Keywords

Administrative sanctions based on “commensurate” standard

Synopsis

Plaintiff Suzhou Dingsheng Food Co., Ltd. (Dingsheng) is a foreignowned enterprise engaged in the production and processing of baking products and sales of self-made products. The company has registered trademarks for “艾维尔I WILL”, “艾维尔”and “艾维尔I WILL & DESIGN.” On June 23rd, 2009, Dingsheng signed a purchase contract with Zhejiang Jianli Packing Co., Ltd., hiring Jianli to produce gift boxes with trademark and other packaging products.

In September 2009, Dingsheng started to sell the moon cake of 23 different product series, including “cool autumn,” “happiness” as well as “LOHAS” involved in this case. The products were mainly sold by Dingsheng stores and franchise stores.
The third party Donghua Textile Group applied for, and received registration of, the trademark “乐活 LOHAS” on July 14th 2009, for “pastry; instant rice; cereal; ice cream” in Class 30, but up until the case on appeal, has never used the mark on the designated products.

On September 8th 2009, defendant Suzhou Administration for Industry and Commerce (the Administration), upon receipt of a complaint, made an investigation of Dingsheng.

Upon finding that Dingsheng used the trademark “乐活LOHAS” on its moon cake products in that year, the Administration determined that Dingsheng’s engaged in infringement activities of a registered trademark in violation of Article 52 (a) of the Trademark Law, and therefore decreed an order of injunction with an administrative fine of 500,000 yuan. Dissatisfied with this administrative decision, Dingsheng requested reconsideration with Suzhou Municipal People’s Government. The Government upheld the administrative decision, and Dingsheng, still not satisfied, sought judicial review in court.

The court of first instance deferred, holding that the administrative made a proper finding of facts and correctly applied the law, therefore dismissing the claims of Dingsheng. Plaintiff appealed. The second instance court, Jiangsu Higher People’s Court, opined that an administrative decision involving sanctions against a trademark infringer must be commensurate. When injunctive relief is sufficient for the purpose of protecting the exclusive right under registered trademark and the interest of consumers and the relevant public, the discretionary imposition of a fine shall be based on a comprehensive consideration of the factors of the intent of the parties, the circumstances, the nature, and the effect of the violation. If the administrative penalty decision is made without considering the above factors and goes against the “commensurate” standard, the result of administrative penalty will become obviously unfair and the people’s court shall have the power to correct the decision. The court of second instance then vacated the first instance judgment and changed the administrative decision to an “injunction.”

Judge’s comment

Under the framework of IP trial mechanism, this was the first case in Jiangsu that judicial judgment changed the decision on administrative punishment for administrative case of trademark infringement. The case was also listed in the Supreme People’s Court 2012 Top10 Cases of Judicial IP Protection. The value of the case lies in that it sets the following important judicial guidelines to IP administrative law enforcement organs: 1. In administrative law enforcement, when determining whether a trademark constitutes the same or similar trademark, the judgment standards applied by the People’s Courts in civil cases of trademark infringement should be an important reference; 2. When imposing administrative penalties in accordance with law, administrative law enforcement organs should be restricted to law enforcement purposes and follow the “proportional justice” principle provided by Article 4 of China’s Administrative Punishment Law. The trial of this case makes important contribution to establishing and perfecting the trial of administrative cases of trademark infringement. Particularly, it plays a positive role in guiding the industrial and commercial administrative organs to gain accurate understanding of the legislation spirit and infringement criteria of the Trademark Law and to exercise discretion properly in trademark administrative law enforcement. It reflects that judicial IP protection plays the leading role in the “dual” IP law enforcement system.

(Recommended by the Jiangsu Higher People’s Court)

10. Copyright infringement dispute: Beijing Hanyi Information Technology Co., Ltd. v. Prince Frog (China) Daily Chemical Co., Ltd., Fujian Shuangfei Daily Chemical Co., Ltd. and Suguo Supermarket Co., Ltd.

1st Inst. Case No.: (2011) Ning(Zhi)ChuZi No. 59 Civil Judgment, the Nanjing Intermediate People’s Court
2nd Inst. Case No.: (2012): Su(Zhi)ChuZi No. 0161 Civil Judgment, the Jiangsu Higher People’s Court

Keywords

Relatively high and unique aesthetic standard; font characters clearly distinctive of any existing styles deserving copyright protection

Synopsis

Hanyi, founded in 1993, is China’s first high-tech enterprise specialized in the research, development and sales of Chinese fonts. In June 1997 Hanyi started to design Hanyi Xiuying Font and finalized the font for every Chinese character on June 4th, 1998.The features of Xiuying Font include: the thickness of every stroke is basically the same; both ends of the stroke has round shape; point is heart-shaped; short left falling stroke is willow-shaped while long left falling stroke is overflying; right falling stroke is rising to the upper-right direction; folding stroke uses soft arc lines and turns to round-shaped. Compared with the well-known art characters, the basic strokes of Xiuying Font have distinct characteristics. Hanyi then developed a variety of font database entitled Hanyi Browsing Font in April 1999, in which the Xiuying Font was included (Simplified and Traditional). Its software license contract states that Hanyi authorized end-user to use the software on one registered computer and the software is protected by the Computer Software Protection Regulations and other relevant laws. End-users should treat it like other copyright works (such as books, recordings). Court demonstration showed that Windows 98 computer system could run the software disc and the four characters  (city baby) could be typed in Hanyi Xiuying Font. The four characters were contained in the original design draft of Hanyi Xiuying Font.

Starting in 2003, Shuangfei obtained from the Trademark Office the trademark registration Nos. 3589726, 3880842 and 6127596, all for use in class 3. The words in the trademarks used the Hanyi Xiuying Font (as shown below).

On December 25th, 2010, Hanyi purchased the “City Baby” and “Frog Prince” products made and sold by Shuangfei and Frog Prince under notarization.

After comparison on court, the product packaging uses the four Chinese characters and the registered trademark “Frog Prince” on significant positions. The font of the characters is the same as  in Hanyi Xiuying Font.

Judge’s comment

There is still no consensus in both theory and practice whether newly designed computer Chinese character fonts should be protected with intellectual property. Courts of both first and second instances did not rigidly adhere to the existing theories and judicial concept, but start from the analysis of the profound, rich history of Chinese characters. Courts believe that the Chinese characters are featured by the integration of image, sound and meaning. This feature is unique in the world and is significantly different from other fonts currently widely used in the world. Chinese character font has a lot of room for creativity, which can encourage wonderful association and inspire joy of beauty. Therefore, it is determined that computer font, which is based on calligrapher creation, belongs to the plastic arts works that are formed by lines, colors, etc. and have aesthetic meaning. So that computer font can enjoy protection by copyright law. At the same time, the courts were also fully aware that the computer font has the feature as a useful tool. To protect the public interest and to prevent excessive protection for character font, courts follow the eclecticism principle that only font with unique aesthetic level and significantly different from the prior known font can obtain protection by the Copyright Law. The establishment of this protection standard provides valuable reference for exploring protection methods for computer character font.

(Recommended by the Jiangsu Higher People’s Court)

11. Invention patent infringement dispute: Zhejiang Huali Communication Group Co., Ltd. v. Shenzhen Samsung Kejian Mobile Communication Technology Co., Ltd.

1st Inst. Case No.: (2007) HangMinSanChuZi No. 108 Civil Judgment, the Hangzhou Intermediate People’s Court
2nd Inst. Case No.: (2009) Zheng(Zhi)ZhongZi No. 64 Civil Judgment, the Zhejiang Higher People’s Court

Keywords

Case of first impression involving an internationally well-known mobile phone manufacturer as defendant

Synopsis

Zhejiang Huali Communication Group Co., Ltd. (Huali) is exclusive licensee of invention patent No. ZL02101734.4 entitled “A Method of GSM/CDMA Dual Mode Mobile Communication,” owning exclusively all the rights in the invention patent.

Huali, realizing that Samsung Kejian Mobile Telecommunication Technology Co., Ltd. (SSKMT) had been making, and a certain Dai Gang had been selling a type of mobile phone modeled SCH-W579 which had the same technical solution as that of the claim 1 of its patent, filed a complaint in Hangzhou Intermediate People’s Court on April 11th, 2007, seeking injunction and damages of 50,000,000 yuan against SSKMT, and an injunction against Dai Gang for further sale of the mobile phone.

The court, finding that the technical solution of the SCH-W579 mobile phone made by SSKMT and sold by Dai Gang to be within the patent protective range of Huali’s patent claim 1, either literally or by equivalency, ruled on December 19th, 2008, that SSKMT was enjoined from making and selling the infringing SCH-W579 phones; that Dai Gang was enjoined from selling the SCHW579 phones made by SSKMT; and 50,000,000 yuan in damages was assessed against SSKMT for compensation to Huali.

Dissatisfied with the decision, SSKMT appealed to the Zhejiang Higher People’s Court.

At trial, the Higher Court took the issue as whether the technical solution of the SSKMT SCH-W579 fell into the protection scope of Claim 1 of the patent. The technological solution of the patent at issue was not as simple of a few operating steps as were demonstrated by the interfacing operation on the phone, which could be achieved by different technical solutions. Therefore, the comparison demonstrated by the mobile phone interface from which SCH-W579 technical solution and operating methods derived was apparently less than ideal or scientific. To reveal the technical solution SCH-W579 and further to determine where it practiced the patented method, the technical determination of professional organization was necessary. Thus, the court granted SSKMT’s request to engage Shanghai Technological and Scientific Consultation Service Center to compare the allegedly infringing product and its technological method with the technological solution of the patent. Through technical assessment, the Center was of the opinion that the technological solution of SCH-W579 were different from the certain limitations of Claim 1 of the patent; the mobile communication method that SCHW579 used to support the GSM/ CDMA dual standby mode did not cover all the limitations of the patent; the technical means used and the functions performed by the two were different from each other; and the effects of the GSM/CDMA dual mode communication that the two achieved were different from each other. Thus, the two were different technical solutions. Pursuant to the conclusion, the court determined that the patented method described in Claim 1 of the patent did not read on SSKMT’s SCH-W579 phones, which fall outside the protection scope of the patent and did not constitute infringement. On March 5th, 2012, the court ruled to vacate the judgment below and dismissed the claims of Huali Communication.

Judge’s comment

This case is one of first impression in which an international famous mobile phone manufacturer was sued by its Chinese counterpart. As the petition and damage compensation claimed in the first-instance trial was as high as 50,000,000 yuan, it aroused wide attention from all society. The second-instance court guided the parties through the production of evidence and cross-examination and on that basis, went further to investigate the technological issues. It revised the original judgment and ruled that no infringement was constituted by Samsung Kejian. It reflects the court’s adherence to the rule that a party, either domestic or foreign, will be equally protected. The second instance judgment was accurate and profound in the analysis of the evidence and facts, and the comparison between the accused infringing product and the patent claims are thorough and pertinent.

(Recommended by the Zhejiang Higher Peo,,ple’s Court)

12. Trademark infringement dispute: Crocodile Shirts Co., Ltd. v. Qingdao Ruitian Garments and Accessories Co., Ltd.

1st Inst. Case No.: (2011) Qing(Zhi)MinChuZi No. 546 Civil Judgment, the Qingdao Intermediate People’s Court
2nd Inst. Case No.: (2012) LuMinSanZhongZi No. 81 Civil Judgment, the Shandong Higher People’s Court

Keywords

In OEM manufacturing, the labeling is not use of trademark in trademark sense, and cannot constitute trademark infringement.

Synopsis

Plaintiff, Crocodile Shirts Co., Ltd. (Crocodile HK) filed the lawsuit claiming that as a famous Hong Kong company, it entered the Mainland market in early 1980s, and registered the trademark “CROCODILE” in Class 25; that by recording its trademark with the Customs, it has tracked a large number of counterfeit products including 1,760 woven cotton wadded jackets from Qingdao Ruitian Garments and Accessories Co., Ltd. (Ruitian) for export; that the aforesaid products were labeled with the “CROCODILE” trademark in violation of its exclusive rights under the trademark registration.

It requested the court: 1. To issue an injunction against Ruitian; and 2. Award damages of 500,000 yuan, plus costs. Rui t ian responded that its manufacturing was in the nature of Original Equipment Manufacturing (OEM) on behalf of a foreign party; that it lawfully used the mark with permission, without any bad intent or fault; that it caused no adverse impact or damages to Crocodile HK, and that therefore did not infringe Crocodile HK’s trademark.

The first-instance court held that Ruitian’s use of the “CROCODILE” logo on the collar label of the ready-made jackets as submitted to the Customs for export was an infringement upon Crocodile HK’ exclusive right to the registered trademark “CROCODILE” No. 246898, and should be liable to an injunction; that it cannot assess and thus would not sustain Crocodile HK’s request for damages because none of the infringing products entered Chinese market, and no actual damages could be ascertained; and that Crocodile HK deserves reasonable cost and expenses, for which, however, only the litigation cost can be awarded to Crocodile HK because it failed to introduce any evidence of its reasonable expenses in seeking judicial remedies. On account of the above, the first-instance court issued an injunction against Ruitian from further use of the “CROCODILE” mark and dismissed other claims of Crocodile HK. 

Dissatisfied with the first instance ruling, Crocodile HK appealed, seeking reversal of the decision below, and damages in the amount of 300,000 yuan from Ruitian.

At second instance trial, the court opined that the trademark law protects a trademark merely in its identifying function, which is meaningful only in the sense of trademark use. Thus, the issue in this case is hinged on whether the alleged use of Ruitian is in the sense of trademark use under the trademark law. In the case, Ruitian’s OEM use of the mark is not connected with the flow of goods, and is therefore not in the sense of trademark use; moreover, Ruitian’s use of the tag and collar label had been lawfully authorized by its foreign customer, and used reasonable care. The court below was erroneous in finding Ruitian liable for trademark infringement of CROCODILE mark and in awarding cost to Crocodile HK, and misapplied the law, which must be corrected. On account of the above, it is hereby announced that the decision below is vacated and all the claims of Crocodile HK be dismissed.

Judge’s comment

This case is concerned with how to determine the nature of OEM use of trademarks, which in practice is highly debated. The second instance court starts from the territorial limitation and identifying attribute of the trademark, and goes on to conduct a deep analysis over the “trademark use” requirement of infringement as provided in Article 52(1) of the Trademark Law. The court did not limit itself to the literal meaning of the provision to determine the nature of OEM manufacturing in an overly simplified manner. But, it took into account the legal attributes and basic functions of a trademark and the subjective intention of domestic manufacturers in this respect. It concluded that in the OEM manufacturing activity concerned, the use of the trademark is not infringing.

(Recommended by the Shandong Higher People’s Court)