Keywords

Assignee’s standing to sue for breach of trade secret

Synopsis

Texaco Inc. of the United States developed a gasification process, together with the structural design of the gasifier, including the coal gasification process (where the coal and/or water is oxidized using oxygen or any gas containing oxygen, to generate a synthesis gas that contains CO, hydrogen and other chemical raw materials). In 2004, General Energy Inc. of the United States (General Energy) acquiredall the gasification technologies and related businesses from Texaco Inc. and ChevronTexaco Worldwide Gasification Technology Inc., thereby becoming the proprietor of what is known as “Texaco Gasification Technology” and the trade secret in such technology. Shandong Hualu Hengsheng Co., Ltd. (Hualu Hengsheng) applied a coal gasification technology in a nitrogenous fertilizer project that it invested and built. The Northwest Research Institute of Chemical Industry (Northwest Institute) provided Hualu Hengsheng with the drawings and other information concerning the gasi f i cation technology. Hualu Hengsheng delivered such technological information to Hualu Engineering & Technology Co., Ltd. (Hualu Engineering). General Energy discovered that its trade secret was contained in the design drawings that Hualu Engineering delivered to Hualu Hengsheng. Believing that its trade secret had been infringed by Hualu Engineering, it brought an action before the Xi’an Intermediate People’s Court of Shaanxi Province. Thereafter, following the evidence preservation procedure, it added Hualu Hengsheng and Northwest Institute as co-defendants. It requested the Court to order Hualu Engineering, Hualu Hengsheng and Northwest Institute to immediately stop the infringement and pay US$ 2,900,000 in damages.

At trial, under the coordination by Shaanxi Yanchang Petroleum (Group) Co., Ltd. (Yanchang Petroleum), which was the parent company of Northwest Institute, the parties stipulated that Northwest Institute and its affiliate should not use or permit any third party to use the trade secret of General Energy as contained in the gasification technology concerned; Northwest Institute should have the right to research and develop the multi-component slurry gasification process, or practice or use the process so developed at Yanchang Petroleum or its subsidiary; and Hualu Engineering should stop using and return to General Energy any and all drawings and information that contained the gasification technology concerned of General Energy.

Judge’s comment

This case is significant in that: assignee who received a trade secret through technological transfer may have standing to sue in its own name; the proprietor, who discovered a third party using its trade secret but was unable to collect the evidence due to objective causes, may apply to the court to have the evidence preserved and following the evidence preservation, to implead additional parties to the action; the right owner, who brought an action on the account that its trade secret had been infringed, should produce evidence in advance that the trade secret complied with relevant legal conditions; during the trial, the right owner retained a foreign expert witness to explain the technological issue concerning its trade secret, which was in compliance with the legal provisions; the alleged infringer, who questioned the constituent requirements of the trade secret, should be able to file an appraisal application to the court, after the right owner of the trade secret finished with his evidence production; and the parent company, which was not a party to the case, and which was only provided of rights other than obligations in the final mediated agreement, may not be added as an additional party to the dispute.

The case is not only a significant trade secret infringement dispute, but also bears an essential impact on the judicial IP protection and the growth of the gasification technology and industry in China.

Finally all the parties fully reconciled with each other by entering into a Strategic Cooperation Agreement and starting new cooperation. The result integrates perfectly the effects in legal, social and political arenas. The handling of the case proves once again that in China, the road to judicial IP protection is free and unimpeded, and fair and authoritative.

(Recommended by the Xi’an Intermediate People’s Court)

18. Trademark infringement dispute: Louis Vuitton Malletier v. Shaanxi Xinrun Crystal Island Hotel Management Co., Ltd.

Case No.: (2011) XiMinSiChuZi No. 00079 Civil Judgment, the Xi’an Intermediate People’s Court

Keywords

No separate damages for infringement of two trademarks in one product.

Synopsis

On January 15th, 1986, as approved by the State Intellectual Property Office (SIPO), Louis Vuitton Malletier (Louis Vuitton) obtained registration of its trademark “LOUIS VUITTON,” which was approved to be used on backpacks, etc. On September 28th, 2011, Louis Vuitton discovered that Shaanxi Xinrun Crystal Island Hotel Management Co., Ltd. (Crystal Island Hotel) had its Goods Department to sell products labeled with “LOUIS VUITTON.” It purchased from Crystal Island Hotel one backpack, one wallet and one belt. The payment slip indicated that the “Room Fee” was 750 yuan and the “Transaction Amount at the Goods Department” was 2,200 yuan. The backpack had on it two registered trademarks of Louis Vuitton. The purchase was notarized by the Notary Office of Xi’an. Louis Vuitton, which believed that Crystal Island Hotel’s selling these products infringed upon its exclusive use of the registered trademarks concerned, brought an action before the Xi’an Intermediate People’s Court of Shaanxi province, requesting an order that Crystal Island Hotel should stop selling the backpacks infringing its exclusive use of the registered trademarks, make apologies to it, and pay damages in the amount of 300,000 yuan, together with its reasonable cost of 20,000 yuan.

During the hearing, Louis Vuitton stated that since the backpack that Crystal Island Hotel sold used two of its registered trademarks, Louis Vuitton filed two actions against the Hotel on account of these two trademarks and in each of the actions, requested a payment of 300,000 yuan in damages.

At trial, the Intermediate People’s Court of Xi’an held that: since the Goods Department sold the goods on behalf of Crystal Island Hotel, Crystal Island Hotel qualified as the defendant in the case; Crystal Island Hotel’s selling the backpack labeled with the registered trademark “LOUIS VUITTON” infringed upon the exclusive use of Louis Vuitton to the trademark; Louis Vuitton’s request that Crystal Island Hotel should make apologies in public was insufficiently based; and as Louis Vuitton filed two actions to request two damages for the two trademarks, the Court considered only one of the requests after considering the total damages, because the infringing product was the same. Therefore, the Court decided that: Crystal Island Hotel should immediately cease from selling backpacks that infringe upon Louis Vuitton’s exclusive use to its registered trademarks concerned; Crystal Island Hotel should compensate Louis Vuitton 30,000 yuan for the loss that the latter had sustained, including any reasonable cost in preventing the infringing act; and the other claims of Louis Vuitton were dismissed. Following the judgment, since neither party appealed, the judgment has come into force.

Judge’s comment

The judgment is meaningful in that: since the Goods Department was part of, and ran in the name of, the Hotel, when the Goods Department sold anything that infringed upon another party’s registered trademark, the Hotel should be a qualified defendant; for such infringement, the damages should be determined according to the place that the infringing goods were sold, the frequency that such goods might be purchased from the Hotel, the geographical location of the Hotel, the value of the faked goods, the business model of the Hotel, the seriousness of the subjective fault of the Hotel, and the nature, scope, duration and consequence of the infringement, and the reputation of the trademarks so infringed; in the event that the trademark owner filed two actions and request for two damages, because the alleged infringing products were the same and thus the loss that the trademark owner had sustained and the illegal income that the defendant had received were also the same, the court should take into account the whole situation in awarding the damages and should not decide twice to hold the infringer liable for double damages.

(Recommended by the Xi’an Intermediate People’s Court)

19. Software copyright dispute: Siemens PLM Software Co., Ltd. v. Yituo Mike Technology Co., Ltd.

Keywords

The court actively mediates between the parties when the statutory compensation cap is exceeded

Synopsis

On March 19th, 2012, the Intermediate People’s Court of Shenzhen published its judgment of a case where Shenzhen Yituo Mike Technology (Yituo Mike) infringed upon the software copyright of Siemens Product Life Cycle Management Software Co., Ltd. (Siemens PLM). The Court decided according to law that Yituo Mike should immediately cease the infringing act and pay 1,160,000 yuan in damages to Siemens PLM for the economic loss that the latter had sustained, together with the reasonable costs.

As one of the well-known mould manufacturers in Shenzhen, Yituo Mike had engaged in the large-scale use of unauthorized copies of the NX series software for a long period, resulting in huge economic losses to the copyright owner. On November 19th, 2010, Siemens PLM, which had tried to solve the infringement with the defendant to no avail, brought the case before the Court on the account that the defendant had infringed upon its copyright in the NX series software. On December 15th, upon the request of Siemens PLM, the Court took actions to preserve the evidence of Yituo Mike. In the procedure, it discovered that the Design Department of Yituo Mike had a number of computers installed with the pirated copy of NX4 or NX6 software (previously known as Unigraphics or UG).

On October 27th, 2011, the Court rendered its first-instance judgment. It found that Siemens PLM owned the copyright in the NX4 and NX6 software concerned and according to the Berne Convention for the Protection of Literary and Artistic Works, the copyright of Siemens PLM should be protected by the law of China. Yituo Mike infringed upon the copyright of Siemens PLM by copying and using the software of Siemens PLM for business purposes without due authorization. It decided that Yituo Mike should immediately cease from the infringing act and pay damages in the total amount of 1,160,000 yuan to Siemens PLM for the economic losses sustained by the latter.

Expert’s comment

A lawyer of the case believed that the interests of the copyright owner were sufficiently protected, which was a breakthrough as compared with prior judgments. The Court considered that the statutory compensation was limited to 500,000 yuan by the current Copyright Law, which was insufficient to cover the loss of the copyright owner. Thus, it ruled that the defendant should separately pay for the reasonable costs of the plaintiff, in addition to the legal compensation. Moreover, the effective evidence preservation process, the proactive mediation and the efficient judgment proved sufficiently the protection for the copyright owner and the judicial power in securing a fair competitive order in the market.

An expert said, “As the most active manufacturing costal city in China, Shenzhen has kept on growing fast. Its manufacturing enterprises have been transforming from ‘simple’ to ‘sophisticated’ manufacturing. This transformation cannot be without the basis on knowledge, technology and self-initiated innovation.”

“Intellectual property is intricately connected with the transformation. A company cannot develop well and stably unless and until it respects and protects the IP rights of the others. The relevant laws of China and other foreign countries all require companies to use genuine software copies in their design, production and operation. Therefore, from the traditional labor-intensive operation to the current knowledge intensive operation, the only way that Chinese manufacturers must take is to learn how to respect and protect IP rights.”

(Recommended by the Business Software Alliance)

(Case 1-4 translated by Monica Zhang)
(Case 5-10 translated by Li Guanqun)
(Case 11-19 translated by Ren Qingtao)

Due to limitations of space, not all of the cases are included in the Cover Story. For full version, please contact: chinaip@hurrymedia.com <mailto:chinaip@hurrymedia.com>