Inadequacies of the anti-unfair competition law

Research has shown that the Anti- Unfair Competition Law, as the fallback law in the IP legal system, has many inadequacies in protection of the merchandising rights.

Firstly, the Anti-Unfair Competition Law limits subjects of unfair competition to “operators engaging in trading of goods or profit-making services.” This renders it impossible for operators not engaging in profit-making commercial activities or merchandising rights holders not in direct competition with other operators to resort to the Anti-Unfair Competition Law to protect their rights. Obviously subjects of the merchandising rights are usually not operators, they are natural persons and individuals. Even if they are operators, they are often practitioners engaged in cultural and creative industries, and are not in the same operating field as subjects who actually use or infringe their merchandising rights.

Secondly, the Anti-Unfair Competition Law is applicable only if the plaintiff and the defendant are in direct competition, whereby if the holder of the merchandising rights is not an operator engaged in profit-making activities or is not in direct competition with other operators, the law will not be applicable in protection of the merchandising rights.

Thirdly, the Anti-Unfair Competition Law protects objects which are the name, packaging or decoration peculiar to “well-known goods or services,” actually negating a lot of ordinary, unknown characters.

Fourthly, the Anti-Unfair Competition Law adopts a list to define its range of jurisdiction, but the range is too broad to reflect its principle to protect free and fair competition.

Fifthly, the nature of the Anti-Unfair Competition Law determines that only in the event of confusion, the Anti- Unfair Competition Law can provide afterwards relief for the violated rights. This means that the law will provide relief only after infringement has occurred and cannot provide advance prevention.

Selection of protection paths

In summary, all of the existing protection options available under the civil law, namely the Personality Right Law, the Copyright Law, the Trademark Law, the Patent Law and the Anti-Unfair Competition Law, all have some shortcomings or inadequacies. Consequently, for the time being it is more feasible to adopt a cross-protection approach which uses laws such as the Personality Right Law, the Copyright Law and the Trademark Law as the core and the Anti-Unfair Competition Law as the fallback.

Niu Shijie proposed that at present either we independently enact norms on the merchandising rights, ensuring more comprehensive and systematic protection of the right, or we categorize the merchandising rights and incorporate each right in different laws and regulations for protection.

Zhang Xuejun, vice-president of the IP division of Higher People’s Court of Guangdong Province, said of the protection of animations that “The key lies in recognition of the existence of the merchandising rights to images of animations, on the basis of which the legal system will be built. The most important role the merchandising rights of works plays is to introduce images, plots and personality of characters into the protection range, greatly enhancing the IP protection of animations. The protection methods for copyright, trademark right and patent right are currently unable to cover the range.”

IP counsel Sun Cheng states that the merchandising rights of virtual characters, which originated from literary and artistic creations, can be regarded as a derivative copyright of original literary and artistic creations. The characters, due to their features of identifiability, distinctiveness and commercial value, can be independent of the original literary and artistic creations for protection. Therefore, it is recommended the ongoing revision of copyright law add chapters concerning merchandising of virtual characters, setting forth clear definitions and determinations on the merchandising of virtual characters, determination of infringement and liabilities, and the reasonable range of use.

Some experts state that before promulgation of the relevant legislation, it is relatively realistic and effective to promptly and effectively address the emerging issues by means of relevant judicial interpretations.

For now, though, it is too premature to discuss how to establish the protection regime for the merchandising rights. Due to the objective circumstances, the relevant departments should timely enact relevant rules and norms to ensure more direct and effective protection of the interests of the holder of the merchandising rights.