Recently, Watson & Band Partners Mr. Zhang Sijie and Mr. Guo Yifan successfully represented three affiliated defendants in a trademark infringement dispute and concurrent counterclaim for malicious intellectual property litigation. The Jiading District People's Court of Shanghai upheld the defendants' prior use defense, dismissed all claims brought by the plaintiff, and granted the defendants' counterclaim for malicious litigation within the same proceeding—ordering the plaintiff to reimburse the defendants' legal fees in full.

Case Background

Plaintiff Company A, relying on a licensed device trademark registered for wine products, sued affiliated Companies B, C, and D for trademark infringement, seeking over RMB 500,000 in damages and expenses. However, Company C had completed the wine label design incorporating the disputed mark as early as late 2016 and commercially distributed the wine between 2017 and 2018, with Companies B and D subsequently assuming certain brand operations. Prior to this lawsuit, Company B had sued Company A for infringing Company B's own registered trademark (also represented by Mr. Zhang Sijie and Mr. Guo Yifan, resulting in a first-instance judgment finding infringement by Company A). Despite having examined Company B's prior use evidence in that earlier action, Company A initiated this retaliatory lawsuit using its licensed device mark.

Litigation Strategy and Court Ruling

On the defense side, the Watson & Band team assembled a comprehensive chain of prior use evidence—including label design correspondence, distribution agreements, and promotional records—predating the application and use dates of the plaintiff's mark, while demonstrating that internal business succession among the three defendants did not expand the original scope or manner of use. Offensively, recognizing that Company A filed suit despite actual knowledge of the defendants' prior use and without a legitimate rights basis, the team advised filing a counterclaim for malicious IP litigation within the same proceeding. The Jiading District People's Court upheld the prior use defense, ruled that Company A abused its licensing and litigation rights in bad faith, dismissed all of Company A's claims, and ordered full reimbursement of the defendants' attorney fees.

Practical Takeaways

On October 13, 2026, the Shanghai High People's Court highlighted Shanghai's first case supporting a defendant's counterclaim for malicious litigation damages within the same proceeding. Meanwhile, the newly revised PRC Trademark Law—set to take effect on January 1, 2027—sends a strong legislative signal against abuse of rights and bad-faith litigation under Article 9 (prohibiting abuse of trademark rights) and Article 81 (establishing civil liability for malicious trademark litigation). During the trial, the Watson & Band team cited Supreme People's Court Guiding Case No. 82 (Ellassay) and the June 2026 SPC retrial judgment (2025) Zui Gao Fa Min Zai No. 187 ("Feng Si Nv Shang"), successfully arguing that abuse of rights must be evaluated holistically based on how the mark was acquired, actual commercial use, and litigation intent rather than mere formal registration validity. This victory provides a valuable judicial reference for deterring retaliatory IP litigation and safeguarding fair market competition.