware of the high reputation of the plaintiff’s prior registered well-known trademark "Luwang." Therefore, the agent Wealth Connection was held 80% liable for the infringement.
Liability of Agency Planning and Guiding Trademark Infringement
The court held that, as a professional agenct, Xiruan Zhigu should have a higher duty of care in determining potential trademark infringements. Given the high renown of the plaintiff’s registered trademark “Luwang,” Xiruan Zhigu, upon accepting the commission, should have performed preliminary searches and reviews, and noted the high similarity of the infringing trademark “Da Luwang” to the plaintiff’s trademark. Particularly, prior to this case, the plaintiff had sued for infringement concerning similar trademarks, and the court had found the defendants guilty of trademark infringement, with Xiruan Zhigu also serving as the trademark agent for the defendants in that case.
The court also determined that Xiruan Zhigu provided infringing schemes to its clients, actions that clearly exceeded the normal scope of services provided by a trademark agent. These included establishing a shell company in Hong Kong, under whose name part of the infringing trademarks were filed; acting as an intermediary in locating and purchasing similar accused trademarks for its clients, thereby earning a differential; providing clients with various infringing marks for selection and advising on registration and purchase, thereby playing a substantial guiding role. The critical evidence for this, including WeChat chat records between the agenct and its clients and agreements for the purchase of trademarks, was voluntarily submitted by the defendants in another related trademark infringement case to demonstrate their use of the trademark.
Conclusively, the court found that the creation and use of the infringing marks, and the infringing pattern in this case, could not have occurred without the planning and arrangement by Xiruan Zhigu. Although not the direct registrant of the infringing trademarks, its actions clearly violated principles of good faith and professional ethics. These actions were improper and significantly directed and participated in the infringement alleged in this case. Therefore, Xiruan Zhigu should also bear full liability for the infringement.
Takeaways
This case sets a crucial precedent for holding trademark agencies civilly liable for their involvement in trademark infringement. Chinese courts are increasingly willing to hold agencies accountable for their participation in malicious trademark registrations, imposing significant liabilities for their involvement in infringement schemes. For rights holders, pursuing bad-faith trademark agencies for joint infringement liability could be an effective strategy to combat these registrations. Cease and Desist letter to the trademark agent, and non-use cancellation application may yield “surprising” favorable evidence to prove the bad faith of the agent in the civil litigation.
