Belinda Yang and Joshua Whale
Rouse
byang@iprights.com, jwhale@iprights.com

A Conflict of Rights

The packaging or decoration used on well-known products is of great value to its rightful owners. Unfortunately, imitators often seek to cash-in on consumer goodwill towards those designs.

Article 5(2) of the Anti-Unfair Competition Law (1993) forbids business operators from the unauthorised use of:

“…the names, packaging or decoration peculiar [or similar to] well-known goods… so that their goods are confused with the well-known goods of others, causing buyers to mistake them for the well-known goods of others…”

However, smart infringers often pre-empt Article 5(2) complaints, by registering bogus design patents that cover their similar or identical packaging or decoration. This creates a conflict of rights that can stall proceedings against them.

Fortunately, China’s laws provide a solution to such conflicts.

Legal Basis for Resolving the Conflict of Rights

Design patents have no standing against a prior right

Article 23 of the Patent Law (2000) states that:

“Any design for which a patent right may be granted must not be identical with or similar to any design which, before the date of filing, has been publicly disclosed in publications in the country or abroad or has been publicly used in the country, and must not be in conflict with any prior right of any other person” (emphasis added).

Furthermore, the Response on Unauthorised use of Packaging or Decoration and obtaining Design Patents (2003)¹ by the State Administration of Industry and Commerce (AIC) affirms this priority rule from the anti-unfair competition perspective.

The rightful owner of the packaging design has a right against unfair competition

The Anti-Unfair Competition Law is often thought to create a public right only. However, Article 16 of the Several Provisions of the Supreme People’s Court on Issues Concerning Applicable Laws to the Trial of Patent Controversies (2001) clearly tells us that “…a prior right includes the packaging or decoration peculiar to well-known goods.”

The AIC has jurisdiction to adjudicate over this conflict of rights

Rule 65 (3) of the Implementing Regulations of the Patent Law of the People’s Republic of China (2001) says that:

“Where a request is filed for invalidation of a design patent on the grounds that the design patent is in conflict with a prior right of another person acquired earlier, but no effective decision or judgment is submitted which proves the handling of the collision of rights in question, the Patent Administrative Organ under the State Council shall not accept it.”

By necessary implication, this tells us that the proper procedure for resolving this conflict of rights is through the applicable AIC or Court. Since these authorities will already be deciding whether the product is well-known, the only real difference is that they must also establish when the packaging was first used.

Once the Court or AIC has decided that there is a prior right, the way is clear to issue a ruling on this (as described under Rule 65(3) above) and continue with proceedings as if no design patent existed.

Evidence

The following evidence will be useful in showing the product’s well-known status and the priority:

Showing the product’s well-known status

Persuasive evidence with a good chance of being admitted includes:

a. government-issued market share statistics;

b. evidence showing time-span and geographical coverage of:

i) distribution;

ii) sales volume; and

iii) profits;

c. positive customer testimonials;

d. evidence showing level of investment in advertising;

e. evidence of actual media advertising accessible to the relevant market;

f. prizes awarded by authoritative departments and reputable industry publications;

g. judgments and punishment decisions showing that the product is a popular target for infringers.

Showing priority of the packaging

Well-known product owners will need to show that the packaging or decoration was in use before the design patent registration. Such evidence might include:

a. prior-dated official documents:

i) approving the goods for manufacture;

ii) approving the packaging, (e.g. by the State Food and Drug Administration); and

iii) trade mark office receipts of application for trade mark registration for the packaging; and

b. prior-dated media advertising showing the packaging or decoration.

Conclusion

a. Producers of well-known goods have a private right to fair competition in respect to their packaging.

b. This right takes precedence over later design patent registrations.

c. The Courts and the AIC are responsible for establishing whether such a prior right is established on the facts of the case.

d. If a prior right is established, the Courts and the AIC may disregard the later design patent and continue with proceedings.

This means as long as producers of well-known products can show when the infringed packaging was first used, later design patents should not pose an obstacle to enforcement under the Anti-Unfair Competition Law. This may save consumers and businesses years of delay and further infringement while awaiting a patent invalidation, thereby removing the incentive for this wasteful misuse of the patent system.

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