Interpretation on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition (hereinafter referred to as “Interpretation”) has been promulgated by the Supreme People’s Court on January 12, 2007 and come into force as of February 1, 2007. As the first Interpretation promulgated by the Supreme People’s Court concerning the civil cases of unfair competition, it sets out more specific standard in trial involving affirming the matter of fact and applying the law in hearing civil cases. The key points of Interpretation include the following:

1. Defining “well-known commodities” and “specific name, package and decoration of well-known commodities” expressly

Commodities shall not be affirmed as “well-known”, provided that they are only famous outside the territory but not within the territory of China.

For affirming well-known commodities, the time, region, volume and targets for selling such commodities, the duration, degree and scope for any publicity of the commodities, as well as the protection situation as well-known commodities shall be taken into consideration.

Where an identical or similar name, package or decoration with that specific to a well-known commodity is used within a different region, if the later user can prove its good faith in using it, it will not constitute the unfair competition.

The identity or similarity with the specific name, package or decoration of a well-known commodity may be affirmed by referring to the principles and methods for judging identical or similar trademarks. With respect to decoration, its scope has been extended to the overall business image which is constituted by the business place, the pattern of business tools or the clothes of business staff and so on.

2. Extending the protected scope of enterprise name or personal name, as well as
the commercial use

The name of enterprise or personal name which shall be protected according to law has been extended to the business name of an enterprise or the pen name or stage name of any natural person that has certain market popularity and is known by the relevant public.

The commercial use of an enterprise name has been extended to commodity exchange documents, advertisements, exhibitions or other commercial activities.

3. Providing affirming standard of business secrets, confirming legitimacy of reverse engineering and regulating the name list of customers specifically

Interpretation clarifies 6 circumstances which may be affirmed that the relevant information is not known to the public and 7 circumstances which shall be deemed as adopting confidentiality measures. Interpretation provides that the name list of customers among business secrets shall generally refer to the name, address, contact information, trading habits, trading intent, and trading contents of customers that consist of the specific client information different from relevant public information. Furthermore, the specific customers that have kept a long-term and stable trading relationship have been brought into the protected scope as well.

In accordance with Interpretation, it is legitimate for managers to obtain business secrets by way of reverse engineering.

4. Determining two types of civil liabilities, including stopping infringement on any business secret and declaring compensation for the damage as generated therefrom

The calculating method of determining compensation is provided in Interpretation.

For determining the damages for infringement on business secrets and other three types of unfair competition activities, Interpretation introduces the methods of determining damages for patent and registered trademark infringements by analogy.

5. Indicating that the cases involving unfair competition in Interpretation generally shall be subject to the jurisdiction of the intermediate people’s court

The promulgation and enforcement of Interpretation is significant for courts to correctly hear cases involving unfair competition, unify the principals of trial, protect relevant intellectual property according to law and prohibit unfair competition activities. Besides that, it is also important for companies to protect intellectual property and participate in fair competition.