News and Cases from China: August 2018
Court upholds Board’s rejection of Design Patent for a Desk Lamp
Recently, the Beijing Intellectual Property Court heard an appeal from a decision of the Patent Reexamination Board in relation to design patent 201330158399.2, issued on 23 October 2013, for an ‘LED table lamp (fashion style mini type)’ in the name of Su Yuan.
The Court held that desk lamp products can qualify for design patent protection if the shape is both novel and not determined solely by functional requirements. In this case, it found that Su Yuan’s design combined the features of two previous designs, Comparative Designs 1 and 2, but that the combination had not resulted in any visual effect: there was no significant difference between Su Yuan’s design and the Comparative Designs. Not having any unique visual features, the design did not comply with Article 23 (2) 2 of the Patent Law. The Plaintiff’s appeal was dismissed. Neither party has appealed the Court’s decision.
China’s Top Three Telecom Operators Fined for Deceptive Ads
On 6 August, the Zhangjiajie Administration Bureau for Industry and Commerce Wulingyuan Branch issued administrative penalty decisions against three major Chinese telecom operators for false advertisements relating to ‘Unlimited data’: China Telecom, China Mobile and China Unicom. This is the first time administrative penalties have been imposed on telecom operators for false advertisements.
According to the Wulingyuan Branch, from 1 January 2018 to 31 March 2018, China Mobile handled new registrations for 295 households in Wulingyuan; in relation to 292 of those households it used technology to restrict data. The specific technical method is as follows: when the user's Internet data reaches 40 GB in the current month, the speed is reduced from 100 Mbps to less than 1 Mbps; after the monthly usage flow reaches 100 GB, the monthly data function stops. It will resume automatically the next month. The Wulingyuan Branch found that China Mobile essentially establishes a highest limit for the user's monthly data usage, which obviously breaches the ‘unlimited data’ promise.
China Mobile’s advertisement has a substantial impact on potential users’ buying behaviour. In terms of content, the advertisement states only part of the facts and easily leads to misunderstanding; for example, China Mobile uses a relatively small font to mark additional conditions such as data limit and speed reduction, causing users to purchase the data service in the mistaken belief that data is really unlimited. The company’s behaviour violates Article 28(2) of the Advertising Law and constitutes false advertising.
Wulingyuan Branch ordered China Mobile to immediately make a correction and imposed a fine of RMB 31,186.25 (approx. US$ 4536.97) for publishing false advertising. China Telecom and China Unicom were also fined RMB 32,500 (approx. USD 4728.10) and RMB 31,657.05 (approx. USD 4605.47) respectively, for false advertising.
The Court of the First Instance Awards 1.441 Billion Yuan (approx. US$ 201,000,000) in Wong Lo Kat Trademark Dispute
Guangzhou Baiyunshan Pharmaceutical Holdings.,Ltd (Guangzhou Pharmaceutical) is the owner of registered trademark ‘Wong Lo Kat’. On 2 May 2000, it entered into a Trademark License Agreement with JDB’s parent company, Hung to Company (Hung), permitting it to use the ‘Wong Lo Kat’ trademark in mainland China until 1 May 2010. The parties signed two separate Supplemental Agreements , the first in November 2002, the second in June 2003, stipulating that the Trademark License Agreement shall expire on 1 May 2020. The China International Economic and Trade Arbitration Commission subsequently held that the two Supplemental Agreements had been entered into as a result of bribery.
In 2014, Guangzhou Pharmaceutical filed a lawsuit with the Guangdong Higher People's Court, claiming that JDB had infringed its ‘Wong Lo Kat’ registered trademark and demanding compensation for economic loss of 1 billion yuan (Approx. US$15 million). It claimed that five companies in the JDB Group were jointly liable to pay the compensation. In February 2015, Guangzhou Pharmaceutical changed the amount of compensation being sought to 2.93 billion yuan (approx. US$430 million).
The Court held that the Supplementary Agreements had been signed as a result of Hung bribing the vice chairman and general manager of Guangzhou Pharmaceutical. The Supplementary Agreements involved a malicious conspiracy, which was detrimental to the interests of the State as well as the parties involved. The Supplementary Agreements were invalid. Therefore, Hung’s continued use of the trademark ‘Wong Lo Kat’ after the original expiry date of the Trademark License Agreement was unauthorised. Further, after Guangzhou Pharmaceutical had filed an arbitration application and the Supplementary Agreements had been held to be invalid, JDB not only did not immediately stop using the ‘Wong Lo Kat’ trademark, but changed the double-sided ‘Wong Lo Kat’ trademark logo by replacing the ‘Wong Lo Kat’ logo on one side with the ‘JDB’ logo. JDB had malicious intent to transfer the goodwill accumulated on the ‘Wong Lo Kat’ trademark of Guangzhou Pharmaceutical to the ‘JDB’ trademark. The Guangdong Higher People's Court made a first-instance judgment that JDB Group compensate Guangzhou Pharmaceutical for economic loss and reasonable rights protection expenses in the sum of 1.441 billion yuan (approx. US$201 million). JDB has issued a statement on its official website saying that JDB will appeal.
NetEase Cloud Music and Kuwo Series Disputes over Infringement on the Right of Communication of Works and Information Via Network
NetEase Cloud Music, a music streaming service, obtained the exclusive right to distribute a series of musical works electronically. After discovering that Kuwo (one of the three major music platforms of Tencent Music Entertainment Group) had illegally distributed NetEase Cloud Music copyrighted music without permission to the public through Kuwo Music web, pc and mobile app, and charged users, NetEase Cloud Music filed a series of lawsuits claiming that Kuwo had diverted mobile platform users, obtained high advertising revenue, and infringed copyright and related rights.
The Court held that in the resolution of disputes over online music works, it should consider, along with the rights of the parties involved, the promotion of wider dissemination of musical works. It encouraged cooperation between the two parties, including cross-licensing and authorization cooperation, which would provide a win-win solution with benefits in both legal and social areas. The parties subsequently reached agreement.