Deceptive Trademark Risks — Legal Framework, Case Studies, And Compliance Recommendations

Executive Summary

This briefing provides an in-depth analysis of legal risks associated with deceptive trademarks under the Chinese legal framework, in light of recent heightened regulatory measures by the China National Intellectual Property Administration (CNIPA). It distinguishes between two categories of misconduct—use of deceptive trademarks and deceptive use of trademarks—which, although related, have distinct legal characteristics, applications, consequences, and prevention strategies. Through representative case studies, this report highlights high-risk factors and outlines comprehensive compliance recommendations for enterprises to safeguard brand value and market reputation in a tightened enforcement environment.

I. Background & Definitions

In its recent Notice on Strengthening Trademark Use Management, the CNIPA emphasized stricter enforcement to regulate trademark use, fortify intellectual property protection, and maintain fair market competition. Two high-priority targets for enforcement were identified:

1. Use of prohibited, unregistered trademarks with deceptive characteristics; and
2. Deceptive use of registered trademarks.

Both belong to the broader category of "deceptive trademarks" under the Trademark Law, but their legal nature differs significantly.

1. Use of Deceptive Trademarks

This refers to circumstances where the trademark itself is inherently misleading to the public. Examples include marks containing false indications of origin, fictitious certifications, or exaggerated descriptions of product quality or function—causing consumers to misperceive the nature, origin, or quality of the goods upon seeing the mark alone. Under Article 10(1)(7) of the Trademark Law, such marks are prohibited from registration, and even if registered, are subject to invalidation under Article 44.

2. Deceptive Use of Trademarks

This occurs when a lawfully registered trademark is used in a manner that misleads consumers through its association with advertising slogans, packaging elements, imagery, or altered presentation. Examples include combining a registered mark with marketing content that gives a false impression of product quality, origin, or special characteristics, or altering the mark to imitate another well-known trademark. The risk arises from the manner and context of use, assessed based on overall consumer perception.

II. Legal Application and Consequences

1. Use of Deceptive Trademarks

Article 10(1)(7) of the Trademark Law prohibits registration of marks that mislead the public regarding quality, characteristics, or origin of goods. If such deception is found during examination, registration will be refused; if discovered post-registration, invalidation proceedings under Article 44 will be initiated.

Consequences:

• Denial or cancellation of registration
• Immediate cessation of mark use
• Required redesign of packaging and promotional materials
• Loss of brand investment

Prevention:

Implement strict compliance reviews during trademark design, checking the truthfulness of claims involving origin, efficacy, and certifications; evaluate cross-cultural meanings to ensure no unintended misrepresentation.

2. Deceptive Use of Trademarks

The Trademark Law (Article 49) prohibits unauthorized alterations of registered trademarks. The Anti-Unfair Competition Law (Article 9) forbids misleading advertising, and the Consumer Rights Protection Law (Articles 8 & 10) upholds consumers' right to know and right to fair trade. Violations are determined via factual investigation and market effect assessment.

Consequences:

• Administrative penalties, fines, confiscation of goods
• Civil liability for infringement, damages, and corrective measures
• Criminal liability in serious cases

Prevention:

Ensure accompanying advertising claims, packaging elements, and marketing materials are truthful, legally compliant, and verified; prohibit the use of unverified honours, certifications, or origin claims alongside trademarks.

III. Case Studies

1. Use of Deceptive Trademarks

Case 1: "Shuiniu Formula" Trademark Review and Refusal

Authority: China National Intellectual Property Administration (CNIPA) —Decision No. [2023]0000194420

Key Findings: Trademark No. 65650420 "水牛配方 "(Shuiniu Formula in Chinese), designated for goods including milk, was found likely to mislead consumers into believing that the products contained buffalo milk or originated from buffalo-producing regions. This constituted a misrepresentation of composition/origin. Registration was refused pursuant to Article 10(1)(7) of the Trademark Law.

Case 2: "Lugangcheng" Trademark Invalidation

Authority: Beijing IP Court — Administrative Judgment (2024) Jing 73 Xing Chu No. 18599

Key Findings: Prior to the filing date, the term "Lugang" had acquired a specific meaning, referring to national inland logistics hubs connected to major railway, highway, and station-based transportation corridors. Beijing is not a city of this type. The registrant of Trademark No. 17434701 "陆港城 "(Lugangcheng in Chinese), incorporated in Beijing, applied for the mark for services such as real estate agency, appraisal, and leasing. Its use was deemed likely to mislead consumers regarding the service location or characteristics, thereby violating Article 10(1)(7) of the Trademark Law. The court overturned the CNIPA's earlier decision that the mark did not constitute such a violation.

2. Deceptive Use of Trademarks

Case 1: "Xinfei Feihong" Over-Range Use

Authority: Intermediate People's Court of Xinxiang City, Henan Province — Administrative Judgment (2022) Yu 07 Xing Zhong No. 570

Key Findings: Henan Xinfei Feihong Industrial Co., Ltd. owned the registered Trademark No. 31219345 "新飞飞鸿 " (Xinfei Feihong in Chinese) in Class 35 for services. However, the mark was used on goods in commerce, falling outside the approved scope of registration. The Xinxiang Municipal Administration for Market Regulation issued an order to rectify the over-range use within a specified period. The court found the facts clear and the enforcement measure appropriate, dismissing the company's appeal.

Case 2: "Jiangu" Trademark Infringement

Authority: Intermediate People's Court of Jiangmen City, Guangdong Province — Civil Judgment (2019) Yue 07 Min Zhong No. 828

Key Findings: Wei Huang Company, in its use of registered Trademark No. 12072749 " 柬古" (Jiangu in Chinese), altered the font style from Song typeface to running script. In particular, the character "Jian" was modified to be highly similar to the traditional form of the character "Dong" appearing in Donggu Company's registered Trademark No. 1989916 " 东古" (Donggu in Chinese),. The arrangement of the "Jiangu" characters—vertically or diagonally—also closely imitated the layout of the Donggu in Chinese mark. The first-instance court held that the accused products infringed Donggu Company's exclusive rights to its registered trademark, ordering cessation of infringement, destruction of the remaining infringing goods, and damages of RMB 70,000. The second-instance court upheld the judgment, finding the facts clear and the law correctly applied.

3. Key Takeaways

The cases show that use of deceptive trademarks is judged mainly on the inherent truthfulness of the mark itself, while deceptive use of trademarks focuses on the misleading effect created by how the mark is used. Key risk areas for both include origin, efficacy, honours, and certifications—factors most likely to influence consumer perception and trigger regulatory scrutiny.

Enterprises should adopt a dual line defense:

• ensure compliance at the trademark design and registration stage, and
• maintain strict controls during commercial use and marketing.

This combined approach helps protect brand value and supports steady growth under tighter enforcement.

IV. Compliance Recommendations

1. Use of Deceptive Trademarks

To ensure compliance and avoid the refusal or invalidation of a trademark application, enterprises should adopt preventative measures at the design and registration stage, including:

• Factual Verification and Elimination of Misleading Elements

During the trademark design phase, thoroughly verify the truthfulness of information relating to product origin, composition, functions, and other core attributes. Eliminate any textual, graphical, or symbolic elements that could mislead consumers about such attributes, thereby ensuring both accuracy and authenticity.

• Pre-filing Legal Clearance

Prior to filing the application with the CNIPA, conduct comprehensive legal clearance searches to screen for potential deceptive elements.

• Cross-cultural Assessment

Where necessary, perform cross-language and cross-cultural evaluations to identify and mitigate risks of misunderstanding in domestic and international markets. Maintain verifiable supporting documentation for any factual claims, ready for submission during examination or enforcement proceedings.

2. Deceptive Use of Trademarks

To prevent misleading effects resulting from trademark usage in commerce, enterprises should implement robust internal control measures, including:

1. Approval Mechanism for Trademark Use

Establish a rigorous internal approval process requiring all promotional, marketing, and packaging materials featuring a trademark to undergo review and formal approval by the legal or compliance department prior to release.

2. Pre-use Review and Evidence-based Claims

Conduct detailed pre-use reviews of advertisements, packaging designs, and marketing copy, focusing on elements relating to product functions, ingredients, place of origin, and qualifications. All such claims must be substantiated with reliable documentary evidence to reduce the risk of misrepresentation.

3. Distributor Contractual Controls and Compliance Training

Incorporate explicit contractual clauses in distributor and agency agreements prohibiting the use of unverified information in conjunction with trademarks. Complement these contractual safeguards with targeted compliance training for marketing, branding, and sales teams to strengthen awareness of legal boundaries.

4. Market Feedback and Public Opinion Monitoring

Establish mechanisms to monitor market feedback and consumer sentiment, enabling the enterprise to promptly detect potential misunderstandings and adjust promotional strategies to prevent escalation of legal or reputational risks.

Conclusion

With the CNIPA strengthening regulation of trademark use, risks relating to deceptive trademarks have become more prominent. Enterprises must ensure both truthfulness and legality of the mark itself and accuracy and transparency in usage. These are not only compliance obligations but also essential to sustaining brand reputation and market competitiveness.

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.