Trade mark ruling extends infringement to digital worlds

As a case involving virtual in-game items, the final ruling in the trade mark infringement and unfair competition dispute between Xuanwo Automotive Technology (Shanghai) Co., Ltd. ("Xuanwo") and several entities, including Shanghai Qiaoba Taifeng Co., Ltd. ("Qiabo Taifeng"), carries pivotal significance.

In July 2025, Hangzhou Intermediate People's Court in Zhejian Province issued a final judgement in this long running dispute, opening the doors to virtual infringement. The trademark infringement and unfair competition dispute between Xuanwo Automotive Technology (Shanghai) Co., Ltd. ("Xuanwo") and several entities including Shanghai Qiaoba Taifeng Co., Ltd. ("Qiaoba Taifeng"). In its judgement, the second-instance court not only affirmed acts of conventional trade mark infringement but also broke new grounds by recognising virtual automobiles in games as similar goods to real-world automobiles.

The infringement claims

Xuanwo is the legitimate registrant of "G.PATTON", "乔治巴顿" (Chinese translation of "George Patton") etc. trademarks registered in Class 12, covering goods related to automobiles.

The company alleged that Qiaoba Taifeng and other parties had engaged in trade mark infringement by using identical or similar marks (e.g. , "乔治·巴顿") in social media promotions, investment solicitations for automobile production and sales, and brand collaborations involving virtual cars in Tencent's game "Game for Peace".

Additionally, Xuanwo accused the defendants of unfair competition by making several false promotional claims such as

• fabricating a distribution relationship with Xuanwo
• inventing brand history
• misrepresenting ties with U.S. companies, and
• by using company names similar to Xuanwo's registered trademarks.

First & second court rulings

The Hangzhou Xiaoshan District People's Court (first-instance court) ruled that Qiaoba Taifeng and other involved parties had committed trade mark infringement by using identical or similar marks in promotional and investment-related activities on automobiles.

However, the first-instance court concluded that virtual car models in games are categorised as goods different from automobiles in Class 12, citing distinctions in function, production channels, and consumer groups. On those grounds, it dismissed the trade mark infringement claim regarding virtual cars.

It recognised that the false claims, such as Qiaoba Taifeng's fabricated distribution relationship with Xuanwo, constituted unfair competition. However, the court found that Xuanwo had not sufficiently proven that its trade marks enjoyed "certain influence" or had established an exclusive connection with the company. Therefore, it rejected the claim that the use of similar enterprise names constituted unfair competition.

Ultimately, the court ordered Qiaoba Taifeng to cease its infringing and unfair competitive acts and to pay compensation of RMB 1 million to Xuanwo.

Dissatisfied with the judgment of the first-instance court, both parties appealed to the Hangzhou Intermediate People's Court (second-instance court).

The second-instance court upheld the first-instance court's opinion regarding the trade mark infringement in respect of real automobile goods.

Regarding the use of related trade marks on virtual cars in the game, the second-instance court acknowledged that while virtual in-game vehicles differ from real automobiles in function, purpose, and distribution channels, there is still a certain degree of overlap.

For instance, in-game vehicles function as rides that simulate real automobile features, transporting players to destinations and replicating the appearance and interior designs of actual cars. In terms of consumer groups, exposure to the virtual versions may spark gamers' interest in real-world automobiles, creating a meaningful overlap between these audiences.

From the perspective of public perception, players may perceive a connection between the automobile brand and the game, thereby creating a likelihood of confusion. Therefore, virtual in-game vehicles and real automobiles may, under certain conditions, be considered similar goods.

On the issue of unfair competition, the second-instance court further affirmed that fabricating brand history, falsely claiming ties with U.S. companies, and inventing a distribution relationship constituted unfair competition through false advertising.

The court also held that the Qiaoba Taifeng's use of enterprise names "USG-PATTONVEHICLESINC.", "USG-PATTONGROUP", etc. similar to Xuanwo's registered trademarks in promotions amounted to free-riding on Xuanwo's reputation and is likely to cause public confusion.

In the end, the second-instance court ruled that Qiaoba Taifeng and other involved parties had committed trade mark infringement and unfair competition, ordering them to compensate Xuanwo with RMB 1 million and to publish a statement to eliminate the adverse impact caused by their acts.

Implications of the ruling for brands and TM owners

This case marks the extension of China's judicial protection of IP to digital worlds. In the past, the determination of "similarity" between virtual items and real-world goods has been controversial.

In this ruling, the court clarified that, under specific circumstances, virtual car props and physical automobiles may qualify as similar goods – based on functions, overlapping consumer groups, and the general perception among the relevant public that such items are related in commercial transactions.

It provides an important reference for the adjudication of trade mark infringement cases in the digital realm. At the same time, this case may serve as a warning to enterprises: in emerging business scenarios like the virtual reality or metaverse, they must still abide by the boundaries of IP protection and refrain from free-riding on others' reputation or committing infringing acts by leveraging virtual scenarios.

For right holders, this case also provides judicial practice guidance for safeguarding their trademark rights and interests in the virtual economy sector.

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