Lusheng secures landmark trade mark squatting win for Juratek

Lusheng, a strategic partner of UK-headquartered IP firm Rouse, today (9 December) announced a significant win in a trade mark infringement case for Juratek, a leading European original equipment manufacturer (OEM). Lusheng represented Juratek in the case brought by Laizhou Baoyi Machinery Co (Baoyi), a Chinese parts manufacturer.

The case concerned trade mark ‘squatting’, which occurs when companies deliberately register other brands’ trade marks with the aim of selling the trade mark back to its original owner for an inflated amount; or to sell counterfeit products under the trade mark registered in China.

The Juratek win supports recent efforts by the Chinese courts to crack down on trade mark squatting and is a significant milestone for Chinese OEMs, which typically face an uphill battle in disputes with trade mark squatters. OEMs are commonly found to be infringing the squatter’s rights when a squatter has registered a similar trade mark. Chinese courts have difficulty supporting an OEM's claim it does not infringe Chinese registered trade mark rights by virtue of its trade mark rights abroad. This means victims of trade mark squatting in China could find their products which had been manufactured for export only, could be seized by Customs and prevented from being exported. 

In 2017, Baoyi registered trade marks for Juratek’s company name and logos, despite Juratek using the trade marks in China and overseas since 2000. Baoyi used the trade marks against Juratek’s Chinese automotive parts supplier, and Customs detained the shipments for export. 

Throughout the court case, Lusheng utilised the ‘principle of good faith’ – under which all parties are legally obliged to act honestly – rather than legal provisions of trademark ownership, to demonstrate Baoyi was aware it was trade mark squatting, alongside other significant evidence.

In the first instance decision, the court ruled in Baoyi’s favour as owner of the trade mark. However, Juratek were successful on appeal after the High Court placed a greater emphasis on the ‘principle of good faith’.

Landy Jiang, head of Beijing dispute resolution at Lusheng, commented: “IP protection in China has improved dramatically over the years – but that doesn’t mean that all issues have been resolved.  It’s a gradual process, and complications and risks still exist, particularly for foreign businesses seeking to protect their brands in China. A company that loses its trademark rights in China could risk being pushed out of the market altogether.

“China’s IP landscape is changing rapidly, and at the same time, the level of complexity involved in trademark squatting and OEM issues is also escalating. We are glad to see courts and administrative authorities like CNIPA are giving greater attention to such matters, and the second instance court in this case is willing and able to make significant breakthrough to support and protect foreign brands based on the ‘Principle of Good Faith’.”

Miriam Yang, Senior Associate at Lusheng, said: “Trade mark disputes like this one are common among OEMs, which have complex supply chains of components to be used in the production of goods by other manufacturers, but what is unusual is for the applicant against the squatting company to win cases such as these in China.

“This is a significant win – the case can be used as a blueprint precedent for the use of the ‘Principle of Good Faith’ to be used in a trademark squatting case. The decision supports the protections of the rights of foreign investors looking to expand or launch their brands in the Chinese market, and should provide confidence for OEMs and other businesses with sophisticated, complex supply chains in protecting their rights in China.”

Matt Robinson, Juratek Managing Director said he was “delighted with the end result”. He added: “ We faced some dark moments in the early days when our shipments were being detained, and it was extremely frustrating.

“We have done business in China for 20 years and have been very happy with things, but we were starting to doubt the system. However, we were advised to hold tight and that we would get there in the end – which fortunately we did – and my faith is restored.”