2024/08/21

Top 10 Chinese IP cases in 2023

China Patent Trademark Copyright Unfair Competition Plant Variety Trade Secret

  With the advent of the World IP Day on April 22, the Supreme People’s Court (“SPC”) reported at its press conference the overall development status of IP judicial protection in Chinese courts. According to the SPC, more than 540,000 first instance, second instance and retrial cases relating to IP were docketed by Chinese courts last year. Compared with 2022, the number of closed cases and the number of newly-received cases were up by 3.41% and 0.13%, respectively. In the 319 infringement cases in which the courts awarded punitive damages, the total damages amounted to CNY 1.16 billion (equivalent to USD 160 million). Meanwhile, the SPC announced the top ten IP judgments and 50 typical IP cases in 2023, covering the intellectual property of patents, trademarks, copyrights, new plant varieties and anti-unfair competition. The cases involved the development of a number of cutting-edge key areas and industries relating to core technological innovations, well-known domestic and international brands, digital economy, and farming and agriculture, among others. The ten cases mentioned in the SPC’s announcement are summarized below; in all cases, the names of both parties have been redacted from the SPC press release.

 

  1. Infringement and unfair competition involving “Siemens” trademark [SPC (2022) SPCCivilFinal-No.312]

 

  Company X (likely to be Siemens) is the owner of the registered trademarks “西门子” and “SIEMENS” for household appliances. Company Q used a company name incorporating the same term “西门子” as a business logo in the packaging and commercial campaigns for laundry machines. The SPC upheld the original judgment in the second instance, finding that Q’s willful use of “西门子” caused confusion and constituted unfair competition. As for the amount of compensation, the SPC found that although the evidence presented was insufficient to ascertain X’s actual losses or Q’s actual gains from the infringement, at least either one had ran over CNY 5 million, the ceiling for statutory damages. Q’s refusal to present financial data relating to the infringement activities created a barrier to evidence. Based on press reports that Q’s average annual sales were CNY 1.5 billion, the court ruled that Company X should be awarded CNY 0.1 billion (1/15 of the total sales) due to infringements.

 

  In this case, the Court implemented the evidentiary rule of judicial obstruction. If a party bearing the burden of proof deliberately refuses to submit evidence and interferes with the fact-finding process, it will result in an unfavorable judgment against the party.

 

  2. Infringement and unfair competition involving “LAFITE” trademark [SPC (2022) SPCCivilFinal-No.313]

 

  Company L (likely to be Château Lafite Rothschild) is the long-time owner of registered trademarks “LAFITE” and “CHATEAU LAFITE ROTHSCHILD” on alcoholic beverages, establishing a connection with “拉菲.” In 2005, Company J based in Nanjing applied for the registration of “拉菲庄园” and subsequently used “拉菲庄园” and “LAFEI MANOR” for the manufacture, sale and import of wines. In 2016, the SPC upheld the decision to revoke J’s applications. L then sued for infringement. In the second instance at the SPC, the Court held that J’s applications constituted an act of malicious misappropriation of L’s goodwill, and that J had falsely exaggerated the history and publicity of the “拉菲庄园” wines. The Court found infringement and awarded damages of CNY 79.17 million.

 

  The case highlights the importance of good faith and integrity in market competition. The intent to free-ride on another’s reputation should be discouraged.

 

  3. Patent invalidation involving “human face recognition” technology [SPC (2021) SPCIntellectualAdminFinal-No.556]

 

  A third party raised an invalidity action against patent 200480036270.2 for “A Method for Acquiring Facial Images and a Facial Recognition Method and System” owned by Company Z. During the invalidity proceeding, Company A requested for a post-grant amendment of claims. The CNIPA accepted some parts of the amendment and rejected others, before making the decision to declare the ‘270 patent invalid due to lack of inventiveness. Company Z sued against the CNIPA’s decision.

 

  The new Patent Examination Guidelines have added a new type of post-grant amendment of a claim known as the “further limitation of the claim.” The Supreme People’s Court emphasized in the second instance of this case that amendments to claims shall not exceed the scope of the specification and the claims as filed or expand the scope as granted. In such a context, therefore, an acceptable approach to further limiting a claim is to form a new claim that contains all the technical features in the previously granted claim as well as other new features in other claims. Furthermore, the Court emphasized that amendments to claims in invalidity proceedings can only be those which are made in order to overcome defects in response to rejections or objections. Actual restructuring of claim set in under the guise of overcoming rejections is generally unacceptable. In the present case, the newly amended Claims 8-10 depending from Claims 4 and 7 were admissible. The CNIPA’s decision was wrong and was therefore remanded.

 

  The case addressed the definition, acceptability and purpose of post-grant amendments, particularly as a further limitation of claims in invalidity proceedings.

 

  4. New plant variety invalidation involving the corn breed “Red Jade (Danyu) No.405” [SPC (2022) SPCIntellectualCivilFinal-No.2907]

 

  Company D’s new corn variety Red Jade No. 405 had been passed off by Company N with its corn varieties Purple Light No. 4 and Beautiful Jade No. 118, among others. Company D sued for economic loss and enforcement expenses of CNY 3 million (CNY 1.5 million as the royalty base figure plus 100% punitive damages multiplier); however, the court of first instance granted only CNY 1 million. The Supreme People’s Court in the second instance evaluated multiple factors including the repetitive activities, the wide territorial span, and the large scale of the consequences and determined there to be malicious willfulness on the part of the infringer. By calculating the quantity and gross sales profit of the disputed Red Jade No. 405 corn harvests, the Court found that damages of CNY 1.5 million should be sufficient to cover the loss. A total of CNY 3 million as claimed was awarded.

 

  In China, the damages base can be set at the court’s discretion in view of the presented evidence. The court would not merely use a statutory figure simply because of the difficulty for accurately calculating the base figure.

 

  5. Copyright infringement and unfair competition involving a navigation map [Beijing High People’s Court (2021) JingCivilFinal-No.412]

 

  Company S authored a series of electronic maps and licensed them to Company B (likely to be Baidu), the license term last until 2016. After the license expired, Company S complained that Company B continued to use a number of substantially the same navigation maps in its six applications including “Baidu Maps,” “Baidu CarLife” and “Baidu Navigation.” Company S sued for copyright infringement with unfair competition. Both the first and second instance courts found that the disputed maps constituted graphic works protectable under the Copyright Law. In a review of the evidence comprising a large amount of map data—including, for example, 30 secret labels—the courts found that the six apps of the defendant used substantially the same maps as the plaintiff. Consequently, the courts awarded damages of CNY 64.5 million plus enforcement costs.

 

  One of the main questions in the case was whether an electronic navigation map is a copyrightable work, and the court conducted a complete analysis on this. Copyright law protects an original expression in a particular fixed form. Factors such as whether an electronic map is created or stored in a computer medium, whether it requires the use of software or hardware to present, and whether it offers personalization of the operating interface do not necessarily determine copyright eligibility. When an electronic map is downloaded to a terminal device, the expression is fixed regardless of the user’s customized settings. Furthermore, the electronic maps in this case employed unique object labeling, drawing methods and color matching, among other things, in contrast to choices or processing based on standards, rules and practical functions. In addition to merely presenting geographical facts, the disputed maps were essentially personalized compositions. Thus, they demonstrated originality and were therefore eligible for copyright protection.

 

  6. Unfair competition involving digital data [Guangdong High People’s Court (2022) YueCivilFinal-No.4541]

 

  Company W (likely to be Sina Weibo) is the operator of Sina Weibo, a microblogging service and one of the largest social media platforms in China. Company W complained that a Company J illegally employed an API to capture a large quantity of Weibo data and then stored and sold the same.

 

  The courts of first and second instance found Company W to have used the Weibo server API to retrieve a large quantity of data by deceptive means, switching the IP addresses and the user’s ID, and subsequently selling the data for profit. Such activities posed certain data security risks involving personal privacy and sensitive information leakage, unfairly and unethically undermining the competition in the data market as a consequence. Calculated at an average rate of approximately CNY 1 per 100 uses, the total damages for infringement were summed up to CNY 21 million.

 

  In terms of damages awarded, this is one of the cases with largest damages award involving data competition. The ownership and utilization of data are protectable by law. Unauthorized use by illegal means is a violation of good faith.

 

  7. Copyright infringement involving a medical device [Shanghai Third Intermediate People’s Court (2023) Hu03CriminalTrial-No.23]

 

  Defendants Liu and Liu were found to have willfully and jointly manufactured and sold dongles that bypassed technological copyright protection measures to provide links for downloading maintenance manuals and to duplicate support software for medical device products of Company X. The piracy software was substantially the same as the work of the copyright holder. The unauthorized duplication and dissemination of software and the circumvention of copyright protection measures constituted a grave offense of willful infringement of copyright. Both e were sentenced to imprisonment and received monetary fines.

 

  This is a typical case following the effectiveness of the 11th Amendment to the Criminal Law; the Amendment clarified the adjudication criterion determining criminal liability for circumventing and undermining technical protection measures. It demonstrated the strength of the judicial department in safeguarding the lawful interests in software copyright and promoting the development of the digital economy.

 

  8. Infringement of trade secret involving “lentinan” [Nanjing Intermediate People’s Court (2019) Su01CivilTrial-No.3444]

 

  Company H and Company T entered into a technological license agreement whereby Company H agreed to supply Company T with raw materials for manufacturing lentinan, a polysaccharide extracted from shiitake mushrooms. According to the terms of the license contract, the lentinan produced by Company T was to be sold to a distributor designated by Company H. In the case of Company T entrusting distribution to another company, Company T would be liable for compensation amounting to CNY 20 million. Both Companies H and T had adhered to confidentiality regarding the technological license. Several years later, it was found that Company T arbitrarily transferred the licensed lentinan manufacturing technology to a third party for a consideration of CNY 1 million, and this third party made a public announcement that it had put the lentinan raw materials into mass production, with a total value in excess of CNY 100 million. Company H sued Company T. In the review of an Intermediate Court, the lentinan technology in dispute was not known to the public, was of economic value, and was subject to confidentiality measures. It met the requirements of eligibility for protection as a trade secret. Company T’s transfer and disclosure of substantially the same technology to another entity without consent constituted infringement by breach of the license contract. According to the indemnification clause in the contract, Company T was duly obliged to provide compensation to Company H to the amount of CNY 20 million. The Supreme People’s Court affirmed the decision and the case was finalized.

 

  This case involved secrets of the processing of raw materials from shiitake mushrooms for traditional medicine. It has explored inquiries relating to the identification of secrets of traditional medicine technology and the unauthorized use of secrets. It is conducive to the protection of the IP of traditional medicine and has collaterally encouraged modernization and innovation in traditional medicine.

 

  9. Unfair competition involving “XiaoAi Classmate” voice activation command [Wenzhou Intermediate People’s Court (2023) Zhe03CivilTrial-No.423]

 

  In 2017, Company X (likely to be Xiaomi Technology) launched a smart speaker (or “AI personal assistant”) that is voice-activated using the wake word “XiaoAi Classmate”. AI voice interaction engines using the same wake word were installed in subsequent products such as cellphones and TVs. An individual named Chen underwent applications for 66 registrations of the word mark “XiaoAi Classmate” on a variety of classes of products. Chen served warning letters to Company X and also collaborated with a Company Y to use the “XiaoAi Classmate” mark on sport watches, alarm clocks and other products. Company X sued Chen and Company Y. The Intermediate Court found that “XiaoAi Classmate” had been widely used as an influential wake word, as the name of an AI voice interaction engine, and as an electronic product equipped with such an engine. It was protected by the unfair competition law. Defendants Chen and Company Y’s activities of “trademark squatting” and issuing warning letters were deemed to have violated the good faith principle and undermined fair market order. Their sales of products bearing the “XiaoAi Classmate” mark were deemed a dissemination of misleading and false commercial information, constituting unfair competition. They are jointly liable for economic losses and enforcement expenses incurred by Company X totaling CNY 1.2 million.

 

  The court recognized the protection of an AI voice-activated wake word. The unauthorized use of influential wake words was against the legal interests under the unfair competition law. The malicious practice of “trademark squatting” by using another party’s famous wake word was effectively discouraged. The business reputation of an innovative enterprise was fully safeguarded.

 

  10. Unfair competition involving “teen mode” age verification [Tianjin Free Trade Pilot Zone People’s Court (2022) Jin0319CivilTrial-No.23977]

 

  Company T (likely to be Tencent) offers a “teenage mode” in its “Tencent Video” and “Tencent NOW Live” apps. When running the app, a window pops up to notify the device owner of the choice to activate the teenage mode. In teenage mode, the app disables in-app purchases such as crediting and gifting or switches to an anti-addition mechanism. Before running the app, the user must click the “Terms and Conditions” checkbox to promise not to modify or sabotage the normal operation of the teenage mode. Company A created an adware removal tool whereby a premium user can disable the teenage mode pop-up notification. The court of first instance found that Company A’s tool interfered with or undermined the normal operation of Company T’s product for the purpose of exploiting economic interests. By damaging the industrial ecology, violating laws and regulations around youth protection, and discouraging the development of the audio/video industry, it constituted unfair competition. Taking into account such factors as the widespread coverage across multiple apps, the large number of downloads, and the considerable impact on the youth population, the court ordered that CNY 3 million be awarded in damages and enforcement expenses. Following the verdict, the two parties reached a settlement.

 

  This case recognized the positive role of teenage protection mechanisms in apps. Disabling the protection mechanism using unfair means would be characterized negatively. By emphasizing the importance of youth protection, the judgment also highlighted the significance of business operations’ responsibilities in terms of ESG.

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