A recent judgment1 issued by the Shanghai IP Court (“SIPC”) clarifies how the PRC Anti-Unfair Competition Law (“AUCL”) can be applied to parties that use bad faith trademark registrations they secure in other jurisdictions to launch enforcement actions – including takedown requests and cease-and-desist letters – against businesses in China.
Case Summary
The plaintiff in the case was a Chinese manufacturer of “DOC” brand protective masks, Neolithic Tech Co., Ltd., while the defendants included four related parties: a married couple surnamed Jiang and Gan, a Hong Kong limited company under Jiang’s control and a Shanghai company managed by Gan.
In 2016, the plaintiff began selling DOC-branded masks to customers in various countries, establishing market recognition. The plaintiff did not register its trademark in China or elsewhere.
Meanwhile, in 2020, Jiang began sourcing masks from the plaintiff for distribution in Europe through his Shanghai company, and that same year, both his Shanghai and Hong Kong companies filed pre-emptively for Neolithic’s trademark “DOC+Care” in the PRC and the European Union, respectively, for goods in Class 10, covering medical masks. While the PRC application was rejected, the EU application successfully registered in April 2021. Shortly after the registration of the EU mark, the defendants launched a series of actions against the plaintiff, including:
- sending a cease-and-desist letter to the plaintiff;
- filing takedown requests with Alibaba International against the plaintiff’s online store;
- pressuring the plaintiff’s German distributor to terminate its cooperation with the plaintiff; and
- lodging an administrative complainant in China with the local market supervision bureau (an administrative enforcement authority).
The plaintiff claimed that these actions generated severe commercial harm, including the closure of its Alibaba store, the loss of a key distribution relationship, and a 60% decline in export sales. Seeking compensation for this harm, Neolithic initiated a civil action before the Shanghai Hongkou District Court, claiming unfair competition under the general provisions of Article 2 of the AUCL. The plaintiff specifically argued that the defendants, despite knowing of the plaintiff’s prior use of the DOC mark, had acted in bad faith by registering a similar EU trademark and then weaponizing it to disrupt the plaintiff’s business. In response, the defendants argued that their EU registration (which was technically valid and had not been invalidated by the plaintiffs through standard registry proceedings) provided a legitimate basis for their enforcement actions.
In the first-instance judgment, the Shanghai Hongkou District Court held that the defendants’ actions, including filing take-down requests with Alibaba International and sending letters to the plaintiff’s German distributor, violated the principles of good faith and commercial ethics. These actions damaged the plaintiff’s marketing channels and export sales, and constituted unfair competition under Article 2 of the AUCL. Accordingly, the Hongkou District Court ordered two of the defendants, Jiang and the Hong Kong company, to compensate the plaintiff for economic losses amounting to RMB 500,000 (~US$ 70,000).
Jiang and Hong Kong company appealed the first-instance judgment to the SIPC, which ultimately upheld the lower court’s decision.
Significance of Case
This case is meaningful for brand owners in several respects.
1. The AUCL can be applied to parties that use foreign trademark registrations to attack businesses in China.
Although in this case, one of the defendant-appellants was a Hong Kong company, it holds an EU trademark registration, and some of its actions – including the sending of warning letters to a German distributor – targeted parties outside of China, the Court identified China as the location where the conduct occurred and found Chinese law applicable based upon the findings that: (a) the defendant-appellants’ actions specifically targeted a Chinese company and caused substantial harm within China; and (b) Alibaba International, the cross-border e-commerce platform involved in this case, was established in China. Additionally, the parties agreed after the infringement that the AUCL was applicable.
By treating these actions as direct extensions of unfair competition originating in China, the judgment demonstrates Chinese courts’ willingness to provide brand owners with remedies to defend against extraterritorial unfair competition activities that harm businesses in China.
2. Holding a foreign trademark registration does not shield against liability for unfair competition.
Regarding the defendant-appellant’s EU trademark registration, the SIPC’s decision confirmed that holding a foreign trademark registration does not shield against liability for unfair competition in China when the underlying conduct is found to be in bad faith. The SIPC declined to comment on the validity of the defendant-appellant’s EU registration, but instead determined the key issue is whether the mark was filed in good faith. While not specifically stating so, the SIPC no doubt took the view that it was unnecessary for the plaintiff to invalidate the defendant’s EU registration before seeking remedies under the AUCL. (Other Chinese courts have taken a similar stance when dealing with disputes involving bad faith trademark registrations obtained in China).
The SIPC did however conduct an analysis of relevant EU legislation, concluding that – similar to Chinese law – when a party applies to register a trademark in the EU that it knows (through contractual, business, or other relationships) to be identical or similar to another party’s unregistered mark that is already in use on identical or similar goods, the application constitutes bad-faith trademark squatting and lacks legitimacy.
With evidence of the parties’ prior dealings, the SIPC’s judgment concluded that the EU registration was filed in bad faith, particularly when the timing of the defendant-appellants’ actions (all initiated shortly after registration of the EU mark) further demonstrate that their actions were an intentional scheme designed specifically to disrupt the plaintiff-appellee’s export business.
Future Disputes under Revised AUCL
In June 2025, the National People’s Congress amended the AUCL by adding a new Article 40 which explicitly states that Chinese courts may apply the law to parties that engage in acts of unfair competition overseas that cause harm to parties inside China. While not explicitly stated, this clearly includes actions arising from trademark piracy as well as trade secret violations that take place outside China.
The extraterritoriality provisions of the revised AUCL is not a first for Chinese law. Analogous provisions were previously introduced in China’s Anti-Monopoly Law (2022), Cybersecurity Law (2017), Data Security Law (2021), and Personal Information Protection Law (2021), which explicitly create causes of action for acts conducted overseas that create harm to parties inside China.
The revised AUCL enters into effect on October 15, 2025. But as illustrated by the above case, Chinese courts are likely to grant relief against analogous acts of unfair competition taking place outside of China before the revised law enters into effect, and under the general provisions of Article 2 of the AUCL.
For further information on the recent revision of the AUCL, see here.
