Passing-off of Well-Known Products

Company B would like to proceed to the court in China for remedies. Counsel to Company B considered the following questions:

(i) Does Company B as a foreign company have any rights for its well-known wine products in China?

(ii) Is a preliminary injunction available to Company B to stop Company A from continuing to produce the new products in China?

(iii) Are there any other procedures that need to be considered to protect Company B's intellectual property rights?

Well-known merchandise

Article 1 of the Interpretation Concerning Several Questions of Application of Law regarding the Trial of Civil Disputes of Unfair Competition (the law against unfair competition) provides that a passing-off action is the unauthorized use of a peculiar name, packaging or get-up of a well-known product, whereby consumers are misled or deceived into thinking that the passing-off products are the same as the well-known products. 'Well-known products' refers to such merchandise that is known to the relevant public in their particular market.

A passing-off action against the unauthorized use of another company's product packaging presupposes the existence of the well-known product in China. When determining the degree to which the merchandise is well known, the court will take into account the time the merchandise was released to the market, the territory and volume of its sales, its market penetration, the amount of funds invested in the products by way of advertising or otherwise, the time of advertising, the degree and scope of advertising coverage and other factors, such as records of recognition of well-known products by the administrative authorities or the court.

As far as the hypothetical case is concerned, it would be difficult to find Company A committing an unfair competition act in China if Company B's products are not distributed in China. Products that are well-known in a foreign country but are not used in China will not generally be considered to be well-known products in China.

However, if Company B's products are distributed in China, the level of unfair competition would depend on the degree of knowledge of the products among the relevant public in China. In considering this issue, the court will consider all the circumstances of the case. It will also examine whether the knowledge of the relevant public is limited to the local city/provincial market or extends to the national market.

The level of public confusion caused is examined from two angles:

(i) confusion over the products has occurred, resulting in actual cases of misidentification of goods, and

(ii) confusion was such that is sufficient to cause misidentification of goods.

Where the goods are of the same type, there will be a presumption that there is sufficient confusion to cause misidentification of the goods. The plaintiff does not need to produce evidence to show whether the confusion has actually caused a misidentification of the goods' source.

Company B may be entitled to remedies available to an unfair competition claim, including a stop order, public apology and monetary damages, where the products are found to be well-known in China and where the passing off has caused confusion.

Preliminary injunction

In the Supreme People's Court's law against unfair competition (draft for solicitation of public opinions, November 19 2005), the court made a reference to Article 162 of the Supreme People's Court Opinion Concerning Several Questions on Implementation and Execution of the General Principles of Civil Law of the People's Republic of China (April 2 1988), which provides that in the course of civil proceedings where there are situations that call the need to stop harm, prevent hindrances and eliminate dangers, the court may, upon request or ex officio, make a preliminary ruling to such effect. By referring to this provision, the supreme court opined that preliminary injunctive relief may be granted not only in the course of the civil proceedings but prior to their commencement in cases of unfair competition matters.

Unfair competition

According to a notice from the State Administration of Industry and Commerce in 2003, Company A's registering of the well-known design packaging of Company B's wine product as its own patent in China will also be considered to be unfair competition.

Company B may apply to the administrative authorities for administration penalties against Company A. Company B may further apply to cancel the registered design patent before the Patent Re-Examination Board on the basis that the patent was not granted in accordance with the provisions of Chinese patent law. In such an action, Company B will need to establish its prior rights in the well-known merchandise, including any prior patent or trademark registrations, in respect of the wine label's design in China.