In order to counter the proliferation of bad faith trademark applications by counterfeiters, foreign companies should not only register their own trademarks in China, but also trademarks with similar words, signs and designs as defensive trademarks. Although these defensive trademarks can be cancelled after three consecutive years for non-use, their registration is cheaper than other legal procedures.
An example is the case of Guanzhou Redsun, a kitchen and bathroom equipment supplier. As early as 1995, the company applied for the trademark 红日及图, which was recognised as a well-known Chinese trademark in 2014. In 2016, Rui Shang, a company founded by a former Redsun marketing employee, registered the mark 红日E家(Redsun E Home), a brand for digital kitchen and bathroom equipment. Rui Shang used the Redsun E Home brand as a free rider to benefit from the brand awareness of the original manufacturer.
The Guangzhou Intellectual Property Court of first instance ruled that the defendant company Rui Shang and four distributors were guilty of trademark infringement and unfair competition and ordered the defendants to pay damages of RMB 50 million – the highest compensation in IP infringement cases in the household appliance industry. On appeal, the Guangdong High People’s Court upheld the first instance decision.
The case shows that the trademark strategy of Guangzhou Redsun was not perfect. If the company had registered similar trademarks, it could have spared itself the costly and time-consuming litigation. We therefore recommend restricting the scope of action for trademark pirates by defensive trademarks, systematically evaluating the trademark notices issued by the Chinese Trademark Office within the framework of a trademark monitoring process and immediately filing an opposition or invalidation if similar trademark applications are discovered.