Beware of “commercial libel” when defending intellectual property rights

OWhen it comes to protecting intellectual property rights, litigation and administrative procedures can be time-consuming options. Maybe there is a better way? Would it be possible, for example, to allude to the nature of the competitor as an infringer? Or, if the administrative complaint is not accepted, is it possible to report the competitor to other regulatory authorities for, for example, product defects, as a backdoor way to protect our own intellectual property rights?

While it makes sense to take several steps simultaneously to protect intellectual property rights, these should not be brash or reckless. Some measures, at first glance, may seem like a legitimate exercise of rights, but they may carry the legal consequences of commercial defamation.

Article 11 of the law against unfair competition provides that “operators must not manufacture or disseminate false or misleading information to damage the commercial reputation or the reputation of competitors’ products”. Commercial defamation includes subjective elements, behavioral elements and harmful consequences. In addition, the courts also examine whether the author has the subjective intention to drive out competitors or to disturb the order of competition in the market.

Platform Complaints

In a 2019 case involving a commercial defamation lawsuit between ENES, Jieksoil, and Taobao, Jieksoil found that products sold by ENES on its Taobao online store infringed its trademark law. Without pursuing any investigation or purchasing these products for basic comparison, he filed more than 10 complaints with Taobao in four months, which resulted in the removal of ENES products from the platform, and ENES was marked as seller of counterfeit products.

During this period, ENES was able to submit appeal evidence several times, all of which were successful, but Jieksoil did not conduct further verification or stop filing complaints.

The court held that, although complaints against Taobao are closed in nature, the results of these complaints affect the entire platform, and Jieksoil’s action directly cuts off public access to Taobao’s products. ENES on the platform. Therefore, the repeated complaints were determined to have public ramifications, objectively resulting in reduced business opportunities and loss of goodwill for ENES. The court ruled that Jieksoil’s actions constituted commercial libel.

Administrative complaints

In a commercial libel dispute between a Shanghai company and a Beijing rival based on a complaint by the Shanghai company, the Shaanxi Workplace Safety Administration sent a letter to a Shaanxi oil company, a customer of the Beijing company and user of the product in question, asking it to provide information demonstrating that the product had been certified by the competent national institutions.

The Beijing company filed a lawsuit against the Shanghai company on the grounds that the complaint constituted commercial defamation. For this case, the courts of first and second instance agreed that the scope of “dissemination” referred to in section 14 of the Unfair Competition Act (1993, invalid) includes direct dissemination to consumers, as well as indirect distribution to consumers. consumers by reporting and complaining to the administrative services.

Therefore, if the act fulfills the constituent elements of commercial defamation, it must be identified as such. However, since the majority of the content disseminated in this case was factual, the court found that the defendant’s act did not constitute “dissemination of false information” and dismissed the plaintiff’s claim.

Addition

In a 2018 commercial defamation dispute between Haimao Company, Hengtai Company and Anjing Company, all three of which are aquatic product companies, Duan, the legal representative of Anjing Company, said during a “promotion meeting” at which fully supported aquaculturists that “Haimao is wrong…its source of seed shrimp is also wrong”.

The president and vice president of Hengtai later expressed similar views. Haimao believed that these actions constituted commercial libel and filed a lawsuit.

To begin with, the court ruled that commercial defamation can be established on the grounds that the defendants had no evidence to prove their claims. Regarding the topic of liability, the court held that since the promotion meeting in question was organized by Hengtai, Hengtai’s senior manager also repeatedly introduced himself and spoke as shareholder and vice chairman of Hengtai. Combined with the content of his remarks, the action was identified as an act in the exercise of his official duties.

In addition, since the theme of the meeting was to introduce Hengtai’s seed shrimp business, although Duan was the legal representative of Anjing, he attended the meeting as the general representative of Chinese business of Anjing. an international seed shrimp company based in the United States. Therefore, the liability should be borne jointly and severally by Hengtai and the American Seed Shrimp Company, and Anjing Company was not liable for the infringement.

Beyond the scenarios listed above, rights holders try to protect their own rights by posting short videos or articles on social media without waiting for an official judgment from a competent authority, or by sending official letters to commercial partners of the competitor to disseminate the idea that “the competitor is an infringer”, may be held liable for commercial defamation.

In summary, in the exercise of their legitimate rights, companies must observe recognized business ethics and ensure the maintenance of the market order of fair competition. When formulating an IPR protection plan, the first step companies should take is to thoroughly investigate and obtain evidence.

Even with full understanding and belief of the breach, companies should remain cautious when making complaints or remarks, so as not to deviate from the original intent to stop the breach. Rights holders should avoid inappropriate means or extreme remarks and seek only appropriate and legitimate rights protection.

Li Jialin is a partner at Tiantai Law Firm