In March 2019, the Beijing Chaoyang District Court ruled in favour of Jaguar Land Rover ("JLR") and ordered an injunction against Jiangling Holding's car model Land Wind X7 which closely resembled the design of JLR's Evoque. The judgment is pending appeal and therefore the injunction is not enforceable yet. This does not stop the news of the ruling to be widely reported. JLR described the victory as a "first" for the global car industry. Quite correct, this first is hard earned after 15 years of losing battles experienced in similar copy car cases such as Shuanghuan v Honda in 2003, General Motors v Chery in 2004, Fiat v Great Wall in 2006, and Neoplan v Zhonda in 2006. If one takes a step back and look at the ecosystem of Chinese companies competing by low costs replica, the uphill battles suffered by design owners are not limited to the auto industry but also commonly seen in home appliances, fashion, or industrial machineries. Is the JLR case a token victory which happened to be in the right place at the right time, or does it signify a new trend?
Why is it so difficult?
Several European countries have incorporated the concept of slavish imitation into their unfair competition law. In Asia, the Japan Unfair Competition Prevention Act classifies the act of trading in goods that imitate the configuration of another person's goods (excluding functional shapes) as unfair competition. However such provision is not found in the Chinese Anti-Unfair Competition Law (AUCL). As a result, right owners are forced to look for protection under other legal regimes. These include copyright, design patent protection, trade dress infringement, or the general principle statement in AUCL which prohibits against unfair trading practices. However these provisions are designed with other purposes in mind, and when they are invoked against slavish imitation certain misfits are observed.
Copyright Law is drafted with the protection of expression in the field of literary and science. The design drawings of cars, for example, could be a subject matter protectable as a work of fine art under Article 3(4) or as graphic drawings under Article 3(7) of the PRC Copyright Law. However, the hurdle for the artistic level in qualifying as a work of fine art is too high to overcome, because in general understanding it is a commercial product and not an art. As for graphic drawings, the act of turning a 2D design drawing into a 3D prototype is not considered by most courts as an act of copying. Once the chain of copying is broken, copyright does not subsist in the 3D prototype. The conclusion follows that there is no copyright infringement in copying from the commercial products.
Pursuing design infringement is another possibility with its own obstacles on the way. In Neoplan v Zhongda, the Beijing No.1 Intermediate People's Court initially found in favour of Neoplan against Zhongda's copy of the bus design, and awarded damages in the sum of RMB 21 million. However, Neoplan's design patent was invalidated subsequently due to a prior disclosure by itself before the design patent application. Also, there is no protection for partial product (the use of dotted lines) under Chinese design law. This poses difficulties when the registration is for the design of the car as a whole but then the copying is directed to specific distinctive features only. A third reason is that courts and local intellectual property offices tend to have a strict standard on similarity. While the design of the cars might have striking resemblance at first glance, after days of trial hearings to compare the two side-by-side, the defendants are able to get away by zooming in on the parts which differ.
Lastly, Article 2, Article 6(1) and 6(4) of AUCL offer remedies against acts of unfair competition which causes confusion. Article 2 - the general principle of fairness and good faith in business – has been used in some cases as a catch-all tool when all else failed. However, fairness is difficult to define, and the boundary of its application is highly uncertain. The Supreme People’s Court has directed local courts to exercise caution on application of this catch-all provision so as to avoid restriction on free trading caused by overuse. Article 6(1) and 6(4) are against unauthorised use of other persons' trade dress or other acts of unfair competition which causes consumer confusion. In copy car cases, confusion is a key point to overcome when the copy car manufacturers put in obvious marking of its own name and brand. There is probably no confusion when a customer purchased the car from the authorised 4S shop, but one could argue that to a passer-by catching a glance of a moving car, confusion is likely. Or, as an internet joke coined, the "inexperienced gold digger" test when one thought the date drove a McLaren and it turned out to be something else.
What has JLR done right?
Against these difficulties, JLR won the case by strategy and tenacity. Its first move is to bring an invalidation action against Jiangling's design registration for the Land Wind X7 on the basis that there are no distinctive differences from a prior design of Range Rover Evoque. The design patent for Land Wind X7 was filed on 6 November 2013 and granted to Jiangling in April 2014. JLR filed their invalidation petition before the Patent Re-examination Board ("PRB") of China in August 2014, just a few days before the Landwind X7 is officially launched into the market. Utilising the fast track system of design invalidation, JLR obtained a favourable ruling that the design of Land Wind X7 is similar to the Evoque, despite all the differences that had been cited by Jiangling in defending its registration. This was the perfect moment to move for injunction or perhaps even preliminary injunction as the queue for patent administrative appeal could take years. Jiangling fought back and sabotaged this chance by invalidating JLR's own design registration over Evoque. This is because Range Rover Evoque was first exhibited in the Guangzhou International Automobile Exhibition in December 2010, JLR missed the six-month grace period in China when it filed the corresponding design patent in November 2011.
The loss of its design patent did not stop JLR from pursuing the case. In 2015, JLR bought two infringement actions before the Beijing Chaoyang District Court, alleging unfair competition and copyright infringement respectively. It lost the copyright claim because of the difficulties stated above, but its argument based on Article 6(1) of AUCL gained traction. JLR produced a meticulous line up of evidence to prove that the design of the Range Rover Evoque enjoys a relatively high reputation in China, and that confusion was shown by numerous Chinese media and public about the "face clash" between the two car models.
JLR's case also came at the right time when everyone talks about strengthening of IP protection, and in particular the directional statement announced by President Xi Jinping in the G20 meeting in December 2018. Separate from this case and in parallel, on 27 March 2019 IP Appellate Tribunal of the Supreme People's Court handed down its very first judgment since the tribunal was established on 1 January 2019. That case is a dispute in the automotive industry between Valeo Systemes d'Essuyage and Xiamen Lukasi Car Accessories Co., Ltd. et al. The case relates to an invention patent owned by Valeo entitled "connectors and the corresponding connection device for windscreen wipers of auto vehicle. The Supreme People's Court agreed with the first instance judgment of the Shanghai IP Court that it is appropriate in the circumstance to award a partial judgment on the injunction claim when damages assessment is still pending.
What could be done going forward?
Amid practicable and legal difficulties as they stand, the JLR v Jiangling case illustrates that with a will to fight and a proper plan, success can be achieved. The two auto cases ruled by the Beijing and Shanghai Courts are leading indicators of IP protection in the auto sector. In 2019 we expect to see a consistent increase in the amount of damages awarded.
It is also important to remember that Chinese IP law is constantly developing and advancing, in our other article (link here) we reported how the enactment of the Foreign Investment Law resulted in the deletion of liability provisions in TIER against foreign technology importers. Specifically against the problem of low costs replica, domestic as well as international communities could lobby for changes to occur:
A specific subject of "Work of Applied Art" as protectable subject matter in the copyright law
Protecting design registration over part of a product
Extension of the term of protection for design patent to 15 years
A separate heading in the Anti-Unfair Competition Law against slavish imitation.