Keyword Advertising Triggers Triple Punitive Damages

In practice, a consumer who enters a brand name into a search engine may find that the resulting link leads not to the brand owner's website, but to that of competitors. This advertising tactic is highly disruptive in effect and has gradually become a recurring issue that must be confronted in brand protection disputes involving well-known enterprises. Compared with traditional trademark infringement, which typically manifests itself through the direct imitation or unauthorized use of a mark on goods, this new form of conduct operates through the manipulation of search engine keyword mechanisms. By setting another party's well-known trademark as a keyword to attract online traffic, certain operators appropriate commercial opportunities that should accrue to the right holder. At the same time, such practices weaken the distinctiveness of the trademark and distort consumers' understanding of market relationships.

In recent years, Shaohe Law Firm has successfully handled a number of disputes involving similar forms of online traffic diversion for its clients. Most recently, a notable case handled by our firm resulted in a favorable first-instance judgment. In this case, our European client had gained widespread recognition for its brand in the Chinese market over many years of cultivation. It later discovered that a domestic enterprise with no affiliation to the client had, over a prolonged period, on a major Chinese search engine, used the client's trademark as a search keyword and directly embedded the mark in its advertising headlines, for example: "Choose XYZ to buy ABC," where ABC was our client's registered trademark and XYZ the domestic enterprise's own trade name. Such practices were found to be likely to cause confusion among the relevant public.

Throughout the enforcement process, we focused on the following three key aspects. These experience-based steps also provide a clear and practical roadmap for enterprises facing similar challenges.

I. Assessing whether the client's prior rights were sufficient and stable

Effective enforcement presupposes clear and wellestablished rights. As a first step, we assisted the client in systematically reviewing and consolidating sufficient evidence relating to trademark registration, licensing arrangements, and market recognition, including awards, media coverage, and sales data. This ensured that the asserted trademark rights covered the goods and services at issue and that the mark had already acquired a certain level of influence in the relevant market.

II. Clearly defining the legal nature of the opposing party's conduct

In this case, the opposing party argued that, as a foreign trade company, it was engaged in the resale of genuine products bearing the client's trademark and that its use of the mark for promotional purposes was therefore justified. However, the company also acted as a distributor of industrial products from multiple other foreign brands. Under such circumstances, its practice of intentionally using the client's trademark "ABC" as a prominent search keyword was likely to lead the relevant public to believe that a specific commercial association existed between the company and the client's brand. This, in turn, enabled the opposing party to make explicit use of the goodwill attached to the client's trademark in seeking improper gains from its sale of other brands' products

Accordingly, even if the opposing party did sell certain genuine products of the client, its conduct went beyond the scope of reasonable referential use of a trademark. In light of the relevant provisions of the Trademark Law and prior judicial precedents, such use constituted trademark infringement. The newly amended Anti-Unfair Competition Law, which took effect on October 15, 2025, explicitly defines such conduct as an act of confusion, thereby providing stronger legal protection for halting infringements and safeguarding the legitimate rights and interests of trademark holders.

III. Securing evidence of all infringing activities

We conducted evidence fixation against the infringing websites through the Unitrust Timestamp. Over a period of nearly two years, more than a dozen evidence fixation actions were carried out. These materials proved critical in establishing both the commencement and the duration of the infringing conduct, and later served as a key factual basis for calculating the infringer's unlawful gains.

Upon completion of the above steps, we proceeded to implement the following enforcement strategies on behalf of the client:

1. As a first step, we sent a cease-and-desist letter to the opposing party. This approach is the most time- and costeffective. Where an infringer is not directly engaged in manufacturing activities, the pressure of potential liability for damages often leads to cooperation and corrective action.

2. As the opposing party failed to rectify its conduct in a timely manner, we lodged a report with the local market regulatory authority. Compared with civil litigation, administrative proceedings are more time- and cost-efficient. After investigating the infringing company "XYZ," the authority determined that the above conduct was unlawful and issued an administrative penalty decision accordingly. Moreover, the investigative findings and the administrative penalty decision issued by the authority can provide solid evidence to support the right holder's claim for damages against the infringer in subsequent civil proceedings.

3.Subsequent monitoring showed that, after briefly ceasing the infringing conduct, the opposing party again set the trademark as a search keyword. In view of this repeated infringement, we initiated civil proceedings against the opposing party for trademark infringement and unfair competition, claiming damages and certain enforcement costs.

The court of first instance found that the infringement was malicious and applied punitive damages. It ordered the opposing party:

• Publish a apology statement to eliminate the adverse impact caused to our client.
• Compensation of RMB 4.32 million, comprising economic damages plus triple punitive damages for intellectual property infringement;
• Compensation of RMB 100,000 for economic damages suffered due to unfair competition.

The total amounted to RMB 4.5 million.

In addition, the court held that the well-known Chinese search engine that provided traffic diversion services constituted a joint infringer and it was ordered to bear joint and several liability for a specified portion of the above compensation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.