Can Van Cleef & Arpels' “Four-Leaf Clover” be Registered as a Three-dimensional Trademark?

Ever since 1968, Van Cleef & Arpels Ltd. (“Van Cleef & Arpels”), inspired by four-leaf clover, created the first Alhambra four-leaf clover lucky series necklace, which has become very popular among fashion people. However, can the four-leaf clover be registered as a three-dimensional trademark?

Recently, the Beijing Intellectual Property Court issued a first instance judgment on the three-dimensional trademark case of Van Cleef & Arpels , rejecting Van Cleef & Arpels’ claim. 

It is reported that Van Cleef & Arpels was approved to register a three-dimensional trademark in January 2016 under the class 14, including jewelry, gemstones, necklaces (jewelry) etc. In April 2018, the third party, Bi filed a request for invalidation of the trademark. After hearing the case, the NIPA held that the registration of the trademark constituted the circumstances stipulated in paragraph 1(3), Article 11 of the PRC Trademark Law, and ruled that the disputed trademark should be invalidated.

Van Cleef & Arpels refused to accept the ruling and brought the case in front of Beijing intellectual property Court, claiming that the trademark was created by Van Cleef & Arpels, with a number of unique designs different from other general jewelry, and already has the function of identifying source of the goods.

Specifically, the Beijing Intellectual Property Court held that to judge whether the trademark has distinctiveness, the factors such as the trademark logo itself, the designated use of the trademark, the cognitive habits of the relevant public and the actual use of the commodities in which the trademark is designated shall be taken into account. In this case, the trademark is a three-dimensional figure composed of the shape and pattern of a four-leaf clover. Although the trademark have certain characteristics in terms of the shape and combination of decoration, it is used in the designated commodity "jewelry and accessories”, which, consumers will only recognize it as a shape, not a source of commodity. Even if Van Cleef & Arpels claims that its shape is not a usual design, the essential distinctiveness of the trademark will not be affected by its originality. Therefore, the Van Cleef & Arpels’ claim that the trademark design is unique and has strong distinctiveness cannot be supported.

With respect to the issue on whether the distinctiveness of trademark can be obtained through actual use, the Beijing Intellectual Property Court stated that when the trademark logo is lack of distinctiveness, relevant evidence shall be considered. Although the evidence submitted by Van Cleef & Arpels can prove that the company's "four-leaf clover Alhambra" series have been widely publicized and sold in the Chinese market, it cannot prove that the disputed trademark can be identified as a source of commodity which the public can recognize the brand through the shape itself.

In summary, the Beijing Intellectual Property Court rejected Van Cleef & Arpels’ claim. The case is still pending for the second instance.

China IP News

Publish Date: July 2, 2020  

ZLWD Commentary:

The focus of the dispute is whether the three-dimensional figure composed of four-leaf clover has distinctiveness and whether it can be registered as a three-dimensional trademark.

Article 9 of the Rules of the Supreme People's Court on Issues Relating to the Hearing of Administrative Cases Involving Granting or Affirming Trademark Rights provided that, “For an application for registering the shape or part of the shape of the commodity itself as a trademark of three-dimensional sign, as it is hard for relevant public to identify the trademark as a sign indicating the source of the designated commodity in general circumstances, such three-dimensional sign is not of distinctiveness as a trademark. The unique creation or earliest use of the shape by the applicant cannot be definitely identified as of distinctiveness as a trademark. If the sign mentioned in the preceding paragraph has been used widely or for a long time and relevant public can identify the source of commodities via the sign, the sign may be determined as of distinctiveness. Where a registered trademark is applied for only a part of the shape of the commodity itself or its own shape as a three-dimensional mark, it is generally difficult for the relevant public to identify it as a sign indicating the origin of the commodity, and the three-dimensional mark does not have a distinctive feature as a trademark. The original or earliest use of the shape by the applicant does not of course lead to its distinctive characteristics as a trademark ." Therefore, according to the current laws and regulations, the registration of three-dimensional trademark is still based on distinctiveness. In this case, the trademark is a three-dimensional figure composed of four-leaf clover. Although it has certain characteristics, it is used in approved class of commodities such as "jewelry". The consumers are prone to recognize it as the shape of commodities, which is lack of distinctiveness.

A lot of three-dimensional trademark disputes have emerged in recent years, such as Dior j'adior perfume , ZIPPO lighter, Nestle square bottle and so on, which have attracted wide attention of the society. At present, the law does not specify the standard of trademark distinctiveness for three-dimensional mark. The court's current attitude towards the three-dimensional mark is tend to tighten the situation. From the point of view of judicial practice, there are three perspectives to be considered; first, the originality of the commodity itself; second, the public's cognitive habit of the shape or packaging of the commodity; and third, whether the relevant public will regard its three-dimensional graphic cognition as the basis of judgment.

Claim for RMB 10 Billion! i Robot Sued Apple

On August 3, Shanghai Zhizhen Intelligent Network Technology Co., Ltd. (“i Robot”) filed a lawsuit with the Shanghai High People's Court today, requested Apple to stop patent infringement through Siri (Intelligent Assistant), including but not limited to, requesting Apple to stop manufacturing, using, promising sales, selling and importing a product invented from the patent “a chat robot system” (“the patent involved”, patent number: ZL200410053749.9). The i Robot claimed for RMB 10 billion.

It is reported that i Robot is the patent owner of the patent involved. The patent was submitted in 2004 and was authorized in 2009. The patent allows robots to complete tasks in a formatted language, as well as complete conversations in a natural way.

The indictment filed by i Robot indicated that in 2011, Apple first launched Siri with iPhone 4S, and then loaded it in iPhone, iPad, iTouch, MacBook, HomePod and other products one after another. Siri become the main entrance to human-computer interaction of Apple products. Through judicial expertise, Siri technical scheme falls into the scope of protection of patent claim i Robot No. ZL200410053749.9.

Yuan Hui, founder, chairman and CEO of the i Robot said, “As a technology practitioner, I respect Apple. Their products and services brought a lot of value and experience to the world. However, every Apple product that consumers buy is paid. In turn, Apple has to respect innovation, pay us reasonable fees after using our patent."

Actually, as early as June 2012, i Robot brought lawsuit against Apple to the Shanghai No.1 Intermediate People's Court on the grounds that Siri programme infringed its patent involved. Subsequently, Apple filed a counterclaim and a request for invalidation of patent involved. After trial, the original patent review committee made a decision to maintain the validity of the patent involved. Apple refused to accept the decision and filed an administrative lawsuit with the Beijing No.1 Intermediate People's Court. The court found that the patent involved was fully disclosed and that the claim was in accordance with the relevant provisions of the Patent Law and its implementing rules, and decided to uphold the decision of the original Patent Reexamination Board. Apple filed an appeal with the Beijing High People's Court (“Beijing High Court”) against the ruling. According to the Beijing High Court, the manual only contain the idea of a game server and the realization of interactive games, there is no record of how the game server is connected to the other parts of the chat robot. The patent involved failed to disclose how to realize the game function limited by the patent right claim, which violated Article 26(3) of the PRC Patent Law. Therefore, the judgment revoked the judgment of first instance and the decision of being sued.

The i Robot did not agree with the second instance judgment, and filed an application for retrial with the Supreme People's Court.

The Supreme Court held that, according to the complete contents of the manual and the evidence of the case, it should determine that using the formatted statement for the game module to realize the game function belongs to the existing technology of the patent involved, and the game server is not a distinguishing feature between the patent and the existing technology. Therefore, there are errors in the second instance judgment, and specification of the patent involved complied the provisions of Article 26(3) of the Patent Law. Accordingly, the Supreme Court set aside the second instance judgment and upheld the first instance judgment.

ZLWD Commentary:

A core reason for invalidation of the i Robot patent administrative dispute case is whether the patent document conforms to the provisions of Article 26(3) of the Patent Law, which provided that “the manual shall provide a clear and complete explanation of the invention or utility model to the extent which can be materialised by technical personnel in the relevant technological field; diagrams shall be attached where necessary. The summary shall include a brief explanation of the technical features of the invention or utility model.” 

Unlike the court of second instance, the Supreme Court held that there was no need for the manual to give clear and specific guidance, provided that the technical personnel in the field can be informed of all available technologies and is able to apply conventional experimental means so that the personnel can reach the existing technologies. Meanwhile, features distinguished from existing technologies should be subject to objective criteria rather than self-admission by the patent applicant or patentee.

The case also alarms the patentee that whether the patent can maintain validity, in addition to the technical scheme itself, the quality of patent application documents also plays a crucial role.

The Amendment to the PRC Copyright Law (Draft) was Submitted for Review

On August 8, the Amendment to the PRC Copyright Law (Draft) (“the Draft”) was submitted to the Standing Committee of the National People's Congress for consideration for the second review. The version of the Draft for the second review responds to a number of legal issues, such as perfect the definition and type of works, delete the provisions that do not abuse rights to affect the normal dissemination of works and legal liability, and add relevant provisions to the audio-visual works of copyright classification protection etc.

It is stated that the second version of the Draft further improves the definition and types of works, which revised the provision to "work shall mean original intellectual achievements in the fields of literature, art and science which has originality.”

In the aspect of improving the protection of audio-visual works, the second version of the Draft distinguishes the copyright ownership of audio-visual works on the basis of the first instance draft. For example, the Draft put additional provisions on the basis of "works of film or TV series", and other audiovisual works "constitute cooperative works or official works, the ownership of copyright shall be determined in accordance with the relevant provisions of this Law; if they do not constitute cooperative works or official works, the ownership of copyright shall be agreed upon by the producer and the author, and if there is no agreement or unclear agreement, the producer shall enjoy the right of authorship and the right to remuneration. If the producer uses the audio-visual works specified in this paragraph beyond the scope of the contract or industry practice, the producer shall obtain the author's authorization ."

Furthermore, in view of the abuse of copyright, the Draft for the second review focuses on the connection with the Civil Code, Antitrust Law and other laws, and removes the expression "no abuse of rights to affect the normal dissemination of works" and the relevant legal liability provisions in the first draft. Meanwhile, in order to better balance the protection of copyright and public interest, the Draft intends to appropriately expand the scope of the legal use of the relevant works without the permission of the copyright owner and without paying remuneration to them.

China IP News

Publish Date: August 2, 2020

ZLWD Commentary:

The Draft amended "film works and works created by similar means of film production" to "film works, TV series works and other audio-visual works", which is of great significance in overcoming the difficulties of judicial practice caused by rigidly using "film and film production methods" to define audio-visual works. At the same time, with the rapid development of the Internet video industry, the works of short video are not limited to individual production, but may be completed by investors, actual producers and other parties. The Draft has certain positive significance for clarifying the copyright ownership of "other audio-visual works" other than movies and TV dramas.

What is the Protection Scale for Well-known Trademarks?

What is the basis for cross-class protection of well-known trademarks and how wide is the scope of protection for well-known trademarks? In the light of the No.14331625 "六福LIUFU" trademark (“disputed trademark”) case, the Beijing High People's Court gave the answer in their judgment.

The Court held that the cross-class protection for well-known trademarks is different from the whole class protection, and the basis for giving them cross-class protection should be subject to the popularity and significance of well-known trademarks, so as to avoid harming the legitimate rights and interests of well-known trademark owners. In this case, although Liufu Group Co., Ltd. (“Liufu Group”) can prove that No.944398 “六福” trademark (“reference trademark) has a high reputation on certain classes of commodities such as gemstones, precious metals accessories, before the date of application for registration of the trademark. Nevertheless, the approved classes for the referred trademark are mine drainage pump, aquarium tank ventilation pump. There are obvious differences between the disputed trademark and referred trademark in terms of function, purpose and consumption channels.

Liufu Group was founded in 1991. In January 2018, it filed invalidation application of disputed trademark to NIPA regarding the disputed trademark violating the principle of good faith and its prior rights of the trademark. On April 8, 2014, Taizhou Liufu Electromechanical Ltd. filed the registration application for its commodities and was approved for use in 7 classes. The referred trademark was approved for use in 14 classes of commodities.

In the stage of trademark evaluation, Liufu Group submitted evidence such as the disputed trademark file, the record of “六福” trademark obtaining well-known trademark protection, the annual report of the enterprise and some certificates of honor and trophy photos, and the brand promotion of “六福”, etc.

The commercial committee considered that the evidence submitted by Liufu Group could prove that the “六福” trademark had a high popularity and influence on the approved use of precious stones, precious gold ornaments (jewelry) and other commodities before the registration date of disputed trademark. However, the mine drainage pump, aquarium ventilation pump and other commodities were quite different from the above mentioned commodities in terms of function, purpose, sales place and so on. At the same time, the evidence submitted by Liufu Group is not enough to prove that before the date of registration, the name of “六福” has a certain popularity in mine drainage pump, aquarium ventilation pump and other commodities. To sum up, the original commercial judges made a ruling to uphold the trademark.

Liufu Group refused to accept the ruling, and then filed an administrative litigation with the Beijing Intellectual Property Court.

The Beijing Intellectual Property Court held that the two trademarks are designated to use in rather different classes, which do not cause confusion or misunderstanding among consumers or damage to the interests of the plaintiff. Hence, the Court rejected Liufu Group’s request.

The Liufu Group appealed to the Beijing High People's Court, stating that the referred trademark has reached a well-known level through publicity and use, and that the registration of the disputed trademark will highly likely mislead the public and reduce the well-known degree of the referred trademark, thus harming the interests of the company, and shall be invalidated.

The Beijing High Court held that the judgment of the Beijing Intellectual Property Court and the ruling of the original commercial committee were correct, rejected the appeal request of Liufu Group and upheld the judgment of first instance.

China IP News

Publish Date: August 13, 2020

ZLWD Commentary:

The focus of the dispute in this case is whether well-known trademarks can enjoy cross-class protection? What is the scope of cross-class protection? In accordance with Article 13 of the PRC Trademark Law, an application for registration of a trademark which is a replication, imitation or translation of other's well-known trademark not registered in China for use on identical or similar commodities which is easily misleading shall not be registered and the use of such a mark shall be prohibited. Generally, in practice, well-known trademarks are protected to a greater extent than ordinary trademarks, however, the scope of protection is limited to a certain extent, that is, the basis of granting cross-class protection is to obtain a certain degree of protection subject to the PRC Trademark law, and to grant protection in closely-related classes which can be easily misleading to the public and may harm the interests of the obligee. This does not mean that well-known trademarks will obtain full-class protection. For instance, although “六福” trademark is a well-known trademark in this case, there are huge difference regarding the function, purpose and sales places between the classes of disputed trademark and referred trademark. The registration and use of the disputed trademark will not mislead the public, hence the appeal request of Liufu Group was rejected.

The recognition of well-known trademarks is limited to individual cases. Certainly it may not be effective for the cases in the future, nor can it take effect outside the case. Therefore, even if well-known trademarks can obtain greater protection than ordinary trademarks under specific conditions, enterprises shall not overly rely on the passive protection of well-known trademarks, and shall take initiative to register trademarks as early as possible.

Broadcast Chinese Super League without Authorization, Zhejiang Telecom was Found for Infringement

As the highest professional football league in China, the Chinese Super League has always attracted the attention of many fans. And the infringement disputes caused by the broadcast of the event also occur from time to time. Hangzhou Internet Court recently ordered China Telecom Co., Ltd. Zhejiang Branch (“Zhejiang Telecom”), China Telecom Co., Ltd. Hangzhou Branch (“Hangzhou” Telecom), Zhejiang Radio and Television New Media Co., Ltd. (“Zhejiang New Media”) violated right of dissemination via information network of the "2019 Super League Round 8 Guangzhou Evergrande VS Beijing Guoan" and unfair competition dispute case. It was found that Zhejiang Telecom, Hangzhou Telecom and Zhejiang New Media's unauthorized broadcast of the game constitutes an infringement, and the three defendants are ordered to compensate Suning sports for economic losses and reasonable expenses in a total of RMB 500,000.

Unauthorized Dissemination

Suning sports said, it was authorized by Sports and Olympic Power (Beijing) Sports Communication Co., Ltd (“Sports and Olympic Company”) to obtain exclusive online video rights for 2019 Super League Games, containing right of dissemination via information network. Zhejiang Telecom, Hangzhou Telecom and Zhejiang New Media provide on-demand services to the public on the "Zhejiang Telecom IPTV" platform, operated by Zhejiang Telecom, without authorization. Suning Sports believes that, Guangzhou Evergrande and Beijing Guoan are the Chinese super league team. The two teams have gained a lot of attention and the commercial value is extremely high. Suning sports gained the exclusive rights to broadcast the game after paying high price.

Zhejiang Telecom and Zhejiang New Media jointly argued that the originality of the program involved in the case did not reach the height of the work and did not belong to the works in the sense of copyright law, nor should it be regarded as audio and video products in the sense of copyright law, and was not the object of the protection of the right of dissemination via information network. Zhejiang Telecom broadcasting the game does not constitute infringement. “Zhejiang Telecom IPTV" platform transmitted the game with authorization and did not infringe the rights of others. CCTV, as the IPTV’s head platform, has been authorized to broadcast the game, and has the right to disseminate the game to the IPTV’s sub-platform for broadcast.

Hangzhou Telecom argued that Hangzhou Telecom is not the main entity to operate “Zhejiang Telecom IPTV" platform and has nothing to do with the case.

The Court Found Infringement

After trial, the court held that the game involved in the case belongs to the film works stipulated in the Copyright Law, meanwhile, meets the original standards of film works. The plaintiff, authorized by the Sports and Olympic Company, enjoys the right of dissemination via information network of the game.

In this case, CCTV obtained authorization to broadcast the type of live broadcast, delay broadcast and replay, the three defendants can not prove that they have obtained the right type of authorization. At the "Zhejiang Telecom IPTV" platform, the three defendants provide online on-demand services for the programs involved, which constitutes an infringement of the right to disseminate information network. The unfair competition behavior is consistent with the violation of the right to disseminate information network, and the repeated protection of anti-unfair competition law is not applicable. Zhejiang Telecom, Hangzhou Telecom and Zhejiang New Media jointly operate the "IPTV" business, while Hangzhou Telecom opens business in its own name and provides services and collects fees. Therefore the three defendants constitute a joint infringement.

Renmin Online

Publish Date: July 28, 2020

ZLWD Commentary:

Watching sports game has become an favourable entertainment event for the public. Live sports events can only be protected by the Copyright Law if they meet the requirements for the object of rights, meaning the requirements for constitution of work. However, there are different conclusions in practice as to whether sports events constitute works in the sense of copyright law.

According to Article 2 of the PRC Implementation Regulations for the Copyright Law, the term "works" as stated in the Copyright Law shall include original works of literature, arts and sciences with intellectual results which can be reproduced in a tangible form. Whether the live picture of sports events is the qualitative nature of the work is controversial. The focus of the dispute is mainly on the recognition of the original standard and the interpretation of "fixed". However, different trial courts have different judgment criteria on originality. In practice, there are two kinds of standards, “whether there is originality” and “whether the originality is high". The first standard refers to that the sports event fully reflects the creators’ choice, editing and processing of the continuous picture under their will. The second standard holds that the live broadcast of sports events has the constraints and requirements of the production. Staff must follow the guidance of the manual to select the material and play the certain pictures.

Whether live sports can be regarded as a work shall be judged case by case.

Negotiation for License Failed, How Can Xiaomi Breakthrough?

Recently, the U.S. digital mobile and video technology developer InterDigital Ltd. filed a patent infringement lawsuit against Xiaomi in India, involving three patents of 3G/4G network performance, video decoding and image quality, as well as other relevant patents, and claimed for punitive damages. After Xiaomi filed a domestic lawsuit against InterDigital for patent licensing fees, the latter fought back in the Indian market.

InterDigital is not a stranger to the industry. The Delaware-based mobile and video R&D company, with its preemptive advantage, frequently file lawsuits against mobile phone manufacturers. Apart from the patent disputes with Xiaomi, the company also have had patent disputes with many domestic or foreign manufactures. InterDigital announced in april that it signed a global patent license agreement with Huawei to settle the patent litigation in China and the U.K. that lasted for more than 15 months. Qualcomm, the largest player in the field of mobile communications standards, did not escape the patent war started by InterDigital and had to pay patent fees. How can Xiaomi breakthrough when they are facing a strong opponent like InterDigital?

Recently, InterDigital company believed that Xiaomi used its three patents related to mobile communications and two patents related to H.265/HEVC video coding technology without authorization, hence it sued Xiaomi to the High Court of New Delhi, India, for punitive damages, and requested the Indian court to issue a restraining order to prevent Xiaomi from continuing to violate patented technology in the Indian market unless Xiaomi agreed to sign a patent license agreement based on principles of fairness, reasonableness and non-discrimination (FRAND) with it.

The patent lawsuit originated from the failure of both parties to reach a patent license agreement. Xiaomi has been actively communicating with InterDigital previously, hoping to settle the patent dispute in a fair and reasonable way, but after multiple consultations and communications, InterDigital still insists on its unreasonable patent license conditions. Unfortunately, before the InterDigital launched a lawsuit in India, Xiaomi took the lead in domestic litigation on the patent license fee of InterDigital, hoping that the judiciary would determine a package of licensing conditions that meet the principles of fairness, reasonableness and non-discrimination.

The patent license dispute between the two parties is not an isolated case. Previously, Huawei filed a lawsuit with the Shenzhen Court for InterDigital's excessive patent license fee, which took 15 months to settle. Xiaomi supposed that InterDigital filed the lawsuit in India was because Xiaomi brought the dispute in front of domestic courts, trying to threaten Xiaomi through litigations and bans, and force Xiaomi to accept unreasonable licensing conditions.

The data shows that InterDigital's patent license fee in 2019 accounts for about 90% of its revenue, and has carried out a series of successful patent lawsuits against Ericsson, Apple, RIM, Samsung, LG, Nokia, Panasonic, Sanyo etc. How can Xiaomi deal with such patent litigation?

In response, Li Junhui, a special researcher at the intellectual property Research Center of China University of political Science and Law, stated that Xiaomi was not the first to be sued for patent infringement in India, and Xiaomi should have the ability to deal with the lawsuit. Referring to the previous patent dispute between Ericsson and Xiaomi in India, when domestic enterprises are involved in litigation abroad, first of all, they should submit a deposit to the court in time in accordance with local laws to ensure that the sales of their products in India are not affected. Secondly, in view of the patent involved in the infringement, the request for invalidation is filed. This includes both in the country where the dispute occurred and in other important sales markets of Xiaomi. Finally, Xiaomi needs to assess the patent license agreement proposed by InterDigital whether the standard essential patent is involved, and whether the licensing conditions proposed by the other party conform to the principle of "fairness, reasonableness and non-discrimination", and negotiate and cooperate with the relevant parties under the guidance of this principle.

“We can see this trend in the industry from the past. Patent licensing companies often choose to file lawsuits or threaten with bans in countries with high-risk patents, forcing enterprises to accept unreasonable licensing conditions, and reducing the competitiveness of domestic enterprises." Xiaomi officials said the company will respond with a positive attitude, safeguard the company's legal rights and protect the company's innovative advantages and competitiveness in key overseas markets.

In the past, Xiaomi has always respected the reasonable patent claims of other manufacturers and sought to resolve patent disputes in the way of cooperation, but it will not easily bow to its opponents for those patent licensing fees that are too high or unreasonable. Late last year, Xiaomi sued Sisvel Italian company in court, asking the court to determine the license rate for all Chinese standard necessary patents in the wireless transmission technology patent package held by Sisvel company. This was also Xiaomi's first patent rate litigation.

China IP News

Publish Date: July 10, 2020

ZLWD Commentary:

In order to preventing holders of standard essential patents from improperly exploiting their advantages, standard-setting organizations generally require that the holders shall permit the use of their standard-necessary patents in accordance with the principles of FRAND (fairness, reasonableness and non-discrimination) in their intellectual property policies. As more and more enterprises go abroad, it is inevitable for domestic enterprises to encounter patent encirclement and suppression in the process of overseas market expansion. Xiaomi is not the only oversea mobile phone manufacturer sued by InterDigital. Samsung, Apple, Huawei and other companies have also been sued by InterDigital.

One of the key points to avoid the patentee obtaining excessively high license rate in the overseas market is that the enterprise should improve its patent quantity and quality, as well as carry out the patent portfolio.

The First Game Monopoly Case in China was Upheld in the Final Instance

On August 4, the Guangdong High People's Court delivered its final judgment in the dispute over abuse of market dominance and unfair competition between Huaduo and NetEase and the dispute over copyright licensing contract and monopoly between Zhang and NetEase. The Court held that NetEase does not have a dominant market position in the relevant market and does not have the market ability to exclude and limit competition, and rejects all claims of the two appellants in accordance with the law and upheld original judgment.

NetEase is the copyright owner of the online game "Meng Huan Xi You", Zhang and Huaduo are the player of the game and the operator of a live broadcast platform respectively. NetEase stated in an unseal agreement that, without the written consent of NetEase, users may not publicly display and play all or part of the content of this product. Zhang brought a lawsuit against NetEase, saying that the above agreement are standard terms, which limits players’ freedom to broadcast the live game, violates the regulations in contract law and antitrust law, hence the agreement should be regarded as invalid. Huaduo also filed a lawsuit, saying NetEase only allows players to stream the game on a specific platform, and the behaviour that bundle the game and live broadcast platform has constituted an abuse of market dominance. Guangzhou Intellectual Property Court rejected the two plaintiffs' claims in the first instance, Zhang and Huaduo appealed.

The Guangdong High People’s Court held that the gaming scenarios of “Meng Huan Xi You” shall be considered as film works. NetEase, as the copyright owner of the company, enjoys the right to prohibit others from broadcasting the game without permission pursuant to the law, and the relevant contract agreement does not belong to the act of abusing intellectual property rights to exclude and restrict competition. Further, online games are spirits consuming products, content and service are the primary factors affecting the player's choice. Although a single game may have a strong locking effect on the player, such effect is limited. It is difficult to form a specific related market. At the same time, NetEase’s shares in the relevant markets are far less than the proportion stipulated in the antitrust law. In addition, the clauses in the agreement does not exclude the main rights of gamers, and does not violate the relevant provisions of contract law.

Guangdong Court Online

Publish Date: August 4, 2020

ZLWD Commentary:

This case is the first game monopoly dispute case in China. One of the main issues on the case is that whether the game is similar to film works and NetEase enjoys copyright of the game. The Guangdong High People's Court held that although the game can only fully displayed after players’ operations, the composition elements such as pattern colors, character images, effect tools, language music, story scenes, and the entire game process are pre-set by the developer. Therefore, the overall picture of the game involved in the case is in line with the the core feature of film works that “composition of a series of pictures with or without sound". The production process is complicated, and the final audiovisual expression enjoys high creativity. Thus, it is deemed to be a film-like work. NetEase, as the copyright owner, shall be protected by the copyright law.

Game streaming is an new industry emerging from technological advancement. With the internet traffic and fan economic effect, huge market benefits have been generated. The market order of free competition needs to be based on the protection of intellectual property rights. The game streamer shall respect the exclusive right of the game copyright owner to control the dissemination of the copyright work .

This Newsletter is produced by Economic and Legal Development Research Centre for Guangdong-Hong Kong-Macao Greater Bay Area 

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Yu DENG, Yuming LI, Shell WU, Oyagi, Gong CHEN, Ning NING

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