Trademark Squatting: the case of Xiaomi's AI-powered voice prompt

The case involving Xiaomi and Chen Xiong is a notable example of the challenges posed by trademark squatting, particularly in China, where the practice has been a persistent issue. 

In July 2017, Xiaomi, a major Chinese electronics company, introduced a smart speaker featuring a voice-activated command prompt called "小爱同学" (Xiao Ai Tong Xue). This name quickly became synonymous with Xiaomi's AI-powered voice interaction technology, gaining significant recognition and becoming a key part of Xiaomi's product ecosystem.

In August 2017, just a month after Xiaomi's launch, Chen Xiong, an individual with no prior connection to Xiaomi, registered the name "小爱同学" as a trademark. 

Over the next few years, Chen aggressively expanded his trademark filings, registering 66 marks across 21 different classes. 

This is a typical example of trademark squatting. In fact, trademark squatting involves registering well-known or popular trademarks with the intent of profiting from them, often by demanding payment from the legitimate brand owner or by selling the trademark rights.

After obtaining the trademark registration, Chen sent a cease-and-desist letter to Xiaomi, demanding that the company stop using the "小爱同学" name. Chen also began using the trademark on his own products, including watches and clocks, to establish a claim of legitimate use.

Faced with the threat to its brand, Xiaomi filed a lawsuit against Chen Xiong and the licensee of the copycat trademarks in the Intermediate People’s Court of Wenzhou. Xiaomi argued that Chen's actions constituted unfair competition and were a clear case of trademark squatting.

Court's Ruling

On December 14, 2023, the Wenzhou Court issued a first-instance civil judgment in favor of Xiaomi. The court ruled that the name "小爱同学" was indeed associated with Xiaomi's products and had gained considerable recognition and goodwill in the market. 

The court found that Chen's actions, including the extensive trademark squatting and the cease-and-desist letter, violated the good-faith principle, which is a cornerstone of the Anti-Unfair Competition Law in China. The court determined that Chen's actions unfairly prejudiced Xiaomi's rights and interests.

The court ordered Chen to pay Xiaomi 1.2 million yuan (around 168,000 US$) in compensation for commercial losses and reasonable legal expenses. 

This ruling was significant because it not only protected Xiaomi's interests but also sent a strong message against trademark squatting.

The case has been recognized as one of the top 10 intellectual property (IP) cases of 2023 by the Supreme People’s Court of China. This designation underscores the case's importance and its potential to influence future IP disputes in China.

The court's decision to protect Xiaomi's VACP under the Anti-Unfair Competition Law, rather than relying solely on trademark law, highlights the broader legal avenues available to companies facing similar challenges. This approach allows for the protection of brand assets even when trademark registrations are held by third parties.

The ruling is expected to deter future trademark squatters by demonstrating that the Chinese legal system is willing to take strong action against those who seek to exploit well-known brands for personal gain.

For Xiaomi, the ruling is a significant victory, allowing the company to continue using the "小爱同学" name without fear of legal repercussions. It also reinforces the importance of promptly securing trademarks for key brand elements to avoid similar situations.

Conclusion

The Xiaomi vs. Chen Xiong case serves as a landmark decision in the fight against trademark squatting in China. It highlights the importance of protecting intellectual property and sets a strong legal precedent for other companies facing similar challenges. 

The case also illustrates the effectiveness of China's Anti-Unfair Competition Law in safeguarding the rights of legitimate brand owners against unfair practices.