CHANG TSI
Insights
Recently, the Supreme People’s Court released eight typical cases concerning anti-unfair competition. The selected cases cover various types of unfair competition such as confusion, commercial defamation, and trade secret infringement in emerging sectors like live streaming platforms, game services, e-commerce platforms, and AI. These cases reflect the proactive stance of Chinese judiciary in keeping pace with the times, safeguarding fair competition, and optimizing the business environment.
Below we provide a summary of these typical cases.
In this case, the defendant operated a third-party platform providing virtual currency trading services for game users, with some transactions involving game currency from illegal sources, such as plug-ins or account theft. The court found that the platform knowingly or should have known about the illegal origins of the traded items but continued to provide services, harming the interests of game operators and public social interests. This case balances the rights and interests of game operators, the order of the game industry, and the trading needs of game users for virtual property, providing judicial guidance for standardizing the circulation of virtual property in online games. It was also selected as one of the China’s Top 10 Typical Cases of Internet-Related Justice (2023-2024). For more cases, please refer to our previous article here.
In this case, the defendant used the disputed trademark extensively in short videos to attract traffic for their live stream, imitated the plaintiff’s store decoration, and utilized the attire of hosts and product placement to involve the disputed trademark, misleading consumers and selling products of other brands. The court found that the defendant's actions constituted trademark infringement and unfair competition by comprehensively free-riding on the plaintiff's fame, exceeding the scope of indicative fair use of trademark. This case addresses unfair competition in a new business model, reflecting the Chinese judiciary's response to emerging issues in practice.
The defendant developed a software to scrape product data from the plaintiff's e-commerce platform, offering paid services to merchants for setting up stores on other platforms and redirecting orders back to the plaintiff's platform to complete transactions. The court ruled that the platform, having invested significant resources in the lawful collection and processing of data, held rights over the data aggregation. The defendant's actions increased the platform's operational costs, diverted its traffic, and deprived it of potential business opportunities, constituting unfair competition. The case affirmed the legitimate rights of e-commerce platforms over their data and provided a reference for similar unfair competition cases involving data scraping.
The plaintiff developed a photo effect AI model, while the defendant directly used its model structure and parameters to develop similar effects, resulting in substantive substitution. The court held that the model structure and parameters, refined through extensive training and optimization, constitute a competitive advantage. The defendant's use of the plaintiff's model harmed the plaintiff's competitive interests and violated business ethics, constituting unfair competition. This case established the protectability of AI model structures and parameters, creating an approach based on the general principles of the Anti-Unfair Competition Law to safeguarding emerging competitive interests. For more details, refer to the previous article in this column here.
In addition to the above cases involving new types of unfair competition, the remaining typical cases also include some traditional unfair competition cases. In a case concerning unfair use of other’s company name, the court clarified that with evidence indicating an intention to conduct business, the act of registering a company name itself may be considered confusion behavior. In a trade secret case, the court established that even though parts of the technical solution were publicly known, the optimized and experimentally formed overall solution could still be recognized as a trade secret. In a software copyright and trade secret infringement with nominee shareholder case, the court provided a detailed analysis of the liability of the defendant company and the individual involved. In a defamation case, the court delineated the boundaries between defamation and lawful commercial promotion. These rulings bring new highlights to traditional unfair competition cases.
