With respect to the dispute over liability for damages arising from bad-faith IPR litigation (hereinafter “Counter-claim action”) we initiated on behalf of Fast Retailing (China) Trading Co., Ltd. and Uniqlo Trading Co., Ltd. against Guangzhou Compass Exhibition Services Co., Ltd. and Guangzhou Zhongwei Enterprise Management Consulting Services Co., Ltd. (hereinafter “Compass” and “Zhongwei”), Guangzhou Intellectual Property Court made the second instance judgement in full support of our claim for damages in the amount of over 4 million RMB.

Fast Retailing (China) Trading Co., Ltd. and Uniqlo Trading Co., Ltd. are the operating entities of the well-known clothing brand “UNIQLO” in China. As a result of the SPA (Specialty store retailer of Private label Apparel) operation mode, “UNIQLO” has grown into a globally renowned clothing brand and even a culture symbol since its foundation in Japan in 1984, winning the hearts of a large number of customers.

In the autumn of 2013, UNIQLO released a line of popular ultra-light down products, using the “ ” mark on both product hangtags and carrying pouches. However, Compass and Zhongwei, the co-owner of the No.10619071 “” trademark started to file lawsuits for trademark infringement against UNIQLO nationwide since March 2014, with a total of 42 cases in the end.   

Actually, as owners of more than 2,600 trademarks, Compass and Zhongwei make profits mainly from registering and selling a large number of trademarks to others. Obviously they register trademarks for assignment rather than for use of trademarks, including the No.10619071 “” trademark.

Upon discovering that the logo used by UNIQLO was very similar to the “” trademark, Compass and Zhongwei proposed to transfer the trademark to UNIQLO at a sky-high price of nearly RMB 10,000,000 yuan, which was refused by UNIQLO. Therefore, the two companies attempted to impose further pressure on UNIQLO through filing a large number of trademark infringement cases.

The foresaid legal action of Compass and Zhongwei not only devastated the sales of UNIQLO’s ultra-light down products, but also cost UNIQLO a huge amount to reasonably avoid infringement and respond to the lawsuits.

Given the active enforcement of legitimate rights and interests by UNIQLO and China’s intensified crackdown on malicious hoarding of trademarks and bad-faith trademark litigation in recent years, the Supreme People’s Court adjudicated the series of trademark infringement lawsuits filed by Compass and Zhongwei as bad-faith litigation; the No.10619071 registered trademark “” of Compass and Zhongwei was also declared invalid by CNIPA.

In response to the bad-faith litigation of Compass and Zhongwei based on the “” trademark registered with malice, UNIQLO filed a lawsuit for dispute over “liability for damages arising from bad-faith IPR litigation” against the said two parties, requesting them to compensate UNIQLO for the reasonable expenses on enforcement and the business interest loss in a total amount of more than 4 million RMB. Both the trial court – Guangzhou Tianhe Primary People's Court and the appellate court – Guangzhou Intellectual Property Court held that all of the 42 trademark infringement cases filed by Compass and Zhongwei against UNIQLO are bad-faith litigation and have caused relevant economic losses of UNIQLO, for which Compass and Zhongwei shall be fully liable.

The IPR counter-claim action for damages refers to the lawsuit filed against the bad-faith IPR litigation for damages, which is rather rare in trademark related cases. The significance of this case lies in: (i) both the trial court and the appellate court adjudicated that the 42 lawsuits initiated by Compass and Zhongwei are bad-faith litigation; and (ii) more importantly, the courts ascertained the legal fees and travelling expenses that the appellants paid to respond to the bad-faith litigation, as well as the business interest loss that the appellants suffered therefrom, and finally supported our claimed damages in full amount.

The victory is attributable to the concrete proof damages provided by us in this case as well as our sufficient clarifications to the court of the relevance and the cause-effect relationship between the bad-faith litigation filed by the two companies and the losses and damage suffered by UNIQLO. Finally our efforts paid off and claims of UNIQLO were fully supported by the court.

With the constant social development, IPR infringement is now conducted by more diversified and complicated means. Even if the “right holder” legitimately owns the IP right, its seemingly lawful enforcement action may still constitute infringement and it shall thus bear corresponding legal liabilities, as long as the related right is acquired to jeopardize the legitimate rights and interests of others out of malicious intention, thus being fundamentally inconsistent with the spirit of law. Therefore, the counter-claim litigation system has been established to regulate and curb this newly-emerging infringement form.

Compared with the traditional strong protection, judicial and administrative authorities in the new environment will get more insight into the actual intention of the right holder to acquire and exercise its rights and fundamentally identify the good or bad faith of the right holder and the actor, thus balancing the rights and obligations among the interested parties from the aspects of legislative intent and value orientation, which is undoubtedly of profound and far-reaching significance.

Watson-Band lawyers will continue to provide professional legal services to its clients to address various and complicated intellectual property cases, and makes every effort to protect the legitimate rights and interests of its clients to the greatest extent.