In the case below we can see a direct application of good faith, bad faith principles and how the court uses them. This case includes trademark infringement and a famous brand of dumplings, Gou Bu Li. （狗不理）

I will run over the basic facts of the case. There are two companies that use the same characters, Goubuli, for their brand name of dumplings. The plaintiff, Tianjin Goubuli, registered the Goubuli trade-mark in 1994. Tianjin Goubuli is also considered a “well known trade-mark in China”. To find out more about “well known trade-mark in China”, Chinalawblog has a great post on this. The defendant, Tianfengyuan of Jinnan, is also a producer of the famous Goubuli dumpling and uses that name in its restaurant.

Tianjin Goubuli is suing Tianfengyuan for trademark infringement on the use of the name “Goubuli”. Tianjin Goubuli believes Tianfengyuan uses the name intentionally to confuse costumers and gain additional revenue via “hitchhiking” from the brand name recognition.

Tianjin Goubuli tells the court, Tianfengyuan is using the name in bad faith. As it turns out, Tianfengyuan has been making Goubuli dumplings since the 1940’s and has continued since to make Goubuli dumplings famously in their city of Jinnan. “Goubuli Steamed Dumplings Stuffed with Pork and Soup”, was one of the many logos they used in/on the restaurant. Catchy right? It was famous in Jinnan in its own right.

Since history plays a part in all this, the court finds that Tianfengyuan was not acting in bad faith. It was using the name way before Tianjin Goubuli was created and was not using the name to confuse the customers and gain extra profit. In fact, they were using the name in good faith. They used the name, as they had used in the past, to represent their company’s famous snack. Even after Tianjin Goubuli became famous after 1994, Tianfengyuan still had not tried to use the name for bad faith purposes.

There were some banners and menus that only had the characters, Goubuli. They were not considered to be used in bad faith and asked Tianfengyuan to remove those characters, which are a registered trade-mark of Tianjin Goubuli. All other compensations were rejected.

What is important about good faith and bad faith distinction in this case is the difference between being sued for compensation or not. If the court found Tianfengyuan using the name for misleading people, compensation would be necessary. Intent and being able to prove it is important.

A quick note… good faith and bad faith, is not only about trade-marks. It is a general principle that can be used in all applications of law and business situations. A big problem about this subject above is proving it. You need to have clear map of showing HOW something was not done in good faith. WHY was in done in bad faith? Simply claiming it will not get you the results you’re seeking.

Contract law:

Article 6 The parties shall observe the principle of good faith in the exercise

of their rights and performance of their duties.

Article 42 A party shall be liable for compensation if he, in the course of concluding the contract, causes damage to the other party in one of the following situations:

1. he negotiates in bad faith under the pretext of concluding a contract;

2. he intentionally conceals a material fact relevant to the conclusion

of the contract or gives false information;

3. he engages in other acts that violate the principle of good faith.

Looking above at article 6, what does that even mean? What about article 42, “1. he negotiates in bad faith under the pretext of concluding a contract”? For the first example, it means acting in honesty or correct conduct and for the second, malicious behavior. For example, intentional trying to have a contract fail or breach.

Good faith and bad faith are a bit of catch-alls. They are general principals law might not be directly addressing or law that has not been developed yet. This is especially important for China, since the law system is in constant flux. In the country side, for example, updated national laws are not know yet or simply not followed.  This one catch-all of good faith and bad faith is a still constant and has been from the beginning.

This week I will give more examples of how good faith and bad faith are used.