China’s Supreme People’s Court Releases Top 10 Intellectual Property Cases of 2021
On April 21, 2022 China’s Supreme People’s Court (SPC) released the Top 10 IP Cases in Chinese Courts in 2021 (2021年中国法院10大知识产权案件). The cases cover trademark infringement, unfair competition, trade secret misappropriation, antitrust, new plant variety infringement, invention patent infringement, and copyright infringement. Of particular note was Wyeth’s win for trademark infringement that resulted in a significant punitive damages award and a vanillin trade secret misappropriation case that led to one of the highest intellectual property verdicts in China. China also simultaneously released a list of 50 Typical Intellectual Property Cases in Chinese Courts in 2021.
The cases are as follows, with explanations of two of more notable cases.
1. Disputes over trademark infringement and unfair competition between Shuangfeiren Pharmaceutical Co., Ltd. and Guangzhou Wrights Business Consulting Co., Ltd. [最高人民法院（2020）最高法民再23号民事判决书]
2. The case of disputes over infringement of trade secrets between Jiaxing Zhonghua Chemical Co., Ltd., Shanghai Xinchen New Technology Co., Ltd. and Wanglong Group Co., Ltd. [最高人民法院（2020）最高法知民终1667号民事判决书]
The Supreme People’s Court announced a verdict on February 26, 2021 against Wanglong Group Co., Ltd. awarding Jiaxing Zhonghua Chemical Co., Ltd. (嘉兴市中华化工有限责任公司) and Shanghai Xinchen New Technology Co., Ltd. (上海欣晨新技术有限公司) 159 million RMB (~$24.5 million USD) in trade secret case relating to the manufacture of vanillin, a food flavoring. This is the largest ever trade secret theft award reported in China.
The plaintiffs in this case, Zhonghua and Xinchen, jointly developed a new process for producing vanillin, and protected it as a trade secret. Before the trade secret theft in this case, Zhonghua was the world’s largest vanillin manufacturer, occupying approximately 60% of the global vanillin market.
In 2010, the former employee of Zhonghua and defendant Fu Xianggen received remuneration from the defendant Wanglong Group, he disclosed the vanillin trade secret to the supervisor of Wanglong Group and Ningbo Wanglong Technology Co., Ltd. Since June 2011, Wanglong began to produce vanillin, becoming the third largest vanillin manufacturer in the world within a short period of time. In 2015, the defendant Xifu Lion King Dragon Spices (Ningbo) Co., Ltd. (喜孚狮王龙香料（宁波）有限公司) invested was established by Wanglong, and continued to use Wanglong’s vanillin production equipment to produce vanillin. After Wanglong illegally obtained the “vanillin” trade secret, they began to produce vanillin in June 2011 and continue to this day. The actual annual production of vanillin is at least 2,000 tons, accounting for 10% of the world market share. At the same time, the vanillin products produced by the defendants infringing the trade secrets involved in the case are sold in major markets around the world, and they are competing against the Zhonghua for customers and markets. Since Wanglong illegally obtained the technical secrets involved in the case, they had no substantial R&D cost investment and were able to sell vanillin products at lower prices, which formed a significant impact on the original international and domestic markets of Zhonghua . As a result, the global vanillin market share of Zhonghua fell from 60% to 50%.
In 2018, Zhonghua and Xinchen filed a lawsuit at the Zhejiang Higher People’s Court, arguing that Wanglong Group Company, Wanglong Technology Company, Xifu Lion King Dragon Company, Fu Xianggen, and Wang Guojun infringed on the vanillin manufacturing trade secret. The plaintiffs requested the court to order the above-mentioned defendant to stop the infringement and compensate 502 million RMB. The court of first instance found that Wanglong Group Company, Wanglong Technology Company, Xifu Lion Wanglong Company, and Fu Xianggen stole trade secrets involved in the case, and ordered them to stop the infringement, and compensate 3 million RMB for economic losses and 500,000 RMB for costs related to stopping the infringement (e.g., court costs). At the same time, the court of first instance issued an injunction that that Wanglong Technology Company and Xifu Lion King Dragon stop using the trade secret related technology involved in the case to produce vanillin, but Wanglong Technology Company and Xifu Lion King Dragon did not actually stop their use.
Except for the defendant Wang Guojun, all parties in this case refused to accept the first-instance judgment and appealed to the Supreme People’s Court. In the second instance, Zhonghua and Xinchen reduced their claims for compensation to 177 million yuan (including reasonable expenses). The Intellectual Property Court of the Supreme People’s Court found in the second instance that Wanglong Group Company, Wanglong Technology Company, Xifu Lion King Dragon, Fu Xianggen, and Wang Guojun infringed all the trade secrets involved in the case. According to the economic loss related data provided by the rights holder, considering the serious circumstances of the infringement, the great commercial value of the trade secrets involved, and the refusal of the infringers such as Wanglong to stop their use of stolen trade secrets per the injunction, the judgment of the first instance was revoked and the judgment was changed. The infringers now must jointly compensate 159 million RMB to the trade secret right holder (including 3.49 million RMB for reasonable rights protection expenses). At the same time, the amount of damages claimed by the right holders in this case was only calculated until the end of 2017, and the law at that time did not provide for punitive damages. Therefore, punitive damages were not applicable to this case. However, the Supreme People’s Court pointed out to the right holders that each defendant continued to infringement after 2018 and plaintiffs may seek additional relief in accordance with the law.
In addition, because the infringement of trade secrets involved in the case has bad circumstances and serious consequences, and may be suspected of criminal offences, the Supreme People’s Court shall transfer relevant suspected criminal evidence to the public security department for prosecution.
3. Taizhou Luqiao Geely Motor Vehicle Driving Training Co., Ltd., Taizhou Luqiao District Chengrong Driver Training Co., Ltd. and Taizhou Luqiao District Donggang Automobile Driving Training School, etc., Taizhou Luqiao District Zhedong Driver Training Service Co., Ltd. has a horizontal monopoly Agreement Dispute Case [最高人民法院（2021）最高法知民终1722号民事判决书]
4. Jiangsu Jindi Seed Industry Technology Co., Ltd. and Jiangsu Qingengtian Agricultural Industry Development Co., Ltd. for the dispute over infringement of new plant variety rights [最高人民法院（2021）最高法知民终816号民事判决书]
5. Zhou Qin and Wuxi Ruizhishun Machinery Equipment Manufacturing Co., Ltd. Infringement of Invention Patent Disputes [江苏省苏州市中级人民法院（2019）苏05知初1122号民事判决书、（2020）苏05司惩1号决定书〕
6. Wyeth Co., Ltd., Wyeth (Shanghai) Trading Co., Ltd., and the former Guangzhou Wyeth Baby Maternity and Baby Products Co., Ltd. Infringement of trademark rights and unfair competition disputes [浙江省高级人民法院（2021）浙民终294号民事判决书 ]
On April 26, 2021, the Zhejiang High Court upheld a verdict of 30.55 million RMB (~$4.7 million USD) in damages including punitive damages in favor of Wyeth in a trademark infringement case. Wyeth LLC (“U.S. Wyeth”) , a global leader in infant milk powder, originally sued Guangzhou Wyeth Baby Maternal and Infant Products Co., Ltd. (广州惠氏宝贝母婴用品有限公司) (“Guangzhou Wyeth”) for trademark infringement and unfair competition in Hangzhou Intermediate Court and was awarded 30.55 Million RMB in damages and an injunction per a decision released January 6, 2021. In addition to the damages, Guangzhou Wyeth must stop using Wyeth and 惠氏 (a transliteration of Wyeth) in production and sales of products for infant bathing, skin care, feeding, laundry, diapers, mosquito repellent wipes, adult care and pregnancy products, product packaging, advertising and other commercial activities.
The Hangzhou Intermediate Court determined that the Guangzhou Wyeth and co-defendants used the marks “Wyeth”, “Wyeth”(Chinese) and “Wyeth Little Lion” on the infringing products, product packaging and brochures they produced and sold, and carried out publicity on the website. This constitutes the use of trademarks that are the same as or similar to Wyeth’s registered trademarks on similar goods, which easily confuses the relevant public about the source of the goods and infringes on the exclusive rights of Wyeth’s registered trademarks. Co-defendant Qingdao Wyeth’s use of “Wyeth” in its corporate name constitutes unfair competition.
In terms of the amount of compensation, the Hangzhou Intermediate People’s Court took into account that the plaintiff’s trademark reputation was high, the defendant’s malicious infringement of Wyeth’s goodwill and brand name was obvious, the defendant’s infringement lasted for a long time, involved a wide area, and the scale of infringement was serious. The products involved in the case are related to factors such as the health and safety of infants and young children and therefore punitive damages was appropriate.
On appeal, Guangzhou Wyeth Company argued that its use of the Wyeth logo was reasonable and legal, and there was no subjective malice of infringement, and there was no serious circumstances – the court of first instance applied punitive damages unreasonably. The Zhejiang High Court rejected that argument holding the defendant’s infringement lasted for a long time and made great profits, which met the “intentional” and “serious circumstances” requirements for punitive damages, and the application of punitive damages was not inappropriate. The Court determined that the application of the law in the judgment of the first instance was correct and the trial procedures were legal, and ruled to reject the appeal and uphold the original judgement.
The full text of the Hangzhou Intermediate Court opinion is available here: 判决书 (Chinese only). The full text of the Zhejiang High Court opinion is available here (Chinese only).
7. China Acrobatic Troupe Co., Ltd. and Zhang Shuo Acrobatic Troupe in Sangyuan Town, Wuqiao County, etc. Disputes over copyright ownership and copyright infringement [北京知识产权法院（2019）京73民终2823号民事判决书]
8. Jining Luohe Network Technology Co., Ltd. and Guangzhou Wanyou Network Technology Co., Ltd., a case concerning infringement of computer software copyright [广州知识产权法院（2019）粤73知民初207号民事判决书]
9. Unfair competition disputes between Shanghai Hantao Information Consulting Co., Ltd. and Qingdao Simple Payment Network Technology Co., Ltd. [山东省青岛市中级人民法院（2020）鲁02民初2265号民事判决书]
10. Liang Yongping, Wang Zhenghang and other 15 persons infringing copyrights [上海市第三中级人民法院（2021）沪03刑初101号刑事判决书、上海市杨浦区人民法院（2021）沪0110刑初826号刑事判决书]
The full text of the announcement with explanations of the Top 10 cases is available here (Chinese only).
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