Determination on the Ownership of Packaging and Decoration Specific to Famous Commodities
——GPHL v. JDB Company et al.
[Syllabus]
The “famous commodities” and “specific packaging and decoration” stipulated in Item 2, Article 5 of the Anti-unfair Competition Law are mutually interdependent and inseparable; only the commodities that use specific packaging or decoration can be the object regulated by the Anti-unfair Competition Law. Abstract commodity names or commodity concepts without definitive connotations are detached from the concrete commodities on which packaging and decoration depend, short of evaluable conducts of actual usage, and thus unevaluable under Item 2, Article 5 of the Anti-unfair Competition Law.
The determination of the ownership of the rights and interests of specific packaging and decoration shall both encourage honest work on the premise of following the principle of good faith, and respect consumers’ cognition on the source of commodities objectively formed based on the distinctive features of packaging and decoration per se.
[Case No.] Supreme People's Court (2015) MSZZ No.2 and (2015) MSZZ No.3
[Cause of Action] Disputes over unauthorized use of the packaging and decoration specific to a famous commodity
[Collegial Panel Members] Song Xiaoming Xia Junli Zhou Xiang Qian Xiaohong Tong Shu
[Keywords] Unfair competition, famous commodity, specific packaging and decoration, ownership
[Relevant Legal Provisions] Item 2, Article 5 of Anti-unfair Competition Law of the People's Republic of China
[Basic Facts]
On July 6, 2012, Guangzhou Pharmaceutical Holdings Limited (hereinafter referred to as "GPHL") and Guangdong Jiaduobao Beverage and Food Co., Ltd. (hereinafter referred to as "JDB Company") respectively instituted legal proceedings in a court on the same day, each asserting its rights and interests of the packaging and decoration specific to a famous commodity, “Red-Canned Wanglaoji Herbal Tea”, and alleging on this basis that the packaging and decoration of the red-canned herbal tea produced and sold by the other party constituted infringement. Specifically speaking, GPHL, as the holder of registered trademark “Wanglaoji” believes that since “Wanglaoji” is an inseparable part of the packaging and decoration and distinctively indicates the source of commodity, consumers would take it for granted that the Red-Canned Wanglaoji Herbal Tea originates from the holder of trademark “Wanglaoji”, and the recipe and taste would not affect the consumers’ identification and judgment of the commodity. JDB Company, as the former actual operator of Red-Canned Wanglaoji Herbal Tea, believes that the rights and interests of the packaging and decoration and the ownership of trademark right of “Wanglaoji” are independent from, and do not affect, each other. What consumers love is the Red-Canned Wanglaoji Herbal Tea produced by JDB Company with specifically selected recipe, and the packaging and decoration in this Case is used by JDB Company and closely integrated with the said commodity; thus the rights and interests relating to the packaging and decoration shall belong to JDB Company.
Holding
In the first instance, Guangdong High People's Court held that the rights and interests of the packaging and decoration of "Red-Canned Wanglaoji Herbal Tea" shall belong to GPHL and that the production and sale of red-canned herbal tea by Guangzhou Wanglaoji Health Industry Co., Ltd. (hereinafter referred to as "Health Company") with the authorization by GPHL did not constitute infringement. Since JDB Company did not own the rights and interests of the packaging and decoration concerned, its production and sale of both red-canned herbal tea with “王老吉(Wanglaoji)” and “加多宝(JDB)” on either side and that with “加多宝(JDB)” on both sides constituted infringement. Hence, the Court in the first instance ordered JDB Company to cease the infringement, publish a statement to eliminate the effect, and compensate GPHL 150 million yuan for economic losses and more than 260,000 yuan for reasonable enforcement costs. JDB Company appealed both judgments of the first instance to the Supreme People’s Court. The Supreme People’s Court made the second-instance judgment on July 7, 2017, dismissing all the claims of both GPHL and JDB Company.
[Reasoning]
The Court held in the effective judgment that distinctive features of packaging and decoration for recognition and their application to fairly famous commodities are the conditions for the rights and interests of the commercial indications connected with packaging and decoration to be protected by the Anti-unfair Competition Law. The application of Item 2, Article 5 of the Anti-unfair Competition Law shall correctly understand the relationship between “specific packaging and decoration” and “famous commodity”, as being mutually interdependent and inseparable. Only the commodity that uses the specific packaging and decoration is evaluable by the Anti-unfair Competition Law. On the contrary, abstract commodity names or commodity concepts without definitive connotations are detached from the concrete commodities on which packaging and decoration depend, short of evaluable conducts of actual usage, and thus unevaluable under Item 2, Article 5 of the Anti-unfair Competition Law. When dispute occurred between the two parties, “Wanglaoji Herbal Tea”, as a kind of commodity name, could at least refer to variously packaged and decorated herbal tea products such as the green-boxed one produced by GPHL and red-canned one produced by JDB Company. The purpose of defining “famous commodity” is to judge whether the specific packaging and decoration attached thereto meet the conditions for the rights and interests of commercial indications to be protectable by the Anti-unfair Competition Law. Hence, such “famous commodity” shall be clearly directed to the packaging and decoration concerned. The court of first instance disregarded the dependence of the packaging and decoration on the commodity, and found the commodity name “Wanglaoji Herbal Tea”, which has non-specific references, as the “famous commodity” in this Case. This decision lacks factual and legal basis and is hereby corrected.
This dispute over the packaging and decoration specific to the famous commodity arose from the failure of both parties to clearly contract, while entering into and performing the trademark license contract, how to allocate the derivative benefits accruable during the term of license. Usually, once the trademark license terminates, the licensee shall immediately stop its use, and the goodwill accumulated on the licensed trademark shall be simultaneously returned to the licensor. The dispute in this Case occurred in an unusual way in the sense that the specific packaging and decoration introduced during the licensed use not only closely related to the licensed trademark, but also created features of goodwill beyond trademark rights due to their attribute as independent rights and interests under the Anti-unfair Competition Law. The claims proposed by the parties both entail the general application of law on the protection of rights and interests of commercial indications, and reflect the complex historical and realistic factors involved in the formation process of the rights and interests of the specific packaging and decoration in this Case. The registered trademark system and the protection system of the rights and interests of the packaging and decoration specific to famous commodities have different sources of rights and conditions for protection though they both belong to the legal system to protect the rights and interests of commercial indications. Registered trademarks and packaging and decoration can each play an independent role of recognition, and respectively belong to different rightholders. After the Red-canned Wanlaoji Herbal Tea was launched to the market and effectively marketed by JDB Company and its affiliates, the packaging and decoration used on the Red-canned Wanlaoji Herbal Tea has generated independent rights and interests of commercial indications due to its popularity and specificity. This Case is exceptional because in the course of design, use and promotion, JDB Company, as the actual operator of the packaging and decoration concerned, always highlighted the word “Wanglaoji”, a registered trademark of GPHL, on its packaging and decoration, and never intended to break and clearly distinguish the relation between the packaging and decoration and the registered trademark contained therein, which objectively caused the packaging and decoration to simultaneously refer to JDB Company and GPHL. Consumers would not deliberately differentiate, in the legal sense, the trademark rights and the rights and interests of the packaging and decoration specific to famous commodities, but would naturally relate the Red-canned Wanglaoji Herbal Tea to GPHL and JDB Company at the same time. Actually, the packaging and decoration concerned did contain the influence of GPHL’s brand “Wanglaoji” and the commodity popularity formed and developed by JDB Company through production, operation and promotion for more than ten years as well as the remarkable recognitive effects of the packaging and decoration. In an overall consideration of the abovementioned factors, as well as the development history of Red-canned Wanglaoji Herbal Tea, cooperation background between the parties, consumers’ cognition and the principle of equity, on account of the positive role of GPHL and its predecessor and that of JDB Company and its affiliates in the forming and developing the rights and interests of the packaging and decoration concerned and establishing the goodwill, it would result in obvious unfairness and might harm public interests if the rights and interests of the packaging and decoration are all awarded to either party. Therefore, on the premise of compliance with the principle of good faith and respect for consumers’ cognition, without prejudicing the lawful rights and interests of others, the rights and interests of the packaging and decoration specific to the famous commodity concerned may be jointly owned by GPHL and JDB Company.
