MMLC Group - China Unfair Competition Law

China’s Supreme People’s Court Releases Typical Unfair Competition Case Analysis

By Xia Yu
Published 16 October 2023

On 14 September 2023, China’s Supreme People’s Court (“SPC”) released five judicial typical cases on anti-unfair competition providing a reference for courts at all levels in China. These typical cases involve the field of life consumption such as household appliances, short videos, online games and restaurant reviews, as well as the high-tech field of diagnostic reagents, and provide the latest judicial perspectives on the determination of unfair competition behaviours such as the act of confusion, technical solutions constituting technical secrets, improper data capture, unfair competition in online game commercial boosting, and using false transactions to conduct false propaganda.

Typical Case One: Dispute over confusion acts, Siemens AG (“Siemens”), Siemens Ltd., China (“Siemens China”) v Ningbo Qishuai Electric Appliances Co., Ltd. (“Qishuai”), Kunshan Xinweichuang Electric Co., Ltd.(“Xinweichuang”), the SPC, (2022) SPC IP Civil Judgment of Final Instance No. 312

This typical case involves the identification of imitation and confusion. The court in this case determined that the act of using a logo, which is the same or similar to the trade name and registered trademark of a third party with a certain influence, as its trade name and engaging in business activities constitutes unfair competition as stipulated in Article 6 of China’s Anti-Unfair Competition Law. Meanwhile, under the situation where the existing evidence could not prove the specific amounts of the defendant’s profits and the plaintiff’s losses, but was sufficient to determine that the defendant’s profits from infringement exceeded the statutory upper limit of compensation, the court fully supported the plaintiff’s claims after taking full consideration of factors such as the popularity of the plaintiff and the unfair means of the defendant.

Siemens and Siemens China own the exclusive right regarding the “西门子”, the Chinese version of “SIEMENS”, trademark registration designated on washing machines. The “西门子” trademark registration has a high reputation in China. In addition, “西门子” being the Chinese version of the trade name of Siemens and Siemens China also has a certain influence in China. Qishuai manufactures and sells washing machines. It uses a logo of “上海西门子电器有限公司”, the Chinese version of Shanghai Siemens Electric Appliances Co., Ltd., in its washing machines, the packaging of these washing machines and related promotional activities. Xinweichuang sold these washing machines from Qishuai. Siemens and Siemens China filed a lawsuit under the grounds that the actions of Qishuai and Xinweichuang infringed on their registered trademark rights and constituted unfair competition, requesting compensation of RMB 100 million in economic losses and RMB 163,000 in reasonable expenses.

The court of the first instance fully supported the compensation claims of Siemens and Siemens China. Qishuai was dissatisfied and appealed. The SPC rejected the appeal and upheld the original verdict. The SPC held that Qishuai’s use of the logo on its washing machines, their packaging and promotional activities constituted trademark infringement and unfair competition behaviour provided in Article 6 (2) and (4) of China’s Anti-Unfair Competition Law respectively. The court of first instance used the content of media reports on file as the basis for calculating total sales and calculated the sales ratio of the accused infringing product as one-fifteenth, and then determined the amount of compensation. Given that Qishuai refused to provide financial information related to the infringement in the lawsuit, this approach was not inappropriate. Although the existing evidence cannot prove the profits and losses from the infringement, it is sufficient to determine that Qishuai’s benefits from the production and sale of the accused infringing washing machines exceed the maximum statutory compensation limit stipulated in Article 17 (4) of China’s Anti-Unfair Competition Law. Taking into account factors such as the high popularity of the trade name of Siemens and Siemens China, the obvious malicious intention of Qishuai, the scale of the infringement, and duration of the infringement, and the profit margin of washing machines, the SPC considers that the amount of compensation determined in the first instance was not inappropriate. 

Typical Case Two: Disputes over infringement of technical secrets, Beyond Biotech (Shanghai) Co., Ltd. (“Beyond”) v Mr. Cheng, Chengdu IXING Biotechnology Co., Ltd. (“Ixing”), the SPC, (2020) SPC IP Civil Judgment of Final Instance No. 1889

This typical case involves the identification of technical solutions that constitute technical secrets. The court in this case clarified that the technical solution claimed by the right holder to constitute a technical secret can be a technical solution that is reasonably summarized, briefed and refined based on technical information recorded in multiple technical documents that is not known to the public.

Beyond is the owner of the technical secret of a universal fluid for a photostimulated chemiluminescence analysis system. Mr. Cheng, A former Beyond employee, joined Ixing after resigning and disclosed the technical secret to Ixing. Ixing uses the disclosed technical secret to produce and sell in vitro diagnostic kits. Beyond filed a lawsuit under the grounds Mr. Cheng and Ixing infringed its rights and interests in the technical secret.

The court of the first instance ordered the two defendants to stop the infringement and jointly compensate Beyond for economic losses of RMB 1 million and reasonable rights protection expenses of RMB 300,000. Mr. Cheng and Ixing appealed. The SPC rejected the appeal and upheld the original verdict. The SPC held that technical secrets are usually reflected in technical materials such as drawings, process procedures, quality standards, operating instructions, and experimental data. To prove the existence and content of a technical secret, the technical secret information that needs to be protected is usually summarized, briefed and refined based on the carrier documents that embody the technical secret. A technical secret can be either a complete technical solution or part of the technical information that constitutes the technical solution. When the right holder summarizes, briefs and refines confidential information from its technical materials and other carriers, it shall be allowed to combine its confidential information with existing technology and common knowledge to form a complete technical solution to request protection. Technical solutions reasonably extracted by the right holder from technical documents such as process procedures and quality control standards that are not known to the public can be protected as technical secrets as long as they are not generally known to the public and are not easily accessible. Beyond advocates protecting eight complete technical solutions as technical secrets. They can be protected as technical secrets as the technical information such as particle CV value and particle diameter were correspondingly recorded in relevant technical documents, and Beyond reasonably summarized and refined the eight technical solutions based on the existing technology and common knowledge in this field.

Typical Case Three: Dispute over unfair competition, Beijing Microlive Vision Technology Co., Ltd. (“Microlive Vision”) v Beijing Chuangrui Media Co., Ltd. (“Chuangrui”), Beijing IP Court, (2021) Beijing Civil Judgment of Final Instance No. 1011

This typical case involves the identification of unfair competition behaviour in data capture. The court in this case clarified the legal nature and independent economic value of non-original data collections, distinguished the rights protected by China’s Copyright Law and the scope of legal interests under China’s Anti-unfair Competition Law, and protected the legitimate rights and interests of short video platform operators in collecting, storing, processing, and transmitting data.

Mircrolive Vision operates the short video platform of the TikTok APP. Without permission, Chuangrui used technical means or manual methods to obtain more than 50,000 video files, more than 10,000 user information, and 127 comments from the TikTok APP and provided them to the public through its Shuabao APP. Mircrolive Vision filed a lawsuit under the ground that Chuangrui’s behaviour constituted unfair competition.

The court of the first instance held that Chuangrui’s behaviour constituted unfair competition and ordered it to compensate Mircrolive Vision for economic losses of RMB 5 million. Chuangrui was dissatisfied and appealed. The Beijing IP Court rejected the appeal. The Beijing IP Court held that the video files, user information, and comment content involved in the case constitute data collection on the TikTok APP. The data collection is presented in a non-original manner and the content is independently retrievable but has independent value. Through legal operations, Mircrolive Vision invested huge manpower, material resources, and financial resources to collect, store, process, and transmit the data of the TikTok APP, forming a non-original data collection including user personal information, short videos, and user comments. The scale agglomeration effect of this data collection can bring huge economic benefits to Mircrolive Vision and form a competitive advantage in market competition. The competitive interests formed by Mircrolive Vision based on the non-original data collection are not stipulated in China’s Copyright Law or other special IP laws and should be protected by China’s Anti-Unfair Competition Law. As the operator of the Shuabao APP, Chuangrui used unfair means to capture and move the substantive content of non-original data collections in the TikTok APP, seizing the competitive resources of Mircrolive Vision, weakening its competitive advantages, damaging the consumer’s welfare, and undermining the market competition order in the short video industry. The harm caused by the behaviour of Chuangrui is far greater than the benefits gained by consumers based on it. Therefore, Chuangrui’s behaviour violated the principle of good faith and business ethics and constituted unfair competition.

Typical Case Four: Dispute over unfair competition, Tencent Technology (Chengdu) Co., Ltd. (“Tencent Chengdu”), Shenzhen Tencent Computer System Co., Ltd. (“Shenzhen Tencent”) v Foshan Nanhai District Beisheng Network Technology Co., Ltd. (“Beisheng”), Shanghai Pudong New Area People’s Court, (2022) Hu 0115 Civil Judgment of First Instance No. 13290

This typical case involves the determination of unfair competition in online game commercial power levelling. The court in this case applied the principal provisions of China’s Anti-Unfair Competition Law, based on the harmful consequences and unfairness of the accused behaviour, and determined that the commercial power-training behaviour that bypasses the anti-addiction mechanism for minors and damages the game operation mechanism constitutes unfair competition as stipulated in Article 2 of China’s Anti-Unfair Competition Law.

Tencent Chengdu is the copyright holder of the game of Honor of Kings and has authorized Shenzhen Tencent to exclusively operate the game. The game provides users with free downloads. The user agreement requires real-name registration, and the account is not allowed to be provided to others for commercial use such as power levelling or playing. The game is equipped with anti-addiction measures, and minors can only log in to the game within the period specified by the National Press and Publication Administration. An APP operated by Beisheng to assist in power levelling lures users, including minors, by forms of issuing cash rebates and setting up special areas to conduct commercial game power levelling transactions through its platform and obtain profits from them. The order taker can log in to the game of Honor of Kings without a real identity, and minors can also take orders and obtain others’ game accounts to bypass the anti-addiction mechanism, enter the game and earn fees. The APP of Beisheng protects transactions through security deposits and other methods and draws a certain percentage from it as platform revenue. Tencent Chengdu and Shenzhen Tencent filed a lawsuit on the grounds that Beisheng’s behaviour constituted unfair competition.

The court of the first instance held that the Honor of Kings game has a fair matching mechanism of the ELO rating system, which attracts and accumulates users based on the competitive level evaluated by the analysis and evaluation of game behaviour data, and ultimately obtains game revenue. This competitive advantage should be protected by law. The game implements China’s requirements for preventing game addiction for minors, and the goodwill gained based on this should also be protected by law. Beisheng organized commercial power levelling services through its APP, which failed the real-name system and anti-addiction mechanism for minors in the games involved. This hinders the order of online game operations, is not conducive to online ecological governance and the protection of the rights and interests of minors, and harms social and public interests. At the same time, it bypasses the real-name system and anti-addiction mechanism for minors in the Honor of Kings game, causing the relevant public to question the plaintiffs’ compliance operations and social responsibility. In addition, Beisheng’s behaviour prevents other real-name game users from being matched with opponents and teammates of comparable levels, and they are unable to obtain a fair competitive gaming experience. Furthermore, it increases the risk of minor players becoming addicted to games and affects the physical and mental health of minors. Therefore, the court of first instance held that Beisheng’s behaviour constituted unfair competition and ordered it to compensate for economic losses and reasonable expenses totalling RMB 985,000. After the first instance verdict, neither party appealed.

Typical Case Five: Dispute over unfair competition, DianPing Holdings Ltd. (“DianPing”) v Mr. Wu, Longhua District People’s Court of Shenzhen City, (2022) Yue 0309 Civil Judgment of First Instance No. 2585

This typical case involves the identification of false propaganda using false transactions. The court in this case determined that the behaviour of improperly obtaining traffic by helping platform operators organize false transactions, fake good reviews and other methods constituted unfair competition of false propaganda.

Dianping.com, operated by DianPing, is a local life information and trading platform that provides users with information services such as merchant information, consumer reviews, and consumer discounts. Platform review rules require users to ensure the authenticity, objectivity and legality of the information when posting information. Shiweixian (Shenzhen) Catering Management Co., Ltd. (“Shiweixian”) operated by Mr. Wu is an agency operating company. The company helps operators on Dianping.com to quickly increase their ratings through fake transactions and fake reviews. DianPing filed a lawsuit under the grounds that Shiweixian’s behaviour constituted trademark infringement and unfair competition. During the litigation process, Shiweixian was cancelled.

The court of first instance held that user reviews are the real advantage of Dianping.com, and review data is an important basis for DianPing to obtain user traffic and user stickiness. DianPing enjoys legitimate rights and interests in the platform data generated based on real consumption evaluations and the derived commercial value. Shiweixian used methods such as false transactions and fake good reviews to help operators on Dianping.com carry out false business promotions and quickly improve their ranking on the platform. It violates the platform’s evaluation rules, affects its credit system, and hurts the normal development of the platform’s business model. Therefore, this behaviour constitutes unfair competition through false propaganda. The court of first instance ordered Mr. Wu to compensate for economic losses and reasonable expenses totalling RMB 227,880. After the first instance verdict, neither party appealed.