Packaging is one of the essentials in the manufacturing and marketing of commodities. The packaging is directly concerned with the value of the commodity in market circulation. Like the trademark, the package and decoration symbolize the accumulation from the corporate culture, and works to identify the commodity. It contains the features of the intellectual achievement, the nature of the valuable property, and the attributes of the subject matter under intellectual property rights. Certainly, it deserves legal protection. Due to the economic factors involved, the packaging design has been a cause of action between many companies.

 

The packaging design of a commodity is divided into package and decoration. The package means the auxiliary object or container, such as a bag, can, box, case or bottle, which is used for the commodity in order to identify and makes it easy to carry or store. The decoration includes any additional letters, patterns or colors or any combination thereof, on the commodity or the package, in order to identify or beautify the product.

 

Article 5.2 of the Unfair Competition Law states that it is an unfair competitive act prohibited by law, if anyone uses, without authorization, a name, package or decoration equivalent or similar to that characteristic of a well-known commodity of another, causing confusion between his commodity and the well-known commodity, resulting in the buyer mistakenly believing that his commodity is the well-known commodity. In July 1995, the State Administration for Industry and Commerce issued the Rules on Prohibition of Fraudulently Copying the Name, Package or Decoration Characteristic of a Well-Known Commodity (Rules). Article 2 of the Rules states that “the unfair competitive act of fraudulently copying the name, package or decoration characteristic of a well-known commodity” means to breach Article 5.2 of the Unfair Competition Law by applying without authorization the name, package or decoration characteristic of a well-known commodity for similar or equivalent purposes, causing confusion with the well-known commodity, resulting in the buyer mistakenly believing that the commodity of the fraudulent copier is the well-known commodity. Such concepts as well-known commodity, characteristic, package and decoration, as well as the tests and punishments for the tort, are also defined.

 

The above two laws show that the act of fraudulently copying the name, package or decoration of a well-known commodity is an unfair competitive act. There are three required elements: (1) the name, package or decoration fraudulently copied is that of a well-known commodity; (2) the name, package or decoration fraudulently copied is characteristic of a well-known commodity; and (3) the fraudulent copying act is enough to cause confusion between the commodities or mistake among the consumers.

 

Essentially, to fraudulently copy the package or decoration of a well-known commodity means the unauthorized copier “takes a free ride” on the commercial goodwill of another. Although the Unfair Competition Law and the Rules have provisions on the act of fraudulently copying the name, package or decoration characteristic of a well-known commodity, they offer protection only to the packages and decorations of well-known commodities and this protection is limited to the means under the Unfair Competition Law. As a result, in practice, this renders the court unable to effectively protect the rights and interests of the holder of the packaging design and maintain normal market order. Three cases have been selected from Beijing, Shanghai and Guangdong respectively for the following discussion.

 

In Kunming Dihon Pharmaceutical Co., Ltd. v. Hubei Chengtian Pharmaceutical Co., Ltd. & Andingmen Chinese Medicine Hospital of Beijing, the No. 2 Intermediate People’s Court of Beijing held that both Chengtian Pharmaceutical Co., Ltd. and Dihon Pharmaceutical Co., Ltd. were manufacturers of drugs, which were engaged in manufacturing and selling drugs. They both manufactured the drugs concerned in the case. They both were competitive subject operators under the Unfair Competition Law.

 

According to the relevant legal provisions, if an operator applies a decoration similar to that of a well-known commodity, causing confusion between his commodity and the well-known commodity, resulting in the buyer mistakenly believing that his commodity is the well-known commodity, he has damaged the legal rights of the operator of the well-known commodity and his act is an unfair competitive act. A well-known commodity means a commodity that has achieved certain fame and is well known to the relevant public. In the case, the drug concerned of Dihon Pharmaceutical Co., Ltd. has been manufactured since 1997. It has been sold to a good many buyers in a wide region for a long period of time, with the annual sales volume of more than 10 million Yuan in recent years. It has won national and provincial-level prizes. It has achieved a relatively wide influence among the relevant public. To sum up, the court decided that the drug was a well-known commodity under the law.

 

However, the name of the drug is a generic name, and the package is the usual square or oblong-shaped carton. They both are not unique and thus, uncharacteristic of the drug. The decoration is unique, in that the fundamental tones (i.e. the dominant colors and the background), the letters, the lines, and the patterns are used and arranged and combined in a way to achieve a whole visual effect. It contains distinctive features to identify the origin of the commodity. Therefore, the decoration is characteristic of the well-known commodity under the law.

 

After the comparison between the two packaging designs, it was found that the decoration of the drug of Chentian Pharmaceutical Co., Ltd. and that of the drug of Dihon Pharmaceutical Co., Ltd. contained the same fundamental colors, similar arrangements of the colors, and similar lines and patterns, in similar combinations of these elements to achieve similar whole visual effects. This was sufficient to cause confusion between the drugs of the two companies, resulting in the relevant public mistakenly believing that the drug of the former was that of the latter. Therefore, the decoration of the drug of Chentian Pharmaceutical Co., Ltd. was similar to that of the drugs of Dihon Pharmaceutical Co., Ltd. The claim of Chengtian Pharmaceutical Co., Ltd. that the decorations of the two drugs were different lacked the basis and was disaffirmed. Finally, the court judged that the act of the Chengtian Pharmaceutical Co., Ltd. constituted unfair competition by fraudulently copying the characteristic decoration of the well-known commodity of Dihon Pharmaceutical Co., Ltd.; and Chengtian Pharmaceutical Co., Ltd. should bear the legal liabilities to stop the infringement and compensate for the loss that Dihon Pharmaceutical Co., Ltd. had suffered.

 

The Shanghai case is Castrol Ltd. v. U.S.A. Jiashiduo International Petroleum Group (Hong Kong) Ltd. et al. The complainant is a world-famous (British) petrochemical company. Its lubricating oils under the brands of CASTROL or 嘉实多(Pinyin: Jiashiduo) have been internationally famous. They have also achieved fame in the Chinese market. In 1996, the complainant entered the market on the mainland where it registered the trademarks of 嘉实多and CASTROL one after the other. In 2000, these two trademarks were included in the Catalog of Trademarks for Key National Protection of the State Administration for Industry and Commerce. In 2008, the 嘉 实多 trademark that the complainant had registered and used on the lubricating oil commodities was certified as a Famous Trademark through the administrative procedure.

 

On December 12, 2004, the correspondent Yao Yuxin registered the U.S.A. Jiashiduo International Petroleum Group (Hong Kong) Ltd. in Hong Kong. The co-respondent Jiashuai Lubricating Oil Factory, which was created by the wife and the daughter of Yao Yuxin, used the business name of this Hong Kong Company by highlighting the “Castrol” letters, in the name of a license from the Hong Kong Company. It was also used on its lubricating oil products the product names of 奔程(Pinyin: Benteng) and 超霸 (Pinyin: Chaoba) and the packaging decoration of 磁宝 (Pinyin: Cibao). The complainant argued that the acts of the three co-respondents infringed upon the complainant's exclusive use of the trademarks concerned, and constituted unfair competition. Thus, three suits were filed against them. The complaints asked the court to order the three correspondents to cease infringement upon the trademarks of the complainant, stop highlighting the texts of these trademarks, and stop applying the characteristic name and packaging decoration of the trademarks; eliminate the ill effects; and compensate for the financial loss of 500,000 Yuan that the complainant had suffered.

 

The No. 2 Intermediate People’s Court of Shanghai held as follows. The respondents, U.S.A. Jiashiduo International Petroleum Group (Hong Kong) Ltd. and Jiashuai Lubricating Oil Factory, had infringed upon the right of the complainant to the exclusive use of the 嘉实多 trademark, by having the registered trademark 嘉实多 registered as a trade name and highlighting the use of this trade name on commodities similar to those of the complainant, which easily confused the consumers between the commodities of the complainant and those of the respondent. The respondent had used without authorization the commercial goodwill and trademark reputation of the complainant, by commercially using the trade name of U.S.A. Jiashiduo International Petroleum Group (Hong Kong) Ltd. which contained the Castrol text, in the Mainland China, and by covering this up with a formally legal license from the Hong Kong Company. This confused the consumers between the two market operators and the origins of their commodities. It violated the rules of fairness and good faith in civil activities, and the business ethics generally acknowledged. It had damaged the legal rights of the complainant and undermined the order of fair competition. It constituted unfair competition against the complainant.

 

In addition, it was found that through many years of operating and advertising its products and trademarks by the complainant and its affiliates in the Chinese Mainland, the products manufactured with the authorization from the complainant had achieved high fame on the market and been known to the relevant public in the territory. They should be decided as well-known commodities. The product names of 奔程 and 超霸, and the packaging decoration for the product of 超级嘉力 (Pinyin: Chaoji Jiali) contained distinctive features to identify the origin of the commodities. They should be determined as the characteristic name, package and decoration of the well-known commodities. The product names of 奔程 and 超霸, and the packaging decoration of 磁宝 that the respondents used were equivalent or similar to the name and package and decoration of the well-known commodities of the complainant. They could easily cause confusion between the products of the two companies, and result in the buyer mistakenly believing that they are the well-known commodities of the complainant. They constituted unfair competition by infringing upon the right of the complainant to the exclusive use of the characteristic name and package and decoration of the well known commodities. The court decided that the respondent should stop the trademark infringement and the unfair competitive act, eliminate the ill effects, and compensate for the financial loss of 350,000 Yuan in total that the complainant had suffered.

 

In the above two cases, the trademarks of the complainants are well-known trademarks. However, the third case, which occurred in Guangdong, is more typical. The case is Guangzhou Sibao Daily Chemical Co., Ltd. v. Shantou Qianfen Cosmetic Industry Co., Ltd. for trademark infringement and unfair competition disputes. It was concerned with infringement of the packaging decoration design. The complainant discovered that the packaging decoration of the respondent was extremely similar to that of the third-generation MaeStro 美涛 (Pinyin: Meitao) product of the complainant in terms of the use of the colors, the layout of the letters and patterns, and the entire style. It argued that this extremely similar packaging decoration was sufficient to cause the consumer to mistakenly believe that the commodity of the respondent was that of the complainant. Therefore, it constituted an infringement upon the legal rights and interests of the complainant. The respondent argued that the allegedly infringing packaging decoration was designed by the respondent itself, and that the packaging decoration claimed by the respondent was not characteristic to the product of the complainant. A comparison between the notarized documents showed that the package and decoration of the shampoo product that the respondent manufactured and sold was suspected of imitating the use of the colors on the product concerned of the complainant. Regarding the textual layout, the upper part of the product of the respondent is the artistic calligraphies of the MINGtao名涛 (Pinyin: Mingtao) trademark, where the letter M is capitalized and made artistic in the same way as in the trademark of the complainant, and where the letter S is added as a false embellishment in the same position as in the trademark of the complainant, and where the Chinese characters 名涛 contain the character 涛 as the trademark of the complainant does. In the middle, the description of the product of the respondent is equivalent to that of the trademark of the complainant. At the bottom, the name of the product of the respondent is laid out in the same way as the trademark of the complainant. Regarding the whole style, the packaging design of the suspected product of the respondent is extremely similar to that of the product concerned of the complainant.

 

The complainant stated two causes of action, i.e. the trademark infringement dispute and the unfair competition dispute. Because of the time lapse for the High People’s Court of Guangdong to reply to the case, the unfair competition dispute was tried first. In the trial, the complainant asserted its action on the basis of Article 5.2 of the Unfair Competition Law. From the constituent requirements of an act of fraudulently copying the package or decoration of a well-known commodity under the relevant legal provisions, one can see that whether the commodity concerned of the complainant is well-known is a key to the trial of such unfair competition dispute. Thus, whether the commodity concerned is a well-known commodity must be addressed. Before this, however, the intellectual property is uncertain in the packaging design of the commodity concerned of the complainant. In addition, whether the trademark infringement dispute would be decided is even more uncertain to the complainant. As this author has stated previously, currently only the Unfair Competition Law can be relied on for the packaging design protection. There is no approach to the Trademark Law to protect the packaging design, such as the three-dimensional trademark. Therefore, it is the least possible, if not impossible, to hold that the respondent has infringed upon the trademark of the complainant for the only sake of the character 涛 in the packaging design of the respondent. This adds to the difficulty for the court to decide on the infringement in practice.

 

From this case, one can see that the legal protection is weak and often fails to protect the holder of its packaging design. The 美涛 brand, as involved in the case, is a famous brand. If it were an emerging brand, we could expect it would be doomed. The malicious infringing act would not be subject to deserved punishment, and the consumers would suffer losses due to the confusion or the mistaken belief between the two products.

 

In the opinion of some scholars, the copyright and the design patent are the first options necessary to protect the commodity packaging, as long as the packaging design is distinctive and novel. However, as this author believes, there are two problems. First, the copyright law protects only the packaging design that contains texts and images, that is, not all packaging designs are covered under the protection of the copyright law. Also, the packaging design must be novel. Even if copyright protection is available, the period of the protection is limited. Obviously, the copyright is not the prior choice to protect the packaging design. Second, the packaging design is made mixed with the industrial design. The industrial design is specific to the product itself, which does not include the packaging design.

 

However, the Unfair Competition Law, as an existing means to protect the packaging design, does not offer an authorized protection, other than decides upon the existing fact. In the Rules, the test for the use of a name, package, or decoration similar to that of a well-known commodity is actually to test whether the use of such similar name, package or decoration has caused confusion with a well-known commodity and the mistaken belief in the consumer that the commodity bearing such similar name, package or decoration is a well-known commodity. The court will not decide on the ownership of the name, package or decoration of a commodity until such name, package, or decoration is fraudulently copied, to cause confusion with the commodity and a mistaken belief with the consumer. In so doing, it intends to protect the fair competition, preserve the legal rights and interests of the business operator, and prevent the consumers from developing any mistaken belief towards the commodity concerned. In other words, the court will not judge the ownership of such name, package or decoration, until and unless the market order is damaged by the fraudulently copying of the same. In addition, since the Unfair Competition Law protects only the packaging decoration of well-known commodities, this protective approach is apparently insufficient.

The industrial design is particular, as one of the subject matters under the protection of the intellectual property rights. As an invention, it may be protected by the Copyright Law; as an expression of aesthetic thought, it may be protected by the copyright laws. When it achieves distinctiveness on the market, it may be protected by the Trademark Law as a trademark or by the unfair competition law as the industrial design of a commodity. The industrial design, or the industrial design of the commodity packaging may be protected by the Patent Law, but the package or decoration of the commodity is different and may only be protected by the unfair competition law. The package which is the tool to package the commodity, and the decoration which is the element to beautify the commodity are not a constituent part of the commodity. They are distinctive from the industrial design and may not be accorded with so many protective means as the latter is.

 

However, it should be noted that the packaging decoration contains certain contents of the industrial design of the commodity. The commodity decoration under the Unfair Competition Law includes certain contents of the industrial design, such as the plane or three-dimensional design. Article 3 of the Rules states, “the decoration means any additional text, pattern, or color or any arrangement or combination thereof on the commodity or its packaging, to identify or beautify the commodity.” The “additional text, pattern, or color or any arrangement or combination thereof on the commodity or its packaging” should include the plane or three-dimensional industrial design of the product (or commodity). Thus, as long as it identifies the product, the decoration, be it the plane or three-dimensional industrial design, and may be protected by the Unfair Competition Law. Conversely, an industrial design patent application may be filed for and the industrial design patent protection may be accorded to a decoration which satisfies the requirements for the industrial design.