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CHINA INTELLECTUAL PROPERTY LAW NEWSLETTER
SPECIAL ISSUE:
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- Summary of the Court's Decision
In 1992, Lego toys were launched in China. Interlego AG (Lego), the Swiss holder of intellectual property rights of the famous Danish toy manufacturer Lego, owns all of the intellectual property related to and in Lego toy blocks in China. Several years later, Lego found that the toys blocks manufactured by a local company, Tianjin Coko Toy Co. Ltd. (Coko), was similar to those of Lego and therefore infringed on Lego's copyright. In 1999, Lego filed a lawsuit against Coko with Beijing No. 1 Intermediate People's Court on a copyright infringement basis. Lego argued that its 53-piece toy block set should enjoy copyright as works of applied art according to the Berne Convention for the Protection of Literary and Artistic Works, to which both Switzerland and China are contracting countries. The manufacturer of the accused toy blocks by Coko, which copied or substantially copied the 53 toy blocks of Lego, infringed on Lego's copyright according to Chinese copyright law.
In its defense, Coko claimed that Lego's products should not be regarded as works of applied art as they are merely individual parts of toys and therefore should not be protected by copyright law. Additionally, Lego's toy blocks had already been granted design patent protection, and thus should be protected solely as designs and not copyright as well.
After the initial trial, the Beijing No. 1 Intermediate People's Court rendered its judgment, which held that Coko infringed on Lego's copyright and ordered Coko to hand over the molds and the unsold toy blocks to the court, pay Lego RMB 67,000 (roughly US $8,072) as compensation and publish an apology in the Beijing Daily newspaper. Neither party was satisfied with the judgment, and both appealed to the Beijing High People's Court.
In its eventual decision, the Beijing High People's Court upheld the judgment of first instance and provided further explanation in the judgment. According to the court, the central issue of the case was whether the 53 toy blocks, on which Lego claimed copyright protection, should be protected as works of applied art under Chinese law, and if so, to what extent?
According to the Berne Convention and the Regulations on Implementing International Copyright Treaties, the latter issued by the Chinese government on September 22, 1992, a work of applied art created by citizens of the member countries of the Berne Convention shall be protected under Chinese laws and regulations for a period of 25 years starting from the date when such work was completed. Works of applied art refer to the products of intelligence that possess an industrial application and artistic quality and satisfy the requirements of "works". Therefore, works of applied art shall possess industrial application, artistic quality, novelty and can be reproduced in a certain physical form.
Among the 53 toy blocks, 3 pieces were held to be sufficiently lacking in creativity and therefore did not meet the test for works of applied art. The remaining 50 pieces could be protected as works of applied art as they possess the four elements. Although Coko claimed that there was no explicit provision in the law stating that works of applied art should be granted dual protection of patent and copyright by Chinese laws, the court held that the lack of an explicit provision did not mean that Chinese laws exclude the dual protection of copyright and patent right for works of applied art of foreigners.
Therefore, the court stated that Lego's toy blocks, which had been granted patent right protection, may also be protected under the copyright law. However, the court also upheld the lower court's decision that some of Coko's toy blocks were not substantially similar to the 17 cited Lego toy blocks, and therefore infringement could not be found. The Beijing High People's Court further explained it was reasonable for the court of first instance to issue this decision as the 17 toy blocks had less artistic quality and could not be simply deemed as typical works of applied art.
- Commentary
Australian Financial Review: Lego Win Fails To Block Piracy
China's WTO commitment to protect intellectual property lacks teeth, Michael Dwyer reported from Beijing.
Lego's recent legal win over Chinese counterfeiters may have been heralded as a landmark victory by the Danish toy maker, but in reality copyright laws still don't hold much sway in China.
Tens of thousands of Chinese factories still operate with relative impunity in spite of the commitments to intellectual property protection that Beijing made in order to become a member of the World Trade Organization.
More than 12 months after China's formal accession to the WTO, locals and tourists alike still flock to the Hongqiao markets in the southern suburbs of Beijing to pick up their fake Rolex watches and counterfeit Prada handbags. China regularly tops the list of the world's worst offenders when it comes to copyright violations.
Late last year the International Intellectual Property Alliance claimed piracy levels in most copyright sectors in China were still running at about 90 per cent, costing foreign firms close to $US 2 billion ($3.4 billion) a year.
And according to the Business Software Alliance, a group of multinationals set up to protect the intellectual property rights of its members, only Vietnam can top China's 94 per cent rate for software piracy.
Beijing has shown a strong commitment to modifying the country's intellectual property laws in order to bring them into line with China's WTO agreement.
But according to a report released last month by the office of the United States Trade Representative, copyright violations still represent a "major challenge" for the central Chinese government.
"Intellectual property rights enforcement is hampered by lack of co-ordination among Chinese government ministries and agencies, local protectionism and corruption, high thresholds from criminal prosecution, lack of training and weak punishments," the USTR report said. "US companies complain that, in most regions of China, the police are either not interested in pursuing counterfeiting and piracy cases or simply lack the resources and training required to investigate these types of cases effectively."
Lego's recent legal victory highlights many of the difficulties that foreign companies face when trying to protect their intellectual property in China.
The toy maker has been fighting its way through China's legal system since 1999 in a bid to force the Tianjin-based Coko Toy Corporation from copying some of its more popular product lines.
But Lego's legal win is still somewhat limited and when enforced will stop only the counterfeiting of one Chinese company.
Lego is still pursuing legal actions in Norway, Finland and Denmark against companies that have been importing the fake Coko products.
Earlier this month lawyers for Lego touring the Hong Kong Toy Fair also found what they described as "blatant imitations" of their products at 12 stands, and most of the manufacturers involved were located across the border in mainland China.
(Source: Australian Financial Review)
Financial Times: Lego Wins Landmark Chinese Court Victory in Piracy Lawsuit
Lego, renowned as a vigorous defender of its intellectual property rights, said this was the first time the Chinese legal system had delivered a judgment confirming copyright protection of industrial design and applied art.
The judgment is viewed as precedent-setting because it establishes the possibility of gaining "double protection" under China's legal system. This allows a company to register design protection and simultaneously obtain copyright protection for a product in the courts. "This is a remarkable ruling which is sure to play an important role in the future as more and more companies have to watch copies of their products being made and sold in China," said Henrik G. Jacobsen, Lego's intellectual property lawyer.
The ruling, delivered by the Beijing High People's Court, means that Coko must halt production of the copied items and turn over the relevant molding equipment to the authorities for destruction. It also has to publish an apology in the Beijing Daily and pay symbolic compensation.
(Source: Financial Times)
Editor: The Lego decision has brought forth the usual commentary from both the optimists and the pessimists. Lego counsel is pleased with the decision, while other corporate counsel that have counterfeiting problems originating in China are clamoring for more progress. Straddling the usual political fence is the United States and other governments, which offer praise and criticism reflecting both viewpoints.
Commentators using this opportunity to focus on enforcement shortcomings certainly have valid arguments. On the other hand, the frenetic pace of China's economic expansion and legal reforms suggest to some of us that the government has done remarkably well in this area, all things considered. When one compares the less than 25 years of experience the Chinese market has had in dealing with these matters, compared to the relatively slow development of these legal concepts in the West, some perspective can be brought to these criticisms.
Without a legal system of stare decisis, the Beijing High Court decision is indeed of limited value and should not be taken as binding on all courts in the land. However, the persuasive power of a court decision is significant. The ability of foreign copyright holders to seek protection for their works of applied art, notwithstanding their design patent portfolio, is a welcome additional weapon in the China intellectual property rights protection arsenal.
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Lehman Lee & Xu
China Lawyers, Notaries, Patent, Copyright and Trademark
Agents
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The China Intellectual Property Law Newsletter is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.