China’s Supreme People’s Court Releases 2023 People’s Courts Typical Anti-Monopoly and Anti-Unfair Competition Cases

Share Post:

On September 14, 2023, China’s Supreme People’s Court (SPC) released the 2023 People’s Courts Typical Anti-Monopoly and Anti-Unfair Competition Cases (2023年人民法院反垄断和反不正当竞争典型案例) in conjunction with the 2023 China Fair Competition Policy Publicity Week. A total of 10 typical cases were released this time, including 5 typical anti-monopoly cases and 5 typical anti-unfair competition cases. A translation of the IP-related case case summaries from the SPC follows.

1. Dispute over the abuse of market dominance of the “loratadine ” API – Properly handle the relationship between intellectual property protection and antitrust
[Case No. 最高人民法院(2020)最高法知民终1140号〔扬子江药业集团广州海瑞药业有限公司、扬子江药业集团有限公司与合肥医工医药股份有限公司、合肥恩瑞特药业有限公司、南京海辰药业股份有限公司滥用市场支配地位纠纷案〕
[Basic facts of the case] Yangzijiang Pharmaceutical Group Co., Ltd. and its subsidiaries (collectively known as Yangzijiang ) sued, claiming that they are the manufacturer of the anti-allergic drug loratadine tablets with the trade name “Beixue”. Hefei Yigong Pharmaceutical Co., Ltd. owns patents related to loratadine . For a long time, the company and its subsidiaries and affiliated companies (collectively referred to as Yigongfang) have been responsible for the production of “Beixue” and the only supplier of loratadine APIs. In addition to producing the API of loratadine , Yigongfang also produces  loratadine capsules. Therefore, Yingongfang and Yangzijiang are both the supply and demand sides of the raw materials involved in the case, and they are also the competitors of the preparations involved. Yangzijiang  alleged that Yigongfang took advantage of its dominant position in the market for the raw materials involved in the case, restricting Yangzijiang to only purchase the raw materials involved in the case from Yigongfang, significantly raising the price of the raw materials involved, threatening to stop supplying the raw materials involved, and forcing Yangzijiang to accept other business arrangements irrelevant to the transaction of the raw material medicine involved in this case, thereby causing huge losses to Yangzijiang. This constituted restricting transactions, charging unfair high prices, tying, and additional unreasonable conditions and other abuses of market dominance within the meaning of the Anti-Monopoly Law. Yangzijiang requested the Court to order Yigongfang to cease the abuse of its dominant market position and compensate Yangzijiang for losses and reasonable rights protection expenses of 100 million RMB. The court of first instance held that Yigongfang had abused its dominant market position by restricting transactions, charging unfairly high prices, and attaching unreasonable transaction conditions. It ruled that Yigongfang should immediately stop the above-mentioned behaviors and compensate Yangzijiang Party for more than 68 million RMB. Both parties appealed. Yigongfang believed that it did not have a dominant position in the relevant market and had not committed any abuse of market dominance. It requested that the original judgment be revoked and Yangzijiang’s lawsuit be dismissed in accordance with the law. Yangzijiang believed that the compensation amount in the first instance was too low and requested that the judgment be changed to more than 78 million RMB.
The Supreme People’s Court held in the second instance that although Yigongfang had a dominant market position in the market for loratadine API in China but their dominant market position was weakened to a certain extent due to the strong indirect competition constraint from the market of the downstream antihistamine preparations, and the existing evidence could not prove that they had committed any abuse of their dominant market position. First, loratadine fell within the scope of patent protection of Yigongfang . Yigongfang restricted Yangzijiang to only purchase the patented raw materials involved in the case from it within a certain period and scope. This was a legitimate exercise of the patent rights. The market blocking effect produced by this does not exceed the legal exclusive scope of the patent, and does not constitute an act of restricting transactions without justifiable reasons. Second, comprehensively considering the internal rate of return after the price increase and the matching between price and economic value, the initial price of the patented API involved in the case is more likely to be a promotional price, and subsequent price increases are likely to be a reasonable adjustment from the promotional price to the normal price. Just because the price increase is significantly higher than the cost increase is not enough to determine unfair high prices. Third, the existing evidence is not enough to prove that Yigongfang has expressly or implicitly bundled unrelated transactions with the sales of patented raw materials involved in the case, so it is difficult to determine that there is any behavior of attaching unreasonable transaction conditions. The Supreme People’s Court made a final judgment, revoking the first-instance judgment and changing the judgment to reject Yangzijiang’s claim.
[Typical Significance] This case is related to a monopoly case in the field of APIs, and clarifies the basic considerations for determining and regulating the consideration of indirect competition restraints from the downstream market when determining the dominant market position of an intermediary input business operator, the relevance between the effect of market blockade by the alleged limited trading act and the exercise of patent rights, the judgment methods, unfair and high prices, the imposition of unreasonable trading conditions, and other acts. This case has made useful explorations in properly handling the relationship between patent protection and anti-monopoly, giving equal consideration to encouraging innovation and protecting market competition, making good use of economic analysis to assist in judging monopolistic behaviors, and is of positive significance in promoting the accurate application of the Anti-Monopoly Law and effectively maintaining fair competition in the pharmaceutical market.

6. Case on Disputes over Counterfeiting and Confusion of “Siemens” — Determination of Counterfeiting and Confusion

  [Case No. 最高人民法院(2022)最高法民终312号〔西门子股份公司、西门子(中国)有限公司与宁波奇帅电器有限公司、昆山新维创电器有限公司等侵害商标权及不正当竞争纠纷案〕

  [Basic Facts] The registered trademark “Siemens” as approved and registered on washing machine products at issue is the exclusive right of Siemens Joint Stock Company (“Siemens”) and Siemens (China) Co., Ltd. (“Siemens China Company”), and has a high reputation after long-term use. The brand name “Siemens” of Siemens AG and Siemens China AG also had a certain impact. Ningbo Qishuai Electric Appliances Co., Ltd. (hereinafter referred to as “Qishuai Company”) used the logo of “Shanghai Siemens Electric Appliances Co., Ltd.” in the production and sale of washing machine products, product packaging and relevant publicity activities, while Kunshan Xinweichuang Electric Appliances Co., Ltd. (hereinafter referred to as “Xinweichuang Company”), a sole proprietorship, sold the aforesaid alleged infringing products. Siemens Corporation and Siemens China Corporation filed this action on the ground that the aforesaid acts of Qishuai Company and Xinweichuang Company had infringed upon their exclusive right to use registered trademarks and constituted unfair competition, and requested compensation of 100 million RMB for economic losses and 163,000 RMB for reasonable expenses. The Higher People’s Court of Jiangsu Province held in the trial of first instance that the acts of Qishuai Company and Xinweichuang Company constituted trademark infringement and unfair competition, and fully supported the compensation claims of Siemens AG and Siemens China. Qishuai Company appealed.

  After a second-instance hearing, the Supreme People’s Court held that Qishuai Company’s use of “Shanghai Siemens Electric Appliance Co., Ltd.” in washing machines, commodity packaging and publicity activities constituted trademark infringement of Siemens’ rights and unfair competition as prescribed in items (2) and (4) of Article 6 of the Anti-unfair Competition Law. Considering that Qishuai Company refused to provide the financial materials related to the infringement in the litigation, it was not improper for the court of first instance to take media coverage as the basis for calculating the total sales amount, and calculate the proportion of sales amount of the allegedly infringing products on the basis of 15%, and then determine the amount of damages. Although the existing evidence could not prove the profits from the infringement and the losses from the infringement, it was sufficient to determine that Qishuai Company’s benefits from the production and sale of the alleged infringing products obviously exceeded the statutory maximum amount of compensation as prescribed in paragraph 4 of Article 17 of the Anti-unfair Competition Law. Considering that the enterprise names of Siemens have relatively high popularity, Qishuai Company had obvious subjective malice, the scale of infringement, the duration of infringement, and in consideration of the profit margin of washing machine products and other factors, the amount of compensation determined in the trial of first instance was not inappropriate. After the second-instance judgment of the Supreme People’s Court, the appeal was dismissed and the original judgment was sustained.

  [Significance] This case is a typical case of cracking down on the act of counterfeiting and causing consumer confusion. In this case, the people’s court has determined that the use of a mark which is identical with or similar to the trade name and registered trademark of an enterprise name with a certain level of influence as a trade name and the business operations conducted by the enterprise constitute an act of unfair competition as prescribed in Article 6 of the Anti-Unfair Competition Law. At the same time, under the circumstance that the existing evidence cannot prove the profits from the infringement and the specific amount of actual losses, the people’s court has specified the considerations for determining the amount of compensation. The judgment of this case is of exemplary significance to the determination of confusion, calculation of compensation amount, and other issues concerning the application of law.

7. Dispute over infringement upon trade secret of “general liquid of photostimulated chemiluminescence analysis system” — determination of technical scheme constituting technical secret

  [Case No. 最高人民法院(2020)最高法知民终1889号〔科美博阳诊断技术(上海)有限公司与程某、成都爱兴生物科技有限公司侵害技术秘密纠纷案)

  [Basic Facts] Kemei Boyang Diagnostic Technology (Shanghai) Co., Ltd. (hereinafter referred to as “Boyang Company”) was a trade secret right holder of “General Liquid of Photostimulated Chemiluminescence Analysis System.” After leaving his post, Cheng, a former employee of Boyang Company, joined Chengdu Aixing Biological Technology Co., Ltd. (hereinafter referred to as “Aixing Company”) and disclosed the aforesaid trade secret to Aixing Company, which then used the aforesaid trade secrets to produce and sell in vitro diagnostic kits. Boyang Company instituted this action on the ground that the aforesaid acts of Cheng and Aixing Company constituted an infringement upon their rights and interests in trade secrets. In the trial of first instance, the Shanghai Intellectual Property Court ordered Cheng and Aixing Company to stop infringing upon the trade secrets involved and jointly compensate Boyang Company 1 million RMB for its economic losses and 300,000 RMB for its reasonable expenses for rights protection. Cheng and Aixing Company appealed.

  The Supreme People’s Court held in the second instance that trade secrets are usually embodied in such technical materials as drawings, technical rules, quality standards, operating guidelines, and experimental data, and the trade secret holders prove the existence and content of technical secrets, and generally summarize and extract the trade secret information that needs to be protected on the basis of the documents embodying the trade secrets, and the trade secrets may be either complete technical plans or part of the technical information constituting the technical plans. When summarizing, generalizing or distilling secret information from the documentation such as their technical materials, the holders shall be allowed to combine their confidential information with the prior art and common knowledge to form a complete technical solution for protection. The technical solutions reasonably extracted by the holder from such technical documents as the technical procedures, quality control standards, etc. that are not known to the general public may be protected as trade secrets as long as they are not widely known and easily obtained by the general public. Boyang Company claimed that the eight complete technical plans should be protected as trade secrets. Upon examination, the CV value of fine particles, the particle size and other technical information in the technical documents all have corresponding records. By combining the existing technologies and common knowledge in the field, Boyang Co. could reasonably summarize and extract the aforesaid technical solutions, and may protect them as trade secrets. The Supreme People’s Court, as the court of second instance, dismissed the appeal and sustained the original judgment.

  [Significance] This case is a typical case to stop misappropriation of trade secrets. In the trial of a case involving infringement on trade secrets, the trade secrets are unknown to the public, which makes the problem of finding out the contents of trade secrets a difficult problem in judicial practice. In this case, the people’s court has specified that the technical solutions constituting trade secrets claimed by the right holders may be the technical solutions reasonably summarized and extracted on the basis of the technical information recorded in multiple different technical documents and unknown to the public. The judgment of this case has exemplary significance in reasonably allocating the burden of proof for cases involving infringement on trade secrets and effectively enhancing the judicial protection of the legitimate rights and interests of trade secrets.

The full list of cases and summaries is available here (Chinese only).

Author: Aaron Wininger

Aaron Wininger is a Principal and Director of the China Intellectual Property at Schwegman Lundberg & Woessner.

Author: Aaron Wininger

Aaron Wininger is a Principal and Director of the China Intellectual Property at Schwegman Lundberg & Woessner.