MUJI: lost a trademark and committed defamation

In 2020, we talked about the case where Japanese retail company MUJI lost the trademark infringement dispute against its Beijing Cottonfield Textile Corp that owns the trademark “无印良品” (MUJI in Chinese) in Class 24 in China. Link here

Followed by the ruling, MUJI announced on its online and offline retail stores that they indeed had infringed the trademark rights because “another company” was “trademark squatting” on some of its trademark rights in China.

Beijing Cottonfield Textile Corp (hereinafter referred to as Cottonfield) then filed another lawsuit against MUJI Shanghai Co., Ltd. and its Japanese parent company Ryohin Keikaku Co., Ltd. (hereinafter referred to as MUJI) on the ground of commercial defamation.

According to a court decision disclosed in early November, MUJI lost this case again and has been ruled to pay total of 400,000 RMB to Cottonfield as compensation to its economic losses and reasonable legal expenses.

Cottonfield alleged that MUJI has fabricated and disseminated false information about the plaintiff’s “squatting” of its trademark, which caused the relevant public to misidentify Cottonfield’s “无印良品” trademark, and thus some of their products, such as towels and quilts, were recognized as “copycat” products. It claimed that MUJI’s statement had caused them economic losses and such behavior constituted commercial defamation, for which it requested a compensation of 3.1 million RMB.

According to the court decision, the court agreed that the public statement of MUJI was objectively contrary to the facts, which indeed has detracted the goodwill of Cottonfield and therefore constituted commercial slander. In addition to the compensation, MUJI has also been ordered to publish statements for a consecutive month on its physical and online stores to eliminate the negative impact cause by the commercial defamation.

Trademark squatting has been a serious problem in China especially for the foreign brands who want to enter the local market. In this case, whether the behavior of Cottonfield can be considered as “trademark squatting” and whether the term “squatting” has the connotation of commercial defamation are the key disputes between the two parties.

While the plaintiff sees “squatting” as a negative word, the defendant believes that it is an objective and truthful statement for preemptive registration. The court gave the plaintiff its support by ruling that the term “squatting” is misleading and using it has damaged the plaintiff’s commercial and product reputations. The plaintiff’s claim therefore has a factual and legal basis.

Again, this ruling shows that the key to tackle bad-faith trademark squatting is to file trademark applications as soon as possible and cover as many classes of goods and services as possible in order to prevent squatting from the beginning as well as extend the scope of protections.