Guiding Cases issued by the Supreme People’s Court of the PRC (SPC)
September 14, 2021
On July 30, 2021, the Supreme People’s Court of the PRC (SPC) issued six guiding cases. Five of the guiding cases are on intellectual property rights and one on false advertising (but also IP related). Although China is not a common law jurisdiction, SPC’s guiding cases have precedential value on later rulings by courts on all levels in China.
1. Guiding Case No. 162 Trademark Invalidation – Chongqing Jiangxiaobai Wine Co., Ltd. v. State Intellectual Property Office (third-party – Chongqing Jiangjin Wine Factory (Group) Co., Ltd.)
Ruling Summary
Both parties have signed a sales contract and a customized product sales contract at the same time. Although there is a principal-agent distribution relationship, the disputed trademark drawings, product design, etc. are all proposed by the agent, and the customized product sales contract clearly stipulates that the principal shall not use the customized product concepts, advertising language, etc., without prior consent by the agent. Absent the prior use by the principal, the disputed trademark is NOT the “principal’s trademark” as referred to in Article 15 of the Trademark Law.
Legal Basis
Article 15 of the Trademark Law
In the event that an agent or a representative seeks to register the client’s trademark in its own name without the authorization of the client and faces objection from the client, such trademark shall not be registered and shall be prohibited from being used.
Where a trademark that the applicant applies for registration with respect to the same or similar goods is the same as or similar to an unregistered trademark that has been used by others, and there is contractual, business or any other relation between the applicant and others in addition to previous provisions, such trademark shall not be registered when the others raise objections.
Facts and Procedural History
Chongqing Jiangxiaobai Wine Co., Ltd. owns the mark “Jiangxiaobai” (Reg. No.: 10325554) in Class 33 (through several transfers). The last owner was Sichuan Xin Lan Tu Trading Co., Ltd. (Xin Lan Tu). Chongqing Jiangjin Wine Factory (Group) Co., Ltd. (Jiangjin) filed to invalidate this mark, claiming that Xin Lan Tu was its distributor. The distribution agreement states that Xin Lan Tu owns the product concept, design, advertising, and etc..
SIPO found in favor of Jiangjin and invalidated the disputed mark. Beijing IP Court reversed and remanded SIPO’s decision on trial. Beijing Higher Court reversed Beijing IP Court’s ruling on appeal. Eventually, SPC sided with Beijing IP Court and reversed the appellate decision.
2. Guiding Case No. 161 False Advertising – Guangzhou Wang Lao Ji Great Health Industry Co., Ltd. v. JDB (China) Drinks Co., Ltd.
Ruling Summary
To determine whether an advertisement constitutes false advertising under the Anti-Unfair Competition Law (AUCL), the court should consider factors including whether the content of the advertisement is ambiguous, whether it is easy to cause public confusion, and whether the party is at fault. If a party’s advertisement is objectively based on the trademark license agreement between the parties and its contribution to the goodwill of the trademark, unlikely to cause public confusion, and does not unfairly freeride on the goodwill of the trademark, it is not a false advertising under the AUCL.
Legal Basis
Article 8 of the Anti-Unfair Competition Law
A business operator shall not conduct commercial promotions for the performance, function, quality, sales status, user evaluation, honor received concerning its products in a false or misleading manner, attempting to cheat or mislead consumers.
Facts and Procedural History
Guangzhou Pharmaceutical Holdings Limited (GPH) is the owner of “Wang Lao Ji” series marks on herbal tea. GPH licensed the defendant and its affiliates to use the marks and distribute “Wang Lao Ji” herbal tea from May 2, 2000 to May 2, 2010. Through JDB’s long term marketing, “Wang Lao Ji” brand and its red-can trade dress had become well-known in China.
On May 25, 2012, GPH licensed the plaintiff to distribute the herbal tea in red can. Around the same time, JDB started to market “JDB” herbal tea and advertised that “the leading red-can herbal tea brand changed its name to JDB”. The plaintiff filed suit for false advertising.
Chongqing No. 5 Intermediate Court ruled in favor of the plaintiff and ordered the defendant to stop such false advertising. Chongqing Higher Court dismissed the defendant’s appeal. SPC reversed the lower court’s rulings and found in favor of the defendant.
3. Guiding Case No. 160 New Plant Varieties Infringement – Xinguang CAI v. Guangzhou Runping Commercial Co., Ltd.
Ruling Summary
- The propagating material of the protected variety is the protection scope of the new plant varieties right and is the basis for the varieties right holder to exercise the exclusive right. The scope of protection of the protected variety is not limited to the propagating material obtained in the specific way during the application for the varieties right. If other plant materials can be used for the propagating material of the protected variety, even if it is different from the propagating material commonly used by breeders in the application of the new plant varieties right, it should be included in the protection scope of new plant varieties rights.
- For a plant material to be recognized as propagating materials of a certain protected variety, it must meet all the following requirements: being alive, having the ability to reproduce, and the new individuals reproduced having the same characteristics as the protected variety. Plant materials that can only be used as harvest materials but not propagating materials do not fall within the scope of protection of new plant varieties rights.
Legal Basis
Article 6 of the Regulations on the Protection of New Plant Varieties
The entity which or the person who has accomplished the breeding has an exclusive right in their protected variety. Except otherwise provided in these Regulations, no other entity or person shall, without the consent of the holder of the varieties rights (hereinafter referred to as the ” varieties rights holder”), produce or sell for commercial purposes the propagating material of the said protected variety, or use for commercial purposes the propagating material of the protected variety in a repeated manner in the production of the propagating material of another variety.
Facts and Procedural History
Xinguang CAI applied for the new plant varieties right of “San Hong Honey Pomelo” on November 10, 2009, which was granted on January 1, 2014. Mr. CAI filed suit before Guangzhou IP Court in 2018, claiming that the defendant’s sales of “San Hong Honey Pomelo” infringed upon his new plant varieties right. Guangzhou IP Court dismissed the case, believing that the disputed product is not infringing because it uses breeding method for the propagating material which is different from the one specified in the plaintiff’s new plant varieties right.
The SPC corrected Guangzhou IP Court’s reasoning in this part, stating that such interpretation would unfairly limit the protection scope of a new plant varieties right. The SPC dismissed the case on a different ground that the seeds and juice sacs of the disputed honey pomelo are not reproductive, therefore not protected by the varieties right of the plaintiff’s.
4. Guiding Case No. 159 Patent Infringement – Shenzhen Guo Jun Technology Co., Ltd. v. Shenzhen Ji Xiang Tenda Technology Co., Ltd.
Ruling Summary
- If the defendant incorporated the substance of the patented process into the allegedly infringing product for business purposes, such incorporation irreplaceably and substantially enables the full coverage of the technical features of the patent claims, and end users can naturally reproduce the patented process when they use the allegedly infringing product in its intended way, then the defendant has implemented the patent and infringed upon the patent right.
- If the patent holder claims damages based on illegal gains and has provided prima facie evidence of the scale of infringement, but the defendant refuses to produce relevant evidence of the scale of infringement without justification and raises defense that the court should consider the contribution by the patent to the illegal gains, the court can dismiss such defense.
Legal Basis
Article 1, 11, and 64 of the PRC Patent Law
Facts and Procedural History
The plaintiff claims that the defendant sold commercial wireless router both online (TMALL, JD.com) and offline. This product infringes upon the plaintiff’s patent by using the same internet access protocol as the patented process. The defendant claims that it only manufactures the allegedly infringing product but does not use the technical solutions protected by the patent.
Ji’nan Intermediate Court found in favor of the plaintiff and ordered the defendant to cease infringing activities and pay damages of RMB5,000,000 (maximum statutory damages supported). The defendant appealed to the SPC, who dismissed the appeal.
5. Guiding Case No. 158 Patent Ownership Dispute – Shenzhen Weibond Technology Co., Ltd. v. LI Jianyi and Shenzhen Distance Automation Equipment Co., Ltd.
Ruling Summary
To determine whether “an invention is in connection with” the employee’s own duties or tasks assigned by his/her previous employer under Article 12 (3) of the Implementing Rules of the Patent Law, the court should balance the interests of the previous employer, the employee, and the current employer. Factors to be weighed include
- the specific job descriptions of the employee’s own duties or tasks assigned by his/her previous employer,
- the disputed patent and its relation to the employee’s own duties or tasks assigned by his/her previous employer,
- whether the previous employer engages in R&D in connection with the disputed patent or has other legitimate source for the technology, and
- whether the right holder and inventor of the disputed patent can reasonably explain the R&D process and source of the disputed patent.
Legal Basis
Article 6 of the PRC Patent Law and Article 12 of the Implementing Rules of the Patent Law
Facts and Procedural History
The defendant LI Jianyi was the Director of Manufacturing of the plaintiff’s and directly charged with the R&D management of the disputed technology. On April 17, 2013, LI terminated his 7-month employment with the plaintiff. On July 12, 2013, LI applied for the disputed patent and transferred the same to the other defendant on February 5, 2016.
Shenzhen Intermediate Court found in favor of the plaintiff. Guangdong Higher Court upheld the judgment. The SPC dismissed the defendants’ appeal.
6. Guiding Case No. 157 Copyright Infringement – Crosplus Home Furnishings (Shanghai) Co., Ltd. v. Beijing Zhongrong Hengsheng Wood Industry Co., Ltd. and Nanjing Mengyang Furniture Sales Center
Ruling Summary
Works of applied art which are creative, artistic, functional, and duplicable, and whose functionality and artistic aspect are separable can be protected as works of art under the copyright law. Works of applied art which can be protected under the copyright law must have artistic aspect. The copyright law protects the artistic aspect but not the functional aspect.
Legal Basis
Article 2 and 4 of the Implementing Rules of the Copyright Law
Facts and Procedural History
The plaintiff designed the disputed furniture set and marketed the set on several online platforms. The defendants sold similar furniture set offline. The two sets are artistically similar in their L-shape, shutter layout, accessory decoration, plate color pattern, and overall look and feel.
Nanjing Intermediate Court ruled against the plaintiff. Jiangsu Higher Court overturned the trial court’s decision. The SPC dismissed the defendant’s appeal, based on the similarity in the artistic aspect and the defendant’s “access” and “substantial similarity” to the plaintiff’s design.
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