Beijing Wei Chixue Law Firm--Discussion on Common Issues of Protection to Product Packaging and Decoration under Chinese Anti-Unfair Competition Law

Attorney-at-Law Jie CHEN, Min YAO

The packaging and decoration of goods are important resources for enterprises in their market competition. In judicial practice, imitation of packaging and decoration of goods is a common type of intellectual property infringement. China's laws and judicial practices provide various ways of protection for the packaging and decoration of goods. Among them, the Anti-Unfair Competition Law protects the packaging and decoration of products which are well-known and identifiable in the manner of "packaging and decoration with some influence". But this kind of rights is different from trademark rights that also protect identifiable sources. "Packaging and decoration with some influence" does not have a specific certificate of rights indicating the subject, scope, term, and other contents of the rights. This article will discuss the common issues in the judicial practice of protecting the product packaging and decoration through the Anti-Unfair Competition Law in combination with practical cases, hoping to provide some reference for readers.

I. Who is the right holder of "packaging and decoration with some influence" protected by the Anti-Unfair Competition Law?

Since packaging and decoration is adhere to the product, it is generally believed that the owner of the packaging and decoration rights is the manufacturer and operator of the product. However, there may also be other rights in packaging and decoration, for instance trademark right of the sign represented in the packaging and decoration, design patent may be applied for the product packaging and decoration, and copyright for the original work contained in the packaging and decoration. When these rights holders are different from the producer and operator of the product, there may be disputes over who is the owner of the packaging and decoration rights.

In judicial practice, the ownership of rights and interests in the packaging and decoration of goods triggered by trademark licensing is a controversial issue. For example, in the case of Guangdong JDB Drink & Food Co., Ltd. v. Guangzhou Wang Laoji Great Health Industry Co., Ltd. for unauthorized use of the unique name, packaging and decoration of well-known goods [first instance case number: (2013) Yue High Court Civil San First No. 1, second instance case number: (2015) Civil San Final No. 2], the actual operator of the product JDB Company, and Guangzhou Pharmaceutical Holdings Limited who is the right holder of the trademark "王老吉" (trademark for Wang Laoji herbal tea), both claimed rights and interests in the packaging and decoration of the red canned Wang Laoji herbal tea. The Guangdong High Court of First Instance held that the trademark "王老吉", which occupies a significant part of the packaging, carries great goodwill and value, and is an indispensable factor for the continuation and development of the popularity of the red canned Wang Laoji herbal tea products involved in the case, and therefore held that the rights and interests in the packaging and decoration belong to the trademark owner, Guangzhou Pharmaceutical Holdings Limited. The Supreme Court of the second instance also denied the manufacturer's information as the direct basis for determining the ownership of rights and interests, and put forward that factors such as the role played by the brand "王老吉" in the formation of the packaging and decoration rights involved in the case, the role played by JDB's business behavior in the red canned Wang Laoji herbal tea in the formation of the packaging and decoration rights and interests involved in the case, consumers' cognition and consideration of the principle of fairness, etc., and finally held that the complete awarding of the rights and interests in the packaging and decoration involved in the case to any one party would lead to obvious unfair results and may harm the public interest. Under the premise of following the principle of good faith and respecting consumer cognition and not harming the legitimate rights and interests of others, it was ruled that the rights and interests in the unique packaging and decoration to the well-known goods involved in the case could be jointly enjoyed by Guangzhou Pharmaceutical Holdings Limited and JDB.

Disputes over rights in packaging and decoration similar to the above-mentioned red canned Wang Laoji herbal tea products stem from unclear stipulation of ownership of rights and interests generated during the trademark licensing contract. In order to avoid such disputes as much as possible, our firm suggests that the trademark licensing contract should clearly stipulate the ownership of rights and interests in the product packaging and decoration generated subsequently. For example, the product of a well-known Japanese brand that our firm represented has suffered a lot of imitation of packaging and decoration. We suggested that the trademark owner of the brand, the subsidiary responsible for production and operation in China, and the production factory sign a written agreement to clarify the ownership of packaging and decoration rights. According to the written agreement, it was determined that the owner of the rights and interests filed a lawsuit as the plaintiff against the enterprise that engaged in imitation. Some defendants challenged the eligibility of the plaintiff, but in view of our written agreement expressly agreeing on the attribution of ownership, the defendant's defense was not supported by the court. The packaging and decoration of the product under this brand have also been identified as product packaging and decoration with some influence and have been protected by China's Anti-Unfair Competition Law, which effectively curbed the imitation of packaging and decoration.

II. After termination of design patent for product packaging and decoration or the design patent is still in existence, can the right holder choose the Anti-Unfair competition Law to protect product packaging and decoration?

The shapes and patterns involved in the packaging and decoration of products are also the object of protection of design patents. In practice, many enterprises applied design patents for the packaging and decoration of products. However, the term of protection for design patents is limited, which is 15 years under the existing law and only 10 years before the fourth revision of the Patent Law. Then, after termination of the design patent of the packaging and decoration, can the Anti-Unfair Competition Law still be an option in protection?

The Supreme Court first clarified in the "M&G Automatic Pen" case involving unauthorized use of the unique decoration of well-known goods with case reference number (2010) Civil Retrial No. 16 that for the appearance of goods for which a design patent right is obtained, after the termination of the design patent right, if the goods using the design become well-known goods, and if the use of the design by others is sufficient to cause confusion or misidentification of the source of the goods by the relevant public, such a subsequent use would improperly exploit the goodwill of the prior user of the design and constitute unfair competition. Therefore, after the termination of a design patent right, the design does not automatically enter the public domain, and it can also be protected by the Anti-Unfair Competition Law if it meets the protection conditions stipulated by the law.

This leads to another related question. Can the right holder choose to apply the Anti-Unfair Competition Law for protection during the existence of a design patent for the packaging and decoration of goods? The answer is also positive. For example, in the case of House Foods Group Inc. v. Foshan Desheng Xinghuo Food Co., Ltd. and Guangzhou Desheng Food Co., Ltd. [First Instance Case No.: (2018) Hu 0115 Civil First No. 28722, Second Instance Case No.: (2019) Hu 73 Civil Final No. 242], we claimed that the plaintiff's product packaging and decoration constituted packaging and decoration with some influence, and sought protection under Anti-Unfair Competition Law, while the defendant in this case argued that the plaintiff still had a design patent for the packaging and decoration. Where patent law as special law can be applied, Anti-Unfair Competition Law as general law should not be applied for protection. We refuted this point from the perspectives of the relationship between patent law and anti-unfair competition law, the object and conditions of protection of design patent rights and packaging and decoration rights and interests, and the scope of protection, and the courts of first and second instance of this case both supported our view, holding that the plaintiff had the right to choose the protection method.

Generally speaking, for the packaging and decoration of goods, although there may be multiple protections based on design patent and anti-unfair competition law, their conditions and scope of protection are not completely overlapping. For more comprehensive and effective protection, we recommend acquiring as many rights as possible. A design patent may be applied before the product is put into market and made public and the right can be used to exclude imitation during the term of patent right, which can ensure the distinctiveness and identification of packaging and decoration so that after the patent is terminated, it can continue to obtain protection based on the Anti-Unfair Competition Law while meeting the protection requirements of the law.

III. When packaging and decoration are updated, can the new packaging and decoration inherit the popularity and influence achieved by the original packaging and decoration?

After product upgrading, packaging and decoration of the upgraded products are often updated accordingly in order to distinguish the upgraded ones from the old ones. So after the packaging and decoration are updated, can the new packaging and decoration inherit the market popularity and influence achieved by the original packaging and decoration?

When the overall design style and core identification elements of the new packaging and decoration are consistent with the original packaging and decoration, the new packaging and decoration can inherit the market popularity and influence that the original packaging and decoration have achieved. In the above-mentioned case of House Foods Group Inc. v. Foshan Desheng Xinghuo Food Co., Ltd. and Guangzhou Desheng Food Co., Ltd., the defendant argued that the packaging and decoration of the plaintiff's product "Baimengduo Curry" had undergone revisions, and its use of packaging and decoration was not consistent, and the packaging and decoration of the goods could not be directed to the plaintiff. The courts of first instance and second instance of this case both supported the plaintiff's claim, that is, the overall style of the packaging and decoration of the product before and after the revision was the same, the main design elements were not significantly different, the identification relationship with the source of the goods was not broken, and the new packaging and decoration could inherit the influence achieved by the old packaging and decoration.

Therefore, when the packaging and decoration of a product has achieved some popularity and influence in the market, in order to continue the popularity and influence, it is recommended that when updating the packaging and decoration, it is necessary to pay attention to keeping the core identification elements and overall style of the packaging and decoration unchanged.

IV. Can the appearance of industrial products be protected through the Anti-Unfair Competition Law?

Although the protection of the appearance of industrial products through the Anti-Unfair Competition Law requires the satisfaction of relatively strict conditions, which is quite difficult, the appearance of products that have been used in large quantities for a long time and acquired the function of identifying the source of goods may be determined to constitute the decoration of goods with some influence as stipulated in the Anti-Unfair Competition Law, and thus obtain protection. In recent years, there have been a number of judicial cases in which the shape and structure of goods have been protected by the Anti-Unfair Competition Law as the unique decoration of well-known goods or product decoration with some influence.

In the (2020) Yue 03 Civil First No. 3331 case represented by our firm, the plaintiff, AUDEMARS PIGUET HOLDING SA, launched the "Royal Oak" watch in 1972 and continued to operate the watch for decades, the signature design of which is an octagonal bezel with eight hexagonal screw heads. The defendant's products imitated the design of the plaintiff's watches and were sold on various e-commerce platforms. Our firm filed a lawsuit on behalf of the plaintiff in court, claiming that the design of the plaintiff’s watch constituted goods decoration with some influence. The defendant argued that the watch design was part of the product body and was not be able to identify the source of the product. In order to prove that the structure and design of the "Royal Oak" watch has actually played a role in distinguishing the source of goods, so that it can be protected by the Anti-Unfair Competition Law as product decoration with some influence, our lawyers have collected and sorted out a large amount of evidence to emphasize and prove that the plaintiff's octagonal bezel with eight hexagonal screw heads has distinctive features that distinguish it from common watch designs on the market, and has been highly recognizable among the relevant public, after long-term use and a lot of publicity. A stable market connection has been established between the watch design and the plaintiff, so the watch design plays a role in distinguishing the source of the product. In the end, the court upheld our claim and ruled that the design and structure of the plaintiff's "Royal Oak" watch constituted product decoration with some influence. The first-instance judgment in this case has taken effect.