Conditions and Restrictions on the Protection of Product Appearance under Anti-unfair Competition Law -Comments on Unfair Competition Dispute SSM Schaerer Schweiter Mettler AG. v. Zhejiang Weifeng Machinery Co., Ltd January 25, 2017 China Intellectual Property News Edition 09: Rights Protection.Weekly (Xu Fei) [Case No.] (2013) No. 746, First Instance, No. 3 Civil Tribunal (Intellectual Property Tribunal), Pudong New Area People's Court of Shanghai [Judgment Summary] If a design is to be protected under the Anti-unfair Competition Law as a decoration peculiar to well-known product, the product shall have certain popularity and the design can be used to identify the source of the product. If a product design is available in the public domain due to the operator's failure to file a patent application in time and it's neither popular nor distinct, it won't be protected under the Anti-unfair Competition Laweven though it's used by others. [Case Review] The plaintiff SSM is a Swiss corporation which, together with the defendant Weifeng, manufactures textile machinery and its products have been reported by China Textile Leader, China Textile and Apparel, Melliand China and Cotton Textile Technology, etc. SSMclaimed that its PW2 precision digital winder was launched on the market earlier than Weifeng products. Weifeng's WF-50precision winder was similar to its product in terms of the overall structure of head box, settings of shaft andoperation panel and color of various components. 4 body components were also the same as those of SSM's product. The plaintiff believed that i) its product had been recognized by domestic and foreign customers and was wellknown in the industry. Its unique shape was designed and developed by SSM independently and was distinctive, which, through the company's publicity and commercial operation, was able to be used to distinguish the source of goods. Weifeng's product imitated the decoration peculiar to its well-known product - head box, which violated Article 5(b) of the Anti-unfair Competition Law; ii) Weifeng and SSM were competitors in business who had attended the same exhibitions in the textile industry. Weifeng's act of imitating its head box and winder body without due efforts but making use of its achievements directly to obtain unfair competitive advantages violated the principle of good faith and fair competition as well as Article 2 of the Anti-unfair Competition Law. Therefore, the plaintiff brought Weifeng to court for unfair competition and requested the court to rule that Weifeng bear the civil liability of ceasing infringement, eliminating the effect and compensating for the loss. After the trial, Pudong New Area People's Court of Shanghai held that the head box claimed by the plaintiff as a decoration peculiar to its well-known product was not very distinctive nor could be used to identify the source of goods, which, therefore, shouldn't be deemed as a decoration peculiar to well-known product under the protection of the Anti-unfair Competition Law; given that the plaintiff failed to submit the patent application in time, the defendant use of similar design didn't constitute unjustified use of its achievements nor violate Article 2 of the Anti-unfair Competition Law. In summary, the court dismissed all of the plaintiffs' claims. The judgment has taken effect as neither parties filed an appeal. [Case Study] 1. Conditions and recognition criteria for product design to be protected as a decoration peculiar to well-known product In this case, the plaintiff claimed that its head box was a decoration peculiar to well-known product as stipulated in Article 5 of the Anti-unfair Competition Law of P.R.C. When determining whether such claim should be supported or not, the court has to consider the legislative purpose of this article and recognition of product design and packaging arising therefrom. According to Article 5(b) of the Anti-unfair Competition Law of P.R.C, a business operator shall not use for a commodity without authorization a unique decoration of another's famous commodity, or use a decoration similar to that of another's famous commodity to confuse the commodity with that famous commodity and lead the purchasers to mistake the former for the latter. This provision aims to protect the decorations of commodities which are well-known and have the function of identifying the source of commodities, and to prevent others from confusing the relevant public about the source of the commodities throughcounterfeiting, which harm the interests of consumers and legitimate rights and interests of competitors. The primary function of commodity decoration is adornment. If an operator uses such decoration as a commercial mark in its business activities, which has obtained certain popularity, the decoration can be used to identify the source of the commodity and be protected under the Anti-unfair Competition Law as a decoration peculiar to well-known product. Therefore, function of identifying the source of commodity is the premise for commodity decoration to be protected by the Anti-unfair Competition Law, and whether commodity decoration has such function or not shall be determined based on the characteristics and use pattern of commodity name, packaging and decoration, especially if it is distinctive or becomes distinctive through use. n this case, the head box claimed by the plaintiff is an important and highly functional component of its product. Although its color and structure were subject to design and selection and the court didn't deny the practicality and decorative role of some decorations, judging from the appearance features of the head box, the combination of cabinet and operation panel is meant to make the product useful, and few decorative elementsadded for beauty didn't have strong decorative functions, which couldn't constitute decorations of the commodity, or, even if in the opposite case, weren't very distinctive. As to distinctiveness, the plaintiff used the head box as a product component only rather than a commercial mark. It wasn't mentioned in the reports provided by the plaintiff as evidence, or even though mentioned in the reports or product brochures, it appeared as a product component in pictures or drawings instead of a commercial mark indicating the source of the product. Existing evidences are insufficient to conclude that it becomes distinctive through use and can be used to identify the source of the product. 2. Relationship between general clauses and special clauses of the Anti-unfair Competition Law SSM believed that the Weifeng's act of using head box highly similar to its product without creative work and due efforts but making use of its achievements directly to obtain unfair competitive advantages violated the principle of good faith and fair competition, Article 2 of the Anti-unfair Competition Law as well as Article 5 thereof, which constituted unfair competition. According to Article 2 of the Anti-unfair Competition Law of P.R.C, a business operator shall, in his market transactions, follow the principles of voluntariness, equality, fairness and good faith and observe the generally recognized business ethics. This is a general clause whereas foregoing Article 5 is a special clause. Their relationship is general norm and special norm. To be specific, first of all, if an act not stipulated in special clause violates the provisions of general clause, suppression of which won't affect normal fair business competition, it may be deemed to constitute unfair competition according to the general clause - Article 2. That's to say, Article 2, as a principle clause, can also act as a miscellaneous provision and supplementary provision, based on which acts unstipulated in the specific clauses of the Anti-unfair Competition Law of P.R.C may be deemed to constitute unfair competition. Secondly, according to the law application principle that specific law prevails over general law, acts that can be regulated by specific special clausesshould be regulated and adjusted by special clauses rather than general clauses. That is to say, general clause - Article shouldn't be invoked for an act that has been stipulated in the special clause of the Anti-unfair Competition Law. Therefore, in the present case, the plaintiff couldn't claim application of Article 2 since it has claimed that the head box involved constituted the decoration peculiar to well-known product specified in Article 5. It should be noted that even if the plaintiff claims the application of Article 2 of the Anti-unfair Competition Law instead of Article 5, its claim won't be supported for the reason below. 3. Operator cannot resort to the protection of principle clauses of the Anti-unfair Competition Law if it fails to submit the patent application timely In this case,defendant's product is quite similar to that of the plaintiff in terms of appearance and structure, etc. The dispute arises mainly because the plaintiff fails to submit the design patent application in time after product design has been completed, making it impossible to seek the protection of patent law when competitors produce and sell products of the same structure and therefore resort to the Anti-unfair Competition Law. China's intellectual property laws includePatent Law, Trademark Law, Copyright Law, Anti-unfair Competition Lawand so on. Each has its own legislative policies, protected objects and protection conditions. If exhaustive protection has been provided in special laws, operators shall not be allowed to seek additional protection from the anti-unfair competition law, otherwise, it will be difficult to define the limits of rights and difficult for the public to predict the legality of their conduct. In this case, the plaintiff might have obtained a patent if it submitted a utility model or design patent application after the product design was completed. However, its technical solution or design entered the public domain along with product promotion or sales due to its negligence in protecting its rights and therefore the plaintiff should bear the consequences. Given that the design or technical solution of head box involved had entered the public domain due to plaintiff's failure to submit a utility model or design patent application, defendant's act of adopting similar design or technical solution shouldn't constitute unjustified use of the plaintiff's achievements, and no remedies shall granted be according to the Anti-unfair Competition Law simply because the plaintiff failed to obtain the patent according to the Patent Law, otherwise, technical solutions and designs that have been disclosed but for which patent applications haven't been submitted yet will be in trouble, making it difficult for other operators to predict the legality of their conduct and judge which technical solutions and designs available in the public domain can be used, thereby hindering technological advances and fair market competitions. (Author affiliation: Shanghai Intellectual Property Court)
