Facts
First instance decision
Supreme Court opinion
Comment
On April 21 2008 Chen Guang, a Shanghai-based pen manufacturer, sued Wei Ya Da, a pen manufacturer in Ningbo, on the grounds of unfair competition. The plaintiff claimed that one of Wei Ya Da's models - known as the Ref 681 pen - was a slavish copy of its own pen, the K-35, which it considered to be a well-known product.
Chen Guang had filed a design patent for the K-35 pen in 2002 and the patent had been granted. However, the design right had been terminated - presumably because the annual fee had not been paid - and the patent right was not in force when the lawsuit started.
The case was complicated in view of the provisions of the relevant legislation. Article 5(2) of the Unfair Competition Law 1993 provides a list of practices that are deemed unfair, including:
"any use in the course of trade, without authorisation, of the identical name, packaging or decoration [that is] unique to a well-known product, or any use in the course of trade of a similar name, packaging or decoration [that is] unique to a well-known product, causing confusion and misleading consumers."
The difficulty for the plaintiff lay in convincing the court that the reproduction of the shape or configuration of the K-35 pen was an act of unfair competition, even though such reproduction did not extend to the imitation of the decoration or packaging. Many similar claims had been rejected in the past, as the courts had refused to accept that mere reproduction of the shape of a product could fall within Article 5(2) of the law.
The case proceeded rapidly, largely because it involved two Chinese parties. On June 19 2008 the Shanghai No 2 Intermediate Court held that:
- the K-35 pen was a well-known product; and
- its configuration could be considered special decoration of the well-known product.
Therefore, Wei Ya Da's copying of the configuration of the K-35 pen was deemed to constitute unfair competition.
On October 20 2008 the Shanghai Higher Court upheld the first instance decision. The defendant applied to the Supreme Court for review, but during the procedure the parties settled the case. The Supreme Court acknowledged this settlement in its ruling; however, in view of the important issues at stake, on December 3 2010 it rendered a detailed decision in which it expressed its opinion on the issues.
The Supreme Court considered two questions:
- If a related design patent right has expired or is terminated, can a product still be protected under unfair competition law?
- If the alleged infringement consists merely of slavishly copying the shape or configuration of the product, without additional imitation (ie, of decoration or packaging), what are the requirements for such an act to be considered an act of unfair competition?
Expired design patent
The Supreme Court stated that in the domain of intellectual property, an object may be protected by multiple IP rights. The termination of one form of right does not necessarily negate the effect of other rights. When a design patent is terminated, the design does not automatically enter the public domain. The design may simultaneously constitute the packaging or trade dress of the product; if so, it is entitled to protection on this basis.
The court further stated that in order to seek protection under the law, the following criteria must be met:
- The product in question must be a well-known product;
- The design must already have acquired the de facto function of distinguishing the source of the product;
- The design must not be determined by the nature of the product or be necessary to achieve a certain technical effect, or add substantial value to the goods; and
- The use of the design by a third party must be liable to cause confusion or incorrect identification among the relevant public.
Shape or configuration
The term 'trade dress' usually applies to wording, a device, a colour or a combination of such elements when attached to the product or shown on its packaging. The Supreme Court considered that the shape or configuration of the product alone, without additional single or combined elements, can be considered trade dress and decoration if:
- it has obvious features that distinguish it from ordinary designs; and
- through its use on the market, the relevant public has already come to associate it with the producer or supplier of the product - that is, if the shape or configuration has obtained a secondary meaning through use.
Comment
The Unfair Competition Law is being revised and a new draft has recently been released by the State Administration for Industry and Commerce. It is hoped that the new draft will follow the example set by the Shanghai courts. In opining on a settled case, the Supreme Court demonstrated the importance of these issues and laid out principles for the future. Its interpretation virtually treats the configuration of the K-35 pen as an unregistered three-dimensional trademark and grants protection under unfair competition law. If a product has lost its design patent protection, but is widely recognised by the relevant public in China as a result of its distinctive design, it is now possible to seek protection under unfair competition law if a third party copies the design without authorisation.
For further information on this topic please contact Zhang Shuhua or Paul Ranjard at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000), fax (+86 10 6894 8030) or email ([email protected] or [email protected]).