China’s New Civil Procedure Law behind the Application for an Injunction of Guangzhou Pharmaceutical Company

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(By Albert Chen) Guangzhou Pharmaceutical Company’s lawsuit (GPC) against Jia Duo Bao (JDB) for false advertising was heard in January of this year at the Guangzhou Intermediate People’s Court. In addition to the arguments held by each party regarding the false advertising, they also disputed whether an injunction could be issued as applied to GPC. Ultimately, the Guangzhou Intermediate People’s Court approved the injunction, basing its decision on findings that  JDB had exploited GPC through false advertising, thereby confusing and misleading consumers. The Court  then prohibited JDB from making advertisements with claims that GPC’s vitamin drink “Wang Lao Ji” had changed its name to JDB, or any other similar slogans indicating that somehow GPC’s Wang Lao Ji product was the same as JDB’s as the result of a name change.

What are the legal grounds for the Guangzhou court’s approval of the injunction? In this essay we would like to introduce you to the relevant clauses in the new Civil Procedure Law.

I. New regulations on lawsuit injunctions in the Civil Procedure Law

After losing the right to use the trademark “Wang Lao Ji,” JDB adopted advertising slogans implying that Wang Lao Ji had changed its name to JDB in order to publicize the new brand. In response, GPC claimed JDB’s conduct constituted both unfair competition and false advertising. It seems natural that GPC would do so; as the trademark holder for the massively popular herbal tea drink “Wang Lao Ji,” GPC had a lot to lose if consumers were suddenly confused or even convinced that “Wang Lao Ji” was the same thing as “Jia Duo Bao.” As a matter of course, however, before the issuance of an injunction, an ongoing lawsuit still requires several days for the court to issue an answer. At this point we still don’t know what the final decision of the court will be. Will the court find that advertising alone is sufficient to cause actionable damage to GPC’s interests in the mark “Wang Lao Ji?”

In facing a dilemma such as the one in this present set of circumstances, Article 100, Section 1 of the new Civil Procedure Law, which came into effect January 1, 2013, provides GPC with the ability to stop JDB’s advertisements at the very beginning of the lawsuit. According to the relevant parts:

“The People’s Court may issue preservation over assets, orders to perform some acts or prohibit it from performing some acts on the application of the opposing party when it considers that the future judgment would be difficult to implement or that the party may suffer certain losses due to the acts conducted by one party, or for other reasons; if no application has been filed, the People’s Court may order for preservation when necessary.”

II. Preliminary Enforcement in the Civil Procedure Law

Before the enforcement of an injunction as provided in Article 100 of the new Civil Procedure Law, similar cases to the one at discussion were mainly regulated by the “preliminary enforcement” system, which has for all intents and purposes been inherited in the revised law. The details regarding the preliminary enforcement system can be found in the articles of the Civil Procedure law and in the Opinions on Several Issues concerning the Application of China’s Civil Procedure Law (the “Opinions”).

According to Article 106 of the current Civil Procedure Law, a preliminary execution can be mainly used in the following situations:

(1) Claims for alimony, support for children or elders, pension for the disabled or the family of a decedent, or expenses for medical care;

(2) Labor remuneration claims; and

(3) Urgent circumstances that require preliminary execution.

In terms of intellectual property cases, the initiation of a preliminary execution primarily relies on the third point; namely, “urgent circumstances that require preliminary execution.” Furthermore, the Opinions break this clause into the following cases:

(1) Where it is necessary to immediately stop infringement or remove interference;

(2) Where it is necessary to immediately stop certain behavior;

(3) Where it is necessary to immediately return the funds to purchase raw materials or tools for production;

(4) To claim the urgent insurance compensation for the retrieval of the production or operations.

It can be easily concluded that in infringement cases, the first point above is the most prominent basis for the application of an injunction. Of course, courts will not grant all preliminary execution applications, and they will consider the two following points in determining whether to grant the application:

(1) The relationship of rights and obligations between the parties is definite, and denial of preliminary execution would seriously affect the life or business of the applicant; and

(2) The person against whom the application is made is capable of fulfilling his or her obligations.

At present, JDB has appealed for a review of the injunction, but as provided in Article 108 of the Civil Procedure Law: “No stay of the injunction enforcement during the review.” However, as found by the author, even with such regulations in place, JDB has continued its harmful advertisements. This is yet another example of just how difficult it is to enforce judgments handed down by the courts in actual practice . How the injunction will be put into practice following the promulgation of the new Civil Procedure Law is now a challenge presented to the Guangzhou Intermediate People’s Court.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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