Key words: unfair competition, product packaging, common name, prior use right 

Case description: Hainan Island Salt Corporation (hereinafter referred to as Salt Corporation) was registered and founded on October 9, 1990 (Business scope: edible iodized salt, salt distribution and transport, plastic packaging products, salt chemical etc.) On September 13, 2018, Salt Corporation was granted the certificate of registration for its artwork “master chef” (registration No.: G-Z-D-Z-2018-F-00617490). The type of artwork specified in the certificate is fine arts, and the artwork was created and first published on September 18, 2006. The pattern in the artwork registered is a pattern on the package bag of iodized salt produced by Salt Corporation. Base color of the package bag is white. There is a red rectangle in top left corner; and a symbol of iodized salt in human figure is designed in the rectangle. There is a small blue and white trademark in top right corner and it is called flower of life. There are bold orange Chinese characters on the package bag: Edible Solarized Iodized Salt. The Chinese character “Yan” is surrounded by a semicircle; there are black characters (grade 1) under that and a “master chef” pattern is placed in the middle. The left hand of the master chef holds a pan and the right hand holds a purple shovel. A yellow ribbon circles the master chef and there are red Chinese characters “Hainan Island Salt” on the ribbon. There are two rows of black characters at the bottom of package: Marketed by Salt Corporation, Produced by Jinghui Corporation. Jiangsu Jinqiao Salt Co., Ltd. (hereinafter referred to as Jinqiao Corporation) was registered and founded on January 6, 2011 (Business scope: production, processing and sale of edible salt and crude salt). On January 7, 2019, Jinqiao Corporation signed Copyright Use Permission Contract with Wen Hu, who was not a party of this case. Jinqiao Corporation was authorized to use the artwork registered in the artwork registration certificate (registration No.: G-Z-D-Z-2018-F-00563479) of Wen Hu. The type of artwork specified in the certificate is fine arts created on May 20, 2010 and published on May 20, 2010. The artwork is a chef whose left hand holds a pan and right hand holds a shovel; a ribbon circles the chef. On October 21, 2019, an agent of Salt Corporation and notary went to “Cheng De Li” store (proprietor: Li Cunrong, business canceled already) to buy 5 bags of edible solarized iodized salt (grade 1). On the back of the package bag of the edible solarized iodized salt, it was specified that the manufacturer was Jinqiao Corporation and the production license number is SD-017. Base color of the front of the package bag is white; there is a red rectangle in top left corner; and a symbol of iodized salt in human figure is designed in the rectangle. There is a small blue and white trademark in top right corner and it is called Gu Huai. There are bold orange Chinese characters on the package bag: Edible Solarized Iodized Salt. The Chinese character “Yan” is surrounded by a semicircle; there are black characters (grade 1) under that and a “master chef” pattern is placed in the middle. The left hand of the chef holds a purple pan and the right hand a shovel. A yellow ribbon circles the chef and there are red Chinese characters “For Hainan” on the ribbon. There is a row of black Chinese characters at the bottom of the package: Grade-1 Edible Solarized Iodized Salt for Hainan. Hainan Weifang Salt Co., Ltd. (hereinafter referred to as Weifang Corporation) is the franchiser of Jinqiao Corporation. Haikou Fangwei Logistics Co., Ltd. is forwarding agent. Salt Corporation thought Jinqiao Corporation, Fangwei Logistics Corporation, Weifang Corporation and Li Cunrong were in unfair competition and sued them to the court. Salt Corporation demanded that: Jinqiao Corporation, Fangwei Logistics Corporation, Weifang Corporation and Li Cunrong should stop the infringement act immediately, compensate economic loss of 5 million yuan and other reasonable expenses 201,955.5 yuan, publish a statement of apology on www.sina.com, hinews, hainan.net and popular newspapers including Hainan Daily, South Metropolitan Daily, China Market Regulation News and China Salt Industry to eliminate the negative effect.  

Result of judgment: In the judgment of the court, Jinqiao Corporation committed unfair competition. The Salt Corporation and Jinqiao Corporation both produce and sell edible salt. Salt Corporation was founded in 1990 and began using the package of master chef to sell edible iodized salt in different cities and counties of Hainan in 2006. It can be seen from the audit report of Salt Corporation that the sales volume of the corporation was great and income was high. Relevant websites advertised the package bag of Salt Corporation since 2006. The package bag of iodized salt produced by Salt Corporation has been known widely and used continuously in long term. The package has had certain influence in Hainan and played the function of differentiating the source of goods. The Chinese characters “Edible Solarized Iodized Salt” on the salt package of Salt Corporation shall be common name of commodity and shall not be used exclusively. However, the combination of the characters with other pattern, trademark and color is exclusive. In the comparison between the iodized salt packing of Salt Corporation and the product package of Jinqiao Corporation, sued party, the name and white and blue trademark in top right corner, the characters on ribbon circling the chef and the bold characters at bottom of package bag are different, but the size, font and configuration of characters, the structure, color and elements of pattern on the package of Jinqiao Corporation are similar with those on that of Salt Corporation. Common consumers can be confused and mistake products of the two corporations easily. Although the time of Salt Corporation getting artwork registration certificate is later than the time of Wen Hu getting his artwork registration certificate, Salt Corporation began using the pattern of master chef on package bag of iodized salt in 2006 in fact. In other words, Salt Corporation began using the pattern of master chef before Wen Hu registered the pattern. Therefore, the artwork certificate registered by Wen Hu cannot withstand the prior use right of Salt Corporation for the master chef pattern on package bag of iodized salt. Besides, Wen Hu only registered the pattern of master chef. If Jinqiao Corporation uses the pattern of master chef, it should freely design a pattern that was different from that on the package bag of Salt Corporation. As a large corporation of salt production and sale, Jinqiao Corporation should know the salt sale information in Hainan market and should know the salt package of Salt Corporation after entering Hainan market, but it used a package that was similar with that of Salt Corporation. It was unfair competition and Jinqiao Corporation shall undertake corresponding legal responsibility. According to Article 17 of the Law of the People’s Republic of China Against Unfair Competition, existing evidences cannot prove the amount of profit got from the right infringement of Jinqiao Corporation; the evidences offered by Salt Corporation cannot prove the amount of loss caused by the right infringement. Considering the unit price of salt sold by Jinqiao Corporation, the time of Jinqiao Corporation entering Hainan market, the severity of the fault, the profit decrease information of Salt Corporation and the expenses paid for stopping the right infringement, Jinqiao Corporation is ordered to compensate economic loss and reasonable expenses of 700,000 yuan to Salt Corporation. The products sold by Weifang Corporation and the store of Li Cunrong are produced by Jinqiao Corporation, in other words, the products sold have legal source. Therefore, Weifang Corporation and Li Cunrong only undertake responsibility of stopping infringement and do not undertake compensation responsibility. Fangwei Logistics Corporation is a transport unit without act of unfair competition and will not undertake responsibility of infringement. Salt Corporation did not prove loss of goodwill caused by Jinqiao Corporation, so the claim of Salt Corporation requesting Jinqiao Corporation, Fangwei Logistics Corporation, Weifang Corporation and Li Cunrong to make apology statement on relevant websites and newspapers will not be supported. To sum up, it is judged below: 1. Jinqiao Corporation stops using the package and decoration that is similar to “flower of life” package of salt produced and sold by Salt Corporation from the first valid day of this judgment; Jinqiao Corporation pays 700,000 yuan for the economic loss and reasonable expenses of Salt Corporation within 15 days from the first valid day of this judgment. 2. Weifang Corporation and Li Cunrong stop selling the products whose package is similar to the “flower of life” package from the first valid day of this judgment. 3. Other claims of Salt Corporation are rejected. 

Typical significance: This is the first case of unfair competition dispute tried after Haikou intellectual property court was founded. It is a case involving local famous enterprise in Hainan. The iodized salt packed by the chef pattern of Salt Corporation has been popular and well known by consumers after it is continuously used, advertised and popularized by Salt Corporation. The color, pattern and characters on its package and decoration have been exclusive and prominent. Through use by the right holder for many years, it can play the function of recognizing source of commodity. As an operator in the same industry, the defendant should know the popularity of the iodized salt packed by the chef pattern and the special packing decoration of Salt Corporation. To enter the market of Hainan and increase shares in market, Jinqiao Corporation used package that was similar to the package of a local famous salt enterprise of Hainan. Subjectively, it was malicious to take advantage of the brand popularity of others; objectively, consumers may be confused and mistake the products. The behavior is an unfair competition act specified in Article 6, Section 1 of the Law of the People’s Republic of China Against Unfair Competition. Therefore, Jinqiao Corporation shall undertake corresponding civil responsibility according to law. To normalize market operation and maintain good business environment for Hainan Free Trade Port, act of unfair competition will be restrained according to law.