Chinese court issues judicial interpretation of anti-unfair competition law

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On March 16, 2022, the Supreme People’s Court of China issued the Judicial Interpretation (JI) of the Anti-Unfair Competition (UCL) Law (若干问题的解释), which will enter into force on March 20, 2022. Anti-unfair competition law has been used effectively by foreigners in trademark and trade dress cases where the foreigners’ marks have not been registered (or in addition to a trademark infringement action for a registered mark).

By a press conference held by the third civil chamber of the Supreme People’s Court, one of the main considerations of this JI is the inconsistent determination of new types of unfair competition. For example, Article 3 of the JI explains that unfair competition based on violation of business ethics is not common ethical standards, but standards generally followed and recognized in specific areas of business. The JI also stipulates that the people’s court shall, in the light of the specific circumstances of the case, thoroughly examine the rules of the sector or business practices, the subjective situation of the operator, the choice of the counterparty to the transaction , the impact on the rights and interests of consumers, market competition order, social and public interests, etc.

Article 3 reads,

A generally followed and recognized code of conduct in specific business areas may be recognized by the people’s court as “business ethics” as stated in Article 2 of the Unfair Competition Law.

The people’s court must, in light of the specific circumstances of the case, thoroughly consider factors such as industry rules or trade practices, the subjective state of the operator, the willingness of the counterparty to the transaction to choose, the impact on the rights and interests of consumers, the market competition order, and social and public interests, and judge the operator according to law. If it violates business ethics.

To determine whether a contractor has violated business ethics, the people’s court may refer to standards of practice, technical standards, self-discipline conventions, etc. formulated by competent professional authorities, professional associations or self-regulatory organisations.

Article 2 of the UCL reads, in part,

Companies must, in their production and distribution activities, adhere to the principles of free will, equality, fairness and good faith, and respect the laws and business ethics.

Article 5 of the OMC reads as follows:

If the label stipulated in article 6 of the law against unfair competition falls under one of the following circumstances, the people’s court will determine that it does not have any distinguishing characteristics that distinguish the source of the goods:

(1) The common name, graphics and model of the merchandise;

(2) Marks which directly indicate only the quality, principal raw materials, functions, uses, weight, quantity and other characteristics of the goods;

(3) Forms which derive solely from the nature of the commodity itself, the form of the commodity which is necessary to achieve technical effects and the form which gives the commodity substantial value;

(4) Other signs without distinctive characteristics.

When the labels referred to in points 1, 2 and 4 of the preceding paragraph have acquired distinctive characteristics through use and enjoy a certain reputation on the market, and the parties apply for protection in accordance with Article 6 of the law against unfair competition, the people’s court will support it.

For commercial actors, article 8 of the JI provides protection,

In the event that the decoration of the place of business, the model of the business tools, or the clothing of the business personnel of a business operator, etc. constitute an overall corporate image with a unique style, the people’s court can affirm it as the “decoration” prescribed in point 1 of article 6 of the law against unfair competition.

In addition, foreign names of foreigners used in China could be protected in JI without trademark registration according to Article 9.

The company name legally registered by the Business Entity Registration Management Department and the foreign company name used for business purposes within the territory of China may be recognized by the people’s court as the “name of the company” stipulated in point 2 of article 6 of the Anti-Unfair Competition Law.

The full text of the MOC is available here (Chinese only). The full text of the corresponding press conference is available here (Chinese only).

© 2022 Schwegman, Lundberg & Woessner, PA All rights reserved.National Law Review, Volume XII, Number 77

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